Annual Report 2011 www.altiacorporation.com 2 | 3 Altia annual report 2011 3 | 3 _Contents 04 32 Altia’s year Framework for sustainable 08 development CEO’s review 33 Framework and definition 10 of reporting Value in three 35 waves Financial 14 responsibility Never-ending passion 36 for brands Environmental WE THINK responsibility AHEAD 16 Brands are the core of 39 our growth IN Altia’s quality, safety GOOD and environmental COMPANY principles FAST TRACK 18 TO THE Selection of Altia’s MARKETS own brands 44 Social responsibility SHARING THE BEST 20 Fast track to the Nordic 49 MOMENTS and Baltic markets We follow responsible THIRST 22 business principles FOR Selection of Altia’s 51 GROWTH partner brands Comparing the report to the recommendation by Global 24 Reporting Initiative PASSION Industrial Services to customers 52 FOR Board of Directors BRANDS 26 Competitiveness through 54 BORN production, logistics and Executive Management sourcing Team RESPONSIBLE 30 56 Responsibility report Contact details 4 | 5 Altia annual report 2011 5 | 5 _ Leading in the Nordics and Baltics Altia is the leading wine and spirits company offering quality brands in the Nordic and Baltic countries. Altia produces, delivers, markets, sells, imports and exports alcoholic beverages in these markets. Altia’s own brands such as Blossa, Chill Out, Explorer, Renault, Grönstedts, Koskenkorva, Jaloviina, O.P. Anderson, Xanté and Key Ratios for Altia Group 2011 2010 2009 Skåne Akvavit have a strong market position and many of them a long heritage to cherish. Net sales, EUR million 524.8 487.9 407.3 Operating profit, EUR million 34.4 32.6 15.6 ( % of net sales ) 6.6 6.7 3.8 Altia’s partner brands represent both local and international Profit before taxes,EUR million 31.1 29.6 9.4 ( % of net sales) 5.9 6.1 2.3 brands from all over the world, such as Codorníu, Drostdy-Hof, Profit for the period, EUR million 21.3 25.7 5.3 Hardy’s, Jack Daniel’s, Bowmore, Nederburg, Ravenswood ( % of net sales) 4.1 5.3 1.3 Statement of financial position, and Robert Mondavi. EUR million 586.8 581.1 398.4 Return on equity, % 11.6 17.2 4.3 Return on invested capital, % 8.4 10.0 4.2 Altia serves its customers, partners and consumers close to markets Equity Ratio, % 32.5 29.6 34.3 with its wide production, sales and logistics set-up. Gearing, % 51.8 76.3 55.5 Capital expenditure, EUR million 6.1 106.4 6.7 Average number of personnel 1 178 1 122 1 042 6 | 7 Altia annual report 2011 Total market volumes (mill. litres) & Altia Spirit market forecast Altia has market shares 2011, spirits (%) 2011–2016, mill. litres 1 distillery, 3 bottling plants, warehouses and 2011 offices in 6 countries. 2012 35 2013 DISTILLERY 2014 30 2015 26 PRODUCTION 55 % 2016 25 24 WAREHOUSE 20 18 18 17 OFFICE 30 % 15 15 (million litres) (million 5 % 18 % 7 % 5 % 10 0 Finland Sweden Norway Denmark Estonia Latvia Finland Sweden Estonia Latvia Denmark Norway Total market volumes (mill. litres) & Altia Wine market forecast market shares 2011, wines (%) 2011–2016, mill. litres 2011 250 2012 2013 200 220 2014 2015 2016 14 % 170 150 Koskenkorva 100 78 71 (million litres) (million 2 % Rajamäki 50 8 % 24 27 % 17 5 % 12 % Helsinki (headquarters) 0 Finland Sweden Norway Denmark Estonia Latvia Sweden Denmark Norway Finland Latvia Estonia Tabasalu Oslo Stockholm Market shares 2011, % Source: IWSR In the case of Finland, Sweden and Norway Riga sales of alcoholic beverages from the State monopolies have been taken into account as retail sales. The figures are based on the sales Copenhagen volumes (litre) published by the monopolies Odense (Alko, Systembolaget and Vinmonopolet). The Svendborg information relating to Denmark, Estonia and Latvia is based on estimates. Sources: The Nordic Alcohol Monopolies and Altia 8 | 9 Altia annual report 2011 _ CEO’s review e have reached the financial goals set for the a consequence, operations in Altia’s associated company year 2011. For this, I would like to thank A-Pullo Ltd had to be discontinued and operations in the everyone in Altia, as well as our customers, Rajamäki alcoholic beverage plant significantly altered. partners and cooperation partners. This massive change project was completed with desired results thanks to well-functioning internal cooperation. Our gross margin improved from the previous year totalling EUR 64.8 (51.0) million and our operating profit Good operational results were achieved through the was EUR 34.4 (32.6) million. We have also been able to development actions carried out within the Swedish improve the key financial position ratios important to our partner operations, which reinforced our belief in growth growth strategy; the ratio of net debt and gross margin to opportunities. In Norway, we have partially achieved 1.5 (2.6) and gearing to 51.8 % (76.3 %). our development goals, but we will still launch some new development projects to strengthen our position. Sound In 2010, we executed a business acquisition through results were also achieved in the spirits segments across which we bought leading wine and spirits trademarks the whole core market area. The Koskenkorva production in Sweden and Denmark, the Svendborg alcoholic plant operated with good utilisation rate mainly beverage plant in Denmark as well as the logistics attributable to contract production of ethanol and strong centres in Odense, Denmark and Årsta, Sweden. The demand for starch and feed products. integration of the business acquisition has met the set expectations, thus strengthening our opportunities to In 2012, we will continue to execute our strategy. Based execute further business acquisitions. Together with on the achieved results, we believe that we are capable of organic development, it has made Altia the leading actor making remarkable operative and financial improvements in our core markets in the Nordic and Baltic countries. during the coming years. We will be investing in Our portfolio of own and partner products is the most developing knowhow and preparedness throughout Altia extensive in these markets. to reach these goals. During the reporting period, we started a production development project resulting in the Svendborg alcoholic beverage plant in Denmark mainly specialising in packing wines and the Rajamäki alcoholic beverage plant in Finland mainly specialising in bottling spirits. Bottles made of recyclable glass and plastic have been taken Antti Pankakoski into use instead of refillable glass bottles in Finland. As CEO 10 | 11 Altia annual report 2011 THIRST FOR _Value GROWTH in three We aim to increase the value of Altia through a growth strategy implemented in three waves waves. The themes of the waves are efficiency improvement, growth and expansion. uring the first wave, we develop our Business units and trademarks not fitting in the operating model and improve our operating model according to the strategy have been sold competitiveness. Efficiency improvements or discontinued. As a result of these actions, we have are sought from rationalization of the improved our operating profit by approximately EUR 10 Waves of execution operating model structure, our processes and Supply million from 2009. Our operating profit as a whole has Expand Chain. tripled from 2009. to new geographies and extend service scope Our goal is to create efficient and scalable operating model Penetrate WE strenGthen our position in the Nordic for Altia, solid basis of knowhow, as well as sufficient cash and Baltic countries the home market to flow and strong financial position, which together will increase market share enable further development and expansion projects. This In the second wave, we strengthen our position as the is made possible by emphasising more the development of leading alcoholic beverage company in our core markets the personnel’s knowhow and our operating culture. The in the Nordic and Baltic countries by aiming to grow Restructure incomplete operating model solutions in accordance with faster than the overall growth of markets. Growth the business and 2013– the first wave will be completed during 2012. is pursued both organically and through business operating model to - Expand into growing acquisitions. improve profitability markets Efficiency froM inteGrated operatinG Model 2011–2014 - Grow selected During the past two years, we have executed one business international product Our current integrated operating model was created in acquisition and three supplementary acquisitions of - Grow faster than market segments 2009. It enables the efficient use of production capacity trademarks, which together have increased our net sales average - Continue developing and creation of remarkable economies of scale in by approximately EUR 100 million, or 25 %, and our 2009–2012 - Acquire businesses and profitability procurement and logistics. We are also able to offer our operating profit with synergetic effects by over EUR 10 - Increase efficiency of brands customers the most extensive product portfolio of own million. supply chain and processes and partner products. - Review the business After the business acquisition executed in 2010, we have portfolio renewed our production structure so that we focus on - Develop performance bottling spirits in Finland and on packing wines in culture and competencies Denmark. The operating models of unprofitable business units have been developed and their operating profits have been turned to positive. 12 | 13 Altia annual report 2011 Our aiM is TO EXpand TO the GrowinG Markets IN Eastern Europe In the third wave, our aim is to expand to the growing markets in Eastern Europe where there are opportunities for business acquisitions generating benefits of synergy. We have started to review these markets and potential acquisition targets. During 2012, we will continue to develop our operations in accordance with the strategy. All business areas will sharpen their operations and focus on actions creating growth.