DIRECTORS’ REPORT 1. MAIN ACTIVITIES Jotun’s primary business activities include the development, production, marketing and sales of paints and coatings systems and related products for the treatment, protection and beautification of surfaces. The Jotun Group is organised 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, Powder Coatings and Decorative Paints. DECORATIVE PAINTS Jotun develops, manufactures and distributes interior and exterior paints to consumers and professionals worldwide. MARINE COATINGS Jotun is the world’s leading provider of marine coatings to the Newbuilding and maintenance markets. Jotun also supplies coatings solutions for mega yachts and leisure yachts. PROTECTIVE COATINGS Jotun’s protective coatings are sold to companies active in the offshore, energy, infrastructure, and hydrocarbon processing industries. 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 is a global company made up of 63 companies in 45 countries, including 37 production facilities. The company extends its reach to other countries through a network of subsidiaries, joint ventures, associates, agents, sales offices and distributors. The parent company, Jotun A/S is headquartered in Sandefjord, Norway. Of the Group’s operating revenue, approximately 22 per cent is related to its activities in Norway while 78 per cent is related to the rest of the global network. 2. REVIEW OF THE ANNUAL ACCOUNTS In 2016, the Jotun Group recorded a total operating revenue of NOK 15 785 million. This is a reduction in revenue of 3 per cent compared to 2015 (NOK 16 282 million), a year in which revenue increased by 24 per cent. While the Decorative Paints and Powder Coatings segments both delivered good sales growth, lower demand in the shipping and offshore markets led to reduced sales in the Marine and Protective Coatings segments. In addition, sales in some regions were impacted by political unrest and economic turmoil in key markets. However, total sales volume continued to grow, showing an increase of 10 per cent in 2016. The Group achieved good profitability supported by favourable raw material prices, delivering the second highest profit for the year in the Group’s history. 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 Group achieved an operating profit for the year of NOK 1 763 million compared to NOK 2 064 million in 2015. The decline in profit is explained by other operating expenses higher than normal due to product claims, currency losses tied to the sharp devaluation of the Egyptian pound and bad debt primarily related to a few large customers. Net financial costs totalled NOK 169 million, and the pre-tax profit amounted to NOK 1 132 million. Jotun’s activities are subject to ordinary company tax in the countries in which the Group operates. The tax costs decreased by NOK 40 million to NOK 462 million for 2016. The parent company, Jotun A/S, achieved a total profit for the year of NOK 948 million, compared to NOK 905 million in 2015. Allocation of profit for the year: In 2016, Jotun A/S posted profit for the year of NOK 948 million. The Board of Directors proposes the following allocation: Proposed dividend NOK 513 million Transfer to equity NOK 435 million Associated companies and joint ventures consist of Jotun’s shareholding in companies in South Korea, China, the UAE and Saudi Arabia. The Group’s share of profits from these companies totalled NOK 690 million compared to NOK 562 million in 2015. 5 BOARD OF DIRECTORS
Jotun Annual Report 2016
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