Annual Report 2012 Think Asia. Think DKSH. WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 DKSH at a glance As the No. 1 provider of Market Expansion Services with a focus on Asia, we help companies to grow their business in new and existing markets. Our Business Units Our Business Units focus on the fields of consumer goods, healthcare, perfor- mance materials and technology, and offer a comprehensive range of Market Expansion Services to business partners in their respective areas. Consumer Goods Performance Materials Focusing on fast moving consumer We source, develop, market and dis- goods, food services, hotel supplies, tribute a wide range of specialty and luxury and lifestyle products, our chemicals and ingredients for the spe- services range from product feasibility cialty chemicals, food and beverage, studies and sales and marketing to pharmaceutical and personal care in- physical distribution. dustries. Healthcare Technology With a product range covering ethical We provide marketing and sales as pharmaceuticals, consumer health and well as application engineering and over-the-counter health products, as after-sales services for capital invest- well as medical devices, we offer ser- ment goods and analytical instruments vices including product registration, in the areas of industry, infrastructure, marketing and sales, and physical dis- energy, research, food and beverage, tribution. as well as advanced metals. WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 Highlights 2012 New record year 2012: Profit growth +21.3% vs. 2011 January February March April May June Opening of new February 15: Opening of two Acquisition of distribution center Publication of new innovation Australian specialty for Consumer record full-year centers in Thailand cables distributor Goods in Thailand 2011 results and Taiwan ElectCables DKSH market Opening of food entry in Sri Lanka innovation center with Performance in Mumbai Materials Opening of new distribution center for Healthcare in Hong Kong IPO: listing at SIX Swiss Exchange at CHF 48 per share WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 Sales growth +20.4% vs. 2011 July August September October November December Acquisition of Acquisition of specialty German/Japanese chemicals distributor trading house Staerkle & Nagler Clay Share price gained 37.3% since IPO Publication of excellent on March 20, half-year figures 2012 with EBIT of CHF 127 million Disposal of contract Extension of CEO’s manufacturing Release of Second contract until 2017 plant OLIC Global Market and appointment of Expansion Services Bruno Sidler as COO Opening of new Report distribution center for Technology and Performance Materials in Thailand Completion of company-wide SAP upgrade WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 Contents Letter to shareholders 2 DKSH share information 4 Key figures 5 Our growth story 6 Growth in a dynamic market 14 Market Expansion Services 15 Business model 19 Services along the value chain 21 Our strategy for sustainable, profitable growth 22 Making business partners grow 23 Our Business Units 24 Corporate functions 32 Organizational structure 34 People, values and employer value proposition 36 Corporate social responsibility 39 Risk management and compliance 41 Corporate governance 42 Management’s discussion and analysis 68 Consolidated financial statements DKSH Group 73 Financial statements DKSH Holding Ltd. 131 DKSH locations worldwide 141 1 WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 02a_AR-12_Letter to shareholders_02-03_en.indd 1 14.03.2013 08:12:02 > DKSH Annual Report 2012 > Letter to shareholders Letter to shareholders gain of CHF 24.7 million in profit was achieved through the sale of DKSH’s non-core contract manufacturing plant OLIC in Thailand. Net sales increased by 20.4% (CHF +1.5 billion) to CHF 8.8 billion. Out of that growth, 1.3% originated from M&A. With this strong performance, DKSH again clearly outpaced the Market Expansion Services industry’s growth rate of 8.3%, more than doubling it in our addressable markets, confirming that we have gained further market share in a dynamic environment. Free cash flow increased by CHF 198.7 million to CHF 249.5 million, despite the very strong sales growth of DKSH by CHF 1.5 billion in 2012. Earnings per share improved by 17.7% to CHF 2.79 (exclud- ing OLIC). In view of DKSH’s strong financial performance, the Board of Directors will propose an ordinary dividend of CHF 0.80 (CHF +0.15 or +23.1%) per share at the Annual General Meeting in April 2013, in line with its long-term policy of paying out 25% – 35% of profit after tax. Furthermore, the Board of Directors proposes that share- holders participate in the form of an extraordinary dividend of CHF 0.15 per share in the successful divestment of OLIC. Together, upon approval at the Annual General Meeting, our shareholders will receive a total dividend payment of CHF 0.95. We are proud of the achievements in 2012, particularly the value created for the shareholders in our first year as a public company. In line with our track record, we have again delivered on our promise to achieve sustainable, profitable growth. Adrian T. Keller, Chairman, and Dr. Joerg Wolle, President & CEO, DKSH Group. All Business Units and regions contributed to the excellent perfor- mance as a result of the successful implementation of our strategy. It is based on achieving organic growth through the expansion of existing business partnerships, multiplying success stories from coun- Dear Shareholders, try to country, winning new clients and customers, as well as up- grading our service portfolio and the continuous improvement in We are pleased to present the first Annual Report of DKSH Holding operational efficiency. The organic growth is complemented by Ltd. (“DKSH”) as a public company after turning in the best selective bolt-on acquisitions. performance in our nearly 150-year history. Formed in 2002 through the merger of long-established Swiss In 2012, DKSH once again set new records by growing our business trading houses Diethelm Keller Services Asia and SiberHegner, DKSH mainly organically and supported by bolt-on acquisitions. We has transitioned from a trading company into the leader in the achieved strong double-digit profit growth, highlighting our recently defined Market Expansion Services industry. Since then, we efficiency and high operational leverage. In line with our promise of have more than doubled net sales from CHF 3.5 billion to CHF 8.8 delivering sustainable, profitable growth, Earnings Before Interest billion, increased EBIT fivefold from CHF 55.6 million to CHF 277.3 and Taxes (EBIT) increased to CHF 277.3 million, an increase of million, with a long-term annual growth rate of more than 17%. 16.7% compared to the prior year. The company’s profit after tax In 2012 alone, DKSH has created 1,540 jobs and employed approxi- grew by 21.3% to CHF 184.7 million. Additionally, an extraordinary mately 25,900 specialists at year-end 2012. 2 WorldReginfo - 55c3045d-d49d-4b97-8ec7-76e97e6e9486 02a_AR-12_Letter to shareholders_02-03_en.indd 2 14.03.2013 08:12:05 > DKSH Annual Report 2012 > Letter to shareholders Taking the company public in March 2012 was another milestone in Moreover, the increased need of companies nowadays to focus on our history. Our unique investment case of providing access to fast- their core competencies is fueling the widespread trend toward growing markets in Asia combined with Swiss Corporate Gover- outsourcing of non-core activities to specialized service providers nance is enthusiastically accepted by investors. The share price such as DKSH. performed extremely well following the IPO, with an increase of 37.3% until the end of 2012 compared to its issue price of Our achievement of consistent and strong financial performance CHF 48.00, adding CHF 1.1 billion in market capitalization in 2012. over the past decade confirms that we are ideally positioned to The greater visibility that comes with being a public company exploit the growth generated by the long-term trends within increases awareness of DKSH and our unique business model both our core Asian markets – including the rapid spreading of Asia’s among clients and customers, as well as our standing in the market middle classes, strong growth in trade flows into and within Asia, for new talents. and increasing trend of outsourcing. Our business model is highly diversified and scalable for expansion. In 2013 we expect to Three small bolt-on acquisitions were completed in 2012. Business grow net sales at least in line with the projected addressable Unit Technology’s leading position in Market Expansion Services for market growth of 8.3%. As the leading Market Expansion Services capital investment goods and analytical instruments was strength- provider with a focus on Asia, from today’s perspective DKSH is ened by the acquisition of Australia’s specialty cables distributor set to continue its course of sustainable, profitable growth and ElectCables and by the takeover of the well-established German- to achieve double-digit EBIT growth for the full-year 2013. Japanese trading firm Clay in Japan, which also enhances DKSH’s lifestyle business in Japan. Business Unit Performance Materials 2012 was a landmark year for DKSH. We wish to thank our business acquired Swiss specialty chemicals distributor Staerkle & Nagler in partners, employees and shareholders for their commitment and November, complementing its market leadership in Asia by strength- contributions to yet another year of outstanding success. ening the European footprint and expanding its client and product portfolio. These transactions follow the successful and value-adding acquisitions and integrations in previous years of primarily smaller, Sincerely yours, traditional trading houses. It confirms DKSH’s position as the industry consolidator in the fast-growing but still highly fragmented Market Expansion Services industry. In order to optimally position ourselves for the next phase of expansion, we have also decided to strengthen our management structure by establishing the function of a Chief Operating Officer Adrian T.