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Jotun Annual Report 2014

Directors’ Report 1. MAIN ACTIVITIES 5 Jotun’s business activities include development, production, marketing and sales of paints and coatings systems and products for surface treatment and protection. The Jotun Group is structured into seven regions: Scandinavia, Western Europe, Eastern Europe and Central Asia, Middle East, India and Africa, North-East Asia, South East Asia and Pacific, and the Americas. Each region is responsible for the sale of paints and coatings in four segments: Marine, Protective and Powder Coatings and Decorative Paints. BOARD OF DIRECTORS Decorative Paints Jotun manufactures, sells and distributes interior and exterior paints to consumers and professionals. Marine Coatings Jotun is a world leading provider of marine coatings to the newbuilding, DryDock and SeaStock markets. In addition, Jotun supplies coatings solutions for megayachts and leisure yachts. Protective Coatings Jotun’s protective coatings are sold to companies active in industries related to offshore, energy, infrastructure, the hydrocarbon processing industry and mining. Powder Coatings Jotun Powder Coatings is a leading supplier to companies active in industries related to appliances, furniture, building components, pipelines and general industries. Jotun has a worldwide network and is represented on every continent by subsidiaries and joint ventures. The Group, including joint ventures and associates, comprises 68 companies in 43 countries, including 33 production facilities. In addition, Jotun has agents, sales offices and distributors in a number of countries. The parent company, Jotun A/S has its head office in Sandefjord, Norway. 2. REVIEW OF THE ANNUAL ACCOUNTS After a slow start, Jotun has delivered results in line with expectations for the year. In accordance with section 3-3a of the Norwegian Accounting Act, the Board confirms that the prerequisites for the going concern assumption exist and that the financial statements have been prepared based on the going concern principle. Profits The company’s long-term growth trend continued in 2014, with improved sales in most segments and regions. The Group’s total operating income was NOK 13 171 million in 2014 compared with NOK 12 034 million in 2013. The Group achieved a consolidated profit for the year of NOK 946 million (NOK 857 million in 2013). Operating profit increased by NOK 56 million to NOK 1 314 million. Net financial costs totalled NOK 12 million, and the pre-tax profit amounted to NOK 1 301 million. Jotun’s activities are subject to ordinary company tax in the countries in which the Group operates. The tax costs increased by NOK 21 million to NOK 356 million for 2014. The parent company, Jotun A/S, achieved a total profit for the year of NOK 846 million, compared to NOK 422 million in 2013. The increase mainly attributable to higher dividends received from subsidiaries and associated companies and joint ventures. Associated companies and joint ventures consist of Jotun’s shareholding in companies in South Korea, China, the UAE, Saudi Arabia and Yemen. These investments are presented according to the equity method on the line for associated companies and joint ventures. The Group’s share of the net result ended at NOK 356 million compared with NOK 287 million in 2013. The increase is mainly due to higher sales in North East Asia within the Marine Coatings segment, and higher activity in key markets in the Middle East. The currency situation, with a generally weak NOK, positively impacted the Group’s results for the year. Financial position, capital structure and risk The Jotun Group had a consolidated positive cash position of NOK 1 421 million at year end 2014 compared to a positive cash position of NOK 1 120 million as of 31 December 2013. The cash balance is attributable to a combination of the Group’s cash pool agreement, short-term deposits in money market funds and local bank accounts. In addition, Jotun A/S has NOK 900 million in long-term credit lines. This committed funding serves as a backstop for the certificate loans as well as a strategic reserve for short-term financing of the Group. At year-end, all of these credit lines were unused. The Group increased its investments in 2014 to NOK 911 million from NOK 733 million in 2013. Moreover, higher activity following the Group’s sales growth in combination with significant currency translation effects resulted in an increase in working capital. The net interest bearing debt for the Group was NOK 1 702 million at year end 2014 compared to NOK 1 322 million


Jotun Annual Report 2014
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