BOARD OF DIRECTORS
9
2018 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”,
“West Europe”, “East Europe and Central Asia”, “Middle East,
India and Africa”, “North East Asia”, “South East Asia and
Pacific” and “the Americas”.
Jotun’s business is organised in Decorative Paints (Decorative
segment) and Performance Coatings (Marine, Protective and
Powder Coatings segments):
Decorative Paints
Jotun develops, manufactures and distributes interior and
exterior paints to consumers and professionals worldwide.
Performance Coatings
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 is a leading supplier of protective coatings (steel and
concrete protection) to companies active in the offshore, energy,
infrastructure, and hydrocarbon processing industries.
Powder Coatings:
Jotun is a leading supplier of powder coatings to companies
active in the manufacture of appliances, furniture, building
components, pipelines and general industries.
Jotun is a global company made up of 62 companies in 45
countries, including 40 production facilities. The company
extends its reach to other countries through a network of
subsidiaries, joint ventures, associated companies, sales
offices and distributors. The parent company, Jotun A/S,
has its headquarters in Sandefjord, Norway. Of the Group’s
operating 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 annual accounts
In 2018, the Jotun Group recorded total operating revenue
of NOK 17 660 million, which is an increase of 8 per cent
compared to 2017 (NOK 16 401 million).
Increased revenue was achieved by continued good growth in
Decorative Paints and a strong recovery in Protective Coatings.
Sales in Marine Coatings remain impacted by the prolonged
downturn in the shipping industry, while low activity in key
markets affected sales in Powder Coatings. Still, all regions
and segments reported higher sales in 2018 than in 2017.
The increase in revenue is supported by a volume growth of
5 per cent.
The Group experienced a stable operational profit in 2018.
However, the impact from higher raw material costs has largely
been offset by price increases and Jotun’s efforts to control
manageable costs.
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 1 361 million, compared to NOK 1 354 million in 2017. A
continued increase in raw material costs has largely been offset
by higher selling prices. Net financial costs increased by
NOK 128 million to NOK 246 million, mainly due to unrealised
currency effects. This resulted in a profit before tax of
NOK 1 115 million compared to NOK 1 236 million in 2017.
Jotun’s activities are subject to ordinary company tax in the
countries in which the Group operates, and income tax
amounted to NOK 442 million in 2018. This led to a profit for the
year of NOK 674 million compared to NOK 798 million in 2017.
The parent company, Jotun A/S, achieved a total profit for the
year of NOK 727 million, compared to NOK 1 079 million in
2017.
Allocation of profit for the year:
In 2018, Jotun A/S posted profit for the year of NOK 727 million.
The Board of Directors proposes the following allocation:
Proposed dividend NOK 428 million
Transfer to equity NOK 299 million
Financial position, capital structure and risk
Cash generated from operating activities improved by
NOK 171 million to NOK 1 745 million. However, due to higher
financial costs and tax payments, net cash flow from operating
activities decreased by NOK 80 million to NOK 1 018 million.
At year end, the Group had a positive cash position of
NOK 1 012 million compared to NOK 1 027 million as of
31 December 2017.