Annual Report (ESEF) • Mar 3, 2021
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Download Source FileAnnual Report 2020 Royal Unibrew A/S CVR no. 41 95 67 12 Corporate social responsibility Page Our new long-term sustainability strategy CEO Letter Page CEO Lars Jensen commenting on and the strategy evolution Organizational support Preferred choice Strategy Page Main elements of our strategy Contents Who we are Royal Unibrew in brief Results for and outlook for CEO letter Results for - business segments Financial and non-financial highlights and ratios CFO letter Strategy Purpose and Ambition Our strategy Business model Operating Model Our growth formula Multi beverage and niche Non-alcoholic categories Alcoholic categories Financial targets, capital structure and distribution policy Outlook for Performance Financial review Western Europe Baltic Sea International Governance Corporate Governance Risk Management Remuneration Board of Directors and Executive Management Shareholder information Corporate Social Responsibility Our new long-term sustainability strategy Sustainability framework Our consumers and customers Our products Our people Signatures and statements Management’s Statement on the Annual Report Independent auditor’s report Consolidated Financial Statements Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes Parent Company Financial Statements Income Statement Balance Sheet Cash Flow Statement Statement of Changes in Equity Notes Other Information (part of management report) Group Structure Quarterly Financial Highlights and Ratios Definitions of Financial Highlights and Ratios Disclaimer ROYAL UNIBREW Annual report 20202 Contents → Foto:Sami Tuoriniemi Royal Unibrew in brief I Results for 2020 and outlook for 2021 I CEO letter I Results for 2020 - business segments I Financial and non-financial Highlights and ratios (5Y) I CFO letter Who we are ROYAL UNIBREW Annual report 20203 Who we are Who – COVER Non- alcoholic Baltic Sea Baltic Sea Above mainstream brands Multi-niche and niche InternationalInternational Alcoholic Western Europe Western Europe Mainstream brands Multi- beverage MARKETS Multi-beverage Multi-niche Production Associates 65 65 35 35 2019 2020 45 48 43 44 9 11 2019 2020 48505052 2019 2020 77 77 23 23 2019 2020 42 44 48 49 8 9 2019 2020 Royal Unibrew is a leading regional multi-bever- age company providing strong brands to our main markets Denmark, Finland, Italy, Germany, France and the Baltics, and to 65+ countries in the rest of the world. We serve our consumers by offering high quality beverages within beer, malt beverages, soft drinks as well as ciders, ready- to-drink, juice, energy and water products. In addition to our own brands, we offer license-based international brands from PepsiCo and Heineken in Northern Europe. Together with our , employees, we are facilitating great moments and enjoyment for our consumers and creating valuable partnerships with our customers – always in a responsible way. NET REVENUE SPLIT IN ALCOHOLIC VS. NONALCOHOLIC (%) Royal Unibrew in brief NET REVENUE BY BRAND CATEGORY (%) VOLUME BY SEGMENT (%) EBIT BY SEGMENT (%) NET REVENUE SPLIT (%) ROYAL UNIBREW Annual report 20204 Who we are Who – Royal Unibrew in brief 2016 2017 2018 2019 2020 Net revenue 4,000 5,000 6,000 7,000 8,000 0 5 10 15 20 EBIT margin 2016 2017 2018 2019 2020 0 5 10 15 20 25 2016 2017 2018 2019 2020 CO 2 from production CO 2 (kgCO 2 /hl) scope 1+2 0 10 20 30 40 1 2 3 4 5 2016 2017 2018 2019 2020 0 400 800 1,200 1,600 2016 2017 2018 2019 2020 0 400 800 1,200 1,600 2016 2017 2018 2019 2020 No/Low sugar 80 100 120 140 160 With strong performance in Off-Trade, planning and cost focus we managed to deliver highest EBIT ever despite the impact from COVID-19. Developments in • Strong financial performance • Increased market shares in our key markets • Both EBITDA margin and EBIT margin increased • Free cash flow increased by % to DKK , million compared to , but is positively impacted by the extraordinary beer campaign in Finland and COVID- related channel and country mix changes • Earnings per share up from DKK . to DKK . (+%) • New Management team • Updated strategy including sustainability • In 2020, total distribution to shareholders was DKK 962 million • A dividend of DKK 13.50 per share for 2020 (2019: DKK12.20) is proposed to the AGM • A new share buy-back program of DKK 250 million is initiated + 3% EBIT INCREASE FOR TO DKK , MILLION + 3% EBITDA INCREASE FOR TO DKK , MILLION - 2% NET REVENUE DECREASE FOR TO DKK , MILLION 20.0% EBITMARGIN FOR , AN INCREASE OF . PERCENTAGE POINT EARNING PER SHARE (DKK) NET REVENUE/EBITMARGIN (mDKK) (%) VOLUME GROWTH IN SOFTDRINKS WITH LOW OR NO SUGAR (Index) CO FROM PRODUCTION Outlook for Medium-term EBIT margin target remains -% Actual Actual mDKK Outlook 2020 2019 Net revenue 7,557 7,692 EBIT 1,475-1,625 1,515 1,469 Results for 2020 and outlook for 2021 EBIT (mDKK) FREE CASH FLOW (mDKK) ROYAL UNIBREW Annual report 20205 Who we are Who – Results for 2020 and outlook for 2021 CEO Letter Increased focus on sustainable and profitable growth was probably the most abnormal year for many decades – at least for Royal Unibrew. However, our strategy proved its strength and our local management model demonstrated once again agility, customer closeness and great service levels despite significant changes on a daily basis. While working intensively on the short-term hour by hour, we managed to keep focus on the long-term growth opportunities within e.g. low/no-alcohol, low/no-sugar and in categories within energy drinks and ready-to-drink and thereby enhanced our position in these categories. The beginning of was at full steam, January and Febru- ary were strong and our pipeline of launches and innovations was very promising in all channels. When COVID- broke out in Italy at the beginning of March and soon thereafter in Northern Europe, sales in On-Trade and convenience in particular halted and Off-Trade did not really catch up as con- sumers destocked home inventories. April and May were very uncertain months but as societies partly re-opened towards summer, we experienced improved sales despite restrictions in events and gatherings in general. The uplift in sales was led by a combination of good weather and staycation effects. In total, September and October turned out to be close to nor- mal months, while November and December on the contrary were quite difficult months. Just to illustrate the volatility we have experienced. Despite all of the above: • We managed to get through the year with very few COVID- infected employees • Our ranking by our customers was strength- ened even further • We increased our value market share in all our key markets by channel • We managed to improve our financial performance • Our produced and supplied volume is the highest ever by the company We could not have done this with- out an outstanding performance and strong teamwork in the entire organization. We managed to in- crease communication instant- ly and digitally to secure that everybody was well informed, and we shared learnings across countries and within countries across channels. Some employees moved from On-Trade to Off-Trade or from On-Trade to logistics with few days’ notice; others were sent home on different schemes or simply taking holidays while ROYAL UNIBREW Annual report 20206 Who we are Who – CEO letter some unfortunately had to leave the company on a more permanent basis. I would like to thank all employees for a solid performance, something we can all be proud of. In the convenience, On-Trade, sports and event channels the pandemic has had huge consequences, and many custom- ers have had to rethink their business model and e.g. move into take-away instead of restaurant dining. I hope that our customers have felt that we - with innovation and local un- derstanding - have been there for them throughout . We are ready and eager to assist them in re-establishing solid business when the societies re-open to a new normal. From an investor perspective our share price has been on a rollercoaster during the year as we were one of the first companies in the beverage industry to withdraw guidance. We were also one of the first ones to resume with a guidance, which in our mind was the right thing to do from a legal perspective, but certainly also from a business perspective. Most importantly for us, has been to secure our strong flight altitude into and towards a more permanent opening of the societies in which we do business. This also means that commercially we have spent sufficiently in in order not to lose ground versus competition and to increase likelihood for future growth. As we got full transparency on the cash generation during the summer, we resumed the share buy- back and paid out the full dividend. Since I took the helm as CEO on September , we have reorganized the leadership of the company by establishing a Senior Leadership Team with six leaders including HR with a core focus on commercial closeness, continuity and diver- sity. We aim to build our organization even stronger and with a bench that continuously evolves and will supplement the existing team in our aspiration to grow organically as well as through acquisitions. Together, we have re-visited and aligned on our short-term as well as on our longer-term strategy. On our strategic route we are continuously creating evolution rather than revolution and, in that context, we have taken a longer view on cate- gories, countries and channels during recent months and established our long-term view on consumer trends. Our conclusion is a combination of reconfirming and redefining our focus slightly. We reconfirm areas within low/no-alcohol, low/no-sugar & premium products, while we increase our ambitions and growth views in e.g. the energy drinks, en- hanced drinks and ready-to-drink categories. Finally, as specified in the full year statement from we have established a long-term ambition for the total CSR area which aims to move us in the front among sustainable bev- erage companies within the next five years. We are generally already performing well but have identified mid-term oppor- tunities that will enhance the outcome quite significantly. Not all is yet known and technologies will evolve so we will stay open-minded through our journey. An important factor - and in particular in terms of the CO emission - is the support we get from our suppliers but also from local municipalities in the areas where we produce. Generally, we see CSR as an integrated part of our strategy which enhances our business opportunities. Thanks to all around us for continued support. Lars Jensen President & CEO “We have established a long- term ambition for the total sustainability area aiming to move us in the front among sustainable beverage companies within the next five years.” ROYAL UNIBREW Annual report 20207 Who we are Results for 2020 - business segments Western Europe DENMARK, GERMANY, ITALY AND FRANCE Baltic Sea FINLAND, LATVIA, LITHUANIA AND ESTONIA International MARKETS IN AMERICAS AND EMEAA 4,682 thl VOLUME (down by 3%) 5,409 thl VOLUME (up by 3%) 1,002 thl VOLUME (up by 6%) 687mDKK EBIT (down by 5%) 675 mDKK EBIT (up by 3%) 171 mDKK EBIT (up by 30%) 3,548mDKK NET REVENUE (down by 4%) 3,237mDKK NET REVENUE (down by 2%) 772 mDKK NET REVENUE (up by 11%) 19.4% EBITMARGIN (down by 0.2pp) 20.8% EBITMARGIN (up by 1.0pp) 22.2% EBITMARGIN (up by 3.2pp) Read more: page 28 Read more: page 30 Read more: page 32 ROYAL UNIBREW Annual report 20208 Who we are Who – Results for 2020 business segments 2020 2019 2018 2017 2016 Volume (million hectolitres) 11.1 11.0 10.8 9.9 9.9 INCOME STATEMENT (MDKK) Net revenue 7,557 7,692 7,298 6,384 6,340 Organic growth net revenue (%) -3% 1% 9% 1% 5% EBITDA 1,861 1,814 1,673 1,362 1,306 EBITDA margin (%) 24.6 23.6 22.9 21.3 20.6 Earnings before interest and tax (EBIT) 1,515 1,469 1,339 1,069 1,001 EBIT margin (%) 20.0 19.1 18.4 16.7 15.8 Income after tax from investments in associates 33 25 20 18 28 Other financial income and expenses, net -43 -36 -31 -31 -31 Profit before tax 1,505 1,458 1,328 1,056 998 Net profit for the year 1,198 1,140 1,040 831 784 Parent company shareholders’ share of net profit 1,183 1,142 1,041 831 784 BALANCE SHEET (MDKK) Non-current assets 7,015 7,163 6,775 5,121 5,180 Total assets 8,306 8,493 8,062 6,778 6,076 Equity 3,332 3,106 2,908 2,814 2,911 Net interest-bearing debt 2,193 2,705 2,522 975 991 Net working capital -875 -671 -748 -957 -881 Invested capital 5,930 6,211 5,835 4,030 4,111 CASH FLOWS (MDKK) Operating activities 1,738 1,402 1,214 1,168 985 Investing activities -324 -262 -401 -218 37 Free cash flow 1,414 1,140 813 950 1,022 Compared to the Annual Report the definition of fre cash flow has been updated to reflect market practise of the IFRS implementation. Comparables for and have been adjusted. Financial Highlights and Ratios 2020 2019 2018 2017 2016 SHARE RATIOS (DKK) Number of shares (million) 49.4 50.1 51.0 52.7 54.1 Earnings per share (EPS) 24.1 23.0 20.6 16.0 14.7 Diluted earnings per share 24.1 22.9 20.6 16.0 14.6 Free cash flow per share 28.8 23.0 16.1 17.8 18.7 Dividend per share 13.5 12.2 10.8 8.9 8.2 Year-end price per share 706.6 610.0 449.0 371.8 272.6 EMPLOYEES Average number of employees (FTE) 2,631 2,567 2,416 2,299 2,350 FINANCIAL RATIOS (%) Return on invested capital including goodwill (ROIC) 20 19 21 21 18 Return on invested capital excluding goodwill (ROIC) 33 30 33 32 28 Free cash flow as a percentage of net revenue 19 15 11 15 16 Capex as a percentage of net revenue 5 4 6 4 0 Cash conversion 118 100 78 114 130 Net interest-bearing debt/EBITDA (times) 1.2 1.5 1.5 0.7 0.8 Equity ratio 40 37 36 42 48 Return on equity (ROE) 37 38 36 29 27 Dividend payout ratio (DPR) 56 54 53 56 56 Ratios comprised by the “Recommendations and Financial Ratios” issued by the Chartered Financial Analyst So- ciety Denmark’s Committee for Accounting standards have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page . Due to adoption in of IFRS (leases) using the modified retrospective approach the to highlights and ratios are not comparable with those for -. ROYAL UNIBREW Annual report 20209 Who we are Who – Financial highlights and ratios 2020 2019 2018 2017 2016 Production figures Production sites 9 9 9 7 7 Production volume, total million hl 10.6 10.3 10.4 9.1 9.3 Environment & Climate Purchased Electricity GWh 79.1 81.4 81.2 73.7 75.4 Natural gas GWh 88.3 94.2 88.9 80.1 82.1 Purchased Heat/steam/cooling GWh 30.6 37.8 40.8 43.7 46.5 Other GWh 2.8 1.9 2.9 2.5 0.7 Energy, total GWh 200.8 215.3 213.8 200.0 204.7 CO from production (location based) million kgCO 35.7 40.0 39.8 36.5 37.1 CO from production (market based) million kgCO 24.2 26.2 n/a n/a n/a Total water consumption million hl 33.3 33.3 33.3 28.2 29 Total amount of wastewater discharged million hl 22.3 22.3 22.7 18.5 19.3 Hazardous waste million kg 0.1 0.1 0.1 0.1 0.1 Landfilled waste million kg 0.9 0.4 0.5 0.4 0.4 Incinerated waste million kg 0.7 1.5 1.1 0.9 0.9 Recycled waste million kg 5.0 5.9 5.4 3.1 4.3 Other waste million kg 0.5 Solid Waste, total million kg 7.2 7.9 7.1 4.5 5.7 Spent grain & yeast million kg 76.8 77.4 80.9 91.3 96.7 Relative production figures Energy kWh/hl 18.9 20.9 20.6 20.1 22.1 CO kgCO/hl 3.4 3.9 3.8 4.0 4.0 Water hl/hl 3.1 3.2 3.2 3.1 3.1 2020 2019 2018 2017 2016 Packaging material Cans % 15.6 13.4 n/a n/a n/a Returnable glass bottles % 17.8 21.5 n/a n/a n/a Non returnable glass bottles % 42.8 42.8 n/a n/a n/a PET % 12.0 8.1 n/a n/a n/a Kegs % 2.1 7.5 n/a n/a n/a Bulk % 9.7 6.7 n/a n/a n/a People well-being & development Occupational Health & Safety Total number of lost-time incidents (LTIs) 56 42 39 46 52 Lost time incident frequency 13.7 10.8 10.2 12.9 14.3 Number of Lost days 2,070 1,594 687 n/a n/a Lost day rate 506 412 180 n/a n/a Fatalities 0 0 0 0 0 Employee engagement Employee turnover % 15.3 17.5 20.6 n/a n/a Leave of absence due to illness (not work related) % 3.7 3.9 3.5 n/a n/a Diversity Percentage of employees by gender, total Female % 24 25 26 24 24 Male % 76 75 74 76 76 Employees by gender, Int. Management teams Female % 33 32 31 30 35 Male % 67 68 69 70 65 * Location based: Calculated CO emission based on IEA country factors ** Market based: Subtracting CO emission covered by green certificates *** Other waste is R11 and 12 according to the EU waste directive Packaging material: Weight basis distribution Non-financial highlights and ratios ROYAL UNIBREW Annual report 202010 Who we are 2020 started with ambitious plans and focus on continuing the underlying positive development in earnings. After a strong beginning in January and February all plans were changed in March when the COVID-19 pandemic became a reality. To manage the high uncertainty, we revised our plans based on the following principles: • Protect our employees • Support customers • Prepare for the worst case and manage cost • Protect our liquidity position Initially, in late March and April it was difficult to foresee how the market environment would react. However, since June our business has performed strongly until November when our main markets were impacted by the second wave of the pandemic. Our revised new plan for the year has worked and we have managed to deliver a profitability slightly above and with growing market shares. Strong performance in The assumptions for our plans for were no longer rele- vant after the lockdown in March. Compared to any other year, categories and sales channels have developed very differently during the year. The commercial parts of our organization have done an outstanding job in refocusing sales efforts to the growing categories and sales channels and at the same CFO letter Tight focus and planning led to strong performance time spending a minimum of resources on declining are- as. We have never experienced such extensive changes in volumes from On-Trade to Off-Trade and from kegs to cans and PET. Our supply chain colleagues have shown great ability to adapt to the new reality and produced record volumes during the summer. A key learning in situations when assumptions change dramatically is to drop the budget and make a new plan with maximum flexibility. As we worked with limited visibility, we had clear guiding principles for decision making. Across the business we made many new short- term plans and shifted resources to segments with positive momentum. Our business model with strong country organizations and clear local decision power has shown very effective also in situations with high uncertainty. “We expect 2021 to end with a good momentum, but the start of the year seems to be challenging” ROYAL UNIBREW Annual report 202011 Who we are Who – CFO letter 2016 2019 202020182017 10 15 20 25 30 % 35 Balancing short and long term The spending level we had during the summer months was not consistent with our ambitions to continue to grow and develop the business. Consequently, we started initiatives during the late summer to ensure that we have momentum as we move into . This includes capacity expansion pro- jects, selective commercial initiatives, IT investments and maintenance cost. Liquidity and capital allocation As uncertainty was high in the spring, we made additional credit facilities, postponed dividend payment and the initiated share buy-back program. The guiding principle has been to maximize our financial flexibility in order to be ready for both difficult markets but also for potential M&A projects. Over the summer, we saw the markets develop positively and cash flow generation was strong. Therefore, we decided to pay out dividend and initiate two tranches of share buy-back programs. In order to secure that our ROIC develops positively over time, we target to manage the investments by keeping investments around % of revenue (excl. M&A). This will be a challeng- ing target to meet as our ambitions within sustainability will require investments as well as the continued growth will demand more investments in capacity. Back to growth Our ambition is to return to profitable topline growth again in . Across the business we have interesting organic growth opportunities that we aim to focus on. The planning for is a bit unusual as we still live with COVID- related restric- tions and it is likely that the start of the year will be difficult. Consequently, we have commercial initiatives that will not be committed before we have more clarity on how restrictions and the vaccine will impact the trading conditions. We expect to end with a good momentum, but the start of the year may be challenging. Lars Vestergaard CFO ROIC incl. goodwill ROIC excl. goodwill ROIC DEVELOPMENT 20162020 ROYAL UNIBREW Annual report 202012 Who we are → Purpose and Ambition I Our strategy Strategy ROYAL UNIBREW Annual report 202013 Strategy Strategy – COVER our people We recruit, develop and retain entrepreneurial and empowered people thirsting for success and striving to do better every day. Our people drive our success and progress – and live and protect our values. We work as one team and find solutions to all challenges. our consumers Bringing people together and facilitating great moments and enjoyment is the heart of our business. We offer strong local beverage brands in combination with global brands – continu- ously striving to match con- sumers’ changing preferences through meaningful innovations and by offering a broad range of refreshments that deliver choice. The preferred choice We want to be the preferred choice of local beverage partner that challenge the status quo by doing better every day in a fun, agile and sustainable way The preferred choice for Purpose and Ambition our customers We partner with our customers and strive to grow together by offering a portfolio of relevant brands and having a challenger mindset. With our local, decen- tralized setup we focus on agility and close collaboration – aiming to provide best-in-class service as well as pursuing extraor- dinary brand execution in all channels. the future We are deeply rooted in the communities where we work, and we partner with all our stakeholders to make a positive impact on society. Our focus is to build a long-term sustainable business and to minimize the environmental footprint of our operations from raw materials to the end consumption. our shareholders Our main focus is to invest behind the categories and channels that grow the most, pushing premiu- mization and driving organic EBIT growth. On top of this, we will do value accretive bolt-on, as well as strategic acquisitions if possible. We aim to increase distribution to shareholders over time through dividend and share buy-backs. ROYAL UNIBREW Annual report 202014 Strategy Strategy – Purpose and Ambition Build sustatinable business Prepare for future growth Grow the most committed employees Organizational support Preferred choice Royal Unibrew’s overall strategy remains to be a strong regional multi-beverage provider in select- ed core markets and in other markets to build and develop strong niche positions. Royal Unibrew operates in diverse markets that are char- acterized by different dynamics. We aim to be the preferred choice for our consumers, customers, shareholders and peo- ple through the following four strategic priorities. We want to expand our markets and market shares through multi-beverage and niche strategies. We need to continuously develop and innovate our product portfolio and channel mix to be the preferred choice for consumers. We will also continue to pursue opportunities to continuously enhance the efficiency across the company. We want to be the preferred partner for our customers with the most relevant innovations for our consumers by addressing consumer demographies, geographies and trends of e.g. health and wellness, authenticity and care for the environment. We will pursue structural improvements through M&A and partnerships with focus on Western Europe. We will maintain Royal Unibrew’s financial flexibiliy by continuously considering our capital structure with the intention of adjusting it to support the realization of the strategic and financial targets. We will convert our energy consumption to renewable energy and also focus on the entire value chain and include the consumption by our suppliers. We will work with suppliers that share our values and focus on green energy consumption and lower the impact from packaging material through recycling. As a regionally based beverage company founded on strong local presence in the societies of typically rural areas, Royal Unibrew aims to be a responsible member of the community. We will invest in renewable energy and have an open mindset towards new technologies. Operational efficiencies and circular thinking have always been a part of the Royal Unibrew DNA. Becoming the most sustainable beverage company requires that all employees are engaged in the journey and we will work persistently to embed a sustainability mindset throughout our organization. Become the most sustainable beverage company Insights and strong competences are required to reach our ambitious strategic targets. Therefore, we strive to create a culture that encourages talent, develops skills and competences, recognizes achievements and values each individual. We give high priority to retaining experienced employees and recruiting new employees who bring accelerated momentum and new knowledge. This includes a diverse and strong blend of educational background, work and life experience, diversity of beliefs, nationality and gender. A succession process ensures identification of talents and ensures acceleration of careers within Royal Unibrew. Our strategy Our growth formula: Volume + Value + Efficiency Investments in growth = Increased Earnings ROYAL UNIBREW Annual report 202015 Strategy Strategy – Our strategy → Operating Model I Our growth formula I Multi beverage and niche I Non-alcoholic categories I Alcoholic categories I Financial targets, capital structure and distribution policy I Outlook for 2021 Business model ROYAL UNIBREW Annual report 202016 Business Busi – COVER We have a strong performance culture with a very solid operating model that fits well with our portfolio of strong local brands. Royal Unibrew has built its business on the core belief that beverages and the nature of the business make it important to be close to customers and act locally. This is reflected in the composition of our business and brands. Our business is built on one common group IT platform, per- formance management system and procurement setup. This gives us the ability to obtain transparency and to optimize our business processes across the group. All other functions are managed locally under the supervision of the country manager. We operate with marketing depart- ments and sales organizations having competences to make commercial decisions in each individual country/market. This ensures proximity to our consumers and customers in the different markets and product portfolios which are managed locally. Profitability and competition by category differ from country to country and consequently our model enables our local organization to prioritize where to invest and focus. Royal Unibrew operates with a flat organizational structure with few management layers. E.g., all country managers re- port directly to the Senior Leadership Team. The corporate functions are designed according to the business model and consequently group functions are kept at a minimum level. This ensures that activities in the single countries are not duplicated centrally. Digital approach Our digital journey is a key enabler of our future success. For the main processes we strive to work on common systems once the processes have reached a certain maturity level. E.g., we operate with one groupwide ERP system based on SAP and several related tools that are common across the group. In areas where development varies across countries, we allow local solutions to be developed; particularly in the commercial area. However, as the processes mature we strive to roll out common solutions across the group. Operating model ROYAL UNIBREW Annual report 202017 Business Busi – Operating model Volume growth Our growth formula We continue to pursue and remains committed to deliver profitable growth and thereby a strong cash-flow generation. To maintain momentum in our business we work within a number of areas: We aspire to be consumers’ and customers’ preferred bev- erage provider through investments in our existing portfolio, but also from developing new products and thereby over time providing a more sustainable beverage offering. We strive to create a culture that attracts and maintains talents, develops skills and competences, as well as offers personal development opportunities for our employees. We aim to create a positive total shareholders return, through a combination of growing distribution (dividends and share buy-backs) over time as well as an increasing share price. Our target is to grow faster than the market in which we compete and consequently increase our value market share. The ambition is to reduce the ratio of fixed costs per net revenue every year. We also strive to create value by acquiring companies. The foundation for acquisitions is always that it can be incorporat- ed in our operating model and our business model enables us to extract synergies. To fuel growth in medium to long-term, we strive to increase commercial spending directed towards growth initiatives every year. The increase will depend on the opportunities identified in the marketplace. • We want to be the preferred partner to our customers. This is achieved by strong focus on in-store execution and ensuring that our products are displayed well in customers’ prem- ises to ensure that customers per- form well in the individual beverage categories. • We want to grow distribution by fo- cusing on channels where our prod- ucts are underrepresented. • We want to prioritize commercial spending to support growing cate- gories and channels. Efficiency improvements • Efficiency remains a key pillar in our value creation journey. The key driver of efficiency is operating leverage. We achieve operating leverage by growing the topline faster than our fixed cost. Our multi beverage oper- ating model enables us to achieve higher utilization of fixed assets, sell more per salesperson, have higher average drop size to customers and in general have higher productivity per employee. • The foundation for continued im- provement of our productivity is that we are able to digitalize and stand- ardize as many processes as possi- ble. In terms of servicing our custom- ers there is a constant battle between offering a good and personalized service level and at the same time manage costs. Our guiding principle is to spend as little time as possible on repetitive tasks in order to direct time towards value creating tasks. Premiumization • We want to continuously develop new products at a more premium level than the average portfolio we currently offer. This enables Royal Unibrew to obtain a higher price and to deliver better value to consumers and customers. • We want to grow the more profitable channels faster and thereby offer a product portfolio with better value. • We want to direct our commercial spending to the more premium part of our portfolio. ROYAL UNIBREW Annual report 202018 Business Busi – Our growth formula MARKETS Multi beverage Multi-niche Niche Denmark Italy Austria Finland US Switzerland Lithuania UK Africa Latvia Germany Middle East Estonia Canada Caribbean France and more Royal Unibrew has two fundamental strategic routes which is multi beverage and niche position. The multi-beverage strategy is relevant in markets with a wide coverage of beverage categories and full channel coverage. The portfolio would aim to cover mainstream and above mainstream. The multi-beverage strategy is currently being pursued in Denmark, Finland, Lithuania, Latvia and Estonia. From a value perspective the largest beverage categories in the markets are often beer, carbonated soft drink, energy drinks and RTD. Our brand portfolios in the multi beverage markets are combinations of own locally anchored brands and partner brands from e.g. PepsiCo, Heineken and Dia- geo. In the multi beverage market the combined value of the full portfolio is very important as it delivers leverage for our customers and for Royal Unibrew. Economies of scale on all dimensions is a winning formula. The niche strategy is more targeted to either single brands or a few brands in the specific market. This strategy is currently being pursued in markets like e.g. Italy, France, Germany, Austria, Switzerland, US and Canada. Currently, most markets outside of the multi beverage territory would be either single brand or two brands markets, while markets like Italy, US, UK, Germany, Canada and France are multi-niche markets. In most cases we would leverage an individual sales organization covering several channels in multi-niche markets, while niche markets would be serviced by local partners through our international key account organization. Multi beverage and niche ROYAL UNIBREW Annual report 202019 Business Busi – Multi beverage and niche CSD Water Energy Malt Non-alcoholic beers Other non-alcoholic beverages CSD Malt Other non- alcoholic beverages Non- alcoholic beers EnergyWater -20 -10 0 10 20 67 66 12 14 7 8 6 7 2 2 5 4 2019 2020 Non-alcoholic categories Our non-alcoholic beverage portfolio is outgrowing our alcoholic beverage portfolio, and we are repre- sented in some very interesting growth categories. Carbonated Soft Drinks (CSD) constitutes % of our non-al- coholic revenue. We have very strong positions in Denmark and Finland where Faxe Kondi and Jaffa have market leading positions, respectively. In Italy, Lemon Soda is # in the lemon category in the Off-Trade. On top of these local super brands, we have an International partnership with PepsiCo covering Denmark, Finland and the Baltic countries. Around % of our non-alcoholic revenue stems from water. In Finland, Novelle is the market leader and operates within still, sparkling, and enhanced water. Our CO neutral brand Egekilde, which is sold in PET bottles made of % recycled plastic holds a market leading position in Denmark. was negatively impacted by Convenience and On-Trade sales. Energy has grown to become a relatively large part of our non-alcoholic portfolio with % of revenue in . Energy is growing faster than the average beverage market in all our markets, and our brands Cult, Faxe Kondi Booster and ED is very well received by consumers and customers. Our Malt Beverage business is % of our non-alcoholic rev- enue. Our brands, Vitamalt, Supermalt and Power Malt are primarily sold in the Americas and Africa as well as among ethnic groups from these areas living in and around major cities in Europe and the US. The share of non-alcoholic beers has increased to more than % of our non-alcoholic beverage revenue, as it grew almost % from to . We have a strong portfolio of alcohol- free beers based on our local strong brand portfolio, as well as Heineken . through our international partnership cov- ering Denmark and Finland. Other non-alcoholic beverages constitute % of our non- alcoholic revenue of which the majority is juice where our Cido brand has a very strong market position in the Baltic countries. REVENUE SPLIT, NONALCOHOLIC BEVERAGES (%) NONALCOHOLIC REVENUE GROWTH RATES (2020 VS 2019) (%) ROYAL UNIBREW Annual report 202020 Business Busi – Non-alcoholic categories Beer Cider/RTD Wine & spirits Beer Wine & spiritsCider/RTD -16 -12 -8 -4 0 71 71 21 21 8 8 2019 2020 REVENUE SPLIT, ALCOHOLIC BEVERAGES (%) ALCOHOLIC REVENUE GROWTH RATES (2020 VS 2019) (%) In 2020, the alcoholic beverage segment was severe- ly impacted by COVID-19 in all our markets, espe- cially in the On-Trade segment. Beer is by far the largest revenue contributor to our alcoholic beverage segment, as it contributes around % of revenue. We have strong market positions in Denmark, Finland and the Baltic Countries and is the market leader in the super premium segment in Italy. We also produce, sell and distrib- ute Heineken in Denmark and Finland. Our export brand Faxe is growing significantly in the international segment and is heading toward mhl in . Around % of our alcoholic beverage revenue stems from Ci- der and RTD where we have strong positions in Denmark and Finland. In Denmark, Shaker has a strong position, whereas Original Long Drink in Finland is the market leader in the segment. In Finland, we offer a range of international spirits and wine brands, including Johnny Walker, Captain Morgan, Lanson, JP Chenet and Baileys on an agency basis, and constitutes around % of revenue in the alcoholic beverages segment. Alcoholic categories ROYAL UNIBREW Annual report 202021 Business Busi – Alcoholic categories EBIT margin 2016 2017 2018 2019 2020 .% .% .% .%.% NIBD / EBITDA 2016 2017 2018 2019 2020 .. . . . Equity ratio 2016 2017 2018 2019 2020 %% % % % Dividend 2016 2017 2018 2019 2020 %% % % % -% <. times At least % -% of consolidated profit for the year Financial targets, capital structure and distribution policy Our financial targets are based both on creating shareholder value and developing the business for the benefit of all stakeholders. To achieve this, we aim to create financial flexibility to develop the busi- ness over the medium to long term. The capability of achieving the financial targets is conditional on continuous business development through focus on growth opportunities, partnerships, innovation, sales and marketing, and on continuous efficiency measures. The positive devel- opment in recent years has enabled us to increase our EBIT margin target and to make considerable distributions to our shareholders. EBIT margin Our medium-term EBIT margin target is -%. In , we achieved an EBIT margin of %. The year was very unusual as the margin over the year varied significantly from a normal year due to COVID- and cost level was unusually low. The EBIT margin is best in class when compared to other bev- erage companies in Europe and has increased substantially over recent years due to strong strategic and commercial execution and cost management. The profit growth formu- la has worked well in recent years and will be continued in alignment with the same principles. Our focus is to stay within the EBIT margin target and focus on growing the absolute EBIT by securing funds to invest in supporting the organic growth opportunities that arise in our markets. Capital structure and distribution policy The objective of our capital structure policy is to secure enough flexibility to develop the business in line with our stra- tegic priorities. It remains the target that net interest-bearing debt is not to exceed . times EBITDA and that an equity ratio of at least % is to be maintained at year-end. Given the current composition of the balance sheet, the equity ratio is the ratio that determines the pay-out capabilities. We may depart from the targeted ratios for a certain period of time if structural business opportunities arise. Our priorities for capital allocation are as follows: . Maintain financial flexibility • Net debt/EBITDA less than . • Equity ratio of more than % . Invest in organic growth . Acquisitions . Stable dividend pay-out ratio (-%) . Share buy-backs to adjust capital structure Our annual investments including repayment on lease facil- ities (IFRS ) are expected to be around % of net revenue. Management evaluates on an ongoing basis if the capital structure is to be adjusted by launching share buy-back pro- grams. It is generally the intention that shares bought back will be cancelled. ROYAL UNIBREW Annual report 202022 Business Busi – Financial targets, capital structure The start to 2021 has taken place in the shadow of COVID-19. Our On-Trade business has been hit through tough restrictions imposed on restaurants, bars, night entertainment, sports and music events and much more. The Off-Trade business is not picking up as much of the lost sale in On-Trade during the winter months, as the case was in the spring of . This is because there are not the same outdoor drinking occasions during the winter and because gathering restrictions are much tighter now compared to the first round of lock-downs. As a result, uncertainty continues at elevated levels, and this year’s results are strongly dependa- ble on when restrictions on the On-Trade business are lifted, and on when gathering restrictions are eased. The current environment therefore caters for a continued focus on cost flexibility, production planning, the capability to deliver, while at the same time pursue our commercial agenda and continuously find the pockets of growth in our markets and still be ready for the reopening of societies on the back of the pandemic. Despite the current circumstances, we expect to deliver an EBIT in the range of DKK ,-, million, which should be compared to EBIT of DKK , mil- lion in . Compared to where we realized an EBIT of DKK , million, we therefore expect to grow our EBIT by up to %, despite the negative impacts caused by COVID-. The Board of Directors has decided to initiate a share buy- back program of up to DKK million as soon as possible covering the period until June . During the summer, it will be decided whether an additional share buy-back will be initiated based on the state of COVID- and our financial flexibility at that point.The Board of Directors will recommend to the AGM in a distribution of ordinary dividend of DKK . per share. Hence, at least DKK million is expected to be distributed based on the Financial Statements for . Assumptions about markets and main priorities for We want to continue to grow faster than the market in all the markets we compete, by overinvesting in pockets of growth across our footprint. We expect to move towards normali- zation as restrictions are eased, normalizing our sales and marketing expenses, building our brand equity further and investing in the opportunities that will arise once societies reopen. Our organization is prepared for different scenarios given the volatile environment we are in, which means that we have a tight focus on our cost base, while we at the same time invest cautiously behind our mainstream brands. Given our new sustainability strategy we are investing in CSR to strengthen our medium-term opportunities, as well as we are investing in capacity expansions. Our strategic focus remains set on products with low and no sugar and alcohol and premium and craft products. On top of this, we want to take advantage of the high growth in energy drinks and RTD/cocktails, as well as the continuing trend towards healthier beverages, which are benefiting our enhanced waters. That said, will be a year with continued high uncertainty why flexibility in planning and use of cost is very important. The key risks to our business outlook are when restrictions will be lifted and gathering restrictions eased, especially in Denmark, Italy and Finland, but also if consumers after this will return towards the consumption behavior they had in . The high end of our EBIT guidance range assumes that On-Trade restrictions are lifted and gathering restrictions eased around April , and that the On-Trade therefore is opened through the entire summer. At the low end of our EBIT guidance range, we have assumed that restrictions are lifted around July . The low end of our EBIT guidance range includes lower sales and marketing costs, compared to the high end of the guid- ance range. In that scenario, the development in gathering restrictions will be an important factor, because when these are eased, people are able to meet again inside, but also outside in the spring and early summer months. We are as- suming a normal summer in and Christmas season. Our free cash flow in was positively affected by several factors, of which around DKK million are expected to revert during . In , mix shifted towards Off-Trade and northern Europe where businesses in general have shorter payment terms. We expect business activity to normalize during . We also do not expect to continue the extraordi- nary beer campaign activity in Finland, which will impact our cash flow negatively compared to . On top of this comes payment of delayed tax payments and for holiday accruals in Denmark (legislation change). In total, these factors are ex- pected to generate a net working capital headwind of around DKK million in compared to . OUTLOOK FOR 2021 mDKK Outlook 2021 Actual 2020 EBIT 1,475-1,625 1,515 Outlook for 2021 ROYAL UNIBREW Annual report 202023 Business Busi – Outlook for 2021 Financial assumptions • As was a normal summer, the outlook has been made under same assumption. • Net selling prices are assumed to be slightly increasing during as a result of the reopening of the On-Trade business as well as growth in the convenience (single serve) channel. In addition, our overall premiumization efforts and price/pack strategies in each segment and country will support a positive price/mix development. These efforts are unchanged and include optimization of the product mix. • Generally, costs are expected to follow the inflation in . Commercial costs are expected to increase in connection with growth initiatives and investments in the existing business, as well as a pick-up in sales and marketing costs compared to following the expect- ed reopening. • We will continue our focus on generating continuous improvements and enhancing efficiency across the business and in all entities. • Royal Unibrew has entered into hedging agreements for a large part of the expected consumption of key raw and packaging materials for . • Exchange rates between DKK and other currencies are expected to remain unchanged as compared to the end of February . • COVID- has had a significant impact on the On-Trade business in the first months of , which is expected to continue until restrictions are lifted. The guidance is based on an opening during Q. • In , our net investments are expected to be higher than set by our financial targets of around %, due to the fact that some capex-plans from were pushed into , we will increase our investments in CSR and expand capacity to support future growth. • Corporate income tax rate is expected to amount to around % of profit before tax excluding income after tax from investments in associates. TOTAL DISTRIBUTION FOR THE YEAR mDKK 2020 2019 2018 2017 2016 Dividend 600 538 451 426 386 Share-buy-back 362 433 484 508 443 Total distribution 962 971 935 934 829 as a % of prior year consolidated profit 84 93 113 119 117 ROYAL UNIBREW Annual report 202024 Business → Financial review I Western Europe I Baltic Sea I International Performance ROYAL UNIBREW Annual report 202025 Performance Perform – COVER Financial review 2020 was a challenging year due to COVID-19, but through tight planning and strong cost focus, Royal Unibrew came out of 2020 with increased market shares and a strong earnings performance. Initially , started with ambitious plans to continue the underlying positive development in earnings, despite tough comparable from a very strong . Already in March, the COVID- pandemic forced us to revise our plans, as restric- tions were imposed on the On-Trade channel in many of our markets. Through tight planning and with a strong focus on costs, we managed to deliver a profitability slightly above last year, as well as expanding our market shares across most markets. Volumes The volumes sold increased by % to . mhl and were or- ganically at the same level as last year. Net revenue Net revenue amounted to DKK , million and decreased % organically. The reported net revenue decrease by % as the acquisitions contributed positively with %. Net revenue was negatively impacted by COVID- in the Western Europe and Baltic Sea segment, whereas the Inter- national segment was able to grow % organically. EBIT EBIT amounted to DKK , million, an increase of % com- pared to . EBIT increased in the Baltic Sea and Interna- tional segments, whereas Western Europe declined mainly related to the result in the Italian On-Trade channel. Acquisitions impacted EBIT by less than % at group level. In all our market the On-Trade business was affected by COVID- restrictions, which was only partly recovered by increased sales in the Off-Trade business. Lower sales, mar- keting and fixed costs contributed positively to the improved EBIT result. Read more: page 80 Balance sheet Total assets at December amounted to DKK , million, which is DKK million below the December figure, which is mainly explained by lower receivables and because amortization and depreciation of non-current assets exceeds investments in . Equity amounted to DKK . million and the equity ratio improved by percentages points to % by the end of . Read more: page 82 Cash flow The free cash flow amounted to DKK , million in ver- sus DKK , million in . The increase of DKK million was positively impacted by the extraordinary beer campaign in Finland, extended payment term on employee tax, as well as channel and country mix. The positive impact on cash flow from the extraordinary beer campaign in Finland is due to longer payment terms on the excise payment compared to the customer payment and is a phasing impact between and . In , mix shifted towards Off-Trade and northern Europe – both with shorter payment terms than group average – this is expected to nor- malize in . During , different support programs and aid packages has been presented across countries. Royal Unibrew has only to a limited extend benefitted from these programs and packages. At the end of , Danish employee taxes to a total of DKK million were postponed into . We estimate that the normalized free cash flow level for Royal Unibrew in was around DKK , million. In , free cash flow will be negatively impacted as some of the positive impacts from will flow back, see outlook section. Read more: page 84 Financing Net interest bearing debt was DKK , million at the end of , corresponding to a net decrease of DKK million equal to the positive free cash flow less distribution to share- holders. At the end of , the net interest-bearing debt to EBITDA ratio was .x (: .x). Our revolving credit facility has been extended for year with final maturity end of . Share buy-back During the year, Royal Unibrew has repurchased shares at a total purchase price of DKK million. (: DKK million). Total announced programs were DK million. The remainder of the programs have been completed in the beginning of . Read more about the share buy-back programs on page 46. ROYAL UNIBREW Annual report 202026 Performance Perform – Financial review 2019 2020 48 45 2019 2020 48 47 2019 2020 43 44 2019 2020 43 43 2019 2020 9 11 2019 2020 9 10 Overview business segments financial performance Western Europe DENMARK, GERMANY, ITALY AND FRANCE Baltic Sea FINLAND, LATVIA, LITHUANIA AND ESTONIA International MARKETS IN AMERICAS AND EMEAA Further information: page 28 Further information: page 30 Further information: page 32 SHARE OF NET REVENUE SHARE OF NET REVENUE SHARE OF NET REVENUE SHARE OF EBIT SHARE OF EBIT SHARE OF EBIT ROYAL UNIBREW Annual report 202027 Performance Perform – Overview business segments 2018 450 500 550 600 650 700 750 2016 2017 2019 2020 2018 17.5 18,0 18.5 19.0 19.5 20.0 20.5 2016 2017 2019 2020 2016 2017 2018 2019 2020 3,100 3,400 3,700 4,000 4,300 4,600 4,900 2018 1,900 2,200 2,500 2,800 3,100 3,400 3,700 2016 2017 2019 2020 Western Europe Financial Performance In Western Europe, total volumes showed a % decrease in and a total of . mhl. Net revenue from beverages was % lower than in , as the On-Trade and Border business was significantly hit by COVID- restrictions. Earnings before interest and tax (EBIT) for showed a DKK million decrease from DKK million in to DKK million in , due to the lower net revenue. The EBIT margin decreased slightly by . percentage points to .%. WESTERN EUROPE Q4 Q4 mDKK 2020 2019 % changes 2020 2019 % changes Volumes (thl) 4,682 4,813 -3 1,041 1,085 -4 Net revenue 3,548 3,691 -4 769 831 -7 EBIT 687 722 -5 120 132 -9 EBIT margin 19.4 19.6 15.6 15.8 “The On-Trade business was highly impacted by the COVID-19 restrictions. However, due to the close cooperation with our customers as well as an agile organization and supply chain we succeeded to direct our efforts towards the growing Off-Trade business – resulting in satisfactory results and increasing market shares.” Jan Ankersen, SVP South Europe and GM Italy In Q , volumes declined by % compared to Q , whereas net revenue declined by % in the same period. Both due to the COVID- restrictions imposed on the On-Trade channel throughout the region. The EBIT margin declined by . percentage point from .% in Q to .% in Q . EBIT (mDKK) EBITMARGIN (%) VOLUMES (thl) NET REVENUE (mDKK) 4.7 mhl VOLUME (down by 3%) 687mDKK EBIT (down by 5%) 3.5 bDKK NET REVENUE (down by 4%) 19.4% EBITMARGIN (down by 0.2pp) ROYAL UNIBREW Annual report 202028 Performance Perform – Western Europe Development and initiatives in 2020 During , COVID- restrictions on social gatherings and opening hours challenged the On-Trade business in all mar- kets. It also opened new opportunities that the organization quickly responded to. After the COVID- outbreak in Denmark, a number of re- strictions were introduced in March, including a closure of the borders to Germany. The restrictions had a positive impact on the Off-Trade business in Denmark and Germany, although not in a scale that could compensate for the lost business in the On-Trade channel and border business. The sales and supply teams responded quickly to support the growing Off-Trade business, while at the same time support- ing On-Trade customers in the difficult situation. During the lockdown, for example, we hosted the biggest virtual beer testing event in Denmark and brewed a beer to the famous Danish TV show “Natholdet”, and when the market re-opened during the summer period, we supported bars and restau- rants with initiatives to support their business. To support future growth, particular in the Danish market and at the German border, the construction of a new High Bay Warehouse in Faxe started in (expected to be put in use in ). The new facilities will increase the storage capacity significantly at the site and thus the flexibility of delivery to our customers. In Italy about % of our business is in On-Trade. To part- ly compensate for the effects of the significant decrease in sales during the periods with lockdowns and restrictions, we have focused on boosting our supermarket operations and ensuring that the wholesale and Cash & Carry channels were well-stocked and activated with our Ceres and LemonSoda brands. Ceres has in particular performed well in the Off- Trade channel where we launched a range of speciality beer next to our iconic Ceres Strong Ale. We have also actively supported bar owners in the periods between the lockdowns. In France, we focus on building a solid platform from which we can drive high value creation and with focus on in-store execution and e-commerce initiatives for our Lorina brand. In , we reach all time high market share in lemonade, a cat- egory which grew faster than the general soft drink market. During the COVID- period, we have reached out to our con- sumers online in both Italy and France. In Italy the Italian . Ceres virtual apero event and in France the Lorina mixer event each Friday at . are just a few of many new occasions where our brands created happiness and new moments of enjoyment among consumers. Faxe Kondi in Denmark was a great year for our Faxe Kondi brand, especially for the calories which grew % in volume. Successful virtual beer tasting events During the very unusual , we have supported a number of initiatives to help our customers and local societies. One example is our virtual beer tasting events in Denmark, where we promoted more than local craft breweries and sold more than . of their beers. ROYAL UNIBREW Annual report 202029 Performance Baltic Sea 2018 3,700 4,000 4,300 4,600 4,900 5,200 5,500 2016 2017 2019 2020 2018 1,600 1,900 2,200 2,500 2,800 3,100 3,400 2016 2017 2019 2020 2018 350 400 450 500 550 600 650 700 2016 2017 2019 2020 2018 12 14 16 18 20 22 2016 2017 2019 2020 BALTIC SEA Q4 Q4 mDKK 2020 2019 % changes 2020 2019 % changes Volumes (thl) 5,409 5,268 3 1,321 1,229 7 Net revenue 3,237 3,308 -2 765 787 -3 EBIT 675 654 3 99 127 -22 EBIT margin 20.8 19.8 12.9 16.2 Financial performance In Baltic Sea, volumes for showed a % increase com- pared to primarily due to the large beer campaign in Finland in Q. Net revenue showed a % decrease and was affected by the product and channel mix. EBIT increased to DKK million and were DKK million above the figure. The EBIT margin increased by percent- age point from .% in to .% in . The earnings de- velopment was positively affected by tight cost management during the lockdown periods and the acquisition of Bauskas. “In a challenging year, we have benefited from our broad portfolio and have taken advantage of the growth in the low/no sugar/alco segments. The satisfactory results in 2020 can also be attributed to our ability to deliver the right products at the right time.” Kalle Järvinen, SVP Baltic Sea & MD Hartwall Volumes increased by % in Q , which is primarily due to the extraordinary beer campaign in Finland, as we did not have that campaign in Q . Revenue declined by % due to COVID- restrictions, whereas the EBIT margin declined by . percentage points from .% in Q to .% in Q . VOLUMES (thl) NET REVENUE (mDKK) EBIT (mDKK) EBITMARGIN (%) 5.4 mhl VOLUME (up by 3%) 675 mDKK EBIT (up by 3%) 3.2 bDKK NET REVENUE (down by 2%) 20.8% EBITMARGIN (up by 1.0pp) ROYAL UNIBREW Annual report 202030 Performance Perform – Baltic Sea Development and initiatives in 2020 The Baltic Sea segment was also impacted by the COVID- restrictions, but to a lesser extent as well as at a later stage for some of the countries compared to Italy and Denmark. Due to a fast response and great flexibility, we succeeded to obtain an even better result than in the record year , and at the same time we gained market share. In Finland, we continued the premiumization of our beer portfolio, with our brands Aura, Lahden Erikois and Lapin Kulta Pure. We also continued our efforts in the low/no sugar /alco area, including introducing a new Lapin Kulta .%, and our portfolio delivered very strong growth rates. In the Ready-to-Drink category, Original Long Drink con- tinued to grow. The campaign “The greyest day of the year” reached . participants in compared to . the year before and despite COVID-. In , we continued our innovation adding new tastes and the Original Long Shot to the portfolio. In the Baltics, we have been less impacted by COVID- as we are less dependent on the On-Trade channel in this region. CULT energy was introduced to the market in and was well received by the consumers. The beer sale in Lithuania and Latvia has developed positively, supported by products from our latest acquisition Bauskas, which are perform- ing better than expected. The addition of Bauskas in Latvia has strengthened our multi-beverage model in the Baltics. Bauskas is now fully integrated into the business, which has strengthened our presence in the craft beer segment in the country. We have also successfully captured new customers in the On-Trade segment as a result of the acquisition. On March , Bauskas was moved to our group-wide SAP system. Zero Zone in supermarkets In all countries in the Baltic Sea segment we are gaining ground with our low/no beverage portfolio, with PepsiMax leading the growth, and supported by our own strong local brands such as Jaffa and Enjoy. To make the choice even more visible for consumers, we have established Zero Zone areas together with the super- markets – efficiently presenting our no sugar and no alcohol products. ROYAL UNIBREW Annual report 202031 Performance Inter- national 2018 18 19 20 21 22 23 24 2016 2017 2019 2020 2018 150 300 450 600 750 900 1,050 2016 2017 2019 2020 2018 50 70 90 110 130 150 170 2016 2017 2019 2020 2018 400 500 600 700 800 2016 2017 2019 2020 Financial Performance Volumes in showed a % increase and net revenue in- creased by %. The net revenue was impacted by positive de- velopments in all categories and brands. EBIT amounted to DKK million and were DKK million above the figure. The EBIT margin went up by . percentage points from .% to .%. The earnings development was positively affected by a better product mix and savings on travel costs. INTERNATIONAL Q4 Q4 mDKK 2020 2019 % changes 2020 2019 % changes Volumes (thl) 1,002 942 6 285 220 30 Net revenue 772 694 11 198 170 16 EBIT 171 132 30 39 24 63 EBIT margin 22.2 19.0 19.9 14.0 “In 2020, things have gone well in almost all markets in International and we have been favored by a number of factors, including a strong position of our main brands, a re-branding of some of our products and an increasingly wider distribution.” Carsten Nørland, SVP International In Q , volumes increased by % as some markets were restocked to reflect sale out. Revenue increased by % in the same period, less than volumes because of market mix. The EBIT margin increased by . percentage points from .% in Q to .% in Q . This development can partly be explained by impairment in Q of DKK million last year (Q- EBIT-margin adjusted for impairment .%). VOLUMES (thl) EBIT (mDKK) EBITMARGIN (%) NET REVENUE (mDKK) 1.0 mhl VOLUME (up by 6%) 171 mDKK EBIT (up by 30%) 0.8 bDKK NET REVENUE (up by 11%) 22.2% EBITMARGIN (up by 3.2pp) ROYAL UNIBREW Annual report 202032 Performance Perform – International Development and initiatives in 2020 The impact from COVID- has been fragmented in the Inter- national segment and we have seen countries in Asia moving towards a more normal situation with a reopening of bars and restaurants faster than in countries in Europe. With reference to the Danish Vikings, our FAXE brand had a great year in , especially in Africa. We have built the brand over many years in close cooperation with our local distribut- ers offering affordable premium products to the consumers. In , we also supplemented the FAXE brand with a non alcoholic variant with great taste. The Tempt cider brand continues to grow significantly in Asia, where the COVID- impact was mainly seen in the beginning of the year. The Malt business is also performing well across countries, and we have invested in digital campaigns as well as new packaging formats to support the positioning of the malt brands. In , we will focus on the areas that have performed in- creasingly well in the past couple of years. Donation of Supermalt Supermalt can in many respects be considered a dietary supplement, and during the COVID- outbreak we have donated Supermalt and Vita- malt to hospitals in Africa and the Caribbean to support patients and health staff. Virtual carnival No matter what happens in the world, we all need a break, socializing and fun – with a Vi- tamalt event we supported the yearly carnival in London, which in was organized as a virtual carnival. ROYAL UNIBREW Annual report 202033 Performance → Corporate Governance I Risk Management I Remuneration I Board of Directors and Executive Management I Shareholder information Governance ROYAL UNIBREW Annual report 202034 Governance Gover – COVER Royal Unibrew has focus on running its business and designing its management systems in accord- ance with good corporate governance practices. The objective is to ensure that Royal Unibrew meets its obligations to shareholders, customers, employees, authorities and other stakeholders and that long- term value creation is pursued. The recommendations of the Committee on Corporate Gov- ernance, current legislation and regulation within the area, best practices and internal rules provide the framework for Royal Unibrew’s corporate governance. For the financial year , Royal Unibrew has prepared a remuneration report in accordance with section b of the Danish Companies Act. The report concludes that the remu- neration of the Board of Directors and the Executive Manage- ment has been provided in accordance with the remuneration policy and incentive guidelines of Royal Unibrew adopted by the AGM on April . Royal Unibrew established a whistleblower scheme in for expedient and confidential notification of possible or sus- pected wrong doings. In , no whistleblower cases were reported. Royal Unibrew’s website https://investor.royalunibrew.com/ corporate-governance provides a detailed description of the Board of Directors’ approach to the Corporate Governance Recommendations issued by the Committee on Corporate Governance and designated by Nasdaq Copenhagen. Diversity and inclusion Royal Unibrew strives to promote diversity based on a con- viction that inclusion and diversity contributes to achieving Royal Unibrew’s vision and goals in a competitive global busi- ness environment. This includes a diverse and strong blend of educational background work and life experience, diversity of beliefs, nationality and gender, both within the Board of Directors as well as in our respective management teams and our workforce in general. We believe that a diversified organization increases the versatility and total competences of the Company and improves decision-making processes. The international management team of Royal Unibrew – a total of leaders – comprises % (: %) male and % (: %) female. Our target is a more balanced gender representation of at least % of each gender in the Board of Directors and international management teams. When recruiting new executives, we prioritize identifying candidates of both genders without discrimination and aim to encourage female candidates’ interest in taking on managerial tasks. Currently, the Board of Directors consists of six Board mem- bers elected by the AGM and three Board members elected by the Danish based employees (all males). Three of the mem- bers elected by the AGM are Danish and three are non-Dan- ish. Two of the AGM elected board members are females. We aim for the Board of Directors to consist of expert mem- bers who should, to the widest extent possible, complement each other in terms of age, background, nationality, gender, etc., with a view to ensuring a competent and versatile con- tribution to the board duties at Royal Unibrew. These mat- ters are taking into consideration when the Nomination and Remuneration Committee identifies new candidates for the POLICY ON DATA ETHICS Pursuant to changes in the Danish Financial Statements Act listed companies are required to adopt a policy on data ethics and include a statement of the company’s policy in the annual report – or explain if the company does not have a data ethics policy. The new rules impose further obligations in addition to the GDPR and will apply from the financial year . Royal Unibrew adopted its policy on data ethics in . The policy establishes the overall guidelines and principles for how data ethics is considered and included in the use of data as well as design and implementation of technologies, especially new technologies, used for processing of personal data in Royal Unibrew. The policy is based on the principles on data ethics adopted by the Danish Council for Digital Security (Rådet for Digital Sikkerhed) and sets the general guidelines as well as specific details on relevant topics, e.g. legality, ethical design, conse- quences of processing data, security, transparency and respect for human rights. The existing GDPR Steering Committee (CFO, CIO, HR Director and General Counsel) is responsible for the data ethics policy and its implementation, while the practical compliance with the policy is incorporated in the existing data protection compliance program in Royal Unibrew. The data ethics statement will be included in the annual report. Corporate governance ROYAL UNIBREW Annual report 202035 Governance Gover – Corporate governance 55 54 32 32 7 6 7 7 2019 2020 Board of Directors, and it is an objective of the committee to identify both male and female candidates. However, recom- mendation of candidates will always be based on an assess- ment of the individual candidate’s competences and how he/ she will match Royal Unibrew’s needs and contribute to the overall efficiency of the Board. Shareholder and stakeholder relations Royal Unibrew’s Management strives and works actively to maintain a good and transparent communication and dia- logue with its shareholders and other stakeholders. We be- lieve that a high level of transparency in the communication of information on the Company’s development supports our work and a fair valuation of the Company’s shares. Our open- ness is limited only by the duties of disclosure of Nasdaq Copenhagen and by competitive considerations. The dialogue with and communication to shareholders and other stakeholders take place in connection with the pub- lishing of financial reports and other announcements com- municated via audio casts, meetings with investors, analysts and the media. Financial Reports and other announcements are available at Royal Unibrew’s website immediately after being published. Our website also includes material used in connection with investor presentations and audio casts. According to the Articles of Association of Royal Unibrew, general meetings shall be convened not more than five weeks and not less than three weeks prior to the general meeting. It is an objective to formulate the notice convening the meeting and the agenda in a way that gives shareholders an adequate presentation of the business to be transacted at the general meeting. Proxies are limited to a specific general meeting and are formulated also to allow absent shareholders to give specific proxies for individual items of the agenda – either to the Board of Directors or to a person attending the general meeting. All documents relating to general meetings are published at Royal Unibrew’s website. Each share of a nominal value of DKK entitles the holder to one vote. Royal Unibrew’s shares are not subject to any restrictions of voting rights, and the Company has only one class of shares. All shareholders may submit proposals for resolutions to the Board of Directors to be considered at the AGM; such proposals for resolutions are to be received by the Board of Directors no later than six weeks prior to the date of the AGM. Board of Directors The Board of Directors oversees the company’s overall strat- egy and supervises the organizational, financial and perfor- mance management of the Company as well as continuously evaluates the work performed by the Executive Management on behalf of the shareholders. ATTENDANCE AT MEETINGS (IN TOTAL 12) Position Board meetings Walther Thygesen Chairman Jais Valeur Vice chairman Catharina Board member Stackelberg-Hammarén Christian Sagild Board member Claus Kærgaard Board member Einar Esbensen Nielsen Board member Floris van Woerkom Board member Heidi Kleinbach Sauter Board member Karsten Slotte Board member Lars Vestergaard Board member Martin Alsø Board member Attended the meeting Did not attend the meeting Not a board member at the time The Board of Directors performs its tasks in accordance with the Rules of Procedure of the Company governing the Board TAX Royal Unibrew seeks to comply with all tax legislation to its business operations and, in doing so, aims to minimize its tax risk by actively seeking to identify, evaluate, monitor, and man- age tax risks. The resulting allocation of profits is regularly tested for com- pliance with this standard. Royal Unibrew has taken action to ensure that it meets the enhanced transfer pricing disclosures and documentation re- quirements by tax authorities and OECD. All interactions with Tax Authorities are conducted in an open, collaborative, and professional manner. The total contribution through taxes in amounted to DKK. billion (: . billion). TAX BY CATEGORY (%) Excise duties VAT Personal taxes and social security contributions Company income taxes ROYAL UNIBREW Annual report 202036 Governance of Directors and the Executive Management. These Rules of Procedure are reviewed and updated annually by the Board of Directors. The Board of Directors usually meets for six annual ordinary board meetings, of which at least one focuses on the Compa- ny’s strategy and prospects and one takes place in a market in which the Company operates. In addition, the Board members meet when required. In , board meetings were held. The Board of Directors has established the following com- mittees: Nomination and Remuneration Committee The committee consists of the Chairman and the Deputy Chairman of the Board of Directors. In , the primary activities of the committee were the preparation of the an- nual evaluation of the Board of Directors and the Executive Management, the selection and nomination of potential new candidates for the Board of Directors, succession of the CEO, the overall succession planning of the Board of Directors as well as assessment and recommendation of remuneration of the Board of Directors and the Executive Management. Furthermore, the committee considered the implications of the implementation of the revised Shareholder Rights Direc- tive and prepared the remuneration report to be presented at the AGM in . The committee had meetings in . ATTENDANCE AT MEETINGS (IN TOTAL 28) Remuneration and Position Nomination Committee Walther Thygesen Chairman Jais Valeur Vice chairman Attended the meeting Did not attend the meeting Not a committee member at the time Audit Committee The committee consists of two members; the Chairman (Floris van Woerkom) and one member (Christian Sagild). The low level of complexity of the business and wide usage of standard and automated IT tools are the prime reasons for the size of the committee. It is the Audit Committee’s objective to secure quality and integrity in the Company’s presentation of Financial Statements, audit and financial re- porting. Further, the Audit Committee monitors accounting and reporting processes, the audit of the Company’s financial reporting, risk issues and the external auditor’s performance and independence. Moreover, the Audit Committee assesses and recommends to the Board of Directors election of external auditors. The ex- ternal auditor has participated in all ordinary meetings of the Audit Committee. The committee held eight meetings in . ATTENDANCE AT MEETINGS (IN TOTAL 8) Position Audit Committee Meetings Christian Sagild Board member Floris van Woerkom Chairman Audit Committee, Board member Lars Vestergaard Board member Attended the meeting Did not attend the meeting Not a committee member at the time Evaluation of the work of the Board of Directors Evaluation of the work of the Board of Directors takes place annually. The evaluation focuses on ensuring that the Board of Directors (as a body) has expertise and experience within Fast Moving Consumer Goods (FMCG), production, sales and marketing of brands globally and in business-to-business markets, strategic and general management and within eco- nomic, financial and capital market issues, including those relating to listed companies. The evaluation is facilitated by the Chairman of the Board of Directors. For this purpose, the Chairman receives written replies to a questionnaire distributed to all members of the Board. The findings of the evaluation were presented and discussed at a Board meeting and based on the evaluation it was concluded that the Board of Directors possesses the necessary competencies taken Royal Unibrew’s business model and strategy into con- sideration. An external consultant is involved in the evaluation at least every third year. An evaluation by an external consultant took place in . Both the performance of the Executive Management and the cooperation between the Board of Directors and the Executive Management are evaluated annually as a minimum. Composition of the Board of Directors When composing the Board of Directors, we emphasize that the members have the competences required. The Board of Directors assesses its composition annually, ensuring that the combined competences and diversity of the members match the Group’s activities. Candidates for the Board of Directors are recommended for election by the general meeting supported by motivation in writing by the Board of Directors as well as a description of the recruiting criteria. The individual members’ competences and credentials are described in the below section on the Board of Directors and the Executive Management. Upon their election, the new Board members are introduced to the company through a focused program. Election of members by the employees takes place in compli- ance with the company law rules described at the Company’s website. When joining the Board of Directors, the members elected by the employees are offered relevant training in serving on a board. ROYAL UNIBREW Annual report 202037 Governance Risk is an inherent part of business and we take an active approach to risk management, ensuring that our key risks are identified and mitigated in a struc- tured and prioritized manner. Royal Unibrew has defined clear risk management processes, including policies and procedures, to strive to minimize the effect of our key risks as well as to protect our repu- tation, values and freedom to operate. The key enterprise risks are: market risks, industry and part- nerships related risk, business interruption and third-party risks and financial risks. A detailed description of the financial risks is included in note . We assess risks within each of the key risk areas based on their potential impact and likelihood. To ensure a sound and deeply rooted risk culture within the Royal Unibrew group, local risk owners as well as central risk owner from group functions are appointed to facilitate the risk identification, control and mitigation, supported by the central risk man- agement function. A challenging with COVID- The Royal Unibrew multi-beverage model and risk manage- ment setup have demonstrated their resilience over time and not at least in a time with COVID- related uncertainties. However, the pandemic continues to challenge our employ- ees, consumers and customers, placing additional require- ments on our risk management and business planning. Initiatives have been taken to ensure the safety of our em- ployees during , and we have succeeded not to close or reduce the production at any of our production sites during the pandemic. With restricted opening hours at bars and restaurants, closed nightlife, no larger events and festivals as well as closed borders between many of our home markets, extra support to customers and more frequent re-planning of production has been needed during . To be able to meet changes in market demand, we continue to invest in our production sites, to secure sufficient production and storage capacity. Our agile way of working has helped us to adjust to new opportunities both commercially and across the supply chain. Risk management ROYAL UNIBREW Annual report 202038 Governance Gover – Risk management SENIOR LEADERSHIP TEAM Determines risk management policies and strategies for the individual risks and ensures implementation of these adequate mitigation efforts. Ensures consistency between the risk management policy and the business objectives. Monitors risk management and the development in key risks and ensures that adequate resources are available to implement efficient risk management. STAFF FUNCTIONS AND BUSINESS UNITS Identify, assess, quantify and record risks. Make suggestions for mitigation. Monitor risk management activities initiated. Report regularly to the Senior Leadership Team. BOARDOF DIRECTORS Approves the overall risk policy and reviews the findings reported by the Executive Management. AUDIT COMMITTEE Monitors the development in the total strategic risk exposures and the individual risk factors and verifies compliance with the overall risk policy. Risk management structure and Governance Royal Unibrew’s risk management structure is based on a systematic process of risk identification, risk analysis and risk assessment. This structure provides a detailed overview of key risks relating to the realization of our strategies in the short and long term and enables Royal Unibrew to take the required measures to address risks. The Board of Directors assesses the overall risk factors re- lating to Royal Unibrew’s activities. Risks are assessed under a two-dimensional “heat map” assessment system which estimates the impact of the risk in relation to profit, damage to Royal Unibrew’s reputation, violation of legislation or en- vironmental implications as well as the likelihood of the risk resulting in an incident. Based on the continuous assessment of potential risks, the ”heat map” is updated to bring a cur- rent and better understanding of potential risks to ensure adequate mitigations efforts are initiated. The identified risks and proposed action plans are reviewed and assessed by the Company’s Senior Leadership Team, whereas, the Audit Committee reviews the adequacy and the effectiveness of the risk management system. Based on this the Executive Management presents the key risks to the Board of Directors and reports the necessary risk-mitigating activities/action plans for review. The overall risk management structure is outlined below. RISK MANAGEMENT STRUCTURE ROYAL UNIBREW Annual report 202039 Governance Key risk factors in In addition to financial risks, the following risk factors are considered key risks in : Area Description Risk mitigation Commodity prices and raw materials The prices of a large number of key commodities fluctuate in line with world market prices. To the extent that higher unit costs cannot be compensated for by higher selling prices per unit or in other ways of increasing the average selling price per unit correspondingly, Royal Unibrew’s earnings will decrease. The price fluctuation can also lead to deficiency of raw materials and effect Royal Unibrew's earnings negatively. Royal Unibrew monitors the trend in commodity prices. Hedging against short-term price increases takes place through agreements with suppliers and through commodity hedges with financial institu- tions. The Group’s policy for hedging commodity risks involves a smooth and time-differentiated effect of commodity price increases. For 2021, more than 60% of our commodity price exposure is hedged. Industry In most markets, the product categories beer and soft drinks are characterized by tough price competition and intensive marketing from a number of suppliers. The COVID-19 pandemic has led to an increase in local e-commerce and entry of global e-commerce providers has opened new routes to customers. Royal Unibrew’s earnings and competitiveness are ensured through constant focus on markets and segments in which Royal Unibrew holds or may achieve a significant position. Our investment in digital solutions and the continuous improvements across the business will contribute towards limiting the negative effect from the changes in the industry. Moreover, Royal Unibrew focuses on value manage- ment through the development of products, containers and packaging, cooperation with customers and communication with consumers. In 2020, we have launched a B2B e-commerce platform for our customers in Denmark. IT risks Royal Unibrew’s activities are to a large extent dependent on the use of the estab- lished IT systems and the quality of the applied IT security solutions. A prolonged breakdown, unintended maloperation or an unauthorized break-in into the systems supporting sales and supply processes as well as internal information systems may involve a significant risk of interruption of Royal Unibrew’s activities. Royal Unibrew works consistently to improve our IT security and have established procedures to ensure: • day-to-day operation of the IT systems supporting the key business processes • protection against data loss • protection against unauthorized access to and distribution of confidential data • general protection against cybercrime and securing physical access to RU facilities When acquiring companies, it is our risk philosophy to adopt the companies into our existing IT system landscape and IT Security framework. On 1 March 2021, Bauskas was integrated into Royal Unibrew's ERP platform. Macro- economic uncertainty Royal Unibrew’s product portfolio is sold in markets and market areas where market developments are usually determined by long-cycle trends. Macroeconomic uncer- tainty, including changes of free trade agreements or low growth of long duration or outbreaks causing a threat to the public health, may affect earnings negatively. As a consequence of this we might experience declining consumption or shifts in product mix towards products in other packaging formats with lower earnings. By focusing on flexibility in our action plans, Royal Unibrew is striving to get some leeway for reducing the effect of macroeconomic uncertainty and changes to consumption patterns. The efforts directed at continuous improvements across the business will contribute towards limiting the negative effect of macroeconomic changes. We continue to invest in our production set-up, including new can filling lines. Partnership Royal Unibrew cooperate with different partners across markets and product cate- gories. Changes to these relationships may affect the Group’s sales and net revenue, and thus earnings. Royal Unibrew has in general a long history with our partners and mitigate the partnership risk by entering into long term agreements and by providing adequate business results to ensure a mutually beneficial development of the partnerships. Statutory restrictions Royal Unibrew’s activities are subject to national legislation in the markets in which Royal Unibrew operates. Any legislative changes may impact the ability to operate, e.g. by way of restrictions in respect of the sale, marketing, packing material and production of Royal Unibrew’s products or due to increasing consumption taxes. Such restrictions may affect the Group’s sales and earnings significantly. Royal Unibrew participates in local and international cooperation fora within the brewery industry with a view to influencing legislative decision makers to ensure that conditions for producing and marketing beer and soft drinks do not deteriorate, and that consumption taxes are applied in a balanced manner. Weather The sale of Royal Unibrew’s products is dependent on weather conditions. Usually, the consumption of Royal Unibrew’s products is highest in the summer months. However, this presupposes dry and fair weather. The weather in the summer of 2020 is regarded as normal. Through focus on flexibility of action plans and production capacity, Royal Unibrew operates with a flex- ible cost structure and can partly adjust to lower earnings caused by unfavorable weather conditions in the summer months, and at the same time ensuring the agility to support the customers in years with favorable weather. ROYAL UNIBREW Annual report 202040 Governance Remuneration of the Executive Management mDKK 2020 Change 2019 Fixed salaries to Executive Management 20 63% 12 Short-term bonus scheme for Executive Management 9 63% 6 Long-term bonus scheme for Executive Management 9 41% 6 Remuneration of Executive Management 38 57% 24 Remuneration of Board of Directors 5 6 43 30 Average remuneration of employees Royal Unibrew employees (Group) 0.4 -1% 0.4 * The increase from 2019 to 2020 is primarily due to the changes in the Executive Management which includes severance payment to Johannes Savonije. Excluding of this, the remuneration has increased by 7%. ** The average salary is impacted by amongst other acquisitions where more employees are in countries with lower salaries, as well as postponed replacements of higher paid jobs during COVID-19. The overall objective of the remuneration is to attract, motivate and retain qualified members of the Board of Directors and the Executive Management. The remuneration of the Board of Directors and Executive Management during the past financial year has been provid- ed in accordance with the remuneration policy and incentive guidelines of Royal Unibrew adopted by the Annual General Meeting on April . The complete Remuneration Policy and Remuneration Report for the Board of Directors and the Executive Management are disclosed at the Company’s website at http://investor.royaluni- brew.com/corporate-governance. The Overall Guidelines for Incentive Pay adopted at the Com- pany’s Annual General Meeting are available at http://investor. royalunibrew.com/corporate-governance. Read our full Remuneration Report here Remuneration ROYAL UNIBREW Annual report 202041 Governance Gover – Remuneration Board of Directors and Executive Management Walther Thygesen Chairman of the Board Jais Valeur Deputy Chairman of the Board Martin Alsø Elected by the employees Position Professional board member in a number of enterprises Group CEO of Danish Crown Business Unit Manager Directorships Chairman of the board of directors of Sonion Holding A/S, DK, and Kartago Development ApS, DK; Member of the board of directors of German High Street and Properties A/S (GHSP), DK Member of the board of directors of Foss A/S, DK Special competences Special expertise in general management with experience from both Denmark and abroad as well as sales and marketing expertise, especially in the business to business market Special expertise in general management of international enterprises within FMCG (Fast Moving Consumer Goods) Committees Chairman of the Nomination and Remuneration Committee Member of the Nomination and Remuneration Committee Initially elected 2010 2013 2014 Term of office 2020-2021 2020-2021 2018-2022 Considered independent Yes Yes No Nationality Danish Danish Danish Year of birth and gender 1950, male 1962, male 1974, male No. of Royal Unibrew shares (change from 1 January 2020) 15,000 (+5,500) 536 (+536) 2,400 (+ 500) Board of Directors ROYAL UNIBREW Annual report 202042 Governance Gover – Board of Directors and Executive Board Einar Esbensen Nielsen Elected by the employees Heidi Kleinbach-Sauter Member of the Board Claus Kærgaard Elected by the employees Position Terminal worker Professional board member Sales Manager Off-Trade Directorships Member of the board of directors of Chr. Hansen Holding A/S, DK Special competences Broad international experience within general management and special expertise within the food and beverage industry. Committees Initially elected 2018 2019 2018 Term of office 2018-2022 2020-2021 2018-2022 Considered independent No Yes No Nationality Danish German/US Danish Year of birth and gender 1954, male 1956, female 1968, male No. of Royal Unibrew shares (change from 1 January 2020) 119 (+72) - 180 (+180) Board of Directors (continued) ROYAL UNIBREW Annual report 202043 Governance Christian Sagild Member of the Board Catharina Stackelberg-Hammarén Member of the Board Floris van Woerkom Member of the Board Position Professional board member Executive Chairman of the Board, Marketing Clinic Entrepreneur and independent consultant Directorships Member of the board of directors of Ambu A/S, DK, and Danske Bank, DK; Chairman of the board of directors of Nordic Solar Energy A/S, DK, and Nordic Solar Global A/S, DK Member of the board of directors of Alma Media, Finland, Marimekko, Finland, Marketing Clinic Oy (including subsidiaries), Finland, and Scansecurities Oy, Finland Special competences Special expertise within general management of listed enterprises, including in-depth insight within finance and risk management Special expertise in strategy and marketing within the food and beverage industry for FMCG (Fast Moving Consumer Goods) in the Nordic markets Broad international experience, including experience within the beer industry and FMCG (Fast Moving Consumer Goods) as well as special expertise within finance, risk management, stra- tegy and management of international corporati- ons Committees Member of the Audit Committee Chairman of the Audit Committee Initially elected 2018 2019 2018 Term of office 2020-2021 2020-2021 2020-2021 Considered independent Yes Yes Yes Nationality Danish Finnish Dutch Year of birth and gender 1959, male 1970, female 1963, male No. of Royal Unibrew shares (change from 1 January 2020) 3,000 (+1,500) 450 (+150) 1,000 Board of Directors (continued) ROYAL UNIBREW Annual report 202044 Governance Lars Jensen President & CEO Lars Vestergaard CFO Qualifications Diploma in business economics, informatics and management accounting, Copenhagen Business School Master of Science (MSc) in Economics from Aarhus University Directorships Member of the board of directors of Hansa Borg Holding AS including subsidiaries, Norway Position CEO from September 2020 COO April-August 2020 CFO December 2011-March 2020 Joined in 1993 CFO from April 2020 Member of the Board of Directors April2018-March2020 Nationality Danish Danish Year of birth and gender 1973, male 1974, male No. of Royal Unibrew shares (change from 1 January 2020) 71,988 (+ 30,413) 1,183 (+ 768) Executive Management ROYAL UNIBREW Annual report 202045 Governance Shareholder information DEVELOPMENT IN ROYAL UNIBREW’S SHARE CAPITAL DKK ‘000 2020 2019 2018 2017 2016 Share capital 1/1 100,200 102,000 105,400 108,200 110,985 Capital reduction -1,500 -1,800 -3,400 -2,800 -2,785 Capital increase - Share capital 31/12 98,700 100,200 102,000 105,400 108,200 Royal Unibrew strives to maintain a high and con- sistent level of information to our shareholders and other stakeholders and to keep them continuously up-to-date on the Company’s development. Share information The Royal Unibrew share is listed on Nasdaq Copenhagen and is included in the blue chip index OMX C. In , a total of ,, (: ,,) shares were traded, corresponding to % (: %) of the total number of shares (at year end), through Nasdaq Copenhagen (source: Bloomberg). The trading value amounted to DKK , billion (: DKK . billion) representing an % increase. At the end of , the price of the Royal Unibrew share was . compared to . per share of DKK at the end of . Royal Unibrew’s market capitalization amounted to DKK . billion at the end of compared to DKK . billion at the end of . Each share carries one vote, and all shareholders registered in the Company’s register of shareholders are entitled to vote. Change of control The realization of a takeover bid resulting in change of control of the Company will entitle a few trading partners and lend- ers to terminate trading agreements entered. The Executive Management will not be entitled to any compensation. How- ever, a member of the Executive Management may choose to consider himself dismissed. BASIC INFORMATION Share capital, DKK 98,700,000 Number of shares 49,350,000 Denomination DKK2 Number of share classes 1 Restriction of voting right None Place of listing Nasdaq Copenhagen A/S Short name RBREW ISIN code DK0060634707 Bloomberg code RBREW DC Reuter code RBREW.CO Index OMXC25 Treasury shares in At the AGM on April , the Board of Directors was au- thorized to acquire treasury shares for up to % of the total share capital in the period up until the next AGM. On March , the Board of Directors initiated a share buy- back program for a maximum market value of DKK mil- lion and for a term until October . Due to the evolving situation around COVID- the share buy-back program was suspended on March at which point Royal Unibrew had bought back , shares representing a market value of DKK million. A new share buy-back program was initiated on September for a maximum market value of DKK million and a term until December . The share buy-back program was completed on November . After completion Royal Unibrew had bought back , shares representing a market value of DKK million. A third share buy-back program was initiated on November for a maximum of DKK million. The program was completed on January with a total buy-back of , shares. The initiated share buy-back programs were carried out in accordance with the “Safe Harbour” method. In , Royal Unibrew bought back a total of . shares at a market value of DKK million and as of December Royal Unibrew held , treasury shares of a nominal value of DKK each, corresponding to ,% of the Company’s share capital of which approx. , are for the purpose of covering the incentive program offered to the Executive Man- agement. In , , shares were cancelled. ROYAL UNIBREW Annual report 202046 Governance Gover – Shareholder information 2019 2020 42 4 50 51 6 1 2 44 0 20 40 60 80 100 120 140 160 jan feb mar apr may jun jul aug sep okt nov dec Royal Unibrew OMX C 25 Peer group MAY 3 29 28 28 APRIL APRIL APRIL At the end of , the total number of shares of the Company was ,,, including treasury shares. Ownership At the end of , Royal Unibrew had approx , registered shareholders holding together % of the total share capital. According to the latest Company Announcements or other public announcements, the following shareholders hold more than % of the share capital: Shareholder End of February 2021 Chr. Augustinus Fabrikker A/S, 15.02% Denmark (reported on 22 September 2017) BlackRock, Inc., 10.01% USA (reported on 23 July 2019) DIVIDEND DATES FOR 2021 Resolution at AGM Last trading date with right to dividend for First trading date without right to dividend for Distribution of dividend BREAKDOWN OF SHAREHOLDERS AT THE END OF 2020 Share transactions made by members of the Board of Direc- tors and the Executive Management are governed by Royal Unibrew’s insider rules, and their transactions as well as those of their connected persons are subject to a notifica- tion requirement according to the Market Abuse Regulation. Individuals on Royal Unibrew’s insider lists as well as their spouses and children below the age of may trade Royal Uni- brew shares only when the Board of Directors has announced that the window for trading shares is open (and provided that they do not have inside information). This normally applies for a period of four weeks following an announcement of financial results. On December , board members held , shares of the Company, and members of the Executive Management held , shares, corresponding to a total of .% of the share capital. SHARE PERFORMANCE 2020 (index) Note: The peer group consists of Anheuser-Busch InBev, Carlsberg, Heineken, Molson Coors Brewing Company, Britvic, Olvi and AG Barr (Source: Bloomberg) Foreign Investors Danish Investors Not registered Danish and foreign investors Royal Unibrew Royal Unibrew OMX C25 Peer group ROYAL UNIBREW Annual report 202047 Governance NOVEMBER 17 23 28 28 APRIL APRIL AUGUST FINANCIAL CALENDAR FOR 2021 April Trading Statement for the period January - March April Annual General Meeting August Interim Report for the period January - June November Trading Statement for the period January - September AGM The Company’s AGM will be held on April , at pm CET. The AGM will be convened electronically, and information on the registration for electronic communication is provided at Royal Unibrew’s website www.royalunibrew.com under “Investor”. Registration of shareholder’s name is handled by the bank holding the shares in safe custody. The Board of Directors will propose the election of the fol- lowing two new candidates at the AGM: Peter Ruzicka is the former CEO of Orkla in Norway, and he brings international senior leadership experience within FMCG retail business. He currently serves as Chairman of Pandora A/S, board member of Norwegian Aspelin Ramm AS and Norwegian AKA AS. Torben Carlsen is the CEO of DFDS and currently serves on the investment committee of Copenhagen Infrastructure Partners, Gro Capital and Navigare Capital. He brings a strong commercial and value creation track record with experience in Finance and M&A having previously worked as CFO and for various Private Equity companies. SHARE RATIOS Per share of DKK 2 – DKK 2020 2019 2018 2017 2016 Parent Company shareholders’ share of earnings per share 24.1 23.0 20.6 16.0 14.7 Parent Company shareholders’ diluted share of earnings per share 24.1 22.9 20.6 16.0 14.6 Free cash flow per share 28.8 23.4 18.7 17.8 18.7 Year-end price per share 706.60 610.0 449.0 371.8 272.6 Dividend per share 13.5 12.20 10.80 8.90 8.15 Number of shares 49,350,000 50,100,000 51,000,000 52,700,000 54,100,000 Investor relations activities Royal Unibrew aims to ensure open and timely information to its shareholders and other stakeholders. In order to maintain and develop good relations with the Com- pany’s stakeholders a number of activities are carried out continuously. In , Royal Unibrew facilitated four audio casts in connection with the publication of the Annual Report as well as the Q Trading Statement, H Interim Report and Q Trading Statement . Audio casts and presenta- tions from audio casts and seminars are available at Royal Unibrew’s website, www.royalunibrew.com under investor. Moreover, Royal Unibrew facilitates and participates in analyst and investor meetings in connection with the publication of financial reports. This year, the majority of the meetings have been virtual and around individual and group meetings with Danish as well as foreign investors have taken place. Currently, Royal Unibrew is covered by brokers including brokers from major international investment banks. Analysts covering the Royal Unibrew share can be found at www.royal- unibrew.com under investor. Shareholders, analysts, investors, stockbrokers and other stakeholders who have questions concerning Royal Unibrew may contact Royal Unibrew A/S, Faxe Alle 1, DK-4640 Faxe: Contacts Jonas Guldborg Hansen (Head of IR) [email protected] Telephone +45 20 10 12 45 Stine Felten (daily IR contact) [email protected] Telephone +45 29 23 04 93 ROYAL UNIBREW Annual report 202048 Governance → Our new long-term sustainability strategy I Sustainability framework I Our consumers and customers I Our products I Our people This section is prepared in accordance with section 99a of the Danish Financial Statement Act and is at the same time our Communication On Progress report in accordance with UN Global Compact. Corporate Social Responsibility ROYAL UNIBREW Annual report 202049 Corporate Social Responsibility CSR – COVER To be the preferred choice for the future, we want to lead the beverage industry with respect to climate action and the demand for sustainable products. Our focus is on reducing the impact of our operations and the entire value chain we are a part of while at the same time delivering sustainable business growth. During , we stepped up on our ambitions when it comes to creating a sustainable business foundation and at the end of , we finalized the work with our long-term sustaina- bility strategy defining goals and KPIs. Royal Unibrew wants to be the preferred local beverage partner. For us that entails providing sustainable products with great taste. The strategic focus being: • Our consumers & customers • Our products • Our people For each of these areas, we have defined and com- mitments complementing the short-term targets set in . We aim for a substantial reduction in carbon emissions from the entire value chain, providing healthy, nutritious and re- sponsible products (outperforming the market) and enabling a deeply engrained safety and sustainability culture at our company. We believe that it is of particular importance to transform our pledges and objectives into concrete plans and actions with goals, operational KPIs and close follow-up. Therefore, all our goals are supported by defined initiatives. In order to succeed with our ambitious sustainability strategy coordinated and wide-ranging efforts are needed – and we Our new long-term sustainability strategy cannot do it alone. We will innovate, develop and engage in partnerships for mutual benefit with our key stakeholders, such as strategic suppliers, major customers, consumers, local communities and our employees. In general, we are tracking well on our short term targets for . Due to COV- ID-, the initiative on packaging waste in the Americas, Africa and Asia was postponed. Short term targets 2020 Target Realized Status 2022 Target Our consumers/customers New product development New soft drinks products Balanced between Balanced between regular, and low/no - regular, and low/no Number of low/no products in Beer, Cider and RtD Increase - Increase Our products Packaging, CO₂, waste, energy Recycled paper labels per unit >50% 69% >90% Recycled carton/corrigated cardboard per volume >70% 75% >90% Recycled PET per volume >15% 19% >30% Electricity-based transportation vehicles Test - Implement CO 2 reduction (scope 1 and 2) per hl vs 2015 15% 22% 30% Packaging waste in Americas, Africa and Asia Reduce - Documented reduction Our people Occupational health and safety Training and awareness campaign Establish Country level Repeated annually LTI reporting Monthly Quarterly by month Monthly LTIF reduction vs 2018 20% -43% 40% Target for 2020 reached Target for 2020 partly reached Target for not reached “Our strategy development in 2020 was launched with an aspiration of becoming a global leader in sustainable beverages and a balanced focus on financial performance, social and environmental/ climate impact. The Growth Leadership Team headed up the development of key areas of the strategy. We believe that, Royal Unibrew has established a robust foundation with concrete initiatives, goals and KPIs for achieving our long-term ambition.” Lars Jensen, CEO & President ROYAL UNIBREW Annual report 202050 Corporate Social Responsibility CSR – Our new long-term Achievement highlights in 2020 We continued our sustainability journey in 2020 not only by developing the new long term strategy with ambitious targets, but also by continuing our efforts to reduce our footprints and potential impacts for our consumers/customers, our products and our people following up on our short term targets for 2022 and many other initiatives. Establishing our new Senior Leadership Team, appointing a Senior Vice President for HR and moving Group CSR reference to our CEO are major organizational im- provements to ensure the right balance between commercial, people and sus- tainability aspects. Our policy and objectives on diversity and inclusion was approved by the BoD dur- ing . Currently focusing on gender but to be expanded to other business critical aspects. We are improving on diversity in our mar- kets' management teams, where we are above % of the underrepresented gen- der, i.e. women. An analysis of equal pay across the Group shows that we do not have significant variation when compar- ing pay to competences, seniority, age, gender, etc. Collective bargaining and freedom of association is a basic right for all our employees, but in all the markets where we operate. Royal Unibrew is currently establishing an overview of the percent- age of the workforce covered by collective agreements. Organizational development and diversity We are currently awaiting approvals to build a Solar Park in Faxe, Denmark, aiming at providing % renewable en- ergy for our entire power consumption in Denmark. In addition, we are looking at geo-thermal energy project at our Lahti site in Finland. Investing in renewable energy Royal Unibrew has succeeded in decou- pling volume growth from carbon emis- sions. In the period from to , we have had a decrease of % kgCO/ hl while having a volume increase of %. Our success is a combination of our keen focus on optimizing our energy consumption year-on-year, the positive results of phase one of a large energy efficiency project at our Lahti site in Finland and specifically between and there was a change in product mix due to COVID- with a shift from the more energy consuming brewing process to less energy consuming soft drinks production. Royal Unibrew’s production facilities are not located in water scarce areas, but as water is an important raw material for us, water preservation and quality are key. Reducing water consumption remains a priority and the consumption of water per hl has decreased by % from to and in a like-to-like compar- ison by %. Decoupling growth year-on-year All our primary packaging contains information on material, recycling and deposit return, which is one of the ways we engage with consumers to close the loop. The effect can be measured in the year on year improving return rates in the well-functioning Deposit Return Systems in Finland, Denmark and Lithuania. From to the overall increase in returned cans and bottles was - % on average across the three markets. The return rate in was in a range of to % for PET, to % for cans and for glass between to %. Royal Unibrew is working on down gauging (re- moving) unnecessary material and increasing the content of recycled material in all our markets. Resulting in a reduced carbon footprint from pack- aging and elimination of unnecessary material. In the table on short term targets on packaging ma- terial, we have indicated the achievements across the Royal Unibrew on r-PET (%), r-paper (%) and r-carton (%). A few examples of material reduction we did in was e.g. down gauging of a standard cl can, resulting in annual material savings of ton alumina. Another example is re- duction in plastic material in PET bottles, where we in one market alone are saving ton plastic per year by a design change. A third example is trays where we in DK alone, have reduced the corrugated carton by ton per year. Packaging materials reused, reduced and recycled Royal Unibrew wants to provide choice for the consumers, but we are aware of the global challenges formulated by WHO regarding obesity as well as alco- hol abuse. We take our responsibility very seriously, in our product declaration, in our marketing of products and not the least when we develop new products. We want to offer products with great taste for every occasion, including a balanced launch of regular, no and low products in different categories. Between and , the volume growth for no and low products out-performed regular prod- ucts, significantly for both soft drinks, beer, cider and RTD. For our CSD, water and energy portfolio, this is also reflect- ed in a % general reduction in calory content per ml across our markets during the same period. For beer, RTD and cider the average alcohol percentage are clearly reduced in Denmark, Finland and the Baltics between to %. NO and LOW sugar, calories and alcohol ROYAL UNIBREW Annual report 202051 Corporate Social Responsibility CSR – Achievement highlights in 2020 Disclaimer: The targets apply to our current footprint. It is our ambition that potential acquisitions will be integrated, but a grace period may be required Overall KPIs No/Low growing faster than average on the portfo- lio - and faster than market (YoY) #1 partner of choice for customers as sustainable beverage supplier by * 40% of marketing budget allocated to brands/ campaigns with a sustainability position by 100% carbon emission free by in scope and 50% reduction in supply chain emissions (scope , , ) by 100% recycled, recyclable or reusable packaging by 100% safety culture 80% of employees are Royal Unibrew ambassadors by 100% sustainability culture by Our consumers & customers Our products Our people ”Preferred choice”, as related to the corporate vision; ** without distribution ROYAL UNIBREW Annual report 202052 Corporate Social Responsibility CSR – Overall KPIs Further information: page 57 Further information: page 61 Further information: page 66 Health & nutrition In the market circularity Local engagement Renewable energy sources Product circularity Supplier roadmap Proudest employees Diversity, equality & inclusion Safe workplace mindset Sustainability - Overview Our aspiration is to be recognized globally as a leader in sustainable beverages – delivering strong financial performance along with strong local engagement and a neutral CO footprint. In 2020, we stepped up our sustainability efforts and drew up our new long-term sustainability strategy as an integrated part of our overall strategy – and we set our ambitious 2030 targets. Our consumers & customers We want to be the preferred partner for our customers with the most relevant innovations for our consumers regarding health and wellness, authenticity and care for the environment Our products We will convert our energy consumption to renewable energy in the entire value chain. We will work with our partners on reducing CO emissions and lowering the impact from packaging material through recycling, while having a positive social impact. Our people We will lead a sustainable business including fostering a sustainability culture promoting a safe and healthy working environment where employees feel proud, included, and have equal opportunities to realize their potential. We will develop tomorrow’s talents while building competences that ensure our success today and tomorrow KEY AREAS KEY AREAS KEY AREAS ROYAL UNIBREW Annual report 202053 Corporate Social Responsibility CSR – Sustainability - Overview Royal Unibrew is a strong regional beverage company, found- ed on local anchored facilities, employees and sourcing of materials and services. We aim to provide successful, sus- tainable brands that people trust and therefore, we have always been committed to contributing positively to the de- velopment in the areas in which we operate, to limiting our environmental impact, to establishing safe and good working conditions for our employees and to delivering high quality products to consumers. We also realize that being regional but with global markets, we continuously need to improve our efforts and having a sustainability scope encompassing the entire value chain across our markets. Our sustainability approach is underpinned by Royal Uni- brew’s purpose and strategy, the UN Global Compact (UNGC) principles and the UN Sustainable Development Goals (SDGs). A strong company culture is crucial for our ongoing progress – a culture in which decisions are taken with respect to our customers’, suppliers’ and other key stakeholders’ views and Sustainability framework At Royal Unibrew, we are committed to conducting our business in a sustainable, responsible and ethical way. priorities, and which encourages people to take responsibility for their actions. We believe that this approach will help us continuously to integrate sustainability deeper into our or- ganization and to realize our ambitious targets. During , we worked intensively to reach our short-term sustainability targets for - within selected areas such as alcohol and sugar content in new products, CO emission for activities ‘inside our fence’ and packaging material as well as lost time incident frequency. Furthermore, we con- tinued our endeavors towards establishing a well-defined and transparent corporate social responsibility framework and as planned, we have formulated our new longer-term sustainability strategy, including specific long-term targets. OUR SUSTAINABILITY JOURNEY Materiality assessment highlighting 9 strategic focus areas for sustainability Calculation of carbon footprint and overview of carbon emissions throughout the entire value chain Establishing 2020-2022 targets aligned with the SDGs focusing on CO 2 , recycled packaging, no/low products and employee safety Signing up to UN Global Compact Establishing the framework for our sustainability strategy and setting long-term (2030) targets and KPIs Implementation of a number of initiatives, including renewable energy, use of recycled plastic, launch of no/ low products, continued local engagement and focus on employee safety Disclosing climate data through CDP (Carbon Disclosure Project) ROYAL UNIBREW Annual report 202054 Corporate Social Responsibility CSR – Sustainability framework Our consumers & customers Our products Our people Policy Country level: • Quality policy • Food Safety policy Country level: • Environmental policy Group level: • Code of Conduct Country level: • Occupational health and safety (OHS) policy Group level: • Ethics policy • Remuneration policy • Diversity&inclusion policy Systems, procedures and guidelines ISO ( sites) Global Food Safety (GFSI) recognized standards at all production sites () Tax compliance and transfer pricing documentation ISO ( sites) Energy assessment at all production sites ISO ( sites) Employee satisfaction survey Mandatory training: GDPR, Competition, Marketing law POLICIES AND SYSTEMS Royal Unibrew is working in accordance with international and national legislation as well as international guidelines, conventions and standards for corporate social responsibility (CSR) and sustainability. Our policies and systems at either Group or country level ensures that we conduct our business in accordance with regulatory requirements and guidelines. All our production sites are operating in accordance with internationally recognized quality standards and all sites are food safety certified, in accordance with standards recognized by GFSI (Global Food Safety Initiative). In addition, we have a systematic approach to environment, health and safety, where several sites are certified, too. Royal Unibrew’s ethics policy and our Code of Conduct provide guidance for our employees, third parties acting on behalf of the Company and suppliers regarding anti-corruption, environment, human rights and labor standards but also GDPR (General Data Protection Regulation), competition and marketing law. The basic requirement for Royal Unibrew is being in legal compliance, i.e. having the right mechanisms to ensure that we have no violations. Internal controls and the whistle-blower scheme are impor- tant means for controlling and reporting potential irregulari- ties also by external stakeholders. Regular training is among the tools to ensure compliance internally, thus employees are trained in relevant aspects depending on their function inside and outside of the Company. Our policies and systems ROYAL UNIBREW Annual report 202055 Corporate Social Responsibility CSR – Our policies and systems GOVERNANCE STRUCTURE Board of Directors Growth Leadership Team Group CSR Key Areas Renewable Energy Sources Product Circularity Local Engagement In the Market Circularity Supplier Roadmap Health and Nutrition Proudest Employees Safe work place mindset Diversity, equality & inclusion Executive Management Our sustainability activities, including the formulation of our sustainability policies and targets, are anchored at the Board of Directors, which sets the direction for our strategy, targets and Group policies together with the Executive Management. The targets are aligned by and implemented through the Growth Leadership Team. To ensure focus on sustainability, group CSR reports directly to CEO. Signing up to the UN Global Compact in was the starting point for further formalization of our sustainability efforts, including further improvement of transparency in our sus- tainability policies, systems and due diligence processes, and these efforts were intensified during . Establishing clear accounting policies for sustainability indi- cators and thus establishing the basis for transparency and external assurance has been an integral part of this process. Group CSR and Finance are responsible for measuring our re- sults including good practice guidelines for risk and controls. Based on the accounting policies, a control framework will be established to ensure a consistent quality in our reports and documentation. We strive to work with a balanced approach towards our stakeholders, both by disclosing potential risks to our busi- ness and how we control these, as well as by showing the opportunities for Royal Unibrew; commercially, as a sustain- able beverage company and locally a sustainable partner and not the least as a great place to work. Our governance structure We have implemented policies and procedures to minimize risks from our activities and to ensure our freedom to operate. Compliance with legal and other requirements, including our ethical policy, is fundamental. Potential risks may include food safety incidents, workplace incidents, human rights vi- olations in the value chain or failure to attract and retain the right employees preventing our business from expanding. Market availability of recycled packaging material, lack of well-functioning waste collection and recycling systems, un- intentional emissions or inefficient processes are the main environmental risks. ROYAL UNIBREW Annual report 202056 Corporate Social Responsibility CSR – Our governance structure KPI # PARTNER OF CHOICE FOR CUSTOMERS AS SUSTAINABLE BEVERAGE SUPPLIER We want to be the preferred partner for our customers with the most relevant innovations for our consumers regarding health and wellness, authenticity and care for the environment. We aim to • Support consumers in making the healthy, nutritious and sustainable choice • Become circular by engaging consumers and customers • Involve actively in the local communities where we are present • Responsible drinking Health & nutrition In the market circularity Local engagement Our consumers & customers KEY AREAS ROYAL UNIBREW Annual report 202057 Corporate Social Responsibility CSR – Our customers and consumers Health & nutrition Being a responsible company, Royal Unibrew is aware of the global challenges formulated by WHO regarding obesity and the associated risks of cardiovascular diseases, cancer and diabetes as well as risk of alcohol abuse, linked to excess consumption of food and beverages. We strive to offer consumers and customers sustainable enjoyment through a broad variety of beverages, comple- menting the setting/situation whether the individuals find themselves at a music venue, dining with family and friends, exercising, travelling or at other occasions. The purpose is to provide energy, refreshment, quenching thirst or simply a good time. Consequently, we develop, launch and supply products with great taste and with regular, low/no-alcohol and calorie content, all clearly declared. Our aim is to of- fer a low/no alternative in all categories and in all markets to enable our customers to offer healthier choices to the consumers. Royal Unibrew also wants to lead development of healthy and nutritious products and markets, not only by offering new products and outperforming market growth but also by investing in more information and communication about the products. During recent years, Royal Unibrew has across the Group introduced more low/no sugar alternatives compared to regu- lar, e.g. full sugar, products in the soft drink, water and energy categories. The volume of low/no sugar products increased by % from to , while regular products increased by only % in the same period, which indicates our short- term target of a balanced launch of regular, low and no beverages is working. We believe in the consumer’s choice. We want to help consumers make the healthy or nutritious choice by always having an alternative to regular products, e.g. fully sugared, alcoholic, etc. We want to provide transparency for the consumer when choosing. • Offer a no/low alterna- tive in all categories • Reduce sugar/kcal/ alcohol per serving • Promote responsible drinking KEY INITIATIVES The production of .% and low alcohol containing products (Beer, Cider and RTD) increased across the Group in ac- commodating the general consumer trend. The no-alcohol segment increased by % from to compared to a % increase for low alcohol containing products and unchanged or slightly reduced growth for strong and regular in the same pe- riod, which indicates our target of increasing the number of beverages with .% and low alcohol will be met. Over the coming years, we will continue with a balanced de- velopment and launch of regular and reduced – both low and no – content of alcohol and sugar in our beverages. Responsible drinking We support national and international trade associations, such as Brewers’ of Europe’s views and guidelines on respon- sible drinking. In addition, we support a large variety of sports and health initiatives through our sponsorships regionally and locally. In Finland, for example, all beer sponsorships will be converted into .% alcohol beer. Our responsibility for products containing alcohol is to prioritize quality and value over quantity. We will continue to promote responsible drinking through support and participation in relevant programs and partner- ships regionally. This also applies for sugar contents, where we participate actively in partnerships looking at ways to re- duce calorie content in soft drinks. ROYAL UNIBREW Annual report 202058 Corporate Social Responsibility Today, all Royal Unibrew’s primary packaging material has information on either deposit return or labels on recycling. Some of the secondary packaging contains this information as well. It is our objective to expand the product information not only to include packaging material information but by to include sustainability information from the entire value chain as well. However, information is not enough in itself. For the well-func- tioning deposit return systems (DRS) there are generally very high return rates, e.g. +% in Denmark and Finland. But % is still lacking and in markets with poor or non-existing DRS, the challenge is much bigger. Therefore, we will step up on engaging consumers in closing the loop, thus, ena- bling food grade material for recycling. Recycling campaigns are currently run together with the deposit return systems (DRS) in Denmark, Finland and Lithuania, and it is our plan to conduct campaigns on waste reduction and circularity in large markets by to increase consumer awareness on recycling. In fact, this also applies to our customers, where awareness and handling of secondary packaging especial- ly in export markets, must be improved. The activities may involve support for local initiatives for improving/developing the infrastructure. In the market circularity We want to become circular across the value chain by engaging consumers and customers. We will close the material loop, reduce the strain on resources and reduce our footprint. • Reduce food waste • Engage consumers in closing the loop • Develop infrastructure KEY INITIATIVES CURRENTLY ALL PRIMARY PACKAGING ARE LABELED. ROYAL UNIBREW Annual report 202059 Corporate Social Responsibility • Drive sustainability in local communities, organizations and NGOs • Empower local players • Develop local products KEY INITIATIVES Local engagement As a strong regional multi-beverage company, it is in our DNA to engage not only in the local societies surrounding our premises, sports clubs, employees’ families but also in our brand communities, with customers, other business partners and NGOs. We strive to provide successful brands that people trust and therefore, we have always been committed to contributing positively, wherever we operate and are connected. We be- lieve, it is part of our responsibility and value as a company to drive, develop and support sustainability efforts through relevant touch points. Local sourcing of ingredients and developing local products are other examples of our local engagement. Royal Unibrew has a number of on-going local engagements with local sports clubs, the local music scenes, city festivals, etc. We want to make these interactions sustainable. This also applies to music festivals and large sports events, where we participate. The initiatives encompass concepts introduc- ing reusable cups, making your own energy in the “festival reactor”, introducing organic beverages (beer, CSD, RTD), sponsorships with . beer, supporting local lake preservation in Lahti (Finland), supporting circularity mindset through a student oriented “beer for pre-owned furniture” concept and The local connection is in our DNA – we want to be present in the local communities with local brands and products, actively engaging through the activities we support. many more only partly tested in . Our goal is that at least % of our engagements include sustainability elements by , and for large events we are even more ambitious with % already in . Supporting local businesses in general is another important undertaking for Royal Unibrew. During the pandemic this has become even more pertinent, especially in relation to on- trade and events. Like many other beverage companies, we have assisted with alcohol for sanitizers and various support for health workers and other frontline personnel. In addi- tion, we quickly engaged in activating consumers using our platforms and channels together with various customers for ‘Take Away’, we launched the ‘Together together’ campaign and Ceres Bar supporter in bars and restaurants and was the main driver behind Denmark’s biggest virtual beer tasting supporting micro-breweries. ROYAL UNIBREW Annual report 202060 Corporate Social Responsibility Our products Our ambition is to be one of the most sustainable beverage company and to be the preferred choice for the future. We will convert our energy consumption to renewable energy in the entire value chain and we will work with our partners on reducing CO emissions and lowering the impact from packaging material through recycling, while having a positive social impact. We will reach our targets by: • Shifting to renewable energy • Becoming circular • Engaging with our entire value chain KPI % REDUCTION IN SUPPLY CHAIN EMISSIONS (SCOPE ,,) KEY AREAS Renewable energy sources Product circularity Supplier roadmap Improving energy efficiency At our production site in Lahti, Finland, we have successfully implemented phase 1 of our energy optimization project. The project is mainly considering reducing thermal energy consumption for HVAC (Heat, Ventilation & Aircon- ditioning), CIP (Clean in Place) and pasteurization, resulting in a reduction of at least , ton CO per year. In phase , we are expecting even higher reductions by utilizing geo-thermal energy and/or by utilizing fuel sources based on renewables. ROYAL UNIBREW Annual report 202061 Corporate Social Responsibility CSR – Our products * Approx industry average 15% * RAW MATERIALS CO impact 15% BREWERIES 36 mkg 10% DISTRIBUTION 30 mkg 10% * REFRIGERATION 45% PACKAGING 143 mkg 5% * MALTING Scope +, excl. own logistics Scope - Down stream, incl. own distribution (scope ) Renewable energy sources Royal Unibrew is setting ambitious targets on carbon emis- sions. From our own production (scope and ) we aim at being carbon emission free in , and for the entire supply chain reducing our footprint by at least % in . We have decided on several initiatives to reach these ambitious tar- gets, but we also acknowledge that implementation of new, not yet available technologies, are key to succeed. For the multi-beverage industry, the main part of the CO footprint is ’outside the fence’. Therefore, we need to work not only on scope and ‘inside the fence’ but as well on scope ‘outside the fence’. We will increase our renewable energy use towards 2030, starting from our own production and gradually increasing demands on suppliers. • Transform and electrify production • Demand renewable energy in the supply chain • Optimize energy and water consumption KEY INITIATIVES Royal Unibrew’s principles for reducing carbon footprint is to work continuously with optimizations to increase energy efficiency. Based on the general consensus on the need to transform and electrify production processes, we will apply and invest in new technologies, when available and commer- cially viable. Investing actively in or pushing for additionality of renewable energy in the grid is included as well. The most pertinent challenge for the industry is transforming thermal processes to power-based processes. The technologies to heat/cool efficiently by power are, however, not available, yet. Principles for reducing CO emission from production is: Reduce energy consumption/increase energy efficiency Investing in transformation of thermal energy to electrical energy Actively invest in or push for additionally of renewable energy in the grid As a last resort and in the short to medi- um term either source renewable energy power or biogas or buy accredited certif- icates EMISSIONS THROUGHOUT THE LIFE CYCLE Proportion of greenhouse gas emissions in each stage of the life cycle of our products. ROYAL UNIBREW Annual report 202062 Corporate Social Responsibility 2016 2019 202020182017 20 25 30 35 40 45 3.0 3.3 3.6 3.9 4.2 4.5 2016 2019 202020182017 50 100 150 200 250 16 18 20 22 24 2016 2019 202020182017 15 20 25 30 35 2.0 2.4 2.8 3.2 3.6 Our ambition to become emission free or reducing the im- pact significantly will also translate into new demands for our suppliers and partners across the entire value chain. Potential symbiosis and new business models in our local communities which also links into product circularity will also be part of the solution. To support the transition towards using renewable energy we are investigating the possibility of constructing a solar park, covering our Danish power consumption, and in Finland, we are investigating solutions using geo-thermal energy for heating and for biogas replacing natural gas in our boilers. Transportation is another area where technologies for heavy duty transportation still are rather immature. The offering and availability of renewable fuel sources are gradually increasing but there are still major technological challenges in becoming carbon emission free. The industry currently estimates a potential of % reduction in . Royal Unibrew is currently looking at fossil free fuels as transitional options as well as CO 2 from production kg CO 2 /hl CO 2 FROM PRODUCTION (mkg) (kg CO/hl) Total energy consumption kWh/hl ENERGY CONSUMPTION (mKWh) (kWh/hl) Total water consumption Water consumption hl/hl WATER CONSUMPTION (mhl) (hl/hl) electric or hybrid vans/cars for lighter duty. Forklifts and other ‘inside the fence’ distribution is primarily power-based today. In , the CO impact from production, packaging materials and distribution was , , million kg CO, respectively. Essentially unchanged from in absolute amount but with an improvement per produced unit of to % for transpor- tation and packaging material. The reduction for packaging materials is triggered by increasing the content of recycled material. The carbon footprint for our production was reduced by %, measured as kg CO per produced volume, from the base year to . Being above our target of % CO reduction and showing we are on the right track for our target of % in compared to . Between and , the kg CO per produced volume decreased with %. The CO reduction is a result of phase of energy optimization project in Lahti in combination with a shift in product mix, i.e. during the pan- demic there has been a significant increase in the soft drink production volume relative to beer production. Water is our most important raw material and therefore water preservation and water quality are key to us. All our wastewater is treated before emission either at our site or at the municipal treatment plant to meet the requirements. Reducing water consumption remains a priority to us and the consumption of water per hl has decreased by % from to and in a like-to-like comparison with %. Royal Unibrew’s production facilities are not located in water scarce areas, and some of our sites do not have full separation of rainwater and process water, resulting in a larger waste- water discharge than actual. And at our site in Italy, we use well water for the last rinse in the cleaning process and it is essentially not contaminated water but is accounted for as consumption. We only use municipal or own well water at our sites. ROYAL UNIBREW Annual report 202063 Corporate Social Responsibility 100% recycled PET Use of recycled packaging material has been increasing over the last couple of years – and will increase significantly towards . For exam- ple, our Egekilde water brand is now in % recycled PET, Lapin Kulta and Royal Organic is packed with % recycled shrink film, Ceres is with % recycled paper labels and our Faxe Kondi Booster in % recycled corrugated trays. Product circularity In the beverage industry product circularity depends to a high degree on closing the loop for packaging material (primary, secondary and tertiary). The elements are to remove, reduce, reuse and recycle material. The food safety requirements for primary packaging material (e.g. glass bottles, PET bottles and cans) are stringent as it is key to protect our products. The entire packaging system, e.g. bottles, crates, trays and wraps ensures there is no harm to our products during distribution, and packaging is therefore key to product protection and avoiding food waste. Thus, the packaging systems are complex, and substituting or eliminat- ing elements such as plastic wrap or down-weighting require careful testing to ensure continued stability. We continuously cooperate with our suppliers on reducing the weight of material/amount of material used per item. We have already reduced PET weight by % over a -year period and reduced aluminum in cans by %. In our secondary system, cardboard is being reduced as well. The work continues and we are in a process of setting concrete targets together with our suppliers. Furthermore, we have worked on increasing the amount of recycled PET in our bottles for several years. In , we set short term targets for and for selected catego- ries and with our new strategy, we are setting even higher We want to become circular across the value chain by engaging suppliers. We will close the material loop, reduce the strain on resources and reduce our footprint. • Eliminate unneces- sary packaging (incl. plastics) • Source recycled packaging material • Become the sustainable partner KEY INITIATIVES ambitions with a target of % recycled material for more categories in and even more by . We estimate that the transitioning from virgin to recycled packaging will reduce our CO footprint for packaging material by more than %. It is our target only to offer products in recyclable packaging in all our markets by . In principle, we only use mono materials today. Mono materials can easily be separated, sorted and recycled in clean fractions such as glass, PET, carton, aluminum, steel and shrink film. However, our juice portfolio, contributing .% of packing materials in on weight basis, is currently provided in coated carton, i.e. more complex laminated materials. While the recyclability of that particular material may be improved over the next couple of years, we will however, also be looking at alternatives. Reuse of materials is also an important part of ensuring product circularity. There is well-established reuse systems for packaging material in several of our markets, e.g, return systems for glass bottles, crates, steel kegs and pallets. How- ever, such systems are not in place in all markets. Well-func- tioning deposit return systems (DRS) are in place in Denmark, Finland and Lithuania and similar systems are currently being discussed in France, Latvia and Italy. We will continue our support to DRS in our major markets to increase the return rate further and look for solutions to avoid packaging wasting in other markets with more immature systems. ROYAL UNIBREW Annual report 202064 Corporate Social Responsibility We aim to ensure that our suppliers meet our high standards. In 2020, approximately 60% of our suppliers of direct material have signed our code of conduct. Supplier road map We have a large share of our footprint (environmental and social) outside our own direct control, and at the same time consumer awareness about impacts of the supply chain foot- print is increasing. Therefore, we engage with our supply chain to reduce the footprint and to increase supply chain transparency. We aim to ensure that our suppliers meet our high standards. In , approximately % of our suppliers of direct material have signed our code of conduct. We want to further develop our responsible sourcing principles by establishing a set of specific requirements. The principles will also encompass requirements for CO emission reduction targets for the sup- pliers as more than % of our carbon footprint is ‘outside our fence’. By , the target is a % reduction of the supply chain emissions and no later than all Royal Unibrew’s critical suppliers should have signed the responsible procurement principles and an agreement with a defined road map to re- duce their carbon footprint. We engage with our entire value chain to reduce carbon emissions in scope 3 and minimize negative environmental impact, including biodiversity, and social impact. • Further develop re- sponsible procurement principles • Road map for CO reduction in trans- portation, packaging, agriculture and sales refrigeration KEY INITIATIVES In , we have had preliminary meetings with selected suppliers regarding their goals and initiatives. This in com- bination with the current general consensus on possible tech- nological advances in the relevant sectors until , makes us believe it is a realistic target. Royal Unibrew has always cooperated closely with suppliers and other partners to improve our products as well as pro- duction and process performance. To reach our targets, it is pivotal on the one hand to build on these well-established relations and strengthen them further and on the other hand to identify and establish new partnerships for sustainable development. ROYAL UNIBREW Annual report 202065 Corporate Social Responsibility KEY AREAS Proudest employees Diversity, equality & inclusion Safe workplace mindset Our people We will lead a sustainable business including fostering a sustainability culture promoting a safe and healthy working environment where em- ployees feel proud, included, and have equal opportunities to realize their potential. We will develop tomorrow’s talents while building com- petences that ensures our success today and tomorrow We will reach our targets by: • Ensuring employees feel proud and to be an attractive employer • Developing sustainable leadership fostering diversity, equality, inclusion and developing tomorrow’s talents • Providing a safe and healthy working environment KPI % OF EMPLOYEES ARE ROYAL UNIBREW AMBASSADORS ROYAL UNIBREW Annual report 202066 Corporate Social Responsibility CSR – Our people Proudest employees We believe a key to take proudness to an even higher level is through sustainable leadership. When we invest in sustain- able leadership capabilities, we will not only stimulate more proudness but also obtain a relentless focus on developing talents as well as building today’s and tomorrow’s compe- tences to secure our future success. Additionally, sustaina- ble leadership nurtures a culture of innovation through an inclusive and diverse working environment and promotes a learning culture where everybody has equal opportunities de- velop their potential. Sustainable leaders recruit, develop and retain entrepreneurial and empowered talents thirsting for success and striving to do better every day. Finally, sustain- able leaders ensure that the workplace culture matches the expectations and needs of multiple generations of employees through creating purpose and meaning to the task at hand while upholding our high engagement levels. Our people drive our success and progress – and live and protect our values. We work as one team and our people are flexible while finding solutions to all challenges. Royal Uni- brew wants to honor our people by offering flexible working options that provides opportunities to adapt their job to their personal life circumstances. With job crafting we will addi- tionally provide the opportunity to raise empowerment and provide individuals to unfold their potential. With COVID- virtual working practice have become the new normal. We will continue utilising digital tools to drive more flexible modes of working, thereby also promoting a future environmentally friendly and sustainable workplace. We want people to feel proud of working at Royal Unibrew and feel proud of their individual contribu- tion. We believe that proud employees create better results and promotes us as an attractive employer • Develop sustainable leadership capabilities • Offering flexible work- ing options and job crafting • Employee involvement in local communities KEY INITIATIVES During , several areas were re-organized to meet new challenges, and in general, employees across functions and business units showed an enormous flexibility and agility in meeting the unprecedented challenges related to the global COVID- pandemic. Developing our ability to lead remotely and building resilience as a response to the COVID uncer- tainties was in focus the entire year. In Finland, Italy, and France an engagement survey was con- ducted in December . The results demonstrated an even higher engagement than the previous one. The results from the latest Group engagement survey from late showed that % of the employees are proud of working at Royal Unibrew. Additionally, % responded that they feel they have a meaningful work, whereas the influence on own job param- eter was lower at %. We have been working with various initiatives to improve the engagement across business units and functions in . In , we initiated an improvement of our human capital management practices in our major markets ranging from recruiting, onboarding, performance, compensation, learning, succession, and development. To emphasis the importance of the people strategy Human Resources is now a part of the Senior Leadership Team. The new recruits in Hartwall We recruited the second group of graduates in . In short, the idea is to recruit young potentials every year who enter a two-year trainee program. They are offered a “real” role in the business which changes after the first year and furthermore, their developed is supported by a number of activities in addition to their specific role. After two years, they get a permanent position in the organization. This is an example of how we work to attract young talents and at the same time support social responsibility. ROYAL UNIBREW Annual report 202067 Corporate Social Responsibility Diversity, equality & inclusion We want our organization to reflect the diversity of today’s society and we believe that a more diverse, equal and inclu- sive workforce creates the best and most dynamic workplace climate, as well as it supports innovation and long-term value creation for all our stakeholders. Continuous efforts are made to ensure workplace diversity and inclusion. Traditionally, the beverage industry is rela- tively male-dominated, but Royal Unibrew strives on an on- going basis to ensure a more equal gender representation. We measure gender diversity in international management teams and at the Board of Directors. The number of women at the Board of Directors is out of members elected by the shareholders. In our international management teams, we improve gender diversity year after year. Our target is a more balanced gender representation of at least % of each gender by and the same applies to the Board of Directors. When recruiting new executives and managers, we prioritize identifying without discrimination and aim to encourage female candidates’ interest in taking on managerial tasks. Several other initiatives were carried out, such as approval of our policy and objectives on diversity and inclusion by the Board of Directors and an improvement project on employee master data to improve the foundation for our D&I priorities. Diving into the gender diversity and inclusion performance as an effect of our initiatives, there is a very positive trend in our management teams at our dif- Diversity, equality and inclusion is a fundamental part of sustainability. We want a diverse, equal and inclusive company providing resilience and driving innovation. • Ensure/enable a culture of equality and inclusion valuing diversity • Become a driver of equality and inclusion in the local communities KEY INITIATIVES ferent markets, where we for the past two consecutive years are above the % target, at % on average in of the underrepresented gender, i.e. women, compared to our inter- national management teams average of % in , which has also improved year on year. We also work on promoting other diversity aspects for exam- ple by including people that for various reasons struggle to maintain or get a foothold on the job market. In the coming years we will focus on two initiatives: the first is to analyze where diversity is specifically challenging seen from a busi- ness critical angle being gender, competences, age, seniority, ethnicity, etc., supported by data, and the second is to work on maintaining an inclusive culture. EMPLOYEES BY GENDER, INT. MANAGEMENT TEAMS Gender % 2020 2019 2018 Female 33 32 31 Male 67 68 69 ROYAL UNIBREW Annual report 202068 Corporate Social Responsibility 2016 2019 202020182017 0 4 8 12 16 Safe workplace mindset A good working environment is a safe working environment, and that is a top priority for Royal Unibrew. We focus on min- imizing risks and raising awareness about health and safety for all our employees and take preventive measures to avoid employees being worn out and incurring work-related injuries – and we recognize that one accident is one to many. When deploying our sustainability strategy, we will enhance our efforts to support behavioral based safety and employee well-being (where harassment is a focus area) we see that as fundamental for maintaining and further developing our safety mindset and culture. With the aim to move towards zero lost time incidents, all employees will be trained in be- havior-based safety, including increasing the transparency of root cause assessments to improve learning, as well as linking safety to bonus targets. Safety is a prerequisite for taking care of employees and ensuring that they can be something for other people outside of work. To be successful in our safety efforts this needs to be a mindset and something our employees live by every day. • Create a harassment free working environ- ment • Ensure employee wellbeing • Further develop our safety culture KEY INITIATIVES Local focus and initiatives have resulted in a continued re- duction in Lost Time Incidents per million working hours (LTI frequency) by % from to and has leveled out between and . The LTI frequency unfortunately in- creased between and from . to .. The target of % reduction in compared to was therefore not met. Root cause assessments indicate that behavior is the main reason for incidents. We believe the increase may at least in part, be explained by the job rotation between on- trade and off-trade as a result of COVID-, where employees from other functions assisted in off-trade and the unusual sales situation may have stressed the organization as well. Working overtime more than usual may be an additional fac- tor. We will enhance our behavioral-based safety training and awareness in across the Group to reduce the LTI frequency. Harassment free working environment In connection with our on-going dialogue in the production area, we have identified a need for addressing and increasing awareness of potentially abusive acts and harassment to improve well-being. Royal Unibrew has zero tolerance, and we have just launched a new initiative governed by our well-being groups to facilitate our journey towards zero. The objective is to create an environment, where everyone not only has the right to speak up but also feel comfortable, when they point at a lack of consideration from a colleague, including managers. LOST TIME INCIDENTS Accidents per million work hours “Further development of the safety culture by using humor is the philosophy behind our “Safety Thirst” campaign developed together with employees from various business functions. The campaign is currently being rolled out.” ROYAL UNIBREW Annual report 202069 Corporate Social Responsibility Note 1: Basis for preparation Royal Unibrew A/S has developed a CSR data reporting manual encom- passing roles and responsibilities, data scope, reporting, controls and documentation requirements as well as a detailed description of each key performance indicator. Note 2: Our Consumers/Customers The data disclosed as target follow up for to is based on actual sales volume in the period from to , divided into no/low and regular kcal content for the categories Carbonated soft drinks, Water and Energy and for alcohol content (Beer, Cider and RTD) no and low compared to regular and strong. The sales volumes are used as an assessment of a balanced development and launch of new no/low and regular products. Note 3: Our products Royal Unibrew has reported on environmental performance for a num- ber of years. Therefore, data are available from . The data has been corrected to the reporting requirements mentioned in Note . Acquisitions in and increased our absolute comsumptions. Despite acquisitions in and the absolute and relative consump- tion of energy decreased slightly from to and the associated CO emissions as well. The energy consumption per hectoliter and the CO emission per hectoliter decreased significantly compared to (baseline for the / targets) by % and %, respectively. If corrected for the acquired sites, the CO emission decreased %. The improvement is due to a keen focus on energy reduction projects. The consumption of water per hectoliter has decreased by % compared to , and more than %, if corrected for the acquisitions. Whereas the absolute consumption of water has levelled out from to . We have for the second time calculated the CO emission for transpor- tation (downstream), including GHG Scope and Scope , i.e. owned and leased vehicles as well as third party forwarders measured as kg CO eq. The calculation is based on industry standards and direct input from our forwarders. It is estimated that at least % of the footprint is accounted for, but further data development is needed. The same applies to our CO emission from packaging material. Note 4: Our People Royal Unibrew A/S has collected data for lost time incidents (LTI) and disclosed information in our annual report since . The data has been corrected to the new reporting requirements mentioned in Note . There may be underreporting of LTIs as the focus traditionally has been on registering incidents for production/ware housing and to a lesser degree distribution, sales and administration. We will continue our focus in this area. As it may be noted other relevant data for occupational health and safety performance has only been collected for to , as the recording has been lacking at some entities before that. The same applies to employee engagement and diversity. Descriptive notes for the non-financial highlights and ratios ROYAL UNIBREW Annual report 202070 Corporate Social Responsibility → Management's statement on the Annual Report I Independent auditor's report Signatures and statements ROYAL UNIBREW Annual report 202071 Signatures and statements Sign – COVER The Board of Directors and the Executive Management have today considered and adopted the Annual Report of Royal Unibrew A/S for January - December . The Annual Report is prepared in accordance with Interna- tional Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for annual reports of listed companies. In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position of the Group and the Parent Company at December as well as of the results of the Group and Parent Company operations and cash flows for the financial year January - December . In addition, in our opinion the Annual Report for Royal Unibrew A/S for January - December with the file name ROYAL---.zip in all material aspects is prepared in accordance with ESEF Regulation. In our opinion, Management’s Review gives a true and fair account of the development in the operations and financial circumstances of the Group and the Parent Company, of the results for the year, cash flows and of the Parent Company’s financial position, as well as a description of the key risks and uncertainties facing the Group and the Parent Company. We recommend that the Annual Report be adopted at the Annual General Meeting. Faxe, 3. marts 2021 Executive Management Lars Jensen Lars Vestergaard President & CEO CFO Board of Directors Walther Thygesen Jais Valeur Chairman Deputy Chairman Martin Alsø Einar Esbensen Nielsen Heidi Kleinbach-Sauter Claus Kærgaard Christian Sagild Catharina Stackelberg-Hammarén Floris van Woerkom Management's Statement on the Annual Report ROYAL UNIBREW Annual report 202072 Signatures and statements Sign – Management statement To the shareholders of Royal Unibrew A/S Opinion In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view of the Group’s and the Parent Company’s assets, liabilities and financial position at December and of the results of the Group’s and Parent Company’s operations and cash flows for the financial year January – December in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements in the Danish Financial Statements Act. Our opinion is consistent with our long-form audit report to the Board or Directors and the Audit Committee. Audited financial statements Royal Unibrew A/S’ consolidated financial statements and separate financial statements for the financial year January – December comprise the income statement, state- ment of comprehensive income, balance sheet, statement of changes in equity, statement of cash flows and notes, includ- ing summary of significant accounting policies, for the Group as well as for the Parent Company (the financial statements). The financial statements are prepared in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements in the Danish Financial Statements Act. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We believe that the audit evidence we have obtained is suf- ficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the In- ternational Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these rules and requirements. We declare, to the best of our knowledge and belief, that we have not provided any pro-hibited non-audit services, as referred to in Article () of the Regulation (EU) / and that we remained independent in conducting the audit. Appointment as auditors We were appointed auditors of Royal Unibrew A/S for the first time on April for the financial year . We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of three years including the financial year . Statement on the Management’s review Management is responsible for the Management’s review. Our opinion on the financial statements does not cover the Management’s review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management’s review and, in doing so, consider whether the Management’s review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Man- agement’s review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the Management’s review is in accordance with the financial statements and has been prepared in accordance with the requirements of the Danish Financial Statement Act. We did not identify any material misstatement of the Management’s review. Management’s responsibility for the financial statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the International Financial Reporting Standards as adopted by the EU and additional requirements in the Danish Financial Statements Act and for such internal control that Manage- ment determines is necessary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error. In preparing the financial statements, Management is responsible for assessing the Group’s and the Parent Com- pany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Independent auditor's report ROYAL UNIBREW Annual report 202073 Signatures and statements Sign – Independent auditor Key audit matters How our audit addressed the key audit matter Valuation of intangible assets Goodwill and trademarks represent 51% of the Group’s assets. Management conducts annual im- pairment test to determine whether the carrying values of recognised goodwill and trademarks are considered to be impaired and, hence, should be written down to the recoverable amount. Management determines the recoverable amount of the Cash Generating Units (CGUs) using a dis- counted cash flow model (value in use). Management uses key assumptions in respect of market and country risks, revenue and margin development and discount rate for the CGUs. The audit of the recoverable amount has been considered a key audit matter as the determina-tion of the recoverable value is associated with significant estimation uncertainty. The carrying amount of investments in subsidiaries in the parent company’s separate financial state- ments and the values of intangible assets contained therein is also tested to identify any impairment. This is the same test as described above. Reference is made to note 11 in the consolidated financial statement and note 11 in the Parent Com- pany financial statements. For the purpose of our audit, the procedures we carried out included the following: • We have discussed with Management and evaluated the internal controls and procedures for preparing impairment tests and the budget and forecasts. • We have focused our audit on the models and the appropriateness of key assumptions used by Management to calculate the values in use, as well as defined CGUs and assessed the consistency of the assumptions applied. • We have assessed the appropriateness of the discount rates applied and underlying assumptions, as well as benchmarking to market data and external information. • Our internal valuation specialists have supported the audit where relevant. • In addition, we have assessed whether the disclosures; Note Intangible Assets in the consolidated financial statements meet the requirements of IFRS. Revenue recognition There are a significant number of transactions and contracts with customers. Sales contracts with customers are relatively complex with discounts and agreements with marketing contributions etc. Furthermore locally imposed duties and fees are complex. Overall this introduce an inherent risk to revenue recognition process. Therefore we have considered this as a Key Audit Matter. Reference is made to note 5 in the consolidated financial statements. For the purpose of our audit, the procedures we carried out included the following: • We have considered the appropriateness of the Group’s revenue recognition policy and assessed the compliance with IFRS Revenue from Contracts with Customers. • We have evaluated the systems and key controls, designed and implemented by Management, related to revenue recognition. • We have discussed with Management the key judgements related to recognition, measurement and classification of revenue • In addition, we have performed substantive procedures. We have discussed significant and complex customer contracts, locally imposed duties and fees and the development in discounts and the treatment of marketing contribution to ensure that accounting policies are applied correctly. • We have performed journal-entries testing and verification of proper cut-off at year-end. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the 2020 financial year. These matters were addressed in the context of our audit of the financial statements as a whole, and in the forming of our opinion thereon. We do not provide a separate opinion on these matters. ROYAL UNIBREW Annual report 202074 Signatures and statements Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasona- ble assurance is a high level of assurance but is not a guaran- tee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements may arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or er- ror, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omis- sions, misrepresentations or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the pur- pose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material unc- er-tainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opin- ion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Company to cease to continue as a going concern. • evaluate the overall presentation, structure and con- tents of the financial statements, including the disclo- sures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance re- garding, among other matters, the planned scope and tim- ing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with government with a state- ment that we have complied with relevant ethical require- ments regarding independence, and communicate to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated to those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and therefore the key audit matters. We de- scribe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determined that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on compliance with the ESEF Regulation As part of our audit of the Consolidated Financial State- ments and Parent Company Financial Statements of Royal Unibrew A/S we performed procedures to express an opinion on whether the annual report of Royal Unibrew A/S for the financial year January – December with the file name ROYAL---.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) / on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; ROYAL UNIBREW Annual report 202075 Signatures and statements • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for financial information required to be tagged using judge- ment where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material re- spects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of proce- dures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial State-ments. In our opinion, the annual report of Royal Unibrew A/S for the financial year January – December with the file name ROYAL---.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Copenhagen, March KPMG Statsautoriseret Revisionspartnerselskab CVR no. Lau Bent Baun Niels Vendelbo State Authorised State Authorised Public Accountant Public Accountant MNE no. MNE no. ROYAL UNIBREW Annual report 202076 Signatures and statements Consolidated financial statements 2020 ROYAL UNIBREW Annual report 202077 Consolidated Financial Statement ConFin – COVER Consolidated Income Statement mDKK Note 2020 2019 Net revenue 7,557 7,692 Production costs 6, 7 -3,613 -3,612 Gross profit 3,944 4,080 Sales and distribution expenses 6. 7 -2,085 -2,262 Administrative expenses 6, 7 -344 -349 EBIT 1,515 1,469 Income after tax from investments in associates 13 33 25 Financial income 8 3 5 Financial expenses 9 -46 -41 Profit before tax 1,505 1,458 Tax on the profit for the year 10 -307 -318 Net profit for the year 1,198 1,140 Profit for the year is attributable to: Equity holders of Royal Unibrew A/S 1,183 1,142 Non-controlling interests 15 -2 Net profit for the year 1,198 1,140 Earnings per share (DKK) 17 24.1 23.0 Diluted earnings per share (DKK) 17 24.1 22.9 mDKK Note 2020 2019 Net profit for the year 1,198 1,140 Other comprehensive income Items that may be reclassified to the income statement Exchange adjustment of foreign group enterprises -29 4 Value adjustment of hedging instruments 11 14 Tax on other comprehensive income (fair value adjustment) 10 -2 -3 Total -20 15 Items that may not be reclassified to the income statement Actuarial gain on pension schemes 1 2 Tax on actuarial gain on pension schemes 0 0 Total 1 2 Other comprehensive income after tax -19 17 Total comprehensive income 1,179 1,157 Comprehensive income for the year is attributable to: Equity holders of Royal Unibrew A/S 1,164 1,159 Non-controlling interests 15 -2 Net profit for the year 1,179 1,157 Consolidated Income Statement for 1 January - 31 December Consolidated Statement of Comprehensive Income for 1 January - 31 December ROYAL UNIBREW Annual report 202078 Consolidated financial statements ConFin – Income statement 2016 2017 2018 2019 2020 3,700 4,700 5,700 6,700 7,700 2016 2017 2018 2019 2020 8,000 9,000 10,000 11,000 12,000 Sales and earnings VOLUMES (thl) NET REVENUE (mDKK) Volumes, net revenue and gross profit Change, Q4 Q4 Change, 2020 2019 % 2020 2019 % Volumes, beverages (thl) 11,093 11,024 1% 2,647 2,534 4% Net Revenue (mDKK) 7,557 7,692 -2% 1,733 1,787 -3% Gross Profit (mDKK) 3,944 4,080 -3% 878 908 -3% Volumes for show an aggregated sale of . million hectolitres of beverages, which was % higher com- pared to . Organically the volumes were at the same level as in . Net revenue for decreased by % and amounted to DKK , million compared to DKK , million in . The decrease primarily related to impact from Covid- in Western Europe and Baltic Sea. In the International segment the Covid- impact was more than compensated by increased sales in International and due to better product-mix and USD currency rates in Americas. Organic growth decreased % compared to . Compared to the overall average selling price per volume unit has decreased with % due to Covid--related shift from On-Trade to Off-Trade sales channel. The gross profit for was DKK million below figure and amounted to DKK , million equivalent to a % decrease (Q: -%). The gross margin was . percentage point below the margin (Q: increase .pp) and represented .% compared to .% for . Gross profit per volume unit was % lower (Q: lower %) than in . Expenses Change, Q4 Q4 Change, 2020 2019 % 2020 2019 % Sales and distribution expenses (mDKK) 2,085 2,262 -8% 528 541 -2% Administrative expenses (mDKK) 344 349 -1% 98 100 -2% Sales and distribution expenses for was DKK million below the figure and amounted to DKK , million compared to DKK , million for . The net saving covers lower spending on sales activity due to COVID- and marketing, while increased provision for loss on trade receivables has had the opposite impact. Administrative expenses for showed a DKK million decrease compared to and amounted to DKK million compared to DKK million for , primarily caused by COVID- related cost savings. , mDKK in net revenue A DECREASE OF % COMPARED TO ROYAL UNIBREW Annual report 202079 Consolidated financial statements 2016 2017 2018 2019 2020 500 700 900 1,100 1,300 1,500 1,700 1,900 18 19 20 21 22 23 24 25 EBITDA AND EBITDA MARGIN (mDKK) (%) EBITDA EBITDA margin 2016 2017 2018 2019 2020 0 500 1,000 1,500 2,000 0.0 7.5 15.0 22.5 30.0 EBIT AND EBIT MARGIN (mDKK) (%) EBIT EBIT margin EBITDA, EBIT and financials Change, Q4 Q4 Change, 2020 2019 % 2020 2019 % EBITDA (mDKK) 1,861 1,814 3% 329 361 -9% EBIT (mDKK) 1,515 1,469 3% 252 267 -6% Net interest expenses -43 -36 19% -13 -9 44% Income after tax from investments 33 25 32% 15 9 67% Earnings before interest, tax, depreciation and amortization (EBITDA) for showed a DKK million in- crease and amounted to DKK , million compared to DKK , million for . In Q EBITDA decreased by DKK million compared to the same period in . EBIT for amounted to DKK , million, which is DKK million above the figure. The positive development in both EBITDA and the EBIT are primarily attributable to the International and Baltic Sea segments, while due to COVID- EBIT and EBITDA decreased in the western europe . The EBIT margin for was .% compared to . % realized in . Net financials expenses for were DKK million higher than in aggregating an expense of DKK million. Financial expenses were DKK million on a net basis compared to DKK million in , mainly due to exchange rate losses. Profit and earnings per share Change, Q4 Q4 Change, 2020 2019 % 2020 2019 % Profit before tax (mDKK) 1,505 1,458 3% 254 267 -5% Tax on profit (mDKK) -307 -318 -3% -36 -45 -20% Net profit (mDKK) 1,198 1,140 5% 218 222 -2% Earnings per share (DKK) 24.1 23.0 5% 4.6 4.3 7% Profit before tax for was DKK million above the figure and amounted to DKK , million compared to DKK , million for , equivalent to an increase of %. Tax on the profit for was an expense of DKK million and corresponds to a tax rate of .% on the profit excluding income after tax from investments in associates. The net profit for amounted to DKK , million, which is DKK million above the figure, equivalent to an increase of %. The earnings per share increased in to DKK . per share compared to . for in , equivalent to an increase of %. The Parent Company’s profit for the year amounted to DKK , million compared to DKK , million for . Dividend income from subsidiaries and associates amounted to DKK million compared to DKK million for . ROYAL UNIBREW Annual report 202080 Consolidated financial statements ConFin – Income statement text Consolidated Balance Sheet Assets at 31 December Liabilities and Equity at 31 December mDKK Note 2020 2019 NON-CURRENT ASSETS Intangible assets 11 4,408 4,516 Property, plant and equipment 12 2,455 2,501 Investments in associates 13 131 126 Other non-current investments 14 21 20 Non-current assets 7,015 7,163 CURRENT ASSETS Inventories 15 517 463 Receivables 16 639 736 Prepayments 54 59 Cash and cash equivalents 81 72 Current assets 1,291 1,330 Assets 8,306 8,493 mDKK Note 2020 2019 EQUITY Share capital 17 99 100 Other reserves 716 746 Retained earnings 1,827 1,640 Proposed dividend 666 611 Equity contributable to equity holders of Royal Unibrew A/S 3,308 3,097 Non-controlling interests 24 10 Equity 3,332 3,107 LIABILITIES NON-CURRENT LIABILITIES Deferred tax 18 554 546 Mortgage debt 3, 20 831 851 Credit institutions 3, 20 1,293 1,303 Other payables 52 105 Non-current liabilities 2,730 2,805 CURRENT LIABILITIES Mortgage debt 3, 20 19 4 Credit institutions 3, 20 131 619 Trade payables 1,047 1,018 Provisions 10 17 Corporation tax 10 9 29 Other payables 19 1,028 894 Current liabilities 2,244 2,581 Liabilities 22 4,974 5,386 Liabilities and equity 8,306 8,493 ROYAL UNIBREW Annual report 202081 Consolidated financial statements ConFin – Balance Sheet 2016 2017 2018 2019 2020 0 2,000 4,000 6,000 8,000 2016 2017 2018 2019 2020 -1,500 -1,000 -500 0 500 2016 2017 2018 2019 2020 0 10 20 30 40 ROIC excl goodwill ROIC incl goodwill Balance sheet and financial position NET WORKING CAPITAL (mDKK) ROIC (%) INVESTED CAPITAL (mDKK) Balance Sheet Royal Unibrew’s balance sheet amounted to DKK , million, which is DKK million below the figure. The decrease is mainly caused by a net inventories and receivables decrease of DKK million due to lower sales activities end of Q and to amortisation and depreciation of non-current assets exceeding investments in the amount of DKK million. Further, the performance based earn-out part of the agreed purchase price for Bev.Con ApS (Cult) will not be paid due to lower than expected performance in , hence the fair value of the assets and the earn-out debt have been lowered by DKK million when preparing the final purchase price allocation (we refer to note ). Invested capital decreased by DKK million from to . ROIC excluding goodwill calculated on a run- ning months basis increased by . percentage points to .% mainly due to the decrease in the invested capital. ROIC including goodwill increased by . percentage points to .%. Compared to , the equity ratio increased by percentage points in amounting to % end of compared to % at the end of . Equity at the end of December amounted to DKK , million compared to DKK , million at the end of . The DKK million increase comprised the positive comprehensive income of DKK , million (: DKK , million) reduced by distribution to shareholders of DKK million (: DKK million) by way of dividend and share buy-back. Net interest-bearing debt for showed a DKK million decrease and amounted to DKK , million at December compared to DKK , million at the end of . The decrease in net interest-bearing debt was as expected and comprised the positive free cash flow before prepayment of lease facilities of DKK , million less distribution to shareholders of DKK million and other items of DKK million. The net interest-bearing debt to EBITDA ratio (running months basis) was .x (: .x). Funds tied up in working capital showed a negative DKK million at the end of December compared to a negative DKK million at the end of . Funds tied up in working capital thus decreased by DKK million in (: increase of DKK million), mainly due to the beer campaign in Finland and channel mix. Funds tied up in inventories, trade receivables and trade payables decreased by DKK million (: increase of DKK million), whereas funds tied up in the other elements of working capital such as excise taxes and witholding tax on salaries decreased by DKK million (: decrease of DKK million). , mDKK in equity AN INCREASE OF MDKK COMPARED TO ROYAL UNIBREW Annual report 202082 Consolidated financial statements ConFin – Balance text Consolidated Cash Flow Statement for 1 January - 31 December mDKK Note 2020 2019 Debt financing: Proceeds from increased drawdown on credit facilities 20 149 546 Repayment on credit facilities 20 -579 -419 Repayment on lease facilities 20 -73 -62 Dividends paid to shareholders -600 -538 Acquisition of shares for treasury -362 -433 Capital increase, minority shareholders 0 2 Cash flows from financing activities -1,465 -904 Change in cash and cash equivalents 15 -74 Cash and cash equivalents at 1 January 72 145 Exchange adjustment -6 1 Cash and cash equivalents at 31 December 81 72 From the 1 Janury 2020 Royal Unibrew defines the free cash flow as net cash operating activities less net cash used in investing activities excluding acquisitions and net proceeds from intangible assets and fixed asset investments, less repayment on leasing facilities. Comparable numbers 2019 have been adjusted. Free cash flow Net cash from operating activities 1,738 1,402 Net cash used in investing activities -251 -200 Repayment on lease facilities -73 -62 Free cash flow 1,414 1,140 Effect from changed free cash flow definition -18 mDKK Note 2020 2019 Net profit for the year 1,198 1,140 Adjustments for non-cash operating items 21 670 680 Change in working capital 227 -43 Received financial income 4 5 Paid financial expenses -46 -40 Financial expenses related to leasing -2 -2 Corporation tax paid -313 -338 Cash flows from operating activities 1,738 1,402 Dividends received from associates 21 25 Sale of property, plant and equipment 8 36 Purchase of property, plant and equipment -280 -261 Acqusition of subsidiaries -6 -365 Purchase/-sale of intangible assets and fixed asset investment -1 -7 Cash flows from investing activities -258 -572 ROYAL UNIBREW Annual report 202083 Consolidated financial statements ConFin – Cash Flow Statement Net interest bearing debt NIBD/EBITDA lb 12 months Due to adoption in 2018 of IFRS 16 (leases) using the modified retrospective approach 2016-2017 are not comparable to 2018-2020 2016 2017 2018 2019 2020 0 700 1,400 2,100 2,800 0.0 0.5 1.0 1.5 2.0 2016 2017 2018 2019 2020 0 500 1,000 1,500 2,000 2016 2017 2018 2019 2020 0.0 1.5 3.0 4.5 6.0 Cash Flow NIBD AND NIBD/EBITDA (mDKK) FREE CASH FLOW (mDKK) Cash Flow Statement Cash flows from operating activities for amounted to DKK , million (: DKK , million) compris- ing DKK , million (: DKK , million) of profit for the period adjusted for non-cash operating items, positive working capital cash flow of DKK million (: a negative DKK million), net interest paid of DKK million (: DKK million) and taxes paid of DKK million (: DKK million). The free cash flow for amounted to DKK , million, which was an increase of DKK million compared to . Cash flows from operating activities and dividend from associates showed a DKK million increase compared to the figures, and net investments in property, plant and equipment showed a DKK million decrease, comprising DKK million higher gross investments and DKK million lower revenues from asset divestments. Further repayment on lease facilities increased DKK million. We estimate that the normalized free cash flow level (without COVID- impact and extraordinary beer campaign in Finland) for Royal Unibrew was around DKK , million. , mDKK free cash flow MDKK HIGHER THAN OF WHICH MDKK FROM WORKING CAPITAL INVESTMENTS IN % OF NET REVENUE (%) ROYAL UNIBREW Annual report 202084 Consolidated financial statements ConFin – Cash flow text Consolidated Statement of Changes in Equity for 1 January - 31 December Parents Share Proposed company Share premium Translation Hedging Total other Retained dividend share of Minority mDKK capital account reserve reserve reserves earnings for the year equity share Total Equity at 31 December 2019 100 773 -24 -3 746 1,641 611 3,098 9 3,107 Changes in equity in 2020 Net profit for the year 0 1,183 1,183 15 1,198 Other comprehensive income -29 11 -18 1 -17 -17 Tax on other comprehensive income 0 -2 -2 -2 Total comprehensive income 0 0 -29 11 -18 1,182 0 1,164 15 1,179 Dividends paid to shareholders 0 -600 -600 -600 Dividend on treasury shares 0 2 -2 0 0 Acquisition of shares for treasury 0 -362 -362 -362 Proposed dividend 0 -657 657 0 0 Capital reduction -1 -12 -12 13 0 0 Share-based payments 0 7 7 7 Tax on changes in equity, shareholders 0 1 1 1 Total shareholders -1 -12 0 0 -12 -996 55 -954 0 -954 Total changes in equity in 2020 -1 -12 -29 11 -30 186 55 210 15 225 Equity at 31 December 2020 99 761 -53 8 716 1,827 666 3,308 24 3,332 The share capital at 31 December 2020 amounts to DKK 98,700,000 (2019: DKK 100,200,000) and is distributed on shares of DKK 2 each. Proposed dividend for the year amounts to DKK 13.50 per share (2019: DKK 12.20 per share). ROYAL UNIBREW Annual report 202085 Consolidated financial statements ConFin – Equity Consolidated Statement of Changes in Equity for 1 January - 31 December Parents Share Proposed company Share premium Translation Hedging Total other Retained dividend share of Minority mDKK capital account reserve reserve reserves earnings for the year equity share Total Equity at 31 December 2018 102 787 -31 -17 739 1,507 551 2,899 9 2,908 Changes in equity in 2019 Net profit for the year 0 1,142 1,142 -2 1,140 Other comprehensive income 7 14 21 -1 20 20 Tax on other comprehensive income 0 -3 -3 -3 Total comprehensive income 0 0 7 14 21 1,138 0 1,159 -2 1,157 Minority shareholders’ share of acquired businesses 0 2 2 Dividends paid to shareholders 0 -538 -538 -538 Dividend on treasury shares 0 13 -13 0 0 Acquisition of shares for treasury 0 -433 -433 -433 Proposed dividend 0 -611 611 0 0 Capital reduction -2 -14 -14 16 0 0 Share-based payments 0 6 6 6 Tax on changes in equity, shareholders 0 5 5 5 Total shareholders -2 -14 0 0 -14 -1,004 60 -960 2 -958 Total changes in equity in 2019 -2 -14 7 14 7 134 60 199 0 199 Equity at 31 December 2019 100 773 -24 -3 746 1,641 611 3,098 9 3,107 ROYAL UNIBREW Annual report 202086 Consolidated financial statements Descriptive notes Basis of preparation .............................................. Significant accounting estimates and judgements .................................................... Financial risk management .................................. Derivatives .............................................................. Segment reporting................................................. Notes referring to Income Statement, Balance Sheet and Cash Flow Statement Staff expenses ......................................................... Expenses broken down by nature ........................ Financial income ................................................... Financial expenses ............................................... Tax on the profit for the year ................................ Intangible assets ................................................... Property, plant and equipment ............................ Investments in associates .................................... Other fixed asset investments ............................. Inventories ............................................................. Receivables ............................................................ Equity and basis of earnings/ cash flow per share .............................................. Deferred tax ............................................................ Other current payables ......................................... Debts ....................................................................... Cash Flow Statement ............................................ Other notes Contingent liabilities, security and other liabilities ................................................ Related parties ....................................................... Acquisition of subsidiaries .................................... Notes to Consolidated Annual Report ROYAL UNIBREW Annual report 202087 Consolidated Financial Statement ConFin – Notes contents Descriptive notes to Consolidated Annual Report Note 1 Basis of preparation of Consolidated Annual Report Basis of preparation Royal Unibrew A/S is a limited liability company registered in Denmark. The Financial Statements for the period January - December presented in the Annual Report comprise both Consolidated Financial Statements of Royal Unibrew A/S and its subsidiaries (Group) and sep- arate Parent Company Financial Statements. The Financial Statements of Royal Unibrew for have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for financial statements, cf the Danish Statutory Order on Adoption of IFRS issued pursuant to the Danish Financial Statements Act. The Board of Directors and the Executive Management considered and adopted the Annual Report of Royal Unibrew A/S for on March . The Annual Report will be submitted for adoption by the sharehold- ers of Royal Unibrew A/S at the Annual General Meeting on April . The Financial Statements are presented in Danish kroner (DKK). Accounting policies are unchanged from last year. Significant accounting policies This section describes the general accounting policies applied by Royal Unibrew. A detailed description of the accounting policies applied and critical estimates made with respect to specific reported amounts is presented in the relevant notes. The purpose of this is to create full transparency of the disclosed amounts by providing a total description of the relevant accounting policy, the critical estimates and the numerical information for each note. The description of accounting policies in the notes constitutes part of the overall description of Royal Unibrew’s accounting policies. Accounting policies are unchanged from last year except from imple- mention of: • Amendments to References to the Conceptual Framework in IFRS Standards • COVID--Related Rent Concessions (Amendment to IFRS ) • Amendments to IFRS Definition of a Business • Amendments to IAS 1 and IAS 8 Definition of Material • Amendments to IFRS , IAS and IFRS Interest Rate Benchmark Reform – Phase (IBOR) None of the new standards have had any impact on recognition and measurement on the Group's consolidated financial statements . New and amended standards and interpretations that have not yet taken effect At the time of publication of this Annual Report, the IASB has issued new and amended financial reporting standards and interpretations which are potentially relevant, but not mandatory, for Royal Unibrew A/S at the time of preparation of the Annual Report for : • IFRS Insurance Contracts including amendments to IFRS • Amendments to IAS : Classification of liabilities as current or non-current • Amendments to IFRS Business Combinations: Reference to the Conceptual Framework • Amendments to IAS Property, Plant and Equipment: Proceeds before Intended Use • Amendments to IAS Provisions, Contingent Liabilities and Contin- gent Asset: Onerous Contracts – Costs of Fulfilling a Contract • Annual Improvements – • Amendments to IFRS Insurance Contracts – deferral of IFRS • Amendments to IFRS , IAS , IFRS , IFRS and IFRS : Interest Rate Benchmark Reform – Phase The adopted, not yet effective standards and interpretations will be implemented as they become mandatory for Royal Unibrew A/S. None of the new standards or interpretations are expected to have a signif- icant impact on recognition and measurement for Royal Unibrew A/S. Consolidated Financial Statements The Consolidated Financial Statements comprise Royal Unibrew A/S (the Parent Company) and enterprises in which the Parent Company exercises control (subsidiaries). Enterprises in which the Group holds between % and % of the votes and exercises significant influence but not control are classified as associates. The Consolidated Financial Statements are prepared on the basis of Financial Statements of all group enterprises prepared under the Group’s accounting policies by combining accounting items of a uniform nature. Elimination is made of intercompany income and expenses, unrealized intercompany profits and losses, balances and sharehold- ings. Comparative figures are not adjusted for newly acquired, sold or wound-up enterprises. Acquired enterprises are recognised as of the date of acquisition. Enter- prises disposed of are recognised in the consolidated income statement up until the date of disposal. Non-controlling interests’s share of profit/loss for the year and of the equity in subsidiaries is included as part of Royal Unibrews profit and equity respetively, but shown as seperate items. Translation policies For each of the reporting entities of the Group, a functional currency is determined. The functional currency is the currency of the primary ROYAL UNIBREW Annual report 202088 Consolidated financial statements ConFin – Note 01 Note 1 Basis of preparation of Consolidated Annual Report (continued) Note 2 Significant accounting estimates and judgements economic environment in which the reporting entity operates. Transac- tions in other currencies than the functional currancy are transactions in foreign currencies. Transactions in other currencies than the functional currency are in- itially translated into Danish kroner (DKK) at the exchange rates at the dates of transaction. Receivables, payables and other monetary items in foreign currencies not settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Exchange adjustments arising due to differences between the transaction date rates and the rates at the dates of payment or the rates at the balance sheet date, respectively, are recognised in financial income and ex- penses in the income statement. Property, plant and equipment and intangible assets, inventories and other non-monetary asset purchase in foreign currencies and measured at historical cost are translated at the transaction date rates. On recognition in the Consolidated Financial Statements of enterprises with another functional currency than Danish kroner (DKK), income statements are translated at average annual exchange rates. Balance sheet items are translated at the exchange rates at the balance sheet date. Exchange adjustments arising on the translation of the opening balance sheet items of foreign enterprises at exchange rates at the balance sheet date and on the translation of income statements from average exchange rates to exchange rates at the balance sheet date are recog- nised in other comprehensive income. Similarly, exchange adjustments arising due to changes made directly in equity of foreign enterprises are recognised in other comprehensive income. On recognition in the Consolidated Financial Statements of associates with a functional currency that differs from the presentation currency of the Parent Company, the share of results for the year is translated at average exchange rates, and the share of equity including goodwill is translated at the exchange rates at the balance sheet date. Exchange adjustments arising on the translation of the share of the opening equity of foreign associates at exchange rates at the balance sheet date and on the translation of the share of results for the year from average exchange rates to exchange rates at the balance sheet date are recognised in other comprehensive income and classified in equity under a separate translation reserve. In connection with the preparation of the Parent Company and Consoli- dated Financial Statements, Management makes estimates and judge- ments as to how recognition and measurement of revenue, assets and liabilities should take place based on the accounting policies applied. Judgements as an element in significant accounting policies The calculation of carrying amounts of certain assets and liabilities requires judgement as to how assets and liabilities should be classified in the Financial Statements and how future events will affect the value of these assets and liabilities at the balance sheet date. In connection with the financial reporting for , the following judgments have been considered material affecting the related items as described in relevant notes, see list below. Critical accounting estimates Management’s estimates are based on assumptions which Manage- ment considers reasonable but which are inherently uncertain and unpredictable. In connection with the financial reporting for , the following critical estimates have been made as described in the notes, see list below. Note Derivative financial instruments 4 Segment reporting 5 Net revenue 5 Share-based payments 6 Expenses 7 Financial income 8 Financial expenses 9 Corporation tax 10 Intangible assets 11 Property, plant and equipment 12 Investments in associates 13 Other fixed asset investments 14 Inventories 15 Receivables 16 Equity 17 Deferred tax 18 Deposit returnable packaging 19 Debt 20 Cash Flow Statement 21 Purchase Price Allocation (PPA) 24 Legends Significant accounting policies Judgements as an element in significant accounting policies Critical accounting estimates Comments to the note ROYAL UNIBREW Annual report 202089 Consolidated financial statements ConFin – Note 02 The Group’s financial risks are managed centrally according to the Treasury Policy approved by the Board of Directors, which includes guidelines for the handling of currency, interest rate, liquidity and credit risks. Commodity risks are also managed under a commodity risk policy approved by the Board of Directors. Currency risk Royal Unibrew is exposed to currency risks through the geographic spread of the Group’s activities. This currency exposure is reflected through the activities in the subsidiaries and the Parent Company’s export activities where cash flows are earned in foreign currencies, and in connection with the purchase of raw materials primarily in EUR and USD, including purchases which involve an indirect USD risk on the part of the purchase price related to the raw material element. Purchases are in all materiality made in the currencies in which the Group has income, which results in a total reduction of the currency risk. Furthermore, the translation of loans to/from subsidiaries as well as the Group’s net debt is subject to currency risk where these are not established in DKK. The above describes Royal Unibrew’s transaction risks, which are hedged actively according to the Treasury Policy. EUR is not hedged as the risk is immaterial provided that the existing .% band of DKK to EUR under Denmark’s monetary policy is maintained. The objective is to reduce negative effects on the Group’s profit and cash flows (cf. note ). The risk is therefore monitored and hedged continually. The Group’s cash flows are primarily in EUR, USD, CAD and GBP. The total gross currency risk (before hedging) on the balance sheet items was calculated at December . The following table shows Note 3 Financial risk management Earnings impact Earnings impact Equity Equity impact mDKK Change before tax 2020 before tax 2019 impact 2020 2019 EUR 0.1% -1.1 0.7 -1.1 0.7 USD 10% 2.5 3.6 2.5 3.6 GBP 10% -1.1 0.3 -1.1 0.3 CAD 10% 2.1 1.3 2.1 1.3 the sensitivity to a positive change in the cross rates at December with all other variables remaining unchanged. A negative change has a corresponding effect merely with the sign reversed. Royal Unibrews translation risk relates primarily to US (USD), Canada (CAD), UK (GBP), France, Italy, Finland, Latvia, Estonia as well as Lithu- ania (EUR). The translation risk related to Royal Unibrew’s investments in foreign subsidiaries is, as a general rule, not hedged. Financial risks such as the loss of competitive strength due to long- term exchange rate changes are not hedged by financial instruments but are included in Royal Unibrew’s strategic considerations and risk management. Interest rate risk Royal Unibrew’s interest rate risk at consolidation is substantially re- lated to the Group’s loan portfolio which is primarily denominated in DKK and EUR. Interest rate changes will affect the market value of fixed-interest loans as well as interest payments on floating-rate lia- bilities. Debt is established only in currencies in which the Group has commercial activities. In Royal Unibrew’s assessment, the key interest rate risk is related to the immediate effect of interest rate changes on the Group’s interest expenses and payment flows and Royal Unibrew focuses only secondar- ily on changes in the market value of the debt. It is group policy to limit the effect of interest rate changes on profit and cash flows while, within this framework, also achieving the lowest possible financing cost. At the end of , mortgage debt amounted to DKK million (: DKK million) with an average term to maturity of . years (: . years). Bank debt comprises committed bank credit facilities and long term loan with an agreed term to maturity between to years (: to years). % (: %) of the mortgage and bank debt is fixed-interest through the Group’s hedging of interest rate risk and fixed rate loans with a fixed-interest period between - years (: - years). A one percentage point interest rate change will affect the Group’s interest expenses by approx +/- DKK million (: approx +/- DKK million), and the interest expenses of the Parent Company by approx +/- DKK million (: approx +/- DKK million). Credit risks The Group’s credit risks relate primarily to trade receivables and coun- terparty risks. The Group’s counterparty risks comprise both commercial and financial counterparty risk. The commercial counterparty risk relates primarily to business agreements with a built-in element of firm rate/price. The financial counterparty risk relates to hedging agreements as well as net bank deposits. The financial counterparty risk is actively reduced by distributing net bank deposits on banks in accordance with the credit rating criteria determined in the Treasury Policy. Royal Unibrew seeks to limit risks relating to credit granting to cus- tomers in export markets through extensive use of insurance cover and other types of hedging of payments. Where effective hedges cannot be established, Royal Unibrew has established procedures for approval of such risks. The credit risk is generally higher relating to customers in the on-trade sales channel than relating to off-trade customers. This difference in credit risk is addressed through various approval proce- dures and credit granting conditions for customers in the two sales ROYAL UNIBREW Annual report 202090 Consolidated financial statements ConFin – Note 03 Note 3 Financial risk management (continued) channels. In Finland, risks on major single receivables from customers are reduced through sale of the receivables DKK million (: DKK million). The increase was caused by the beer campaign in Finland ending Q . Credit risks relating to trade receivables are reduced by setting off accrued bonus. At December , accrued bonus amounts to DKK million (: DKK million) set off against trade receivables. The maximum credit risk corresponds to the carrying amount of the financial assets. Liquidity risks It is group policy that its cash resources should be adequate to meet the expected liquidity requirements in the current and next financial year. The cash resources may be bank deposits, short-term bonds and unutilised credit facilities. Capital management Royal Unibrew wants to ensure structural and financial flexibility as well as competitive power. To ensure this, continuous assessment is made to determine the appropriate capital structure of Royal Unibrew. It is the target that the Group’s net interest-bearing debt should not exceed . x EBITDA and that an equity ratio of at least % should be maintained at year end. The target for dividend payout ratio is -% of the profit. At the operational level, continuous efforts are directed at optimising working capital. Subject to adequate capacity and capability, invest- ments in production facilities will be limited to replacement of individual components, related to specific products or to optimisation of selected processes as well as maintenance. Commodity risks The commodity risk relates primarily to the purchasing of cans (alu- minium), malt (barley), hops and packaging materials (cardboard) as well as energy. The commodity risk is actively hedged commercially and financially in accordance with the Group’s Treasury Policy. The objective of managing Royal Unibrew’s commodity risk is to achieve a smooth and time-differentiated effect of commodity price increases, which is primarily achieved by entering into fixed-price agreements with the relevant suppliers. As regards to the Group’s purchase of cans, financial contracts have been made to hedge the risk of aluminium price increases. Exchange rate changes with respect to the settlement currency of aluminium (USD) are an element of the overall currency risk management. The most significant part of purchases for the next months has, in accordance with Royal Unibrew’s policy, been hedged by entering into supplier agreements and financial contracts. A +/-% change in the price of aluminium would have an effect on the income statement of approx +/- DKK million (: DKK million). ROYAL UNIBREW Annual report 202091 Consolidated financial statements Financial liabilities Maturity Group Contractual Maturity > 1 year Maturity Carrying mDKK cash flows < 1 year < 5 years > 5 years amount 31/12 2020 Non-derivative financial instruments: Financial debt, gross 2,185 121 1,616 448 2,121 Leasing 156 72 81 3 153 Trade payables 1,047 1,047 1,047 Other payables 475 423 52 475 Total 3,863 1,663 1,749 451 3,796 The debt is classified as “debt at amortised cost” with DKK , million and “debt at fair value” with DKK million. 31/12 2019 Non-derivative financial instruments: Financial debt, gross 2,631 606 1,343 682 2,554 Leasing 231 64 163 4 223 Trade payables 1,018 1,018 1,018 Other payables 526 421 105 526 Total 4,406 2,109 1,611 686 4,321 The debt is classified as “debt at amortised cost” with DKK , million and “debt at fair value” with DKK million. Note 3 Financial risk management (continued) Derivative financial instruments Derivative financial instruments are initially recognised in the balance sheet at fair value and are subsequently remeasured at their fair values. Positive and negative fair values of derivative financial instruments are included as other receivables and other payables, respectively. Changes in the fair values of derivative financial instruments that are designated and qualify as fair value hedges of a recognised asset or a recognised liability are recognised in the income statement as are any changes in the value of the hedged asset or the hedged liability. Changes in the fair values of derivative financial instruments that are designated and qualify as hedges of future cash flows are recognised in other comprehensive income. Income and expenses relating to such hedging transactions are transferred from other comprehensive income on realisation of the hedged item and are recognised in the same entry as the hedged item. For derivative financial instruments which do not meet the criteria for hedge accounting, changes in fair values are recognised on a current basis in financial income and expenses in the income statement. Derivative financial instruments When entering into derivative financial instruments, Management exercises judgement to determine whether the instrument qualifies as effective hedging of recognised assets or liabilities or expected future cash flows. Derivative financial instruments recognised are tested for effectiveness at least quarterly, and any ineffec- tiveness identified is recognised in the income statement. ROYAL UNIBREW Annual report 202092 Consolidated financial statements Currency, commodity and interest rate risks and use of derivative financial instruments Hedging of currency, commodity and Interest risk The risk is managed by entering into derivatives such as forward contracts and swaps. At the end of , the Group had only few short term FX contracts, to cover the balance sheet exposure end of in USD, CAD and GBP. The Group actively hedges the commodity risk related to aluminium. At the end of , the Group has hedged % (: %) of the expected use with in the next month. The interest rate swaps hedge the interest rate exposure on the the mortgage debt in Denmark and Finland. Hedge effectiveness is assessed on a regular basis by comparing changes in the value and timing of the underlaying exposure, with the value and timing of the designated hedging transaction. Derivative financial instruments entered into to hedge expected future transactions and qualifying as hedge accounting under IFRS : Group mDKK 2020 2019 Deferred Deferred gain (+) gain (+) Period / loss (-) / loss (-) Forward contracts: USD 0 - 1 year 0 0 CAD 0 - 1 year 0 0 GBP 0 - 1 year 0 0 Total 0 0 Commodity hedge: mainly aluminium 0 - 1 year 10 1 Total 10 1 Interest rate swaps: Mortgage and bank loans 5 year -2 -4 Total hedging instruments 8 -3 The fair value of the hedging instruments is included in current liabilities under other payables. The derivative financial instruments applied in and may all be classified as level- instruments in the IFRS fair value hierarchy. The determined fair value of derivative financial instruments is based on observable market data such as yield curves or forward rates. Realized hedging transactions in the income statement mDKK 2020 2019 Realized hedging transactions are included in the income statement as follows: Net revenue includes currency hedges of 0 0 Production costs include foreign currency and commodity hedges of -10 -17 Financial income and expenses include currency, commodity and interest rate hedges of -4 -4 Total -14 -21 Note 4 Derivatives ROYAL UNIBREW Annual report 202093 Consolidated financial statements ConFin – Note 04 The Group’s results, assets and liabilities break down as follows on segments: Western Inter- mDKK Europe Baltic Sea national Unallocated Total 2020 Net revenue 3,548 3,237 772 7,557 Amortisation and depreciation 150 171 23 2 346 Impairment 0 Earnings before interest and tax (EBIT) 687 675 171 -18 1,515 Financial income 0 Financial cost -6 -11 0 -26 -43 Share of income from associates 33 33 Profit/loss before tax 714 664 171 -44 1,505 Tax -307 -307 Profit/loss for the year 714 664 171 -351 1,198 Assets 2,766 5,353 56 8,175 Associates 131 131 Total assets 2,897 5,353 56 0 8,306 Additions of property, plant and equipment 268 102 3 373 Additions by acquisitions (adjustment fair value) -58 -58 Liabilities 682 1,817 21 2,454 4,974 Sales (million hectolitres) 4.7 5.4 1.0 11.1 * all goods sold in International are produced by group entities in Western Europe ** Unallocated liabilities include the Parent Company’s net interest-bearing debt. Western Inter- mDKK Europe Baltic Sea national Unallocated Total 2019 Net revenue* 3,691 3,308 694 7,693 Amortisation and depreciation 147 170 19 2 338 Impairment 7 7 Earnings before interest and tax (EBIT) 722 654 132 -39 1,469 Financial income 1 0 4 5 Financial cost -5 -10 -26 -41 Share of income from associates 25 25 Profit/loss before tax 742 645 132 -61 1,458 Tax -319 -319 Profit/loss for the year 742 645 132 -380 1,139 Assets 2,991 5,287 89 0 8,367 Associates 126 126 Total assets 3,117 5,287 89 0 8,493 Additions of property, plant and equipment 202 141 1 344 Additions by acquisitions 1 10 1 12 Liabilities 957 1,788 25 2,616 5,386 Sales (million hectolitres) 4.8 5.3 0.9 11.0 * all goods sold in International are produced by group entities in Western Europe ** Unallocated liabilities include the Parent Company’s net interest-bearing debt. Note 5 Segment reporting ROYAL UNIBREW Annual report 202094 Consolidated financial statements ConFin – Note 05 Geographically, revenue and non-current assets break down as follows: 2020 2019 Net Non-current Net Non-current mDKK revenue assets revenue assets Denmark 2,229 1,574 2,070 1,565 Italy 714 663 853 664 Finland 2,418 3,384 2,515 3,504 Other countries 2,196 1,394 2,255 1,430 Total 7,557 7,015 7,693 7,163 The geographic breakdown is based on the geographic location of the Group’s external customers and com- prises countries that individually account for more than % of the Group’s net revenue as well as the country in which the Group is headquartered. No single customer accounts for revenue in excess of % of the Group’s net revenue. Note 5 Segment reporting (continued) ROYAL UNIBREW Annual report 202095 Consolidated financial statements Note 5 Segment reporting (continued) Segment reporting - The Group’s activities break down as follows on segments: Western Inter- Un- mDKK Europe Baltic Sea national allocated Group 2020 Net revenue 3,548 3,237 772 7,557 Earnings before interest and tax (EBIT) 687 675 171 -18 1,515 Assets 2,897 5,353 56 8,306 Liabilities 682 1,817 21 2,454 4,974 Sales (million hectolitres) 4.7 5.4 1.0 11.1 2019 Net revenue 3,691 3,308 694 7,693 Earnings before interest and tax (EBIT) 722 654 132 -40 1,468 Assets 3,117 5,286 89 8,492 Liabilities 957 1,788 25 2,616 5,386 Sales (million hectolitres) 4.8 5.3 0.9 11.0 2018 Net revenue 3,378 3,338 582 7,298 Earnings before interest and tax (EBIT) 645 599 127 -32 1,339 Assets 2,816 5,166 80 8,062 Liabilities 976 1,719 28 2,431 5,154 Sales (million hectolitres) 4.5 5.5 0.8 10.8 Western Inter- Un- mDKK Europe Baltic Sea national allocated Group 2017 Net revenue 2,829 3,076 479 6,384 Earnings before interest and tax (EBIT) 564 431 106 -32 1,069 Assets 1,733 5,006 0 39 6,778 Liabilities 771 1,711 7 1,475 3,964 Sales (million hectolitres) 3.9 5.3 0.7 9.9 2016 Net revenue 2,870 2,986 484 6,340 Earnings before interest and tax (EBIT) 527 395 108 -29 1,001 Assets 1,051 4,986 0 39 6,076 Liabilities 250 1,697 6 1,212 3,165 Sales (million hectolitres) 3.8 5.4 0.7 9.9 Segment reporting The Group’s business segment is beverage sales. Reporting on the business segment is by geographical mar- kets. Segment reporting is based on the Group’s returns and risks and its internal financial reporting system. Items included in net profit for the year, including income from investments in associates and financial income and expenses, are allocated to the extent that the items are directly or indirectly attributable to the markets. Items allocated both by direct and indirect computation comprise “production costs” and “administrative expenses”, which are allocated by indirect computation based on allocation keys determined on the basis of the market’s drain on key resources. Administrative expenses incurred in the group functions of the Parent Company are partly allocated. Assets comprise the non-current assets that are directly or indirectly used in connection with activities in the markets. Segment liabilities comprise liabilities derived from activities in the market, including provisions, trade payables, VAT, excise duties and other payables. ROYAL UNIBREW Annual report 202096 Consolidated financial statements Note 5 Segment reporting (continued) Net revenue Net revenue from the sale of goods is recognised in the income statement at the point in time when the control of goods and products is transferred to the customer, which is generally upon delivery, and if revenues can be measured reliably and are expected to be received. Net revenue from contracts with customers is measured at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods. Net revenue is measured exclusive of VAT and net of discounts as well as excise duties collected on behalf of third parties. The Group gives various discounts and fees depending on the nature of the customer and business. Discounts comprise unit price reductions as well as contributions to promotional activities and product pro- motion based on volumes or value of purchases. The discounts are either granted as deductions from the invoice amount or are earned as a bonus paid at the end of the bonus period. All types of discounts granted are recognised in net revenue The Group considers whether contracts include other promises that constitute separate performance obli- gations and to which a portion of the transaction price needs to be allocated. Note 6 Staff expenses Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows: mDKK 2020 2019 Fixed salaries to Executive Management 20 12 Short-term bonus scheme for Executive Management 9 6 Long-term bonus scheme for Executive Management 9 6 Remuneration of Executive Management 38 24 Remuneration of Board of Directors 5 6 43 30 Wages and salaries 966 951 Contributions to pension schemes 109 112 1,075 1,063 Other social security expenses 21 21 Other staff expenses 44 46 Total 1,183 1,160 Average number of employees 2,631 2,567 ROYAL UNIBREW Annual report 202097 Consolidated financial statements ConFin – Note 06 Note 6 Staff expenses (continued) Executive Share price Total fair value Share-based payment Management Board at grant date at time of grant Number DKK DKK thousand Program 2017/2019 58,564 264 15,058 Program 2017/2019 8,250 370 3,052 Program 2020 17,921 370 6,631 Anti-dilution adjustment 1,457 Outstanding at 1 January 2019 86,192 Anti-dilution adjustment 1,535 Outstanding at 31 December 2019 87,727 Excercised -69,806 Outstanding at 31 December 2020 17,921 Exercisable at 31 December 2020 17,921 2020 2019 Remaining Remaining Matching term to Matching term to shares maturity shares maturity Number Months Number Months Matching shares 2017-19 0 0 69,806 0 Matching shares 2020 17,921 0 17,921 12 Outstanding at 31 December 2020 17,921 87,727 Comment The share-based payments to the Executive Management comprise a programme of , restricted (condi- tional) shares allotted for no consideration vesting in the period January to December . These shares are excerciable at December . No further restricted (conditional) shares are outstanding at December . Share-based payments The Group only has schemes classified as equity-settled schemes. Restricted shares are measured at fair value at the time of granting and are recognised in staff expenses in the income statement over the vesting period. The counter item is recognised directly in equity. At the initial recognition of the restricted shares, the number of shares expected to vest is estimated. Sub- sequently, the estimate of the number of restricted shares is revised so that the total recognition is based on the actual number of shares allotted. Share-based payments The fair value of the expected allotment of restricted shares is estimated under the Black-Scholes model. In determining fair value, conditions and terms related to the restricted shares are taken into account. The market value of program applying to has been calculated under the Black-Scholes model at DKK per share of DKK , which is equal to Royal Unibrew A/S market price at the time of allotments March . The market price was DKK million for the estimated maximum number of shares. The market value has been charged to the income statement on an estimated straight-line basis over the vesting period, cor- responding to the rate at which the conditions for the allotment of the shares was expected to be met. The conditions have been fully (%) met at December . ROYAL UNIBREW Annual report 202098 Consolidated financial statements Note 7 Expenses broken down by nature mDKK 2020 2019 Aggregated by function Production costs 3,613 3,612 Sales and distribution expenses 2,085 2,262 Administrative expenses 344 349 Total 6,042 6,223 Break down by nature as follows: Raw materials and consumables 2,856 2,862 Wages, salaries and other staff expenses 1,183 1,160 Operating and maintenance expenses 263 281 Distribution expenses and carriage 532 564 Sales and marketing expenses 713 869 Bad trade debts 27 5 Office supplies etc 122 137 Amortisation and depreciation 346 345 Total 6,042 6,223 Total amortisation and depreciation are included in the following items in the income statement: Production costs 185 177 Sales and distribution expenses 145 143 Administrative expenses 16 25 Total 346 345 Fee to auditors elected at the general assemply Fee for the audit of the Annual Report: KPMG 2 2 Total 2 2 KPMG fee for non-audit services: Other assurance services 0 0 Other assistance 0 2 Total 0 2 * Fees for other assistance than statutory audit of the financial statements provided by KPMG primarily com- prise services relating to financial due dilligence. Expenses Production costs Production costs comprise direct and indirect expenses incurred to manufacture the finished goods repre- senting revenue for the year, including expenses for raw materials and consumables purchases, salaries and wages, renting and leasing as well as depreciation of and impairment losses on plant and machinery. Production costs also include development costs that do not meet the criteria for capitalisation. Sales and distribution expenses Sales and distribution expenses comprise expenses for distribution and sales campaigns relating to goods sold during the year, including expenses for sales personnel, marketing, depreciation and amortisation as well as losses on trade receivables. Administrative expenses Administrative expenses comprise expenses for management and administration of the Group, including ex- penses for administrative personnel, management, office supplies, insurance, depreciation and amortisation. Leases Under IFRS , the Group assesses whether a contract is or contains a lease based on the definition of a lease based on the assessment of whether: • fulfilment of the arrangement was dependent on the use of a specific asset or assets; and • the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met: • the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output; • the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or • facts and circumstances indicated that it was remote that other parties would take more than an insig- nificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.” ROYAL UNIBREW Annual report 202099 Consolidated financial statements ConFin – Note 07 Note 8 Financial income mDKK 2020 2019 Finance income Trade receivables 1 2 Other financial income 1 1 Interest tax-extempt 0 0 Exchange adjustments Trade receivables 0 2 Trade payables 1 Cash at bank and in hand and external loans Total 3 5 Note 9 Financial expenses mDKK 2020 2019 Finance costs Mortgage debt 8 8 Credit institutions 27 26 Leasing 2 2 Finance costs on liabilities at amortised cost 37 36 Other financial expenses 1 2 Exchange adjustments Cash at bank and in hand and external loans 0 Trade receivables 6 Trade payables 0 Forward contracts 2 3 Total 46 41 Financial income and expenses Financial income and financial expenses comprise interest, capital gains and losses on investments, balances and transactions in foreign currencies, amortisation of financial assets and liabilities, fair value adjustments of derivative financial instruments that do not qualify as hedge accounting as well as extra payments and repayment under the on-account taxation scheme, etc. Note 10 Tax on the profit for the year mDKK 2020 2019 Tax on the taxable income for the year 302 303 Adjustment of previous year 2 2 Adjustment of deferred tax 4 11 Total 308 316 which breaks down as follows: Tax on profit for the year 307 318 Tax on other comprehensive income 2 3 Tax on changes in equity, shareholders -1 -5 Total 308 316 Current Danish tax rate 22.0 22.0 Adjustment of previous year 0.1 0.2 Income from associates after tax -0.4 -0.4 Effect on tax rate of permanent differences 0.4 0.3 Differences in effective tax rates of foreign subsidiaries -1.7 -0.3 Effective tax rate 20.4 21.8 Tax on the profit for the year Tax for the year consists of current tax for the year and movements in deferred tax for the year. The tax at- tributable to the profit for the year is recognised in the income statement and other comprehensive income, respectively, whereas the tax attributable to equity entries is recognised directly in equity. The Parent Company is jointly taxed with its Danish subsidiaries. The Danish current tax for the year is allo- cated to the jointly taxed Danish enterprises in proportion to their taxable incomes (full allocation with credit for tax losses). Corporation tax Current tax liabilities are recognised in the balance sheet as calculated tax on the expected taxable income for the year adjusted for tax on taxable incomes for previous years and for tax paid on account. ROYAL UNIBREW Annual report 2020100 Consolidated financial statements ConFin – Note 08 ConFin – Note 09 ConFin – Note 10 Note 11 Intangible assets Distribution Customer mDKK Goodwill Trademarks rights relations Total 2020 Cost at 1 January 2020 2,342 1,962 248 154 4,706 Exchange adjustment -9 -7 -2 -1 -19 Disposals -13 -13 Addition by acquisition -43 -15 -58 Cost at 31 December 2020 2,290 1,940 233 153 4,616 Amortisation and impairment losses at 1 January 2020 -7 -6 -87 -90 -190 Exchange adjustment 1 2 3 Reversal of depreciation of disposals 13 13 Amortisation for the year -15 -19 -34 Imparment for the year 0 Amortisation and impairment losses at 31 December 2020 -7 -6 -88 -107 -208 Carrying amount at 31 December 2020 2,283 1,934 145 46 4,408 Distribution Customer mDKK Goodwill Trademarks rights relations Total 2019 Cost at 1 January 2019 2,125 1,775 235 128 4,263 Exchange adjustment 1 1 0 0 2 Addition by acquisition 216 186 13 26 441 Cost at 31 December 2019 2,342 1,962 248 154 4,706 Amortisation and impairment losses at 1 January 2019 -6 -75 -74 -155 Exchange adjustment 0 0 -1 -1 Amortisation for the year -12 -15 -27 Impairment for the year -7 -7 Amortisation and impairment losses at 31 December 2019 -7 -6 -87 -90 -190 Carrying amount at 31 December 2019 2,335 1,956 161 64 4,516 ROYAL UNIBREW Annual report 2020101 Consolidated financial statements ConFin – Note 11 Impairment test of goodwill and trademarks As in , the impairment test in did not give rise to recognising any impairment losses. The carrying amount of goodwill and trademarks with indefinite useful lives at December is related to the cash-generating operational units and breaks down as follows: mDKK Goodwill Trademarks Total Share 2020 Western Europe 899 681 1,580 37% Baltic Sea 1,384 1,253 2,637 63% Total 2,283 1,934 4,217 100% the most significant value relates to Finland The recoverable amount is based on value in use, which is calculated by means of expected net cash flows on the basis of budgets and forecasts for - approved by Management as well as estimated market driven discount rates and growth rates. The consumption in the markets in which Royal Unibrew operate is generally expected to regain the negative impact from Covid- on the as from H . In Western Europe and Baltic Sea consumption of Royal Unibrews beverage categories is in addition to the assumed disapperance in H of Covid- impact expected to be at the same level as in but changing towards high value products in the coming years. Through further developing the businesses acquired in and , continued focus on exploiting commercial opportunities and innovation following the consumer trends, Royal Unibrew expects to gain market shares and consequently increase the revenue and earnings from the core brands and business areas. Gross margins are expected to remain stable at the present level through continuous focus on value management and continuous efficiency improvements. The key assumptions for the calculation of recoverable amount are shown below. Western Europe Baltic Sea Growth rate 2024-2027 0.0-1.0% 0.5-0.7% Growth rate on terminal value 0.2-1.5% 0.9-2.0% Discount rate pre tax 4.4-6.5% 4.4-5.4% The forecasted results approved by Management are based on previously achieved results and expected market developments assuming no negative impact from Covid- as from , see above. The average growth rates applied are in accordance with Management’s expectations taking into account industry conditions in the in- dividual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. External consultants have advised how to determine the discounts rates. Note 11 Intangible assets (continued) Comment Goodwill and trademarks with indefinite useful lives relating to Hartwall (Finland) represents more than % of the total value of goodwill and trademarks. Development costs incurred are immaterial and have been recognised in production costs. Goodwill Goodwill is initially recognised in the balance sheet at cost. Subsequently, goodwill is measured at cost less accumulated impairment losses. The carrying amount of goodwill is allocated to the Group’s cash-generating units at the time of acquisition. The determination of cash-generating units is based on management structure and internal financial management. Trademarks, distribution rights and customer relations Trademarks, distribution rights and customer relations are initially recognised in the balance sheet at cost. Subsequently, they are measured at cost less accumulated amortisation and less any accumulated impair- ment losses. Distribution rights and customer relations are amortised on a straight-line basis over their estimated useful lives. Trademarks are not amortised as they are all well-established, old and profitable trademarks which custom- ers are expected to continue demanding unabatedly, other things being equal, and which Management is not planning to stop selling and marketing. Distribution rights are amortised on a straight-line basis over their estimated useful lives, maximum years. Customer relations are amortised on a straigt-line basis over their estimated useful lives, maximum years. Goodwill and trademarks with indefinite useful lives are not amortised but are tested annually for impairment. It is the Group’s strategy to maintain trademarks and their value. ROYAL UNIBREW Annual report 2020102 Consolidated financial statements The forecasted results approved by Management are based on previously achieved results and expected market developments, see above. The average growth rates applied are in accordance with Management’s expectations taking into account industry conditions in the individual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. External consultants have advised how to determine the discounts rates. In Western Europe, the highest point of the range indicated for the discount rate relates to Italy. In Baltic Sea, the lowest point of the range indicated for the growth rates of terminal value and discount rate relates to Finland. The assumptions applied by Management are inherently subject to uncertainty and unpredictability. Reasonably probable changes will not lead to recognition of impairment losses, why no sensitivity analysis has been disclosed. Impairment The carrying amounts of intangible assets and property, plant and equipment are reviewed on an annual basis to determine whether impairment has incurred other than that expressed by normal amortisation and depreciation. If so, the asset is written down to the higher of net selling price and value in use. Goodwill and other assets for which a value in use cannot be determined as the asset does not on an individual basis generate future cash flows are reviewed for impairment together with the group of assets (cash-generating units) to which they are attributable. The carrying amount of goodwill and trademarks with indefinite useful lives is tested for impairment at least on an annual basis, together with the other non-current assets of the cash-generating unit to which goodwill has been allocated, and is written down to recoverable amount in the income statement if the carrying amount exceeds the recoverable amount. The carrying amount of financial assets measured at cost or amortised cost is written down for impairment if, due to changed expected net payments, the net present value is lower than the carrying amount. Intangible assets In relation to trademarks, Management makes an annual judgement to determine whether the current market situation has reduced the value or affected the useful life of the trademarks, including whether past estimates of indefinite useful lives may be maintained. An annual impairment test is made of the values recognised in the Financial Statements of goodwill and trade- marks assessed to have indefinite lives which are therefore not amortised. For a description of the discount rates and growth rates applied in connection with the impairment test of goodwill and trademarks as well as other assumptions of the impairment test, reference is made to the above note. Note 11 Intangible assets (continued) In Western Europe, the highest point of the range indicated for the discount rate relates to Italy. In Baltic Sea, the lowest point of the range indicated for the growth rates of terminal value and discount rate relates to Finland. The assumptions applied by Management are inherently subject to uncertainty and unpredictability. Reasonably probable changes will not lead to recognition of impairment losses, and therefore no sensitivity analysis has been disclosed. mDKK Goodwill Trademarks Total Share 2019 Western Europe 946 698 1,644 38% Baltic Sea 1,389 1,258 2,647 62% Total 2,335 1,956 4,291 100% the most significant value relates to Finland The recoverable amount is based on value in use, which is calculated by means of expected net cash flows on the basis of budgets and forecasts for - approved by Management as well as estimated market driven discount rates and growth rates. The consumptions in markets in which Royal Unibrew operates is generally expected to remain at the same level in as in . In Western Europe the Danish consumption of Royal Unibrews beverage categories is expected to be stagnant in the coming years. In the Baltic Sea segment Royal Unibrew expects unchanged Finnish consumption for while the consumption in the Baltic countries will still be negatively affected by legislative changes and the demographic development. Through further developing the business acquired in to and with continued focus on exploring commercial opportunities and innovation following the consumer trends, Royal Unibrew expects to be able to maintain or increase the revenue and earnings from the core brands and business areas mainly through volume increase. Gross margins are expected to remain stable at the present level through continuous focus on value management and continuous efficiency improvements. The key assumptions for the calculation of recoverable amount are shown below. Western 2019 Europe Baltic Sea Growth rate 2023-2026 0.0-1.0% 0.0-0.5% Growth rate on terminal value 0.2-1.3% 0.7-1.3% Discount rate pre tax 5.8-7.1% 5.8-7.4% ROYAL UNIBREW Annual report 2020103 Consolidated financial statements 2020 Other fixtures Property, Leasing of Total other and fittings, plant and property, property, Land and Plant and tools and equipment plant and plant and mDKK buildings machinery equipment in progress equipment equipment Cost at 1 January 2020 1,850 2,527 1,026 101 320 5,824 Exchange adjustment -4 -4 -2 1 -1 -10 Adjustment previous year 0 Additions 6 61 102 111 89 369 Additions by acquisitions 0 Disposals -6 -49 -71 -112 -238 Transfers for the year 5 44 17 -66 0 Cost at 31 December 2020 1,851 2,579 1,072 147 296 5,945 Depreciation, revaluation and impairment losses at 1 January 2020 -767 -1,730 -725 0 -100 -3,322 Exchange adjustment 0 2 3 5 Adjustment previous year 0 Depreciation for the year -45 -104 -96 -69 -314 Reversal of depreciation of assets sold 5 48 65 23 141 Depreciation, revaluation and impairment losses at 31 December 2020 -807 -1,784 -753 0 -146 -3,490 Carrying amount at 31 December 2020 1,044 795 319 147 150 2,455 Leasing of property, plant and equipment: Cost at 31 December 2020 147 149 296 Depreciation, revaluation and impairment losses at 31 December 2020 -60 -86 -146 Carrying amount per asset type 87 63 150 Land and buildings at a carrying amount of DKK million have been provided as security for mortgage debt of DKK million. Contracts for the delivery of property, plant and equipment in or later have been entered into only to an immaterial extent. 2019 Other fixtures Property, Leasing of Total other and fittings, plant and property, property, Land and Plant and tools and equipment plant and plant and mDKK buildings machinery equipment in progress equipment equipment Cost at 1 January 2019 1,842 2,439 900 141 281 5,603 Exchange adjustment 0 0 0 0 0 0 Additions 9 0 5 -3 11 Additions by change in accounting policy 21 47 138 41 97 344 Additions by acquisitions 5 4 2 0 1 12 Disposals -36 -24 -30 -56 -146 Transfers for the year 9 61 11 -81 0 0 Cost at 31 December 2019 1,850 2,527 1,026 101 320 5,824 Depreciation, revaluation and impairment losses at 1 January 2019 -727 -1,635 -653 0 -58 -3,073 Exchange adjustment 1 -1 2 -1 1 Adjustment previous year -9 0 -5 3 -11 Depreciation for the year -41 -110 -93 -63 -307 Reversal of depreciation of assets sold 9 16 23 19 67 Depreciation, revaluation and impairment losses at 31 December 2019 -767 -1,730 -725 0 -100 -3,323 Carrying amount at 31 December 2019 1,083 797 301 101 220 2,501 Leasing of property, plant and equipment: Cost at 31 December 2019 184 136 320 Depreciation, revaluation and impairment losses at 31 December 2019 -44 -56 -100 Carrying amount per asset type 140 80 220 Land and buildings at a carrying amount of DKK , million have been provided as security for mortgage debt of DKK million. Contracts for the delivery of property, plant and equipment in or later have been entered into only to an immaterial extent. Note 12 Property, plant and equipment ROYAL UNIBREW Annual report 2020104 Consolidated financial statements ConFin – Note 12 Property, plant and equipment Land and buildings, plant and machinery and other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Borrowing costs relating to the acquisition of property, plant and equipment are capitalised. Depreciation is calculated on a straight-line basis over the useful lives of the assets. Profits and losses on the disposal of property, plant and equipment are calculated as the difference between the sales sum less the expenses necessary to make the sale and the carrying amount at the time of sale. Profits or losses were immaterial in both and and have been recognised in the income statement as an adjustment to depreciation in production costs, sales or distribution expenses or administrative expenses, respectively. Property, plant and equipment The expected useful lives of the assets remain unchanged from and are as follows: Buildings and installations, 25-40 years Leasing of property, plant and equipment over the term of the lease Plant and machinery, 10-15 years Other fixtures and fittings, tools and equipment, 5-8 years Vehicles 4-5 years IT hardware and software 3 years Returnable packaging, 3-10 years Management reviews its estimate of the useful lives of property, plant and equipment annually. Leases Under IFRS , the Group recognises right-of-use assets and lease liabilities for most leases - i.e. these leases are on-balance sheet. The Group decided to apply the recognition exemptions to short-term and low value leases. Note 12 Property, plant and equipment (continued) ROYAL UNIBREW Annual report 2020105 Consolidated financial statements Investments mDKK in associates Cost at 1 January 2020 76 Cost at 31 December 2020 76 Value adjustments at 1 January 2020 50 Exchange adjustment -7 Dividend, net -21 Share of profit for the year 33 Other comprehensive income 0 Value adjustments at 31 December 2020 55 Carrying amount at 31 December 2020 131 Cost at 1 January 2019 76 Cost at 31 December 2019 76 Value adjustments at 1 January 2019 48 Exchange adjustment 2 Dividend, net -25 Share of profit for the year 25 Other comprehensive income 0 Value adjustments at 31 December 2019 50 Carrying amount at 31 December 2019 126 Judgement concerning accounting policy: Financial disclosures on associates Financial disclosures are provided on an aggregated basis for all associates as none of Royal Unibrew’s shares of net revenue or balance sheet total constitute more than % in proportion to the Consolidated Financial Statements; therefore, it is not considered essential to provide disclosures separately for each associate. Royal Unibrew’s share of: mDKK 2020 2019 Profit from continuing operations for the year 33 25 Other comprehensive income 0 0 Comprehensive income 33 25 Total carrying amount at 31 December of the Group’s total investments in associates, share of equity 131 126 Investments in associates in the Consolidated Financial Statements Investments in associates are measured in the balance sheet at the proportionate share of the net asset value of the enterprises calculated under the accounting policies of the Group with deduction or addition of the proportionate share of unrealized intercompany profits and losses and with addition of the carrying amount of goodwill. Associates with a negative net asset value are measured at DKK . If the Group has a legal or constructive obligation to cover the negative balance of the associate, this obligation is recognised in liabilities. The proportionate share of the results of associates is recognised in the income statement of the Group after adjusting for impairment losses on goodwill and eliminating the proportionate share of unrealized intercom- pany gains and losses. Note 13 Investments in associates ROYAL UNIBREW Annual report 2020106 Consolidated financial statements ConFin – Note 13 Other Other Total other invest- recei- fixed asset mDKK ments vables investments Cost at 1 January 2020 64 8 72 Exchange adjustment 0 Additions by acquisition 1 1 Additions 0 Disposals 0 Cost at 31 December 2020 64 9 73 Value adjustments at 1 January 2020 -52 0 -52 Value adjustments at 31 December 2020 -52 0 -52 Carrying amount at 31 December 2020 12 9 21 Cost at 1 January 2019 60 5 65 Exchange adjustment 0 0 0 Additions 1 1 Disposals 3 5 8 Disposals 0 -2 -2 Cost at 31 December 2019 64 8 72 Value adjustments at 1 January 2019 -52 0 -52 Value adjustments at 31 December 2019 -52 0 -52 Carrying amount at 31 December 2019 12 8 20 Other investments Other investments classified as fair value trough profit and loss are recognised in non-current assets at fair value at the trading date and at estimated fair value calculation on the basis of market data and recognised valuation methods as regards unlisted securities. Unrealized value adjustments are recognised in other com- prehensive income except for impairment losses and reversal of impairment losses which are recognised in financial income and expenses in the income statement. Upon realisation, the accumulated value adjustment recognised in other comprehensive income is transferred to financial income and expenses in the income statement. Other investments may be classified as level- instruments. Other receivables Other receivables under fixed asset investments held to maturity are initially recognised at fair value and are subsequently measured at amortised cost or an estimated lower value at the balance sheet date. Other investments In connection with the presentation of the Financial Statements for , Management estimated the fair value of its investments (% of the share capital) in the Polish brewery company Perla Browary Lubelskie at DKK due to governance issues. Since , Management has maintained its fair value estimate of DKK as these issues have not subsequently been resolved. The consolidated financial statements of Perla Browary Lubelskie S.A. for ( not yet avalable) have been prepared on the basis of Polish accounting law and show a profit after tax of PLN million (DKK million) and equity of PLN million ( DKK million). The fair value measurement of the investments in Perla Browary Lubelskie is classified in level of the fair value hierarchy. Note 14 Other fixed asset investments ROYAL UNIBREW Annual report 2020107 Consolidated financial statements ConFin – Note 14 mDKK 2020 2019 Raw materials and consumables 210 190 Work in progress 22 27 Finished goods and goods for resale 285 246 Inventories 517 463 Inventories Indirect production costs are recognised in the value of work in progress and finished goods at DKK million (: DKK million). As in , write down of inventories is an insignificant amount, DKK million (: DKK million). Inventory write down recognised in the income statement amounts to DKK million (: DKK million). . Inventories Inventories are measured at the lower of cost under the FIFO method and net realisable value of individual product groups. The net realisable value of inventories is calculated at the amount of future sales revenues expected to be generated by inventories at the balance sheet date in the process of normal operations and determined allowing for marketability, obsolescence and development in expected sales sum with deduction of calculated selling expenses. The cost of raw materials, consumables, goods for resale and purchased finished goods comprises invoiced price plus expenses directly attributable to the acquisition. The cost of work in progress and finished goods comprises the cost of materials and direct labour with addi- tion of indirect production costs. Indirect production costs comprise the cost of indirect materials and labour as well as maintenance and depreciation of and impairment losses on the machinery, factory buildings and equipment used in the manufacturing process as well as costs of factory administration and management. mDKK 2020 2019 Trade receivables 600 701 Other receivables 39 35 Receivables 639 736 Receivables are classified as “assets measured at amortised cost” under IFRS . Trade receivables falls due as follows: Not due and Due Due Due > mDKK prepaid bonus 1-15 days 16-90 days 90 days Total 2020 Trade receivables 548 48 22 31 649 Impairment provision -25 -1 -5 -18 -49 Trade receivables after impairment 523 47 17 13 600 Impairment provision % *** -4.6% -2.1% -22.7% -58.1% -7.6% Provisions for bad debts, beginning of year -33 Bad debts realized during the year 12 Provision for the year -28 Total -49 * Lifetime expected credit loss. ** Hereof mDKK 17 (3.1%) relates to prepaid bonus *** Historical average loss rate is approx. 1% 2019 Trade receivables 557 89 44 44 734 Impairment provision* -12 -9 -5 -7 -33 Trade receivables after impairment 545 80 39 37 701 Impairment provision % -2.1% -9.8% -12.3% -16.3% -4.5% Provisions for bad debts, beginning of year -38 Bad debts realized during the year 8 Provision for the year -3 Total -33 * Lifetime expected credit loss. ** Hereof mDKK 11 (2.0%) relates to prepaid bonus *** Historical average loss rate is approx. 1% Note 15 Inventories Note 16 Receivables ROYAL UNIBREW Annual report 2020108 Consolidated financial statements ConFin – Note 15 ConFin – Note 16 Receivable Current receivables, other than trade receivables, all fall due for payment in . Receivables Trade receivables and contract assets are measured at amortized cost less allowance for lifetime expected credit losses. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. Furthermore, an allowance for lifetime expected credit losses for trade receivables is recognized on initial recognition.” Trade receivables and contract assets are written off when all possible options have been exhausted and there is no reasonable expectation of recovery. The cost of allowances for expected credit losses and write-offs for trade receivables and contract assets are included in Sales and distribution costs. Treasury shares held by the Parent Company: Nom. value % of Number in mDKK Capital Portfolio at 1 January 2020 883,509 2 1.8 Additions 524,856 1 1.0 Capital reduction -750,000 -1 -1.5 Portfolio at 31 December 2020 658,365 2 1.3 The Group holds no other treasury shares. Portfolio at 1 January 2019 923,397 2 1.8 Additions 860,112 2 1.7 Capital reduction -900,000 -2 -1.8 Portfolio at 31 December 2019 883,509 2 1.8 The share capital has been paid in full. Basis of calculation of earnings and cash flow per share 2020 2019 The Parent Company shareholders’ share of profit for the year amounts to (mDKK) 1,183 1,142 The average number of treasury shares amounted to (number, DKK 2 each) 585,724 911,013 The average number of shares in circulation amounted to (number) 49,108,026 49,601,487 The average number of shares in circulation incl restricted shares amounted to (number) 49,125,947 49,689,214 Cost of share buy-backs during the year (mDKK) 362 433 The share capital has been fully paid. Diluted earnings and cash flow per share have been calculated on the basis of the Parent Company share- holders’ share of profit/loss for the year. Note 16 Receivables (continued) Note 17 Equity and basis of earnings/cash flow per share ROYAL UNIBREW Annual report 2020109 Consolidated financial statements ConFin – Note 17 Comment Shares were bought back during the year as an element in the optimisation of the Company’s capital structure. It is the intention to cancel the bought-back shares to the extent that they are not to be used for share-based payment to the Executive Management. Policy Equity / Proposed dividend Dividend is recognised as a liability at the time of adoption at the Annual General Meeting. Dividend distribution for the year proposed by Management is disclosed as a separate equity item. Treasury shares Treasury shares acquired by the Parent Company or subsidiaries are recognised at cost directly in equity under retained earnings. Where treasury shares are subsequently sold, any consideration is also recognised directly in equity. Dividend on treasury shares is recognised directly in equity under retained earnings. Share premium account Share premium account comprises amounts in excess of the nominal share capital paid up by shareholders in connection with capital increases. Revaluation reserves Revaluation reserves in parent company comprise value adjustment of assets from cost to an estimated permanently higher fair value. Revaluation reserves are transferred to retained earnings when the revalued asset is realized. Translation reserve The translation reserve in the Consolidated Financial Statements comprises exchange adjustments arising on the translation of the Financial Statements of foreign enterprises from their functional currencies into the presentation currency of the Group (DKK). Upon full or partly realisation of the net investment in the foreign enterprises, exchange adjustments are recognised in the income statement. The translation reserve was reset at January in accordance with IFRS . Hedging reserve The hedging reserve comprises changes to fair values of derivative financial instruments that are designated and qualify as cash flow hedges of future transactions. On realisation, the hedging instrument is recognised in the income statement in the same item as the hedged transaction. Note 17 Equity and basis of earnings/cash flow per share (continued) ROYAL UNIBREW Annual report 2020110 Consolidated financial statements mDKK 2020 2019 VAT, excise duties, etc 494 341 Other payables 423 421 Deposit, returnable packaging 111 132 Total other current payables 1,028 894 Deposit, returnable packaging is specified as follows: Balance at 1 January 132 129 Adjustment for the year -21 3 Balance at 31 December 111 132 Comment The change in the deposit on returnable packaging for the year reflects the net exchange with customers of returnable packaging for the year less estimated wastage of returnable packaging in circulation. The devel- opment in of the liability is due to packaging shifting from returnable packaging toward not returnable packaking, e.g. cans and PET-bottles which is not refilled but reused in production of new cans and PET-bottles. The payable relating to deposit on returnable packaging is calculated on the basis of the estimated total packaging volume less packaging held in inventory. Deposit, returnable packaging Plastic crates, bottles and kegs in circulation and held in inventory are recognised in property, plant and equipment, and the obligation to repay the deposit when the packaging in circulation is taken back on inventory is recognised in other payables. Note 19 Other current payables mDKK 2020 2019 Deferred tax at 1 January 546 542 Change in deferred tax for the year 4 11 Deferred tax, no income statement effect for the year -48 Change in deferred tax by acqusitions 42 Exchange adjustments 1 0 Adjustment of previous year 3 -1 Deferred tax at 31 December 554 546 Expected realisation within 1 year -31 -33 Deferred tax relates to: Intangible assets 428 417 Property, plant and equipment 153 147 Current assets -7 13 Non current liabilities -24 11 Current liabilities 4 -42 Total 554 546 The utilisation of unutilised tax losses in one of the Group’s foreign enterprises is not certain. Therefore, the tax asset corresponding to DKK . million (: DKK . million) has not been recognised. Deferred tax Deferred tax is recognised in respect of all temporary differences between the carrying amounts and the tax base of assets and liabilities except for temporary differences arising at the time of acquisition that do not affect the profit for the year or the taxable income and temporary differences concerning goodwill. In cases where the computation of the tax base may be made according to alternative tax rules, deferred tax is measured on the basis of the intended use of the asset or settlement of the liability, respectively. Deferred tax assets are recognised at the value at which they are expected to be realized, either by elimination in tax on future earnings or by set-off against deferred tax liabilities. Deferred tax is measured on the basis of the tax rules and tax rates expected under the legislation at the balance sheet date to be effective when the deferred tax crystallises as current tax. In the balance sheet, set-off is made between deferred tax assets and deferred tax liabilities within the same legal tax entity and jurisdiction. Note 18 Deferred tax ROYAL UNIBREW Annual report 2020111 Consolidated financial statements ConFin – Note 18 ConFin – Note 19 Note 20 Debts Changes to interest-bearing debts Additions by Exchange mDKK 31/12 2019 acquisitions Repayment New facilities adjustment 31/12 2020 Interest-bearing long-term debts 1,991 0 -96 149 -2 2,042 Interest-bearing short-term debts 562 0 -483 0 79 Total interest-bearing debt, mortgage and credit institutions 2,553 0 -579 149 -2 2,121 Interest-bearing long-term leasing debt 163 -13 -67 -1 82 Interest-bearing short-term leasing debt 60 -60 71 71 Total interest-bearing leasing debt 223 0 -73 4 -1 153 Total 2,776 0 -652 153 -3 2,274 * Leasing debt is included in the balance sheet as “Credit institutions” Additions by Exchange 31/12 2018 acquisitions Repayment New facilities adjustment 31/12 2019 Interest-bearing long-term debts 2,397 -390 -16 1,991 Interest-bearing short-term debts 45 -29 546 0 562 Total interest-bearing debt, mortgage and credit institutions 2,442 0 -419 546 -16 2,553 Interest-bearing long-term leasing debt 129 1 -5 39 -1 163 Interest-bearing short-term leasing debt 56 -57 61 60 Total interest-bearing leasing debt 185 1 -62 100 -1 223 Total 2,627 1 -481 646 -17 2,776 Debts Mortgage loans and loans from credit institutions are recognised initially at fair values. Subsequently, the financial obligations are measured at amortised cost equal to the capitalised value using the effective interest method; the difference between the proceeds and the nominal value is recognised in financial income and expenses in the income statement over the loan period. Other debts, comprising trade payables, payables to subsidiaries and associates, VAT, excise duties, etc as well as other payables, are measured at amortised cost, substantially corresponding to the nominal debt. Debts In connection with the acquisition of Hartwall in , defined benefit liabilities were acquired relating to a pension scheme which has not been offered to new employees for a number of years. At December , the net liability amounted to approx DKK . million (: approx DKK . million). Taking into account the amount of the liability, that it has been at the same level in recent years and that it is being phased out, Management does not consider it material to provide the disclosures on the composition of the liability required by IAS . mDKK 2020 2019 Mortgage debt 850 855 Credit institutions 1,424 1,922 Other debts 2,136 2,046 Debts 4,410 4,823 ROYAL UNIBREW Annual report 2020112 Consolidated financial statements ConFin – Note 20 mDKK 2020 2019 Rental and operating lease commitments Total future payments: Within 1 year 16 12 Between 1 and 5 years 23 17 Beyond 5 years 0 0 Total 39 29 Rental and lease commitments relate to low value assets and service not included under IFRS 16. Third-party guarantees 31 26 Security No security has been provided in respect of loan agreements with credit institutions. As regards security for loan agreements with mortgage credit institutes, reference is made to note . Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the Group. Note 22 Contingent liabilities, security and other liabilities Adjustments for non-cash operating items: mDKK 2020 2019 Financial income -3 -5 Financial expenses 46 41 Amortisation and impairment of intangible assets 34 35 Depreciation of property, plant and equipment 314 307 Tax on the profit for the year 307 318 Income from investments in associates -33 -25 Profit and loss from sale of property, plant and equipment (see note 12 re leasing part) -2 3 Share-based payments and remuneration 7 6 Total 670 680 Cash flow statement The consolidated cash flow statement is presented under the indirect method based on the net profit for the year. The statement shows cash flows for the year, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for non-cash operating items, changes in working capital, financial income and financial expenses, and corporation tax paid. Cash flows from investing activities comprise acquisitions and disposals of property, plant and equipment and fixed asset investments as well as dividend received from associates. Cost is measured inclusive of expenses necessary to make the acquisition and sales prices after deduction of transaction expenses. Cash flows from financing activities comprise changes to the amount or composition of the Group’s share capital, payment of dividend as well as borrowing and repayment of interest-bearing debt. Cash and cash equivalents include securities with a maturity of less than months that can readily be turned into cash and are only subject to an insignificant risk of value changes. Note 21 Cash Flow Statement ROYAL UNIBREW Annual report 2020113 Consolidated financial statements ConFin – Note 21 ConFin – Note 22 Acquisition in In no acquisitions have been completed. Acquisition in Acquisition of Bev.Con ApS (CULT) On June , Royal Unibrew entered into an agreement to acquire the company Bev.Con ApS, which owns brands such as CULT Energy, SHAKER and MOKAÏ. The acquisition was completed on February . The final acquisition price has been agreed upon based on an enterprise value of DKK million and has been financed by bank borrowings. The final acquisition price is divided by DKK million in cash and a potential performance based earn-out of DKK million. The final cash acquisition price has been settled in Q , while the earn-out part of the acquisition price should be settled in Q based on a net revenue target for the period January - December . As the target has not been achieved, the earn-out part of the acquisition price will be DKK . CULT was the first to introduce energy drinks in the Danish market, and, through the acquisition, Royal Uni- brew reinforces its market position in Denmark and broadens the range in RTD (Ready-to-Drink) and Cider categories and the market for energy drinks. Royal Unibrew expects to be able to achieve increased distribution and activation of the CULT portfolio, and the acquisition increased Royal Unibrew’s earnings per share (EPS) already in . The company had approx employees focusing on commercial activities; production and logistics have been contracted out to a third party. Royal Unibrew A/S has incurred transaction costs relating to the acquisition of approx DKK million for legal, financial and commercial advisers in connection with the realisation of the transaction. The costs were rec- ognized as administrative expenses in the Annual Report for . The company has been included in the Consolidated Financial Statements of Royal Unibrew as of the date of acquisition in . As part of the integration activities Bev.Con ApS and its % owned subsidiary, Cult A/S, has been merged with Royal Unibrew A/S as the continuing company. Note 24 Acquisition of subsidiaries Related parties comprise the Board of Directors and the Executive Management as well as subsidiaries and associates, see the sections on Board of Directors and Executive Management on page and Group Structure on page . No shareholder exercises control. The following transactions have been made with related parties: Group mDKK 2020 2019 Revenue Sales to associates 18 18 Financial income and expenses Dividends received from associates 21 25 Executive Management Remuneration paid 29 17 Debt re cash-based bonus schemes 7 6 Debt re share-based bonus scheme 7 19 Board of Directors Remuneration 5 6 Transactions with subsidiaries are eliminated in the Consolidated Financial Statements in accordance with the accounting policies applied. Note 23 Related parties ROYAL UNIBREW Annual report 2020114 Consolidated financial statements ConFin – Note 23 ConFin – Note 24 Acquisition of Bruce Ashly Group Inc. On August , Royal Unibrew entered into an agreement to acquire % of the shares in the Canadian company, Bruce Ashley Group Inc. (BAG). The acquisition was completed on August . The acquisition price of DKK million, which has been paid in cash, is based on an enterprise value of DKK million. The valuation of BAG has been based on the price multiples applicable to comparable businesses. BAG is an agency business that during the last years built up a strong portfolio of Japanese sake and European beer brands, including Royal Unibrew’s Faxe Brand. BAG has an organization of employees within sales and marketing. Royal Unibrew A/S has incurred transaction costs relating to the acquisition of approx DKK million for le- gal, financial and commercial advisers in connection with the realisation of the transaction. The costs were recognized as administrative expenses in the Interim Report for the period January - September . BAG has been included in the Consolidated Financial Statements of Royal Unibrew as of the date of acquisition. Royal Unibrew has made the following final calculation of the fair value of the acquired net assets and of goodwill at the time of acquisition. Compared to the preliminary calculation of the fair value disclosed in the Annual Report the final acquisition price in Q was reduced by DKK million. DKK ‘000 Distribution rights 11,589 Property, plant and equipment 1,369 Inventories 6,913 Receivables 6,360 Prepayments 213 Deferred tax -443 Trade payables -15,592 Other payables -2,124 Acquired net assets 8,285 Goodwill 0 Estimated fair value of the business 8,285 Acquired cash at bank and in hand -4,162 Cash consideration 4,123 The receivables acquired include trade receivables of a fair vaue of DKK 6 million corresponding to the gross amount receivable according to contract. Note 24 Acquisition of subsidiaries (continued) Royal Unibrew has in Q1 2020 made the following final calculation of the fair value of the acquired net assets and of goodwill at the time of acquisition. Compared to the calculation of the fair value disclosed in the Annual Report 2019 the final acquisition price is DKK 55 million lower than expected by the end of 2019, as the earn-out part of the acquisition price is not to be paid. The fair value of the trademark is estimated to be DKK 15 million lower than by the end of 2019. DKK ‘000 Trademark 148,000 Customer relations 9,000 Property, plant and equipment 2,388 Inventories 14,120 Receivables 13,677 Prepayments 773 Deferred tax -33,538 Trade payables -6,055 Other payables -3,981 Acquired net assets 144,384 Goodwill 146,494 Estimated fair value of the business 290,878 Earn-out debt 0 Estimated fair value of the business at closing 290,878 Acquired cash at bank and in hand 26,465 Cash consideration at closing 317,343 The receivables acquired include trade receivables of a fair vaue of DKK million corresponding to the gross amount receivable according to contract. Cf. company announcement no. / of June , the normalized yearly net revenue and EBIT is approx DKK million respectively approx DKK million. ROYAL UNIBREW Annual report 2020115 Consolidated financial statements The receivables acquired include trade receivables of a fair value of DKK , million corresponding to the gross amount receivable according to contract. The receivables acquired include trade receivables of a fair value of DKK , million corresponding to the gross amount receivable according to contract. Business combinations On acquisition of new enterprises the purchase method is applied, under which the identifiable assets and liabilities of newly acquired enterprises are measured at fair value at the time of acquisition. Upon business combinations, positive differences between cost and fair value of identifiable assets and liabilities acquired are recognised as goodwill in intangible assets. At the time of acquisition, goodwill is allocated to the cash-generating units that subsequently form the basis of impairment tests. Goodwill and fair value adjust- ments in connection with the acquisition of a foreign enterprise with a functional currency that differs from the presentation currency of the Group are treated as assets and liabilities belonging to the foreign entity and are translated to the functional currency of the foreign entity at the exchange rates at the dates of transaction. Gains or losses on disposal of subsidiaries and associates are calculated as the difference between the sales sum and the carrying amount of net assets at the time of sale (including the carrying amount of goodwill) net of expected expenses and adjusted for exchange adjustments previously recognised in equity. Recognition of acquisition of subsidiary Royal Unibrew acquired in three businesses, Bev.Con ApS (Cult), Bruce Ashley Group Inc. and SIA Bauskas Alus by purchasing shares in the companies wherein the businesses were established. The businesses assets, liabilities and contingent liabilities has been recognised under the purchase method in the Financial Statements of Royal Unibrew. The key assets of the businesses are goodwill, trademarks, customer relations, property, plant and equipment, inventories, receivables, deferred tax and payables. Especially with regard to the intangible assets acquired, there are no efficient markets to be used to determine fair value. Management has therefore made an estimate in connection with the calculation of the fair value of the acquired assets and liabilities at the date of acquisition and has allocated the purchase price on that basis. The fair value calculation is subject to uncertainty and will subsequently be adjusted within a month period from the acquisition date if a need to do so is identified. The unallocated part of the purchase price has been recognised as goodwill related to synergies and the development potential of the activities acquired. Note 24 Acquisition of subsidiaries (continued) Acquisition of SIA Bauskas Alus On May , Royal Unibrew entered into an agreement to acquire % of the shares in the Latvian company, SIA Bauskas Alus (Bauskas). The acquisition was completed on November . The acquisition price of DKK million, which has been paid in cash, is based on an enterprise value of DKK million. The valuation of Bauskas has been based on the price multiples applicable to comparable businesses. Bauskas is a Latvian craft brewery that during the last years has built up a strong portfolio of craft beer products. Bauskas has an organization of approx employees within production, sales, marketing and administration. Royal Unibrew A/S has incurred transaction costs relating to the acquisition of approx DKK , million for legal, financial and commercial advisers in connection with the realisation of the transaction. The costs were recognized as administrative expenses in the Interim Report for the period January - September . Bauskas has been included in the Consolidated Financial Statements of Royal Unibrew as of the date of acquisition. Royal Unibrew has made the following final calculation of the fair value of the acquired net assets and of goodwill at the time of acquisition. DKK ‘000 Trademark 23,246 Customer relations 16,529 Property, plant and equipment 9,734 Inventories 4,958 Receivables 3,496 Prepayments 46 Deferred tax -7,957 Trade payables -946 Other payables -5,205 Acquired net assets 43,901 Goodwill 21,336 Estimated fair value of the business 65,237 Acquired cash at bank and in hand 1,629 Cash consideration at closing 66,866 ROYAL UNIBREW Annual report 2020116 Consolidated financial statements Parent Company Annual Report 2020 ROYAL UNIBREW Annual report 2020117 Signatures and statements ParFin – COVER Parent Company Income Statement mDKK Note 2020 2019 Net revenue 3,630 3,675 Production costs 3, 4 -1,774 -1,798 Gross profit 1,856 1,877 Sales and distribution expenses 3, 4 -917 -989 Administrative expenses 3, 4 -219 -199 EBIT 720 689 Dividends received from subsidiaries and associates 531 559 Financial income 5 6 6 Financial expenses 6 -31 -28 Profit before tax 1,226 1,226 Tax on the profit for the year 7 -156 -152 Net profit for the year 1,070 1,074 Earnings per share (DKK) 24.1 23.0 Diluted earnings per share (DKK) 24.1 22.9 mDKK Note 2020 2019 Net profit for the year 1,070 1,074 Other comprehensive income Items that may be reclassified to the income statement Value adjustment of hedging instruments 6 9 Tax on other comprehensive income 7 -1 -2 Total 5 7 Other comprehensive income after tax 5 7 Total comprehensive income 1,075 1,081 Income Statement for 1 January - 31 December Statement of Comprehensive Income for 1 January - 31 December ROYAL UNIBREW Annual report 2020118 Parent Company Annual Report ParFin – Income statement Parent Company Balance Sheet Assets at 31 December Liabilities and Equity at 31 December mDKK Note 2020 2019 NON-CURRENT ASSETS Intangible assets 9 403 463 Property, plant and equipment 10 1,055 1,017 Investments in subsidiaries 11 4,388 4,389 Investments in associates 11 77 77 Receivables from subsidiaries 12 60 127 Other non-current investments 12 8 8 Non-current assets 5,991 6,081 CURRENT ASSETS Inventories 13 185 158 Receivables 14 341 325 Receivables from subsidiaries 53 71 Corporation tax 1 0 Prepayments 14 18 Cash at bank and in hand 15 0 Current assets 609 572 Assets 6,600 6,653 mDKK Note 2020 2019 EQUITY Share capital 15 99 100 Other reserves 765 771 Retained earnings 1,558 1,485 Proposed dividend 666 611 Equity 3,088 2,967 LIABILITIES NON-CURRENT LIABILITIES Deferred tax 16 159 154 Mortgage debt 2, 19 553 572 Credit institutions 2, 19 830 756 Other payables 50 104 Non-current liabilities 1,592 1,586 CURRENT LIABILITIES Mortgage debt 2, 19 19 4 Credit institutions 2, 19 82 600 Trade payables 415 391 Payables to subsidiaries 1,053 831 Corporate tax 0 1 Other current payables 17 351 273 Current liabilities 1,920 2,100 Liabilities 3,512 3,686 Liabilities and equity 6,600 6,653 ROYAL UNIBREW Annual report 2020119 Parent Company Annual Report ParFin – Balance sheet Parent Company Cash Flow Statement mDKK Note 2020 2019 Net profit for the year 1,070 1,074 Adjustments for non-cash operating items 18 -199 -240 Change in working capital 78 31 Received financial income 6 6 Paid financial expenses -31 -28 Finacial expenses related to leasing -1 -1 Corporation tax paid -148 -126 Cash flows from operating activities 775 716 Dividends received from associates 531 559 Sale of property, plant and equipment 3 5 Corporation tax paid, sale of project development properties Purchase of property, plant and equipment -173 -158 Acqusition of subsidiaries 1 -302 Purchase/-sale of intangible assets and fixed asset investment -3 Cash flows from investing activities 362 101 Debt financing: Proceeds from increased drawdown on credit facilities 149 500 Repayment on credit facilities -581 -342 Repayment on lease facilities -26 -24 Change in financing of subsidiaries 298 18 Dividends paid to shareholders -600 -538 Acquisition of shares for treasury -362 -433 Cash flows from financing activities -1,122 -819 for 1 January - 31 December mDKK Note 2020 2019 Change in cash and cash equivalents 15 -2 Cash and cash equivalents at 1 January 0 2 Exchange adjustment 0 Cash and cash equivalents at 31 December 15 0 Free cash flow Net cash from operating activities 775 716 Net cash used in anvesting activities 361 406 Repayment on lease facilities -26 -24 Free cash flow 1,110 1,098 Effect from reversed free cash flow definition 7 From the 1 Janury 2020 Royal Unibrew defines the free cash flow as net cash operating activities less net cash used in investing activities”” excluding acquisitions and net proceed from intangible assets and fixed asset investments, less “”repayment on leasing facilities Comparable numbers 2019 has been adjusted. ROYAL UNIBREW Annual report 2020120 Parent Company Annual Report ParFin – Cash flow Parent Company Statement of Changes in Equity Share Proposed Share premium Hedging Total other Retained dividend mDKK capital account reserve reserves earnings for the year Total Equity at 31 December 2019 100 773 -2 771 1,485 611 2,967 Changes in equity in 2020 Profit for the year 0 1,070 1,070 Other comprehensive income 6 6 0 6 Tax on other comprehensive income 0 -1 -1 Total comprehensive income 0 0 6 6 1,069 0 1,075 Liability upon acquisition 0 0 Dividends paid to shareholders 0 -600 -600 Dividend on treasury shares 0 2 -2 0 Acquisition of shares for treasury 0 -362 -362 Proposed dividend 0 -657 657 0 Capital reduction -1 -12 -12 13 0 Share-based payments 0 7 7 Tax on changes in equity, shareholders 0 1 1 Total shareholders -1 -12 0 -12 -996 55 -954 Total changes in equity in 2020 -1 -12 6 -6 73 55 121 Equity at 31 December 2020 99 761 4 765 1,558 666 3,088 Share premium account, hedging reserve and retained earnings may be applied for distribution of dividend to the Parent Company shareholders. The share capital at December amounts to DKK ,, and is distributed on shares of DKK each. Proposed dividend for the year is DKK . per share (: DKK . per share). for 1 January - 31 December ROYAL UNIBREW Annual report 2020121 Parent Company Annual Report ParFin – Equity Parent Company Statement of Changes in Equity for 1 January - 31 December Share Proposed Share premium Hedging Total other Retained dividend mDKK capital account reserve reserves earnings for the year Total Equity at 31 December 2018 102 786 -11 775 1,418 551 2,846 Changes in equity in 2019 Profit for the year 0 1,074 1,074 Other comprehensive income 9 9 0 9 Tax on other comprehensive income 0 -1 -1 Total comprehensive income 0 0 9 9 1,073 0 1,082 Liability upon acquisition 0 Dividends paid to shareholders 0 -538 -538 Dividend on treasury shares 0 13 -13 0 Acquisition of shares for treasury 0 -433 -433 Proposed dividend 0 -611 611 0 Capital reduction -2 -13 -13 15 0 Share-based payments 0 6 6 Tax on changes in equity, shareholders 0 4 4 Total shareholders -2 -13 0 -13 -1,006 60 -961 Total changes in equity in 2019 -2 -13 9 -4 67 60 121 Equity at 31 December 2019 100 773 -2 771 1,485 611 2,967 ROYAL UNIBREW Annual report 2020122 Parent Company Annual Report Notes to Parent Company Annual Report Descriptive notes Basis of preparation ........................................ Financial risk management ............................ Notes referring to Income Statement, Balance Sheet and Cash Flow Statement Staff expenses ................................................. Expenses broken down by nature ................... Financial income ............................................. Financial expenses .......................................... Tax on the profit for the year ........................... Realized hedging transactions ....................... Intangible assets ............................................. Property, plant and equipment ....................... Investments in subsidiaries and associates ................................................. Receivables from subsidiaries and other fixed asset investments .................. Inventories ........................................................ Receivables ....................................................... Share capital .................................................... Deferred tax ..................................................... Other current payables ................................... Cash Flow Statement ...................................... Other notes Debts ................................................................ Contingent liabilities, security and other liabilities ......................................... Related parties ................................................ ROYAL UNIBREW Annual report 2020123 Signatures and statements ParFin – Notes contents Basis of preparation Significant accounting policies The Parent Company’s accounting policies remain unchanged from last year. Significant accounting policies are identical to those applied by the Royal Unibrew Group except for those mentioned below. Translation policies Exchange adjustment of balances regarded as part of the total net investment in enterprises with another functional currency than DKK is recognised in financial income and expenses in the Parent Company income statement. New and amended standards and interpretations that have taken effect Reference is made to note to the Consolidated Financial Statements. Critical judgements and accounting estimates In connection with the preparation of the Parent Company and Con- solidated Financial Statements, Management makes estimates and judgements as to how recognition and measurement of assets and liabilities should take place based on the accounting policies applied. Judgements as an element in significant accounting policies The calculation of carrying amounts of certain assets and liabilities requires judgement as to how assets and liabilities should be classified in the Financial Statements and how future events will affect the value of these assets and liabilities at the balance sheet date. In connection with the financial reporting for , the following judgments have been made materially affecting the related items as described in relevant notes, see list below. Critical accounting estimates Management’s estimates are based on assumptions which Manage- ment considers reasonable but which are inherently uncertain and unpredictable. In connection with the financial reporting for , the following critical estimates have been made as desribed in relevant notes, see list below. Accounting policies, judgements as an element in significant account- ing policies as well as critical accounting estimates are described in the notes: Parent Consolidated Company FS note FS note Derivative financial instruments 4 Segment reporting 5 Net revenue 6 Share-based payments 7 Expenses 8 Financial income 9 Financial expenses 10 Corporation tax 11 Intangible assets 12 Property, plant and equipment 13 Investments in associates 14 11 Other fixed asset investments 15 11 Inventories 16 Receivables 17 Equity 18 Deferred tax 19 Deposit returnable packaging 20 Debt 21 Cash Flow Statement 22 Purchase Price Allocation (PPA) 25 Note 1 Basis of preparation of Parent Company Annual Report Legends Significant accounting policies Judgements as an element in significant accounting policies Critical accounting estimates Comments to the note ROYAL UNIBREW Annual report 2020124 Parent Company Annual Report ParFin – Note 01 Financial liabilities Maturity Contractual Maturity > 1 year Maturity Carrying mDKK cash flows < 1 year < 5 years > 5 years amount 31/12 2020 Non-derivative financial instruments: Financial debt, debt financing, gross 1,468 87 1,089 292 1,421 Financial debt, subsidiaries 1,053 1,053 0 0 1,053 Leasing 65 25 39 1 63 Trade payables 415 415 415 Other payables 303 253 50 303 Total 3,304 1,833 1,178 293 3,255 The debt is classified as “debt at amortised cost” with DKK , million and “debt at fair value” with DKK million. The fair value of the total debt is assessed to equal carrying amount. 31/12 2019 Non-derivative financial instruments: Financial debt, debt financing, gross 1,909 596 869 444 1,853 Financial debt, subsidiaries 831 831 831 Leasing 82 24 58 0 79 Trade payables 391 391 391 Other payables 316 212 104 316 Total 3,529 2,054 1,031 444 3,470 The debt is classified as “debt at amortised cost” with DKK , million and “debt at fair value” with DKK million. The fair value of the total debt is assessed to equal carrying amount. For a description of the Parent Company’s and the Group’s currency, interest rate, credit, commodity and other risks as well as capital management, reference is made to note to the Consolidated Financial Statements. Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows: mDKK 2020 2019 Fixed salaries to Executive Management 20 12 Ordinary bonus scheme for Executive Management 9 6 Share-based payments to Executive Management (conditional) 9 6 Remuneration of Executive Management 38 24 Remuneration of Board of Directors 5 6 43 30 Wages and salaries 487 479 Contributions to pension schemes 44 43 531 522 Other social security expenses 6 7 Other staff expenses 18 22 Total 598 581 Average number of employees 973 969 Note 2 Financial risk management Note 3 Staff expenses ROYAL UNIBREW Annual report 2020125 Parent Company Annual Report ParFin – Note 02 ParFin – Note 03 mDKK 2020 2019 Production costs 1,774 1,798 Sales and distribution expenses 917 989 Administrative expenses 219 199 Total 2,910 2,986 break down by nature as follows: Raw materials and consumables 1,426 1,444 Wages, salaries and other staff expenses 598 581 Operating and maintenance expenses 118 131 Distribution expenses and carriage 187 186 Sales and marketing expenses 356 427 Bad trade debts 9 2 Office supplies etc 72 76 Amortisation and depreciation 144 139 Total 2,910 2,986 Note 4 Expenses broken down by nature Note 4 Expenses broken down by nature (continued) Total amortisation and depreciation are included in the following items in the income statement: mDKK 2020 2019 Production costs 83 78 Sales and distribution expenses 46 47 Administrative expenses 15 14 Total 144 139 Fee to auditors Fee for the audit of the Annual Report: KPMG 1 1 Total 1 1 KPMG: Other assurance services 0 0 Other assistance 0 2 Total 0 2 * Fees for other services than statutory audit of the financial statements provided by KPMG Statsautoriseret Revisionspartnerskab primarily comprise services relating to financial due dilligence. ROYAL UNIBREW Annual report 2020126 Parent Company Annual Report ParFin – Note 04 mDKK 2020 2019 Finance income Cash at bank and in hand 0 1 Trade receivables 0 0 Receivables from subsidiaries 2 3 Other financial income 0 Exchange adjustments Cash at bank and in hand and external loans 3 Trade receivables 2 Trade payables 1 Loans from subsidiaries 0 Forward contracts Income liquidation of subsiduary 0 Total 6 6 Note 6 Financial expenses mDKK 2020 2019 Finance costs Mortgage debt 5 5 Credit institutions 18 16 Other financial expenses 2 3 Leasing 1 1 Exchange adjustments Cash at bank and in hand and external loans 0 Trade receivables 4 Trade payables 0 Loans from subsidiaries 0 Forward contracts 1 3 Total 31 28 Note 5 Financial income Note 7 Tax on the profit for the year mDKK 2020 2019 Tax on the taxable income for the year 146 147 Adjustment of previous year 2 0 Adjustment of deferred tax 8 3 Total 156 150 which breaks down as follows: Tax on profit for the year 156 152 Tax on other comprehensive income 1 2 Tax on equity entries -1 -4 Total 156 150 Current Danish tax rate 22.0 22.0 Dividends received from subsidiaries and associates -9.7 -10.0 Effect on tax rate of permanent differences 0.3 0.4 Adjustment of previous year 0.1 0.1 Effective tax rate 12.7 12.5 Note 8 Realized hedging transactions mDKK 2020 2019 Realized hedging transactions are included in the income statement as follows: Net revenue includes currency hedges of 0 0 Production costs include foreign currency and commodity hedges of -7 -11 Financial income and expenses include currency, commodity and interest rate hedges of -2 -3 Total -9 -14 Reference is made to note to the Consolidated Financial Statements for a description of hedging policies ROYAL UNIBREW Annual report 2020127 Parent Company Annual Report ParFin – Note 05 ParFin – Note 06 ParFin – Note 07 ParFin – Note 08 Distribution Customer MDKK Goodwill Trademarks rights relations Total Cost at 1 January 2020 270 188 12 9 479 Disposals -12 -12 Additions by merger -43 -15 -58 Cost at 31 December 2020 227 173 0 9 409 Amortisation and impairment losses at 1 January 2020 0 -3 -12 -1 -16 Reversal depreciation of disposals 12 12 Amortisation for the year 0 0 0 -2 -2 Amortisation and impairment losses at 31 December 2020 0 -3 0 -3 -6 Carrying amount at 31 December 2020 227 170 0 6 403 Note 9 Intangible assets Distribution Customer MDKK Goodwill Trademarks rights relations Total Cost at 1 January 2019 80 25 12 117 Additions 190 163 9 362 Cost at 31 December 2019 270 188 12 9 479 Amortisation and impairment losses at 1 January 2019 0 -3 -12 -15 Amortisation for the year -1 -1 Amortisation and impairment losses at 31 December 2019 0 -3 -12 -1 -16 Carrying amount at 31 December 2019 270 185 0 8 463 Trademarks Trademarks are not amortised as they are all well-established, old and profitable trademarks which custom- ers are expected to continue demanding unabatedly, other things being equal, and which Management is not planning to stop selling and marketing. Reference is made to note to the Consolidated Financial Statements for a description of impairment test. ROYAL UNIBREW Annual report 2020128 Parent Company Annual Report ParFin – Note 09 Other fixtures Property, Leasing of Total other and fittings, plant and property, property, 2019 Land and Plant and tools and equipment plant and plant and mDKK buildings machinery equipment in progress equipment equipment Cost at 1 January 2019 728 1,308 499 52 94 2,681 Additions 20 29 57 52 37 195 Additions by change in accounting policy 1 0 1 Disposals -1 -13 -20 0 -10 -44 Transfers for the year 8 27 10 -45 0 0 Cost at 31 December 2019 755 1,351 547 59 121 2,833 Depreciation, revaluation and impairment losses at 1 January 2019 -404 -926 -361 0 -21 -1,712 Depreciation for the year -14 -48 -47 -25 -134 Reversal of depreciation and impairment of assets sold 0 11 14 5 30 Depreciation, revaluation and impairment losses at 31 December 2019 -418 -963 -394 0 -41 -1,816 Carrying amount at 31 December 2019 337 388 153 59 80 1,017 Leasing of property, plant and equipment: Cost at 31 December 2019 49 71 120 Depreciation, revaluation and impairment losses at 31 December 2019 -13 -28 -41 Carrying amount per asset type 36 43 79 Land and buildings including plant and machinery at a carrying amount of DKK million have been provided as security for mortgage debt of DKK million. Contracts for the delivery of property, plant and equipment in or later have been entered into only to an imma- terial extent. Note 10 Property, plant and equipment Other fixtures Property, Leasing of Total other and fittings, plant and property, property, 2020 Land and Plant and tools and equipment plant and plant and mDKK buildings machinery equipment in progress equipment equipment Cost at 1 January 2020 755 1,351 547 59 121 2,833 Additions 3 36 48 86 23 196 Additions by merger 0 Disposals -6 -39 -42 -19 -106 Transfers for the year 3 15 7 -25 0 Cost at 31 December 2020 755 1,363 560 120 125 2,923 Depreciation, revaluation and impairment losses at 1 January 2020 -418 -963 -394 0 -41 -1,816 Depreciation for the year -14 -51 -48 -28 -141 Reversal of depreciation and impairment of assets sold 6 39 39 6 90 Depreciation, revaluation and impairment losses at 31 December 2020 -426 -975 -403 0 -63 -1,867 Carrying amount at 31 December 2020 329 388 157 120 62 1,055 Leasing of property, plant and equipment: Cost at 31 December 2020 44 81 125 Depreciation, revaluation and impairment losses at 31 December 2020 -19 -44 -63 Carrying amount per asset type 25 37 62 Land and buildings including plant and machinery at a carrying amount of DKK million have been provided as security for mortgage debt of DKK million. Contracts for the delivery of property, plant and equipment in or later have been entered into only to an immaterial extent. ROYAL UNIBREW Annual report 2020129 Parent Company Annual Report ParFin – Note 10 Investments Investments mDKK in subsidiaries in associates Cost at 1 January 2020 4,478 77 Additions -1 Disposals Cost at 31 December 2020 4,477 77 Impairment losses at 1 January 2020 -89 0 Impairment losses at 31 December 2020 -89 0 Carrying amount at 31 December 2020 4,388 77 Cost at 1 January 2019 4,466 77 Additions 12 0 Disposals 0 Cost at 31 December 2019 4,478 77 Impairment losses at 1 January 2019 -89 0 Impairment losses at 31 December 2019 -89 0 Carrying amount at 31 December 2019 4,389 77 Dividend on investments in subsidiaries and associates Dividend on investments in subsidiaries and associates is recognised in the Parent Company’s income state- ment in the financial year in which dividend is declared. Investments in subsidiaries and associates in the Parent Company Financial Statements Investments in subsidiaries and associates are measured at cost and tested in the event of indication of impairment. Where cost exceeds the recoverable amount, the investment is written down to its lower recov- erable amount. Estimate The carrying amount of investments in subsidiaries and the values of intangible assets contained therein is tested to identify any impairment. Reference is made to note to the Consolidated Financial Statements.. Receivables Total other from Other Other fixed asset mDKK subsidiaries investments receivables investments Cost at 1 January 2020 127 55 5 60 Exchange adjustment 0 Additions 0 Disposals -67 0 Cost at 31 December 2020 60 55 5 60 Revaluations and impairment losses at 1 January 2020 0 -52 0 -52 Revaluations and impairment losses at 31 December 2020 0 -52 0 -52 Carrying amount at 31 December 2020 60 3 5 8 Cost at 1 January 2019 119 55 2 57 Exchange adjustment 0 Additions 20 3 3 Disposals -12 0 Cost at 31 December 2019 127 55 5 60 Revaluations and impairment losses at 1 January 2019 0 -52 0 -52 Revaluations and impairment losses at 31 December 2019 0 -52 0 -52 Carrying amount at 31 December 2019 127 3 5 8 Note 11 Investments in subsidiaries and associates Note 12 Receivables from subsidiaries and Other fixed asset investments ROYAL UNIBREW Annual report 2020130 Parent Company Annual Report ParFin – Note 11 ParFin – Note 12 Note 13 Inventories Note 14 Receivables (continued) Trade receivables fall due as follows: Not due and prepaid Due Due Due > bonus 1-15 days 16-90 days 90 days Total 2020 Trade receivables 285 35 14 2 336 Impairment provision -6 -1 -3 -2 -12 Trade receivables after impairment 279 34 11 - 324 Impairment provision % ** -2.1% -2.9% -21.4% -100.0% -3.6% Provisions for bad debts, beginning of year -8 Bad debts realized during the year 7 Provision for the year -11 Total -12 * Lifetime expected credit loss. ** Historical average loss rate is approx. 1% Current receivables, other than trade receivables, all fall due for payment in . 2019 Trade receivables 282 17 8 12 319 Impairment provision -1 - -3 -4 -8 Trade receivables after impairment 281 17 5 8 311 Impairment provision % -0.2% -1.7% -38.0% -33.0% -2.5% Provisions for bad debts, beginning of year -12 Bad debts realized during the year 6 Provision for the year -2 Total -8 * Lifetime expected credit loss. ** Historical average loss rate is approx. 0.6% Receivables Reference is made to note 17 to the Consolidated Financial Statements. mDKK 2020 2019 Raw materials and consumables 78 71 Work in progress 9 11 Finished goods and goods for resale 98 76 Total inventories 185 158 Inventories Indirect production costs are recognised in the value of work in progress and finished goods at DKK million (: DKK million). As in , inventories have not been written down materially. Note 14 Receivables mDKK 2020 2019 Trade receivables 324 311 Other receivables 17 14 Total receivables 341 325 ROYAL UNIBREW Annual report 2020131 Parent Company Annual Report ParFin – Note 13 ParFin – Note 14 Note 15 Share capital Reference is made to note to the Consolidated Financial Statements. Note 16 Deferred tax mDKK 2020 2019 Deferred tax at 1 January 154 115 Change in deferred tax for the year 8 3 Addition by merger 37 Adjustment of previous year -3 -1 Deferred tax at 31 December 159 154 Due within 1 year -7 -9 Deferred tax relates to: Intangible assets 36 38 Property, plant and equipment 105 102 Fixed asset investments 18 18 Current assets 11 10 Current liabilities -11 -14 Total 159 154 Note 17 Other current payables mDKK 2020 2019 VAT, excise duties, etc 69 23 Other payables 253 212 Deposit, returnable packaging 29 38 Total other current payables 351 273 Deposit, returnable packaging is specified as follows: Balance at 1 January 38 38 Adjustment for the year -9 0 Balance at 31 December 29 38 Comment The change in the deposit on returnable packaging for the year reflects the net exchange with customers of returnable packaging for the year less estimated wastage of returnable packaging in circulation. Note 18 Cash Flow Statement Adjustments for non-cash operating items: mDKK 2020 2019 Dividens received from subsidiaries and associates -531 -559 Financial income -6 -6 Financial expenses 31 28 Amortisation and impairment of intangible assets 2 1 Depreciation of property, plant and equipment (see note 10 re leasing part) 141 134 Tax on the profit for the year 156 152 Profit and loss from sale of property, plant and equipment 1 4 Share-based payments and remuneration 7 6 Total -199 -240 ROYAL UNIBREW Annual report 2020132 Parent Company Annual Report ParFin – Note 15 ParFin – Note 16 ParFin – Note 17 ParFin – Note 18 Note 19 Debts Changes to interest-bearing debts mDKK 31/12 2019 Cash flow Additions 31/12 2020 Interest-bearing long-term debts 1,272 -77 149 1,345 Interest-bearing short-term debts 1,449 -504 208 1,152 Total interest-bearing debt, mortgage and credit institutions 2,721 -581 357 2,497 Interest-bearing long-term leasing debt 56 -3 -15 38 Interest-bearing short-term leasing debt 23 -23 25 25 Total interest-bearing leasing debt 79 -26 10 63 Total 2,800 -607 367 2,560 mDKK 31/12 2018 Cash flow Additions 31/12 2029 Interest-bearing long-term debts 1,676 -404 1,272 Interest-bearing short-term debts 805 144 500 1,449 Total interest-bearing debt, mortgage and credit institutions 2,481 -260 500 2,721 Interest-bearing long-term leasing debt 54 -12 14 56 Interest-bearing short-term leasing debt 18 -18 23 23 Total interest-bearing leasing debt 72 -30 37 79 Total 2,553 -290 537 2,800 mDKK 2020 2019 Guarantees Guarantees relating to subsidiaries 661 684 Total 661 684 Rental and lease commitments Total future payments: Within 1 year 7 8 Between 1 and 5 years 11 12 Beyond 5 years 0 0 Total 18 20 Rental and lease commitments relate to low value assets and service not included under IFRS 16. Third-party guarantees 11 11 Security No security has been provided in respect of the Group’s loan agreements with credit institutions other than the Parent Company’s liability for the amounts drawn by subsidiaries on group credit facilities. As regards security for loan agreements with mortgage credit institutes, reference is made to note . Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the Parent Company or the Group. Note 20 Contingent liabilities, security and other liabilities ROYAL UNIBREW Annual report 2020133 Parent Company Annual Report ParFin – Note 19 ParFin – Note 20 Related parties comprise the Board of Directors and the Executive Management as well as subsidiaries and associates, see the sections on Board of Directors and Executive Management on page and Group Structure on page . No shareholder exercises control. The following transactions have been made with related parties: mDKK 2020 2019 Revenue Sales to subsidiaries 561 523 Sales to associates 18 18 Costs Purchases from subsidiaries 70 52 Financial income and expenses Dividends received from associates 21 25 Dividends received from subsidiaries 510 537 Interest received from subsidiaries 2 3 Interest paid to subsidiaries 0 0 Executive Management Remuneration paid 29 17 Debt re cash-based bonus schemes 7 6 Debt re share-based bonus scheme 7 19 mDKK 2020 2019 Board of Directors Remuneration 5 6 Intercompany balances at 31 December Loans to subsidiaries 93 183 Receivables from subsidiaries 19 15 Loans from subsidiaries 1,076 868 Payables to subsidiaries 23 -37 Capital contributed to subsidiaries 7 Guarantees and security Guarantee for subsidiaries 661 696 Note 21 Related parties ROYAL UNIBREW Annual report 2020134 Parent Company Annual Report ParFin – Note 21 → Group Structure I Quarterly Financial Highlights and Ratios I Definitions of Financial Highlights and Ratios I Disclaimer Other ROYAL UNIBREW Annual report 2020135 Other Other - COVER Group Structure Segment Ownership Currency Capital Parent Company Royal Unibrew A/S, Denmark DKK 98,700,000 WESTERN EUROPE Subsidiaries Aktieselskabet Cerekem International Ltd., Denmark 100% DKK 1,000,000 Albani Sverige AB, Sweden 100% SEK 305,000 Ceres S.p.A., Italy 100% EUR 206,400 The Curious Company A/S, Denmark 100% DKK 550,000 Etablissement Geyer-Fréres S.A., France 100% EUR 159,687 Nohrlund ApS, Denmark 51% DKK 103,030 Terme di Crodo S.r.l. 100% EUR 19,000,000 Associates Grønlandskonsortiet I/S, Denmark 50% DKK Hansa Borg Holding AS, Norway 25% NOK 55,510,000 Nuuk Imeq A/S, Nuuk, Greenland 32% DKK 38,000,000 BALTIC SEA Subsidiaries AB Kalnapilio-Tauro Grupe, Lithuania 100% EUR 1,153,337 Oy Hartwall Ab 100% EUR 13,240,140 Lapin Kulta Oy 100% EUR 16,819 Royal Unibrew Services UAB, Lithuania 100% EUR 43,500 SIA “Cido Grupa”, Latvia 100% EUR 1,117,060 SIA Lacplesa Alus, Latvia 100% EUR 68,945 SIA Bauskas Alus, Latvia 100% EUR 932,064 OÜ Royal Unibrew Eesti, Estonia 100% EUR 200,000 Segment Ownership Currency Capital INTERNATIONAL Subsidiaries Centre Nordique d’Alimentation EURL, France 100% EUR 131,000 Ferell sp. z.o.o. 100% PLN 120,200 Supermalt UK Ltd., UK 100% GBP 9,700,000 Vitamalt (West Africa) Ltd., UK 100% GBP 10,000 Royal Unibrew Nigeria Ltd. 100% NGN 10,000,000 The Danish Brewery Group Inc., USA 100% USD 100,000 Bruce Ashley Group Inc. 100% CAD 133 Activity Production, sales and distribution Sales and distribution Holding company Other * not audited as not mandatory audit ROYAL UNIBREW Annual report 2020136 Other Other - Group structure Quarterly Financial Highlights and Ratios (Group) mDKK (unaudited) Q1 Q2 Q3 Q4 2020 2019 2020 2019 2020 2019 2020 2019 Sales (million hectolitres) 2.2 2.2 3.1 3.3 3.2 3.0 2.6 2.5 Income Statement Net revenue 1,524 1,521 2,042 2,270 2,258 2,114 1,733 1,787 EBITDA 287 296 546 584 699 573 329 361 EBITDA margin (%) 18.8 19.5 26.7 25.7 31.0 27.1 19.0 20.2 Earnings before interest and tax (EBIT) 200 211 463 499 600 492 252 267 EBIT margin (%) 13.1 13.9 22.7 22 26.6 23.3 14.5 14.9 Income from investments in associates -2 -2 6 11 14 7 15 9 Financial income and expenses -10 -9 -9 -10 -11 -8 -13 -9 Profit before tax 188 200 460 500 603 491 254 267 Net profit for the period 145 153 360 388 475 377 218 222 Balance Sheet Non-current assets 7,070 7,125 6,974 7,099 6,940 7,089 7,015 7,163 Total assets 8,518 8,735 8,837 8,907 8,390 8,594 8,306 8,493 Equity 3,181 3,001 3,545 2,663 3,398 2,934 3,332 3,106 Net interest-bearing debt 2,832 3,047 2,113 3,000 1,837 2,681 2,193 2,705 Net working capital -465 -399 -650 -749 -957 -695 -875 -671 Invested capital 6,430 6,503 6,076 6,068 5,648 6,018 5,930 6,211 Cash Flows From operating activities -5 -101 707 816 959 490 77 197 From investing activities -67 -62 -55 -41 -60 -63 -142 -96 Free cash flow -72 -163 652 775 899 427 -65 101 Financial Ratios (%) Free cash flow as a percentage of net revenue -5 -11 32 34 40 20 -4 6 Cash conversion -50 -107 181 200 189 113 -30 45 Net interest-bearing debt/EBITDA** 1.6 1.8 1.2 1.7 1 1.5 1.2 1.5 Equity ratio 37 34 40 30 41 34 40 37 Ratios comprised by the “Recommendations and Financial Ratios” issued by the Chartered Financial Analyst Society Denmark’s Committee for Accounting standards have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page . * Compared to the Annual Report 2019 the definition of free cash flow has been updated to reflect market practise of the IFRS 16 implementation. Comparables for 2019 have been adjusted. ** running 12 months ROYAL UNIBREW Annual report 2020137 Other Other - Quarterly financial highlights Definitions of Financial Highlights and Ratios EBITDA Earnings before interest, tax, depreciation, amortisation and im- pairment losses as well as profit from sale of property, plant and equipment and amortisation of intangible assets. EBITDA margin EBITDA as a % of net revenue. EBIT Earnings before interest and tax. EBIT margin EBIT as a percentage of net revenue. Net interest-bearing debt Mortgage debt and debt to credit institutions less cash at bank and in hand, interest-bearing current investments and receivables. Net working capital Inventories + receivables - current liabilities except for corporation tax receivable/payable as well as mortage debt and debt to credit institutions. Invested capital Equity + minority interests + provisions + net interest-bearing debt - financial assets. Investing activities Dividend received from associates, purchase net of sale of property, plant and equipment less net cash used in investing activities excluding acquisitions and net proceed from intangible assets and fixed assets investments, less repayment on lease facilities. Free cash flow Cash flow from operating activities less investing activities. Earnings per share Parent Company shareholders' share of profit for the year/average number of shares in circulation. Diluted earnings per share Parent Company shareholders' share of earnings from operating activities/average number of shares in circulation including re- stricted shares "in-the-money". Free cash flow per share Free cash flow from operating activities/average number of shares in circulation. Dividend per share Proposed dividend per share. Return on invested capital including goodwill (ROIC) EBIT net of tax as a percentage of average invested capital. Return on invested capital excluding goodwill (ROIC) EBIT net of tax as a percentage of average invested capital, ex- cluding goodwill. Free cash flow as a percentage of net revenue Free cash flow as a percentage of net revenue. Capex as a percentage of net revenue Purchase net of sale of property, plant and equipment plus repay- ment on lease facilities as a percentage of net revenue. Cash conversion Free cash flow as a percentage of net profit for the year. Net interest-bearing debt/ EBITDA before special items The ratio of net interest-bearing debt at year end to EBITDA. Equity ratio Equity at year end as a percentage of total assets. Return on equity (ROE) Consolidated profit after tax as a percentage of average equity. Dividend payout ratio (DPR) Dividend calculated for the full share capital as a percentage of the Parent Company shareholders' share of net profit for the year. ROYAL UNIBREW Annual report 2020138 Other Other - Definitions Disclaimer This Annual Report contains forward-looking statements, includ- ing statements about the Group’s sales, revenue, earnings, spend- ing, margins, cash flows, inventories, products, actions, plans, strategies, objectives and guidance with respect to the Group’s future operating results. Forward-looking statements include, without limitation, any statement that may predict, forecast, indi - cate or imply future results, performance or achievements, and may contain the following words or phrases “believe, anticipate, expect, estimate, intend, plan, project, will be, will continue, likely to result, could, may, might”, or any variations of such words or other words with similar meanings. Any such statements involve known and unknown risks, estimates, assumptions and uncer - tainties that could cause the Group’s actual results, performance or industry results to differ materially from the results expressed or implied in such forward-looking statements. Royal Unibrew assumes no obligation to update or adjust any such forward-look - ing statements (except for as required under the disclosure requirements for listed companies) to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Some important risk factors that may have direct bearing on the Group’s actual results include, but are not limited to: economic and political uncertainty (including interest rates and exchange rates), financial and regulatory developments, development in the demand for the Group’s products, intro- duction of and demand for new products, changes in the competitive environment and the industry in which the Group operates, changes in consumer preferences, increasing industry consolidation, the availability and pricing of raw materials and packaging materials, cost of energy, production- and distribution-related issues, information technology failures, breach or unexpected termination of contracts, price reductions resulting from market-driven price reductions, determination of fair value in the opening balance sheet of acquired entities, litigation, pandemic, environmental issues and other unforeseen factors. New risk factors may emerge in the future, which the Group cannot predict. Furthermore, the Group cannot assess the impact of each factor on the Group’s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Accordingly, forward-looking statements should not be relied on as a prediction of actual results. ROYAL UNIBREW Annual report 2020139 Other Other - Disclaimer Design and production: Noted Royal Unibrew A/S Royal Unibrew A/S Faxe Alle DK- Faxe Tel + CVR No.: Financial year: January – December Registered municipality: Faxe Homepage: www.royalunibrew.com E-mail: [email protected] 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Unibrew A/SDenmarkJoint stock companyDenmarkFaxe Allé 1, 4640 FaxeFaxeBeverage providerRoyal Unibrew A/SRoyal Unibrew A/SN/AAnnual reportAuditor's report on audited financial statementsParsePort XBRL Converter2020-01-012020-12-312019-01-012019-12-31529900D69KFL8IAP8Q63Royal Unibrew A/SReporting class D41956712Faxe Allé1DK-4640FaxeFaxewww.royalunibrew.comcontact@royalunibrew.comhttps://investor.royalunibrew.com/corporate-governancehttps://investor.royalunibrew.com/corporate-governancehttps://investor.royalunibrew.com/corporate-governance2,6312567973969Faxe2021-03-03Lars JensenPresident & CEOLars VestergaardCFOWalther ThygesenChairmanJais ValeurDeputy ChairmanMartin AlsøEinar Esbensen NielsenHeidi Kleinbach SauterClaus KærgaardChristian SagildCatharina Stackelberg HammarénFloris van Woerkom529900D69KFL8IAP8Q6341956712Royal Unibrew A/SFaxe Allé 1DK-4640 FaxeOpinionBasis for OpinionCopenhagen2021-03-03Lau Bent BaunState Authorised Public Accountantmne2670825578198KPMG Statsautoriseret RevisionspartnerselskabDampfærgevej282100CopenhagenNiels VendelboState Authorised Public Accountantmne3453225578198KPMG Statsautoriseret RevisionspartnerselskabDampfærgevej282100Copenhagen
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