9
BOARD OF DIRECTORS
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’,
’West Europe’, ’East 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; Decorative Paints and Marine,
Protective and Powder Coatings.
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, infrastructure, energy, and hydrocarbon processing
industries.
POWDER COATINGS
Jotun is a leading supplier of powder coatings to companies
active in industries related to appliances, furniture, building
components, pipelines and general industries.
Jotun is a global company made up of 64 companies in 45
countries, including 40 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 sales revenue, approximately
12 per cent is related to its activities in Norway while 88 per cent
is related to the rest of the global network.
2. REVIEW OF THE ANNUAL ACCOUNTS
In 2017, the Jotun Group recorded total operating revenue of
NOK 16 401 million, which is an increase of 4 per cent compared
to 2016 (NOK 15 785 million).
The Decorative Paints segment continued to deliver good
sales growth in 2017, while weak demand for newbuildings
in the shipping and offshore markets had a negative impact
on revenues in the Marine and Protective Coatings segments.
Furthermore, growth in the Powder Coatings segment was
affected by economic slowdowns in certain key markets.
However, total sales volume continued to grow, showing an
increase of 10 per cent in 2017.
The Group experienced a significant decline in profitability in
2017, mainly due to a sharp increase in the cost of raw materials,
including epoxies, titanium dioxide, copper and zinc. Price
increase initiatives have been implemented to counteract the
effect of higher raw material prices, and there is a continued
focus cost control within the Group.
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 of NOK 1 354 million
compared to NOK 1 763 million in 2016. The decline in profit
is mainly explained by a sharp increase in raw material prices.
Net financial costs totalled NOK 118 million, resulting in a profit
before tax of NOK 1 236 compared to NOK 1 594 million in
2016. Jotun’s activities are subject to ordinary company tax in
the countries in which the Group operates, and income tax
amounted to NOK 439 million in 2017. This led to a profit for the
year of NOK 798 million compared to NOK 1 132 million in 2016.
The parent company, Jotun A/S, achieved a total profit for the
year of NOK 1 079 million, compared to NOK 948 million in 2016.
Allocation of profit for the year:
In 2017, Jotun A/S posted profit for the year of NOK 1 079 million.
The Board of Directors proposes the following allocation:
Dividend NOK 428 million
Transfer to equity NOK 651 million
FINANCIAL POSITION, CAPITAL STRUCTURE AND RISK
The Jotun Group generated a net cash flow from operating
activities of NOK 1 097 million in 2017, a reduction of NOK
930 million compared to 2016. The weaker cash flow is tied
to lower profit as well as an increase in working capital. At
year end, the Group had a positive cash position of NOK 1 027
million at year end 2017 compared to NOK 1 586 million as of
31 December 2016.
The Group reduced its investments in 2017 to NOK 967 million
from NOK 1 133 million in 2016. Investment activity in 2017 has
mainly been related to new production facilities in the Philippines,
DIRECTORS’ REPORT