20162016
2016 English
Contents
Outline of Lundbergs 2 The year in brief 3 President’s review 4 Lundbergs as an investment company 9 Net asset value 12 Cash flow report 13 Alternative performance measures 13 The Lundberg share 14
Subsidiaries and other portfolio companies Fastighets AB L E Lundberg 16 Hufvudstaden 22 Holmen 24 Indutrade 26 Husqvarna Group 27 Industrivärden 28 Handelsbanken 29 Sandvik 30 Skanska 31
Annual report 33 Board of Directors’ Report 34 Definitions 43 Group Financial statements 44 Notes 47 Parent company Financial statements 71 Notes 74 Proposed distribution of earnings 80 Auditors’ report 81
Board of Directors and Auditors 86 Senior executives 88 Annual General Meeting and Financial statements 90 Addresses 91
This is a translation of the original Swedish Annual Report. In the event of differences between the English translation and the Swedish original, the Swedish Annual Report shall prevail. Outline of Lundbergs
Share of Lundbergs holdings, Lundbergs is an investment company that manages and develops a number of SEK 71 billion, on February 21, 2017 companies based on active, long-term ownership.
Other 0.7% Fastighets AB L E Lundberg Skanska 5.6% 16.8% The portfolio of assets includes the wholly owned real estate company Fastighets AB Sandvik 5.3% L E Lundberg, the publicly traded subsidiaries Hufvudstaden and Holmen and the Handels- associated companies Industrivärden, Indutrade and Husqvarna. Lundbergs also has banken 7.2% major shareholdings in Handelsbanken, Sandvik and Skanska.
Industri- Lundbergs’ objective is to generate a return on invested capital over time that värden 18.8% Hufvudstaden 19.1% substantially exceeds the yield on a risk-free interest-bearing investment. Husqvarna 4.8% Indutrade 7.8% Holmen 13.9%
The holdings are measured at market value. Fastighets AB L E Lundberg, with investment properties valued at SEK 17,9 billion, is recognized at net asset value.
The Lundberg share SEK 600 Lundbergs 550
500 100 Fastighets AB L E Lundberg Industrivärden 16 (23)
450 45 (88) Hufvudstaden Handelsbanken 2.0 (2.0)
400 Jan 16 March May July Sept Nov Jan 17 Feb 33 (62) Holmen Sandvik 2.4 (2.4) Lundbergs B OMX Stockholm Index
26 (26) Indutrade Skanska 4.3 (12)
Net asset value after 7.6 (25) Husqvarna deferred tax, per share
6(. Subsidiaries and associated companies Other major shareholdings
The figures denote the percentage of share capital (voting rights) held on February 21, 2017.
)HE
Chairman of the Board Mats Guldbrand
President and CEO Fredrik Lundberg LUNDBERGS 2016 www.lundbergforetagen.se
2 The year in brief
• On December 31, 2016, net asset value after deferred tax amounted to SEK 546 per share (451). • Consolidated net sales amounted to SEK 19,357 m. (20,347). • Profit after financial items totaled SEK 17,419 m. (8,258). Profit also includes a transitional effect for accounting purposes of SEK 5,112 m., resulting from Industrivärden being recognized as an associated company as of the first quarter. • Profit after financial items excluding impairment losses and unrealized changes in value amounted to SEK 11,511 m. (3,783). • Consolidated profit after taxes amounted to SEK 15,457 m. (6,652), of which non-controlling interests accounted for SEK 3,215 m. (2,276). • Earnings per share attributable to the Parent Company shareholders amounted to SEK 98.73 (35.29). • Investments in investment properties in Fastighets AB L E Lundberg totaled SEK 602 m. (468).
• Publicly traded shares were acquired för SEK 2,075 m. (1,012).
• An increase in the dividend to SEK 5.60 per share (5.30) is proposed.
Earnings and key data 2016 2015 Net asset value after deferred tax, SEK billion 67.7 55.9 Net asset value per share after deferred tax, SEK 546 451 Shareholders’ equity per share attributable to Parent Company’s shareholders, SEK 461 387 Net sales, SEK m. 19,357 20,347 Profit after financial items 17,419 8,258 excluding impairment losses and unrealized changes in value 11,511 3,783 Profit after tax, SEK m. 15,457 6,652 of which, non-controlling interests, SEK m. 3,215 2,276 Earnings per share, attributable to Parent Company’s shareholders, SEK 98.73 35.29 Dividend/share, SEK 5.60 1 5.30 Debt/equity ratio 0.18 0.21 Equity/assets ratio, % 69 67
1) Board of Directors’ proposal.
3 President’s review
Although the past year was characterized by major uncertainty in terms of the global economy, politics and geopolitical developments, economic perform ance was relatively favorable in many parts of the world. Parts of Europe, the US and China showed healthy growth, particularly late in the year. The Swedish economy performed well with GDP growth of 3.3%. The weak SEK contributed positively to the Swedish export industry’s performance.
The surprising outcome of the UK’s Brexit referendum and the election of Donald Trump as president of the US gave rise to many question marks. Finance markets initially reacted negatively, but stabilized quickly. In Europe, the EU is being increasingly ques- tioned and a number of political elections will be held during 2017, which could impact on the EU collaboration in the future. Raw material prices, including oil, stabilized and rose during the year. Stock markets worldwide declined sharply during the early part of 2016. This was followed by stabilization and the year ended with upswings in most parts of the world. The total return on the Stock- holm Exchange was 9.6% for the full-year. Although interest rates remained at historically low levels, they rose slightly late in the year.
Lundbergs’ performance in 2016 For 2016, Lundbergs reported consolidated after-tax profit of SEK 15.5 billion (6.7). After minority interests, profit amounted to SEK 12.2 billion (4.4). Excluding impairment losses and unrealized changes in value, profit after financial items was SEK 11.5 billion (3.8). Profit for 2016 also includes a transitional effect for account- ing purposes of SEK 5.1 billion, because Industrivärden switched to being recognized as an associated company. Net asset value per share after deferred tax increased more than 21% during the
ACQUISITION OF SHARES IN MINOR SHARE HUSQVARNA. CONTINUING ACQUISITIONS IN SHARE ACQUISITIONS IN SANDVIK, HUSQVARNA HANDELSBANKEN, INDUSTRI AND CARDO. VÄRDEN AND SANDVIK. LUNDBERGS 2016 2007 2008 2009
4 year to SEK 546 (451). On February 21, 2017, the corresponding holm and our only property in Uppsala were divested for a total of value was SEK 562 per share. In 2016, holders of Lundbergs shares SEK 911 m. At the end of 2016, the market value of our investment received a total return of 20.9%. properties was SEK 17.9 billion (16.7). Lundbergs’ Board of Directors proposes that the Annual The residential rental market remained strong in 2016. General Meeting approve an increase in the dividend to SEK 5.60 Demand for offices was also generally healthy, while demand for (5.30). Our long-term aim is to offer shareholders favorable and retail space varied between markets. The vacancy rate remained steady dividend growth. low during the year. Our financial policy entails that we leverage our properties to The real estate market was extremely strong in 2016, with a a maximum of 50% and that our listed shares are to be unlever- record transaction volume of approximately SEK 200 billion. aged. At year-end 2016, interest-bearing net debt totaled SEK Important reasons are low interest rates and good access to 5.4 billion (4.9), corresponding to 7.3% (7.9) of total assets. If our capital, as well as a lack of attractive investment alternatives. The property company was to account for our entire net indebtedness, strong growth of the Swedish economy and the positive rental this would correspond to a loan-to-value ratio of 29.7% of the trend, as well as institutional owners’ desire to increase their share properties’ market value. of real estate, are further reasons for the strong real estate market. Our credit rating with Standard & Poor’s, which was confirmed A residential new-build project (SEK 69 m.) in Sörbyängen, in December 2016, remains unchanged at a strong A+, with a stable Örebro, was completed in spring 2016 and another housing project outlook. Conditions in the credit market are currently highly favor- (SEK 93 m.) was completed in the same area late in the year. able. In addition to bank loans, we are financed through corporate Örebro is an attractive and rapidly growing university city. We bonds and short-term commercial papers. In October, a 7-year, SEK aim to continue investing in additional housing projects. 1 billion corporate bond was issued at a fixed interest rate of 1.34%. A smaller housing project (SEK 28 m.) was completed in Karlstad At year-end 2016, the average interest rate on our debt financing towards the end of the year. There are additional plans for new was 2.37% and the average term of the loans was 2.9 years. production of housing units. A major housing project (some SEK 810 m.) containing 392 Fastighets AB L E Lundberg rental apartments has been in progress in central Norrköping Lundbergs’ consolidated financial statements include the wholly since late 2015. The project will not be entirely completed until owned subsidiary Fastighets AB L E Lundberg, which reported 2019, but tenants will gradually move in beginning in summer operating profit of SEK 2,251 m. (2,117). Profit includes unrealized 2018. Norrköping is moving in a positive direction, with strong increases in the value of investment properties of SEK 1,464 m. population growth. Demand for new housing units is expected (1,328), equal to a value increase during the year of 8.8% (8.9). to remain healthy over the next few years. Of the value increase, 60% was attributable to a lower yield In Linköping, construction of a housing project (about SEK requirement and 40% to higher rents. 770 m.) with 374 rental apartments is scheduled to begin in In 2016, we invested a total of SEK 602 m. (468) in refurbish- autumn 2017. Linköping is continuing its positive development, ments, new construction and acquisitions of investment proper- with the university and university hospital playing a significant ties and land. In May, all of our investment properties in Katrine- part, and we plan to continue investing in new projects there.
DIVESTMENT OF SHAREHOLDING IN NCC. CONTINUED ACQUISI- TIONS OF SHARES IN SEVERAL OF THE EXISTING PORTFOLIO PARTICIPATION IN COMPANIES. INCREASED SHARE ISSUE AND ACTIVITY IN FASTIGHETS AB MINOR ACQUISITION OF L E LUNDBERG THROUGH SHARES IN HUSQVARNA. ACQUISITIONS AND PROJECTS. AGREEMENT ENTERED INTO WITH ASSA ABLOY CONCERNING s DIVESTMENT OF ALL CARDO SHARES. 2009 2010
5 At the end of 2016, President and CEO Peter Whass stepped Hufvudstaden continued to perform well in 2016, as it has down from his position and was replaced by Louise Lindh. Peter done for many years. Profit from operating activities increased, as has been President and CEO since 2004, and has done an excel- did the value of its properties. As a result, Hufvudstaden reported lent job. Operations expanded during his time as CEO, and in record earnings for 2016. The company’s strong performance is recent years an extensive project business has been established. due to lower yield requirements and higher rents. Office rents I want to express my utmost gratitude to Peter, who will remain rose sharply during the year, especially in central Stockholm but with the company working on our project business. He will also also in central parts of Gothenburg as well. Vacancy rates were low continue as a Board member of Fastighets AB L E Lundberg. and demand remained strong. Given the company’s good perfor- Louise Lindh holds a degree in business administration and mance, a dividend increase is proposed for the 18th year in a row. has worked at the company since 2005. She has been Executive New projects are planned in the next few years in both Stockholm Vice President with responsibility for the Stockholm region since and Gothenburg, which are expected to contribute to continued 2008. Louise is well-prepared for her new assignment. She knows value generation at Hufvudstaden. The company’s organization the company well and has excellent knowledge and experience, led by CEO Ivo Stopner runs very smoothly. Major changes in the as well as a high energy level. I wish her every success and look world around us, such as e-commerce and digitization, mean that forward to working with her. the company must adapt to new circumstances to some extent. In addition, the properties’ technical functions and efficiency must Portfolio companies continuously evolve. I have great confidence in Hufvudstaden, and During 2016, the company acquired publicly traded shares for look forward with confidence to the years ahead. SEK 2,075 m., consisting of SEK 1,612 m. in Industrivärden, SEK In 2016, Holmen continued to adapt its paper operations to 153 m. in Handelsbanken, SEK 133 m. in Indutrade and SEK 176 the new market conditions. The newsprint plant outside Madrid m. in Skanska. As a result, the company’s ownership share in was divested, reducing Holmen’s risk level. The product mix was Industrivärden increased to 16.1% of the share capital and 23.3% also rebalanced, so that newsprint now accounts for a marginal of the voting rights. Industrivärden is recognized as an associated share of the business. The paperboard segment performed well, company of Lundbergs as of February 19, 2016. as did the renewable forest and power assets. Profits rose in 2016 2016 was a strong year for Industrivärden. Its net asset value and the company’s financial position was strengthened. Given the and share price increased far beyond the average performance above, a 14% dividend increase is proposed. Although there is no of the stock market, due to strong value growth in its portfolio doubt that the outlook for using forests as a commodity is bright, companies. A stronger emphasis was placed on value generation a large issue for Holmen is the right to use the forest, which is es- through long-term active ownership. Several personnel changes sentially an issue of ownership rights. Holmen is concerned about at CEO and chairman level were made in the portfolio companies, the forces that want to restrict ownership rights, and it will defend which we hope will help to create increased value in the years these rights. CEO Henrik Sjölund is doing a good job. He has made ahead. Indebtedness declined in accordance with our objective. important changes in a short period, and has become a natural CEO Helena Stjernholm is doing an excellent job and represents leader of the company. I would also like to give Executive Vice Industrivärden well on the boards of Volvo, Sandvik and Ericsson. President Anders Jernhall credit for his dedicated work. Thanks to The board of directors proposes an increased dividend. its large raw material assets, strong financial position and efficient
DISPOSAL OF THE SHARE CONTINUING SHARE HOLDING IN CARDO. SHARES ACQUISITIONS IN HOLMEN, WORTH SEK 1.2 BILLION HUSQVARNA, SANDVIK AND ACQUIRED IN SKANSKA, MAKING SKANSKA. IT A NEW PORTFOLIO COMPANY. FASTIGHETS AB CONTINUING ACQUISITION L E LUNDBERG ACQUIRES OF SHARES IN HOLMEN, PROPERTIES FOR SOME HUSQVARNA, INDUSTRIVÄRDEN SEK 600 M. AND SANDVIK. LUNDBERGS 2016 2011 2012 2013
6 industrial operations, the prospects are favorable for Holmen to and its capital ratios improved. Anders Bouvin was appointed as perform well over the next few years. the new CEO in August. The bank’s board of directors proposes a Although Indutrade’s business model continues to convince, raise of the ordinary dividend. its profits declined somewhat in the second half of the year com- 2016 was a good year for Sandvik. Profits and the operat- pared with a strong second half of 2015, although profit increased ing margin increased, and new orders were strong towards for full-year 2016. Both order intake and sales reached new record the end of the year. Cash flow improved and net indebtedness levels. Eleven acquisitions with total annual sales of SEK 1.1 billion declined. Increased decentralization is now producing results, were completed during the year. The board of directors proposes and central costs are gradually declining. There were many new an increased dividend. After 14 years as CEO, Johnny Alvarsson product launches during the year, thanks to continued invest- will step down from his position during the spring. He has done an ments in product development. It is worth noting how important excellent job and taken Indutrade to a new level. During Johnny’s the change in Sandvik’s leadership has been. Both CEO Björn tenure. the company has internationalized and sharply increased Rosengren and Chairman Johan Molin are doing a very good job. its share of proprietary products. Indutrade’s market capitaliza- Given the company’s good performance, the board of directors tion has risen 700% since it was listed on the stock market in proposes an increased dividend. 2005. I would like to express my warmest gratitude to Johnny! Skanska produced strong results in 2016. Its project develop- Bo Annvik will be the new CEO. He has had a long industrial career, ment operations all reported better earnings compared with 2015, both in Sweden and abroad. I wish him the best and look forward and they account for more than half of the company’s profits. to working with him. However, construction operations did not achieve their targeted Husqvarna improved its profits in 2016 despite negative margin due to problems in Poland and higher costs in the UK exchange-rate effects. The new decentralized organization and the USA Civil business unit. Swedish construction operations performed well, and many new product offerings were launched and USA Building performed very well. Since new construction in the market. The results of CEO Kai Wärn’s skillful work are now orders rose sharply, Skanska has a record large order book for evident. The company’s financial position grew stronger, and the 2017. The company’s financial position remained sound, and the Board proposes an 18% dividend increase. Continued efficiency board of directors proposes raising the dividend this year as well. improvements are expected in the years ahead and, combined Skanska has a strong corporate culture. The collective knowledge with an attractive product program and strong leadership, there is and experience of the organization under CEO Johan Karlström’s reason to be optimistic about the future. leadership are impressive and extremely competitive. This bodes Handelsbanken’s operations were stable in 2016, and profits well for the future. were largely unchanged compared with 2015. The company’s de- centralized business model remained in place and saw continued Outlook success, with an emphasis on long-term customer relationships. Lundbergs’ business model creates value for shareholders The bank’s array of services is being developed for both digital through long-term active ownership in multiple companies. platforms and interaction with local customers, which comple- Properties have been an important part of our business for more ment one another. The bank’s operations in the UK and the than 70 years. Our two real estate companies, Fastighets AB L E Netherlands continue to grow. Its financial position remains strong Lundberg and Hufvudstaden, account for about one third of our
SHARES ACQUIRED FOR ABOUT SEK 1 BILLION ADDITIONAL ACQUISITION AND SEK 1.1 BILLION OF SHARES IN INDUTRADE, INVESTED IN PROPERTIES, MAKING LUNDBERGS THE A HISTORICALLY HIGH PRINCIPAL SHAREHOLDER LEVEL FOR THE COMPANY. IN THE COMPANY. LUNDBERGS CELEBRATES 70 YEARS. s 2013 2014
7 total assets. This gives Lundbergs a stable foundation with low risk. Over time, these investments have provided us with both Our portfolio companies are good current returns and favorable appreciation, which have been top class with skilled executive significant in recent years. We intend to continue developing our real estate companies through development of existing portfolios managements. I attach great and investments in new projects. We have top-class leadership and organizations. importance to leadership, and Other investments by Lundbergs consist of seven listed com- panies in different sectors. One of these companies is Industri I feel that this is the single most värden, which owns eight portfolio companies, three jointly with Lundbergs. This means that we have exposure to 11 Swedish important factor for success. listed companies along with our real estate business, providing us with good risk diversification. Our portfolio companies are top class with skilled executive managements. I attach great importance to leadership, and I feel Lundbergs stands strong as it looks to the future. Our assets are that this is the single most important factor for success. Giving top class and balance one another well. We take a conservative responsibility to others is also fundamental. In my view, decentral- approach to indebtedness, allowing us to continue making invest- ization is the only way to ensure that a company grows strongly ments. We have in-depth knowledge of our portfolio companies and successfully. and their challenges and opportunities, and our involvement with Financial strength is also important, and many times it is deci- them is deep and genuine. In my view, we have good prospects for sive. A company should not make itself dependent on any lender. continuing to successfully fulfill our ownership role in the future. The company can also take advantage of a strong financial posi- Accordingly, it is my hope and ambition to continue providing our tion during economic downturns or other difficult circumstances. shareholders with competitive returns in the years ahead. In many cases this can be entirely decisive to the future. We pursue the issues above at board level as part of our Stockholm, March 2017 long-term active ownership. This has created value, and will continue to do so in the future. Since the board of directors plays an important part, particularly the chairman of the board who has a key role as the “CEO’s boss”, we attach great importance to the selection of the chairman of our portfolio companies. As a major shareholder, it is also natural to maintain a dialog with the chair- Fredrik Lundberg men on various issues.
CONTINUED ACQUISITIONS OF SHARES IN INDUSTRIVÄRDEN, HANDELSBANKEN, INDUTRADE AND SKANSKA. IN TOTAL, SOME SEK 2.1 INDUSTRIVÄRDEN SHARES BILLION WAS INVESTED IN ACQUIRED FOR SEK 1 BILLION. SHARES AND JUST OVER SEK 600 M. IN PROPERTIES. THE REAL ESTATE HOLDINGS IN KATRINEHOLM AND UPPSALA WERE DIVESTED FOR A TOTAL OF SEK 911 M. LUNDBERGS 2016 2015 2016
8 Holmen
Lundbergs as an investment company
Lundbergs business concept is to own, manage and develop a number of companies by being an active, long-term owner. Hufvudstaden The portfolio of assets includes the wholly owned real estate company Fastighets AB L E Lundberg, the publicly traded subsidiaries Hufvudstaden and Holmen and the associated companies Industrivärden, Indutrade and Husqvarna. Lundbergs also has major shareholdings in Handelsbanken, Sandvik and Skanska.
Strategy and objective Lundbergs’ objective is to generate a return on invested capital over time that substantially exceeds the yield on risk-free interest-bearing investments.
Lundbergs’ strategy is to generate such a return and value appreciation while Husqvarna maintaining a low risk. Investments focus mainly on companies characterized by solid market positions, strong and stable cash flow and that have their own products and brands. The financial risk is minimized by combining low indebtedness with good access to funds. The time perspective of Lundbergs’ ownership enables the companies and their management to adopt a long-term approach in their efforts to im- prove market positions and competitive strengths. Long-term ownership is accompanied by participation on boards of directors.
Sustainability Ownership and responsibility Lundbergs’ business concept is based on a long-term approach and active ownership. The company’s responsibility to its shareholders is to develop and Industrivärden maintain a financially sound and well-functioning company. This is achieved by such actions as taking responsibility in those environments in which we are active, and in relation to our employees, business partners and society at large. Through active ownership, Lundbergs can influence the portfolio compa- nies in such areas as the environment and the business environment. It is on the boards of directors of the various companies that Lundbergs conducts its development and value-creation work. Lundbergs has considerable compe- tencies and longstanding experience within the sectors in which the portfolio companies operate. Responsible and persevering actions are a key prereq- uisite for enabling the portfolio companies over time to continue to be both profitable and sustainable operations. Lundbergs is affiliated to and supports the UN Global Compact, which has been established with the aim of promoting responsible enterprise through- out the world. By complying with the UN Global Compact, the company Indutrade LUNDBERGS AS AN INVESTMENT COMPANY undertakes that its operations will realize and integrate the principles con- cerning human rights, working conditions, environment and anticorruption.
Our operations Since L E Lundbergföretagen AB has no in-house manufacturing operations of its own and only some ten employees, the impact of Lundbergs’ Parent Company on the environment and the world at large is very limited. However, through active ownership via work on the portfolio companies’ boards, it can LUNDBERGS 2016 – influence the companies in these matters. Lundbergs’ Board of Directors and
9 management have formulated a code of conduct for the Parent Assets Company and its wholly owned subsidiaries. Lundbergs’ assets are concentrated to a few major holdings. The Lundbergs works to ensure that the approaches of the other real estate holdings, through the wholly owned subsidiary Fastig portfolio companies are also shaped by the code of conduct, hets AB L E Lundberg and shares in Hufvudstaden, represented which means that they are expected to a value of SEK 25.3 billion on February 21, 2017. This corresponds • act in line with the legal requirements applying where the com- to 36% of the total holdings, measured at market value. The pany is active shareholdings in Holmen, Indutrade, Husqvarna, Industrivärden, • act in line with the UN Global Compact; comply with applicable Handelsbanken, Sandvik and Skanska accounted for SEK 44.8 bil- laws, regulations and international guidelines and policies govern- lion or 63% of the holdings. ing the environment, anti-corruption, labor law and human rights • implement investments by taking into account their long-term Organization economic, social and environmental impact Lundbergs’ long-term investment work is conducted in a small orga- • have relations that are characterized by high business ethics nization that represents a wealth of collective experience. The orga- • have workplaces that are characterized by openness, respon- nization that focuses on investment activities and active ownership siveness and mutual respect and that distance themselves from has about ten employees, including the personnel of the subsidiary any form of discrimination L E Lundberg Kapitalförvaltning AB. Management expenses in rela- • strive for openness, clarity och reliability in external commu tion to the holdings measured at market value amounted to 0.08% nication. in 2016. Organizationally, the wholly owned real estate holdings are Subsidiaries separated from the Parent Company and are assigned the same Fastighets AB L E Lundbergs is quality, environmentally and en- status as the Group’s other major investments. ergy certified in accordance with ISO 9001:2015, 14001:2015 and 50001:2011 which, through their enterprise management systems, L E Lundberg Kapitalförvaltning AB ensure compliance with the business concept, strategy and focus L E Lundberg Kapitalförvaltning is a wholly owned subsidiary that in daily operations. By implementing continuous construction engages in securities trading. The objective of operations is to engineering improvements and more modern equipment in the utilize macroeconomic and corporate analyses to generate a fa- properties, the carbon footprint is reduced, thus providing a solid vorable return on capital employed. In addition to securities trad- base for sustainable development. ing, the company accounts for the analysis and follow-up of other Hufvudstaden reports its work on sustainability issues in ac- investments within the Group. Securities trading activities include cordance with the Global Reporting Initiative (GRI) and participates equities and equity-related instruments. Although shares listed in, for example, the Carbon Disclosure Project (CDP) sustainability on Nasdaq Stockholm account for a large part of the investments, survey, in which the company is ranked among the foremost prop- investments may also be made in other markets. The value of the erty companies in the Nordic region. CDP is an international col- portfolio at year-end was SEK 597 m. The organization consists of laboration aimed at encouraging companies worldwide to reduce five employees. their impact on the climate and on natural resources. Both Fastighets AB L E Lundberg and Hufvudstaden offer Investment activities Green Leases, which entail that a concrete action plan is prepared During the year, the Parent Company invested a total of SEK together with the tenant, featuring measures that will contribute 2,075 m. in publicly traded shares. Of these investments, Indus- to improving the environment. Both of the companies are mem- trivärden accounted for SEK 1,612 m., Handelsbanken for SEK 153 bers of the Sweden Green Building Council (SGBC) and also have a m., Indutrade for SEK 133 m. and Skanska for SEK 176 m. In the number of properties that are SGBC classified. This classification wholly owned subsidiary Fastighets AB L E Lundberg, properties is achieved by means of an independent assurance that the build- were divested during the year for SEK 911 m. Properties were ing satisfies requirements in terms of energy, indoor environment also acquired for SEK 111 m. and 491 SEK m. was invested in new and choices of materials. construction and refurbishment. Holmen is ranked 21 in the Global 100, an index that ranks the world’s most sustainable companies. Holmen has reported to Return the CDP Climate program since 2007 and the company’s annual Lundbergs’ mission is to generate a healthy absolute return for report complies with the Global Reporting Initiative, GRI G4, at the its shareholders through growth in dividends and net asset value. Core level. Over the past ten years, net asset value per share, excluding For detailed information on the portfolio companies’ sustain- dividends paid and after deferred tax, has grown by an average ability efforts, reference is made to the websites of the particular of 7.4% annually. During 2016, net asset value per share after company. deferred tax increased 21.1%.
10 Total annual return on the share has Distribution of holdings as a percentage of total asset value averaged 15.8% per year over the past and total asset value in SEK billion 20 years and 11.6% per year over the past % SEK billion 10 years. Total annual return over the past 100 80 five-year period has averaged 24.3%. 90 70 80 Net asset value 60 On December 31, 2016, net asset value 70 50 after deferred tax amounted to SEK 67,675 60 m. (55,865), corresponding to SEK 546 per 50 40 share (451); see table on page 12. 40 On February 21, 2017, estimated net 30 asset value after deferred tax amounted to 30 SEK 69,697 m. corresponding to SEK 562 20 20 per share. Fastighets AB L E Lundberg has 10 been measured at its net asset value, in 10 which the company’s investment proper- 0 0 ties are included at a value of SEK 17.9 bil- 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 lion. The interest-bearing net indebtedness Total value, right scale Fastighets AB L E Lundberg Hufvudstaden Holmen Industrivärden of the Parent Company and the wholly Indutrade Handelsbanken Sandvik Husqvarna Skanska Other Holdings sold owned subsidiaries has been attributed in its entirety to Fastighets AB L E Lundberg. Proportion of share capital, voting rights, market value and acquisition value of shareholdings Cash flow Feb 21, 2017 Dec 31, 2016 Dec 31, 2015 During 2016, dividends totaling SEK 1,482 Share Voting Share Voting Share Voting % 1 capital rights capital rights capital rights m. (1,473) were received. Funds received from sales of securities amounted to a Handelsbanken 2.0 2.0 2.0 2.0 2.0 2.0 Holmen 32.9 61.6 32.9 61.6 32.9 61.6 negative SEK 62 m. due to net purchases Hufvudstaden 45.3 88.1 45.3 88.1 45.3 88.1 in L E Lundberg Kapitalförvaltning AB. Husqvarna 7.6 25.0 7.6 25.0 7.6 24.9 Funds received from real estate operations Industrivärden 16.1 23.3 16.1 23.3 13.6 19.8 totaled SEK 1,666 m. (774), of which sales Indutrade 26.3 26.3 26.3 26.3 25.6 25.6 accounted for SEK 964 m. (84). Accord- Sandvik 2.4 2.4 2.4 2.4 2.4 2.4 ingly, total funds received amounted to Skanska 4.3 12.2 4.3 12.2 4.0 12.0 SEK 3,086 m. (2,252). During the year, Feb 21, 2017 Dec 31, 2016 Dec 31, 2015 SEK 2,075 m. (1,012) was invested in shares Market Acquisition Market Acquisition Market Acquisition and SEK 630 m. (494) in properties. Divi- SEK m. value2 value3 value2 value3 value2 value3 dends paid by Lundbergs amounted to Handelsbanken 5,113 2,572 4,937 2,572 4,234 2,419 SEK 657 m. (620). Interest-bearing assets Holmen 9,787 3,828 8,997 3,828 7,430 3,828 increased SEK 13 m. and interest-bearing Hufvudstaden 13,479 2,830 13,555 2,830 11,294 2,830 liabilities by SEK 509 m. Accordingly, Husqvarna 3,381 2,006 3,061 2,006 2,416 2,006 interest-bearing net debt increased by SEK Industrivärden 13,287 10,302 12,506 10,302 9,334 4,706 496 m. to SEK 5,440 m. (4,944) at Decem- Indutrade 5,497 2,363 5,778 2,363 4,916 2,230 ber 31, 2016. For additional information, Sandvik 3,717 2,729 3,381 2,729 2,222 2,222 LUNDBERGS AS AN INVESTMENT COMPANY see the cash flow report on page 13. Skanska 3,981 2,101 3,912 2,101 2,832 1,925 Other shares 500 430 597 517 503 446 Total 58,743 29,162 56,724 29,249 45,179 22,612
1) The proportion of share capital and voting rights is calculated after a deduction for treasury shares. 2) Publicly traded assets have been entered at the current market price. The market value of the Series C Hufvudstaden shares has been calculated based on a 10% premium on the price of publicly traded Series A shares and the market value of the Series A Skanska shares has been calculated based on a 10% premium on the price of publicly traded Series B shares. LUNDBERGS 2016 – 3) Acquisition value for accounting purposes, where applicable, after impairment losses. During the first quarter of 2016, the acquisition value of Industrivärden for accounting purposes increased by SEK 3,984 m. in connection with its reclas- sification as an associated company (based on share price prevailing at the acquisition date). 11 Net asset value
Composition of net asset value December 31, 2016 December 31, 2015
Shareholding, % Net asset value Net asset value Number Share Voting SEK per Share of SEK per Share of of shares capital rights SEK m. share value, % SEK m. share value, % Handelsbanken A 39,000,000 2.0 2.0 4,937 40 7 4,234 34 8 Holmen A 16,622,000 5,402 44 4,553 37 32.9 61.6 13 13 Holmen B 11,000,000 3,595 29 2,878 23 Hufvudstaden A 85,200,000 12,260 99 10,215 82 45.3 88.1 20 20 Hufvudstaden C 8,177,680 1,294 10 1,079 9 Husqvarna A 39,400,000 2,782 22 2,195 18 7.6 25.0 4 4 Husqvarna B 3,950,000 280 2 221 2 Industrivärden A 66,100,000 11,911 96 8,898 72 16.1 23.3 18 17 Industrivärden C 3,500,000 594 5 435 4 Indutrade 31,575,000 26.3 26.3 5,778 47 8 4,916 40 9 Sandvik 30,000,000 2.4 2.4 3,381 27 5 2,222 18 4 Skanska A 6,032,000 1,427 12 1,093 9 4.3 12.2 6 5 Skanska B 11,550,000 2,484 20 1,739 14 Other securities 597 5 1 503 4 1 Stock portfolio 56,724 457 83 45,179 364 80 Fastighets AB L E Lundberg Value of properties 18,293 17,049 Interest-bearing net indebtedness 1 - 5,440 - 4,944 Other net, including deferred tax 2 - 1,142 - 1,027 Fastighets AB L E Lundberg 11,710 94 17 11,078 89 20
Total market-valued holdings 68,434 552 100 56,258 454 100 Other net, including deferred tax 2 - 759 - 6 - 393 - 3
Net asset value after deferred tax 67,675 546 55,865 451
Market value 69,254 559 57,958 467 Price/NAV, % 102 104
Publicly traded assets have been entered at the current market price. The market value of the Series C Hufvudstaden shares has been calculated based on a 10% premium on the price of publicly traded Series A shares and the market value of the Series A Skanska shares has been calculated based on a 10% premium on the price of publicly traded Series B shares. The proportion of share capital and voting rights is calculated after a deduction for treasury shares.
1) The interest-bearing net indebtedness of the Parent Company and the wholly owned subsidiaries has been attributed in its entirety to Fastighets AB L E Lundberg, which thereby has net indebtedness of 30% (29) of the market value of the properties. 2) Other assets, provisions and liabilities have been entered at the carrying amount. Deferred tax on the difference between estimated market value and the tax-assessment value of the properties has been estimated at a standard rate of 5%. Deferred tax of 22% has been computed on the basis of the provision to the tax deferral reserve and of other differences between market values and tax-assessment value. In accordance with current legislation, no tax is charged for business-related participations.
Key figures 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Net asset value, SEK m. 30,409 22,073 28,046 37,214 33,048 37,501 42,771 49,408 55,865 67,675 Net asset value/share, SEK 245 178 226 300 267 302 345 398 451 546 Change in net asset value, % - 8 - 27 27 33 - 11 13 14 15 13 21
Net asset value after deferred tax, per share Change in net asset value per share SEK % 600 40
500 30
400 20 10 300 0 200 -10 100 -20 0 -30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12 Cash flow report Alternative performance measures SEK m. 2016 2015 2014 2013 2012
Dividends For the purpose of illustrating the Group’s financial Handelsbanken 226 219 206 134 122 position and development, Lundbergs uses per- Holmen 290 276 249 249 209 formance measures as a complement to metrics Hufvudstaden 289 271 257 243 229 defined under IFRS. Calculations to enable the Husqvarna 72 72 65 59 59 Industrivärden 303 331 275 250 225 tracking of performance measures used in the Indutrade 92 79 67 39 37 Group are presented below. Also refer to defini- Sandvik 75 105 105 105 89 tions on page 43 for more information. Skanska 124 112 101 90 69 As of July 3, 2016, “Guidelines – Alternative Other 10 8 15 10 8 Performance Measures” issued by ESMA (European
1,482 1,473 1,339 1,179 1,047 Securities and Markets Authority) are applied. In accordance with these guidelines, disclosures have been expanded in cases where financial ratios Trading in securities1 - 62 6 - 22 - 88 - 4 Real estate operations 702 690 650 611 571 are not defined in IFRSs. Alternative performance Sales, real estate operations 964 84 26 5 310 measures are not to be viewed as substitutes for financial metrics defined in accordance with IFRS Total assets contributed 3,086 2,252 1,993 1,707 1,924 regulations, but as a complement. They need not be comparable with performance measures with Investments, equity management the same name presented by other companies. Handelsbanken 153 Holmen 289 Husqvarna 171 18 Adjusted profit after financial items Industrivärden 1,612 1,012 375 The purpose is to enhance comparability between Indutrade 133 216 848 different periods. Sandvik 212 45 Skanska 176 204 116 266 SEK m. 2016 2015
2,075 1,012 967 1,176 618 Profit after financial items 17,419 8,258 Impairment losses 122 555 Investments, real estate operations 630 494 1,136 509 948 Unrealized changes in value Own dividends 657 620 570 533 496 Investment properties and derivatives - 5,693 - 4,782 Group-wide costs 28 25 31 30 28 Biological assets - 315 - 267 Taxes paid 129 115 154 101 88 Others - 23 19 Financial items 121 124 121 122 127 11,511 3,783 Other - 6 47 11 28 52 Total assets used 3,634 2,437 2,990 2,498 2,356 Net interest-bearing debt Illuminates the Group’s financial position.
Change in net debt - 549 - 184 - 997 - 790 - 432 SEK m. 2016 2015
Closing net debt - 6,047 - 5,499 - 5,314 - 4,318 - 3,527 Long-term financial liabilities 8,499 10,933 of which, interest-bearing - 5,440 - 4,944 - 4,772 - 3,821 - 3,094 Provision for pensions 313 234 Current financial liabilities 7,939 5,069 1) L E Lundberg Kapitalförvaltning AB is recognized net. Long-term financial receivables - 51 - 53 Current financial receivables - 89 - 61 Cash and cash equivalents - 1,491 - 818
LUNDBERGS AS AN INVESTMENT COMPANY 15,120 15,303
Net asset value and cash flow are presented on this spread, while other alternative performance measures and other key figures are presented LUNDBERGS 2016 – on page 3.
13 The Lundberg share
SEK 600
500
400
300
200
100
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Feb
Lundbergs Series B OMX Stockholm Index
Series B Lundberg shares are listed on Nasdaq OMX Nordic, Large of SEK 10. The shares are divided into 48,000,000 Series A shares, Cap. On average, 83,728 Series B shares were traded per trading carrying ten votes per share, and 76,000,000 Series B shares, day in 2016. Total share turnover amounted to 21.2 million Series carrying one vote per share. B shares, corresponding to 28% of the total number of Series B shares. The lowest price paid for the share in 2016 was SEK 399.00 Repurchase of own shares and the highest was SEK 592.50. The Board has been authorized to purchase Lundberg shares. For more detailed information, see page 39. Market capitalization Lundbergs’ market capitalization at year-end was SEK 69,254 m. Ownership structure (57,958). The share price increased 19% during the year. The number of shareholders in Lundbergs totals approximately 27,900 (24,700). Of the total shareholders, some 24,000 (20,700) Share capital are registered in a nominee’s name and about 3,900 (4,000) in the The share capital of L E Lundbergföretagen AB (publ) amounted owner’s own name. Foreign ownership accounts for 7.1% (5.5) of to SEK 1,240 m. at year-end. On December 31, 2016, the total the share capital. number of shares was 124,000,000, each with a quotient value
Key figures 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividend per share, SEK 4.50 3.00 3.25 3.75 4.00 4.30 4.60 5.00 5.30 5.60 1 Growth in dividend, % 6 - 33 8 15 7 8 7 9 6 6 Direct return, % 2.4 2.0 1.8 1.5 2.0 1.9 1.7 1.5 1.1 1.0 Total return, % - 15.6 - 15.3 22.2 40.1 - 17.6 15.3 20.7 25.9 40.0 20.9 Stock market price, Dec 31, SEK 184.00 152.00 182.00 250.00 203.00 229.90 272.70 338.20 467.40 558.50
1) Board of Directors’ proposal.
14 The largest shareholders Total return Feb 2017 Feb 2016 % Holdings as % of Holdings as % of 50 share voting share voting capital rights capital rights 40 Fredrik Lundberg including companies and spouse 42.3 71.0 42.3 71.0 30 Louise Lindh including family 14.0 11.2 14.0 11.2 Katarina Martinson including family 14.0 11.2 14.0 11.2 20 Alecta Pensionsförsäkring 2.4 0.5 2.7 0.6 10 SEB Funds and Trygg Liv 1.7 0.4 1.7 0.4 Spiltan Aktiefond 0.7 0.2 0.5 0.1 0 CBNY-Norges Bank 0.6 0.1 0.6 0.1 -10 Insurance company, Avanza Pension 0.5 0.1 0.5 0.1 Handelsbanken Funds 0.5 0.1 0.7 0.2 -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Skandia Funds 0.5 0.1 0.5 0.1 Total return - Sum total of change in share price and Others 22.9 5.1 22.6 5.1 reinvested dividend. Total 100.0 100.0 100.0 100.0
Swedish shareholders 92.9 98.4 94.5 98.8 Foreign shareholders 7.1 1.6 5.5 1.2 Dividend and direct return Total 100.0 100.0 100.0 100.0 SEK % 6 6
Distribution of shareholders 5 5
No. of Average no. 4 4 No. of As % of all shares As % of of shares/ shareholders shareholders held share capital shareholder 3 3 1 - 500 22,808 81.7 2,639,442 2.1 116 2 2 501 - 2,000 3,617 12.9 3,843,561 3.1 1,063
2,001 - 5,000 807 2.9 2,697,872 2.2 3,343 1 1 5,001 - 20,000 461 1.7 4,373,916 3.5 9,488 20,001 - 50,000 132 0.5 4,219,173 3.4 31,963 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 20161 50,001 - 107 0.4 106,226,036 85.7 992,767 Dividend/share Direct return, right scale Total 27,932 100.0 124,000,000 100.0 4,439 1) Board of Directors’ proposal.
Direct return - Dividend per share as a percentage of share price on December 31.
Trend of share capital, SEK m. Share capital Total paid in/ Added/ paid-out amount canceled Total 1981 Bonus issue, 3:1 75 100 1982 Bonus issue, 1:1 100 200 1983 New issue 300 30 230 LUNDBERGS AS AN INVESTMENT COMPANY 1984 Bonus issue, 1:1 230 460 1989 New issue 412 46 506 1990 Bonus issue, 1:2 253 759 2000 Cancelation of treasury shares - 909 - 76 683 2002 Cancelation of treasury shares - 884 - 62 621 2011 Cancelation of treasury shares - 30 - 1 620 2011 Bonus issue, 1:1 620 1,240
LUNDBERGS 2016 –
15 Annual rental revenues by type of premises
Other 9% Housing 39%
Retail 17%
Office 35%
Annual rental revenues by region
West 23% East 46%
Stockholm 31%
Maturity structure of rental contracts, commercial premises SEK m. 210
180
150
120
90
60
30
0 2017 2018 2019 2020 2021 2022-
Share of Lundbergs’ total assets 16.8% SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES
Chairman Fredrik Lundberg CEO Louise Lindh www.lundbergs.se LUNDBERGS 2016 –
16 Fastighets AB L E Lundberg
Founded in 1944, Fastighets AB Business concept, vision Our regions L E Lundberg has grown into one and objectives Based on our business concept, our long- of the largest private real estate STOCKHOLM REGION term vision is to own, manage and develop R owners in Sweden, with approx- residential and commercial properties on a RLS D ES LS UN imately SEK 18 billion in property long-term basis: S L We intend to be a leading developer of sus- value. WEST REGION REBR S DER L E tainable urban environments where people, companies and organizations can develop N RR P NG The company has largely built up its real interactively. L N P NG estate portfolio itself, a portfolio that con- G ENBURG N P NG sists of housing and commercial premises, Our overarching objective is to be the most EAST REGION primarily for offices and retail. Its business competitive and development-oriented has performed well in recent years through company in the industry, offering a world- active management, acquisitions and new- class customer experience. build projects. Organization Fair value by market area The company’s operational activities are The competitive landscape Arvika 2% Norrköping 25% divided into three regions: Stockholm, West Örebro 3% Historically, the real estate market has Gothenburg 8% been slow moving and relatively stable in a and East. Property management and devel- Karlstad 9% changing world. However, the rapid transi- opment operations are led by the respective tion now taking place, for reasons including regional managers. Eskilstuna 5% digital advances and customers’ higher Everyday management, rental activities demands, means that the real estate and property upkeep are handled in our Södertälje 8% Linköping 12% market is being affected increasingly faster market areas by a decentralized, customer- Stockholm/ Solna 21% Jönköping 7% as well. Major investments in properties focused organization. Long-term tenant must interplay with an ever higher need for relationships are created through high ser- flexibility on the part of our customers. We vice standards and personal meetings, thus want to be the best player in the market increasing our understanding of our tenants’ Fair value trend for investment in this challenging and changing environ- needs and wishes. properties ment. All of our central resources that support our operations are located at our Norr SE b SE b 2 5 20 Strategy köping headquarters. A comprehensive strategy effort was The members of the executive manage- 2 0 16 completed in 2016 in order to increase our ment team are the CEO, the Head of Rental 12 competitiveness. The new strategy is based and Property Administration, the Head of 1 5 Communication and Sustainability, Regional on several cornerstones that we want to de- 1 0 8 velop. The fundamental concept is to actively Managers, the Chief Accountant, the Head of work on the development of our organiza- Human Resources and the Head of Project 0 5 4 tion and our employees, but we must also Development. 0 0 0 develop in cooperation with other players Louise Lindh became the new President such as customers and suppliers. We believe and CEO of Fastighets AB L E Lundberg 0 5 strongly in close cooperation with external on January 1, 2017. Louise has been with
SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES 1 0 players in order to satisfy future customer the company since 2005, in roles including 2012 2013 2014 2015 2016 needs. This process, together with genuine Executive Vice President and Regional Man- e e D e e curiosity about innovation, ensures that our ager for Stockholm. Peter Whass, CEO since F e e e e products and services remain at the abso- 2004, will remain on the company’s Board of lute cutting edge. Directors, and will continue as the working Chairman of the Board of our subsidiary Byggnads AB L E Lundberg. LUNDBERGS 2016 –
17 Real estate portfolio more than 1,000 apartments. Sales agree- is especially pronounced in Stockholm and Fastighets AB L E Lundberg operates in 10 ments were drawn up for three of the blocks Gothenburg, but other regional cities are market areas, from Stockholm in the east in 2016. seeing a positive rental trend as well. As a to Gothenburg in the west. The real estate The expansion of the new Björkalund result of the strong market during the year, portfolio’s approximately one million square district in Norrköping has begun. The area is we completed several renegotiations with meters are distributed across 136 proper- located close to nature near Vrinnevi Hospi- positive outcomes. During 2016, we reached ties, and residential premises account for tal. Sales of approximately 60 single-family new peak levels for office rents in all of our about 47% of this space. The remaining plots will begin in 2017, and the area will office markets. space consists of commercial premises, contain some 500 housing units in total. Retail mainly office and retail space, but also edu- Developable land for about 60 single- We have retail premises in all of our market cational facilities, gyms, movie theaters and family homes has been sold in Hammarö, areas, although the main emphasis is on Norr- warehouses. outside Karlstad. köping, Linköping and Jönköping. While the An additional zoning plan in Ekeby-Alm- performance of our shopping malls and other by outside Örebro became legally binding in Sales, acquisitions and investments centrally located stores is good, consumer be- Properties were acquired for SEK 111 m. 2016. It contains development rights for 75 havior is changing rapidly for reasons includ- and SEK 265 m. was invested in property single-family homes, and project planning ing digitization and maturing online shopping. projects. Land held for future development will begin in 2017. We work closely with our tenants in order to was sold for SEK 52 m., generating a gain of offer a customer journey that will also attract SEK 46 m. On December 31, the property Real estate market the consumers of the future. value totaled SEK 18.3 billion (17.0). The Swedish real estate market performed In 2016, the real estate portfolios in strongly in 2016, with rising prices and Housing Katrineholm and Uppsala were sold for a numerous transactions. Transaction volumes Our housing units maintain a high level of total of SEK 911 m. were at a record level of some SEK 200 bil- quality, in large part thanks to systematic In Gothenburg, the company acquired lion, compared with about SEK 150 billion in management close to our tenants. Renova- the properties Gårda 8:2 and 8:5, which are 2015. tion, refurbishment and extension projects adjacent to one of the company’s properties, The combination of healthy growth and are under way in parts of our portfolio to thus allowing for a larger new-build project. low interest rates has resulted in ever lower ensure the long-term sustainability of our In Örebro, the newly produced proper- yield requirements, as well as a strong rent properties. The leasing rate for our housing ties Körveln 3 and Grönpepparn 1 were trend for commercial properties. units is excellent, at slightly more than 99%. completed, with a total of 87 rental apart- Residential construction has taken off in The relocation rate has been reduced to ments. An infill project consisting of 18 rental many parts of the country, but more actions 15% (17), largely as a result of limited supply. apartments in the Glasberget 19 property in are needed to address the prevailing hous- Karlstad was also completed. ing shortage. An overhaul of the rent setting Satisfied tenants We are constructing 392 rental apart- system is an example of a necessary action. We survey our residential tenants annually ments in 11 buildings over three blocks Many players are building rental apart- through AktivBo, which analyzes some 300 adjacent to the Industrial Landscape district ments, which could affect the residential companies with a total of 900,000 apart- of central Norrköping. The area, known as rental market in many municipalities in a ments. Our tenants’ opinions are extremely Kvarnbacken, is centrally located close to the few years. It is therefore important for the positive and, in early 2016, Lundbergs won Motala River, the university and the Louis new housing units we are building to be of the “Hederskristallen” award for consistent De Geer concert hall and conference center. sufficiently high quality to ensure long-term quality throughout the company. The nomi- Tenants are expected to move into the first attractiveness and profitability. nation included the following rationale: block in the third quarter of 2018. “Lundbergs stands out as one of Sweden’s Lundbergs’ markets best housing companies.” The rental market has been stronger in all Real estate development and prop- A corresponding survey of commercial ten- segments of all of Lundbergs’ submarkets erties held for future development ants is performed every second year, and compared with previous years. The company’s development properties are one was conducted in 2016. The results of mainly located in central Sweden. Offices the survey show a positive trend in both the In Norra Munktellstaden, Eskilstuna, the Demand for both newly produced and exist- service and product areas. Our service rating infrastructure has been improved for nine ing office premises is high, leading to rent improved from 84% to 87%, and our product blocks containing development rights for increases and lower vacancies. The trend rating from 72% to 77%.
18 Krokslätt 149:16, Göteborg
Value growth sources. Lundbergs stands for sound values As a real estate owner, Lundbergs is a long- and, with our financial stability, we can take term player that considers value growth, responsibility for our part of social progress. profitability, low risk and financial strengths Long-term profitability is a fundamental as critically important. requirement for us to be able to implement Since value growth is primarily created our strategies and achieve our goals. Profit- through higher rental revenues, it is of the ability is also a requirement for sustainable utmost importance that we offer high-quality development and responsible enterprise. housing units and commercial premises, as With our stable financial position, we are a Käpplingeholmen 6, Stockholm well as service that ensures high customer reliable business partner for both customers satisfaction. and suppliers, while simultaneously being Our new-build projects are an important an attractive employer for skilled human part of value growth for the company. When resources. Our customers feel secure with a we build housing units, we build them in property owner who is reliable, will honor its attractive locations offering healthy returns, contracts and has the ability to invest in its where we judge the prospects for future properties. satisfactory value growth to be strong. Our project development is quality controlled Community responsibility and cost-effective. Community responsibility is a matter of Value growth is also created by actively relationships with customers, employees, refurbishing and developing our existing suppliers, community players and other properties with our own personnel. stakeholders. In order to grow together, it Our strong rental operation results in is important for our stakeholders to share low vacancies in our real estate portfolio and our values and we will introduce a Code of Gäddan 6, Södertälje we ensure that ongoing property manage- Conduct for suppliers in 2017. ment is run efficiently by implementing For Lundbergs, social responsibility also continuous improvements. means that we are an involved party in the market areas where the company operates, Sustainable enterprise and that we cooperate with customers, As landlords and property and city devel- municipalities and other partners. opers, we have a large impact on people’s Our employees are one of Lundbergs’ everyday lives. For Lundbergs, sustainable principal assets. We create a culture where development means meeting today’s needs we and our customers can live better lives without sacrificing the possibilities of future through our employees’ involvement, skills generations to meet their own needs. and capacity for innovation. As an employer, Because a long-term approach and sus- we take responsibility and aim to provide tainability are mutually dependent, sustain- a secure work environment and a good ability is a natural part of our business. Our working atmosphere where our employees sustainability efforts are based on environ- experience satisfaction and professional mental, social and economic value creation, development. with all three aspects important to creating a Pleasant offices unified entity and a successful company. All Social responsibility of our work must be characterized by high Our social responsibility applies not only to SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES ethical and moral standards. our stakeholders and employees, but also includes a commitment to a sustainable Economic sustainability society in matters large and small. As part The foundation of economic sustainability of our endeavor to achieve our vision – to is to create balanced economic growth that create sustainable urban environments – we does not have a negative impact on ecologi- also contribute to society through involve- cal or social sustainability. It’s important to ment and participation in urban develop- LUNDBERGS 2016 – take care of both people and natural re- ment in the market areas where we operate. 19 Total energy consumption 1 Participation in industry associations perspective. The aim is to take care of the and networks increases our knowledge and assets we have, our properties and the ar- kWh/sqm Atemp our ability to make a positive difference. eas around them, thus creating sustainable 120 For example, we may participate in urban development. We also want to be city-center development groups, city-center part of the development of future sustain-
110 associations, the local business commu- able solutions, and we are on the cutting nity, universities and sports clubs. At the edge when it comes to new products and company level, we are members of the services. 100 Swedish Property Federation, where we Long-term investments in energy pursue such issues as the development of efficiency measures are a critical part of rental apartments as a form of housing, bet- creating a sustainable future. We continu- 90 ter conditions for the construction of rental ously look for improvements in construction 2012 2013 2014 2015 2016 apartments and city-center development. engineering, updated technology in our Housing Commercial premises We are also members of the Sweden Green properties and improved understanding of Building Council, which is responsible for the the issues both within and outside the com- kWh/sqm Atemp 120 SGBC certification system. pany. We work according to clear objectives and with high performance demands. 100 Code of Conduct For many years, we have been one of a 80 Lundbergs’ long-term success is dependent small number of companies that is quality, on managing its business in a responsible environmentally and energy certified accord- 60 manner. ing to the ISO 9001:2015, 14001:2015 and 40 Our Code of Conduct is a foundation for 50001:2011 standards.
20 how Lundbergs employees are to conduct Lundbergs’ carbon footprint is largely themselves both towards one another and associated with our properties. Our opera- 0 2012 2013 2014 2015 2016 towards customers and other stakeholders. tions must be performed with the minimum
Heating Electricity Cooling It is based on the principles of the UN Global possible impact on the environment, and Compact, and clarifies Lundbergs’ posi- we must work proactively to minimize our 1) Normal year adjusted values. tions on human rights, working conditions, carbon footprint. Atemp – total internal area that is heated to more than 10 °C. business ethics and information. Lundbergs The consumption of energy by prop- must comply with laws and regulations, erties accounts for nearly 40% of energy must not discriminate against anyone and consumption in Sweden. Reducing the envi- must apply responsible business methods ronmental footprint of our operations con- that exemplify a high level of business ethics tinuously requires methodical work on nu- and acceptable business practice. merous small improvements. Our long-term The company also has a policy for objective is for our total energy consumption
ethical guidelines that all employees have to be below 100 kWh/sqm Atemp by 2020. signed. The policy addresses issues of Thanks to an intensive process, we are now business ethics and how the company is to close to our goal: in 2016, we consumed
act towards employees, tenants, custom- 101.2 kWh/sqm Atemp. We can declare with ers, suppliers and other stakeholders. One pride that we are one of Sweden’s leading important aspect of the ethical guidelines players in this area. Our prize in Sweden’s is to clarify that Lundbergs does not accept leading energy contest organized annually
SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES any form of corruption. We also continu- by E.ON and Veckans Affärer is confirmation ously perform supplier assessments in order that we are on the right track. In 2016, we to ensure that suppliers live up to the com- won in the energy efficiency category, with pany’s requirements. the following commendation: “Systematic efforts and a strong-willed lead- Environment and energy ership that can inspire others in an industry We safeguard the environment, both in where there is a lot left to do.” LUNDBERGS 2016 – our immediate vicinity and from a systems
20 We have consciously decided to invest in 1,250 m. (1,229). Excluding properties sold Operating profit renewable electricity. Since January 1, 2016, in 2016, the increase was SEK 70 m. The SEK m. 2016 2015 Lundbergs only purchases wind-generated increase refers to the largest section, offices, Net sales 1,347 1,343 electricity and, in spring 2016, we commis- and was primarily attributable to the newly Operating expenses - 602 -565 sioned a 1,100 square meter solar-panel produced Barkassen 5 property in Karlstad, Depreciation - 5 -5 power station located on the roof of the which was completed on July 1, 2015, and to Changes in value 1,510 1,344 Lindens shopping mall in Norrköping. The new space completed during autumn 2015 Operating profit 2,251 2,117 power station is of significant size, and is in the Braxen 19 property in Linköping. The estimated to generate 160,000 kWh/year, vacancy rate totaled 2.9% during the year which is equivalent to the annual ordinary (3.8), of which housing accounted for 0.7% consumption of household electricity for (0.6) and commercial premises for 4.2% Investment properties some 70 apartments. (5.9). SEK m. 2016 2015 Our Lyckan parking garage in central Operating costs, excluding property tax, Opening fair value 16,697 14,902 Norrköping has charging stations for electric amounted to SEK 218 m. (221). Although Acquisitions 111 3 cars. Demand for charging stations is total energy consumption decreased, higher Investments in investment properties 226 220 increasing among both residential and office rates resulted in largely unchanged costs property projects 265 245 tenants. compared with the preceding year. Property Divested properties - 888 We employ two types of environmental tax amounted to SEK 63 m. (58). Mainte- Unrealized change in value 1,464 1,328 classifications: Miljöbyggnad for new produc- nance costs totaled SEK 154 m. (154). Closing fair value 17,876 16,697 tion and GreenBuilding for our existing port- Operating profit was SEK 2,251 m. folio. We aim to achieve the Miljöbyggnad (2,117). In the real estate portfolio, holdings gold level for new production of commercial of management properties had a fair value premises, and silver for the new production of SEK 17,876 m. (16,697) on December Trend in net rental revenues of housing. 31, 2016 and development properties a SEK m. All of our commercial tenants are of- fair value of SEK 417 m. (352). Investments 1,400 fered the opportunity to sign Green Leases. in investment properties amounted to SEK 1,200
226 m. (220), in new property projects to 1,000 Sales and earnings SEK 265 m. (245) and in equipment to SEK 800 Net sales totaled SEK 1,347 m. (1,343). 8 m. (4). During the year, properties were 600 Rental revenues rose SEK 22 m. to SEK acquired for SEK 111 m. (3). 400
200
0 2012 2013 2014 2015 2016 Key figures Stockholm Region West Region East Region Total Number of properties 30 46 60 136 Fair value, SEK m. 5,968 4,004 7,904 17,876 Number of apartments 2,215 1,877 2,055 6,147 Residential units, sqm 166,579 133,083 149,080 448,742 Residential, rent per sqm, SEK 1,042 1,042 1,146 1,077 Residential, rental value, SEK m. 174 139 177 483 Residential, rent-based vacancy rate, % 0.6 1.3 0.2 0.7
Office and retail, sqm 69,169 91,538 171,651 332,358 SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES Other commercial premises, sqm 39,096 36,202 90,225 165,523 Office/retail, rent per sqm, SEK 2,631 1,521 2,030 2,015 Other commercial premises, rent per sqm, SEK 784 638 607 655 Office/retail, rental value, SEK m. 182 139 348 670 Other commercial premises, rental value, SEK m. 31 23 55 108 Office/retail, rent-based vacancy rate, % 2.1 2.4 5.2 3.7 Commercial premises, number of rental contracts 266 256 742 1,264 LUNDBERGS 2016 –
21 The Hufvudstaden share
SEK 160
140
120
100 Jan 16 March May July Sept Nov Jan 17 Feb
Hufvudstaden A OMX Stockholm Index
Annual rental revenues by region
Gothenburg 17% Stockholm City East 45%
Stockholm City West 38%
Annual rental revenues by type of premises
Garage 3% Office 47% Storage and other 4%
Retail and restaurants 46% SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES
Chairman Fredrik Lundberg CEO Ivo Stopner www.hufvudstaden.se LUNDBERGS 2016 –
22 Hufvudstaden
Hufvudstaden, which was founded This business area includes the NK proper- HIGHLIGHTS OF THE YEAR in 1915, is one of Sweden’s leading ties in Stockholm and Gothenburg and the NK brand. It also includes the subsidiary real estate companies. The com- Parkaden, which has parking operations in Gross profit increased 8 percent to SEK pany’s business concept is to use two of Hufvudstaden’s properties. 1,262 m. (1,172). The increase was primarily its own properties in central Stock- The Gothenburg business area com- attributable to higher rental revenues. holm and central Gothenburg to prises four properties with total rentable The year-end market value of the real space of 88,700 square meters. Hufvud- estate portfolio was assessed at SEK 36.5 offer high-quality office and retail staden is one of the largest owners of the billion (31.7), resulting in net asset value of SEK 138 per share (118). premises to successful companies Nordstans shopping center, the leading in attractive marketplaces. shopping center in Sweden and one of the In Bibliotekstan, total refurbishment of the largest shopping malls in Europe. Vildmannen 7 property has commenced, Hufvudstaden’s real estate portfolio is Hufvudstaden works actively to which will result in more attractive and modern retail and office premises. concentrated in prime locations in inner- develop the high quality and efficiency city Stockholm and Gothenburg. The of its real estate portfolio with the aim of company owns commercial office and creating favorable value growth. Through retail properties in the central business development measures, the premises gain districts, including Hamngatan, Norr higher technology standards and more malmstorg, Kungsgatan and Bibliotekstan space-efficient layouts, thus contributing Key financial data in Stockholm and Inom Vallgraven and to an improved operating net and higher 2016 2015 Net sales, SEK m. 1,790 1,689 Östra Nordstan in Gothenburg. This makes returns. Operating profit before Hufvudstaden one of the most special- The company focuses on providing a change in value, SEK m. 1,220 1,133 ized and geographically concentrated real high level of service, which requires close Operating profit, SEK m. 5,425 4,572 estate companies in Sweden. Rentable collaboration with tenants. All properties Profit after net financial items, SEK m. 5,284 4,449 space totals 389,000 square meters, with are located within walking distance of Earnings/share, SEK 19.98 16.82 Hufvudstaden’s offices and the company’s an annual rental value of SEK 1.8 billion. Dividend/share, SEK 3.301 3.10 The market value of the real estate port own operational engineers account for Share price, Series A, Dec 31, SEK 143.90 119.90 folio was estimated at SEK 36.5 billion at management and maintenance of the 1) Board of Directors’ proposal. the end of 2016. properties.
Largest shareholders, Dec 31, 2016 Business areas Financial objectives Hufvudstaden’s financial objective is to Percentage of The operation is divided into three busi- share voting ness areas. Stockholm City East comprises achieve favorable, sustained dividend capital rights 16 properties with total rentable space growth, and the dividend should represent Lundbergs 44.2 87.6 of 151,000 square meters. Stockholm City more than half of net profit from operat- State Street Bank and Trust 6.8 1.4 Citi Bank 4.9 1.0 West comprises nine properties with total ing activities. Over time, the equity/assets JP Morgan Funds 3.5 0.7 rentable space of 149,300 square meters. ratio should amount to at least 40%. NTC Wealth 2.8 0.6
Lundbergs’ holdings, Feb 21, 2017 Number of Series A shares 85,200,000
SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES Number of Series C shares 8,177,680
Share of Lundbergs’ total assets 19.1% LUNDBERGS 2016 –
23 The Holmen share
SEK 400
350
300
250
200 Jan 16 March May July Sept Nov Jan 17 Feb
Holmen B OMX Stockholm Index
Net sales by business area
Energy 2% Forest 17% Timber products 9%
Paper 37% Paperboard 35%
Net sales by market
Outside Europe 13% Sweden 24%1
Rest of Europe 64% 1) Of which, forest and energy 19% SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES
Chairman Fredrik Lundberg CEO Henrik Sjölund www.holmen.com LUNDBERGS 2016 –
24 Holmen
Holmen is a forest industry group forests amounted to some 3.0 million HIGHLIGHTS OF THE YEAR whose strategy is to own forest cubic meters in 2016, corresponding to a self-sufficiency rate of about 50%. and energy assets and to develop Paperboard produces and sells solid board The newsprint mill in Madrid was sold during industrial operations in paper- and folding boxboard based on virgin fiber the year. As a result, printing paper opera- board, printing paper and sawn at one mill in Sweden and another in the tions are being focused on virgin-fiber-based magazine and book paper. timber. The substantial forest and UK. The products are used primarily as consumer packaging materials for such An investment program at the cartonboard energy assets shall deliver stable applications as confectionary, perfume, mills in Iggesund and Workington was com- revenue that grows over time. pharmaceuticals and cosmetics, as well as pleted. These actions provide potential for growth in Holmen’s cartonboard operations. Large-scale industrial operations at for graphic-design applications. efficient facilities shall provide good Paper produces printing paper for maga- In Global 100, an index that ranks the world’s zines, product catalogs, direct advertising, most sustainable companies, Holmen’s position was 21st. profitability through the refining books and newspapers at two Swedish of forest raw material into high- mills. performance consumer paper- Sawn timber products manufactures board, cost-effective printing paper redwood and spruce timber products at two sawmills in Sweden that are integrated and sawn timber for the joinery with the group’s paperboard and printing Key financial data and construction industries. paper production. 2016 2015 Energy accounts for the Holmen group’s Net sales, SEK m. 15,513 16,014 Operating profit, SEK m. 1 2,162 1,700 The group’s production in 2016 totaled hydro-power and wind power assets, Profit after tax, SEK m. 1 1,652 1,323 0.5 million metric tons of paperboard, as well as electricity supply to Holmen’s Earnings/share, SEK 1 19.67 15.80 1.1 million metric tons of printing paper Swedish units. Power generation in 2016 Dividend/share, SEK 12.00 2 10.50 and 0.8 million cubic meters of sawn amounted to 1.1 TWh and, together with Share price, Series B, Dec 31, SEK 326.80 261.60 timber products. Europe accounts for the electricity produced at the mills, this 1) Excluding items affecting comparability. about 90% of sales via Holmen’s own sales accounted for some 40% of the group’s 2) Board of Directors’ proposal. companies and the group has about 3,000 electricity consumption. employees. Largest shareholders, Dec 31, 2016 Financial objectives Percentage of Business areas The group aims to generate a return on share voting capital rights Forest is responsible for the management capital employed in excess of 7%. Another Lundbergs 32.9 61.6 and development of Holmen’s forest hold- aim is to have a strong financial position Kempe Foundations 7.0 17.0 ings and for the efficient supply of timber with a debt/equity ratio that does not Carnegie Funds Sweden 5.4 1.6 to the group’s Swedish production units. exceed 0.5. Dividends are to be based on Lannebo Funds 3.3 1.0 Holmen’s holding of land slightly exceeds the group’s profitability situation, invest- Alecta 2.9 0.8 one million hectares of productive forests ment plans and financial position. in Sweden and harvesting in wholly owned Lundbergs’ holdings, Feb 21, 2017 Number of Series A shares 16,622,000 Number of Series B shares 11,000,000
SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES Share of Lundbergs’ total assets 13.9% LUNDBERGS 2016 –
25 The Indutrade share
SEK Indutrade 200
180
160
140
120 Jan 16 March May July Sept Nov Jan 17 Feb
Indutrade OMX Stockholm Index
Key financial data 2016 2015 Net sales, SEK m. 12,955 11,881 Operating profit, SEK m. 1,272 1,235 Profit after net financial items, SEK m. 1,194 1,137 Earnings/share, SEK 1 7.78 7.44 Dividend/share, SEK 3.202 3.00 Share price, Dec 31, SEK 183.00 160.17
1) After dilution. 2) Board of Directors’ proposal.
Net sales by business area
prerequisites needed to implement value- Special Engineering & Indutrade is an international Products 31% Equipment 12% industrial group that manufactures, creating acquisitions. During 2016, 11 com Fluids & panies with combined annual sales of just Mechanical sells and develops components, over SEK 1.1 billion were acquired. Solutions 12% systems and services with a high-
Measurement tech content. Organization & Sensor The organization is strongly decentralized Technology 9% Indutrade comprises slightly more than and the subsidiaries operate within clearly Industrial Flow Technology Components 19% 17% 200 companies in 28 countries on four defined market niches. The companies continents. The four principal geographic have sophisticated skills in their respec- Largest shareholders, Dec 31, 2016 markets are Sweden, Finland, the UK/ tive areas of technology, thus generating Percentage of share capital and voting rights Ireland and Benelux. added value for their customers. Lundbergs 26.3 Indutrade has widespread representa- The group is divided into six business Didner & Gerge Funds 9.8 tion in various customer segments. The areas: Engineering & Equipment, Flow AMF Försäkring and funds 6.5 dominating segments are engineering, Technology, Fluids & Mechanical Solutions, Handelsbanken funds 5.6 construction, infrastructure and energy. Industrial Components, Measurement & SEB Investment Management 3.7 Activities are concentrated in two main ar- Sensor Technology and Special Products. eas of operation: companies with sales of industrial technology and companies with Lundbergs’ holdings, Feb 21, 2017 Financial objectives their own brands and manufacturing. The Number of shares 31,575,000 The objective is that average sales growth group strives to continuously grow within and the EBITA margin should be at least selected markets, product areas and nich- Share of Lundbergs’ total assets 7.8% 10% annually over an economic cycle. The SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES es. Indutrade has multi-year experience annual return on operating capital is to of company acquisitions. During the past average at least 20% over a business cycle. decade, more than 100 companies have The net debt/equity ratio should normally been acquired. Through its strong history not exceed 100%. Dividend payments of acquisitions, Indutrade has the size and should be between 30 and 60% of profit Chairman Fredrik Lundberg the favorable reputation, experience and CEO Johnny Alvarsson after tax. (Bo Annvik fr o m April 27, 2017) www.indutrade.se LUNDBERGS 2016 –
26 expertise. high-tech and range product competitive a network, distribution global abroad has number of regional company The brands. a has it brands, core group’s the Gardena, and Husqvarna to addition In countries. 40 over in employees 13,000 than more has group The 100 countries. of excess in professionals and consumers to stores retail specialized through mainly sold are solutions and products group’s The and stone industries. diamond tools for construction and equipment in cutting leaders market global ofthe one and ucts prod watering garden in leader market aEuropean also is group The gardens. and parks forests, of upkeep the for products other many and trimmers saws, chain lawnmowers, ride-on lawnmowers, ofrobotic manufacturer leading aworld- is group Husqvarna The Group Husqvarna - expected to make a positive contribution. contribution. apositive make to expected are products, other among lawnmowers, Robotic growth. profitable on focusing now is group the program, improvement major a implemented successfully having After dena Husqvarna divisions: four has Group Husqvarna The demand. in fluctuations and variations seasonal manage to group the enabling thus flexibility, high by ized character is chain delivery The volumes. in through production large effectiveness cost high achieves and units production diversified geographically has group The exceed 25% exceed not must sales net to relation in capital ing work Operational 10%. least at to amount to is margin operating The division. Brands Consumer the excluding annually, 3-5% by increase to are Sales objectives. financial new introduced 2016, Husqvarna During Financial objectives and and Brands , Consumer . Construction , Gar . - - -
LUNDBERGS 2016 – SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES Gardena 14% Swedbank Robur Funds Robur Swedbank Lannebo Lannebo Funds Funds &Gerge Didner Lundbergs Investor Key financial data financial Key Share of Lundbergs’ total assets 4.8% assets total Lundbergs’ of Share Bshares Series of Number Ashares Series of Number 21, Feb 2017 holdings, Lundbergs’ Share price,SeriesA,Dec31,SEK Net sales,SEKm. Net sales by business area business by sales Net 1) 2) The Husqvarna share Husqvarna The Largest shareholders, Dec 31, Dec 2016 shareholders, Largest Chairman Tom Johnstone Tom Johnstone Chairman Profit afternet Operating profit,SEKm. Dividend/share, SEK Earnings/share, SEK SEK 25% Brands Consumer Construction 11% www.husqvarnagroup.com Wärn Kai CEO 80 70 40 50 60 Including nonrecurring items amounting to an an to amounting items nonrecurring Including Board of Directors’ proposal. Directors’ of Board 2015. in 153 m. SEK of expense financial items,SEKm. Jan 16 Husqvarna March May A July 1 OMX StockholmIndex Sept capital 35,982 share share Percentage ofPercentage 70.60 3,218 2,796 2016 16.8 1.95 3.66 Nov 2.5 3.0 4.7 7.5 Husqvarna 50% 39,400,000 2 3,950,000 LUNDBERGS 2009 – LOREM IPSUM Jan 17
36,170 voting rights 55.70 2,827 2,483 2015 25.0 32.9 1.65 3.28 2.7 1.8 1.1 Feb 27
The Industrivärden share
SEK Industrivärden 200
180
160
140
120 Jan 16 March May July Sept Nov Jan 17 Feb
Industrivärden A OMX Stockholm Index
Key financial data 2016 2015 Profit after tax, SEK m. 16,451 3,104 Net asset value, SEK billion 82.8 69.1 Net asset value per share, SEK 191 160 Net debt/equity ratio, % 12 15 Dividend/share, SEK 5.251 5.00 Share price, Series A, Dec 31, SEK 180.20 158.90
1) Board of Directors’ proposal.
Composition of stock portfolio, share of market value, Dec 31, 2016
SSAB 4% Handelsbanken 26% Ericsson 5% ICA Gruppen 6% Industrivärden is a long-term, of ownership of 20-30% of the capital is Skanska 7% value-creating asset manager desirable. The share portfolio currently of listed Nordic companies. comprises eight companies, of which Industrivärden’s business concept Handelsbanken, SCA, Sandvik and Volvo are the largest holdings. The holdings are Volvo 16% is to conduct professional asset characterized by tried-and-tested business management through active Sandvik 18% SCA 18% models and distinct potential for profitable ownership in order to generate a growth. The valuation of the investments Largest shareholders, Dec 31, 2016 return for Industrivärden’s share- must also be attractive and provide a Percentage of holders in excess of the market’s favorable balance between risk and return. share voting return requirement. Taking the risk By involvement in nomination committees capital rights profile of the portfolio investments and boards, Industrivärden exercises ac- Lundbergs 16.1 23.3 Handelsbanken’s into account, the shareholders tive governance. The company also coop- Pension Foundation 6.9 10.6 should receive a total return that erates with other shareholders and various Jan Wallanders & Tom Hedelius participants in the capital market. Indus- Foundation 6.1 9.3 over time exceeds the average for trivärden has a cost-effective organization SCA Pension Foundation 4.1 6.2 the Stockholm Exchange. SCA Vorsorge-Treuhand 2.1 3.2 characterized by high flexibility and short Fredrik Lundberg Industrivärden invests in listed Nordic decision-making paths. The organization incl. companies 2.1 3.0 companies with distinct return potential, comprises some 20 employees. where it can exercise active influence through a strong position of trust and Financial policies Lundbergs’ holdings, Feb 21, 2017 ownership-based positions of influence. Industrivärden’s dividend policy entails
Number of Series A shares 66,100,000 SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES The share of ownership should therefore that the company will generate a positive Number of Series C shares 3,500,000 amount to at least 10% of the number cash flow before portfolio changes and af- of votes and enable board representa- ter payment of dividends. The aim of this is Share of Lundbergs’ total assets 18.8% tion. For new investments, the portfolio to build investment capacity over time and company should have a minimum market be able to support portfolio companies Chairman Fredrik Lundberg CEO Helena Stjernholm capitalization of about SEK 3 billion and for when needed. The debt/equity ratio is to www.industrivarden.se investments in companies with a market be between 0 and 10%, but may periodi- LUNDBERGS 2016 – capitalization of SEK 3 to 10 billion, a share cally exceed or be lower than this range.
28 The Handelsbanken share
Handelsbanken SEK 140
120
100
80 Jan 16 March May July Sept Nov Jan 17 Feb
Handelsbanken A OMX Stockholm Index
Key financial data 2016 2015 Revenues, SEK m. 40,763 40,336 Profit before loan losses, SEK m. 22,325 22,065 Operating profit, SEK m. 20,633 20,475 Earnings/share, SEK 8.43 8.57 Dividend/share, SEK 5.00 1 6.002 Share price, Series A, Dec 31, SEK 126.60 112.90
1) Board of Directors’ proposal. 2) Of which, SEK 4.50 in ordinary dividend.
Income by type of revenue or central level, depending on the amount Handelsbanken is a full-service Other income 1% Net interest income 69% of the loan, but all loans are subject to Net gains/losses bank, with nationwide networks of on financial approval by the customer account office. items 8% branch offices in its home markets Handelsbanken’s primary targets groups of Sweden, the UK, Denmark, Fin- are corporate customers and private individuals with a better than average cash Net fee and land, Norway and the Netherlands. commission Founded in 1871, Handelsbanken flow and the bank always considers profit- income 22% ability to be more important than volume. currently has nearly 12,000 The group’s principal control instruments employees distributed among are its deeply rooted corporate culture more than 800 branch offices in and an effective follow-up system. For a Largest shareholders, Dec 31, 2016 over 20 countries. long time, Handelsbanken’s loan loss ratio has been lower than that of competitors. Percentage of share voting The bank is growing, mainly by opening Handelsbanken’s organization is strongly capital rights branches in locations where it has not decentralized and its operations are Oktogonen Foundation 10.1 10.2 previously been active. Industrivärden 10.0 10.2 always focused on customer require- Swedbank Robur Funds 3.2 3.2 ments. The basic idea is that the collective Alecta 2.1 2.2 responsibility for each client should be Financial objectives Lundbergs 2.0 2.0 concentrated to the local branch so that all Handelsbanken’s overall corporate objec- business decisions can be made close to tive is to achieve higher profitability than the customer. While business decisions are the average for comparable banks in its Lundbergs’ holdings, Feb 21, 2017 strongly decentralized, the bank’s credit home markets. The aim is to be achieved Number of Series A shares 39,000,000 policy is centralized and applies through- primarily by having more satisfied custom- SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES out the group. The assessment of the cred- ers and lower costs than competing banks. Share of Lundbergs’ total assets 7.2% it risk always proceeds on the basis of the Handelsbanken has achieved this target customer’s repayment capacity. For major each year over the past 45 years. loans, decisions are made at the regional Chairman Pär Boman CEO Anders Bouvin www.handelsbanken.se LUNDBERGS 2016 –
29 The Sandvik share
SEK Sandvik 140
120
100
80
60 Jan 16 March May July Sept Nov Jan 17 Feb
Sandvik OMX Stockholm Index
Key financial data 1 2016 2015 Invoiced sales, SEK m. 81,553 85,845 Operating profit, SEK m. 2 11,018 7,271 Profit after net financial items, SEK m. 9,366 5,308 Earnings/share, SEK 5.48 2.79 Dividend/share, SEK 2.75 3 2.50 Share price, Dec 31, SEK 112.70 74.05
1) Remaining operations. 2) Including non-recurring costs of SEK 3.3 billion for 2015. 3) Board of Directors’ proposal.
Sales by business area 1 Sandvik is a high-tech and global Sandvik Machining Solutions is a market Other 6% Machining Solutions 40% industrial group offering products leader in productivity-enhancing tools Materials and tool systems for advanced cutting Technology and services that enhance 16% metal processing in industrial applications. customer productivity, profitabil- Sandvik Mining and Rock Technology is a ity and safety. With some 43,000 world-leading supplier of machines, tools, services and technical solutions for the Mining and employees and sales in more Rock Technology mining and construction industry. Sandvik 38% than 150 countries, operations Materials Technology is a world-leading 1) Remaining operations. cover the entire globe. manufacturer of high value-added prod- ucts made of advanced stainless steel, Largest shareholders, Dec 31, 2016 Sandvik’s customers operate in many powder-based alloys and special alloys for Percentage of share capital and voting rights different sectors, primarily mining, engi- the most demanding industries. Industrivärden 11.8 neering, construction and energy, as well Alecta Pensionsförsäkring 5.9 as the automotive and aviation industries. Handelsbanken’s Pension Foundation 3.2 Financial objectives Swedbank Robur Funds 2.8 Industrial consumption products account By 2018, Sandvik has set an objective of AMF - Insurance and Funds 2,8 for about two-thirds of Sandvik’s products achieving average annual growth in operat- Lundbergs 2.4 and investment goods for one-third. ing profit of at least 7% and improving the return on capital employed by at least Business areas 3 percentage points. Net indebtedness in Lundbergs’ holdings, Feb 21, 2017 The Sandvik group conducts operations in relation to shareholders’ equity is to be Number of shares 30,000,000 three business areas that are responsible lower than 0.8 and 50% of earnings per
SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES for research and development, manu- share is to be distributed to shareholders. Share of Lundbergs’ total assets 5.3% facturing and sales of their respective products and services.
Chairman Johan Molin CEO Björn Rosengren www.home.sandvik LUNDBERGS 2016 –
30 The Skanska share
Skanska SEK 240
220
200
180
160
140 Jan 16 March May July Sept Nov Jan 17 Feb
Skanska B OMX Stockholm Index
Key financial data 2016 2015 Revenues, SEK m. 151,307 154,935 Operating profit, SEK m. 8,199 6,461 Profit after net financial items, SEK m. 8,081 6,148 Earnings/share, SEK 15.89 11.96 Dividend/share, SEK 8.251 7.50 Share price, Dec 31, SEK 215.10 164.80
1) Board of Directors’ proposal.
Revenues per market, Construction
USA Civil 13% Sweden 23% Skanska is one of the world’s property development initiates, develops, leases and sells commercial real estate leading construction and project USA Building projects, with a focus on offices, retail cen- 26% development companies focusing ters and logistics properties. Infrastructure on selected home markets in the development identifies, develops, oper- Norway 9% Nordic region, the rest of Europe ates and sells public-private partnership Finland 5% and North America. infrastructure projects, such as roads, hos- Poland 6% pitals, schools and power plants. Financial United Kingdom 14% Czech Republic 4% synergism is created because construction Supported by global urbanization and is conducted with negative working capital demographic trends and by being posi- and generates a positive cash flow over tioned at the cutting edge of sustainability, time. This cash flow together with the prof- Largest shareholders, Dec 31, 2016 Skanska offers competitive solutions for its generated by the group are invested in Percentage of both basic and complex assignments, thus share voting project-development operations, thus cre- helping customers and society as a whole capital rights ating a healthy return on invested capital to create a sustainable future. Cooperation Industrivärden 6.9 23.9 and also generating new assignments for Lundbergs 4.3 12.2 among the various business streams gen- the construction operations. Alecta 4.0 5.7 erates operational and financial synergism, Swedbank Robur Funds 1.9 2.7 which leads to increased value creation. Norges Bank 1.6 2.3 Skanska has approximately 41,000 Financial objectives employees active in four business streams. Skanska’s financial objective for 2016-2020 Construction is the group’s largest busi- is that the group will achieve an annual Lundbergs’ holdings, Feb 21, 2017 ness stream and includes residential and return on equity of 18%. The operating Number of Series A shares 6,032,000 nonresidential building construction as margin for construction operations must SUBSIDIARIES AND OTHER PORTFOLIO COMPANIES Number of Series B shares 11,550,000 well as civil construction. Construction as- be at least 3.5%. The project development signments are conducted both for external operations are to generate an annual Share of Lundbergs’ total assets 5.6% customers and for Skanska’s development return on capital employed of at least 10%. activities. Residential development initiates The dividend policy is to pay a dividend of Chairman Hans Biörck and develops residential projects primarily 40-70% of net profit for the year. CEO Johan Karlström www.skanska.com
for resale to private customers. Commercial LUNDBERGS 2016 –
31
Annual report Annual Auditors’ Report Auditors’ earnings of distribution Proposed Parent Company Group Definitions Report Directors’ of Board year 2016 the Parent Company. and fiscal Group for the for Report Annual 556056-8817, is number their submit hereby registration corporate whose (publ), AB ofLELundbergföretagen President and ofDirectors Board The Notes statement flow Cash equity ofStatement changes in shareholders’ sheet Balance Statement of comprehensive income Income statement Notes statement flow Cash equity ofStatement changes in shareholders’ sheet Balance Statement of comprehensive income Income statement
4 4 4 4 3 7 7 8 7 4 4 8 47 7 7 74 3 2 5 4 4 1 3 4 3 1 1 6 6 0
33
LUNDBERGS 2012 2016 – ÅRSREDOVISNING – ANNUAL REPORT Report of the Board of Directors
Lundbergs is an investment company with a portfolio of Financing assets primarily comprising a wholly owned real estate Interest-bearing net debt decreased by SEK 183 m. to SEK 15,120 m. (15,303). Interest-bearing liabilities amounted to SEK 16,751 m. company and a number of major holdings in listed (16,236) and interest-bearing assets to SEK 1,631 m. (932). The equity/ companies. Two of these listed companies, Holmen and assets ratio was 69% (67). The debt/equity ratio was 0.18 (0.21). Hufvudstaden, are subsidiaries and are thus consolidated Information about risks and uncertainties in the consolidated financial statements. The manner in which financial risks are managed is decided by the Board of Directors of Lundbergs, Hufvudstaden and Holmen, Group respectively. Risk management is conducted in accordance with the finance policy adopted by the Boards of the respective companies, Operations consist of real estate operations, forest and power op- with the shared aim of achieving a low level of risk. Within all three erations, the manufacture and sale of paperboard, paper and sawn companies, risk management is centralized in a special department. wood products, as well as equity management (including securities For a more detailed account of the management of financial risks, trading). The Group’s operations are described below. Information refer to Note 38 on page 66. Other information about risks and about the Group’s business sectors (Lundbergs, Hufvudstaden uncertainties is presented under the various business sectors. and Holmen) is presented on pages 34-38. The Parent Company Information on important accounting assumptions and estimates is described on pages 38-39. The Corporate Governance Report is presented in Note 37 on page 65. appears on pages 39-43. Business sectors Sales and earnings Consolidated net sales amounted to SEK 19,357 m. (20,347). LUNDBERGS Operating profit amounted to SEK 17,755 m. (8,597). Impair- In this context, Lundbergs is defined as the Parent Company, ment losses and unrealized changes in value had a positive effect L E Lundbergföretagen AB, its wholly owned subsidiaries and, of SEK 5,908 m. (4,475) on profit. Profit also includes a transitional where appropriate, the subsidiaries’ groups of companies active effect for accounting purposes of SEK 5,112 m., resulting from within real estate operations and equity management (securities Industrivärden being recognized as an associated company as of trading). The operations are divided into two business sectors, the first quarter. Real Estate Operations and Equity Management. Net financial items resulted in an expense of SEK 336 m. (expense: 338). Sales and earnings Profit after financial items amounted to SEK 17,419 m. (8,258). Net sales totaled SEK 2,054 m. (2,644) and operating profit was Profit after tax was SEK 15,457 m. (6,652). Earnings per share SEK 10,428 m. (3,283). attributable to the Parent Company’s shareholders amounted to SEK 98.73 (35.29). Real estate operations Net sales amounted to SEK 1,347 m. (1,343) and operating profit to Tax SEK 2,251 m. (2,117). The Group’s tax cost amounted to SEK 1,962 m. (1,606). The increase was primarily due to higher year-on-year unre- alized changes in the value of investment properties. The total Investments vacancy rate was 2.9% (3.8). Investments are recognized under the different business sectors Investments amounted to SEK 226 m. (220) in investment and the Parent Company below. properties, SEK 265 m. (245) in property projects and SEK 8 m. (4) in equipment. At present, one new residential property is being Shareholders’ equity constructed in Norrköping. During the year, the Körveln 3 and The Group’s shareholders’ equity increased by SEK 11,250 m. The Grönpepparen 1 residential properties in Örebro were completed. change primarily comprised profit for the year of SEK 15,457 m., Acquisitions of properties amounted to SEK 111 m., of which dividends paid amounting to an expense of SEK 1,599 m. and other Gårda 8:2 and 8:5 in Gothenburg accounted for SEK 100 m. comprehensive income amounting to an expense of SEK 2,611 m. Sales of all investment properties in Katrineholm and Uppsala The Group’s shareholders’ equity amounted to SEK 84,040 m. were implemented in the form of companies. The purchase consid- (72,790), of which non-controlling interest accounted for SEK eration, less selling expenses, amounted to SEK 911 m. 26,934 m. (24,766). LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
34 An internal valuation was conducted of the real estate portfolio development. Residential properties account for 47% of total at December 31, 2016, by assessing the fair value of each individual rentable space in the real estate portfolio, with commercial property. The valuations were based on both the location-price premises accounting for 53%. The even division between residential method and the present value of estimated future payment flows. and commercial premises adds stability to the operations. To confirm this valuation, external valuations were commissioned The company works actively to optimize the properties’ energy for part of the real estate portfolio. The fair value is estimated at consumption, thereby reducing operating costs. The company also SEK 17,876 m. (16,697). The valuation method and assumptions are monitors and controls costs for each individual property. described in Note 20 on page 58. All properties are covered by full-value insurance. The development properties are recognized in the balance sheet in an amount of SEK 176 m. (167), constituting the lower of Equity management the acquisition value and net realizable value. Development proper- Equity risk includes share price risk and liquidity risk. Share price ties were sold for SEK 52 m. (84). risk pertains to the risk of value loss due to movements in share prices on the stock market. A liquidity risk may arise if a sharehold- Equity management ing is difficult to divest. Lundbergs’ policy is to hold large sharehold- Net sales totaled SEK 707 m. (1,301) and operating profit was ings in a limited number of companies. These shareholdings may SEK 8,177 m. (1,166). change over time. At present, the Group’s shareholdings are partly During the first quarter of 2016, Industrivärden switched to in companies with operations in the same or similar industries. The being recognized as an associated company. The reclassification of portfolio focus on certain industries could continue in the future, Industrivärden from a shareholding to an associated company re- which could give rise to greater risk exposure to individual indus- sulted in the recognition of SEK 4,083 m. Operating profit includes tries and/or companies. profit of SEK 3,626 m. (370) from shares in associated companies, of which the effect of Industrivärden being valued at a NAV discount Non-financial profit indicators when switching to recognition as an associated company account- Lundbergs has collective bargaining agreements with both white- ed for SEK 1,029 m. collar and blue-collar employees. Sickness absence and employee During the year, 1,500,000 series A Handelsbanken shares were turnover are low. There are distinct guidelines for ensuring that no acquired for SEK 153 m., 10,100,000 series A Industrivärden shares discrimination or unfounded wage differences arise. for SEK 1,545 m., 500,000 Series C Industrivärden shares for SEK 68 m., Fastighets AB L E Lundbergs has been quality, environmentally 885,000 Indutrade shares (after a bonus issue) for SEK 133 m. and and energy certified for many years. The certifications, and the en- 1,000,000 series B Skanska shares for SEK 176 m. Net investments terprise management system that has been formulated according in shares amounted to SEK 2,111 m. (980). to prevailing standards, ensure compliance with the company’s business concept, strategy and focus in daily operations. Information about risks and uncertainties The company offers well-maintained and attractively located Real estate operations housing and commercial premises in properties where the focus Changes in the real estate market, such as those that result from is on security and safety. Long-term tenant relations are created economic fluctuations, affect the fair value of the properties, which through high service standards and personal meetings. All aspects constitutes both a risk and an opportunity. of the company’s operations are to be hallmarked by customer Over the short term, opportunities to influence earnings from value, efficiency and profitability. The work conducted should be current operations are limited. Revenues from the commercial systematic with short decision-making routes. Good living and work premises are regulated by relatively long-term rental contracts, environments reduce tenant relocation and thus also the use of normally three to five years. The residential properties are rented materials and chemicals. under contracts that apply until further notice, with the tenant The company’s carbon footprint will be reduced through con- entitled to terminate the contract with three months’ notice. tinuous improvements. The greatest environmental impact derives Operating expenses are difficult to change in a short-term from use of energy for operating the properties. The aim is to perspective while maintaining service and quality. Profitability is reduce total energy consumption in the form of heat, electricity and impacted by the economy and interest rates, but also by political cooling. Active energy-saving efforts are in progress in the company decisions. Accordingly, successful management of the opportuni- and total normal-year adjusted energy consumption per square ties and risks arising in a real estate company requires a long-term meter Atemp was reduced by 1% in the past year. Over the past five approach and active work to develop existing properties. years, it has been reduced by 13%. As of 2016, the company only Lundbergs’ real estate portfolio consists of centrally situated purchases electricity generated from wind power. The use of heat residential and commercial properties. The properties are is based on district heating and heat pumps, thus resulting in low concentrated mainly in large cities characterized by favorable carbon emissions. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
35 The company’s environmental rules entail the use of eco- while operating expenses are difficult to change over a short-term approved building materials, which also applies to contractors, perspective while maintaining service and quality. suppliers of materials and consultants. Hufvudstaden’s profitability and operations are impacted main- No operations were conducted during 2016 that require per- ly by macroeconomic factors such as the economy, interest rates mits or notification in accordance with the Ordinance (1998:899) and regional business development in Stockholm and Gothenburg, concerning Environmentally Hazardous Activities and the Protec- but also by political resolutions. Accordingly, to successfully manage tion of Public Health. the opportunities and risks of a real estate company, a long-term business approach and clear strategies are required. Outlook Changes in the fair value of properties result from economic Because the real estate portfolio is concentrated in central loca- fluctuations, which constitute both a risk and an opportunity. How- tions, it is anticipated that demand for the company’s housing and ever, the properties’ concentration in the most attractive commer- commercial premises will be stable. The leasing rate at the start cial locations limits the risk. of 2017 is favorable. Lundbergs continues to actively develop its existing real estate portfolio, at the same time as the company Non-financial profit indicators implements investments in new projects. Responsible enterprise, both internally and externally, is a prereq- uisite for success. Hufvudstaden contributes to social development HUFVUDSTADEN by accepting responsibility for its properties and the surrounding Hufvudstaden’s operations comprise the ownership and manage- environment, while ensuring compliance with prevailing laws and ment of commercial office and retail properties in central Stock- agreements by enforcing requirements on its contractors and holm and central Gothenburg. subcontractors. For a more detailed description, refer to Hufvudstaden’s 2016 Hufvudstaden’s value foundation characterizes the employees’ annual report. actions and serves as a useful tool in daily activities. Hufvudstaden works actively to reduce environmental impact Sales and earnings by, for example, reducing energy consumption and demanding Net sales totaled SEK 1,790 m. (1,689). Operating profit amounted eco-friendly products. to SEK 5,425 m. (4,571). The increase was primarily due to higher year-on-year unrealized changes in value. The total year-end vacan- Outlook cy rate was 3.9% (4.5). Hufvudstaden’s real estate portfolio is concentrated to central Stockholm and central Gothenburg, both of which are experiencing Investment properties positive development and high growth, thus facilitating continued During the year, SEK 538 m. (497) was invested in properties and expansion. The real estate market is strong and interest rates low, SEK 2 m. (4) in equipment. The Inom Vallgraven 3:2 property in financing opportunities are good, especially for properties in prime central Gothenburg was acquired for SEK 78 m. in March. locations, and there is a shortage of attractive alternative invest- An internal valuation was conducted of the real estate portfolio ments. As a result, there is considerable demand for investments at December 31, 2016, by assessing the fair value of each individual in properties in Hufvudstaden’s submarkets, although the supply property. The value was established through utilization of a vari- is limited, since few owners are inclined to sell. Yield requirements ation on the location-price method termed the net capitalization have declined to historically low levels. It is Hufvudstaden’s assess- method. This method means that the market’s yield requirement is ment that the scenario of low interest rates will continue, which is placed in relation to the property’s net operating income. To con- assumed to lead to continued high demand for properties. firm the values arrived at, external valuations were commissioned The increase in employment, the economic growth and positive for part of the real estate portfolio. private consumption all have an invigorating impact on the leasing The fair value is estimated at SEK 36,517 m. (31,740). The valua- market, in the form of declining vacancies and rising rents for tion method and assumptions are described in Note 20 on page 58. both office and retail premises. Since the cities are also benefiting from an increase in tourism from both domestic and international Information about risks and uncertainties visitors, Huvudstaden believes that the prospects are good for the Over the short term, Hufvudstaden’s opportunities to influence favorable trend continuing in its market areas. earnings from current operations are limited. Revenues are regu- lated by relatively long-term contracts, normally three to five years, LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
36 HOLMEN currency. To reduce the impact on earnings of changes in exchange Holmen is active in forest and power operations, and manufactures rates, net flows are hedged using currency forward contracts. paperboard, paper and sawn timber products. Holmen insures its plants at the replacement value against For a more detailed description than that provided below, refer property damage and business interruption losses. The deductible to Holmen’s 2016 annual report. varies among the different plants, but does not exceed SEK 30 m. for an individual claim. Holmen’s forest holdings are not insured. Sales and earnings The woodland areas are spread over large parts of the country, Net sales totaled SEK 15,513 m. (16,014). and the risk of significant simultaneous damage is considered low. Operating profit amounted to SEK 1,930 m. (769). Operating Holmen has liability insurance that also covers sudden, unexpected profit was adversely impacted in an amount of SEK 350 m. by the damage to the environment that is caused by a third party. sale of the mill in Madrid and positively affected in an amount of SEK 118 m. by insurance compensation for the reconstruction Non-financial profit indicators required after a fire at the Hallsta paper mill, resulting in a net neg- Personnel ative impact of SEK 232 m., which is recognized as an item affecting Holmen’s corporate values of courage, commitment and respon- comparability. Operating profit for 2015 impacted items affecting sibility are intended to create a culture driven by a willingness to comparability negatively by SEK 931 m. pertaining to impairment progress. The expectations of what the organization and the em- losses on fixed assets, provisions to cover costs and the effects of ployees will achieve are highlighted by a performance management a fire. process, in which success factors are identified and performance Operating profit, excluding items affecting comparability, is tracked using KPIs. To maintain competitiveness over time, it amounted to SEK 2,162 m. (1,700). Profit was favorably affected is essential that the right employees are attracted. As a result of primarily by a better product mix in paper, divestment of the mill in Holmen’s sustainability profile combined with future-oriented Spain and reduced costs and higher prices in forest operations. products and a developmental and innovative culture/work envi- ronment, the brand has a strong position in the labor market. To Investments ensure that managers perform well, Holmen arranges internal man- Investments amounted to SEK 785 m. (874). agement programs for managers at all levels. Holmen is working to achieve a work climate characterized by the fundamental view that Information about risks and uncertainties all people have an equal value. Discrimination and harassment at Changes in demand and prices affect opportunities to achieve work are prohibited. profitability targets. Changes in prices and deliveries are greatly Holmen’s sickness absence was 4.2% (4.2). Holmen aims to affected by the market balance in Europe, which is in turn affected achieve a zero-injury operation for the employees. by several factors, including demand, the production trend among European producers, changes in imports to Europe and opportuni- Environment ties to profitably export from Europe. Environmental and energy considerations are a self-evident feature Timber, electricity and chemicals are the principal input mate- of Holmen’s production and investment planning. Operations are rials for Holmen’s industrial operations and changes in commodity characterized by resource-efficient use of renewable raw materials prices impact profitability in the industry. The timber harvest from and energy, and protection of the environment in accordance with Holmen’s own forests essentially matches the consumption of its the prudence principle. To the extent possible, energy, chemicals own sawmills, while pulp wood from its own forests corresponds and fibers are recycled to minimize the environmental impact of to some 40% of consumption in the industry. Paperboard opera- production. tions manufacture almost all of the electricity needed by Holmen’s Holmen’s environmental activities are characterized by con- own mills, while external purchases account for paper production tinuous improvement efforts, conducted within the framework of needs. At the same time, Holmen sells hydro- and wind power elec- the certified environmental and energy management systems. This tricity to the electricity grid. In net terms, Holmen’s own electricity results in compliance with legal and public authority requirements, production corresponds to about 50% of electricity consumption. which is safeguarded by statutory public supervision. The plants’ Physical fixed-price agreements and financial hedges are used to environmental impact mainly arises from emissions to air and manage the price risk associated with this consumption. water. Holmen’s earnings are affected by fluctuations in exchange At year-end 2016, production operations conducted at six rates. The risk associated with transaction exposure pertains to plants required environmental permits. Permits include specifica- considerable amounts of sales in currencies other than the cost tions of terms for permitted production volumes as well as permis- sible emissions to air and water. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
37 At the end of 2016, the operations at Holmen’s production fa- the equivalent of three months’ salary. For senior executives of cilities were certified according to quality, environment and energy L E Lundberg Kapitalförvaltning AB, any bonus payments are to be management systems. In addition to this certification, all plants that based on the results of activities, whereby the bonus is capped at used wood raw materials had chain-of-custody certification for the approximately 15% of reported earnings over time. Bonus pay- wood used. ments are not normally pensionable. Should notice of employment termination be served by the Outlook company, the maximum term of notice is 12 months. In 2017, the harvest from Holmen’s own forest is expected to be Pension benefits for the President and other senior executives unchanged, in line with the long-term plan. The aim is to increase apply from age 65, with benefits corresponding to the ITP (Indi- deliveries of cartonboard after the investments have been im- vidual Supplementary Insurance) plan. Supplementary pension plemented, although competition is expected to sharpen due to solutions may be added. No remuneration in the form of options or the considerable additional capacity in the market. The structural other share-based incentive programs is payable. decline in printing paper is expected to continue. Holmen’s strategy These guidelines encompass those persons who, during the is to grow in magazine and book paper, by offering customers a period when the guidelines apply, constitute senior executives cost-effective alternative to traditional products, at the same time in L E Lundbergföretagen AB and its wholly owned subsidiaries as deliveries of newsprint will be reduced. The market balance for Fastighets AB L E Lundberg and L E Lundberg Kapitalförvaltning AB. timber products is favorable. Holmen will be able to increase pro- The guidelines apply to any contracts entered into after the AGM’s duction somewhat in 2017, at the same time as the processing rate resolution or to any changes made in existing agreements after this can be raised through the ongoing investment in an impregnation point in time. facility. Hydro-power generation was much lower than usual during In certain cases, the Board of Directors is to be entitled to devi- 2016. As a result of low reservoir levels, production in 2017 could ate from the guidelines if required under special circumstances. also be lower than normal. For guidelines concerning senior executives of Holmen and Hufvudstaden, refer to their respective annual reports. Parent Company Share information The Parent Company is an investment company that owns, manag- The share capital of L E Lundbergföretagen AB (publ) amounted es and develops companies. to SEK 1,240 m. The total number of shares was 124,000,000, Net profit for the year amounted to SEK 5,751 m. (1,801). Profit each with a quotient value of SEK 10. The shares are divided into includes dividends of SEK 1,772 m. (1,865). 48,000,000 Series A shares, carrying ten votes per share, and Net investments in listed shares amounted to SEK 2,075 m. 76,000,000 Series B shares, carrying one vote per share. At the (1,012). request of owners of Series A shares, it is to be possible to convert For company information regarding L E Lundbergföretagen AB, Series A shares into Series B shares. refer to Note 2 on page 51. The Articles of Association do not impose any limitations on share transfers. There is no limitation on the number of votes each Guidelines for the remuneration of senior executives shareholder is entitled to cast at the AGM. Fees payable to the Chairman of the Board and other Board The largest shareholder is Fredrik Lundberg (including compa- members are as resolved at the Annual General Meeting (AGM). nies and spouse), who owns a total of 42.3% of the share capital The 2016 AGM adopted guidelines in respect of remuneration of and 71.0% of the voting rights. Fredrik Lundberg is followed by management, which are specified in Note 5 on page 52. Louise Lindh (including family) and Katarina Martinson (including The Board of Directors proposes that the 2017 AGM resolve to family), who each own 14.0% of the share capital and 11.2% of the adopt the unchanged guidelines for determining salaries and other voting rights. The holdings of all other shareholders amounted to remuneration of senior executives. less than 10% of the voting rights. Remuneration of senior executives may consist of fixed salary, Employees do not have any shareholdings through pension bonus payments, other benefits and pensions. The total remuner- funds or other pledges. ation should be competitive in the market and be proportionate to The Articles of Association stipulate that, in addition to mem- each executive’s performance, responsibility and authority. bers appointed by an authority other than the AGM, the Board of For senior executives employed by L E Lundbergföretagen AB Directors shall comprise a minimum of five and maximum of ten or Fastighets AB L E Lundberg, any bonus payments must be con- members, with a maximum of three deputies. Members and depu- nected to predefined and measurable criteria based on earnings ty members are elected at the AGM. and profitability targets. The maximum bonus may not exceed LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
38 Fredrik Lundberg (including companies), Louise Lindh and Ka- idends and the discharge of Board members and the CEO from tarina Martinson have entered into an ownership agreement under personal liability, elects members of the Board and approves their which, for example, constraints are placed on the transfer of shares fees, and, when applicable, elects auditors and approves their fees, should a party other than Fredrik Lundberg (including companies) while dealing with other statutory matters and making resolutions wish to reduce his holding of Series A shares. Otherwise, there are on guidelines for remuneration of senior executives and on other no known agreements that would be affected by a public takeover proposals submitted by the Board of Directors and shareholders. offer. All shareholders who are listed in the share register on a given record day, and who have notified the company of their intention to Repurchase of own shares participate in the meeting within the allotted time period, are enti- On April 21, 2016, the AGM renewed the Board of Directors’ tled to participate in the meeting and exercise voting rights equal to authorization to make decisions regarding the purchase of up to the total number of shares they hold. Shareholders may participate 10% of the company’s Series B shares. The authorization was not via proxy. To be able to exercise their voting rights at the AGM, exercised, however. The Board proposes that the 2017 AGM also shareholders whose shares are trustee-registered must temporari- authorize the Board to buy back up to 10% of the company’s Series ly re-register their shares in their own name in accordance with the B shares. terms in the notification of the AGM. The 2016 AGM was held on April 21, 2016. The annual accounts Corporate governance report and auditors’ report, as well as the consolidated financial statements and auditors’ report on the consolidated financial statements, were Introduction presented at the meeting. In conjunction with this, the Chairman of Corporate Governance in L E Lundbergföretagen AB is based on, in- the Board presented information concerning the work performed ter alia, the Articles of Association, the Swedish Companies Act, the by the Board and information regarding cooperation with the rules and regulations for issuers as published by Nasdaq Stockholm auditors. In addition, President and CEO Fredrik Lundberg provided (the Exchange), the Swedish Code of Corporate Governance (avail- a presentation of Group operations during 2015. able at www.bolagsstyrning.se) (“the Code”) and other applicable The auditors presented a report on their audit to the AGM laws and regulations. The Code is a form of self-regulation within through the submitted auditors’ report and a verbal account of Swedish industry based on the “comply or explain” principle, where- their work during the past year. At the AGM, it was resolved to by companies that apply the Code may deviate from individual adopt the presented income statements and balance sheets and to rules but, in such cases, must explain the reason for each deviation, discharge the Board members and the CEO from personal liability while also describing the solution adopted instead. for the fiscal year. The AGM also resolved on guidelines for the re- muneration of senior executives in accordance with what is stated Division of responsibilities on page 52 of the Annual Report, in addition to authorizing the The shareholders exercise their influence over L E Lundbergföre- Board to decide on the acquisition of company shares. tagen AB at the AGM, which is the highest decision-making body in Official notification of the AGM is to take the form of an an- the company, while responsibility for the management and control nouncement in Post- och Inrikes Tidningar and on the company’s of the company rests with the Board of Directors and the President, website. The fact that notification has been sent is to be announced in accordance with the Swedish Companies Act, other laws and reg- in Dagens Nyheter. Notification of the AGM and of extraordinary ulations, pertinent rules for stock market companies, the Articles of general meetings that are not to address amendments to the Arti- Association and the Board’s internal control instruments. cles of Association must be provided no earlier than six weeks and no later than four weeks prior to the meeting. Notification of other Shareholders extraordinary general meetings must be carried out no earlier than In February 2017, the company had 27,932 shareholders. The ten six weeks and no later than three weeks prior to the meeting. largest owners had total holdings corresponding to 77.1% of the share capital. Foreign investors owned about 7.1% of the share Nomination Committee capital. In view of the composition of shareholders, it has not been deemed necessary to appoint a Nomination Committee. Accordingly, Annual General Meeting proposals for the election of a Chairperson for the AGM, elections The AGM is the highest decision-making body in L E Lundberg- of Board members and, when appropriate, of the auditors, as well företagen AB. The AGM, which is held in Stockholm or Norrköping as proposals concerning the remuneration to be paid to Board within six months of the close of the fiscal year, adopts the income members and the auditors are submitted by the company’s major statement and balance sheet, passes resolutions regarding div- shareholders and presented in the official notification of the AGM LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
39 and on the company’s website. On this point, the company does Chairman not comply with the rules of the Code concerning nomination At the 2016 AGM, Mats Guldbrand was elected Chairman of the committees. Board. The Chairman organizes and directs the Board’s efforts to ensure that the work is conducted effectively and in compliance Board of Directors and its work with the Swedish Companies Act, other laws and regulations, perti- Composition of the Board nent rules for stock market companies (including the Code) and the In accordance with the Articles of Association, the Board of Board’s internal control instruments. The Chairman monitors the Directors shall consist of not less than five and not more than ten operations in dialog with the President, is responsible for ensuring members, and a maximum of three deputy members elected by that other Board members receive satisfactory information and the AGM for the period extending to the next AGM. L E Lundberg- appropriate decision-making documentation and passes on any företagen AB’s Board of Directors, which was elected by the 2016 opinions from the shareholders to the Board. The Chairman is AGM, consists of nine members, including the President. responsible for keeping Board members up to date and broadening Mats Guldbrand, Chairman of the Board, was formerly Equity their knowledge of the company and otherwise providing whatever Manager at AMF Pension, among other positions. Carl Bennet is training might be required for them to effectively conduct their Chairman of the Board of Elanders, Getinge and Lifco, among other Board work. To assure the quality of the work conducted by the positions. Lilian Fossum Biner is Chairman of the Board of Cloetta, Board of Directors, and to ascertain potential requirements of ad- among other positions. Staffan Grefbäck was formerly CEO of Alecta, ditional expertise and experiences, the Chairman, pursuant to the among other positions. Louise Lindh is President and CEO of Fastig Rules of Procedure for the Board, annually performs an assessment hets AB L E Lundberg. Fredrik Lundberg is President and CEO of of the Board’s work. The Chairman has held individual discussions L E Lundbergföretagen AB. Katarina Martinson is Board member with the various Board members to gain an understanding of their of Husqvarna and Indutrade, among other positions. Sten Peterson views on how the work of the Board is conducted and the type of is President of Byggnads AB Karlsson & Wingesjö. Lars Pettersson measures that could be implemented to increase its efficiency. The has, among other positions, served as President and CEO of Sand- results of the evaluation have been discussed by the Board as a vik. For a presentation of the assignments currently performed by whole. the Board members, see page 86. All of the members of the Board, with the exception of Fredrik Board of Directors’ work Lundberg (in his capacity as President and CEO), Louise Lindh (in The Board of Directors establishes written working procedures her capacity as President and CEO of the wholly owned subsidiary every year that regulate the Board’s work agenda and its internal Fastighets AB L E Lundberg) and Sten Peterson (in his capacity as division of duties, decision-making priorities within the Board, the President of Byggnads AB Karlsson & Wingesjö, in which Fredrik Board’s meeting procedures and the Chairman’s duties. In addition, Lundberg is Chairman of the Board and majority shareholder), are the Board has issued a finance policy, an information policy and regarded as being independent in relation to the company. In ad- written instructions regarding the allocation of responsibilities dition, all of the Board members, apart from Louise Lindh, Fredrik between the Board and the President. Lundberg, Katarina Martinson and Sten Peterson, are regarded The Board monitors the President’s work through continuous as being independent in relation to the company’s major share- efforts to follow up operations during the year, assumes responsi- holders. Accordingly, the Board complies with the independence bility to ensure that the organization, management and guidelines requirements imposed in the Code. However, the composition of for administration of the company’s business are suitably designed the Board does deviate from the Code in respect of provision 4.3 and ensures that satisfactory internal controls are in place. The in that two of the Board members are senior executives of the Board is also responsible for the development of and ensuring company and the company’s subsidiary, respectively. This deviation compliance with the company’s strategies through plans and goals, is motivated on the grounds that it is suitable that the Board’s com- decisions regarding acquisitions and divestments of business oper- position reflects ownership conditions in the company. ations, major investments and remuneration of the President, in ac- An even gender distribution is sought and the Board of Directors cordance with the guidelines for remuneration of senior executives comprises three women and six men. Accordingly, gender distribu- that were resolved by the AGM. Once annually, the Board address tion on the Board is relatively good, with women accounting for just the evaluation of the President and CEO’s work, during which no over 33%, which can be compared with the target level set by the one from company management is present. The Board of Directors Swedish Corporate Governance Board of an average of some 35% also approves any significant assignments that the President and for each gender in major companies after the 2017 AGM season. CEO may have outside the company. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
40 In accordance with the applicable working procedures, the ident or other members of company management. The reports by Board holds at least four scheduled meetings and one statutory the auditors did not necessitate any special actions by the Board. meeting per year. Whenever required, unscheduled meetings are held to address special items. Five meetings of the Board were held Remuneration Committee during 2016. The Board focused special attention on strategic and Matters involving remuneration and other terms of employment for financial issues, issues relating to the economy, investment issues the President are prepared by the Chairman of the Board. Deci- and accounting issues during the year. Presentations were also sions on such matters are made by the Board of Directors without made at every scheduled Board meeting regarding the business the participation of the President. Remuneration and other terms development of Fastighets AB L E Lundberg and L E Lundberg Kapi- of employment for other executives are negotiated and agreed talförvaltning AB and of the portfolio companies. upon with the President. The Board also monitors and evaluates Attendance at Board meetings during the year was very high. All all programs for variable remuneration of senior executives. The Board members were present at all Board meetings. The Group’s Board monitors and evaluates compliance with the guidelines CFO participates in Board meetings, as does the Board’s secre- for remuneration of senior executives adopted by the AGM and tary, who is a lawyer that is independent from the company. Other applicable remuneration systems and remuneration levels in the senior executives also participate in Board meetings to present company. The matter of whether to establish a remuneration special issues or whenever deemed appropriate. committee has been considered by the Board, which has concluded that the means of preparation and the division of competencies Remuneration of the Board that are applied in respect of remuneration are appropriate and Fees paid to the elected members of the Board are established sound. Accordingly, the Board has not found any reason to change by the AGM based on proposals submitted by the company’s its position on the matter, even if this constitutes a deviation from largest shareholders. At the 2016 AGM, it was resolved that fees the Code’s rules in that one Board member who is a member of to the Board for the period extending from the 2016 AGM to the company management participates in this work. 2017 AGM would total SEK 2,600,000, of which SEK 780,000 to the Chairman of the Board. Each of the other Board members elected Company management by the AGM, with the exception of the President, will receive a fee The President manages and ensures that business operations are of SEK 260,000. Any further remuneration paid to any member of conducted in compliance with the Swedish Companies Act, other the Board, including the President, is explained in the consolidated laws and regulations, pertinent rules for stock market companies, financial statements, Note 5. the Articles of Association and the Board’s internal control instru- ments, as well as in accordance with the objectives and strategies Audit Committee established by the Board. In consultation with the Chairman of the The Board has considered the matter of whether to establish an Board, the President prepares required information and decision- Audit Committee and decided not to. Instead, the Board as a whole making documentation prior to Board meetings, presents the fulfills the responsibilities otherwise assigned to an audit commit- issues and provides justification for proposals. President and tee. This structure functions well and provides the entire Board CEO Fredrik Lundberg, born 1951, has degrees in engineering and with full insight into and opportunities to actively participate in business administration and is a Doctor of Economics and a Doctor these important issues. During 2016, the Board thus monitored the of Engineering. Fredrik Lundberg is Chairman of Fastighets AB L E system for internal control of financial reporting. This supervision is Lundberg, Holmen, Hufvudstaden, Industrivärden and Indutrade, intended to ensure the efficiency of the operations, their compli- Deputy Chairman of Handelsbanken and Board member of Skanska. ance with laws and regulations and the reliability of the financial Through direct ownership and companies, Fredrik Lundberg and reporting. The Board has reviewed and evaluated the procedures his wife held 38,000,000 Series A shares and 14,502,500 Series B for financial accounting and reporting and followed this up with shares in the company, or a total of 52,502,500 shares, at Decem- evaluations of the work performed by the external auditors, their ber 31, 2016. qualifications and independence. The Board also provides Group management with identification and evaluations of the primary Remuneration of the President and other senior executives risks to which the operations are exposed and ensures that man- The 2016 AGM resolved on unchanged guidelines for the remuner- agement focuses on efforts to adress these risks. During 2016, the ation of senior executives. The guidelines are described in greater Board conducted two reviews with, and received reports from, the detail on page 52. The company has no outstanding share-based or company’s external auditors, once without the attendance of Pres- share-price-related incentive programs. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
41 Active ownership Association, please refer to the company’s website, www.lundberg- L E Lundbergbergföretagen AB is an active owner of its portfolio foretagen.se, under Corporate Governance/Articles of Association. companies. In each of these companies, the company is represent- ed through one or more of the positions of President, Executive Information Vice President or Board member of L E Lundbergföretagen AB. Lundbergs’ information to shareholders and other interested Active ownership is also exercised through representation on the parties is provided via the Annual Report, year-end and interim nomination committees of the portfolio companies. reports, press releases and the company’s website, www.lundberg- foretagen.se. The website also includes information about corpo- Internal audit rate governance. The disclosure of information in the company The company has a simple legal and operating structure and a complies with an information policy adopted by the Board. carefully formulated control and internal audit system. The Board monitors the company’s evaluations of its internal control through Internal control and risk management concerning the financial contacts with the company’s auditors and other means. In view of reporting for the 2016 fiscal year the information presented above, the Board has decided not to The Swedish Annual Accounts Act stipulates that the Board must establish a special internal audit function. annually submit a description of the principal elements of the com- pany’s system for internal control and risk management with regard Auditors to financial reporting. According to the Articles of Association, the company must have two auditors with or without deputies, or alternatively a registered Control environment public accounting firm. At the 2016 AGM, KPMG was elected the The control environment forms the foundation for the internal con- company’s audit firm for a term of office of one year. Authorized trol of financial reporting. The company’s internal control structure Public Accountant Joakim Thilstedt is auditor-in-charge. Other ma- is based on a distinct division of responsibilities and work between jor assignments performed by Joakim Thilstedt include Alfa Laval, the Board of Directors and the President, as well as within the Holmen, Hufvudstaden, Modern Times Group MTG and Sandvik. business operations. Policies and guidelines are documented and The audit is reported to the shareholders in the form of an au- evaluated continuously by management and the Board of Direc- dit report that constitutes a recommendation to the shareholders tors. These control documents, and carefully prepared process ahead of items of business at the AGM concerning adoption of the descriptions are communicated via established information and income statement and the balance sheet for the Parent Compa- communication paths and are thus made available and known to ny and the Group, the disposition to be made of the profit in the the employees concerned. Parent Company and the discharge of the members of the Board and the President from liability for their administration during Risk assessment the preceding fiscal year. The auditors duties include checking The company identifies, analyzes and takes decisions on the handling compliance with the Articles of Association, the Swedish Companies of the risk that errors could arise in financial reporting. The Board Act and the Annual Accounts Act, and with International Financial addresses the outcome of the company’s risk-assessment and Reporting Standards (IFRS), matters involving valuation of balance risk-management processes, in order to ensure that they cover sheet items and follow-ups of significant accounting processes and all significant areas and, wherever required, identifies necessary of the management of the company and financial control. actions. The company’s largest operational risks are related to In addition to the audit assignment, the company has also property valuation and financial transactions (primarily with consulted KPMG AB in matters mainly related to the consolidated respect to holdings of publicly traded shares). financial statements. The amounts of remuneration paid to KPMG are presented on page 53. In its capacity as auditor of L E Lund- Control measures bergföretagen AB and its subsidiaries, KPMG AB is obliged to verify Based on the completed risk assessment, the company has estab its independence before deciding to conduct other assignments. lished a number of control measures. These measures are of a preventive nature, meaning that they are designed to avoid losses Articles of Association or errors in financial reporting, and of an investigative nature. The Articles of Association include established directives con- Another aim of the controls is to ensure that errors are corrected. cerning the company’s business operations, the number of Board Examples of processes with carefully prepared control measures members and auditors, instructions for the official notification of are new builds, refurbishment, maintenance and leasing activities the AGM, business for discussion at the AGM and where the AGM within real estate management, and securities handling within should be held. For more information about the current Articles of equity management. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
42 Information and communications At an overall level, internal information and external communica- DEFINITIONS tion activities are governed by, for example, an information policy. Internal communications to and from the Board of Directors and Adjusted profit after financial items management occur through, for example, regular information Profit after financial items not including impairment losses or meetings arranged by management. Another important commu- unrealized changes in value. nications channel is the company’s intranet, through which all employees have access to up-to-date information. Cash and cash equivalents Cash and bank balances and short-term investments (maxi- Internal policies, guidelines, instructions and equivalent mum of three months). documents that control and support business operations are also published on the intranet. Earnings per share Net profit after tax divided by the average number of shares Follow-up outstanding. The company continuously evaluates the internal controls con- cerning financial reporting, primarily by asking questions and Interest-bearing assets Interest-bearing receivables, short-term investments and familiarizing itself with the work of the controller function. The cash and bank balances. Board receives quarterly reports of financial results, including management’s comments on business operations. At every Board Net interest-bearing debt meeting, the financial situation is addressed. The company’s Interest-bearing liabilities and interest-bearing provisions less auditors participate in Board meetings on two occasions annually interest-bearing assets. and provide information about their observations of the company’s internal procedures and control systems. On these occasions, the Taxes members of the Board have an opportunity to ask questions. On an Current and deferred tax. annual basis, the Board takes decisions on significant risk areas and evaluates the internal controls. Debt/equity ratio Interest-bearing net debt divided by total shareholders’ equity. Proposed dividend and distribution Equity/assets ratio of earnings Shareholders’ equity expressed as a percentage of total The Board of Directors has proposed a dividend of SEK 5.60 per assets. share, or a total of SEK 694 m. The Board’s proposal concerning the distribution of earnings is presented in its entirety on page 80. Vacancy rate The total possible rental revenues less actual rental revenues during the year as a percentage of the total possible annual rental revenues. LUNDBERGS 2016 – REPORT OF THE BOARD DIRECTORS
43 Income Statement and Statement of Comprehensive Income, Group
INCOME STATEMENT, SEK m. Note 2016 2015 Net sales 3 19,357 20,347 Other revenues, etc. 4 1,667 1,000 21,024 21,347
Raw materials, consumables and cost of sold inventory shares - 9,260 - 9,120 Personnel costs 5 - 2,546 - 2,593 Other external costs 6, 7 - 4,038 - 4,606 Depreciation 8 - 1,027 - 1,249 Impairment losses 9 - 122 - 555 Reclassification of shareholdings 10 4,083 Results from participations in associated companies and joint ventures 11 3,609 324 - 9,300 - 17,799 Changes in value of investment properties and derivatives 12 5,716 4,782 Changes in value of biological assets 13 315 267
Operating profit 14 17,755 8,597
Financial income 15 4 Financial expense - 350 - 342 Net financial items 15 - 336 - 338 Profit after financial items 17,419 8,258
Tax 16 - 1,962 - 1,606
Net profit for the year 15,457 6,652
Attributable to Parent Company’s shareholders 12,242 4,376 Non-controlling interests 3,215 2,276 15,457 6,652
Earnings per share attributable to the Parent Company’s shareholders, SEK 98.73 35.29 (there is no dilution effect)
STATEMENT OF COMPREHENSIVE INCOME, SEK m. Note 2016 2015 Net profit for the year 15,457 6,652 Other comprehensive income Items that cannot be transferred to profit or loss Revaluation of defined-benefit pension plans - 164 209 Tax attributable to items that cannot be transferred to profit or loss 16 30 - 44 Proportion of other comprehensive income in associated companies - 24 21 - 158 186 Items that can be or have been transferred to profit or loss Cash-flow hedging Revaluation of derivatives recognized in shareholders’ equity 96 - 111 Transferred from shareholders’ equity to the income statement 126 67 Transferred from shareholders’ equity to fixed assets - 12 10 Translation difference on foreign operations - 165 8 Hedging of currency risk in foreign operations 1 22 Available-for-sale financial assets Revaluation recognized directly against shareholders’ equity - 2,015 300 Transferred to profit and loss when reclassified - 99 Tax attributable to items that can be or have been transferred to profit or loss 16 - 428 95 Proportion of other comprehensive income in associated companies and joint ventures 43 - 29 - 2,453 362 Other comprehensive income after tax - 2,611 548
Total comprehensive income for the year 12,846 7,200
Attributable to LUNDBERGS 2016 – GROUP Parent Company’s shareholders 9,737 4,813 Non-controlling interests 3,109 2,387
44 12,846 7,200 Balance sheet, Group
BALANCE SHEET, SEK m. Note Dec 31, 2016 Dec 31, 2015 ASSETS 38
Fixed assets Intangible fixed assets 17 170 190 Tangible fixed assets 18 9,440 10,373 Biological assets 19 17,448 17,173 Investment properties 20 54,393 48,438 Participations in associated companies and joint ventures 2, 21 20,105 6,614 Financial investments 22, 38 12,230 18,621 Other shares and participations 23 2 4 Long-term financial receivables 24, 38 51 53 Deferred tax assets 16 4 6 Total fixed assets 113,843 101,471
Current assets Properties classified as current assets 25 176 167 Inventories 26 3,578 3,592 Accounts receivable 27 2,225 2,023 Tax receivable 16 132 44 Other current receivables 27 625 621 Current financial receivables 24, 38 89 61 Cash and cash equivalents 24 1,491 818 Total current assets 8,317 7,325
TOTAL ASSETS 122,160 108,796
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity Share capital 29 1,240 1,240 Reserves 30 5,599 8,034 Earnings brought forward, including current-year profit 50,267 38,751 Shareholders’ equity attributable to Parent Company shareholders 57,106 48,024
Non-controlling interests 2, 31 26,934 24,766 Total shareholders’ equity 84,040 72,790
Liabilities Long-term liabilities Long-term financial liabilities 24, 38 8,499 10,933 Other long-term liabilities 47 22 Provision for pensions 32 313 234 Other provisions 16, 33 689 603 Deferred tax liabilities 16 16,564 14,819 Total long-term liabilities 26,113 26,611
Current liabilities Current financial liabilities 24, 38 7,939 5,069 Accounts payable 34 1,937 2,089 Current tax liability 16 36 89 Provisions 16, 33 228 157 Other current liabilities 34 1,868 1,991 Total current liabilities 12,007 9,395
Total liabilities 38,120 36,006
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 122,160 108,796
Information on the assets pledged by the Group and contingent liabilities is presented in Note 35. LUNDBERGS 2016 – GROUP
45 Statement of changes in shareholders’ equity and Cash flow statement, Group
Earnings brought Total forward, including Non-controlling shareholders’ CHANGES IN SHAREHOLDERS’ EQUITY, SEK m. Share capital Reserves current-year profit Total interests equity Opening balance, January 1, 2015 1,240 7,672 34,918 43,831 23,272 67,103
Net profit for the year 4,376 4,376 2,276 6,652 Other comprehensive income 361 75 437 111 548 361 4,452 4,813 2,387 7,200 Dividend - 620 - 620 - 891 - 1,511 Changes in Group composition 1 1 - 2 - 2 SHAREHOLDERS’ EQUITY ON DECEMBER 31, 2015 1,240 8,034 38,751 48,024 24,766 72,790
Net profit for the year 12,242 12,242 3,215 15,457 Other comprehensive income - 2,435 - 70 - 2,505 - 106 - 2,611 - 2,435 12,172 9,737 3,109 12,846 Dividend - 657 - 657 - 942 - 1,599 Share-saving program 1 2 2 4 5 Changes in Group composition 1 1 - 3 - 2 SHAREHOLDERS’ EQUITY ON DECEMBER 31, 2016 1,240 5,599 50,267 57,106 26,934 84,040
1) Pertains solely to Holmen.
CASH FLOW STATEMENT, SEK m. Note 28 2016 2015 Operating activities Profit before taxes 17,419 8,258 Adjustments for items not included in cash flow 11,964 - 3,166 Taxes paid - 738 - 603 4,717 4,489 Change in inventories - 142 45 Change in operating receivables - 164 258 Change in operating liabilities - 30 89 CASH FLOW FROM OPERATING ACTIVITIES 4,380 4,881 Investing activities Acquisition of tangible fixed assets - 792 - 874 Divestment of tangible fixed assets 440 50 Investment in investment properties - 1,219 - 965 Divestment of investment properties 911 Acquisition of financial assets - 475 - 1,012 Acquisition of subsidiaries, associated companies and joint ventures - 1,610 - 8 Divestment of subsidiaries, associated companies and joint ventures 127 Acquisition of other fixed assets - 19 - 12 Divestment of other fixed assets 95 CASH FLOW FROM INVESTING ACTIVITIES - 2,541 - 2,820 Financing activities Raised long-termed loans 2,100 1,100 Repayment of long-term loans - 700 - 1,126 Change in current financial liabilities - 960 - 593 Change in current financial receivables - 6 0 Dividend paid to Parent Company’s shareholders - 657 - 620 Dividend paid to non-controlling interest - 942 - 891 CASH FLOW FROM FINANCING ACTIVITIES - 1,165 - 2,131 CASH FLOW DURING THE YEAR 674 - 70
Cash and cash equivalents on January 1 818 888 Exchange-rate effects - 1 0 Cash and cash equivalents on December 31 1,491 818 LUNDBERGS 2016 – GROUP
46 nized separately from interest expenses attributable to the lease liability. The The liability. lease the to attributable expenses interest from separately nized recog be to is depreciation/amortization loss, or profit In sheet. balance recognized be the in exceptions, of anumber with leases, all to attributable liabilities and assets that requires SIC-15 standard SIC-27. 4, and The IFRIC pretations instruments. financial Group’s the of recognition the on impact material any have not will standard the of application that is assessment initial The 2018. 1, January on effect into come will standard The accounting. hedge as well as instruments, financial of impairment and measurement classification, the to relates standard The 39. IAS replace will instruments, of revenues. respect in disclosures note expanded in result probably will its application requirements, disclosure additional 15 contains IFRS Since revenues. ed consolidat of recognition the on impact material any have not the will of standard application that is assessment initial The initiated. was effects the of tion evalua an and conducted, was flows revenue Group’s the of analysis an year, the During 2018. 1, January on effect into come will standard new 13. The IFRIC 18 11, och IAS IAS replace will that requirements disclosure associated with EU. the by adopted been yet not have or effective become yet not either have but IASB, the by published been have standards new following The effective become yet not have that policies accounting revised and New extent. alimited to statements financial of presentation the affected 1have IAS and Act Accounts Annual the to 1, Amendments 2016. January of as applied been have statements cial finan consolidated the on impact amaterial with policies accounting new No accounting policies Revised estimates. and assumptions accounting -Important 37 Note to refer Also periods. future and period current the affects change the if periods future and made is change the period the in or period, the affects it if only made, is change the which during period the in recognized are estimates in estimates. accounting deviate may these from results Actual costs. and revenues liabilities, assets, of amounts recognized the and policies accounting the of application the affect that tions assump as well as estimates accounting make to required is management company IFRS, with accordance in statements financial the prepare to order In and estimates Accounting assumptions Group. the Parent and the for Company currency reporting the constitutes and currency, functional Company’s Parent the is which SEK, in presented are statements financial The currency and reporting currency Functional financial assets. available-for-sale or loss or profit via value fair at measured assets classified financial as assets financial derivatives, of consist value fair at recognized ities liabil and assets Financial value. fair at measured are which and assets, properties biological investment liabilities, and assets financial certain of ception ex the with (cost), value acquisition at recognized are liabilities and Assets statements financial of preparation the for bases Valuation reasons. tax for cases, certain in and, Act Security Pension the Act, Accounts Annual the to due Company Parent the in IFRS apply to opportunities of terms in limitations by caused were principles Group and Company Parent the between deviations The policies. accounting Company Parent the in specified entries of exception the with applied. been has Council, Reporting Swedish Financial the by issued groups, corporate for rules accounting 1,Supplementary RFR addition, In EU. the by adopted as (IASB), Board Standards International Accounting the by issued (IFRS) Standards Reporting Financial with International accordance in prepared been have statements financial consolidated The Compliance with norms and law ventures. joint as well as companies, ed associat and subsidiaries Company, Parent the of consolidating and the in reporting consistently applied been have policies accounting Group’s The specified below. unless statements, financial Group’s the in presented periods all for consistently applied been have below Group the for policies accounting The Group Notes, Note 1 - Accounting policies IFRS 16 Leases replaces the previous IAS 17 Leases and the related inter related the and 17 Leases IAS previous the replaces 16 Leases IFRS financial of recognition the addresses which Instruments, 9Financial IFRS standard revenue anew is Customers with Contracts from 15 Revenue IFRS Changes regularly. reviewed are estimates and assumptions accounting The Group, the as policies accounting same the applies Company Parent The
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through shareholdings ranging from 20 to 50% of total voting rights. Partici rights. voting total of 50% to 20 from ranging shareholdings through usually control, financial and operating over influence acontrolling not but asignificant has Group the which over companies are companies Associated companies Associated recognizedHoldings according to method the equity influence. controlling of final date the until date acquisition the from statements financial the in included asset. fixed intangible an as recognized is goodwill and constitutes assets net identifiable acquired the of value fair the and value. fair are at measured subsidiary the of liabilities and assets acquired indirectly the that means delay. without verted con or used be can shares potential whether of determinations influence include must controlling of Assessments return. the influence to object vestment in the over control exercise can and company the in holding its from return avariable to entitled or exposed is object, investment the over control has AB Lundbergföretagen LE when achieved is influence Controlling AB. företagen ated companies and jointly controlled companies are eliminated to an extent extent an to eliminated are companies controlled jointly and companies ated associ with transactions from arising gains Unrealized arise). they as their entirety in recognized are which rents, intra-Group is exception (the are prepared statements financial consolidated the when eliminated Group are companies between transactions intra-Group to attributable unrealized losses or and gains expenses or revenues liabilities, receivables, intra-Group All Transactions eliminated on consolidation ceases. ownership, joint the or ence, value. acquisition the in included is acquisition with connection in that arises expenditure Transaction subsidiaries. of acquisition the for used as those policies same the with accordance in recognized is assets net identifiable acompany’s such of value fair net the in share company’s owning the and ue income. comprehensive other Group’s the in line aseparate on recognized is companies various the of income hensive compre other of portion The investment. the of amount carrying received the reduce Dividends ventures”. joint and companies associated in of participations “Results in recognized is values, deficit and surplus losses acquired of impairment reversals or depreciation/amortization, any for after adjustments after tax, profit/loss companies’ various the of share The values. deficit and surplus consolidated and equity, shareholders’ company’s the in share Group’s the matches amount carrying the that means This ventures. joint and companies associated of recognition the for Group the in applied is method equity The method Equity Arrangements. 11 Joint IFRS with complies thus accounting their and method equity the to according recognized already were holdings the that anature such of are ventures joint Group’s The method. equity the with accordance in consolidated are ventures joint in liabilities. to Shareholdings pertaining commitments and assets to entitlement adirect than rather assets net the to entitled is Group the whereby partners, more or one with agreements cooperation through influence acontrolling has Group the which in companies as defined are ventures joint purposes, accounting For ventures owned companies/joint Jointly method. equity the with accordance in recognized are companies associated in pations interests. non-controlling and shareholders Parent Company’s the between meaning equity, shareholders’ in recog atransaction are as nized interests non-controlling from Acquisitions arise. interests trolling Subsidiaries are companies under the controlling influence of L E Lundberg of LE influence controlling the under companies are Subsidiaries Subsidiaries Consolidation policies date. sheet balance the of 12 months within paid or recovered be to expected amounts of consist Parent Group the in and Company liabilities current and assets current significant all Virtually date. sheet balance the after 12 months than more paid or recovered be to amounts of consist expected liabilities long-term and assets fixed significant all Virtually etc. Classification, way. under is statements financial consolidated the on impact potential standard’s the of 2019.Evaluation 1, January on effect into come will standard The equity method is applied up to the date on which the significant influ significant the which on date the to up applied is method equity The val acquisition the between difference any acquisitions, with connection In are subsidiaries the of liabilities and assets and expenses and revenues The non-con subsidiary, the of 100% to pertain not acquisition the Should subsidiary the in shares the of cost acquisition the between difference The which method, purchase the with accordance in recognized are Subsidiaries ------47
LUNDBERGS 20152016 – – KONCERNEN GROUP Note 1, continued
corresponding to the Group’s ownership share in the companies. Unrealized Exchange transactions losses are eliminated in accordance with the same criteria as eliminations of Are recognized as an exchange of an asset for another without any form of unrealized gains, but only to the extent that there is some indication of impair- revenue recognition, since the exchange does not constitute a revenue-gener- ment requirements. ating transaction. This arises in certain cases where forest land is exchanged for other forest land of a similar type and value. Foreign currency Transactions in foreign currency Financial income and expense Transactions in foreign currency are translated to the functional currency Financial income and expense consists of interest income attributable to bank using the exchange rate prevailing on the transaction date. Monetary assets balances and receivables, interest-bearing securities, interest expense on and liabilities denominated in foreign currency are translated to the functional loans, dividends not included in the Equity Management business area (which currency using the exchange rate prevailing on the balance-sheet date. Ex- are recognized as net sales), unrealized and realized gains on financial invest- change-rate differences arising from currency translations are recognized in ments and revaluations of financial instruments recognized at fair value and profit or loss. Non-monetary assets and liabilities that are recognized at histori- unrealized and realized exchange rate losses and gains. cal acquisition values are translated using the exchange rate prevailing on the Calculations of interest income on receivables and interest expense on liabil- transaction date. ities are based on the effective interest-rate method. Dividend income is recognized when the right to receive the dividend has Financial statements of foreign operations been established. Results from the divestment of financial instruments are Assets and liabilities in foreign operations, including goodwill and other consol- recognized when the risks and benefits associated with ownership of the idated surplus and deficit values, are translated from the functional currencies instrument are transferred to the buyer and the Group no longer has control of the foreign business operations to the Group’s reporting currency using the over the instrument. exchange rate prevailing on the balance-sheet date. Revenues and expenses in Interest income and interest expense are normally recognized in profit or foreign operations are translated to SEK using an average exchange rate that loss for the period to which the amounts pertain. represents an approximation of the exchange rates for each transaction date in question. Translation differences arising from currency translations of foreign Taxes operations, as well as associated effects of hedges of net investments, are Income taxes consist of current tax and deferred tax. Income taxes are recog- recognized in other comprehensive income and are accumulated in a separate nized in profit or loss, apart from when underlying transactions are recognized component of shareholders’ equity known as the translation reserve. in other comprehensive income or in shareholders’ equity, whereby the related When a foreign operation is divested, the accumulated translation differenc- tax effect must be recognized in other comprehensive income or in equity. es attributable to the operation are realized in profit or loss less any currency Current tax is the tax to be paid or received for the current year, applying the hedging. tax rate decided or decided in principle on the balance-sheet date. Adjustment of current tax attributable to previous periods is also included in current tax. Conditions for companies operated on a commission basis Deferred tax is calculated in accordance with the balance-sheet method, on Holmen’s operations are operated mainly on a commission basis through Hol- the basis of the temporary differences between the recognized and tax-assess- men Paper AB, Iggesund Paperboard AB, Holmen Timber AB, Holmen Skog AB ment value of assets and liabilities, based on the tax rates and tax regulations and Holmen Energi AB. that have been decided or decided in essence on the balance-sheet date. Temporary differences are not taken into account in consolidated goodwill or Revenues temporary differences pertaining to participations in subsidiaries or associated Net sales companies that are not expected to become subject to tax in the foreseeable Consolidated net sales consist of revenues from real estate operations, equity future. Deferred tax assets pertaining to deductible temporary differences and management and invoiced sales, excluding value added tax attributable to tax loss carryforwards are only recognized insofar as they are likely to be uti- products, timber and energy. Where appropriate, net sales have been reduced lized in the future. Deferred tax assets and deferred tax liabilities in the same by discounts and similar revenue reductions and include exchange-rate differ- country are recognized net insofar as offsetting is permissible. ences on sales in foreign currency. Accordingly, rental revenues and rent paid in advance are recognized as Earnings per share prepaid. Rental revenues include items related to forward-invoicing of costs Earnings per share are calculated on the basis of consolidated earnings attrib- incurred. utable to the Parent Company’s shareholders and on the weighted average Sales revenues are recognized after the critical risks and value in use related number of shares outstanding during the year. to ownership rights to goods sold have been transferred to the purchaser, and there is no power of appointment or any remaining possibility to exercise actu- Financial instruments al control over the goods that were sold. Recognition in and derecognition from the balance sheet Other revenues A financial instrument that is not a derivative instrument is measured initially Revenues attributable to activities outside the ordinary business operations, at acquisition value (cost), which corresponds to the instrument’s fair value changes in inventories and capitalized work on the company’s own behalf. plus transaction expenses, with the exception of assets belonging to the cate- Revenues from property sales are recognized on the date of transfer. Circum- gories of financial assets or financial liabilities measured at fair value through stances beyond the control of the seller and/or buyer that could affect comple- profit or loss, which are recognized excluding transaction expenses. On the tion of the transaction are also taken into consideration. first accounting occasion, a financial instrument is classified on the basis of the reason for acquiring the instrument. Revenues from sales of products are recognized when significant risks and bene- Financial assets or liabilities are recognized in accordance with the trade day fits related to ownership of the products have been transferred to the buyer. method. A financial asset or financial liability is recognized in the balance sheet Revenues from service assignments are recognized based on the degree of com- when the company becomes a party to the instrument’s contractual terms and pletion on the balance sheet date. conditions. Accounts receivable are entered in the balance sheet when the in- Certificates of renewable energy are allocated in relation to the production of voice has been sent. Rent receivables, however, are entered at the beginning of renewable energy, according to a quota system that has been introduced to each rental period. Liabilities are entered when the counterparty has fulfilled promote the use of renewable energy sources. Revenues from allocated certif- his obligation and a contractual obligation to pay has arisen, even if the invoice icates are recognized as other operating income in the same period as produc- has not been received. A financial asset is derecognized from the balance sheet tion occurs. Certificates sold on forward contracts are measured at net sales when the rights in the agreement are realized, expire or the company no longer value. Unsold certificates are measured at the lower of cost and market value. has control over the asset. A financial liability is derecognized when the obliga- tion in the agreement is fulfilled or is extinguished in some other manner. Government assistance is recognized in the balance sheet as accrued income Spot transactions are recognized in accordance with the trade day method. when it can be stated with reasonable certainty that the assistance will be re- A financial asset and a financial liability are offset against each other and ceived and that the terms and conditions associated with the assistance will be recognized in a net amount only when there is a legal entitlement to offset the fulfilled. Government assistance related to a fixed asset reduces the recognized amounts, and the company intends to adjust the entries by a net amount or to cost of the fixed asset. Government assistance, such as road allowances, in- simultaneously realize the asset and settle the liability. LUNDBERGS 2016 – GROUP tended to cover costs is recognized as other operating income. These amounts Financial assets, excluding shares, and financial liabilities have been classi- are accrued systematically in profit or loss in the same way and over the same fied as current if the amounts are expected to be recovered or paid within 12 periods as the costs that the assistance is intended to offset. 48 Note 1, continued months from the balance sheet date. Shares have been classified as long term the hedged item is instead adjusted when it occurs. Hedges of the ineffective if they are intended to be held permanently in the operation. component are recognized directly in profit or loss. Currency forward con- Subsequent measurement of financial instruments tracts and currency swaps are used as cash flow hedges to counter changes in Financial assets measured at fair value through profit and loss comprise a cate- exchange rates. For changes in interest rates, interest-rate swaps are used as gory consisting of two groups: financial assets held for sale and other financial cash flow hedges. assets that the company has initially decided to place in this category (in Hedging of fair value. Changes in the value of derivatives are recognized directly accordance with the Fair Value Option). Financial instruments in this category in profit or loss. Changes in the value of hedged items are recognized in a cor- are measured on a current-account basis at fair value in cases where changes responding manner. in value are recognized in profit and loss. The first group includes derivatives Hedging of net investment. Changes in the value of hedges of net investments in with a positive fair value, with the exception of derivatives that comprise an foreign operations are recognized in other comprehensive income. Accumu- identified and effective hedging instrument, as well as shares held primarily lated changes in value are recognized as a component of shareholders’ equity for trading purposes. (translation reserve) until the operation is divested, at which time the accumu- Loan receivables and accounts receivable are financial assets that are not deriv- lated changes in value are recognized in profit or loss. atives, that are subject to determined or determinable payments and that are Calculating fair value. The fair value of financial instruments traded on an not listed on an active market. These assets are measured at accrued acquisi- active market is based on quoted market prices and belongs to Level 1, as tion value. Accrued acquisition value is determined on the basis of the effective stipulated in IFRS 13. If no quoted market prices are available, fair value has interest rate that is calculated on the date of acquisition. been calculated by discounting cash flows. When calculations of discounted Interest-bearing receivables and securities, cash and cash equivalents, cash flows have been performed, all variables, such as discount interest rates rental receivables and accounts receivable are recognized in this category. and exchange rates used in the calculations, have been derived from market Accounts receivable are recognized at the amount expected to be received, quotations, wherever possible. When calculating discounted cash flows, the meaning after deductions for uncertain receivables. average of the exchange rates and discounting interest rates is used. These Rental receivables and accounts receivable that have an original maturity valuations belong to Level 2. Valuations of currency options applying the Black of less than six months are measured without any discounting of nominal & Scholes formula are performed when this is appropriate. In the event of amounts. holdings of shares in listed companies with several classes of shares (in those Available-for-sale financial assets.This category includes financial assets that cases where not all share series are listed), the unlisted shares are calculated are not classified in any other category or financial assets that the company at a 10% premium on top of the price of the listed shares. These valuations has initially chosen to classify in this category. The assets are measured on a belong to Level 3. current-account basis at fair value with the period’s changes in value recog- nized in other comprehensive income and the accumulated changes in value Tangible fixed assets in a component of shareholders’ equity (fair value reserve), although not the Tangible fixed assets are recognized at acquisition value less accumulated type of changes in value resulting from impairment losses, and not interest on depreciation and any impairment. Tangible fixed assets that consist of com instruments of debt and dividend income and not exchange-rate differences ponents with different useful lives are treated as separate components of on monetary items that are recognized in profit or loss. When the asset is tangible fixed assets. The acquisition value includes the purchase price and divested, the accumulated gain/loss that was previously recognized in other expenditure directly attributable to measures implemented to adapt the asset comprehensive income is recognized in profit or loss. Assets for which it has to the site and to a condition whereby it can be utilized for the purpose that not been possible to determine a fair value have been measured at acquisition it was acquired. Additional expenditure is capitalized only if it is adjudged to value, which is in contrast to the description above. generate financial benefits for the company. The critical factor in assessments Shareholdings that are not recognized as subsidiaries, associated compa- of when an additional expenditure should be added to the carrying amount nies or joint ventures or are held for trading purposes are recognized in this is whether or not it replaces identified components, or parts thereof, and in category. such cases the expenditure is capitalized. The expenditure is also added to the Financial liabilities measured at fair value through profit and loss comprise a carrying amount in cases where new components are created. Any non- category consisting of two groups: financial liabilities held for sale and other depreciated carrying amounts for replaced components, or parts thereof, financial liabilities that the company initially chose to place in this category (in are scrapped and expensed in connection with the replacement. accordance with the Fair Value Option). Financial instruments in this category Amortization principles are measured on a current-account basis at fair value in cases where changes Depreciation is applied straight-line over the estimated useful life. in value are recognized in profit or loss. The following useful life (years) is used: The first group includes derivatives with a negative fair value, with the Machinery for hydro-power generation 10-40 exception of derivatives that comprise an identified and effective hedging Investment and storage buildings, housing (Holmen) 10-33 instrument. The second group includes loans that are measured at fair value, Operational buildings, land improvements and pulp, whereby the Fair Value Option has been applied to achieve a fairer recognition paper and board production machinery 10-20 of profit/loss, and thus match the changes in value of the interest-rate swap Sawmill machinery 10-12 belonging to the loan. Other machines 10 Other financial liabilities are measured at accrued acquisition value. Accrued Forest motor roads 10 acquisition value is determined on the basis of the effective interest rate that Equipment 3-10 is calculated on the date of acquisition. Accounts payable, overdraft facilities and loan liabilities are recognized in this category, with the exception of loans Land is not depreciated. Assessments of an asset’s residual value and useful that are measured at fair value pursuant to the Fair Value Option. Loans that life are made at regular intervals. have been hedged against changes in value are recognized initially including any transaction costs and continuously at market value. Accounts payable that Impairment losses have an original maturity of less than six months are measured without any Carrying amounts for the Group’s assets are impairment tested at the close discounting of nominal amounts. of every fiscal year to assess whether there are indications of impairment Derivative instruments and hedge accounting. All derivatives are measured at fair requirements. Exceptions are made for biological assets, investment proper- value and recognized in the balance sheet. For derivatives that do not meet the ties, financial assets, deferred tax assets and inventories. If any indication of requirements for hedge accounting, changes in value are recognized in oper- impairment arises, an estimate is made to determine the asset’s recoverable ating profit or net financial items, depending on the purpose of the holding. In value. For the exempted assets, as listed above, values are tested in accor- those cases where hedge accounting has been applied, the changes in value dance with the respective standard. are recognized in the following manner. Tangible fixed assets. If there are indications that carrying amounts of Group Cash-flow hedges. The effective portion of changes in value is recognized in oth- assets are too high, an analysis is conducted whereby the recoverable value of er comprehensive income and accumulated in shareholders’ equity (hedging individual assets or naturally related asset types is determined as the higher of reserve) until the hedged flow meets profit and loss, at which time the accu- net realizable value and value in use. The net realizable value is the estimated mulated changes in value are transferred from shareholders’ equity via other selling price less the estimated cost of making the asset ready for sale. Value comprehensive income to profit and loss in order to offset and match the in use is measured as the projected future discounted cash flow. The discount LUNDBERGS 2016 – GROUP hedged transaction. For hedges of investments, the acquisition value (cost) of rate applied takes into account risk-free interest and the risk related to the
49 Note 1, continued
specific asset. Impairment losses correspond to the difference between the the leasing agreement. Variable fees are expensed during the periods in which carrying amount and recoverable value. Impairment losses are reversed if a they arise. positive change has occurred in the parameters used to determine the asset’s All leases for the rental of premises are classified as operational leasing recoverable value. A reversal may not exceed the carrying amount that would agreements with the Group as the lessor. All rental, ground rent and leasehold have been recognized, less depreciation, if no impairment had been posted. agreements that the Group has entered into as lessee are classified as opera- Available-for-sale financial assets.Impairment testing is conducted on a con- tional leasing agreements. The cost of these is expensed continuously. tinuous basis. Impairment losses are posted when the decline in fair value is material or protracted over time. If there is a need for an impairment loss, Borrowing costs any changes in value that had previously been recognized in comprehensive Borrowing costs attributable to the purchase or production of what are known income are restated in profit or loss. Any reversal of previously posted impair- as qualified assets are capitalized as a part of the asset’s acquisition value. A ment losses is recognized in other comprehensive income. For listed shares, qualified asset is an asset that takes a substantial time to complete. Capitaliza- the impairment requirement is based on the current share price at each par- tion primarily takes place for borrowing costs that have arisen on loans that ticular time. are specific to the qualified asset. Secondarily, capitalization takes place for borrowing costs that have arisen on general loans that are not specific to any Loan receivables and accounts receivable. Impairment testing is conducted on a other qualified asset. In the Group, capitalization of borrowing costs becomes continuous basis by determining whether there is any objective evidence that relevant in connection with major investment projects. an impairment requirement prevails. Examples of this are non-payment or delayed payment and other factors indicating that the debtor is experiencing Employee benefits financial difficulties, such as indications of imminent bankruptcy or of financial reconstruction. Defined-contribution plans Pension plans for which the company’s obligation is limited to the contri- Investment properties butions the company pledges to pay are classified as defined-contribution Investment properties are properties held in order to receive rental revenues pension plans. In such cases, the size of the employee’s pension depends on and/or value growth. Initially, investment properties are recognized at acquisi- the contributions paid by the company to the plan or to an insurance company tion value, which includes expenditures directly attributable to the acquisition. plus the capital return that the contributions yield. Accordingly, the employ- Investment properties are recognized in the balance sheet in accordance with ee is exposed to the actuarial risk (that the remuneration will be lower than the fair value method. expected) and the investment risk (that the invested assets will not be suffi- Fair value is based on internal valuations that are quality assured with the cient to yield the expected remuneration). Obligations concerning fees to de- help of external valuations of a selection of properties. Continuous analyses fined-contribution plans are recognized as an expense in profit or loss during are made to determine if there are indications of changes in fair value of the the period the employee performed the services for which the fee is intended. properties. If there are indications of significant changes in value during an Defined-benefit pension plans ongoing year, revaluation occurs in connection with the following quarterly In the Group, salaried employees in Sweden are covered by the ITP plan. interim report. Refer also to Note 20. Both unrealized and realized changes in Obligations for retirement pensions and family pension plans for salaried values are recognized in profit or loss. Changes in value are recognized net and employees in Sweden are covered through insurance in Alecta. In accordance are divided among unrealized and realized changes in value, as presented in with UFR 10, a statement issued by the Swedish Financial Reporting Council, Note 12. this is a multi-employer defined-benefit plan. During the 2016 fiscal year, the Additional expenditures are added to the carrying amount only if the future company did not have access to the information necessary to support recog- economic benefits linked to the asset are likely to become available to the nition of this plan as a defined-benefit plan. Accordingly, the ITP pension plan company and the acquisition value can be estimated in a reliable manner. All covered by insurance in Alecta is recognized as a defined-contribution plan. other additional expenditures are recognized as costs in the period they are Obligations regarding fees for defined-contribution plans are recognized as incurred. The critical factor in assessments of when an additional expenditure expenses in profit or loss when they arise. In addition to the above exceptions, should be added to the carrying amount is whether or not it replaces identified there are defined-benefit obligations for: components, or parts thereof, and in such cases the expenditure is capitalized. The expenditure is also added to the carrying amount in cases where new Lundbergs – Obligations in accordance with the FPG/PRI system components are created. The cost of repairs is expensed as they occur. Holmen – Obligations in excess of the ITP plan for Group management in Sweden, secured through foundations Inventories – Pensions plans in the UK, in trusts (these have been closed Inventories are measured at the lower of acquisition value and production for new vesting since 2015) cost, after an allowance for necessary obsolescence, or the net realizable val- ue. The acquisition cost of inventories is calculated using the FIFO (first-in first- The pension liability is calculated based on estimates of the future bene- out) method. The net realizable value is the estimated selling price in operating fits employees have vested through their employment in both current and activities less the estimated cost of finishing the product and making it avail- previous periods of service. This benefit is discounted to present value The able for sale. The acquisition cost of products manufactured by the company discount rate is the interest rate prevailing on the balance-sheet date on a consists of direct production costs and a reasonable portion of indirect costs. first-class corporate bond with a term corresponding to the pension obliga- Harvesting rights are acquired with a view to ensuring Holmen’s access to tions of the various plans. When there is no active market for corporate bonds, raw materials by means of harvesting. No measurable biological transforma- the market interest rate for government bonds with a corresponding term is tion occurs from the date of acquisition until the felling date. Emission rights used. The computation is made by a qualified actuary based on the projected received are initially recognized as inventories and prepaid income at market unit credit method. If the benefit is fully vested, an expense is entered in profit price on allocation. During the year, the allocation is recognized as income, or loss. at the same time as an interim liability, corresponding to actual emissions, is When determining the obligation resulting from defined-benefit plans, re- expensed. valuation effects may arise, which take the form of actuarial gains and losses. Certificates received for renewable energy sold on forward contracts are Such revaluation effects are recognized in other comprehensive income. Net recognized at net sales value. Unsold certificates are measured at the lower of interest expense/income on the defined-benefit obligation is recognized in cost and market value. Recognition occurs as inventories or accrued revenue profit or loss under net financial items. Other components are recognized in in pace with production. operating profit. Since special employer’s contributions constitute a component of the actu- Leasing arial assumptions, they are recognized as part of the net obligation. For sim- Leasing is classified either as financial leasing or operational leasing. Leased plification, that part of the special employers contribution that is estimated fixed assets, for which the Group is exposed to virtually the same risks and in the legal entity on the basis of the Swedish Pension Obligations Vesting Act benefits as direct ownership of fixed assets, is classified as financial leasing. (“Tryggandelagen”) is recognized as an accrued cost rather than as part of the Leasing of assets for which the lessor retains all material ownership of the net obligation/asset. asset is classified as operational leasing. Costs pertaining to operational leas- The tax on returns is recognized continuously in profit or loss for the period ing agreements are recognized in profit or loss straight line over the term of to which the tax pertains and is thus not included in the calculation of the
LUNDBERGS 2016 – GROUP liability.
50 Note 1, continued
Share-based payment in Holmen Hufvudstaden Holmen Outstanding share-based programs are recognized in accordance with IFRS 2 Subsidiaries, SEK m. 2016 2015 2016 2015 Share-based payment and are settled with equity instruments. Recognition of Revenues 1,790 1,689 15,513 16,014 share-based payment programs settled with equity instruments entails that the fair value of the instruments at the date of allotment is to be expensed Profit 4,120 3,470 1,424 559 in profit or loss over the vesting period, with a corresponding adjustment of Other comprehensive income - 157 166 shareholders’ equity. At every year-end during the vesting period, the expect- Total comprehensive income 4,120 3,470 1,267 724 ed number of allotted shares is estimated and the impact of a potential change in earlier assessments is recognized in profit or loss with a corresponding Fixed assets 36,536 31,758 28,740 29,567 adjustment of shareholders’ equity. A provision is also posted for estimated Current assets 1,173 564 6,151 5,889 social security costs related to the share-based program. Calculations are Long-term liabilities - 11,361 - 11,050 - 7,368 - 8,519 based on the value of the shares at the date of allotment, which is defined Current liabilities - 3,300 - 1,706 - 6,279 - 6,085 as the time when agreements have been concluded between the parties. Employee subscription of Holmen’s share-savings plan was possible between Net assets 23,047 19,567 21,243 20,853 April 27 and May 20, 2016. The average share price during this period was used Cash flow from as the basis for measuring the value of the shares at the date of allotment. The vesting period extends from May 20, 2016 up to the date of publication of - operating activities 1,029 968 1,961 2,526 Holmen’s interim report for the first quarter of 2019. - investing activities - 619 - 500 - 123 - 832 - financing activities 261 - 498 - 1,848 - 1,659 Options issued to employees of associated companies From the viewpoint of the issuer, share-based instruments issued to employ- Cash flow during the year 671 - 31 - 10 35 ees of companies that are not included in the group are not encompassed by the application area for IFRS 2. Premiums received for the warrants, which are Attributable to Hufvudstaden Holmen entered at market price (fair value), are expensed. In subsequent accounting, non-controlling interests 2016 2015 2016 2015 the option liability is measured at fair value through profit and loss Share of profit 2,255 1,899 960 377 Remuneration in the event of employment termination Share of comprehensive income 2,255 1,899 854 488 A cost for remuneration paid in connection with employment termination is Share of net assets 12,614 10,709 14,320 14,057 recognized only if there is evidence that that Group is obliged, without any Dividend - 350 - 327 - 592 - 564 realistic opportunity of withdrawal, by a formal detailed plan to terminate employment before the normal time. When remuneration is paid as an offer to Significant associated companies encourage voluntary retirement, a cost is recognized if it is probable that the L E Lundbergföretagen AB holds shares in Husqvarna AB, AB Industrivärden offer will be accepted and the number of employees who will accept the offer and Indutrade AB to such an extent that these companies constitute associat- can be reliably estimated. ed companies and are recognized in accordance with the equity method in the Short-term remuneration consolidated financial statements. Classification of the companies is based on Short-term remuneration to employees is estimated without discounting and the share of voting rights resulting from these holdings. The companies are is expensed when the related services have been received. listed on Nasdaq Stockholm and information about their operations is present- ed on the website of the respective company. Other Percentage of share Unless stated otherwise, all amounts are rounded off to the nearest million, capital (votes) 1 which means that tables and calculations do not always tally. In texts and Company Country 2016 2015 tables, figures between 0 and 0.5 are reported as 0. Husqvarna AB Sweden 7.6 (25.0) 7.6 (24.9) AB Industrivärden 2 Sweden 16.1 (23.3) 13.6 (19.8) Indutrade AB Sweden 26.3 (26.3) 25.6 (25.6) Note 2 - Information about the company 1) The percentage of voting rights is calculated less treasury shares. L E Lundbergföretagen AB (publ) is a Swedish registered listed company, with 2) AB Industrivärden became an associated company on February 19, 2016. its head office in Stockholm. The company’s shares are listed on Nasdaq Stock- holm, Large Cap, Stockholm. The address to the company’s Head Office is PO 2016 Box 14048, SE-104 40 Stockholm. Associated companies, SEK m. Husqvarna Industrivärden Indutrade Since L E Lundbergföretagen AB has two subsidiaries that are not wholly owned, Hufvudstaden AB and Holmen AB, substantial non-controlling inter- Revenues 35,982 3,078 12,955 ests are recognized in the consolidated financial statements. Classification Profit 2,104 16,451 936 of the companies is based on the share of voting rights resulting from these Other comprehensive income 171 - 10 111 holdings. The companies are listed on Nasdaq Stockholm, Large Cap, and in- Total comprehensive income 2,275 16,441 1,047 formation about their operations is presented on the website of the respective company. Fixed assets 17,169 94,464 5,835 Current assets 15,809 1,160 5,218 Percentage of share Long-term liabilities - 9,236 - 7,796 - 2,837 capital (votes) 1 Current liabilities - 9,377 - 5,699 - 3,817 Company Country 2016 2015 Net assets 14,365 82,129 4,399 Hufvudstaden AB Sweden 54.7 (11.9) 54.7 (11.9) Holmen AB Sweden 67.4 (38.5) 67.4 (38.5) The Group’s share of associated companies, SEK m. Husqvarna Industrivärden Indutrade 1) Attributable to non-controlling interests. Share of net assets on January 1 980 – 948 Share of total comprehensive income 169 3,222 273 Dividends received - 72 - 303 - 92 Acquired shareholders’ equity 10,302 ¹ 26 Share of net assets on December 31 1,078 13,221 1,155 Surplus value 1,118 1,761 Closing carrying amount 2,195 13,221 2,915
1) Including the discount on net asset value. LUNDBERGS 2016 – GROUP
51 Note 2, continued
2015 Of sales of by-products, production surpluses accounted for SEK 141 m. (123), Associated companies, SEK m. Husqvarna Indutrade sawdust, bark, wood chips, etc. for SEK 96 m. (104) and external sales of ener- gy for SEK 127 m. (130). The item Other pertains to insurance compensation Revenues 36,170 11,881 following a fire at the Hallsta paper mill, as well as reimbursement following a Profit 1,888 894 dispute that was resolved in favor of Holmen. Other comprehensive income - 3 - 40 1) Revenue received from production of renewable energy. Total comprehensive income 1,885 854 2) Allotment of emission rights, which are partly used in Holmen’s production operations. The surplus resulted in SEK 25 m. (48) being recognized as profit. Fixed assets 15,749 4,796 Current assets 13,920 4,565 Long-term liabilities - 8,429 - 1,740 Current liabilities - 8,179 - 3,914 Note 5 - Employees and personnel costs Net assets 13,061 3,707 Of whom Of whom Average number of employees 2016 men, % 2015 men, % The Group’s share of associated companies, SEK m. Husqvarna Indutrade Parent Company – Sweden 8 67 8 71 Share of net assets on January 1 914 809 Total in Parent Company 8 67 8 71 Share of total comprehensive income 139 218 Wholly owned subsidiaries – Sweden 150 73 156 74 Dividends received - 72 - 79 Hufvudstaden – Sweden 113 60 105 60 Share of net assets on December 31 980 948 Holmen - Sweden 2,369 81 2,422 81 Surplus value 1,118 1,654 - Estonia 8 75 8 75 Closing carrying amount 2,098 2,602 - France 13 54 13 62 - Hong Kong 5 80 6 83 Information about other subsidiaries and associated companies is presented - Italy 8 63 7 57 in Notes 21 and 40. - Netherlands 77 51 104 64 - Poland 7 14 7 43 - Portugal 1 100 1 100 Note 3 - Net sales, SEK m. - Russia 1 – 1 - - Switzerland 3 67 3 67 2016 2015 - Singapore 6 52 6 50 Real estate operations - Spain 11 56 279 80 Rental revenues, etc. ¹ 2,954 2,839 - United Kingdom 443 89 429 88 Sales of properties classed as current assets 52 84 - Germany 23 57 20 50 Other revenues 131 108 - USA 12 60 9 67 Equity management Total in subsidiaries 3,252 80 3,576 80 Sales of marketable securities, etc. 281 534 Total in Group 3,260 80 3,584 80 Dividends 426 767 Printing paper 5,879 5,956 Distribution of company management by gender Paperboard 5,071 5,248 Percentage of women 2016 2015 Timber 2,572 2,812 Parent Company Sawn timber products 1,337 1,311 Board of Directors 33 38 Energy 314 268 Other senior executives - - Pulp 169 211 Group total Other 170 206 Board of Directors 27 24 19,357 20,347 Other senior executives 20 21 1) Sales-based rent accounts for SEK 20 m. (23) of rental revenues. Guidelines resolved by the Annual General Meeting (AGM) for determining salary and other remuneration of senior executives Note 4 - Other revenues, etc., SEK m. The 2016 AGM resolved to adopt the following guidelines for determining salaries and other remuneration paid to senior executives in L E Lundbergföre- tagen AB and its wholly owned subsidiaries Fastighets AB L E Lundberg and L E 2016 2015 Lundberg Kapitalförvaltning AB. Non-core activities Remuneration of senior executives may consist of fixed salary, bonus pay- Sales of by-products 364 358 ments, other benefits and pensions. The total remuneration should be com- Certificates, renewable energy ¹ 415 435 petitive in the market and be proportionate to each executive’s performance, Sales of fixed assets 75 37 responsibility and authority. For senior executives employed by L E Lund- Forestry assignments 57 67 bergföretagen AB or Fastighets AB L E Lundberg, any bonus payments must Emission rights ² 25 48 be connected to predefined and measurable criteria based on earnings and Other 623 257 profitability targets. The bonus is capped at the equivalent of three months’ salary. For senior executives of L E Lundberg Kapitalförvaltning AB, any bonus 1,559 1,203 payments are to be based on the results of activities, whereby the maximum bonus is approximately 15% of reported earnings over time. Bonus payments Change in inventories of shares - 94 - 16 are not normally pensionable. Change in inventories 203 - 187 Should notice of employment termination be served by the company, the 1,667 1,000 maximum term of notice is 12 months. Should notice be served by the com- pany, severance pay corresponding to six months’ salary could, in appropriate cases, be payable. Pension benefits for the President and other senior execu- LUNDBERGS 2016 – GROUP tives apply from age 65, with benefits corresponding to the ITP (Individual Sup- plementary Insurance) plan. Supplementary pension solutions may be added.
52 Note 5, continued
No remuneration is to be provided in the form of options or other share-based Salaries, other remuneration and social security costs, SEK m. incentive programs. Of which, In certain cases, the Board of Directors is to be entitled to deviate from the members of the guidelines if required under special circumstanses. Board, senior Social Of which, The remuneration paid to Board Members and senior executives in the Salaries and executives and security pension Parent Company is presented in the table below. 2016 remuneration President 1 costs costs 2 Remuneration and other benefits, Parent Company, SEK m. Parent Company 10 6 5 2 Wholly owned subsidiaries 88 20 41 10 Variable Other Basic salary, remun bene- Pension 98 26 46 12 2016 Director fees eration fits cost Total Hufvudstaden 79 17 44 16 Chairman of the Board Mats Guldbrand 0.8 0.8 Holmen 1,589 29 619 138 Member of the Board Carl Bennet Total in other subsidiaries 1,668 46 663 154 Remuneration from the Parent Company 0.3 0.3 Total in Group3 1,767 72 710 165 Remuneration from subsidiaries 0.3 0.3 Member of the Board Lilian Fossum Biner 0.3 0.3 Of which, Member of the Board Staffan Grefbäck members of the Remuneration from the Parent Company 0.3 0.3 Board, senior Social Of which, Remuneration from subsidiaries 0.1 0.1 Salaries and executives and security pension 1 Member of the Board Louise Lindh 2015 remuneration President costs costs 2 Remuneration from the Parent Company 0.3 0.3 Parent Company 10 6 5 2 Remuneration from subsidiaries 1.7 0.2 0.2 2.1 Wholly owned subsidiaries 89 18 41 10 Member of the Board Katarina Martinson 0.3 0.3 98 24 47 12 Member of the Board Sten Peterson Hufvudstaden 72 17 40 12 Remuneration from the Parent Company 0.3 0.3 Holmen 1,665 26 633 127 Remuneration from subsidiaries 0.2 0.2 Total in other subsidiaries 1,737 43 673 139 Member of the Board Lars Pettersson 0.3 0.3 Total in Group 3 1,835 67 720 151 President Fredrik Lundberg Remuneration from the Parent Company 1.5 0.3 1.8 1) In the Parent Company, the Board of Directors (excluding the President) comprises eight Remuneration from subsidiaries 1.1 1.1 people (7) and senior executives comprise three people (3) (including one who receives sala- ry from wholly owned subsidiaries). The wholly owned subsidiaries comprise 11 people (10), Other senior executives 2 Hufvudstaden comprises 15 people (15) and Holmen comprises 20 people (20). Remuneration from the Parent Company 1.6 0.2 0.1 0.4 2.3 2) The President and senior executives accounted for SEK 0.6 m. (0.7) of the Parent Company’s Remuneration from subsidiaries 3.4 2.7 0.4 6.5 pension costs. 3) The President and senior executives accounted for SEK 24.8 m. (22.2) of the Group’s pension 12.6 3.1 0.1 1.3 17.2 costs. On December 31, 2016, the Group’s outstanding pension obligations regarding these pension costs amounted to SEK 70.1 m. (61.8). The obligations are mainly covered by plan assets in independent pension foundations and through reinsurance in FPG. Variable Other Basic salary, remun bene- Pension Share-savings plan 2015 Director fees eration fits cost Total Holmen’s 2016 AGM resolved to introduce a targeted share-savings plan for some 40 key personnel in Holmen. The purpose of the plan is to strengthen Chairman of the Board Mats Guldbrand 0.8 0.8 the community of interest between owners and executive management in Member of the Board Carl Bennet the company, and to create long-term commitment to Holmen. Participation Remuneration from the Parent Company 0.3 0.3 in the plan required that the personnel personally invested in Holmen shares Remuneration from subsidiaries 0.3 0.3 (known as savings shares) during the period April 27 through May 20, 2016. For Member of the Board Lilian Fossum Biner 0.3 0.3 each invested savings share, half of a matching share will be allotted after the close of the vesting period. In addition, a number of performance shares will Member of the Board Louise Lindh be allotted to each participant, linked to Holmen’s return on capital employed. Remuneration from the Parent Company 0.3 0.3 Allotment of the number of performance shares can vary, depending on posi- Remuneration from subsidiaries 1.6 0.2 0.2 2.0 tion, up to a maximum of 3 – 6 shares per participant. To qualify for allotment Member of the Board Katarina Martinson 0.3 0.3 of matching and performance shares, the participant must have been perma- Member of the Board Sten Peterson nently employed by Holmen and retained the savings shares throughout the vesting period. The vesting period extends from May 20, 2016 up to the date of Remuneration from the Parent Company 0.3 0.3 publication of Holmen’s interim report for the first quarter of 2019. The total Remuneration from subsidiaries 0.2 0.2 cost of the plan is estimated at SEK 18 m. For 2016, expenses corresponding to Member of the Board Lars Pettersson 0.3 0.3 SEK 5 m. were recognized. President Fredrik Lundberg Remuneration from the Parent Company 1.5 0.3 1.9 Remuneration from subsidiaries 1.1 1.1 Note 6 - Fees and other remuneration to auditors, SEK m. Other senior executives 2 2016 2015 Remuneration from the Parent Company 1.5 0.2 0.1 0.4 2.2 Remuneration from subsidiaries 3.3 3.0 0.4 6.7 Remuneration of KPMG Auditing assignments 9 9 11.8 3.4 0.1 1.4 16.7 Tax advice 3 3 Other assignments 0 1 1) There are no pension obligations for the President and members of the Board. 12 13 Pension obligations for senior executives amount to SEK 0.6 m. (0.7). Other auditors 1 1
2) The senior executives who report directly to the President are Claes Boustedt and LUNDBERGS 2016 – GROUP Lars Johansson. 12 13
53 Note 6, continued
Auditing assignments are defined as statutory examinations of the Annual Note 12 - Changes in value of investment properties Report and financial accounts, as well as of the administration of the Board of and derivatives, SEK m. Directors and President and other duties in accordance with agreements or contracts. This includes other duties that the company’s auditors are obliged 2016 2015 to conduct and advice or other assistance required due to observations made Investment properties during such examinations or during the performance of such other duties. Realized 23 Tax advice pertains to all consultations in the tax area. Other assignments pertain to advice on accounting issues, advice on di- Unrealized 5,624 4,754 vestment and acquisition of operations and advice on processes and internal Derivative instruments control. Unrealized 68 28 5,716 4,782 Note 7 - Other external costs
Operational leasing Note 13 - Changes in value of biological assets, SEK m. Leasing charges amounted to SEK 79 m. (95). The leases pertained to fees for trucks, cars and ground rent, as well as a lease with an external landlord. Future leasing charges are distributed as follows: 2016 2015 Change due to harvesting - 587 - 540 SEK m. 2016 2015 Unrealized change in fair value 902 807 - 1 year 69 81 315 267 1 - 5 years 144 144 5 years – 54 62 Note 14 - Reporting by operating segment, SEK m. Note 8 - Depreciation, SEK m. An operating segment is a part of the Group that conducts operations from 2016 2015 which it can generate revenues and incur costs and for which independent fi- nancial information is available. The division into operating segments is based Intangible fixed assets 17 19 on the parts of the operations that are followed up by the company’s senior Tangible fixed assets executive decision-maker, also known as a management approach or company Buildings and land 118 142 management perspective. An operating segment is followed up by the compa- Equipment 891 1,089 ny’s senior executive decision-maker in order to evaluate the earnings and be 1,027 1,249 able to allocate resources to it. Operating profit is the earnings measurement against which the follow-up is conducted. The operating segments’ earnings, assets and liabilities include directly attributable items as well as items that Note 9 - Impairment losses, SEK m. can be allocated in a reasonable and reliable manner. Unallocated costs relate to Group-wide functions. 2016 2015 Four operating segments have been identified, namely: Lundbergs’ real Intangible fixed assets estate operations and equity management, as well as Hufvudstaden and Impairment losses during the year 1 Holmen. Revenues in Lundbergs’ and Hufvudstaden’s real estate operations Tangible fixed assets primarily comprise revenues from the leasing of own properties, while Lund- Impairment losses during the year 122 555 bergs’ equity-management revenues comprise dividends from equities and securities trading. Holmen obtains revenues from the manufacture and sale of 122 555 printing paper, paperboard and timber products, as well as from forestry and The impairment losses pertain to units in Holmen AB. power-generation operations. For more information, refer to Notes 17 and 18. Net profit for the year Lundbergs Note 10 - Reclassification shareholdings Equity Real estate manage- Hufvud- In 2016, shares in Industrivärden AB were acquired to such an extent that 2016 operations ment staden Holmen Total the share of voting rights exceeded 20%, which led to the investment being Net sales 1,347 707 1,790 15,513 19,357 reclassified as of February 19 onward as an associated company. This resulted Operating expenses ¹ - 486 - 219 - 440 - 10,472 - 11,616 in profit of SEK 4,083 m. being recognized as follows. Personnel costs - 116 - 20 - 128 - 2,268 - 2,532 SEK m. 2016 Depreciation - 5 - 0 - 3 - 1,018 - 1,026 Value at transition to associate company 8,835 Impairment losses - 122 - 122 Acquisition value - 4,851 Reclassification of shareholdings 4,083 4,083 Recovery of impairment losses ¹ 99 Profit from shares in associated companies and joint ventures 3,626 - 18 3,609 4,083 Changes in value 2 1,510 4,206 315 6,031 1) The reversal of implemented impairment losses was previously recognized in shareholders’ equity. 2,251 8,177 5,425 1,930 17,783
Unallocated costs - 28 Note 11 - Results from participations in associated Operating loss 2,251 8,177 5,425 1,930 17,755 companies and joint ventures, SEK m. Net financial items - 336 2016 2015 Tax - 1,962 Husqvarna AB 158 142 AB Industrivärden ¹ 3,224 Net profit for the year 15,457 Indutrade AB 244 228 1) Including other revenues, etc.; see Note 4. Others - 18 - 46 2) Refers to investment properties and derivatives in Lundbergs and Hufvudstaden as well as 3,609 324 biological assets in Holmen. LUNDBERGS 2016 – GROUP 1) AB Industrivärden is recognized as an associated company as of February 19, 2016. SEK 1,029 m. of the carrying amount arose from the effect of Industrivärden being measured at a discount on net asset value when transitioning to being an associated company. 54 Note 14, continued
Other disclosures Lundbergs Net sales by market 2016 2015 Equity Sweden 7,773 7,932 Real estate manage- Hufvud- 2016 operations ment staden Holmen Total France 661 710 Assets 17,258 13,970 37,709 33,118 102,054 Italy 857 846 Participations in associated Netherlands 694 626 companies and joint ventures 18,332 1,773 20,105 Spain 1,009 1,109 United Kingdom 1,719 2,223 122,160 Germany 1,974 1,981 Liabilities 6,911 2,900 14,661 13,648 38,120 Rest of Europe 2,693 2,753 Rest of world 1,977 2,167 Investments 19,357 20,347 Fixed assets 610 619 775 2,004 Associated companies 1,600 5 1,605 The distribution of sales among products and services is presented in Note 3.
Net profit for the year Lundbergs Fixed assets by country 2016 2015 Equity Sweden 79,626 73,476 Real estate manage- Hufvud- Spain 648 2015 operations ment staden Holmen Total United Kingdom 1,820 2,044 Net sales 1,343 1,301 1,689 16,014 20,347 Others 5 6 Operating expenses ¹ - 451 - 488 - 440 - 11,335 - 12,714 81,451 76,174 Personnel costs - 114 - 17 - 113 - 2,335 - 2,579 Depreciation - 5 - 0 - 3 - 1,240 - 1,248 Carrying amount pertains to intangible and tangible fixed assets, biological Impairment losses - 555 - 555 assets and investment properties. The assets are reported in those countries Profit from shares in associated where the operations are located. companies and joint ventures 370 - 46 324 Changes in value 2 1,344 3,438 267 5,049 Note 15 - Net financial items, SEK m. 2,117 1,166 4,571 769 8,623
Unallocated costs - 26 2016 2015 Operating loss 2,117 1,166 4,571 769 8,597 Financial income Gain on sale of Group companies 12 Net financial items - 338 Other financial receivables - 0 Tax - 1,606 Interest income 3 4 Profit for the year 6,652 15 4 1) Including other revenues, etc.; see Note 4. Financial expense 2) Refers to investment properties and derivatives in Lundbergs and Hufvudstaden as well as Net gain/loss biological assets in Holmen. Assets and liabilities measured at fair value through profit or loss Other disclosures Lundbergs Held for managing financial risks ¹ 36 - 10 Equity Cash and cash equivalents 3 5 Real estate manage- Hufvud- Other financial liabilities - 65 3 2015 operations ment staden Holmen Total Interest expense - 324 - 340 Assets 16,949 19,368 32,323 33,543 102,183 - 350 - 342 Participations in associated Net financial items - 336 - 338 companies and joint ventures 4,700 1,914 6,614 108,796 1) Belongs to the “Held for sale” category according to IAS 39.
Liabilities 7,439 1,209 12,756 14,603 36,006 All interest income pertains to financial instruments that are not measured at fair value. Of total interest expense, SEK 83 m. (110) pertains to financial instru- Investments ments not measured at fair value. The net gains/losses recognized in net financial items pertain primarily to Fixed assets 472 500 874 1,846 currency revaluation, hedging of internal loans and cash and cash equivalents. They also include revaluation of interest rate swaps used for hedging loans Net sales are reported in accordance with the customers’ location, apart from at fixed interest rates. In Lundbergs and Hufvudstaden, the revaluation of net sales generated by equity management, which are reported solely under interest rate swaps used for hedging loans at fixed interest rates is recognized Sweden. in profit or loss as changes in value in investment properties and derivatives (see Note 12). Earnings from financial instruments recognized in operating profit (the prin- cipal items) are presented in the table below.
2016 2015 Exchange rate gain/loss on accounts receivable and accounts payable 15 99 Net gain/loss pertaining to derivatives recognized in working capital - 58 - 39
The derivatives that are recognized in operating profit pertain to currency LUNDBERGS 2016 – GROUP hedges of accounts receivable and payable, interest rates and financial electricity derivatives. 55 Note 16 - Tax, SEK m. Deferred tax assets and liabilities
RECOGNIZED IN PROFIT AND LOSS 2016 Asset Liability Net 2016 2015 Tangible fixed assets - 1,319 - 1,319 Current tax Biological assets - 3,854 - 3,854 Tax cost during the year - 590 - 386 Investment properties - 9,958 - 9,958 Tax attributable to preceding years - 3 19 Financial investments - 651 - 651 Deferred tax 1 Untaxed reserves - 877 - 877 Temporary differences - 1,369 - 1,239 Hedge-accounted transactions 35 35 - 1,962 - 1,606 Other provisions including deferred tax assets 1) Pertains primarily to tax calculated on the difference between cost and fair value of reported net among deferred tax liabilities 4 61 65 biological assets and investment properties. 4 - 16,564 - 16,560
2016 2015 2015 Asset Liability Net Reconciliation of effective tax SEK m. % SEK m. % Tangible fixed assets - 1,363 - 1,363 Profit before tax 17,419 8,258 Biological assets - 3,788 - 3,788 Tax according to applicable tax rates - 3,832 22 - 1,817 22 Investment properties - 8,688 - 8,688 Difference in tax rates for foreign operations 3 - 0 4 - 0 Financial investments - 270 - 270 Non-taxable revenues and Untaxed reserves - 838 - 838 non-deductible expenses 1 1,863 - 11 178 - 2 Hedge-accounted transactions 81 81 Standard interest on tax-deferral reserve - 4 0 - 5 0 Other provisions including deferred tax assets Tax attributable to preceding years - 3 0 19 - 0 reported net among deferred tax liabilities 6 47 53 Effect of booked-up loss carryforwards 6 - 14,819 - 14,813 and temporary differences 3 - 0 4 - 0
Change in tax rate for deferred Holmen divested essentially its entire business in Spain during 2016 and plans tax assets/ liabilities 0 - 0 21 - 0 to discontinue it all. The company has requested an advanced ruling in respect Other 7 - 0 - 11 0 of loss carry-forwards in Spain when the business has been discontinued, - 1,962 11 - 1,606 19 which the Swedish Tax Agency has opposed. The matter has now elevated to the Supreme Administrative Court for determination, and a ruling is expected 1) Non-taxable revenues related to shareholdings amounted to SEK 1,723 m. in 2016. during 2017. Should the right to tax deductions be ascertained, this would RECOGNIZED IN OTHER COMPREHENSIVE INCOME correspond to the equivalent of about SEK 400 m. in tax. No deferred tax asset has been recognized connected to a possible right to tax deductions. 2016 Before tax Tax After tax Hedge accounting 211 - 46 165 Change in deferred tax on temporary differences and loss carryforwards Translation difference deriving Recognize Recognized from foreign operations - 165 - 165 in net in other Translation Hedging of currency risk in foreign operations 1 - 6 - 5 Opening profit for comprehen- differences Closing Available-for-sale financial assets - 2,114 - 376 - 2,490 2016 balance the year sive income and other balance Actuarial revaluations - 164 30 - 134 Tangible fixed assets - 1,363 25 19 - 1,319 Associated companies and joint ventures - net 19 Biological assets - 3,788 - 66 - 3,854 - 2,231 - 399 - 2,611 Investment properties - 8,688 - 1,270 - 9,958 Financial investments - 270 - 5 - 376 - 651 2015 Before tax Tax After tax Untaxed reserves - 838 - 39 - 877 Hedge accounting - 34 7 - 27 Other 134 - 15 - 17 - 2 100 Translation difference deriving - 14,813 - 1,370 - 393 17 - 16,560 from foreign operations 8 8 Hedging of currency risk in foreign operations 22 - 5 17 Recognize Recognized Available for-sale financial assets 300 92 393 in net in other Translation Actuarial revaluations 209 - 44 165 Opening profit for comprehen- differences Closing 2015 balance the year sive income and other balance Associated companies and joint ventures - net - 8 Tangible fixed assets - 1,361 8 - 10 - 1,363 505 51 548 Biological assets - 3,718 - 69 - 3,788 RECOGNIZED IN BALANCE SHEET Investment properties - 7,447 - 1,241 - 8,688 Receivables 2016 2015 Financial investments - 366 4 92 - 270 Deferred tax assets 4 6 Untaxed reserves - 900 62 - 838 Current tax assets 132 44 Other 166 - 4 - 36 8 134 137 50 - 13,627 - 1,241 56 - 1 - 14,813
Liabilities 2016 2015 Provisions for taxes Deferred tax liability 16,564 14,819 Other provisions 62 64 Current tax liability 36 89 LUNDBERGS 2016 – GROUP 16,661 14,972
56 Note 17 - Intangible fixed assets Work in Machinery progress and Intangible assets consist of goodwill, development expenses, patents, licenses Buildings, land and and advanced and IT systems. Expenditure for development is capitalized insofar as it is 2015 land improvements equipment payments Total expected to generate economic benefits in the future. In the balance sheet, tangible fixed assets are recognized at acquisition value less depreciation and Acquisition value any impairment losses. Intangible fixed assets are impairment tested annually. Opening balance 7,135 31,047 175 38,358 Amortization of goodwill is not reversed. Investments 60 818 - 2 876 Reclassification 4 - 15 - 11 SEK m. 2016 2015 Divestments and scrappage - 5 - 532 - 3 - 540 Accumulated acquisition value Translation differences - 20 8 0 - 12 Opening balance 310 300 7,170 31,346 155 38,671 Investments 5 12 Depreciation and impairment losses Divestments and scrappage - 36 - 1 Opening balance - 3,822 - 23,220 - 27,042 Translation differences 0 - 1 Depreciation during the year - 142 - 1,089 - 1,231 280 310 Impairment losses during the year - 306 - 249 - 555 Accumulated depreciation and impairment losses Divestments and scrappage 4 482 486 Opening balance - 120 - 103 Translation differences 19 25 45 Amortization during the year - 17 - 19 - 4,247 - 24,050 - 28,297 Impairment losses during the year - 1 Closing balance 2,923 7,295 155 10,373 Divestments and scrappage 28 1 Translation differences 0 1 Impairment losses on tangible fixed assets are recognized in profit or loss - 110 - 120 under Impairment losses. Holmen’s Spanish operations were divested in 2016, which reduced tangible fixed assets by SEK 527 m., including SEK 122 m. Closing balance 170 190 resulting from impairment losses in connection with the signing of the sales agreement. During 2015, impairment losses of SEK 555 m. were recognized on The above includes goodwill attributable to Lundbergs’ acquisition of Holmen tangible fixed assets pertaining to Holmen’s printing paper assets. totaling SEK 83 m. (83). The recoverable value of the goodwill is assessed due Investment commitments pertaining to approved and ongoing projects to the share price of the holding on December 31 and no amortization or im- amounted to SEK 250 m. (776) at the end of the year. During the year, capi- pairment of the value has been implemented. talized loan charges amounted to SEK 3 m. (3). To determine the amount, an Other intangible fixed assets consist mainly of SEK 64 m. (80) for IT systems. interest rate of 1.5% (1.8) has been used. The assets were mainly acquired externally. Apart from goodwill, all assets have a determinable useful life that is amortized over 3-20 years. Note 19 - Biological assets
Note 18 - Tangible fixed assets, SEK m. The Group divides all of Holmen’s forest assets for accounting purposes into growing forests, which are recognized as biological assets at fair value, and Work in land, which is stated at acquisition cost. It is Holmen’s assessment that no Machinery progress and relevant market prices are available to value forest holdings of the size owned Buildings, land and and advanced by Holmen. Accordingly, the valuation is based on the estimated present value 2016 land improvements equipment payments Total of the projected future cash flow from growing forests. The fair value valuation Acquisition value is based on valuation level three. This calculation of cash flows is made for the Opening balance 7,170 31,346 155 38,671 coming 100 years, which is regarded as the harvesting cycle of the forests. Investments 37 739 30 806 The cash flows are calculated on the basis of harvesting volumes according to Holmen’s current plan and assessments of future price and cost trends. Reclassification 92 - 101 - 9 The cost of replanting has been taken into account, because re-planting after Divestments and scrappage - 1,434 - 4,198 - 5 - 5,637 harvesting is a statutory obligation. The cash flows are discounted using an Translation differences - 33 - 317 - 11 - 361 interest rate of 5.5% (5.5). 5,740 27,661 68 33,470 In total, Holmen owns 1,042,000 hectares of productive forest land, with a volume of standing forest totaling 120 million cubic meters. According to the Depreciation and impairment losses current plan, which is from 2011, harvesting will amount to 3.1 million cubic Opening balance - 4,247 - 24,050 - 28,297 meters of solid volume under bark (m³sub), of which 0.1 million m³sub will be Amortization during the year - 118 - 891 - 1,009 biofuel in the form of branches and treetops. It is believed that this level will Impairment losses during the year - 81 - 41 - 122 remain largely unchanged until 2030. Thereafter, harvesting is expected to Divestments and scrappage 1,212 4,000 5,212 increase gradually to over 4 million cubic meters of solid volume under bark Translation differences 6 181 187 per year by 2110. About 45% of the wood harvested consists of pulpwood that is sold to the pulp and paper industry, 50% is timber sold to sawmills and the - 3,228 - 20,801 - 24,030 remaining portion consists primarily of forest fuel. Closing balance 2,512 6,860 68 9,440 The valuation is based on a long-term trend price that is indexed upwards annually by an inflation rate of 2%. The trend price for 2017 is SEK 424/m³sub, which matches current market prices. The cost forecast is based on present- day levels and is adjusted upward by just over 2% annually. Holmen’s forest holdings are recognized at SEK 17,448 m. before tax (17,173). A deferred tax liability of SEK 3,854 m. (3,788) is recognized in relation to that figure, representing the tax that will be paid in connection with future harvesting. On that basis, the growing forest, net after tax, is recognized at SEK 13,594 m. (13,385). LUNDBERGS 2016 – GROUP
57 Note 19, continued
The change in the value of the growing forest can be divided as follows: Harvest
1,000 m3sub/year SEK m. 2016 2015 4,000 Opening carrying amount 17,173 16,867 Acquisition of growing forest 4 36 Sales of growing forest - 27 - 2 3,000 Change due to harvesting - 587 - 540 Unrealized change in fair value 902 807 2,000 Other changes - 17 5 Closing carrying amount 17,448 17,173 1,000
The net effect of the change in fair value and the change resulting from har- vesting is recognized in profit and loss as a change in value of biological assets. 0 This item amounted to SEK 315 m. (267) for the year. 2001- 2011- 2017- 2021- 2031- 2041- 2051- 2061- 2071- 2081- 2091- 2101- 2010 2016 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110
The table below shows how the value of forest assets would be affected by Average harvest Harvest plan changes in the most significant valuation assumptions. Changes in value SEK m. Before tax After tax Note 20 - Investment properties
Annual change, +0.1% per year Investment properties are recognized at fair value. The fair value is the price Rate of harvesting 740 580 that would be received for sale at the time of valuation through a transaction Price inflation 1,120 870 in a principal market (or the most favorable market) under current market Cost inflation - 600 - 470 conditions (exit price), regardless whether the price is directly observable or calculated using another valuation method. Change in level, +1% Harvest 250 200 2016, SEK m. Housing Commercial Total Prices 390 300 Opening fair value 6,789 41,649 48,438 Costs - 220 - 170 Acquisitions 11 178 189 Discount rate, +0.1% - 480 - 370 Investments 229 801 1,030 Divestments - 490 - 398 - 888
Annual change refers to the annual rate of change used in the valuation of Unrealized change in value 832 4,792 5,624 each parameter. Closing fair value 7,371 47,022 54,393 Change in level refers to the changes in level of each parameter and year.
Prices 2015, SEK m. Housing Commercial Total Opening fair value 5,967 36,752 42,719 SEK/m3sub Acquisitions 3 3 600 Investments 180 782 962 Unrealized change in value 639 4,115 4,754
500 Closing fair value 6,789 41,649 48,438
Information about fair value of investment properties 400 All properties classified as investment properties are owned by the Group and encompass land, buildings, building equipment and refurbishment of existing properties, as well as new buildings. The value of the real estate portfolio has 300 been assessed internally by fair valuing every single property. The investment amount includes capitalized loan expenses during the year of SEK 2 m. (-).
200 Impact on profit during the year 2000 2004 2008 2012 2016 2020 2024 All properties generate rental revenues with the exception of ongoing new Nominal Real Price used in valuation (nominal) production and those comprising undeveloped land. Rental revenues for the year (gross less vacancies) amounted to SEK 2,960 m. (2,838). Costs distributed The price series Nominal applies to the average sales price for Holmen. Real by type are presented in the table below. are nominal prices converted at the monetary value applying in 2016 using the historical Swedish CPI. Type of cost, SEK m. 2016 2015 Operation and administration 389 392 Maintenance 183 187 Personnel costs 238 221 Property taxes 227 211 Site leaseholds 23 22 Depreciation 7 7 1,067 1,041 LUNDBERGS 2016 – GROUP
58 Note 20, continued
The maturity structure of operational leasing contracts (rental revenues) is Since 2011, Hufvudstaden’s average yield requirement has varied from 3.9 presented in the table. to 4.8% and amounted to 3.9% at December 31, 2016. For leasehold properties, the calculation has been based on a required yield that is 0.25% higher. Net operating income is based on market rental income, which is market adapted Annual rents, SEK m. 2017 2018 2019 2020 2021 2022- Total by adjusting current rents to reflect newly signed and renegotiated leases, Housing 499 499 taking into account the anticipated rent trend. Income has been reduced for an Offices 183 299 164 148 173 333 1,301 assessed long-term rental vacancy rate. The vacancy rate is based on the real Retail 317 167 145 122 74 151 975 estate portfolio’s actual outcome over a business cycle, and the anticipated rental situation for the individual property. In the valuation, the average vacan- Other 90 32 23 28 13 24 210 cy rate was assessed at 4%. The actual average vacancy rate during 2007-2016 Total 1,089 498 332 298 260 508 2,984 varied between 3 and 6% and was 3.9% on December 31, 2016. Proportion, % 36 17 11 10 9 17 100 Deductions were made for standard operation and maintenance costs, excluding charges passed on to tenants and parts of property administration. These are based on actual outcome and adjusted for temporary deviations. Valuation method The average cost per square meter in the past five years has been within the The valuation of all properties occurs at level three in the valuation hierarchy. SEK 400-500 interval and the estimated cost in the valuation on December 31, 2016 was at a corresponding level. The input data used for valuation is stated Lundbergs - The real estate portfolio was valued by assessing the fair value of below. every single property. The valuations were based on both location-price data and the present value of estimated future payment flows. The present value Weighted calculation is based on discounted cash flow over the coming ten-year period Office and retail Interval average and thereafter calculating a perpetual yield. The discount factor varies from Net operating income, SEK/sqm 1,470 - 6,390 3,830 4.6 to 8.4% for residential properties and from 5.9 to 9.8% for commercial properties. The calculation of cash flow is based on assumed inflation of 2%, Vacancy, % 2 - 5 4 normalized rental revenues and maintenance costs and a normalized vacancy Required yield, Stockholm, % 3.5 - 4.0 3.7 rate. Subsequently, this calculation is weighted using various location-price Required yield, Gothenburg, % 4.1 - 4.8 4.4 factors in a final valuation. The input data used for valuation is stated below. Required yield, total, % 3.9
Housing Commercial Hufvudstaden’s real estate portfolio was valued at SEK 36.5 billion (31.7). Weighted Weighted To safeguard the valuation, independent valuations of 11 properties were Interval average Interval average obtained, corresponding to 34% of the internally estimated fair value. The ex- Net operating ternal valuation firms arrived at a market value amounting to SEK 12.6 billion. income, SEK/sqm 400 - 1,600 600 200 - 5,200 1,300 Hufvudstaden’s internal valuation of the same properties amounted to SEK 12.3 billion. Required yield residual value, % 2.59 - 6.35 4.24 3.90 - 7.87 5.22 Sensitivity analysis Vacancy, % 0.5 - 3.1 1.3 1.0 - 9.6 3.4 The fair value of a property can only be established with certainty at divest- ment. In connection with valuation, an interval is often stated to demonstrate All rents are assessed to be market based. Growth assumption is assessed the uncertainty in the estimation of a property’s value. The value interval usu- individually for each property. The discount rate is calculated as the required ally amounts to ± 5% but may vary depending on such criteria as the market yield plus the growth assumption during the forecast period. The growth situation, the property’s technical standard and investment requirements. assumption in turn is connected to the assumed inflation for the same period but is assessed individually for each property taking into account contract Lundbergs’ real estate portfolio is valued at SEK 17.9 billion based on an as- terms, vacancy risk, technical condition, etc. sumed uncertainty interval of ± 5%, which corresponds to a plus/minus change The estimated required yield is based on information obtained on the in the property value of SEK 0.9 billion. The most significant factors that influ- yield requirement in the market pertaining to current purchases and sales of ence valuation and their effect on the fair value are stated below. comparable properties in similar locations. The information is checked with valuation and consulting companies. Impact on value, SEK m. Lundbergs real estate portfolio was valued at SEK 17.9 billion (16.7). To Changes Housing Commercial ascertain the valuation, independent valuations were obtained externally for Net operating income SEK 50/sqm 608 402 43 properties, corresponding to 49% of the portfolio in terms of value. The external valuations amounted to a market value of SEK 8.9 billion for these Required yield, residual value -0.25 percentage point 462 528 properties, while the internal valuation amounted to SEK 8.7 billion. +0.25 percentage point - 411 - 480 Rental vacancy -1.0 percentage point 124 142 Hufvudstaden – The real estate portfolio was valued by assessing the fair value of every single property. The value was established through utilization of a variation on the location-price method termed the net capitalization method. Hufvudstaden’s real estate portfolio is valued at SEK 36.5 billion based on an This method means that the market’s yield requirement is placed in relation to uncertainty interval of ± 5%, which corresponds to a plus/minus change in the the property’s net operating income. property value of SEK 1.8 billion. The most significant factors that influence the The estimated required yield is based on information received about yield valuation and their effect on the fair value are stated below. requirements in the market in terms of current purchases and sales of com- parable properties in similar locations. If few or no business transactions have Change ± Impact on value ±, SEK m. been conducted in the property’s subarea, transactions in adjacent areas are Rental revenues SEK 100/sqm 1,000 analyzed. Transactions that are not completed are still able to give indications Property costs SEK 50/sqm 500 of the yield requirements in the market. Consideration was also given to the Rental vacancy rate 1.0 percentage points 480 various types of properties, technical standards and building structures. The yield requirements used in the valuation differ between various regions and Yield requirement 0.25 percentage points 2,350 different subareas within the regions. The information is checked with valua- tion and consulting companies. LUNDBERGS 2016 – GROUP
59 Note 21 - Participations in associated companies and joint ventures, SEK m. Financial information about Parent Company’s associated companies Owned percentage 2016 2015 Associated companies 2016 2015 Revenues 6,385 5,762 Recognized on January 1 6,472 6,321 Profit 2,550 370 Investments 1,605 Assets 20,783 4,628 Divestments - 105 Liabilities 5,328 2,699 Impairment losses - 2 - 7 Shareholders’ equity 15,455 1,929 Reclassification1 8,835 Participation in profit2 3,609 324 Further information about the Parent Company’s associated companies is presented in Note 2. Dividends received - 479 - 151 Participation in other comprehensive income 42 - 15 Financial information about the subsidiaries’ associated companies 19,979 6,472 The combined value of the subsidiaries’ share in the comprehensive income of associated companies is a negative SEK 14 m. (pos: 10). 1) In 2016, shares in Industrivärden AB were acquired to such an extent that the share of voting During the year, Holmen purchased 416 GWh (564) of electricity from rights exceeded 20%, which led to Industrivärden being reclassified as an associated com- pany as of February 19, 2016. The value of these shares at the time when Husqvarna AB’s Harrsele AB, resulting in operating profit of SEK 76 m. (95) from sales in the status was changed to that of an associated company has been reclassified from a financial open market. Harrsele AB owns power assets that generate 950 GWh of investment. In 2016, Industrivärden shares were acquired for a total of SEK 1,612 m. electricity in a normal year. The carrying amount of Harrsele AB’s fixed assets 2) Profit after tax and non-controlling interest in associated companies. is SEK 114 m. (115).
Financial information about joint ventures Joint ventures 2016 2015 The combined value of the subsidiaries’ share in the comprehensive income of Recognized on January 1 141 142 joint ventures is a negative SEK 8 m. (neg: 3). Investments 10 Participation in profit - 30 - 1 Other 6 Note 22 - Financial investments, SEK m. Shareholding, 127 141 Dec 31, 2016 as a % of Number of shares, Holding as a % 2 Carrying amount share voting Dec 31, 2016 2016 2015 2016 2015 capital rights 2016 2015 Available-for-sale financial assets1 1 Associated companies Handelsbanken A 2.0 2.0 4,937 4,234 Parent Company’s Industrivärden A 8,898 3 Husqvarna AB (publ) 43,350,000 7.6 (25.0) 7.6 (24.9) 2,195 2,098 Industrivärden C 435 3 AB Industrivärden (publ) 69,600,000 16.1 (23.3) 13,221 – Sandvik 2.4 2.4 3,381 2,222 Indutrade AB (publ) 3 31,575,000 26.3 25.6 2,915 2,602 Skanska A² 1,427 1,093 4.3 12.2 Subsidiaries’ Skanska B 2,484 1,739 Baluarte Sociedade de 12,230 18,621 Recolha e Recuperação de Desperdicios, Lda 50.0 37 1) Fair value at December 31, 2016 exceeded the cost of all shares. An accumulated impairment loss of SEK 508 m. was recognized in 2015. Brännälvens Kraft AB 5,556 13.9 13.9 36 36 2) The market value of Series A Skanska shares has been calculated based on a 10% premium Gidekraft 990 9.9 9.9 0 0 on the price of publicly traded Series B shares. Harrsele AB 9,886 49.4 49.4 1,465 1,467 Melodea Ltd 119 42.4 42.4 2 2 The assets have been measured at fair value based on the current stock-mar- Peninsular Cogeneración S.A. 50.0 55 ket price. Should the asset comprise shares of various series, the percentage SAS Saica Natur sud 24.0 20 of share capital and voting rights is stated jointly for the holding. In 2016, shares in Industrivärden AB were acquired to such an extent that the share of Uni4 Marketing AB 1,800 36.0 36.0 12 21 voting rights exceeded 20%, which led to the investment being reclassified as Vattenfall Tuggen AB 683 6.8 6.8 75 75 an associated company as of February 19, 2016. VindIn AB 200 17.7 17.7 55 57 Various shares 0 2 19,979 6,472 Note 23 - Other shares and participations, SEK m.
Joint ventures 2016 2015 Subsidiaries’ Accumulated acquisition value Varsvik AB 250 50.0 50.0 127 141 On January 1 4 4 20,105 6,614 Divestments, etc. 0 - 1 1) In those cases where Lundbergs does not hold 20% of the voting rights but exercises Impairment losses, etc. - 2 significant control over the companies’ operations through ownership agreements. 2 4 2) The percentage of voting rights is calculated less treasury shares. The share of voting rights is stated in parentheses if it is not the same as the shareholding. Since it has not been possible to establish a reliable fair value for these items, 3) Based on the current share price, Husqvarna’s fair value is SEK 3,061 m. (2,416), the shareholdings have been measured at acquisition value. Industrivärden’s is SEK 12,506 m. and Indutrade’s is SEK 5,778 m. (4,916).
The shareholdings in Brännälvens Kraft AB, Gidekraft AB, Harrsele AB and Vattenfall Tuggen AB refer to hydropower assets while the shareholding in VindIn AB pertains to wind power assets. The shareholdings entitle Holmen to purchase produced electricity at cost price, which means that only limited LUNDBERGS 2016 – GROUP profits arise in the associated companies. Purchased electricity is sold exter- nally at market price and the profit/loss is recognized in Holmen.
60 Note 24 - Financial instruments Offsetting of assets and liabilities is not applied in the accounting. Recognized derivatives amounted to SEK 213 m. (138) on the asset side and SEK 503 m. Financial instruments measured at fair value in the balance sheet (652) on the liability side. Financial instruments measured at fair value include instruments attribut- able to the categories: items recognized at fair value through profit or loss, Financial instruments not measured at fair value in the balance sheet but available-for-sale financial assets and derivatives subject to hedge accounting. for which disclosures have been provided about the fair value In accordance with IFRS 13, financial instruments are recognized in accordance When disclosures about fair value are provided in the table below for financial with the fair value hierarchy in three levels based on the input data used in the instruments not measured at fair value in the balance sheet, the fair value has measurement. been determined in the following manner: Measurement of financial investments (shares) and shares in listed compa- Loans from banks with fixed-interest rates have been valued at the rate by nies is based on quoted prices for similar instruments, meaning that they are which refinancing could be done on the balance-sheet date. This measurement attributable to Level 1. Input data for measurement of derivatives and other belongs to Level 3 since these rates cannot be observed in the market. Loans financial liabilities has been based on observable market prices, meaning that with variable interest rates are assumed to have a market value that matches they are attributable to Level 2. Since Series A Skanska shares are not publicly the carrying amount provided that a measurable change did not occur in a traded, their value has been calculated based on a 10% premium on the price current spread for a similar transaction. of publicly traded Series B shares, which is based on assumptions that are not Other financial instruments in the balance sheet have a short period re- substantiated by prices of observable data and is thus attributable to Level 3. maining to maturity. The carrying amount has been stated as the fair value of During the year, the value changed was an increase of SEK 334 m. (decline: 21), these instruments, which is regarded to reflect the fair value since the discount which was entirely attributable to unrealized changes in value and has been effect is negligible. recognized in other comprehensive income under Available for-sale financial assets.
Financial instruments included in net financial debt Hedge accounted Accounts and Total Derivatives 1 derivatives loans receivable Other liabilities carrying amount Fair value SEK m. 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Long-term financial receivables Derivatives 0 0 0 Other financial receivables 51 53 51 53 51 53 0 51 53 51 53 51 53 Current financial receivables Accrued interest 1 0 1 0 1 0 Derivatives 55 37 55 37 55 37 Other financial receivables 34 24 34 24 34 24 55 37 34 24 89 61 89 61
Cash and cash equivalents Short-term investments 66 137 66 137 66 137 Bank balances 1,424 681 1,424 681 1,424 681 1,491 818 1,491 818 1,491 818
Long-term financial liabilities MTN loans 5,800 4,500 5,800 4,500 5,946 4,605 Liabilities to banks and other credit institutions 2,550 6,200 2,550 6,200 2,617 6,370 Derivatives 67 137 75 83 142 220 142 220 Other long-term liabilities 8 13 8 13 8 13 67 137 75 83 8,358 10,713 8,499 10,933 8,712 11,207
Current financial liabilities Commercial paper programs 3,209 4,044 3,209 4,044 3,209 4,044 MTN loans 2,450 800 2,450 800 2,450 800 Other bonds 700 700 700 Liabilities to bank accounts 26 27 26 27 26 27 Current portion of long-term loans 1,300 1,300 1,353 Derivatives 103 55 103 55 103 55 Accrued interest 102 95 102 95 102 95 Other current liabilities 49 48 49 48 49 48 103 55 7,835 5,013 7,939 5,069 7,992 5,069
1) Items measured at fair value through profit or loss. LUNDBERGS 2016 – GROUP
61 Note 24, continued
Financial instruments not included in net financial debt Note 27 - Operating receivables, SEK m. 2016 2015 Assets 2016 2015 Financial investments ¹ 12,230 18,621 Rent receivable and accounts receivable ¹ 2,225 2,023 Shares in listed companies ² 597 503 Other current receivables Shares in unlisted companies 1 2 4 Prepaid expenses 196 217 Accrued rental revenues 28 30 Accounts receivable 2,225 2,023 Receivable from associated companies 5 4 Recognized among operating receivables Derivative instruments 158 100 Derivative instruments ² 8 11 Other receivables 238 270 Hedge accounted derivatives 150 89 625 621 Liabilities 2,850 2,644 Accounts payable 1,937 2,089 1) The amount for accounts receivable includes SEK 38 m. (52) for receivables from associated Recognized among operating liabilities companies. Derivative instruments ² 25 2 Accounts receivable are recognized in the amount that is expected to be paid Hedge accounted derivatives 233 375 based on an individual assessment of each customer. Accounts receivable are primarily from European customers. Accounts receivable in foreign currency 1) Items defined as available-for-sale financial assets. have been valued at the year-end exchange rate. The market value of deriva- 2) Items measured at fair value through profit or loss. tives pertains to hedges of future cash flows. Refer also to Note 38. For items in the table above, the carrying amount is the same as the fair value except for shares in unlisted companies, for which it has not been possible to Note 28 - Cash-flow statement, SEK m. establish a fair value. Interest 2016 2015 Interest received 3 4 Note 25 - Properties classified as current assets Interest paid - 306 - 315 Properties classified as current assets (development properties) are held with - 303 - 311 the intention of developing them into developable land or, alternatively, proj- ects for sale. They are valued in accordance with the lowest value principle per Non-cash items 2016 2015 property or per valuation unit. Required impairment losses and recovery of Depreciation 1,027 1,249 previous impairments are recognized under operating costs. Impairment losses 122 555 Reclassification of shareholdings - 4,083 SEK m. 2016 2015 Results from participations On January 1 167 124 in associated companies and joint ventures - 3,132 - 173 Acquisitions during the year 14 36 Changes in value, investment properties - 5,624 - 4,754 Reversals 20 20 Change in value, derivatives - 68 - 28 Divestments and scrappage - 25 - 13 Changes in value of biological assets - 315 - 267 176 167 Change in provisions 170 236 1 Includes SEK 1 m. (25) for accumulated impairment losses. Other - 61 15 The estimated fair value in accordance with internal valuations was SEK 416 m. 11,964 - 3,166 (352). 1) Consists primarily of currency effects and market-value adjustments of financial instru- ments, as well as capital gains/losses on sales of fixed and current assets.
Note 26 - Inventories, SEK m. Change in current financial liabilities The change in current liabilities pertains primarily to borrowing under com- 2016 2015 mercial paper programs. Under commercial paper programs, a total of Shares in listed companies 597 503 SEK 12,792 m. (12,037) was borrowed on a short-term basis, divided among several loans and SEK 13,630 m. (12,439) was repaid. Harvesting rights 431 526 Electricity certificates and emission rights 54 56 Finished products and products in progress 1,431 1,237 Note 29 - Shareholders’ equity Raw materials and consumables 831 971 Share capital Timber and pulpwood 233 299 Quotient 3,578 3,592 December 31, 2016 Number value SEK m. Changes in value pertaining to shares in listed companies are recognized in Series A 48,000,000 SEK 10 480 profit or loss for the year in accordance with IAS 39, meaning at current market Series B 76,000,000 SEK 10 760 price. During the year, impairment losses on other items included in invento- Total shares outstanding 124,000,000 1,240 ries had a negative impact on profit/loss of SEK 2 m. (pos: 18). Quotient December 31, 2015 Number value SEK m. Series A 48,000,000 SEK 10 480 Series B 76,000,000 SEK 10 760 Total shares outstanding 124,000,000 1,240
The company’s share capital comprises shares issued in two series, Series A, each carrying ten votes, and Series B shares, each carrying one vote. The LUNDBERGS 2016 – GROUP Series B share is listed on Nasdaq Stockholm, Large Cap. Shareholders are entitled to request conversion of Series A shares to Series B shares. No such conversions were effected during the year. 62 Note 29, continued
Shareholders’ equity Note 32 - Provision for pensions Shareholders’ equity comprises share capital, reserves and profit brought forward including profit for the year. The profit brought forward comprises For a description of pension commitments within the Group, see Accounting the preceding year’s profit brought forward and profit after deduction for divi- policies, Note 1. The provision for pensions totals SEK 313 m., of which Lund- dends paid during the year. bergs accounted for SEK 97 m., Holmen for SEK 201 m. and Hufvudstaden for SEK 15 m. Information on plans recognized as defined-benefit obligations in accordance with IAS 19 is presented below. Note 30 - Reserves, SEK m. Lundbergs Hedging reserve 2016 2015 Defined-benefit occupational pension plans exist under FPG/PRI programs. The change in defined-benefit pension commitments is specified in the compi- Reserve, January 1 - 70 - 42 lation below. Cash-flow hedging for the year 7 - 36 Tax attributable to hedging during the year - 3 8 SEK m. 2016 2015 - 65 - 70 Obligation, January 1 91 90 Benefits vested during the period 3 2 Translation reserve 2016 2015 Interest 3 3 Reserve, January 1 86 89 Actuarial gain/loss 4 - 1 Translation differences during the year 53 - 2 Pension payments - 4 - 4 Tax attributable to translation reserve during the year - 2 - 2 Special employer's contribution 1 0 136 86 Obligation, December 31 97 91 Fair value reserve 2016 2015 Of which, credit insured via FPG 60 61 Reserve, January 1 8,018 7,625 Change in value recognized directly During the year, pension costs of SEK 3 m. (2) pertaining to defined-benefit in other comprehensive income 2,613 300 plans were recognized in profit or loss. Interest expense during the year on Recognized in profit and loss on reclassification1 - 4,727 the pension liability amounted to SEK 3 m. (3). The actuarial revaluation during Tax attributable to valuation during the year - 376 92 the year was a positive SEK 4 m. (neg: 1) and was recognized in other compre- hensive income. The actuarial loss of SEK 4 m. comprises SEK 0.9 m. in profit 5,528 8,018 resulting from experience-based adjustments, SEK 7.8 m. for losses due to effects of changed financial assumptions and profit of SEK 3.3 m. due to changes in Total reserves 2016 2015 demographic assumptions. On an accumulated basis, actuarial revaluations Reserve, January 1 8,034 7,672 amounted to SEK 27 m. (23). The duration of the obligation is 19 years. Change during the year in: Hedging reserve 4 - 28 Significant actuarial assumptions, % 2016 2015 Translation reserve 51 - 4 Discount interest rate 2.5 3.0 Fair value reserve - 2,490 393 Future pay increases 3.0 3.0 5,599 8,034 Future inflation 1.5 1.5 1) The reversal of implemented impairment losses, as well as value increases pertaining to AB Lifespan assumptions are based on DUS14 (PRI). The current lifespan used to Industrivärden were previously recognized in the fair value reserve. Due to Industrivärden calculate the obligation is stated in the table below. being recognized as an associated company as of February 19, 2016, the implemented rever- sals/value increases have been restated in profit or loss. 2016 2015 Lifespan assumption at 65 years - retired members The hedging reserve includes the effective portion of accumulated net chang- es in the fair value of a cash-flow hedging instrument attributable to hedging Men 22 23 transactions that have not yet occurred. Women 24 25 The translation reserve includes all exchange-rate differences that arise in Lifespan assumption at 65 years - for members who are 45 years old the translation of financial statements from foreign operations that were pre- Men 43 42 pared in currencies other than SEK. The translation reserve also includes ex- Women 45 44 change-rate differences that arise from the revaluation of liabilities that were entered as hedging instruments in a net investment in a foreign operation. The fair value reserve includes the accumulated net change in the fair value The table below shows how the commitment would be influenced in the of available-for-sale financial assets. event of a change in the significant actuarial assumptions (- decreases debt, + increases debt).
Note 31 - Non-controlling interest, SEK m. Sensitivity analysis, SEK m. 2016 2015 Discount rate (+0.5%) - 7 - 7 Non-controlling interests arise from the occurrence of subsidiaries that are not Future pay increases (+0.5%) 4 3 wholly owned. In the L E Lundbergföretagen Group, this comprises mainly the Future inflation (+0.5%) 6 6 non-owned portions of Holmen AB (publ) and Hufvudstaden AB (publ). Payments to defined-benefit plans in 2017 are estimated at SEK 3.8 m. Capital attributable to non-controlling interests 2016 2015 Hufvudstaden Opening balance 24,766 23,272 A provision of SEK 15 m. (13) has been posted for pension liabilities corre- Net profit for the year 3,215 2,276 sponding to endowment policies for the CEO and former executives. Other comprehensive income Reserves - 18 1 Actuarial revaluation of pension liability - 88 111 Dividend - 942 - 891
Share-savings plan in Holmen 4 LUNDBERGS 2016 – GROUP Changes in Group composition - 3 - 2 Closing balance 26,934 24,766 63 Note 32, continued
Holmen The table below shows how the commitment would be influenced in the There are pension commitments in trusts in the UK. Defined-benefit pension event of a change in the significant actuarial assumptions (- decreases debt, commitments for group management in Sweden that exceed the ITP plan are + increases debt). secured via a foundation. The change in the defined-benefit pension commit- ments and the change in plan assets are specified the compilation below. Most Sensitivity analysis, SEK m. 2016 2015 of the commitments below pertain to pension plans in the UK. Discount rate (+0.5%) - 203 - 188 Future pay increases (+0.5%) 2 2 SEK m. 2016 2015 Future inflation (+0.5%) 178 164 Obligation Mortality (+1 year in expected lifespan) 82 72 Obligation, January 1 2,374 2,565 Cost of service, current year 7 23 Holmen’s payments to funded defined-benefit plans in 2017 are estimated Special employer's contribution - 2 - 3 at SEK 31 m. Interest expense 77 93 Multi-employer plans Actuarial gains/losses 399 - 249 Expenditure for the year for pension insurance taken up with the Alecta ITP 2 Receipts from employees 3 amounted to SEK 45 m. (43) and is charged against operating profit. Alecta’s Pension payments - 212 - 101 surplus can be distributed to policy holders and/or the insured. At the end of Transferred from provisions 1 2016, Alecta’s collective consolidation rate was 148% (153). Adjustments - 36 Exchange-rate difference - 230 79 Obligation, December 31 2,414 2,374 Note 33 - Other provisions, SEK m.
Plan assets A provision differs from other liabilities in that uncertainty prevails concerning Fair value of plan assets, January 1 2,244 2,165 the date of payment or the amount that will be required to settle the provision. A provision is recognized when an existing legal or informal commitment aris- Recognized interest income 75 82 es from an event that has occurred, it is probable that an outflow of resources Yield excluding interest income 241 - 43 will be required to settle the commitment and the amount concerned can be Administration fees - 5 - 4 reliably estimated. Receipts from employer 73 65 The provision is posted in an amount that represents the best estimate of Receipts from employees 3 what will be required to settle the existing obligation on the balance-sheet Pension payments - 197 - 84 date. A provision for restructuring is recognized when a detailed and formal Exchange-rate difference - 218 59 restructuring plan has been established, and restructuring has either been started or announced publicly. Fair value of plan assets, December 31 2,213 2,244 Provisions are posted for environmental measures associated with prior Provision for pensions, net 201 130 operations when pollution arises or is discovered and when it is probable that payment liability will arise and the amount can be reliably estimated. Of the total obligations, non-funded obligations accounted for SEK 11 m. (14), Based on interpretations of current forestry legislation and regulations, with the remainder comprising fully or partly funded obligations. The weighted provisions for future forestry charges are calculated when it is considered average duration is 18 years. likely that a payment obligation will arise and a reasonable estimation of the The distribution of plan assets is presented in the table below. The plan amount can be made. assets do not include any financial instruments issued by Holmen companies or any assets used by Holmen. Other 2016 Taxes provisions Total Plan assets, SEK m. 2016 2015 On January 1 64 697 760 Shares 1,130 1,127 Provisions during the year 335 335 Bonds 1,063 1,101 Utilized during the year - 2 - 163 - 165 Short-term interest-bearing investments 20 17 Unutilized that was reversed during the year - 15 - 15 2,213 2,244 Translation differences 2 2 During the year, pension costs of SEK 7 m. (23) pertaining to defined-benefit 62 856 918 plans were recognized as personnel expenses. Interest expense on the pen- Long-term portion 62 627 689 sion liability amounted to SEK 77 m. (93) during the year and the anticipated in- terest income on the plan assets amounted to SEK 75 m. (82). The net of these Current portion 228 228 items has been recognized in net financial items as interest expense. 62 856 918
Cost recognized in other comprehensive income, SEK m. 2016 2015 Return on plan assets excluding interest income 241 - 43 Other Actuarial gains and losses from changes 2015 Taxes provisions Total in demographic assumptions 33 45 On January 1 158 462 620 Actuarial gains and losses from changes Provisions during the year 410 410 in financial assumptions - 418 47 Utilized during the year - 59 - 59 Actuarial gains and losses from Unutilized that was reversed during the year - 95 - 117 - 212 experience-based adjustments - 13 157 Translation differences 0 0 Special employer's contribution - 1 2 64 697 760 - 159 208 Significant actuarial assumptions, % (weighted average) 2016 2015 Long-term portion 64 540 603 Current portion 157 157 Discount interest rate 2.7 3.7 Future pay increases 3.0 3.0 64 697 760 Future inflation 3.1 2.9 Other provisions primarily pertain to uncertainty associated with the divest-
LUNDBERGS 2016 – GROUP ment of Holmen’s Spanish operations, obligations for restoration of the envi- ronment and contracts related to fixed-price electricity supply. The divestment of Holmen’s mill in Madrid accounted for most of the year’s provisions. 64 Note 34 - Operating liabilities, SEK m. Contingent liabilities 2016 2015 Other contingent liabilities 95 131 2016 2015 Accounts payable 1 1,937 2,089 A contingent liability is recognized when there is a possible commitment deriv- Other operating liabilities ing from events that have occurred whose existence can only be confirmed if Accrued expenses and prepaid income one or more uncertain future events that are not fully within the control of the Rental revenues 441 425 company occur or when there is a commitment that has not been recognized Other 713 845 as a liability or entered as a provision because it is not certain that an outflow of resources will be required. Other current liabilities Other contingent liabilities predominantly relate to ongoing legal proceed- Liabilities to associated companies 11 7 ings and guarantee obligations in relation to third parties. Holmen has envi- Derivatives ² 257 377 ronmentally related contingent liabilities that cannot be quantified at present VAT deduction 78 52 but that could give rise to costs in the future. Other 368 285 1,868 1,991 3,805 4,080 Note 37 - Important accounting assumptions and estimates 1) No part of accounts payable is due to liabilities to associated companies (14). The compilation of financial statements requires that company management 2) In all significant respects, the market value of derivative instruments pertains to hedges make accounting estimates that affect the carrying amounts. The accounting of future cash flows. estimates that company management believes are of importance to the carry- ing amounts in the annual report, and for which there is a significant risk that future events and new information could change these accounting estimates, Note 35 - Related parties, SEK m. mainly include:
Key personnel Biological assets Associated companies in executive It is Holmen’s assessment that no relevant market prices are available to value and joint ventures positions forest holdings of the size owned by Holmen. Accordingly, the valuation is based on the estimated present value of the projected future cash flow from 2016 2015 2016 2015 the standing forests. The principal assumptions pertain to how much harvest- Sales to related parties 280 208 11 11 ing can be increased in future years, how the prices of pulpwood and timber Purchases from related parties 172 242 will develop, the rate of cost inflation and the discount interest rate used. The Interest paid to related parties 5 0 valuation’s sensitivity to changes in these estimates is described in Note 19. Receivables from related parties, Dec 31 99 101 Investment properties Debt to related parties, Dec 31 61 91 37 37 In the financial statements, the properties are estimated at fair value. In this valuation, assessments are made of future rent levels, vacancy rates and Services with related parties have been priced on commercial terms. property costs. In the calculation model, an assessment is also made of the Participations in associated companies that produce hydro and wind power required yield for each individual property. However, the value of a property entitle Holmen to purchase produced electricity at cost price in relation to its cannot be established definitively until the proceeds from a sale have been shareholding, which means that only limited profits arise in associated compa- received. The valuation process is described in greater detail in Note 20. nies. Purchased electricity is sold externally at market price. Prior to the divest- ment in Spain, energy and recycled paper were purchased from associated Tax companies. Holmen has applied for an advanced ruling in respect of the right to post tax In 2016, Lundbergs issued a total of 75,000 warrants to senior executives of carryforwards for the losses incurred in its Spanish operations. The Tax Agency Industrivärden in return for market-based payment. Premiums paid amounted has opposed Holmen’s right to recognize the carryforwards. The matter has to SEK 12.00 per warrant. Each warrant provides entitlement during the period now advanced to the Supreme Administrative Court for determination, and February 26, 2020 to February 26, 2021 to the acquisition of one Series C a ruling is expected during 2017. In the event of a positive ruling, this would Industrivärden share for SEK 151.00. The recognized liability (measured at fair correspond to tax deductions of about SEK 400 m. No deferred tax has been value) on December 31, 2016 was SEK 2.2 m. recognized. Pensions Key personnel in executive positions The value of pension commitments is estimated on the basis of assumptions Fredrik Lundberg, who is the President and a member of the Board of the regarding discount interest rates, inflation, future pay increases and demo- Parent Company, received salary during the year of SEK 1.5 m. (1.5) and, in his graphic factors. These assumptions are normally updated each year, which has capacity as Chairman of the Board of the subsidiaries Holmen and Hufvud an effect on the size of the stated pension liability and shareholders’ equity staden, received director fees totaling SEK 1.1 m. (1.1). No variable or other and on the following year’s recognized pension costs. Refer also to Note 32. types of remuneration were received. As at December 31, 2016, via his wholly owned company Byggnads AB Other provisions Karlsson & Wingesjö (including subsidiaries), Fredrik Lundberg and his wife Obligations that could result in costs being incurred are assessed continuous- directly or indirectly held 70.95% (70.96) of the voting rights and 42.34% ly to determine the need for provisions. Uncertainty in assessments pertain (42.36) of the share capital in L E Lundbergföretagen AB (publ). Lundbergs primarily to the timing and size of the future cost. In the Group, there are pro- manages the properties of the Byggnads AB Karlsson & Wingesjö group under visions primarily for uncertainty linked to the divestment of Holmen’s Spanish a management agreement. operations, obligations to restore the environment, contracts for fixed-price Louise Lindh (incl. family) and Katarina Martinson (incl. family) each hold electricity contracts and risks associated with corporate tax. 11.21% (11.21) of the voting rights and 13.98% (13.98) of the share capital in L E Lundbergföretagen AB (publ). Impairment testing The total remuneration paid to a particular Board member is stated in Note 5. Impairment tests of fixed assets are performed annually. Should the profit- ability of an operation be weak and a potential impairment requirement be identified, expanded testing of the asset’s value is performed. In such testing, Note 36 - Pledged assets and contingent liabilities, SEK m. the value of the asset is calculated on the basis of prevailing market conditions and assessments of the future. The calculated value is then compared with Pledged assets 2016 2015 the carrying amount to determine whether or not there is a need to post an Real estate mortgages 3,358 3,308 impairment loss. Other commitments 139 152 LUNDBERGS 2016 – GROUP 3,498 3,460
65 Note 38 - Financial risks Financial liabilities 1, December 31, 2016 Maturity SEK m. Proportion, % The Lundberg Group’s risk management is established by the respective Board of Directors of Lundbergs, Holmen and Hufvudstaden. Risk management is 2017 1,997 36 pursued in accordance with the finance policy established by the Board of 2019 1,850 33 the particular company with the aim of minimizing the risk level. In all three 2020 200 4 companies, risk management is centralized in a special department. The pri- 2022 500 9 mary risks that are managed are the interest rate risk and the refinancing risk 2023- 1,060 19 associated with financing. Within Holmen, exchange-rate and commodity risks associated with business operations (transaction exposure), financing and net 5,607 100 investments in foreign operations are also managed. In the Group, borrowing 1) Excluding derivatives of SEK 25 m. and pension provisions of SEK 97 m. in foreign currency only occurs in Holmen. The maturity structure of financial liabilities and undiscounted amounts are presented below. The maturity structure of undiscounted amounts is presented in the table below.
1 Financial liabilities , December 31, 2016 SEK m. 2017 2018 2019 2020 2021- Maturity SEK m. Proportion, % Financial liabilities 2017 6,989 43 Derivative instruments 24 2 2018 1,514 9 Other financial liabilities 2,102 81 1,931 231 1,558 2019 2,868 18 Financial liabilities 2020 1,112 7 Other financial assets 167 2021 2,000 12 Interest rate risk 2022- 1,898 12 The interest rate risk pertains to the impact of a change in market interest 16,382 100 rates on the Group’s financing costs. Lundbergs’ indebtedness is low, which 1) Excluding derivatives of SEK 117 m. and pension provisions of SEK 313 m. means its interest rate risk is limited. The average period of fixed interest on December 31, 2016 was 35 months (32). Based on periods of fixed interest and The maturity structure of undiscounted amounts is presented in the table below. net indebtedness on December 31, 2016, a one percentage-point increase in market interest rates would have an effect of approximately SEK 4 m. on net SEK m. 2017 2018 2019 2020 2021- financial items in 2017. Longer term, changes in interest rates would impact the entire net indebtedness. The maturity structure of fixed-interest loans is Financial liabilities presented in the table below. Derivative instruments 187 53 22 16 2 Other financial liabilities 7,564 1,646 2,970 1,160 3,388 Maturity structure, fixed-interest loans, December 31, 2016 Average effective Financial liabilities Maturity Liabilities 1, SEK m. Proportion, % interest rate, % Derivative instruments 55 2017 2,057 37 2.5 Other financial assets 1,526 4 4 1 15 2019 1,850 33 2.8 2020 200 4 4.2 LUNDBERGS Lundbergs’ strategy is to create long-term value growth while maintaining 2022 500 9 1.8 financial balance. The financial risk is limited by maintaining a low debt/equi- 2023- 1,000 18 1.3 ty ratio combined with good access to funds. Since, to a considerable extent, 5,607 100 2.4 Lundbergs is an equity-managing company, a strong financial position is an es- sential requirement. The Group’s strong financial position is confirmed by the 1) Excluding derivatives of SEK 25 m. and pension provisions of SEK 97 m. Standard & Poor’s credit-rating agency, which has assigned Lundbergs a long- term rating of A+/stable outlook and short-term ratings of A-1 and K-1. These Credit risk high ratings facilitate less expensive borrowing and more effective access to Lundbergs has limited exposure to credit risks. The exposure that does exist money and bond markets. mainly derives from past-due accounts receivable and rent. The risks are lim- ited through conscious selection of customers with good payment ability and Financing risk advance invoicing of rent. Exposure to individual customers/tenants is limited The financing risk is the risk that it will not be possible to secure necessary and the ten largest customers/tenants account for a combined total of 13% of financing for operations at a given point in time. sales invoiced by property management. The credit risk is also limited by the On December 31, 2016, Lundbergs’ interest-bearing net debt totaled fact that financial assets consist solely of instruments with a high credit rating. SEK 5,502 m. (5,022), of which interest-bearing liabilities and interest-bearing Accounts receivable/rent receivables at the end of the year totaled SEK 36 m. pension provisions accounted for SEK 5,669 m. (5,176) and interest-bearing (16), of which SEK 5 m. (8) with a maturity exceeding 60 days. assets for SEK 167 m. (154). The average capital maturity was 35 months (32). Lundbergs’ derivatives include binding framework agreements about The maturity structure for financial liabilities is presented in the table below. offsetting, which means that the Group is entitled to offset receivables and In addition to raised loans of approximately SEK 5.5 billion, Lundbergs had liabilities when a credit event occurs with the same counterparty. Offsetting of committed long-term lines of credit totaling SEK 2.2 billion and SEK 100 m. in assets and liabilities is not applied in the accounting. Recognized derivatives in committed lines of credit with a maturity of less than 12 months. Lundbergs liabilities amounted to SEK 25 m. (48). has derivatives recognized in the category of financial assets and liabilities measured at fair value via profit or loss. Hedge accounting is not applied. Lundbergs has a commercial paper program with a committed issue limit of a nominal SEK 3.0 billion, of which SEK 0,6 billion had been utilized on December 31, 2016. Lundbergs also has a Swedish Medium Term Note program with an upper limit of SEK 5.0 billion, which provides the option of issuing bonds in SEK or EUR primarily to Swedish investors. At December 31, 2016, SEK 3.0 billion had been utilized.
LUNDBERGS 2016 – GROUP
66 Note 38, continued
Share risk Interest rate risk Share risk pertains to the share-price risk and liquidity risk. The share-price The interest rate risk pertains to the impact on earnings that a lasting change risk is the risk of a decline in value due to changes in share prices in the stock in interest rates would have on net financial items. Hufvudstaden’s financ- market. Lundbergs’ strategy is to have major shareholdings in a limited num- ing sources consist mainly of shareholders’ equity, cash flow from operating ber of companies. The share-price risk is limited by Lundbergs operating as activities, borrowing and lines of credit. Surplus liquidity is invested in financial an active and long-term owner, which enables it to influence the companies’ instruments with short interest rate maturities, which limits Hufvudstaden’s strategies and decisions. A change in the share price by one percentage point exposure to the interest rate risk associated with its investments. would affect the value of the stock portfolio by SEK 122 m. Interest-bearing borrowing gives rise to exposure to the interest rate risk. Liquidity risk could arise, for example, if a share is difficult to divest. Since Hufvudstaden’s finance policy establishes frameworks for how the interest Lundbergs’ portfolio comprises listed shares showing favorable liquidity, the rate risk is to be managed. A fundamental objective is that the expiration liquidity risk is limited. The stock portfolio, which is presented in Note 22 on structure of tenant leases must be taken into account when deciding maturity page 60, amounts to a total of SEK 12,230 m. periods, and that there must be a well-considered balance between current borrowing costs and the risk of a significant negative impact on earnings HUFVUDSTADEN arising from a sudden major change in interest rates. This means that the in- Hufvudstaden is mainly exposed to financing and interest rate risks. Hufvud- terest rate maturity of Hufvudstaden’s net debt should normally be 1-4 years. staden endeavors to have a loan portfolio with diversified capital maturities Borrowing is normally raised at variable interest rates and derivatives are used that enable amortization, if required. Since no borrowing is raised in foreign to attain the desired interest rate maturity. The average period of fixed inter- currency, Hufvudstaden is not exposed to exchange-rate risk. Borrowing est on December 31, 2016 was 23 months (27). Assuming that the borrowing normally occurs on the basis of short interest rate maturities and interest rate volume and the interest rate maturities remain unchanged, a one-percent- swaps are used to attain the desired interest-maturity structure. Derivative age-point change in the interest rates for the current derivative instruments instruments are used only to minimize risk and must be connected to the would affect Hufvudstaden’s interest expense in 2017 by SEK 27 m. At the underlying exposure. At present, the company has derivatives recognized in same time, a change in interest rates would result in changes in the value of the category of financial assets and liabilities measured at fair value through derivative instruments by SEK 45 m. in profit and loss. profit or loss. A decision has been taken to apply hedge accounting for future fixed-income derivatives. Hufvudstaden aims to use surplus liquidity to repay existing loans. The Maturity structure, fixed-interest loans, December 31, 2016 surplus liquidity that is not used for such repayments may only be invested in Average effective highly liquid, low-risk instruments. Maturity Liabilities 1, SEK m. Proportion, % interest rate, % 2017 2,642 40 2.0 Financing risk 2018 1,800 27 2.1 The financing risk occurs when difficulties arise in obtaining financing for -oper ations at a given point in time. To minimize the cost of Hufvudstaden’s borrow- 2019 950 14 2.7 ing and to ensure that financing can be obtained, the company requires com- 2021 1,000 15 1.5 mitted lines of credit that cover the renegotiation of loans and investments. 2022- 300 5 2.1 On December 31, 2016, Hufvudstaden’s interest-bearing net indebtedness 6,692 100 2.1 amounted to SEK 5,673 m. (5,482), of which interest-bearing liabilities account- ed for SEK 6,799 m. (5,936) and interest-bearing assets for SEK 1,126 m. (453). 1) Excluding derivatives of SEK 92 m. and pension provisions of SEK 15 m. On December 31, 2016, committed lines of credit amounted to SEK 3.0 billion, of which SEK 1.0 billion had been utilized. This means that SEK 2.0 billion was Credit risk unutilized, of which SEK 900 m. was reserved to cover outstanding commercial The credit risk mainly derives from past-due accounts receivable, rent receiv- paper. The average capital maturity was 32 months (27). The maturity struc- ables, cash and cash equivalents and financial derivatives with a positive value, ture of financial liabilities and assets is shown in the table below. which at year-end had a total value of SEK 1,129 m., entailing that Hufvud staden’s exposure to credit risks is limited. Financial liabilities 1, December 31, 2016 Losses on past-due accounts receivable and rent receivables arise when customers are declared bankrupt or cannot fulfill their payment commitments Maturity SEK m. Proportion, % for other reasons. The risks are limited through conscious selection of custom- 2017 1,792 27 ers who have well-documented business acumen and competitive operations. 2018 1,200 18 To limit the risk, the customers’ financial position is subject to credit checks 2019 500 8 by obtaining information from various credit information firms. A bank guar- antee or a surety is normally required in connection with new leasing. Rent is 2020 900 13 invoiced in advance. 2021 2,000 30 Hufvudstaden’s ten largest customers account for 24% of total contractu- 2022- 300 4 al rental revenue, of which the largest individual customer accounts for 7%, 6,692 100 which means that Hufvudstaden’s exposure to the credit risk of its customers is relatively limited. Exposure to financial derivative contracts is limited by 1) Excluding derivatives of SEK 92 m. and pension provisions of SEK 15 m. Hufvudstaden’s policy of only concluding such contracts with large financial institutions with a high credit rating and with which the company has had The maturity structure of undiscounted amounts is presented in the table below. long-term relations. In addition, framework agreements with these institutions have been concluded regarding the netting of various derivative contracts, SEK m. 2017 2018 2019 2020 2021- which further reduces exposure to credit risks. Financial liabilities Derivative instruments 70 30 5 Other financial liabilities 2,311 1,255 537 935 1,831 Financial assets Other financial assets 1,114 15 LUNDBERGS 2016 – GROUP
67 Note 38, continued
HOLMEN SEK m. Net Holmen aims to have a strong financial position that will generate financial SEK against EUR 4 stability and the opportunity to make correct and long-term business decisions that are not solely dependent on the business climate and external SEK against USD 4 financial opportunities. Holmen aims to have a debt/equity ratio that does not SEK against GBP 8 exceed 0.5. SEK against other currencies 3
Currency risk Holmen’s earnings are affected by fluctuations in exchange rates. The risk Financing risk associated with transaction exposure pertains to Holmen having consider- Holmen’s financing mainly comprises bond loans and commercial paper. The able amounts of sales in currencies other than the cost currency. To reduce risk that capital procurement will be difficult or costly in the future is reduced the impact on earnings of changes in exchange rates, net flows are hedged by using long-term committed lines of credit. Holmen has a committed line using currency forward contracts. The net flow in EUR, USD and GBP is always of credit in an amount of EUR 400 m. (SEK 3,824 m.) with a syndicate of nine hedged for the four months immediately ahead. banks that which matures in 2020 and 2021. At year-end, the line of credit was The currency exposure that arises when investments are paid for in foreign unutilized and is available for use, presuming that Holmen’s debt/equity ratio currency is separated from other transaction exposure. Normally, 90-100% is less than 1.25. of the currency exposure of major investments is hedged. For the two years On December 31, 2016, interest-bearing net debt totaled SEK 3,945 m. ahead, 90% of anticipated flows in EUR/SEK is hedged for an average of 9.50, (4,799), of which interest-bearing liabilities and interest-bearing pension pro- 90% of the following year’s anticipated flows in EUR/GBP is hedged at 0.86 visions accounted for SEK 4,283 m. (5,124) and interest-bearing assets for SEK and 70% of the following year’s flows in USD/SEK is hedged at 8.93. For other 338 m. (325). The maturity structure of financial liabilities and assets is shown currencies, four months of flows are hedged. in the table below. At year-end, hedging of EUR-denominated net assets amounted to EUR 13 m., Standard & Poor’s long-term credit rating for Holmen is BBB. which essentially corresponds to Holmen’s total EUR-denominated assets. At year-end, hedging of GBP amounted to GBP 5 m. Net assets in other currencies 1 are extremely limited and are not hedged. Financial liabilities , December 31, 2016 Hedging of exposure arising when assets and liabilities from foreign subsid- Total Broken down by currency iaries are translated to SEK (known as equity hedging) is judged from case to Maturity SEK m. Proportion, % SEK EUR GBP Others case and is arranged on the basis of Holmen’s value of its net assets. Hedging takes the form of loans in foreign currency or currency forward contracts. 2017 3,200 78 2,609 68 522 1 Exposure arising when earnings from foreign subsidiaries are translated into 2018 314 8 314 SEK is normally not hedged. 2019 518 13 518 2020 12 0 12 SEK m. 2021- 38 1 38 8,000 4,083 100 3,491 68 522 1 1) Excluding pension provisions of SEK 201 m. 6,000 The maturity structure of undiscounted amounts is presented in the table below.
4,000 SEK m. 2017 2018 2019 2020 2021- Financial liabilities 2,000 Derivative instruments 93 23 17 16 Other financial liabilities 3,151 310 501 0 EUR/SEK USD/SEK GBP/SEK EUR/GBP CNH/SEK Financial liabilities Derivative instruments 55 Transaction exposure, 12 months Hedged transaction exposure Other financial assets 245 4 4 1
Interest rate risk The result of currency hedges is recognized in operating profit in pace with The fixed interest period for Holmen’s financial assets and liabilities is normal- recognition of the hedged item and amounted to a negative SEK 73 m. in 2016 ly short. The Holmen Board can decide to lengthen the period in order to limit (neg: 73). The market value of outstanding transaction hedges at December the effect of a rise in interest rates. Interest-rate swaps are used to steer the 31, 2016 was a negative SEK 26 m. (pos: 82). The market value of investment rate of fixed interest without changing the underlying loans. Holmen’s average hedges is recognized in other comprehensive income until maturity when interest rate on loans in 2016 was 1.1% and the year-end rate 0.9%. The table profit or loss is added to the acquisition value of the hedged fixed assets. The below shows Holmen’s interest-rate maturities by currency. market value of outstanding investment hedges was SEK 0 m. on December 31, 2016. During the period, the acquisition value of hedged items increased by SEK 12 m. Maturity structure, fixed-interest loans, December 31, 2016 Gains on equity hedges amounted to SEK 1 m. (14) in 2016 and are recog- Pension nized in other comprehensive income when hedge accounting is applied. The - 1 year 1-3 years 3-5 years >5 years provisions Total translation of net foreign assets had a positive impact of SEK 192 m. (neg: 8) on SEK 2,311 400 600 23 3,334 Holmen’s shareholders’ equity. The market value of outstanding equity hedges EUR 20 8 28 at December 31, 2016 was SEK 16 m. (25) and related to financial derivatives. A one-percentage-point weakening of SEK would increase shareholders’ GBP 457 170 626 equity by SEK 13 m. in respect of the translation of foreign net assets. Other currencies - 43 0 - 43 A weakening of SEK by one percentage point compared with the year-end 2,744 400 600 201 3,945 level would have a positive impact on 2017 earnings of about SEK 18 m. com- pared with 2016. Without taking into account currency hedging, a one-per- centage-point depreciation of SEK in relation to the currencies specified below would have the following impact on earnings: LUNDBERGS 2016 – GROUP
68 Note 38, continued
A one-percentage-point increase in the average market interest rate from the Note 39 - Events after the balance-sheet date year-end level would have a negative impact of some SEK 21 m. on earnings in 2017. On December 31, 2016, the market value of the derivatives used to steer No events of material significance have occurred since the end of the fiscal the fixed-interest rate was a negative SEK 74 m. (neg: 82), which was recog- year. nized in other comprehensive income since hedge accounting is applied. This value is expected to be recognized in profit and loss in 2017 or later.
Price risk Raw material prices have been stable in recent years. The net consumption of electricity has been price hedged at a rate of 80-90% for 2017-2020 and 60% for 2021. The result of the financial electricity hedges is recognized in profit and loss upon maturity and, in 2016, amounted to a negative SEK 53 m. (pos: 6). The market value of outstanding financial hedges at December 31, 2016 was a negative SEK 57 m. (neg: -365), which is recognized in other comprehen- sive income since hedge accounting is applied. Based on prevailing hedges, a one-percentage-point increase in the price of electricity would impact share- holders’ equity by SEK 13 m.
Credit risk Holmen’s financial transactions give rise to credit risks in relation to financial counterparties. For each financial counterparty, a maximum credit risk is established and the settlement risk is monitored continuously. At December 31, 2016, Holmen had outstanding derivative contracts with a nominal value of some SEK 15 billion and a negative net market value of SEK 194 m. Holmen’s total credit risk resulting from derivative transactions was SEK 1,405 m. at year-end. The calculation is based on maturities and historical volatility for various types of derivatives. The risk that Holmen’s customers will not meet their payment obligations is limited by conducting checks of credit ratings, applying internal credit limits per customer and, in certain cases, by insuring accounts receivable against bad customer debts. Credit limits are monitored continuously. Exposure to individual customers is limited. As of December 31, 2016, Holmen’s accounts receivable amounted to SEK 2,174 m., of which approximately 46% (42) was insured against credit losses. During the year, credit losses on accounts receivable had a negative impact of SEK 5 m. (neg: 27) on earnings. Sales to the five largest customers accounted for 14% of Holmen’s total sales in 2016.
OTHER FINANCIAL RISK MANAGEMENT
Insurance All of Lundbergs’ and Hufvudstaden’s properties are covered by full-value insurance. Holmen insures its plants at replacement value against property damage and business interruption losses. The deductible varies between different plants, but generally does not exceed about SEK 30 m. for an individual claim. Holmen’s forest holdings are not insured. The woodland areas are spread over large parts of the country, and the risk of significant damage is considered low. Holmen has liability insurance that also covers sudden, unexpected damage to the environment that is caused by a third party. LUNDBERGS 2016 – GROUP
69 Note 40 - Group companies
Participations in subsidiaries 1 Number of shares Percentage of share capital 2 Shareholding Registred office Country Dec 31, 2016 2016 2015 Fastighets AB L E Lundberg Norrköping Sweden 250,000 100 100 Byggnads AB L E Lundberg Norrköping Sweden 1,000 100 100 Fastighets AB Strömstaden Norrköping Sweden 6,750 100 100 L E Lundberg Nordic AB Stockholm Sweden 1,251 100 100 L E Lundberg Kapitalförvaltning AB Stockholm Sweden 150,000 100 100 Östgöta Holding AB Stockholm Sweden 1,000 100 100
Hufvudstaden AB (publ) Stockholm Sweden 93,377,680 45.3 45.3 AB Citypalatset Stockholm Sweden 1,200 100 100 Fastighetsaktiebolaget Stockholm City Stockholm Sweden 7,776 100 100 Hotel Stockholm AB Stockholm Sweden 10,000 100 100 Fastighetsaktiebolaget Medusa Stockholm Sweden 300 100 100 Aktiebolaget Hamngatsgaraget Stockholm Sweden 3,000 100 100 AB Nordiska Kompaniet Stockholm Sweden 19,460,666 100 100 NK Cityfastigheter AB Stockholm Sweden 1,680 100 100 NK Concession Aktiebolag Stockholm Sweden 1,000 100 100 Parkaden Aktiebolag Stockholm Sweden 5,000 100 100 GBG Inom Vallgraven 3-2 AB Stockholm Sweden 1,000 100
Holmen AB (publ) Stockholm Sweden 27,622,000 32.9 32.9 Iggesund Paperboard AB Hudiksvall Sweden 1,000 100 100 Holmen Paper AB Norrköping Sweden 100 100 100 Holmen Timber AB Hudiksvall Sweden 1,000 100 100 Holmen Skog AB Örnsköldsvik Sweden 1,000 100 100 Holmen Energi AB Örnsköldsvik Sweden 1,000 100 100 Holmens Bruk AB Stockholm Sweden 1,000 100 100 Holmen Holding AB Stockholm Sweden 10,000 100 100 MoDo Capital AB Stockholm Sweden 1,000 100 100 Holmen Energi Elnät AB Örnsköldsvik Sweden 500 100 100 Stavro Vind AB Stockholm Sweden 500 100 100 Holmen France S.A.S. Paris France 10,000 100 100 Holmen UK Ltd Workington United Kingdom 1,197,100 100 100 Holmen Paper Ltd London United Kingdom 100 100 Iggesund Paperboard Ltd Workington United Kingdom 100 100 Holmen GmbH Hamburg Germany 100 100 Holmen Suecia Holding S.L. Madrid Spain 9,448,557 100 100 Holmen Paper Madrid S.L. Madrid Spain 100 100 Cartón y Papel Reciclado S.A. Madrid Spain 100 Iggesund Paperboard Asia Pte Ltd Singapore Singapore 800,000 100 100 Holmen B.V. Amsterdam Holland 35 100 100 AS Holmen Mets Tallinn Estonia 500 100 100 Iggesund Paperboard Inc Lyndhurst USA 1,000 100 100 Iggesund Paperboard Asia Ltd Hongkong China 4,000,000 100 100
1) The principal shareholdings are stated. 2) The percentage of share capital and voting rights is calculated after a deduction for treasury shares. The share of the voting rights matches the capital share in all cases, except for Hufvudstaden AB and Holmen AB. For Hufvudstaden, the percentage of voting rights at December 31 was 88.1% (88.1) and for Holmen 61.6% (61.6). LUNDBERGS 2016 – GROUP
70 Income Statement and Statement of Comprehensive Income, Parent Company
INCOME STATEMENT, SEK m. Note 2016 2015 Personnel costs 2 - 14 - 13 Depreciation 3 - 1 - 1 Other external costs 4 - 14 - 12 Operating loss - 28 - 26
Result from financial items 5 Result from participations in Group companies 880 947 Result from participations in associated companies 467 151 Result from other securities and receivables classed as fixed assets 4,509 767 Interest income 37 40 Interest expense and similar costs - 51 - 50 Profit after financial items 5,812 1,828
Appropriations 6 - 4 47
Profit before taxes 5,809 1,875
Tax 7 - 57 - 74
Net profit for the year 5,751 1,801
STATEMENT OF COMPREHENSIVE INCOME, SEK m. Note 2016 2015 Net profit for the year 5,751 1,801
Other comprehensive income Items that can be or have been transferred to profit or loss Available-for-sale financial assets 11 Year’s change in fair value 1,969 300 Transferred to profit or loss when reclassified - 4,083 Tax attributable to other comprehensive income 7 - 376 92 - 2,490 393
Total comprehensive income for the year 3,261 2,194 LUNDBERGS 2016 – PARENT COMPANY
71 Balance sheet, Parent Company
BALANCE SHEET, SEK m. Note Dec 31, 2016 Dec 31, 2015 ASSETS
Fixed assets
Tangible fixed assets 8 7 7
Financial fixed assets Participations in Group companies 9 6,838 6,838 Participations in associated companies 10 14,671 4,236 Other long-term holdings of securities 11 12,230 18,621 Total financial fixed assets 33,739 29,695
Total fixed assets 33,746 29,703
Current assets
Current receivables Receivables from Group companies 12, 13 2,193 2,760 Current tax assets 3 Other financial receivables 12 0 0 Other operating receivables 1 1 Total current receivables 2,198 2,761 Cash and bank balances 12, 14 166 152
Total current assets 2,364 2,913
TOTAL ASSETS 36,110 32,616
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity 15 Restricted shareholders’ equity Share capital (124,000,000 shares) 1,240 1,240
Unrestricted shareholders’ equity Fair value reserve 5,528 8,018 Earnings brought forward 18,732 17,588 Net profit for the year 5,751 1,801 Total shareholders’ equity 31,251 28,647 Untaxed reserves 16 532 520
Provisions 17 634 257
Long-term liabilities 12 3,002 2,000
Current liabilities Liabilities to Group companies 12, 13 8 9 Other financial liabilities 12, 13 674 1,164 Current tax liabilities 8 Other current liabilities 18 10 10 Total current liabilities 691 1,192
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 36,110 32,616 LUNDBERGS 2016 – PARENT COMPANY
72 Statement of changes in shareholders’ equity and Cash flow statement, Parent Company
Restricted Total share shareholders’ equity Unrestricted shareholders’ equity holders’ equity Earnings Fair value brought Net profit CHANGES IN SHAREHOLDERS’ EQUITY, SEK m. Share capital provision forward for the year Opening balance, January 1, 2015 1,240 7,625 16,269 1,939 27,073 Distribution of profits 1,939 - 1,939 Total comprehensive income for the year 393 1,801 2,194 Dividend - 620 - 620 CLOSING SHAREHOLDERS’ EQUITY, Dec. 31, 2015 1,240 8,018 17,588 1,801 28,647
Distribution of profits 1,801 - 1,801 Total comprehensive income for the year - 2,490 5,751 3,261 Dividend - 657 - 657 SHAREHOLDERS’ EQUITY ON DEC. 31, 2016 1,240 5,528 18,732 5,751 31,251
CASH FLOW STATEMENT, SEK m. Note 14 2016 2015 Operating activities Profit after financial items 5,812 1,828 Adjustment for items not included in cash-flow 1 - 4,081 1 Income tax paid - 69 - 71 1,662 1,758
Change in current receivables 0 0 Change in current liabilities 0 1 CASH FLOW FROM OPERATING ACTIVITIES 1,663 1,759
Investing activities Acquisition of tangible fixed assets - 0 Acquisition of financial assets - 2,075 - 1,012 CASH FLOW FROM INVESTING ACTIVITIES - 2,075 - 1,012
Financing activities Loans raised 4,400 2,100 Loans repaid - 3,317 - 2,301 Dividend paid - 657 - 620 CASH FLOW FROM FINANCING ACTIVITIES 426 - 821
CASH FLOW DURING THE YEAR 14 - 74
Cash and cash equivalents on January 1 152 227 Cash and cash equivalents on December 31 166 152
1) Adjustments primarily consist of the impact of the reclassification as associated companies, amounting to a negative SEK 4,083 m. (-). LUNDBERGS 2016 – PARENT COMPANY
73 Notes, Parent Company
Note 1 - Parent Company’s accounting policies Note 2 - Personnel costs for employees
The Parent Company applies the same accounting policies as the Group, apart Information regarding the Parent Company’s employees and personnel costs from the cases specified below. The deviations that exist between the Parent is presented in Note 5 in the consolidated financial statements. Company’s and the Group’s accounting policies result from limitations in the ability to apply IFRS within the Parent Company, due to the Annual Accounts Pensions Act (AAA) and the Pension Obligations Vesting Act (Tryggandelagen) and in The company’s employees are covered by the ITP plan. Obligations for old-age certain cases for tax purposes. pension and family pension are secured in part through insurance in Alecta The Parent Company has prepared its annual accounts in accordance with and in part through the payment of premiums. the AAA (1995:1554) and the Swedish Financial Reporting Council’s Recom- mendation RFR 2, Accounting for Listed Legal Entities. According to RFR 2, the SEK m. 2016 2015 Parent Company, as the legal entity, must apply all of the EU-approved IFRS and statements insofar as this is possible within the framework of AAA and Costs for defined-benefit plans 2 2 the Pension Obligations Vesting Act and taking into account the correlation between accounting and taxation. This recommendation specifies the excep- The above cost includes SEK 1.7 m. (1.8) pertaining to ITP-plan commitments tions from and additions to IFRS that may be applied. The Swedish Financial funded in Alecta. Reporting Council’s issued statements concerning listed companies have also been applied. Note 3 - Depreciation according to plan, SEK m. Classification and presentation The Parent Company’s income statement and balance sheet are presented in 2016 2015 accordance with AAA, while the statement of comprehensive income and the Machinery and equipment 1 1 statement of changes in shareholders’ equity are based on IAS 1 Presenta- tion of Financial Statements. The differences in relation to the consolidated financial statements that arise in the Parent Company’s income statement and balance sheet mainly comprise the recognition of results from financial items, Note 4 - Fees and remuneration paid to the auditors, SEK m. fixed assets and shareholders’ equity and untaxed reserves, as well as the existence of provisions as a separate item in the balance sheet. 2016 2015 Remuneration of KPMG AB Significant applied accounting policies The rules of Chapter 4, Section 14 a-d of the AAA, concerning the fair valuation Auditing assignments 0.4 0.3 of certain financial instruments, are applied. This means that “Other long-term Other assignments 0.1 0.2 holdings of securities” are measured at fair value. 0.6 0.5
Subsidiaries and associated companies Participations in subsidiaries and associated companies are recognized in the Note 5 - Financial items, SEK m. Parent Company according to the acquisition value method. This means that transaction charges are included in the carrying amount for shareholdings in subsidiaries and associated companies. Results from participations in Group companies 2016 2015 Dividends 880 947 Revenues Dividend income is recognized when the right to receive the dividend is consid- Results from participations in associated companies 2016 2015 ered certain. Dividends 467 151 Tangible fixed assets Tangible fixed assets are recognized at acquisition value less accumulated Results from other marketable securities depreciation and any impairment losses. and receivables classed as fixed assets 2016 2015 Dividends 426 767 Borrowing costs In the Parent Company, borrowing costs are charged against profit or loss Effects of reclassification as associated company¹ 4,083 during the period to which they pertain. No borrowing costs are capitalized 4,509 767 as assets. Interest income 2016 2015 Taxes In the Parent Company, untaxed reserves are recognized without being divid- Interest income, Group companies 37 40 ed up into shareholders’ equity and deferred tax liabilities, which means this Interest income, others 0 0 approach differs from the consolidated financial statements. 37 40
Group and shareholder contributions Interest expense and similar costs 2016 2015 Shareholder contributions are entered directly in the shareholders’ equity of the recipient and are capitalized in shares and participations by the donor. Interest expenses, Group companies - 0 - 0 Group contributions are recognized according to RFR 2 IAS 18 p3 and RFR 2 Interest expenses, others - 49 - 50 IAS 27 p2. Recognition is according to the alternative rule entailing that Group Other - 2 - 1 contributions received and paid will be recognized as appropriations. - 51 - 50 Financial guarantee agreements 1) In 2016, shares in Industrivärden AB were acquired to such an extent that the share of voting The Parent Company’s financial guarantee agreements consist mainly of sure- rights exceeded 20%, which led to the investment being reclassified as of February 19 onward ties for the benefit of subsidiaries. For the recognition of financial guarantee as an associated company. This resulted in profit of SEK 4,083 m. being recognized as follows. agreements, the Parent Company applies one of the relief rules permitted by 2016 the Swedish Financial Reporting Council, as compared with the rules of IAS 39. Value in transition to associate company 8,835
Acquisition value - 4,851 Reversal of impairment losses 99
LUNDBERGS 2016 – PARENT COMPANY 4,083
74 Note 6 - Appropriations, SEK m. Note 8 - Tangible fixed assets, SEK m.
2016 2015 Equipment 2016 2015 Difference between book depreciation Accumulated acquisition value and depreciation according to plan, Equipment 0 0 Opening balance 11 11 Tax allocation reserve, provision during the year - 87 - 113 Investments 0 Tax allocation reserve, reversal during the year 75 108 11 11 Group contribution received 8 52 Accumulated depreciation according to plan - 4 47 Opening balance - 3 - 2 Depreciation according to plan during the year - 1 - 1 Note 7 - Tax, SEK m. - 4 - 3 Closing balance 7 7 2016 2015 Current tax cost Tax cost during the year - 57 - 74 Tax attributable to preceding years - 0 - 57 - 74
2016 2015 Reconciliation of effective tax SEK m. % SEK m. % Profit before taxes 5,809 1,875
Swedish income tax rate - 1,278 22 - 413 22 Non-tax-deductible costs - 1 0 - 0 0 Non-taxable revenues 1,222 - 21 339 - 18 Standard tax on tax allocation reserve - 1 0 - 1 0 Tax attributable to prior years - 0 0 Other - 0 0 - 0 0 Reported effective tax - 57 1 - 74 4
2016 2015 Tax attributable to other Before Tax After Before Tax After comprehensive income tax tax tax tax Fair value of participations - 2,114 - 376 - 2,490 300 92 393
Note 9 - Participations in Group companies, SEK m.
2016 2015 Accumulated acquisition value On January 1 6,838 6,838 6,838 6,838 Number Specification of direct holdings of shares Holding as a % 1 Fair value Carrying amount of participations in subsidiaries Corp. Reg. No. Registered office Dec 31, 2016 2016 2015 Dec 31, 2016 2016 2015 Fastighets AB L E Lundberg 556049-0483 Norrköping 250,000 100 100 165 165 L E Lundberg Kapitalförvaltning AB 556188-2290 Stockholm 150,000 100 100 15 15 Holmen AB (publ) 556001-3301 Stockholm 27,622,000 32.9 (61.6) 32.9 (61.6) 8,997 3,828 3,828 Hufvudstaden AB (publ)2 556012-8240 Stockholm 93,377,680 45.3 (88.1) 45.3 (88.1) 13,555 2,830 2,830 Other direct holdings 0 0 6,838 6,838 Indirectly owned subsidiaries (major holdings) Owned by Holmen AB (publ) Holmens Bruk AB 556537-4286 Stockholm 1,000 100 100 Holmen Suecia Holding S.L., Spain Madrid 9,448,557 100 100 Holmen UK Ltd, United Kingdom Workington 1,197,100 100 100
Owned by Hufvudstaden AB (publ) AB Citypalatset 556034-7246 Stockholm 1,200 100 100 AB Nordiska Kompaniet 556008-6281 Stockholm 19,460,666 100 100
1) The percentage of share capital and voting rights is calculated after a deduction for treasury shares. The proportion of voting rights is presented LUNDBERGS 2016 – PARENT COMPANY within parentheses to the right of the proportion of share capital if these two percentages are not identical. 2) The market value of Series C shares has been calculated based on a 10% premium on the price of publicly traded Series A shares. 75 Note 10 - Participations in associated companies, SEK m.
2016 2015 On January 1 4,236 4,236 Reclassification ¹ 8,835 Investments 1,600 14,671 4,236 1) In 2016, shares in Industrivärden AB were acquired to such an extent that the share of voting rights exceeded 20%, which led to the investment being reclassified as of February 19 onward as an associated company.
Specification of shareholdings Number of shares Holding as a % Fair value Carrying amount in associated companies Corp. Reg. No. Registered office Dec 31, 2016 2016 2015 Dec 31, 2016 2016 2015 Husqvarna AB (publ) 556000-5331 Jönköping 43,350,000 7.6 (25.0) 7.6 (24.9) 3,061 2,006 2,006 Industrivärden AB (publ) 556043-4200 Stockholm 69,600,000 16.1 (23.3) 12,506 10,302 Indutrade AB (publ) 556017-9367 Stockholm 31,575,000 26.3 (26.3) 25.6(25.6) 5,778 2,363 2,230 14,671 4,236 1) The proportion of share capital and voting rights is calculated after a deduction for treasury shares. The proportion of voting rights is presented within parentheses to the right of the proportion of share capital. Further information about the Parent Company’s associated companies is presented in Notes 2 and 21 in the Group.
Note 11 - Other long-term holdings of securities, SEK m.
2016 2015 Holdings of securities measured at fair value
Accumulated acquisition value 2016 2015 On January 1 19,129 17,745 Acquisition value of listed shares Investments 474 1,012 On January 1 11,779 10,767 Reclassification as associated company ¹ - 8,835 Investments 474 1,012 Year’s changes in value 1,461 371 Reclassification as associated company ¹ - 4,851 12,230 19,129 7,403 11,779 Accumulated impairment losses Year’s changes in fair value through profit or loss On January 1 - 508 - 437 On January 1 - 1,433 - 1,433 Impairment losses for the year - 71 Reclassification as associated company ¹ 99 Reversals for the year 508 - 1,334 - 1,433 – - 508
12,230 18,621 Year’s changes in fair value through the balance sheet On January 1 8,275 7,975 Shareholding, Effects of reclassification as associated company ¹ - 4,083 Dec 31, 2016 as a % of Changes in value 1,969 300 share voting capital rights 2016 2015 6,161 8,275 Available-for-sale financial assets1 12,230 18,621 Handelsbanken A 2.0 2.0 4,937 4,234 1) In 2016, shares in Industrivärden AB were acquired to such an extent that the share of Industrivärden A 8,898 voting rights exceeded 20%, which led to the investment being reclassified as of February 19 Industrivärden C 435 onward as an associated company. Sandvik 2.4 2.4 3,381 2,222 Skanska A 2 1,427 1,093 Skanska B 4.3 12.2 2,484 1,739 12,230 18,621
1) Fair value at December 31, 2016 exceeded the cost of all shares. An accumulated impairment loss of SEK 508 m. was recognized in 2015. 2) The market value of Series A Skanska shares has been calculated using a 10% premium on the price of publicly traded Series B shares.
The assets have been measured at fair value based on the current stock-mar- ket price. Should the asset comprise shares of various series, the percentage of share capital and voting rights is stated jointly for the holding. LUNDBERGS 2016 – PARENT COMPANY
76 Note 12 - Financial instruments, SEK m.
Available-for-sale Accounts and Total carrying 2016 financial assets loans receivable Other liabilities amount Fair value Financial instruments included in net financial debt Current financial receivables Receivable from Group companies 2,193 2,193 2,193 Other financial receivables 0 0 0 2,193 2,193 2,193 Cash and cash equivalents Cash and bank balances 166 166 166 166 166 166 Long-term liabilities MTN loans 3,000 3,000 3,101 Derivatives 2 2 2 3,002 3,002 3,104 Current liabilities Liabilities to Group companies 8 8 8 Commercial paper programs 600 600 600 Other financial liabilities 74 74 74 681 681 681 Financial instruments not included in net financial debt Financial investments 12,230 12,230 12,230 Accounts receivable 0 0 0 Accounts payable 1 1 1
Available-for-sale Accounts and Total 2015 financial assets loans receivable Other liabilities Carrying amount Fair value Financial instruments included in net financial debt Current financial receivables Receivables from Group companies 2,760 2,760 2,760 Other financial receivables 0 0 0 2,760 2,760 2,760 Cash and cash equivalents Cash and bank balances 152 152 152 152 152 152 Long-term liabilities MTN loans 2,000 2,000 2,064 2,000 2,000 2,064 Current liabilities Liabilities to Group companies 9 9 9 Commercial paper programs 1,100 1,100 1,100 Other financial liabilities 64 64 64 1,174 1,174 1,174 Financial instruments not included in net financial debt Financial investments 18,621 18,621 18,621 Accounts receivable 0 0 0 Accounts payable 1 1 1
Financial instruments measured at fair value in the balance sheet Financial instruments not measured at fair value in the balance sheet but In accordance with IFRS 7, disclosures must be provided concerning how fair for which disclosures have been provided about the fair value value has been established for instruments measured at fair value in the bal- When disclosures about fair value are provided in the table above for financial ance sheet, which include financial investments (shares). instruments not measured at fair value in the balance sheet, the fair value has Input data for measurement of financial instruments measured at fair value been determined in the following manner: in the balance sheet has been based on observable market prices, meaning Loans from banks with fixed-interest rates have been valued at the rate by that they are attributable to Level 2 according to IFRS 13. which refinancing could be done on the balance-sheet date. This measurement Since Series A Skanska shares are not publicly traded, their value has been belongs to Level 3 since these rates cannot be observed in the market. Loans calculated based on a 10% premium on the price of publicly traded Series B with variable interest rates are assumed to have a market value that matches shares, whereby the valuation belongs to Level 3 in accordance with IFRS 13. the carrying amount provided that a measurable change did not occur in a During the year, the value change was an increase of SEK 334 m. (decline: 21), current spread for a similar transaction. which was entirely attributable to unrealized changes in value and has been Other financial instruments in the balance sheet have a short period re- recognized in other comprehensive income under Available for-sale financial maining to maturity. The carrying amount has been stated as the fair value of LUNDBERGS 2016 – PARENT COMPANY assets. these instruments, which is regarded to reflect the fair value since the discount effect is negligible. 77 Note 13 - Related parties, SEK m. Note 15 - Shareholders’ equity
Key personnel in Unrestricted shareholders’ equity 2016 Subsidiaries executive positions The fair value provision, earnings brought forward and net profit for the year Sales to related parties 10 constitute unrestricted shareholders’ equity, meaning the amount available for distribution to the shareholders. Interest received from related parties 37
Interest paid to related parties 0 Fair value provision Receivable from related parties, Dec 31 2,193 The company applies the AAA rules pertaining to financial instruments mea- Dept to related parties, Dec 31 8 44 sured at fair value pursuant to Chapter 4, Subsection 14 a-d. The fair value provision includes the accumulated net change in the fair value of available- for-sale financial assets up to the time the asset is derecognized from the Key personnel in balance sheet. 2015 Subsidiaries executive positions Fair value provision, SEK m. 2016 2015 Sales to related parties 11 Opening value 8,018 7,625 Interest received from related parties 40 Reclassification of Industrivärden as an associated company - 4,727 Interest paid to related parties 0 Changes in value 2,613 300 Receivable from related parties, Dec 31 2,760 Tax attributable to changes in value - 376 92 Dept to related parties, Dec 31 9 37 5,528 8,018
Services with related parties have been priced on commercial terms. Earnings brought forward In 2016, Lundbergs issued a total of 75,000 warrants to senior executives of Consists of unrestricted shareholders’ equity and profit for the preceding year Industrivärden in return for market-based payment. Premiums paid amounted after dividend has been paid. to SEK 12.00 per warrant. Each warrant provides entitlement during the peri- od February 26, 2020 to February 26, 2021 to the acquisition of one Series C Dividends Industrivärden share for SEK 151.00. The recognized liability (measured at fair The funds available for distribution by the AGM amount to SEK 30,010,644,219. value) on December 31, 2016 was SEK 2.2 m. The Board of Directors proposes that the AGM on April 5, 2017 approve a dividend of SEK 5.60 per share. The proposed dividend totals SEK 694 m. Key personnel in executive positions The Board of Directors also proposes that the remaining amount of SEK Via his wholly owned company Byggnads AB Karlsson & Wingesjö (including 29,316,244,219 be carried forward. subsidiaries), Fredrik Lundberg and his wife hold, directly or indirectly, 70.95% In the preceding year, a dividend of SEK 5.30 per share (SEK 657 m.) was of the voting rights (70.96) and 42.34% of the share capital (42.36) in L E Lund- paid. bergföretagen AB (publ). Lundbergs manages the properties of the Byggnads AB Karlsson & Wingesjö group under a management agreement. Other information is presented in Note 29 in the Group. Louise Lindh (incl. family) and Katarina Martinson (incl. family) each hold 11.21% (11.21) of the voting rights and 13.98% (13.98) of the share capital in L E Lundbergföretagen AB (publ). Note 16 - Untaxed reserves, SEK m. The total remuneration paid to a particular Board member is stated in Note 5 to the consolidated financial statements. 2016 2015 Equipment Opening balance 1 1 Note 14 - Cash-flow statement, SEK m. Accelerated depreciation during the year - 0 - 0
The cash-flow statement was compiled in accordance with the indirect meth- Closing balance 0 1 od. Recognized cash flow only comprises transactions that involved receipts Tax-allocation reserves and disbursements. Reserved for 2010 fiscal year 75 Reserved for 2011 fiscal year 44 44 Interest and dividends received 2016 2015 Reserved for 2012 fiscal year 67 67 Interest received 37 40 Reserved for 2013 fiscal year 132 132 Interest paid - 47 - 40 Reserved for 2014 fiscal year 88 88 Dividends received 1,772 1,865 Reserved for 2015 fiscal year 113 113 1,762 1,864 Reserved for 2016 fiscal year 87 531 520 Cash and bank balances ¹ 2016 2016 532 520 Bank balances 66 15 Balance on overdraft facility 100 137 166 152 Untaxed reserves include deferred tax of SEK 117 m. (114). 1) The overdraft facility granted totals SEK 100 m. (100).
Under the MTN program, SEK 1,000 m. (500) was borrowed on a long-term basis. Under the commercial paper program, a total of SEK 3,400 m. (1,600) was borrowed on a short-term basis, divided among several different loans, and SEK 3,900 m. (1,600) was repaid. LUNDBERGS 2016 – PARENT COMPANY
78 Note 17 - Provisions, SEK m. Note 19 - Pledged assets and contingent liabilities, SEK m.
Provisions for taxes 2016 2015 No assets were pledged. Holdings of securities measured at fair value Contingent liabilities 2016 2015 On January 1 257 350 Contingent liabilities on behalf of subsidiaries 1,010 1,011 Provisions during the year 376 - 92 634 257
Note 18 - Other current liabilities, SEK m.
2016 2015 Accounts payable 1 1 Other liabilities 0 0 Accrued expenses and prepaid income 9 8 10 10 LUNDBERGS 2016 – PARENT COMPANY
79 Proposed distribution of earnings
The Board of Directors proposes that the funds available for distribution by the Annual General Meeting, an amount of SEK 30,011 m. (SEK 30,010,644,219), be distributed as follows:
To shareholders, a dividend of SEK 5.60 per share SEK 694 m. To be carried forward SEK 29,316 m. SEK 30,011 m.
The company has 124,000,000 registered shares. The sum total of the proposed dividend above, SEK 694 m., may change if the number of treasury shares changes before the record date for dividends. A reasoned statement motivating the dividend proposal will be available on the company’s website www.lundbergforetagen.se no later than three week before the AGM. The statement will also be sent to those shareholders who request it. The Board of Directors and the President give their assurance that the financial statements have been prepared in accordance with generally acceptable accounting practices in Sweden and that the consolidated financial statements have been prepared in compliance with the international accounting standards referred to in the European Parliament’s and the Council’s Ordinance (EC) No. 1606/2002 of July 19, 2002 concerning the application of international accounting standards. The Annual Report and the consolidated financial statements provide a fair and just impression of the Parent Company’s and the Group’s financial position and earnings. The Report of the Board of Directors for the Parent Company and the Group provides a fair and just summary of the development of the Parent Company’s and the Group’s operations, financial position and earnings and describes the significant risks and uncertainties faced by the Parent Company and the companies included in the Group. The Annual Report and the consolidated financial statements were approved for publication by the Board and the President on February 23, 2017. The consolidated statement of income and comprehensive income and statement of financial position and the Parent Company’s income statement and balance sheet will be subject to adoption by the AGM on April 5, 2017. Friday, April 7, 2017 is proposed as the record date for payment of dividends. If the AGM approves the Board’s proposal, it is estimated that the dividends will be distributed by Euroclear Sweden AB on Wednesday April 12, 2017.
Stockholm, February 23, 2017
Mats Guldbrand Carl Bennet Staffan Grefbäck Chairman of the Board Member of the Board Member of the Board
Lilian Fossum Biner Louise Lindh Katarina Martinson Member of the Board Member of the Board Member of the Board
Sten Peterson Lars Pettersson Fredrik Lundberg Member of the Board Member of the Board President and Chief Executive Officer Member of the Board
Our audit report was submitted on February 28, 2017
KPMG AB
Joakim Thilstedt LUNDBERGS 2016 – PROPOSED DISTRIBUTION OF EARNINGS Authorized Public Accountant
80 to the consolidated accounts. consolidated to the relate matters the stated oterwise not If matters. these on opinion aseparate provide not do we but awhole, as accounts solidated con and accounts annual the thereon, opinion our forming in and of, audit our of context the in addressed were matters These period. current the of accounts consolidated and accounts annual the of audit our in significance most of were judgment, fessional pro our in that, matters those are audit the of matters audit Key Key Audit Matters opinions. our for abasis provide to appropriate and ent requirements. these with accordance in responsibilities ethical our fulfilled wise other have and Sweden in accountants for ethics professional with accordance in group the and company parent the of pendent inde We are section. Responsibilities Auditor’s the in described further are standards those under responsibilities Our Sweden. in standards auditing accepted generally and (ISA) Auditing on dards Stan International with accordance in audit our We conducted Basis for Opinions group. the and company parent the for sheet balance and statement income the adopts holders Act. Accounts Annual the with accordance in is statement governance corporate the and accounts, consolidated and counts ac annual the of parts other the with consistent are statement and report the administration corporate governance statutory Act. Accounts Annual the and EU, the by adopted as (IFRS), Standards Reporting Financial International with accordance in ended then year the for flow cash and performance financial 2016 their and 31, December of as group the of position financial the respects, material all in fairly, present and Act Accounts Annual the with accordance in prepared been have accounts consolidated The Act. Accounts Annual the with accordance in ended then year the for flow cash and performance financial 31, 2016 its and December of as company parent the of position financial the respects, material all in fairly, present and Act, Accounts Annual the with accordance document. this in 33-80 pages on included are company the of accounts consolidated and accounts annual 2016. The year the for (publ.) AB LELundbergföretagen of accounts consolidated and accounts annual the audited We have Opinions and consolidated accounts on the annualReport accounts 556056-8817 id: corp. AB, LELundbergföretagen of Meeting To Annual the Report Auditors’ We believe that the audit evidence we have obtained is suffici is obtained have we evidence audit the that We believe share of meeting general the that recommend We therefore The prepared. been has statement governance A corporate in prepared been have accounts annual the opinion, our In
------ projects that have already been completed. been already have that projects of experience previous our to relation in forecasts the of accuracy the evaluate to order in calculation investment original from tions devia potential of analysis and forecasts prepared of part taken have we Moreover, expenses. current and work maintenance and of development investment calculations, contracting property authorizations testing for samples selecting as such procedures internal through controls development projects for property Group´s the evaluated We have Group. the within managers ect proj relevant the with meetings review had projects of a sample properties. its of asubset for obtained has Group the which experts, external independent by out carried valuations property the to comparisons made have we Additionally, experts. valuation and companies property other by used experience, our from are, that methods to them comparing by reasonable seem methods reports. valuation external to according vacancies term long and Group´s the regarding properties agreements rental subscribed newly in levels rent properties, similar involving tions transac of terms in data external against evaluated been have ples for recalculating the valuations. completed property sam selected have and Hufvudstaden and Lundbergs segments operating the in process valuation internal the assessed We have audit the in Response period. the for results reported the affect directly would which adjusted, be to need may and inappropriate been have to proven are properties investment of value carrying the termine projects. these to relation in obligations economic any and costs construction of monitoring the particular in management, project for processes group’s the consider to necessary also is it erties, properties. the of asubset for experts external independent by out carried valuations property To obtained management assure the has valuations additionally rentals. expected and rates occupancy future yield, investment valuations These areproperties. based on assumptions such as Group´s the of each of valuations internal on based is and assets total Group’s the 45% of 31, represents 2016, which December of idated accounts.ThecarryingvalueamountstoSEK54,393m.as Investment propertiesareaccountedforatfairvalueintheconsol- Description of key audit matter matter. the of description and information detailed for accounts consolidated and account annual the in 50 page on principles accounting 37 and 12, note note 20, See note Valuation of Properties Investment With regards to investments in existing properties, we have for for have we properties, existing in investments to regards With valuation internal applied the whether assessed We have vacancies and rentals yield, investment about Assumptions de to used assumptions underlying the that arisk is There prop existing in investments of valuation the to regards With ------LUNDBERGS 2009 – LOREM IPSUM 81
LUNDBERGS 20162014 –– AUDITORS’ AUDITORS’ REPORT REPORT Furthermore, we have considered the completeness of the un- Valuation of Tangible Fixed Assets derlying data and circumstances that are disclosed in the notes to See note 18, note 37 and accounting principles on page 49 in the an- the Annual Reprt and evaluated whether the information provided nual account and consolidated accounts for detailed information and is sufficient to understand management’s judgement and the used description of the matter. key assumptions. Description of key audit matter Tangible fixed assets as of December 31, 2016 have a carrying Valuation of Biological Assets value of SEK 9,440 m. mainly related to the operating segment See note 13, note 19 and note 37 in the annual account and consolid Holmen. In recent years, profitability in certain parts of the busi- ated accounts for detailed information and description of the matter. ness has been weak, which has resulted in impairments of values Description of key audit matter of the related assets. Biological assets consisting of growing forest exist in the Group’s Profitability in someparts of the business is still weak and operating segment Holmen. The carrying value as of December therefore there the need for further impairments of asset values 31, 2016 is SEK 17,448 m. may exist. Biological assets are measured at fair value, via discount- According to IFRS; impairment tests shall be performed ing esti-mated net future cash flows from the growing forest to according to a certain methodology wherein Company manage- present value. Cash flows are estimated over a 100-year period, ment is required to make estimates regarding both internal and representing the assessed average harvesting cycle. The valuation external conditions and plans. Examples of estimates are future is performed internally and is calculated using a combination of cash flows as well as which discount rate should be used to take harvest plans, future sales prices, cost projections, inflation and into consideration the fact that future inflows are associated with discount rates. a certain amount of risk. The valuation is complex and comprises significant level of Response in the audit judgement. We have inspected the Group’s impairment test to ensure that it is There is a risk that the estimates that form the basis of the in line with the aforementioned methodology. carrying value of Biological Assets may need to be adjusted, which Furthermore, through evaluation of management’s written would directly affect the reported result for the period. plans and documentation, we have assessed the reasonableness Response in the audit of future cash flows and the assumed discount rate. We have also We have reviewed and assessed the Group’s choice of a cash flow conducted discussions with the operating segment’s manage- based valuation model. We have also inspected the valuations per- ment and evaluated previous year’s estimates compared to actual formed and the underlying documentation in order to assess that outcomes. they are in line with established valuation techniques. Furthermore, through evaluation of management’s written Provisions for Pensions plans and documentation, we have assessed the reasonableness See note 32, note 37 and accounting principles on page 50 in the an- nual account and consolidated accounts for detailed information and of assumptions regarding volumes, prices, costs and the discount description of the matter. rate used in the valuation. We have conducted discussions with the operating segment’s management and evaluated previous Description of key audit matter year’s estimates compared to actual outcomes. A critical part of The operating segment Holmen has a pension obligation that our work has also been examination and evaluation of the sensi- mainly concerns the United Kingdom. Before reduction by the tivity analysis performed by management that shows how changes fair value of plan assets, this pension obligatoin was valued at in the assumptions can affect the overall valuation. SEK 2,414 m. of December 31, 2016. We have involved our own specialists on the audit to ensure Estimation of the value of the pension obligation relies upon that the audit team has had sufficient experience and competence a number of assumptions, including mortality and inflation rates, within this area, in particular regarding design of the valuation and the discount rate applied to estimated payments of pensions. model. In addition to this we have compared the Group’s valuation The Group engages external actuaries to perform these complex
AUDITORS’ REPORT to valuations per-formed by other companies via comparison of calculations. calculated value per cubic metre. Changes to the assumptions on which the valuation is based We have also considered the completeness of the disclosures could significantly affect total comprehensive income for the finan- in the Annual Report and assessed whether they are in agree- cial period and the size of the pension obligation. ment with the assumptions made by th Group in its valuation of Biological Assets. LUNDBERGS 2016 –
82 Response in the audit Fair value on participations traded on an active market is We have examined the external actuarial report that is used based on quoted prices. For participations in listed companies by the Group for valuation of its pension obligation. We have with several series (if not all series are listed) the fair value is calcu- assessed the assumptions within the calculations, for instance lated based on a 10% premium on the price of the publicly traded regarding inflation and discount rate, with input from our internal serie. The fair value of non listed participations are calculated specialists’ analyses. based on net asset value. We have also considered the the completeness of the disclo- There is a risk that impairment is not recoreded, perticulary on sures in the Annual Report and assessed the disclosures of the participations measured at cost and non listed participations. assumptions used by Company management and their sensitivity Response in the audit analysis. We have inspected and assessed the company’s assessment of the fair values for the financial fixed assets. Other Provisions Valuation of participations traded on an active market has See note 33 in the annual account and consolidated accounts for been verified against current marked data. Valuation of non listed detailed information and description of the matter. participations has been assessed and verified against the compa- Description of key audit matter ny’s calculations. As of December 31, 2016 the operating segment Holmen has We have also considered the the completeness of the disclo- other provisions amounting to SEK 856 m. The provisions relate sures in the Annual Report. to uncertainties regarding the sale of operations in Spain, environ mental obligations and contractual commitments regarding Other Information than the annual accounts delivery of electricity at a fixed price. and consolidated accounts Provisions involve significant levels of judgement regarding This document also contains other information than the annual uncertain future outcomes, in particular relating to the amount accounts and consolidated accounts and is found on pages 1-32 and timing of the final assessments. Changes to the underlying and 86-92. The Board of Directors and the Managing Director are assumptions used to make these provisions could significantly responsible for this other information. affect the reported result. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not Response in the audit express any form of assurance conclusion regarding this other We have inspected the Group’s documentation of its provisions. information. We have assessed management’s estimates and have held discus- In connection with our audit of the annual accounts and sions with management regarding their assumptions in each area consolidated accounts, our responsibility is to read the informa- to ensure that the provisions are in line with the Group’s account- tion identified above and consider whether the information is ing principles and with IFRS requirements. materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowl- Valuation of Financial Fixed Assets edge otherwise obtained in the audit and assess whether the in the Parent Company L E Lundbergföretagen AB See note 5, note 9, note 10, note 11 in the parent company and account information otherwise appears to be materially misstated. ing principles on page 74 in the annual account and consolidated If we, based on the work performed concerning this informa- accounts for detailed information and description of the matter. tion, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing Description of key audit matter to report in this regard. Financial fixed assets in the parent company L E Lundbergföre- tagen AB of December 31, 2016 amount to SEK 33,739 m., which Responsibilities of the Board of Directors represents 93% of the parent company’s total assets. and the Managing Director The financial fixed assets consist of shares, which are account- The Board of Directors and the Managing Director are responsible ed for as participations in group companies, participations in for the preparation of the annual accounts and consolidated ac- AUDITORS’ REPORT associated companies and other long-term holdings of securities. counts and that they give a fair presentation in accordance with the The first two categiries are accounted for in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in cost method, while the last category is accounted for at fair value. accordance with IFRS as adopted by the EU. The Board of Directors Participations measured according to the cost method is and the Managing Director are also responsible for such internal impaired if the fair value at the closing date is lower than cost. control as they determine is necessary to enable the preparation Participations measured at fair value is continously accounted for of annual accounts and consolidated accounts that are free from
at fair value even if that value is higher than cost. LUNDBERGS 2014 – AUDITORS’ REPORT
material misstatement, whether due to fraud or error. LUNDBERGS 2016 –
83 In preparing the annual accounts and consolidated accounts related to events or conditions that may cast significant doubt The Board of Directors and the Managing Director are responsible on the company’s and the group’s ability to continue as a going for the assessment of the company’s and the group’s ability to concern. If we conclude that a material uncertainty exists, we continue as a going concern. They disclose, as applicable, matters are required to draw attention in our auditor’s report to the related to going concern and using the going concern basis of related disclosures in the annual accounts and consolidated accounting. The going concern basis of accounting is however not accounts or, if such disclosures are inadequate, to modify our applied if the Board of Directors and the Managing Director intend opinion about the annual accounts and consolidated accounts. to liquidate the company, to cease operations, or has no realistic Our conclusions are based on the audit evidence obtained alternative but to do so. up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to Auditor’s responsibility continue as a going concern. Our objectives are to obtain reasonable assurance about whether • Evaluate the overall presentation, structure and content of the the annual accounts and consolidated accounts as a whole are annual accounts and consolidated accounts, including the dis- free from material misstatement, whether due to fraud or error, closures, and whether the annual accounts and consolidated and to issue an auditor’s report that includes our opinions. accounts represent the underlying transactions and events in a Reasonable assurance is a high level of assurance, but is not a manner that achieves fair presentation. guarantee that an audit conducted in accordance with ISAs and • Obtain sufficient and appropriate audit evidence regarding the generally accepted auditing standards in Sweden will always financial information of the entities or business activities within detect a material misstatement when it exists. Misstatements can the group to express an opinion on the consolidated accounts. arise from fraud or error and are considered material if, individ- We are responsible for the direction, supervision and perfor- ually or in the aggregate, they could reasonably be expected to mance of the group audit. We remain solely responsible for our influence the economic decisions of users taken on the basis of opinions. these annual accounts and consolidated accounts. As part of an audit in accordance with ISAs, we exercise profes- We must inform the Board of Directors of, among other matters, sional judgment and maintain professional skepticism throughout the planned scope and timing of the audit. We must also inform of the audit. We also: significant audit findings during our audit, including any significant • Identify and assess the risks of material misstatement of the deficiencies in internal control that we identified. annual accounts and consolidated accounts, whether due to We must also provide the Board of Directors with a statement fraud or error, design and perform audit procedures respon- that we have complied with relevant ethical requirements regard- sive to those risks, and obtain audit evidence that is sufficient ing independence, and to communicate with them all relationships and appropriate to provide a basis for our opinions. The risk of and other matters that may reasonably be thought to bear on our not detecting a material misstatement resulting from fraud is independence, and where applicable, related safeguards. higher than for one resulting from error, as fraud may involve From the matters communicated with the Board of Directors, collusion, forgery, intentional omissions, misrepresentations, or we determine those matters that were of most significance in the the override of internal control. audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and • Obtain an understanding of the company’s internal control are therefore the key audit matters. We describe these matters in relevant to our audit in order to design audit procedures that the auditor’s report unless law or regulation precludes disclosure are appropriate in the circumstances, but not for the purpose about the matter or when, in extremely rare circumstances, we of expressing an opinion on the effectiveness of the company’s determine that a matter should not be communicated in the audi- internal control. tor’s report because the adverse consequences of doing so would • Evaluate the appropriateness of accounting policies used reasonably be expected to outweigh the public interest benefits of and the reasonableness of accounting estimates and related such communication. disclosures made by the Board of Directors and the Managing AUDITORS’ REPORT Director. Report on other legal and • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s, use of the going concern basis of regulatory requirements accounting in preparing the annual accounts and consolidated Opinions accounts. We also draw a conclusion, based on the audit evi- In addition to our audit of the annual accounts and consolidated dence obtained, as to whether any material uncertainty exists accounts, we have also audited the administration of the Board of LUNDBERGS 2016 –
84 Directors and the Managing Director of L E Lundbergföretagen AB Auditor’s responsibility (publ.) for the year 2016 and the proposed appropriations of the Our objective concerning the audit of the administration, and company’s profit or loss. thereby our opinion about discharge from liability, is to obtain We recommend to the general meeting of shareholders that audit evidence to assess with a reasonable degree of assurance the profit be appropriated in accordance with the proposal in whether any member of the Board of Directors or the Managing the statutory administration report and that the members of the Director in any material respect: Board of Directors and the Managing Director be discharged from • has undertaken any action or been guilty of any omission which liability for the fiscal year. can give rise to liability to the company, or
Basis for Opinions • in any other way has acted in contravention of the Companies We conducted the audit in accordance with generally accepted Act, the Annual Accounts Act or the Articles of Association. auditing standards in Sweden. Our responsibilities under those Our objective concerning the audit of the proposed appropri- standards are further described in the Auditor’s Responsibilities ations of the company’s profit or loss, and thereby our opinion section. We are independent of the parent company and the about this, is to assess with reasonable degree of assurance group in accordance with professional ethics for accountants in whether the proposal is in accordance with the Companies Act. Sweden and have otherwise fulfilled our ethical responsibilities in Reasonable assurance is a high level of assurance, but is not accordance with these requirements. a guarantee that an audit conducted in accordance with generally We believe that the audit evidence we have obtained is suffi- accepted auditing standards in Sweden will always detect actions cient and appropriate to provide a basis for our opinions. or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s profit or loss are Responsibilities of the Board of Directors not in accordance with the Companies Act. and the Managing Director As part of an audit in accordance with generally accepted The Board of Directors is responsible for the proposal for ap- auditing standards in Sweden, we exercise professional judgment propriations of the company’s profit or loss. At the proposal of a and maintain professional skepticism throughout the audit. The dividend, this includes an assessment of whether the dividend examination of the administration and the proposed appropri- is justifiable considering the requirements which the company’s ations of the company’s profit or loss is based primarily on the and the group’s type of operations, size and risks place on the audit of the accounts. Additional audit procedures performed are size of the parent company’s and the group’s equity, consolidation based on our professional judgment with starting point in risk and requirements, liquidity and position in general. materiality. This means that we focus the examination on such The Board of Directors is responsible for the company’s actions, areas and relationships that are material for the opera- organization and the administration of the company’s affairs. tions and where deviations and violations would have particular This includes among other things continuous assessment of the importance for the company’s situation. We examine and test company’s and the group’s financial situation and ensuring that decisions undertaken, support for decisions, actions taken and the company’s organization is designed so that the accounting, other circumstances that are relevant to our opinion concerning management of assets and the company’s financial affairs other- discharge from liability. As a basis for our opinion on the Board wise are controlled in a reassuring manner. of Directors’ proposed appropriations of the company’s profit or The Managing Director shall manage the ongoing administra- loss we examined the Board of Directors’ reasoned statement and tion according to the Board of Directors’ guidelines and instruc- a selection of supporting evidence in order to be able to assess tions and among other matters take measures that are necessary whether the proposal is in accordance with the Companies Act. to fulfill the company’s accounting in accordance with law and handle the management of assets in a reassuring manner. AUDITORS’ REPORT
Stockholm, February 28, 2017 KPMG AB
Joakim Thilstedt Authorized Public Accountant LUNDBERGS 2014 – Auditors’ report LUNDBERGS 2016 –
85 LUNDBERGS 20162009 – LOREM IPSUM 86 President and CEO of Fastighets AB L E Lundberg LELundberg AB Fastighets of CEO and President Number of shares (including family): 17,338,602 family): (including shares of Number Board member of Fastighets AB L E Lundberg, LELundberg, AB Fastighets of member Board Board of Directors Chairman of the Board of J2L Holding AB AB Holding J2L of Board the of Chairman Foundation II, The King Gustav V 80th V80th Gustav King The II, Foundation Board member of Procordia Pension Pension Procordia of member Board Anniversary Fund Foundation and and Foundation Fund Anniversary Elected to the Board in 2008 2008 in Board the to Elected Elected to the Board in 2010 in Board the to Elected Hufvudstaden and Holmen Hufvudstaden Number of shares: 85,000 shares: of Number Fastighets AB Stenvalvet Stenvalvet AB Fastighets Chairman of the Board Board the of Chairman Mats Guldbrand Louise Lindh Louise Born in 1945 1945 in Born Born in 1979 in Born MBA MBA MBA
Number of shares (including companies and wife): wife): and companies (including shares of Number Chairman of the Board of Fastighets AB AB Fastighets of Board the of Chairman B.Sc., MBA, Hon. PhD in Economics and and Economics in PhD Hon. MBA, B.Sc., L E Lundberg, Hufvudstaden, Holmen, Holmen, Hufvudstaden, L ELundberg, President and Chief Executive Officer Officer Executive Chief and President Deputy chairman of Handelsbanken of chairman Deputy Chairman of the Board of Getinge, Getinge, of Board the of Chairman MBA, Hon. PhD in Technology Technology in PhD Hon. MBA, Elected to the Board in 2009 2009 in Board the to Elected Industrivärden och Indutrade Industrivärden of L E Lundbergföretagen AB AB LELundbergföretagen of Number of shares: 200,000 shares: of Number Board member of Holmen Holmen of member Board Board member of Skanska Skanska of member Board Elected to the board 1975 board the to Elected Fredrik Lundberg Lundberg Fredrik Hon. PhD in Technology in PhD Hon. Lifco and Elanders Elanders and Lifco Carl Bennet Born in 1951 in Born Born in 1951 in Born 52,492,500
President of Byggnads AB Karlsson & Wingesjö &Wingesjö Karlsson AB Byggnads of President Board member of Fastighets AB L E Lundberg, LELundberg, AB Fastighets of member Board Board member of Nobia AB, Thule Group, Group, Thule AB, Nobia of member Board Hufvudstaden and J2L Holding AB AB Holding J2L and Hufvudstaden Chairman of the Board of Cloetta of Board the of Chairman Elected to the Board in 2001 2001 in Board the to Elected Elected to the Board in 2014 in Board the to Elected Lilian Fossum Biner Lilian Fossum Number of shares: 38,000 38,000 shares: of Number Number of shares: 1,000 shares: of Number Givaudan and a-connect a-connect and Givaudan Sten Peterson Born in 1962 1962 in Born Born in 1956 1956 in Born B.Sc. B.Sc. MBA MBA
Chairman of the Board of KP Components A/S A/S Components KP of Board the of Chairman Board member of Industrivärden, Husqvarna, Board member of Fastighets AB L E Lundberg LELundberg AB Fastighets of member Board and the Foundation for Strategic Research Research Strategic for Foundation the and Elected to the Board in 2012 in Board the to Elected Elected to the Board in 2016 in Board the to Elected Indutrade and Festo A.G. Festo and Indutrade Number of shares: 2,000 shares: of Number Number of shares: 200 shares: of Number Staffan Grefbäck Staffan Lars Pettersson Pettersson Lars B.Sc, Hon. PhD PhD Hon. B.Sc, Born in 1954 in Born Born in 1955 in Born B.Sc.
Auditors KPMGAB.Auditor inChargeJoakimThilstedt,Authorized PublicAccountant.Born 1967. Number of shares (including family): 17,338,602 family): (including shares of Number Board member of Fastighets AB L E Lundberg, LELundberg, AB Fastighets of member Board Husqvarna, Indutrade, AniCura, Husqvarna, Elected to the Board in 2009 2009 in Board the to Elected Katarina Martinson Martinson Katarina Fidelio Capital and Lyko and Capital Fidelio Born in 1981 in Born MBA MBA
LUNDBERGS 2009 – LOREM IPSUM 87 Senior executives L E Lundbergföretagen AB
Fredrik Lundberg Claes Boustedt Born in 1951, employed since 1977 Born in 1962, employed since 1991 President and CEO Executive Vice President Number of shares (including companies and wife): President of L E Lundberg Kapitalförvaltning AB 52,492,500 Number of shares: 10,000
Lars Johansson Roger Ekström Born in 1966, employed since 1991 Born in 1961, employed since 2001 Chief Financial Officer Director of Communications Number of shares: 10,000 LUNDBERGS 2016
88 Senior executives Fastighets AB L E Lundberg
Louise Lindh Christian Claesson Roger Ekström Born in 1979, employed since 2005 Born in 1980, employed since 2015 Born in 1961, employed since 2001 President and CEO Regional Manager East Executive Vice President Number of shares (including family): Head of Retail Business Area Head of Communications and Sustainability 17,338,602 Number of shares: 10,000
Johan Ladenberg Peter Lundgren Mattias Markström Born in 1966, employed since 2005 Born in 1970, employed since 1994 Born in 1977, employed since 2012 Executive Vice President Regional Manager West Head of Project Development Head of Rental and Property Administration Number of shares: 2,600 Number of shares: 125 Number of shares: 1,050 Number of call options: 14,000
Elisabet Nisser Johan Sandborgh Linda Wastesson Born in 1978, employed since 2017 Born in 1979, employed since 2009 Born in 1980, employed since 2011 HR Manager Regional Manager Stockholm Chief Accountant Head of Corporate Accounting at L E Lundbergföretagen AB Number of shares: 55
89 Annual General Meeting and Financial statements
Information about the AGM Financial information L E Lundbergföretagen’s AGM will be held on Wednesday, April 5, The following financial statements will be published in Swedish 2017, at 2.00 p.m. at Grand Hotel, Stallgatan 6, Stockholm, Sweden. and English on our www.lundbergforetagen.se website.
Participation in the Meeting May 17, 2017 Interim Report January – March 2017 Shareholders wishing to participate in the AGM must be recorded August 23, 2017 Interim Report January – June 2017 in the Securities Register maintained by Euroclear Sweden AB no November 23, 2017 Interim Report January – September 2017 later than Thursday, March 30, 2017, and notify the company of February 2018 Year-End Report for 2017 their intention to participate no later than Thursday, March 30, 2017. The Annual Report will be sent to shareholders who have notified their desire to receive it. Notification is easiest via www.lundberg- Notifications can be made in any of the following foretagen.se, under the heading Investor Relations/Order Form. manners: - by post to L E Lundbergföretagen AB (publ), SE-601 85 Norrköping - by telephone to Int. +46 11 21 65 00 or - by e-mail to [email protected], whereby the company’s e-mail confirmation that the notification has been received is required.
Notifications must include details of the shareholder’s name, address, telephone number, personal identification/corporate reg- istration number, number of shares held and number of advisors. If participation is to be based on proxy, the proxy document must be sent to the company in connection with notification. A form for proxies is available at the company and on the company’s website www.lundbergforetagen.se. To be able to vote at the Meeting, shareholders whose shares are registered in a nominee’s name must temporarily register their shares in their own names. Such registration must be completed by Thursday March 30, 2017. This means the nominee must be giv- en adequate notice of the shareholder’s wishes before this date.
Dividend The Board of Directors proposes a dividend of SEK 5.60 per share for the 2016 fiscal year. Friday, April 7, 2017 is proposed as the record date for payment of dividends. If the AGM approves the Board’s proposal, it is estimated that the dividends will be distrib- uted by Euroclear Sweden AB on Wednesday April 12, 2017.
90 Addresses
L E Lundbergföretagen AB (publ) Corp. Reg. No: 556056-8817 Registered headquarters: Stockholm PO Box 14048, SE-104 40 Stockholm, Sweden Street address: Hovslagargatan 5B Phone: +46 8 463 06 00 E-mail: [email protected] www.lundbergforetagen.se
Fastighets AB L E Lundberg Corp. Reg. No: 556049-0483 SE-601 85 Norrköping, Sweden Street address Olai Kyrkogata 40 Phone: +46 11 21 65 00 E-mail: [email protected] www.lundbergs.se www.lundbergforetagen.se On Lundbergs’ website, you will find general information about the company, financial information and the current share price. LUNDBERGS 2016
91 The list of properties with addresses and photos of Fastighets AB L E Lundbergs’ properties is available at www.lundbergs.se
Format and production: Anfang Design & Kommunikation, Norrköping Text: Lundbergs Reproduction: Stibo Graphic Print: Tellogruppen Cover Invercote Creato 300 g. Contents: Multiart Silk 150 g and Multi Design Original White 130 g Photography: Ulla-Carin Ekblom, El Studio, Grepp Kommunikation, Jenny Hammar Photography, Handelsbanken, Holmen, Husqvarna Group, Indutrade, Mattias Lindh, M&F Foto, Magnus Pajnert, Q Image, Sandvik, Skanska Print date: March 27, 2017
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