The Group increased its investments in 2019
to NOK 1 464 million, from NOK 1 089 million
in 2018. Investment activity in 2019 has mainly
been related to the new headquarters and
R&D centre in Sandefjord, Norway, acquisition
of territorial rights to the Qatari market from
Jotun U.A.E. Ltd. (L.L.C.), in addition to new
production facilities in Egypt and Vietnam.
The net interest-bearing debt for the Group
was NOK 2 581 million as of 31 December
2019, compared to NOK 2 526 million as of
31 December 2018. At year end, Jotun A/S
had NOK 2 400 million in outstanding bonds,
of which all were long-term. In addition,
Jotun A/S had NOK 731 million in bank
debt outstanding, of which NOK 163 million
was short-term. External borrowing in the
subsidiaries is primarily short-term and through
local banks.
Jotun A/S has NOK 1 700 million in long-term
credit lines. This committed funding serves as
a strategic reserve for financing of the Group
as well as a backstop for short-term certificate
loans. At year end, these credit lines were
unused.
The Group is in a sound financial position with
an equity ratio of 50 per cent at the end of the
year (51 per cent in 2018).
In its regular business operations, Jotun is
exposed to financial risks relating to customer
credit and fluctuations in raw material prices,
currency exchange rates, and interest rates.
Procedures and guidelines for managing these
risks are established in the Group’s Treasury
policy. Companies in the Group primarily
manage financial risks through their normal
operations, for example by increasing prices,
when possible, to compensate for higher raw
material costs and utilizing credit management
systems to reduce credit risk. In addition, the
parent company Jotun A/S hedges currency
risk related to net cash flows in foreign
currencies using forward contracts, options and
foreign currency loans. Currency risk related
to the parent company’s net investments in
subsidiaries, associates and joint ventures, is
generally not hedged. Jotun’s procedures and
measures are considered satisfactory in relation
to the Group’s exposure to financial risks.
3. The market
Decorative Paints
Jotun’s strong performance in the Decorative
Paints segment in 2019 was supported by
improved gross margins due to the stabilisation
of raw materials prices, solid growth in
premium paints and growing success in the
medium range market. While slow economic
conditions in some countries in the Middle
East and South East Asia reduced volumes,
Jotun exceeded expectations in Egypt, Turkey,
Cambodia and Myanmar.
In addition to a number of premium product
launches, Jotun’s success in 2019 was due
in part to the introduction of a number
of programmes to support dealers and
professionals. For example, the company
completed the implementation of a programme
which provides shop owners with detailed
financial data and incentives to make better
business decisions. In addition, a shop sales
staff training initiative is initiated to help
dealers create a better shopping experience for
consumers.
In markets where Jotun’s business relies on
professionals, the company implemented
a painter training and loyalty programme.
Jotun also works more closely with project
owners, architects and consultants to ensure
Jotun products are specified. While segment
Decorative Paints will continue to target the
premium market, the company has found
success with some medium range products,
which offer contractors good quality at more
affordable prices. Jotun’s product innovation
and the development and implementation of
internal and external programmes to support
different stakeholders will help the Decorative
Paints segment continue to thrive.
Protective Coatings
In 2019, Jotun achieved good results in the
Protective Coatings segment supported by
significant growth in North East Asia and
solid growth in every other region. Jotun
benefitted from increased activity in the oil
and gas industry, which created demand
for Jotun products in both the Offshore
and Hydrocarbon Processing Industry (HPI)
concepts. Rising demand for renewable
energy helped Jotun support growth in the
Energy Concept (mostly wind energy). Jotun’s
increased focus on high-performance, low-solvent
steel protection products led to growth
in the Infrastructure concept.
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Jotun retained its leading market position
supplying coatings to new construction projects
in the Offshore industry. However, over the
last five years, Jotun has invested resources to
develop products targeting the maintenance
market for existing facilities to achieve more
predictable growth. Over the past two years,
Jotun has launched customer-focused concepts
engineered to meet the critical business needs
of different stakeholders in the HPI concept.
These include coatings for tank linings and
a range of products engineered for extreme
environments. In the Infrastructure concept,
Jotun is a recognised leader in intumescent steel
protection coatings, which have been applied to
some of the world’s most iconic buildings.
While Jotun will continue to pursue direct
sales in all concepts, the company is seeking to
expand its dealer network to make products
available closer to the customer. Jotun’s
work to expand its distribution network, a
more concept-specific approach to product
innovation and enhanced marketing and sales
has put the company in a strong position to
achieve higher, more predictable growth in the
years ahead.
Marine Coatings
Results and profitability for the Marine
Coatings segment improved significantly in
2019, primarily driven by a strong recovery of
the newbuilding market, especially in South
Korea. In addition, Jotun’s work to develop
products and services to expand market share
in the maintenance market was rewarded with
strong sales growth, notably in West Europe
and South East Asia.
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