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Jotun Annual Report 2014

39 JOTUN GROUP Note 16 continues FINANCIAL RISK MANAGEMENT distribution and few large single accounts, the credit risk in the Jotun Group is viewed to be well diversified. The requirement for impairment is analysed at each reporting date on individual customer basis. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 11. The Group does not hold collateral as security. The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdic-tions and industries and operate in largely independent markets. Jotun A/S has International Swap Dealers Association (ISDA) agreements with its counterparts for derivative transactions, and transactions are made only with the Jotun Group core relationship banks with satisfactory ratings. COMMODITY PRICE RISK The Group is exposed to a significant price risk in respect of a num-ber of raw materials. Raw material purchases accounts for approxi-mately 55 per cent of total sales revenue. The volatile raw material prices over the past years have had a significant impact. Large short-term increases in the raw material prices cannot be compensated immediately in the product prices, and in the period until product prices can be increased, the profit will be negatively impacted. Commodity price sensitivity The following table shows the effect of price changes for the most significant raw materials. Effect on profit before tax Cash flow from operations has seasonal cycles, especially following the sales of exterior decorative paints in Scandinavia, and sales of protective coatings in East-Europe and Central Asia. Through the first months of the year the Group has substantial build-up of work-ing capital as a preparation for the spring and summer sales season. This is an expected cyclical movement and is taken into account when planning the financing. Other drivers for the liquidity devel-opment are investments in new factories and changes in working capital in the individual companies. Investments are financed mostly from Jotun A/S and the cash flows are predictable as the financing for each project is planned well in advance. CREDIT RISK The management of credit risk related to accounts receivable and other operating receivables is handled as part of the business risk and is continuously monitored by the operating entities. Jotun Group’s credit risk is mainly related to markets with generally high DSO (days sales outstanding). Customer credit risk is managed by each business unit subject to the Group’s established policy, pro-cedures and control relating to customer credit risk management. Credit quality of a customer is assessed by the respective business unit and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly moni-tored and credit risk assessments are undertaken. There is no significant concentration of credit risk in respect of single counterparts. Some groups of counterparts can be viewed as signifi-cant: Shipyards, ship owners, real estate developers and some larger retail chains in Scandinavia. In combination with a geographical (NOK thousand) year-end price 2014 2013 Increase in Epoxy resins 5 % -49 830 -45 606 Titanium Dioxide 5 % -42 711 -39 091 Solvents 5 % -35 593 -32 576 Cuprous Oxide 5 % -32 033 -29 318 A decrease in year-end raw material prices would have a positive effect on the profit before tax. The effect of a 10 per cent general increase in raw material prices would, all other variables constant, reduce the profit before tax by NOK 712 million (2013: NOK 652 million). Note 17 SHARE CAPITAL AND SHAREHOLDER INFORMATION The share capital in Jotun A/S as of 31 December 2014 consists of the following share classes: (NOK thousand) Quantity Face value Book value A-shares 114 000 300 34 200 B-shares 228 000 300 68 400 Total 342 000 300 102 600 At the general meeting, each A-share has ten and each B-share has one vote. There are no changes from last year.


Jotun Annual Report 2014
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