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Jotun - Annual Report 2015

44 JOTUN GROUP 20 CONTRACTUAL OBLIGATIONS AND GUARANTEES PURCHASE OBLIGATIONS The Group’s contractual purchase obligations are mainly related to investments in new plants and buildings. For the major ongoing investment projects in Russia, Indonesia, Oman and Turkey the contractually committed capital expenditures (CAPEX) as of 31 December 2015 is approximately NOK 470 million. For purchase of raw materials there are no actual commitments for the Group. In general, these contracts can be terminated more or less without penalties. SALES OBLIGATIONS The Jotun Group has several sales contracts that are material for each entity. We have evaluated existing contracts with contract value of NOK 10 million or more. These contracts are mainly related to the Protective Coatings and the Marine Coatings business. Products are often considered to be commodities in these markets, and alternative suppliers and products are available. Contracts can easily be transferred to other suppliers without inconvenience to the customer and therefore there is no actual commitment involved. Some contracts include breach penalty clauses. Should the Group be forced to cancel any agreement with a penalty clause, this could entail having to pay a compensation of 10 per cent of contract value. The actual commitment related to these contracts is approximately NOK 65 million. There are also contracts within the Marine Coatings segment where certain performance guarantees are given. The actual commitment related to these contracts is approximately NOK 40 million. For most sales contracts within the Group there are no penalty clauses involved. In some situations breach could cause obligation to compensate the customer for change of supplier, including price variations. This type of commitment is considered to be insignificant for the Group. OTHER OBLIGATIONS On behalf of subsidiaries and joint ventures Jotun A/S issued Letters of Comfort amounting to NOK 2 496 million in 2015 (2014: NOK 2 032 million). Guarantees covering tax withholding and other guarantees for subsidiaries amounted to approximately NOK 303 million in 2015 (2014: NOK 340 million). A subsidiary in China, Jotun Coatings (Zhangjiagang) Co. Ltd., has used bank drafts to pay some of its suppliers. The issuing bank(s) is obligated to make unconditional payment to the supplier (or bearer) on a designated date. If unforeseen events occur and the issuing bank(s) is not able to meet its obligation, then Jotun would still hold the final obligation towards its suppliers. Unsettled bank drafts totalling NOK 250 million has been used as payment at 31 December 2015. 21 LEASES Operating lease expenses included in other operating expenses are: (NOK THOUSAND) 2015 2014 OPERATING LEASE EXPENSES Machinery, vehicles and equipment 58 819 50 696 Factory, premises and buildings 57 255 50 778 Land 2 685 2 287 Total 118 759 103 761 OVERVIEW OF FUTURE MINIMUM LEASE PAYMENTS RELATED TO OPERATING LEASES Costs next year 105 196 83 853 Costs next 2-5 years 168 335 123 383 Costs after 5 years 94 115 75 056 Total 367 647 282 293 Leasing commitments show the Jotun Group’s current and non-current commitments arising from leasing contracts for property, plant and equipment. All leasing contracts included in this disclosure note are regarded as operating leases and lease amounts are presented as operating expenses in the income statement. Financial leases are capitalised. There are no capitalised financial leases per end of 2015.


Jotun - Annual Report 2015
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