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. There is a substantial investment program ongoing in The Group. Out of the total ongoing investment program NOK 415 million is contractual committed capital expenditures (CAPEX) at year-end. These contractual commitments mainly relate to Norway, the Philippines and Myanmar. 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. 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 45 million. For most sales contracts within the Group there are no penalty clauses involved. In some situations, a contractual breach could cause an 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 2 324 million in 2016 (2015: NOK 2 496 million). Guarantees covering tax withholding and other guarantees for subsidiaries amounted to approximately NOK 301 million in 2016 (2015: NOK 303 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 197 million have been used as payment as of 31 December 2016. 21 LEASES Operating lease expenses included in other operating expenses are: (NOK THOUSAND) 2016 2015 OPERATING LEASE EXPENSES Machinery, vehicles and equipment 63 208 58 819 Factory, premises and buildings 53 616 57 255 Land 3 187 2 685 Total 120 011 118 759 OVERVIEW OF FUTURE MINIMUM LEASE PAYMENTS RELATED TO OPERATING LEASES Cost next year 123 280 105 196 Cost next 2-5 years 183 204 168 335 Cost after 5 years 71 605 94 115 Total 378 088 367 647 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 as of 31 December 2016.
Jotun Annual Report 2016
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