Jotun Protects Property ANNUAL Report 2011 Contents 2 Jotun worldwide 1 4 Group sales and EBITA 5 Group key figures 6 Directors’ report 11 Financial statements for Jotun Group 11 Consolidated statement of comprehensive income 12 Consolidated statement of financial position 13 Consolidated statement of cash flows 14 Consolidated statement of changes in equity 15 Summary of significant accounting policies 22 Notes 49 Financial statements for Jotun A/S 49 Statement of comprehensive income 50 Statement of financial position 51 Statement of cash flows 52 Statement of changes in equity 52 Accounting policies 53 Notes 71 Auditor’s report 74 Group directory 76 Organisation Belle Chasse, Louisiana North Sea Sandefjord, Norway St. Petersburg, Russia Inner Mongolia, China Quingdao, China Jotun completes upgrade of its Coatings Jotun Coatings wins contract to supply Jotun launched Group Technical, a Jotun Paints acquires nine hectares of Jotun Coatings secures agreement Jotun COSCO Marine holds factory on the coast of the Gulf of coatings to Statoil’s Gundrun Platform, new function tasked with improving land in the Fedorovsky Industrial Park as to supply protective coatings to the groundbreaking ceremony for the Mexico. which will be deployed west of operational efficiency throughout the first step in constructing a factory YaKeShi Wind Farm in China. construction of a new 85,333 square Stavanger. Jotun’s global network. for production of paint and powder meter factory to serve China’s growing coatings. maritime activity. 2 3 JOTUN DWIDE WOR L L WOR DWIDE INTRODUCTION JOTUN Rio de Janeiro, Brazil Istanbul, Turkey Riyadh, Saudi Arabia Abu Dhabi, UAE Nilai, Malaysia Manila, Philippines Jotun announces plans to invest in a Jotun Powder Coatings wins contract Jotun Saudia opens new offices in Bilda Jotun wins contract to supply coatings for Jotun Paints opens the largest paint Jotun established a sales company in factory in Duque de Caxias to serve to supply Super Durable powder Mall, Riyadh following another year of seven packages for the Takreer Ruwais factory of its kind in the Asia Pacific the Philippines to meet the increased Brazil’s growing offshore, industrial and coatings to the Varyap Meridian strong results. Refinery Expansion Project, representing region. The 93,000 square meter demand for marine and protective marine activity. project, an iconic retail and residential one of the largest Protective contracts factory will also serve the Singaporean coatings in the local market. development. won by Jotun to date. market. Group sales and EBITA BUSINESS DIVISIONS 50% Jotun Coatings 4 5 27% Jotun Paints GROUP KEY FIGURES GROUP (Figures in USD million from consolidated group accounts) 2011 2010 14% Jotun Dekorativ EBITA REVENUE KEY AND 9% Jotun Powder Coatings FIGURES ES L Operating revenue 1 902 1 617 SA BUSINESS SEGMENTS Operating revenue outside Norway in % 77 75 ROUP G 36% Marine Coatings COMPREHENSIVE INCOME 34% Decorative Paints 21% Protective Coatings Operating profit 171 205 Profit before tax expense 159 198 9% Powder Coatings Net cash flow from operations 54 117 PROFITABILITY SALES (NOK mill) Return on capital employed, in % 1) 18.3 29.2 11 000 2011 Operating margin, in % 2) 9.0 12.7 Return on equity, in % 3) 13.1 19.9 10 000 YEAR-END FINANCIAL POSITION 9 000 Total assets 1 522 1 329 Investments in intangible and fixed assets 144 95 8 000 Equity 837 801 Equity ratio, in % 55.0 60.3 EBITA 7 000 (NOK mill) Number of employees in group (FTE) 6 013 5 577 1 300 Number of employees in group (FTE), 8 296 7 819 6 000 including 100 per cent in joint ventures and associated companies 2000 1 100 DEFINITIONS 5 000 2003 1) Return on capital employed % = Operating profit - amortisation of intangible assets x 100 900 Average total assets - non-interest-bearing liabilities 4 000 2) Operating margin % = Operating profit x 100 700 Operating revenues 1990 3) Return on equity % = Total comprehensive income for the year 3 000 x 100 Average equity 500 2 000 300 1 000 1980 100 1972 0 0 From 2003 the sales and EBITA is according to IFRS. Before 2003 the figures are according to NGAAP. EBITA is earning before interest, tax and amortisation. Directors’ Report 6 1. MAIN ACTIVITIES Transition to IFRS Strong demand for raw materials contin- 7 By the end of 2011, Jotun’s business ac- With effect from 2011, including com- ued from 2010 into 2011 resulting in short- DIRECTORS tivities included development, production, parable figures from 2010, Jotun has age of key raw materials, longer delivery report marketing and sales of a range of paint and transitioned to International Financial times and frequent price increases. For ’ coatings systems and products for sur- Reporting Standards (IFRS) from Nor- the group, the cost of goods sold rose 16% ’ report face treatment and protection. The Jotun wegian Accounting Standards (NGAAP). compared with last year. Gross margin Group is organised into four divisions: The purpose of the transition is to make continued to decline, although the price of DIRECTORS financial information from Jotun more some raw materials levelled out during the Jotun Dekorativ: Decorative paints, stains easily understandable for a wider inter- last part of the year. Price increases and and varnishes for the professional and national group of readers. The transition other improvement measures were taken DIY markets in Norway, Sweden, Den- has a number of effects on the reported ac- in most product segments, but these were mark and Iceland, as well as production of counts. Please see note 23 in the Accounts/ not sufficient to maintain the margin from binding agents. Annual Report regarding explanations of last year. Around mid-year the situation the transitional effects. eased following major events like the Euro Jotun Paints: Decorative paints in the zone turbulence, China’s stricter monetary Middle East and South East Asia, includ- Profits policy to curb inflation and a continued slow growth in the USA. Combined, this ing marine and protective coatings for lo- The group’s total operating income was Board of Directors (from left to right): Einar Abrahamsen, cal customers in the same regions. NOK 10,659 million in 2011 compared led to slower world economic growth. Richard Arnesen, Torkild Nordberg, Odd Gleditsch d.y., Paul with NOK 9,767 million in 2010. The com- Jordahl, Ingrid Luberth, Birger Amundsen and Nicolai A. Eger. Jotun Coatings: Marine and protective pany’s long-term growth trend continued Associated companies and joint ventures coatings for industry and offshore in Eu- in 2011, with improved sales in most seg- consist of Jotun’s equity interests in Jotun A/S had committed long-term bank The main risk regarding exchange rates is ment. Jotun’s position in Sweden has rope, the USA, South Africa, Australia ments and divisions, primarily ascribable South Korea, China, the UAE., Saudi and credit lines of NOK 1,400 million that connected with the USD and USD-related strengthened in the last year. Jotun Den- and North Asia, as well as decorative to improved markets particularly in Asia Yemen. These investments are presented were available at year end. Additionally, currencies as well as the EUR. The group mark’s result improved satisfactorily after products for local customers in the same and parts of the Middle East. However, according to the equity method on the line NOK 600 million of long-term credit lines hedges its currency risk through foreign having undergone a significant improve- regions. Middle East markets were affected by for associated companies and joint ven- were agreed in the first week of January exchange loans, forward contracts, cur- ment programme. In Norway, Jotun is the the Arabic Spring, and European markets tures. The group’s share of the net result 2012. The NOK 2,000 million of long- rency swaps and options. overall market leader with strong brands Jotun Powder Coatings: Architectural, struggle with slow economic growth. De- ended at NOK 265 million compared with term credit lines serves as a back stop for in both the consumer market and the pro- functional and industrial powder coatings spite a number of unexpected events in the NOK 323 million in 2010. the certificate loans, and will be utilised if Allocation of profit for the year fessional market. in Scandinavia, Europe, the Middle East global economy, Jotun’s business model the short term certificate market dries up. The allocation of the total comprehen- and Asia. has proven to be resilient. Financial position, capital structure The NOK 2,000 million credit lines also sive income for 2011 is presented in the Jotun continuously strives to improve the and risk serve as a strategic reserve for short-term statement of changes in equity. Addition- customer’s experience with Jotun and Jotun has a worldwide network and is The group achieved a consolidated profit The Jotun Group had a positive cash posi- financing for the group companies. ally, the Board of Directors proposes a Jotun products. This is done by work- represented on every continent by sub- for the year of NOK 634 million compared tion of NOK 618 million at year end 2011 dividend of NOK 513 million for 2011. ing closely with dealers and chain stores sidiaries and joint ventures. The group, to NOK 861 million in 2010. Group op- compared to a positive cash position of The group’s equity ratio was 55 per cent Free equity after the proposed dividend through in-store concepts and equipment. including Joint Ventures and associates, erating profit amounted to NOK 956 mil- NOK 717 million as of 31 December 2010. at the end of the year as opposed to 60 amounts to NOK 2,708 million. The division has also invested in more comprises 74 companies in 43 countries, lion, compared with NOK 1,240 million per cent the previous year.