Annual Report • Mar 1, 2016
Annual Report
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Royal Unibrew is a leading regional beverage provider in a number of markets – primarily in Northern Europe, Italy and in the international malt beverage markets.
We produce, market, sell and distribute quality beverages with focus on branded products within beer, malt beverages and soft drinks as well as cider and long drinks.
Our main markets are Denmark, Finland, Italy and Germany as well as Latvia, Lithuania and Estonia. To these should be added the international markets comprising a number of established markets in the Americas region and major cities in Europe and North America as well as emerging markets in for example Africa.
Denmark – the number two provider of beer and soft drinks with a number of strong brands
Finland – the number two provider of beer and soft drinks with a number of strong brands, as well as international spirits and wine brands
The Baltic countries – among the leading providers of beer and soft drinks holding considerable market positions
Italy – among the market leaders in the super premium segment for beer with Ceres Strong Ale
International markets – among the market leaders in the premium segment for dark malt beverages, whereas the beer category is covered by the Faxe brand
In all of our markets, we offer our customers strong and locally based brands.
Based on continuous development and innovation, it is our objective to meet customer demand for quality beverages.
In addition to our own brands, we offer licence-based international brands of the PepsiCo and Heineken Groups.
Our medium-term financial targets:
EBIT margin: 15% NIBD/EBITDA: Max 2.5 times Equity ratio: at least 30% at year end
Royal Unibrew is expected to continue generating a rather significant liquidity surplus in the future, and it remains the intention currently to make distributions to shareholders.
Dividend: 40-60% of net profit for the year
Share buy-backs will be considered currently taking into account optimisation of the capital structure.
It is our strategy to be a focused, regional beverage provider within beer, malt beverages and soft drinks – and to achieve leading positions in the markets or the segments in which we operate.
The main elements of our strategy are as follows:
2015 was a good year for Royal Unibrew.
Solid market positions and Hartwall integration resulted in the best performance ever
* -4% not allocated
15.2
Cash flow per share
DKK per share of DKK 2
Earnings per share (EPS)
DKK per share of DKK 2
| Royal Unibrew in Brief | 2 |
|---|---|
| Results 2015 | 3 |
| CEO Letter | 6 |
| Financial Highlights and Ratios | 9 |
| Strategy | 11 |
| Outlook | 14 |
| Financial Review | 16 |
| Western Europe | 20 |
| Baltic Sea | 24 |
| Malt and Exports | 28 |
| Shareholder Information | 31 |
| Corporate Governance | 35 |
| Risk Management | 38 |
| Remuneration | 42 |
| Board of Directors and Executive Board | 44 |
| Organisation and Employees | 49 |
| Corporate Social Responsibility | 51 |
Management's Statement on the Annual Report 56 Independent Auditor's Report 57
| Income Statement | 59 |
|---|---|
| Statement of Comprehensive Income | 59 |
| Assets | 60 |
| Liabilities and Equity | 60 |
| Cash Flow Statement | 61 |
| Statement of Changes in Equity | 62 |
| Contents of Notes | 63 |
| Notes | 64 |
| Content | 97 |
|---|---|
| Income Statement | 98 |
| Statement of Comprehensive Income | 98 |
| Assets | 99 |
| Liabilities and Equity | 99 |
| Cash Flow Statement | 100 |
| Statement of Changes in Equity | 101 |
| Notes | 102 |
| Quarterly Financial Highlights and Ratios | 116 |
|---|---|
| Definitions of Financial Highlights and Ratios | 117 |
| Group Structure | 118 |
The Annual Report has been prepared in Danish and English. In case of discrepancy the Danish version shall prevail.
2015 was a good year for Royal Unibrew. We improved our earnings and cash flow, and also reinforced our market positions. At the same time, we have made considerable headway with the Hartwall integration. Following a year of dividend pause in 2014 and a significant debt reduction, Royal Unibrew again has satisfactory financial and strategic flexibility. Therefore, as planned, we resumed dividend distribution and share buy-backs in 2015. We also increased our medium-term EBIT margin target from 14% to 15%. The good performance is due to our regional beverage strategy with local closeness to our consumers combined with strong customer relations as well as committed and competent employees throughout our organisation.
We achieved satisfactory earnings for 2015 The earnings were above expectations at the beginning of the year and were achieved in spite of poor summer weather as well as continuing challenging market conditions and a small revenue decline. Throughout 2015, we saw a continuing difficult macroeconomic situation in Finland alongside weaker demand within our product categories in the other European markets, except for Denmark where we saw good progress.
The positive development is due to our focused commercial agenda, the many innovative initiatives in all of our markets as well as continuous efficiency improvement throughout our business. We are directing targeted efforts at maintaining and further developing our market positions, products and brands and at strengthening our partnerships. We cooperate closely with our customers, which enables us to continuously adapt our product portfolio to the needs of local consumers and customers.
Also, in our opinion, a considerable part of the explanation of our positive momentum in recent years lies in our shared values and our leadership within Royal Unibrew, and in the continuity seen among our employees.
The Danish part of our business developed very satisfactorily in 2015. Across channels and categories, we are seeing increasing consumer demand for our products. Our progress in the Danish market also reflects the priority we give to ensuring cooperation with our consumers. This is effected eg through locally based sponsorships for eg the Danish football club AGF and more national concepts such as "Tak Rock" (Thank You, Rock). We have also launched the organic beer ROYAL Økologisk (Royal Organic) and the new, interesting craft beers Schiøtz and Lottrup, which have been received very well by consumers. Schiøtz and Lottrup achieved a top 3 position in their categories in the European Beer Star and the International Food Contest, 2015. Moreover, we consider it a recognition of our work that, also in 2015, we achieved very high scores in third-party measurements of our customers' satisfaction with their suppliers.
Since acquiring Hartwall in 2013, we have directed targeted efforts at ensuring successful integration of Hartwall into Royal Unibrew. We have followed our ambitious plan, and significant changes have been made to simplify and optimise. With the change to a common SAP platform during Q1 2016, we achieved yet another key integration milestone. As in the rest of our business, we will focus on continuous improvement measures going forward.
Alongside the integration, we have been working under difficult market conditions at reinforcing Hartwall's commercial position as a market-leading beverage provider in Finland – and we are moving in the right direction in this multiannual effort. We focus on strengthening partnerships and increasing our presence with our customers. Through continuous innovation, we are striving to meet the changed consumer and customer needs
in the wake of the challenging macroeconomic situation in Finland, and, as in 2014, we succeeded in maintaining our market shares in 2015. At the same time, we are pleased to note that our score in third-party measurements of our customers' satisfaction with their suppliers is significantly higher than before we acquired Hartwall.
In recent years, we have increased our investments in establishing and developing Faxe beer brand and our strong malt beverage brands internationally. Also in 2015, we saw good progress, which was achieved in spite of reduced growth rates as a result of the macroeconomic development in the economies relying on raw materials and the development in the local currencies in several markets in Africa and the Americas. The high growth was primarily generated in Africa. We intend to continue increasing our market investments as long as we identify attractive growth opportunities. We expect continued growth in this part of our business, albeit at a lower level than in recent years due to the weaker macroeconomic development in a number of markets.
It is important for us continuously to further develop our business and establish a basis for future growth. We are therefore pleased that in 2015 we had the opportunity of further reinforcing our long-standing, good cooperation with PepsiCo in Denmark and Finland. As of 1 January 2016, the cooperation with PepsiCo will be expanded to include the production, sale and distribution of a number of PepsiCo soft drinks products in Latvia, Lithuania and Estonia. This will complement our product portfolio in the Baltic countries and strengthen Royal Unibrew's customer relations. Moreover, we will take over the sale of Pepsi-Co's snack products under brands such as Lay's and Bugles in Denmark. These are a good match for our beverage portfolio as consumers often buy and enjoy snacks and beverages together. We are pleased that in 2015, as in 2013, PepsiCo singled out Royal Unibrew as "Bottler of the Year" in the EMEA region.
Based on our good results in 2015 and our expected future development, at the end of 2015 we increased our medium-term EBIT margin target to about 15% compared to the previous target of about 14%. We consider the 15% target ambitious – both compared to international and regional beverage providers in Europe. This should also be viewed in light of continuously challenged European markets, expected lower growth in the malt business than in previous years, smaller efficiency gains than achieved in recent years as well as increased investments in market positions and brands in our key markets.
Our targets for indebtedness and capital structure on the one hand and distribution policy on the other have remained unchanged for several years.
However, as we all know, with the acquisition of Hartwall in August 2013, we decided temporarily to increase our indebtedness beyond the targeted framework while putting our distribution policy on hold until 2015. It was our objective to reduce our debt fast and to restore our financial strength in order to resume dividend distribution. We have succeeded in these efforts due to our good results and strong cash flow. Therefore, as planned, we resumed dividend distribution in 2015, while launching in March 2015 a considerable DKK 350 million share buyback programme. The programme was completed in February 2016.
Based on the results for 2015, the Board of Directors has decided to recommend the distribution of dividend of DKK 7.20 per share and the launch, as soon as possible, of a new share buy-back programme of up to DKK 450 million covering the period to 28 February 2017 at the latest.
We want the Royal Unibrew share to be accessible to all types of investors; therefore, it was resolved at the Annual General Meeting in 2015 to implement a share split. The denomination of the Royal Unibrew share was subsequently reduced from DKK 10 to DKK 2.
In addition to the positive cash flow from the underlying business, also the gradual sale of the brewery site in Aarhus contributed considerably to Royal Unibrew's total cash flow. We have now sold the last part of the site for take-over during 2016, and the sale yielded a total net cash flow after tax of about DKK 470 million. It is very positive to see the impressive transformation of the Ceres Byen (Ceres City) area into a modern urban district in the centre of Aarhus, and we have greatly appreciated the local support demonstrated throughout the process.
The development in 2015 was yet another important step in the development which has enabled Royal Unibrew to reinforce its position as a regional beverage provider in Europe in recent years in a very consolidated industry with global competitors. Our main focus area is Europe, but we also operate outside Europe through our considerable export of non-alcoholic malt beverages and Faxe beer. Our strategy in Europe is to build strong local brand portfolios – preferably supplemented by international brands through strategic bottling agreements such as our agreement with Heineken and PepsiCo. We have proved that this strategy works vis-à-vis our local consumers and customers and that ir yields satisfactory financial results.
Our strong regional base and our local brands are key strengths of ours. Among other things, we are witnessing a trend of consumers to an increasing extent demanding greater originality and locally produced products; moreover, the health trend and the trend towards functional beverages have become more widespread. We are able to accommodate these trends due to our rich history and through our closeness to the markets.
We do, however, also expect the primary markets in which we operate to continue being characterised by challenging market conditions and tough competition in the coming years. Therefore, there will be a constant need for commercial flexibility and innovation in order for us to maintain and strengthen our market positions. In spite of that, we see opportunities of developing our business through the multi-beverage mindset and strong partnerships that generate value to all parties.
Acquisitions are still part of our strategy, and we will carefully consider any acquisition opportunities that may generate added value for our shareholders. It is, however, our assessment that at present there is a relatively low probability that opportunities of realising major, significant acquisitions will arise.
I take this opportunity to thank sincerely everyone at Royal Unibrew for their great and dedicated efforts in 2015, which created good results and reinforced our base in markets subject to constant change. It gives me great confidence that we will continue to be able to further develop Royal Unibrew to the benefit of our employees, consumers, customers and shareholders.
I also take the opportunity to thank our customers profoundly for yet another year of good partnerships and, finally, our shareholders for their support of Royal Unibrew.
Henrik Brandt President & CEO
| 2015 | 2014 | 2013 | 2012 | 2011 | |
|---|---|---|---|---|---|
| Sales (million hectolitres) | 9.1 | 9.0 | 7.0 | 5.4 | 5.7 |
| INCOME STATEMENT (MDKK) | |||||
| Net revenue | 6,032 | 6,056 | 4,481 | 3,430 | 3,431 |
| EBITDA | 1,225 | 1,130 | 732 | 611 | 601 |
| EBITDA margin (%) | 20.3 | 18.7 | 16.3 | 17.8 | 17.5 |
| Earnings before interest and tax (EBIT) | 917 | 826 | 560 | 485 | 474 |
| EBIT margin (%) | 15.2 | 13.6 | 12.5 | 14.1 | 13.8 |
| Income after tax from investments in associates | 31 | 35 | 34 | 34 | 14 |
| Other financial income and expenses, net | -46 | -60 | -46 | -38 | -27 |
| Profit before tax | 902 | 801 | 548 | 481 | 461 |
| Net profit for the year | 711 | 624 | 480 | 373 | 351 |
| BALANCE SHEET (MDKK) | |||||
| Non-current assets | 5,505 | 5,664 | 5,810 | 1,992 | 2,291 |
| Total assets | 6,748 | 7,024 | 6,925 | 2,848 | 2,890 |
| Equity | 2,935 | 2,818 | 2,133 | 1,348 | 1,321 |
| Net interest-bearing debt | 1,184 | 1,553 | 2,379 | 321 | 631 |
| Net working capital | -990 | -814 | -834 | -179 | -149 |
| CASH FLOWS (MDKK) | |||||
| Operating activities | 1,160 | 895 | 653 | 497 | 398 |
| Investing activities | -123 | -69 | -2,837 | 192 | 3 |
| Free cash flow | 1,032 | 824 | 598 | 476 | 384 |
| SHARE RATIOS (DKK) | |||||
| Earnings per share (EPS) | 13.0 | 11.3 | 9.2 | 7.1 | 6.4 |
| Diluted earnings per share | 12.9 | 11.2 | 9.2 | 7.1 | 6.4 |
| Cash flow per share | 21.2 | 16.2 | 12.5 | 8.9 | 7.3 |
| Dividend per share | 7.2 | 6.8 | 0.0 | 4.8 | 3.4 |
| Year-end price per share | 280.1 | 217.4 | 147.2 | 98.4 | 64.3 |
| EMPLOYEES | |||||
| Average number of employees | 2,314 | 2,374 | 1,935 | 1,635 | 1,785 |
| FINANCIAL RATIOS (%) | |||||
| Return on invested capital including goodwill (ROIC) | 16 | 13 | 13 | 21 | 18 |
| Return on invested capital excluding goodwill (ROIC) | 23 | 19 | 18 | 24 | 22 |
| Free cash flow as a percentage of net revenue | 17 | 14 | 13 | 14 | 11 |
| Cash conversion | 145 | 132 | 125 | 128 | 110 |
| Net interest-bearing debt/EBITDA (times) | 1.0 | 1.4 | 2,3* | 0.5 | 1.0 |
| Equity ratio | 43 | 40 | 31 | 47 | 46 |
| Return on equity (ROE) | 25 | 25 | 28 | 28 | 27 |
| Dividend payout ratio (DPR) | 58 | 60 | 0 | 68 | 55 |
* calculated proforma with Hartwall's realised full-year EBITDA
Ratios comprised by the "Recommendations and Financial Ratios 2015" issued by the Danish Society of Financial Analysts have been calculated according to the recommendations.
Definitions of financial highlights and ratios are provided on page 117.
Royal Unibrew's overall strategy remains unchanged and is a continuation of prior years' targeted efforts as a regional beverage provider. In November 2015, the results of the strategy created the basis for increasing the medium-term EBIT margin target to 15%. The capital structure and dividend targets are maintained.
It is Royal Unibrew's strategy to be a focused, strong regional beverage provider within beer, malt and soft drinks, including soda water, mineral water and fruit juices as well as cider and long drinks (RTD) holding leading positions in the markets or the segments in which we operate.
Based on our good results in 2015 and our expected future development, at the end of 2015 we increased our medium-term EBIT margin target to about 15% compared to the previous target of about 14%. We consider the 15% target ambitious – both compared to international and regional beverage providers in Europe. This should also be viewed in light of continuously challenged European markets, expected lower growth in the malt business than in previous years, smaller efficiency gains than achieved in recent years as well as increased investments in market positions and brands in our key markets.
Royal Unibrew operates in markets that are characterised by different dynamics. This has been taken into account when determining the strategy market by market.
Royal Unibrew expects developments in the individual markets to be as follows:
The Danish consumer market is expected continuously to be affected by a minor structural consumption decline in the coming years. The beer category will be the primary driver of the structural decline resulting from consumers increasing their consumption of other alcoholic beverages. In the beer category, the current trend for craft/special brews is expected to continue and enhance the opportunities of added value in the beer market. Within the soft drinks and mineral water categories, new product sub-categories are still expected to be developed driven by, among other things, health trends and the need for functional beverages, which is expected to curb the decline in the total beverage market. Consumer demand for a broader product range and innovative products will continue to affect complexity, and thus the need to be flexible in the face of change.
The Italian beer market, which is characterised by a low per capita consumption compared to other "wine countries", consumption is expected to remain unchanged due to the economic challenges faced by Italy and the Italian consumers. In the medium term, the beer market is expected to show a slight structural increase. The economic challenges faced by Italy are expected to reduce growth opportunities within the super premium segment due to, among other things, consumption pattern changes which imply a shift of sales from on-trade to off-trade.
In Finland the total beverage market in which Hartwall operates is expected to show a slight structural decline in the coming years, due to, among other things, the high indirect tax level. The Finnish macroeconomy is challenged, which will affect total beverage consumption negatively in the coming years. On-trade is still expected to be hit in a higher degree by the negative development than off-trade, and within off-trade a slight increase in sales in the discount segment is expected. Innovation will continue to be an important element in developing the overall beverage market. Consumer demand for a broader product range and innovative products will continue to affect complexity, and thus the need to be flexible in the face of change.
The total beverage market in the Baltic countries is expected structurally to have a larger overall potential in the long term than today. The potential will be closely related to the macroeconomic conditions, including spending power development, unemployment, and emigration as well as indirect tax issues.
The market for dark malt beverages is geographically fragmented, and consumer preference for dark malt beverages is rooted in tradition. The markets for dark malt beverages in established economies in Europe and the Caribbean are expected to be structurally stable. Demand for beer and dark malt beverages is expected to show a structural increase in a number of developing countries, albeit at a lower level than seen in recent years. The lower growth should be viewed in light of the macroeconomic development in a number of countries in Africa and the Americas – a development with is to a large extent characterised by declining raw materials prices, lower foreign investments and a shortage of "hard" currencies.
market positions, these will be assessed if there is a clear strategic match and long-term shareholder value can be created.
• Efforts will be made to reinforce mainstream market positions in smaller markets through focus on a broader beverage portfolio to leverage partnerships with our customers and the entire infrastructure.
• Royal Unibrew's strong position as a regional brewer builds on strong local market positions established on the basis of well-known local brand portfolios subject to continuous further development. The product portfolio development includes the Group's own development of new taste varieties, products and brands within existing and new beverage categories as well as the conclusion of new licence agreements both as a licensee and a licensor. For example, Royal Unibrew has enjoyed long-standing cooperation with PepsiCo and Heineken as a licensee in Denmark, Finland and the Baltic countries (as of 2016) – cooperation through which the local brand portfolios are expanded with well-known international brands.
• Royal Unibrew will continue its focus on pursuing all opportunities of continuously enhancing the efficiency of all links in the Company's value chain. Following several years of significant improvements, the efficiency-enhancing opportunities are expected to be limited in the coming years.
Focus on maintaining Royal Unibrew's financial flexibility, competitive power and scope for strategic manoeuvrability through an appropriate capital structure
Further development of Royal Unibrew and achievement of the financial targets are generally conditional on continuous business development through continued focus on growth opportunities, partnerships, innovation, sales and marketing, and on continuous efforts to improve, optimise and enhance efficiency.
Following the most recent update in November 2015, the medium-term EBIT margin target is about 15%.
It is Royal Unibrew's objective to maintain its indebtedness at a level which, on the one hand, satisfies the request for flexibility with respect to acting on business opportunities and maintaining independence in relation to the Group's bankers, and, on the other hand, ensures that Royal Unibrew is not heavily overcapitalised. The objective is assessed in view of Royal Unibrew's wish to keep its "investment grade" classification.
It remains the target that net interest-bearing debt should not exceed 2.5 times EBIT-DA, and that an equity ratio of at least 30% should be maintained at year end. Royal Unibrew may depart from the targeted ratios for a certain period if structural business opportunities arise as was the case in the period following the acquisition of Hartwall.
Royal Unibrew's annual investments are expected to be at the level of about 4% of net revenue.
As Royal Unibrew is still expected to generate a rather significant liquidity surplus going forward, it remains the intention currently to make distributions to shareholders through a combination of annual dividend and share buy-backs taking into account the mentioned targets for equity ratio and indebtedness, annual earnings and cash flows as well as Royal Unibrew's strategic position in general.
It remains Royal Unibrew's intention to distribute dividend of 40-60% of net profit for the year and to launch share buy-back programmes when it is considered appropriate to optimise the Company's capital structure. It is the intention that shares bought back will be cancelled.
The outlook for Royal Unibrew's financial development in 2016 has been prepared taking into account a number of circumstances, including how the Company's markets are expected to be affected by general economic activity, fiscal measures and consumer uncertainty. Moreover, the outlook has been prepared taking into account the development in material expense categories as well as the effect of initiatives completed and initiated.
| mDKK | Outlook 2016 |
Actual 2015 |
Actual 2014 |
|---|---|---|---|
| Net revenue mDKK | 6,150-6,400 | 6,032 | 6,056 |
| EBITDA | 1,190-1,290 | 1,225 | 1,130 |
| EBIT | 885-985 | 917 | 826 |
The Board of Directors will recommend to the AGM in 2016 the distribution of dividend of DKK 7.2 per share (DKK 400 million). The Board of Directors has decided to initiate as soon as possible a share buy-back programme of up to DKK 450 million covering the period to 28 February 2017. Hence, DKK 850 million is expected to be distributed based on the Financial Statements for 2015.
Several of the markets in which Royal Unibrew offers a broad beverage portfolio are generally seeing a minor structural decline in the total market; therefore, innovation and value management are essential to creating relative growth – and are key parameters with respect to maintaining and developing Royal Unibrew's market positions and in further strengthening customer partnerships. At the same time, our broad beverage portfolio supports the possibilities of high operational efficiency at all organisational levels. Our continuous improvement work will continue relentlessly at all organisational levels, including through investment-driven initiatives, which will contribute positively to improvements. Generally, Royal Unibrew's market shares on branded products are expected to be maintained or increased for the key brands.
In Finland Hartwall's product range comprises a broad beverage portfolio, and Hartwall holds an overall runner-up position in the Finnish market. To ensure Hartwall's continued position as a market-leading beverage business in Finland, our main priorities in 2016 will remain concentrated, without any change, on commercial focus, organisational development and continuous improvements. The Finnish market has been characterised by declining consumption throughout a number of years due to, among other things, the very high level of indirect taxes. This development is expected to continue in 2016 and will be reinforced by the financial challenges faced by Finland and the Finnish consumers. A normal summer is assumed unlike in 2015 when the weather was extraordinarily poor.
In the Danish consumer market Royal Unibrew holds an overall runner-up market position approaching the market through a broad beverage portfolio. Danish consumption is expected to remain negatively affected by a structural consumption decline, whereas normal summer weather is expected to have a slightly positive effect. In 2015 Royal Unibrew's market share was positively affected by a comparative increase in the market for branded products, whereas the market for discount products showed a comparative decline. In 2016 the market for branded products is expected to increase marginally and less than in 2015. Revenue for 2016 will be positively affected by the expanded cooperation with PepsiCo, which will in future include snacks.
In the Baltic countries Royal Unibrew has a broad brand portfolio, primarily within beer, fruit juices, soft drinks and mineral water. The development and continued strengthening of the beverage portfolio are necessary to create a basis for growth, including for strengthening customer partnerships. Consumption in the Baltic market is expected to remain stable; however, as regards market and product mix, the beer market is expected to show a slight decline, whereas the market for non-alcoholic beverages is expected to be stable or slightly increasing. The market development in Lithuania is subject to great uncertainty due to an indirect tax increase and the introduction of a deposit, both measures taking effect during Q1. Revenue for 2016 will be positively affected by the expanded cooperation with Pepsi-Co – a licence agreement has been made comprising, among other products, Pepsi, Pepsi Max and 7up.
In Italy, where Royal Unibrew holds a strong position in the super premium segment with Ceres Strong Ale, the market is expected to show a low single-digit percentage decline due to extraordinarily fine summer weather in 2015. Disregarding the "summer effect", the market is expected to remain stable. We plan to expand our cooperation with the many wholesalers and cash & carry customers, and our cooperation with off-trade customers will be supported by consumer activation.
In the Malt Beverages and Exports segment we continue our focus on a larger presence in already established markets and in the new markets penetrated in the past years. Great emphasis is placed on selecting and retaining our cooperation through customer- and consumer-oriented marketing investments with a view to establishing and reinforcing brand positions. The malt beverage markets in Europe and the Caribbean are expected to remain unchanged. However, the malt beverage and beer markets in Africa and Central America are expected to show slight increases, primarily driven by population growth, but the rate of increase will be reduced as a number of these markets will continue to be negatively affected by the macroeconomic development and devaluation of local currencies.
costs are expected to show a slight decline, whereas increased expenses for growth initiatives and support of the existing business are expected to increase costs correspondingly. The growth initiatives relate primarily to the Malt Beverages and Exports segment and the two new cooperation agreements with PepsiCo. Our efforts to support our existing business relate to our strong brand portfolio in key markets for which we expect to increase marketing expenses. We will continue our focus on generating continuous improvements and enhancing efficiency across the business and in all entities, albeit at a lower level than that achieved in previous years.
• Taking into account exchange rates at the end of February 2016, the prices of the key raw materials categories are expected to remain unchanged in 2016. Royal Unibrew has entered into hedging agreements for the majority of key consumption categories in 2016. The development comprises geographic as well as product-related differences, with some categories being expected to increase whereas others are expected to decline.
This Announcement contains "forwardlooking statements". Undue reliance should not be placed on forward-looking statements because they relate to and depend on circumstances that may or may not occur in the future and actual results may differ materially from those in forward-looking statements. Forward-looking statements include, without limitation, statements regarding our business, financial circumstances, strategy, results of operations, financing and other plans, objectives, assumptions, expectations, prospects, beliefs and oth-
er future events and prospects. We undertake no obligation, and do not intend to publicly update or revise any of these forward-looking statements, unless prescribed by law or by stock exchange regulations.
Royal Unibrew achieved satisfactory earnings for 2015 – earnings which were above expectations at the beginning of the year. The earnings increase was achieved in spite of poorer summer weather in our key markets, Denmark and Finland, than in 2014. Generally, but particularly in Denmark and Germany and in the malt and export markets, Royal Unibrew's market positions developed positively.
Overall, Royal Unibrew's market shares increased in 2015. Sales showed a 1% increase for 2015, whereas net revenue was at the 2014 level in spite of poorer summer weather and a consumption decline in Finland. The highest growth was achieved in the Malt Beverages and Exports segment, in which sales increased by 7% and net revenue by 11% on 2014 despite negative macroeconomic developments and reduced access to "hard" currencies in several markets.
In 2015 Royal Unibrew improved its earnings considerably as compared to last year. Operating profit was positively affected by higher efficiency as well as targeted value management of products and strengthening of customer partnerships, and a changed market mix in the Baltic Sea segment and product mix in sales to Danish consumers affected earnings positively. Exchange rate developments only affected earnings to a limited extent as purchases were mainly made in the Group's revenue currencies.
Earnings before interest and tax (EBIT) amounted to DKK 917 million, which is DKK 91 million above the 2014 figure, which included non-recurring costs of DKK 50 million for restructuring Hartwall. The profit before tax amounting to DKK 902 million for 2015 was DKK 101 million above the 2014 figure. Free cash flow for 2015 amounted to DKK 1,032 million compared to DKK 824 million for 2014 and was extraordinarily positively affected by approx DKK 160 million by a campaign activity in Finland in Q4. In 2015 dividend distribution and share buy-backs totalling DKK 666 million were made, while net interest-bearing debt was reduced by DKK 369 million to DKK 1,184 million. The NIBD/EBITDA debt multiple decreased from 1.4 to 1.0 in 2015.
In 2015, 18,900 square metres of building rights at the brewery site in Aarhus were sold, and A. Enggaard A/S has notified Royal Unibrew (see Company Announcement No 32/2015 of 10 August 2015) of its intention to exercise its option to purchase the remaining 35,625 square metres of building rights in 2016. All 140,000 square metres of building rights are thus expected sold at the end of 2016. The sale of the remaining part of the brewery site is expected to have a net cash flow effect after tax of approx DKK 155 million comprising a negative effect of approx DKK 40 million from tax payment in 2015
| mDKK | Actual Outlook 2015 November 2015 |
Outlook March 2015 |
|---|---|---|
| Net revenue | 6,032 5,950-6,050 |
5,900-6,100 |
| EBITDA | 1,225 1,195-1,235 |
1,100-1,200 |
| EBIT | 917 885-925 |
790-890 |
and a positive effect of approx DKK 195 million in 2016.
A share buy-back programme carried out in accordance with the "Safe Harbour" method for the period to 1 March 2016 was initiated in March 2015 with a view to adjusting the capital structure of Royal Unibrew A/S (see Company Announcement No 2/2015 of 10 March 2015). The share buy-back programme was completed in February 2016 at which time Royal Unibrew had bought back X shares representing a total market value of DKK 350 million. At 31 December 2015, Royal Unibrew had bought back 1,192,118 shares representing a market value of DKK 292 million and held a total of 1,492,118 treasury shares, corresponding to 2.7% of the share capital.
Royal Unibrew has entered into an agreement to produce, sell and distribute a number of PepsiCo soft drinks products such as Pepsi, Pepsi Max and Mirinda in Latvia, Lithuania and Estonia as of 1 January 2016. This will complement Royal Unibrew's product portfolio in the Baltic countries and will also strengthen Royal Unibrew's customer relations.
Moreover, Royal Unibrew is reinforcing its long-standing and good cooperation with PepsiCo by, also as of 1 January 2016, taking over the sale and distribution of PepsiCo snack products under brands such as Lay's and Bugles in Denmark. Consumers often buy and enjoy snacks and beverages together, and therefore snacks products complement and strengthen Royal Unibrew's beverage sales.
Beer and soft drinks consumption in Royal Unibrew's markets in Italy, in the Baltic Sea segment and especially in Finland continues to be affected by consumer restraint. Furthermore, the poor summer weather reduced consumption in Northern Europe in 2015, whereas the extraordinarily fine summer weather in Italy resulted in unchanged consumption as compared to 2014.
Sales for 2015 aggregated 9.1 million hectolitres of beer, malt beverages and soft drinks, which is approx 1% above the 2014 figure. Sales for Q4 2015 were 9% above the figure for the corresponding period of 2014 and primarily related to a campaign activity in Finland.
Net revenue for 2015 was at the 2014 level and amounted to DKK 6,032 million compared to DKK 6,056 million in 2014. Average net selling prices per volume unit were 1.8% lower than in 2014, primarily due to a changed segment mix and an increased campaign share in Finland. Net revenue for Q4 2015 was 5% above the figure for the corresponding period of 2014, whereas average net selling prices per volume unit were 3.3% lower due to a campaign activity in Finland.
2014 figures included costs of DKK 50 million for restructuring the Finnish brewery Hartwall comprising production costs of DKK 17 million, sales and distribution expenses of DKK 21 million as well as administrative expenses of DKK 12 million. The below comments on cost developments from 2014 to 2015 are exclusive of the effect of restructuring costs in 2014.
Gross profit for 2015 was DKK 8 million above the 2014 figure and amounted to DKK 3,175 million. Gross profit was positively affected by higher efficiency, whereas the lower net selling prices per volume unit had a negative effect. Gross margin was 0.3 percentage point above the 2014 margin and amounted to 52.6%
| Western | Baltic | Malt Beverages |
||||
|---|---|---|---|---|---|---|
| Europe | Sea | and Exports | Unallocated | Group 2015 | Group 2014 | |
| Sales (thousand hectolitres) | 3,659 | 4,785 | 656 | - | 9,100 | 8,974 |
| Growth (%) | 0.8 | 1.2 | 6.8 | 1.4 | -0.1 | |
| Share of sales (%) | 40 | 53 | 7 | - | ||
| Net revenue (mDKK) | 2,728 | 2,852 | 452 | - | 6,032 | 6,056 |
| Growth (%) | 2.0 | -4.1 | 11.1 | -0.4 | 0.1 | |
| Share of net revenue (%) | 45 | 47 | 8 | - | ||
| EBIT (mDKK) | 493 | 355 | 102 | -33 | 917 | 826 |
| EBIT margin (%) | 18.1 | 12.5 | 22.5 | 15.2 | 13.6 |
compared to 52.3% in 2014. Measured as an average per volume unit, net selling prices decreased by 1.8% and production costs by 2.5%.
Sales and distribution expenses for 2015 were DKK 44 million below the 2014 figure and amounted to DKK 1,922 million. Sales and distribution expenses per volume unit were 4% lower. The restructuring of Hartwall and the efficiency-enhancing activities in 2014 affected the development in distribution expenses positively. Sales and marketing expenses were at the 2014 level.
Administrative expenses for 2015 were DKK 11 million above the 2014 figure and amounted to DKK 335 million. The higher expenses related to, among other things, the implementation of the Group's ERP system in Finland.
Earnings before interest, tax, depreciation and amortisation (EBITDA) showed a DKK 45 million increase for 2015 and amounted to DKK 1,225 million compared to DKK 1,180 million in 2014 (before deducting restructuring costs of DKK 50 million in 2014). The EBITDA increase related primarily to lower expenses, but also the value management initiatives contributed to the development. EBITDA for Q4 2015 amounted to DKK 223 million, which was DKK 25 million above the figure for the corresponding period of 2014.
Earnings before interest and tax (EBIT) for 2015 amounted to DKK 917 million, which is, on a comparable basis, DKK 41 million above the 2014 figure of DKK 876 million (before deducting restructuring costs of DKK 50 million in 2014). EBIT for Q4 2015 amounted to DKK 142 million compared to DKK 114 million for the corresponding period of 2014.
EBIT margin for 2015 was 15.2% and, as expected, higher than in 2014 when it was 14.5% (13.6% after deducting 0.9 percentage point related to restructuring costs). EBIT margin for 2015 was higher in both the Baltic Sea and the Malt Beverages and Exports segments, whereas it remained unchanged in the Western Europe segment as compared to 2014. EBIT margin for Q4 showed at 1.6 percentage point increase on the corresponding period of 2014.
Net financials for 2015 showed a net expense of DKK 15 million, which is DKK 10 million below the 2014 figure. Interest expenses amounted to DKK 46 million and were DKK 14 million below the 2014 figure due to lower interest-bearing debt. Oppositely, income after tax from investments in associates was DKK 4 million below the 2014 figure and amounted to DKK 31 million. The figures were negatively affected by both the NOK exchange rate development and lower results of Hansa Borg Bryggerierne.
Profit before tax for 2015 showed a DKK 101 million increase amounting to DKK 902 million compared to DKK 801 million in 2014.
Tax on the profit for 2015 was an expense of DKK 191 million, which corresponds to a tax rate of 22 on the profit excluding income after tax from investments in associates.
Net profit for the year amounted to DKK 711 million, which is a DKK 87 million improvement on the net profit of DKK 624 million realised in 2014.
The Parent Company's profit for the year amounted to DKK 691 million compared to DKK 630 million in 2014. Dividend income from subsidiaries and associates amounted to DKK 297 million compared to DKK 272 million in 2014. The brewery site in Aarhus was revalued by DKK 39 million in 2015.
Royal Unibrew's balance sheet at 31 December 2015 amounted to DKK 6,748 million, which is DKK 276 million below the figure at 31 December 2014. The lower balance sheet total is primarily due to a DKK 158 million reduction of cash at bank and in hand as well as to depreciation and amortisation of non-current assets exceeding net investments by DKK 119 million. The sale less revaluation for the year of DKK 39 million of the brewery site in Aarhus reduced the balance sheet total by DKK 40 million. Oppositely, inventories and receivables were DKK 40 million above those at 31 December 2014. Invested capital was reduced by approx DKK 300 million in 2015, which, combined with a higher EBIT, improved ROIC excluding goodwill with a
4 percentage point to 23%, which is at the same level as before the acquisition of Hartwall. ROIC including goodwill increased from 13% in 2014 to 16% in 2015.
The equity ratio increased by 3 percentage points and represented 43% at 31 December 2015 compared to 40% at the end of 2014. Equity at the end of 2015 amounted to DKK 2,935 million compared to DKK 2,818 million at the end of 2014. The DKK 117 million change comprised the positive comprehensive income for the year of DKK 766 million added the value after tax of sharebased payments of DKK 17 million and deducted distribution to shareholders of DKK 666 million by way of dividend and share buy-backs. The comprehensive income comprises the profit for the period of DKK 711 million, revaluation of the brewery site in Aarhus of DKK 39 million, positive exchange rate and other adjustments relating to foreign group enterprises of DKK 13 million, a positive development in the value of hedging instruments of DKK 5 million and deduction of tax on comprehensive income of DKK 2 million.
Net interest-bearing debt for 2015 was reduced by DKK 369 million and amounted to DKK 1,184 million at 31 December 2015 compared to DKK 1,553 million at the end of 2014. As expected in November when the Interim Report for the period 1 January - 30 September 2015 was published, the development in net interest-bearing debt was positively affected by campaign activity in Q4. The change in net interest-bearing debt equalled the free cash flow less distribution to shareholders.
Funds tied up in working capital showed a negative DKK 990 million at the end of 2015 compared to a negative DKK 814 million at the end of 2014. Funds tied up in working capital were reduced by DKK 176 million, net, including DKK 160 million relating to a timing difference between 2015 and 2016 of current liabilities relating to campaign activity in Finland in Q4 2015. Funds tied up in inventories, trade receivables and trade payables decreased by DKK 54 million, whereas the other elements of working capital decreased by DKK 122 million. All entities continue their strong focus on managing inventories, trade receivables and trade payables.
Cash flows from operating activities for 2015 were DKK 265 above the 2014 figure and amounted to DKK 1,160 million (2014: DKK 895 million). Cash flows comprised the profit for the period adjusted for non-cash operating items of DKK 1,235 million (2014: DKK 1,140 million), positive working capital cash flow of DKK 169 million (2014: negative DKK 34 million), net interest paid of DKK 47 million (2014: DKK 60 million) and taxes paid of DKK 197 million (2014: DKK 151 million).
Free cash flow for 2015 showed an increase of DKK 208 million to DKK 1,032 million (2014: DKK 824 million). Cash flows from operating activities and dividend from associates increased by DKK 267 million, and investments in property, plant and equipment showed a net increase of DKK 59 million on 2014. Revenues from asset divestments, substantially relating to the brewery site in Aarhus, were DKK 66 million lower, and investments were DKK 7 million lower. The free cash flow for Q4 2015 amounted to DKK 239 million (2014: DKK 52 million) and was, as expected, positively affected, as compared to the corresponding period of 2014, by an extraordinarily low level of funds tied up in working capital, see above.
The Western Europe segment comprises primarily the markets for beer and soft drinks in Denmark and Germany as well as Italy. Western Europe accounted for 45% of the Group's net revenue for 2015 and for 54% of EBIT (2014: 44% and 59%, respectively).
Sales in Western Europe for 2015 were 1% above sales for 2014. An increase in Royal Unibrew's market shares on branded beer and soft drinks is estimated from 2014.
Net revenue was 2% above the 2014 figure. A shift towards both products and sales channels in Denmark and Germany with higher net selling prices per volume unit had a positive effect on the revenue development, whereas the shift in Italy had a negative effect.
Earnings before interest and tax (EBIT) for 2015 showed a DKK 9 million increase from DKK 484 million in 2014 to DKK 493 million in 2015. The EBIT increase was due to a strengthening of the market position in Denmark and Germany as well as a favourable development of the product mix. EBIT margin was unchanged at 18.1%. The increases in EBIT and EBIT margin for Q4 were due to a better product and market mix in 2015 than in 2014.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hectolitres) | 3,659 | 3,630 | 1 | 880 | 854 | 3 |
| Net revenue (mDKK) | 2,728 | 2,674 | 2 | 632 | 595 | 6 |
| EBIT (mDKK) | 493 | 484 | 86 | 78 | ||
| EBIT margin (%) | 18.1 | 18.1 | 13.5 | 13.1 |
Royal Unibrew is the second largest provider of beer and soft drinks to Danish consumers. Furthermore, Faxe beer is sold to the German market.
Royal Unibrew offers a combination of strong local, national and international beer brands. Royal Beer and the international licence brand Heineken are offered to the entire Danish market, whereas other brands, such as Albani, Ceres and Thor, are offered in areas with strong local bases.
Within soft drinks, Royal Unibrew offers its own brands as well as licence-based brands of the PepsiCo Group. Own brands comprise Faxe Kondi, which is the leading brand in the lemon/lime segment, as well as Nikoline. The Pepsi products include Pepsi, Pepsi Max, 7UP and Mirinda.
Within spring water and natural mineral water, Egekilde is a leading Danish brand which comes in a number of taste varieties, still as well as sparkling. Moreover, Royal Unibrew offers the Faxe Kondi Booster energy drink as well as a number of cider, ready-to-drink and shots products under the Tempt brand.
As of 2016, the beverage range offered will be supplemented by the PepsiCo Lay's and Bugles snack products.
Royal Unibrew has two production facilities in Denmark – one in Faxe and one in Odense.
Both off-trade and on-trade customers are serviced through direct distribution from own terminals.
For Denmark and Germany it is estimated that Danish consumption of beer and soft drinks for 2015 was below that of 2014 due to the poor summer weather, which makes it difficult to assess the development in the underlying consumption. The consumption of branded products increased to the detriment of discount products.
Royal Unibrew's sales for 2015 showed a 1% increase on 2014, and net revenue showed a 2% increase. The higher net revenue per volume unit was due to both a high level of innovation and a number of commercial initiatives, which resulted in a favourable shift in the mix of products and sales channels. It is estimated that Royal Unibrew's market shares increased – primarily due to a continued consumption shift towards branded products.
The level of innovation was high in 2015 with several successful launches of new products. Royal Unibrew was first to the market with an organic beer, Royal Økologisk, which meets increasing consumer demand for organic products. Moreover, Royal Unibrew launched its first proprietary products in the craft beer category under the brand names Lottrup and Schiøtz, as well as new product varieties of Royal Shandy, Faxe Kondi Booster and the Egekilde brand. Danish consumers received the new products well. Schiøtz Gylden IPA was ranked at the top in a Danish consumer test and won the gold medal in the International Food Contest, and Royal Shandy has achieved a clear market leader position in the beer mix category. The Faxe Kondi communication platform "Når der går sport i den" (Becoming a sport) was further developed, and the "Tak Rock" (Thank You, Rock) concept was supported by cooperation with the legendary rock band Dizzy Mizz Lizzy.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hecto-litres) | 3,257 | 3,236 | 1 | 806 | 783 | 3 |
| Net revenue (mDKK) | 2,141 | 2.093 | 2 | 520 | 491 | 6 |
Ceres Strong Ale is among the market leaders in the super premium beer segment and holds a considerable market share in this segment.
It is assessed that about 70% of Ceres Strong Ale is consumed out of home, whereas the rest is consumed at home. The general breakdown of the beer market in Italy is 40% out of home and 60% at home. Ceres Strong Ale has achieved a very high distribution in the on-trade channel, where the product has one of the broadest distributions within the beer category.
Moreover, Royal Unibrew sells Ceres Red Erik in the super premium segment as well as the lager types Ceres Top Pilsner and Faxe in the premium segment.
Distribution in the on-trade channel takes place through many wholesalers who service and supply customers or through a number of cash & carry locations where on-trade customers themselves pick up the goods. Retail customers are serviced either directly to outlets or through distribution centres. All goods in Italy are delivered through third-party suppliers.
The market situation in Italy remains marked by consumer restraint. 2015 consumption in both the on-trade and the off-trade sales channels is estimated to have been at the 2014 level. The extraordinarily fine summer weather, which continued all the way into Q4, affected consumption positively. The consumption of premium and super premium products in off-trade is estimated to have increased marginally, whereas the consumption of economy products declined marginally in 2015.
Royal Unibrew's sales for 2015 showed a 2% increase, whereas net revenue showed a 1% increase. In Q4, there seems to have been some stock building at the distributors. Sales and net revenue showed increases of 4% and 8%, respectively. Developments for both the full year and for Q4 are, furthermore, due to a changed product and sales channel mix. It is assessed that Royal Unibrew has maintained its market shares in the premium and super premium segments in 2015.
In Italy consumer engagement and development of the communication platform for Ceres Strong Ale are key priorities. In 2015 marketing shifted further away from TV towards the social media, and high growth has been achieved in the target group for Ceres product sales, who are consumers aged between 18 and 35. Moreover, focus was directed in 2015 at further strengthening the commercial customer partnerships in the on-trade channel, eg through the launch of Faxe 10%.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hecto-litres) | 402 | 394 | 2 | 74 | 71 | 4 |
| Net revenue (mDKK) | 587 | 581 | 1 | 112 | 104 | 8 |
The Baltic Sea segment primarily comprises the markets for beer, fruit juices and soft drinks in Finland and the Baltic countries (Lithuania, Latvia and Estonia) and in Finland also wine and spirits brands. Baltic Sea accounted for 53% of the Group's net revenue and for 39% of EBIT for 2015 (2014: 49% and 36%, respectively).
Royal Unibrew's sales increased by 1%, whereas net revenue was 4% below the 2014 figure. It is estimated that Royal Unibrew's market share on branded beer and soft drinks products has shown an overall increase. In Finland, which for Royal Unibrew constitutes by far the largest part of the Baltic Sea segment, consumption continued to decline due to consumer restraint and, moreover, due to extraordinarily poor summer weather. These circumstances as well as price pressure have had a significant negative impact on the developments in Royal Unibrew's sales and net revenue for 2015. The positive development in Q4 is related to a campaign activity in Finland which more than offset the negative development in sales in the first three quarters of the year. The average net revenue per volume unit for Q4 was 4.7% below that of the full year.
Earnings before interest and tax (EBIT) were DKK 60 million above the 2014 figure, which was affected by non-recurring costs of DKK 50 million for restructuring the Finnish brewery Hartwall. The fullyear effect of the restructuring and efficiency improvement of Hartwall affected earnings positively, whereas a changed product and channel mix affected earnings for 2015 negatively. EBIT margin went up by 2.6 percentage points from 9.9% to 12.5%. The campaign activity in Finland affected full-year EBIT margin negatively.
BALTIC SEA
SALES
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hectolitres) | 4,785 | 4,730 | 1 | 1,225 | 1,060 | 16 |
| Net revenue (mDKK) | 2,852 | 2,975 | -4 | 697 | 666 | 5 |
| EBIT (mDKK) | 355 | 295 | 45 | 29 | ||
| EBIT margin (%) | 12.5 | 9.9 | 6.4 | 4.3 |
Hartwall is a beverage provider with a broad product range holding a clear runner-up position in Finland. In the Finnish market, Royal Unibrew offers a combination of its own strong local and national brands, international Pepsi and Heineken brands as well as a number of international wine and spirits brands.
With a range of own brands such as the Karjala and Lapin Kulta
As expected, the Finnish market for beer, soft drinks, wine and spirits products was affected by consumer restraint, and this situation is not expected to change in the short and medium term. The extraordinarily poor summer weather intensified the declining consumption trend. A medium single-digit percentage decline in the consumption of branded products is estimated. The decline is due partly to increased consumption of private label products, partly to a shift in sales channel mix from on-trade towards off-trade.
Sales in Finland were declining in 2015, except for Q4 when a campaign activity more than offset the effect of the continuously declining consumption. Hartwall's overall market shares on branded beer brands, Jaffa (soft drinks), Original (RTD), Upcider (cider), ED (energy drink) and Novelle (mineral water) as well as international brands such as Fosters, Heineken and Pepsi, Hartwall is the market leader in the categories of mineral water, cider and ready-to drink (RTD) and a strong runner-up in the categories of branded beer, soft drinks and energy drinks. The trading company Hartwa-Trade operates agencies for a number of international wine and spirits brands and contributes a minor part of Hartwall's revenue.
Hartwall operates two production facilities in Lahti (produces all products but mineral water) and Karijoki (mineral water), respectively.
A distribution network of own terminals supplies off-trade and on-trade customers directly.
products are estimated to be unchanged when adjusting for the campaign activity. The generally declining price level, a changed sales channel and product mix but primarily the campaign activity resulted in a lower net revenue per volume unit for 2015.
With focus on strengthening partnerships and increasing the presence and sale of Hartwall products with customers, efforts were directed in 2015 at reinforcing Hartwall's commercial position as a market-leading beverage provider in Finland. These efforts are expected to continue in the coming years.
The high level of innovation in Finland continued in 2015 with focus on meeting changed consumer and customer demands. The first proprietary product in the craft beer category, Hartwall Classic, was successfully launched, and Hartwall also launched the first natural energy drink, Novelle Vire, in the market. Lapin Kulta and Aura were succesfully relaunched in the beer category.
Following the restructuring and organisational changes in 2014, efforts were directed in 2015 at continuingly creating greater agility in order to continuously improve work processes and organisational flexibility with a view to increasing efficiency. In Q1 2016, the Group's SAP platform was implemented in Hartwall, thus completing the last major single element in the integration of Hartwall into Royal Unibrew.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hecto-litres) | 2,929 | 2,910 | 1 | 826 | 653 | 26 |
| Net revenue (mDKK) | 2,212 | 2,321 | -5 | 562 | 526 | 7 |
Royal Unibrew is a significant beverage provider in the Baltic countries offering a combination of own strong national brands as well as international Heineken brands and, as of 2016, also a number of PepsiCo soft drinks brands.
Royal Unibrew's brewery business Kalnapilio-Tauro Grupe is the second largest in Lithuania with the national beer brands Kalnapilis and Taurus and the Vilkmerges craft beer brand, as well as Faxe and Heineken as international brands. Cido is the number two fruit juice brand in terms of size.
With a complete portfolio of fruit juice products under the Cido brand, mineral water under the Mangali brand and nectar drinks under the Fruts brand, Royal Unibrew's Cido Grupa in Latvia is the leading provider of fruit juices and mineral water. With the national beer brands Lacplesa Alus and Livu Alus and the Vilkmerges microbrew brand as well as Heineken as an international brand, Cido Grupa holds a number three position within beer.
The primary brands in Estonia are Cido in the soft drinks category and Meistriti Gildi, Faxe and Heineken in the beer category.
Royal Unibrew has three production facilities in the Baltic countries – one in Lithuania producing beer, and two in Latvia producing beer and soft drinks, respectively.
Sales are made business-to-business, and distribution is made directly to the individual off-trade and on-trade customers from own terminals.
Beer and soft drinks consumption in the Baltic countries increased marginally in 2015. The overall development was as expected. The summer weather affected consumption positively as compared to 2014. It is estimated that Royal Unibrew's market shares on branded products were maintained.
Royal Unibrew's sales showed a 2% increase for 2015, whereas net revenue declined by 2% as a result of a general decline in beer prices. Beer prices in Lithuania declined in H2 2014 and have declined further in 2015 due to price competition in the off-trade sales channel. Moreover, a large increase in beer taxes in Latvia in the middle of Q3 2015 resulted in increased price competition and a reduction in total consumption in the remaining months of the year. Both of these circumstances explain why net revenue per volume unit was lower in 2015 than in 2014.
In the Baltic countries as in the other group entities, Royal Unibrew has focus on continuous optimisation, and in 2015 focus was directed at increasing flexibility in the total supply chain across the operating units.
The level of innovation was high in the Baltic countries in 2015 with many launches in both Lithuania and Latvia of beer as well as soft drinks products. Mangali Active, Royal Unibrew's first proprietary product in the functional water category, was successfully launched in Lithuania and Latvia; in the craft beer category, Vilkmerges Kriek with cherry flavor was launched in Lithuania and became the best-selling product in the category. Additionally, extra aged beer types were launched under the Kalnapilis and Lacplesis brands.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hecto-litres) | 1,856 | 1,820 | 2 | 399 | 407 | -2 |
| Net revenue (mDKK) | 640 | 654 | -2 | 135 | 140 | -4 |
The Malt Beverages and Exports segment comprises the export and licence business for malt beverages and beer exports to other markets. Malt Beverages and Exports accounted for 8% of the Group's net revenue and for 11% of EBIT for 2015 (2014: 7% and 10%, respectively).
The business area Malt Beverages and Exports comprises an export and licence business, primarily relating to non-alcoholic malt beverages but also to beer exports under the Faxe brand.
Royal Unibrew has several internationally strong dark malt beverage brands which are sold in the premium segment. Vitamalt is assessed to be the malt brand with the broadest global distribution, whereas Supermalt and Powermalt hold strong regional positions.
The key market areas for Royal Unibrew's malt beverages are countries in the Americas region and Africa as well as among ethnic groups from these areas living in and around major cities in Europe and the USA.
The malt beverages and exports markets are primarily supplied by exports from Royal Unibrew's Danish breweries, but also in certain cases on the basis of licence agreements with local breweries.
The sales organisation, which is to a large extent located in the individual markets, cooperates closely with our distribution partners on commercial priorities and marketing initiatives.
2013 2014 2015
0
Sales for 2015 showed a 7% increase and net revenue an 11% increase. The growth is primarily related to the African markets and primarily to the beer category. USD and GBP exchange rate developments affected net revenue positively by approx DKK 22 million. The lower net revenue per volume unit is primarily due to a changed market mix.
Sales in the segment are characterised by large volumes being exported to distributors at a time, which means that inventory changes should be taken into account when comparing periods. It is the assessment that inventories had been built up with distributors at the end of Q3 2015, which affected Q4 sales negatively. Distributors' sales to customers and consumers were as expected.
Earnings before interest and tax (EBIT) for 2015 amounted to DKK 102 million, which is DKK 18 million above the 2014 figure, including approx DKK 14 million from exchange rate developments. Adjusted for the positive exchange rate effect, EBIT margin for 2015 was 19.8% and, as expected, lower than in 2014 due to higher investments made in marketing and penetration of markets with a lower selling price.
In the Americas a changed market mix was seen for 2015 as compared to 2014, which, combined with the exchange rate developments, contributed towards considerable net revenue growth.
The development in the business in EMEAA was as expected for 2015. The macroeconomic development in the economies relying on raw materials and the development in the local currencies of a number of markets in Africa have reduced growth rates in a number of countries. In spite of this, Royal Unibrew's sales in Africa showed high growth, as expected.
| Q1-Q4 2015 | Q1-Q4 2014 | % change | Q4 2015 | Q4 2014 | % change | |
|---|---|---|---|---|---|---|
| Sales (thousand hectolitres) | 656 | 614 | 7 | 130 | 139 | -6 |
| Net revenue (mDKK) | 452 | 407 | 11 | 94 | 90 | 5 |
| EBIT (mDKK) | 102 | 84 | 19 | 16 | ||
| EBIT margin (%) | 22.5 | 20.7 | 20.3 | 17.7 |
Royal Unibrew wants an open dialogue with its shareholders and also wants to keep them continuously up-to-date on the Company's development. Therefore, Royal Unibrew emphasises providing timely and adequate information on its objectives and strategy, business activities, the development in the Company's markets as well as the financial results.
| Share capital, DKK | 110,985,000 |
|---|---|
| Number of shares | 55,492,500 |
| Denomination | DKK 2 |
| 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 | LargeCap |
The Royal Unibrew share is listed on Nasdaq Copenhagen A/S, and Royal Unibrew is included in the LargeCap index.
In 2015 a total of 23,056,784 shares were traded, corresponding to 41.5% of the total number of shares traded (at year end) through Nasdaq Copenhagen A/S (source: Bloomberg). The trading value amounted to DKK 5,541 million (2014: DKK 4,759 million).
To ensure that the Royal Unibrew share is accessible to all types of investors and to align the price level per share with market practice, the AGM in April 2015 resolved to implement a 5:1 share split following which the share denomination was changed from DKK 10 to DKK 2 per share with effect as of 5 May 2015.
At the end of 2015, the price of the Royal Unibrew share was 280.1 compared to 217.4 per share of DKK 2 (corresponding to 1,087 per share of DKK 10 before the share split) at the end of 2014. Royal Unibrew's market capitalisation amounted to DKK 15,543 million at the end of 2015 compared to DKK 12,064 million at the end of 2014. Each share carries one vote, and all shareholders registered in the Company's register of shareholders is entitled to vote.
The Board of Directors has been authorised to increase the Company's share capital on one or several occasions by up to a total nominal amount of DKK 11,000,000 in the period to 30 April 2019.
The realisation of a takeover bid resulting in change of control of the Company will entitle a few trading partners and lenders to terminate trading agreements made. For a description of agreements with Company Management, reference is made to the section Remuneration.
At the AGM on 29 April 2014, the Board of Directors was authorised to acquire treasury shares for up to 10% of the total share capital in the period up until the AGM on 29 April 2015, at which the authorisation was extended until the AGM in 2016.
On 11 March 2015, the Board of Directors initiated a share buy-back programme of a maximum market value of DKK 350 million for the period to 1 March 2016. At 31 December 2015, Royal Unibrew had bought back 1,192,118 shares representing a market value of DKK 292 million, and in 2016 additionally 212,223 shares have been bought back representing a market value of DKK 58 million. Thus, the initi-
| DKK '000 | 2015 | 2014 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|
| Share capital 1/1 | 110,985 | 110,985 | 105,700 | 111,865 | 111,865 |
| Capital reduction | -4,800 | -6,165 | |||
| Capital increase | 10,085 | ||||
| Share capital 31/12 | 110,985 | 110,985 | 110,985 | 105,700 | 111,865 |
ated share buy-back programme, which has been carried out in accordance with the "Safe Harbour" method, has been completed.
Royal Unibrew holds a total of 1,704,341 treasury shares of a nominal value of DKK 2 each, corresponding to 3.1% of the Company's share capital, 300,000 of which are for the purpose of covering the incentive programme offered to the Executive Board. The total number of shares of the Company is 55,492,500 including treasury shares.
At the end of 2015, Royal Unibrew had approx 15,000 registered shareholders holding together 94% of the total share capital.
Members of the Board of Directors and the Executive Board are governed by Royal Unibrew's insider rules, and their share transactions are subject to a notification requirement. Individuals with inside information as well as their spouses and children below the age of 18 may trade Royal Unibrew 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.
At 31 December 2015, directors held 18,605 shares of the Company, and members of the Executive Board held
BREAK-DOWN OF SHAREHOLDERS AT THE END OF 2015
According to the latest Company Announcements or other public announcements, the following shareholders hold more than 5% of the share capital:
| Shareholder | End of February 2016 | |||
|---|---|---|---|---|
| Chr. Augustinus Fabrikker A/S, Denmark | 10.4% | (reported on 11 December 2009) | ||
| HC Royal Holding OY Ab, Finland | 7.1% | (reported on 6 May 2015) | ||
| BlackRock Investment Management (UK) Limited | 5.03% | (reported on 10 July 2015) |
520,830 shares, corresponding to a total of 1% of the share capital.
The Company's AGM will be held on 27 April 2016, at 5 pm at the Radisson Blu H. C. Andersen Hotel in Odense.
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 effected by contacting the bank holding the shares in safe custody.
The Board of Directors will propose that the AGM authorise the Board of Directors to acquire shares for treasury corresponding to up to 10% of the share capital, such authorisation being in force for the period up until the next AGM.
Moreover, the Board of Directors proposes the distribution of dividend of DKK 7.2 per share of DKK 2 for the 2015 financial year as well as the cancellation of 1,392,500 of the shares bought back under the share buy-back programme initiated in 2015.
| Per share of DKK 2 – DKK | 2015 | 2014 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|
| Parent Company shareholders' share of earnings per share |
13.0 | 11.3 | 9.2 | 7,1 | 6,4 |
| Parent Company shareholders' diluted share of earnings per share |
12.9 | 11.2 | 9.2 | 7,1 | 6,4 |
| Cash flow per share | 21.2 | 16.2 | 12.5 | 8.8 | 7.3 |
| Diluted cash flow per share | 21.1 | 16.1 | 12.4 | 8.8 | 7.3 |
| Year-end price per share | 280.1 | 217.4 | 147.2 | 98.4 | 64.3 |
| Dividend per share | 7.2 | 6.8 | 0.0 | 4.8 | 3.4 |
| Number of shares | 55,492,500 | 55,492,500 | 55,492,500 | 52,850,000 | 55,932,490 |
SHARE RATIOS
The share denomination was changed from DKK 10 to DKK 2 in 2015.
Comparative figures for the period 2011-2014 are stated per share of DKK 2.
Note: The peer group consists of Carlsberg, Heineken, SABMiller and Anheuser-Busch InBev. (source: Bloomberg)
Royal Unibrew aims at ensuring open and timely information to its shareholders and other stakeholders.
A number of activities are carried out continuously to ensure good contacts with the Company's stakeholders. In 2015, among other things, Royal Unibrew held four audio casts in connection with the publication of the Annual Report 2014, the Q1 Report, H1 Report and Q3 Report 2015, respectively. Moreover, Royal Unibrew holds analyst and investor meetings in both Denmark and abroad in connection with the publication of Interim and Annual Reports. In total about 200 individual meetings were held with investors and analysts in 2015.
Among other events in 2015, Royal Unibrew participated in the SEB Nordic Seminar in Copenhagen, in the Capital Market Day in Finland, in the DAF Vestsjælland members' meeting at the Faxe brewery, in the Jyske Bank's Company Day, in the SEB Nordic Market Day in New York, in the Deutsche Bank Access Global Consumer Conference in Paris, in the Nomuras West Coast Consumer Conference in San Francisco and in the Danske Bank Copenhagen Winter Seminar.
Audio casts and presentations from audio casts and seminars are accessible at Royal Unibrew's website, www.royalunibrew.com under "Investor".
| 27 April 2016 | Resolution at AGM |
|---|---|
| 27 April 2016 | Last trading date with right to dividend for 2015 |
| 28 April 2016 | First trading date without right to dividend for 2015 |
| 2 May 2016 | Distribution of dividend |
| Company | Analyst |
|---|---|
| ABG Sundal Collier | Michael Rasmussen |
| Bank of America | |
| Merrill Lynch | Ian Wood |
| Carnegie | Jonas Guldborg Hansen |
| Danske Bank | Tobias C. Björklund |
| Deutsche Bank | Tristan Van Strien |
| Handelsbanken | Karri Rinta |
| Jyske Bank | Frans Høyer |
| Nomura International plc | Elsa Hannar |
| Nordea Bank | Hans Gregersen |
| SEB Enskilda | Søren Samsøe |
| 27 April 2016 | Interim Report for the period 1 January - 31 March 2016 |
|---|---|
| 27 April 2016 | Annual General Meeting at the Radisson Blu |
| H. C. Andersen Hotel in Odense | |
| 24 August 2016 | Interim Report for the period 1 January - 30 June 2016 |
| 23 November 2016 | Interim Report for the period 1 January - 30 September 2016 |
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
Lars Jensen, CFO (responsible for IR) [email protected]
Ginette Maasbøl (daily IR contact) [email protected] Telephone +45 56 77 15 12
Royal Unibrew has focus on running its business and designing its management systems in accordance with the corporate governance principles. The objective is to ensure that Royal Unibrew meets its obligations to shareholders, customers, employees, authorities and other stakeholders in the best possible way and that long-term value creation is supported.
The recommendations of the Committee on Corporate Governance, current legislation and regulation in the area, best practice and internal rules provide the framework for Royal Unibrew's corporate governance.
Royal Unibrew complies with the Corporate Governance Recommendations with very few exceptions which are described below.
Royal Unibrew's website http://investor. dk.royalunibrew.com/governance.cfm provides a detailed description of the Board of Directors' approach to the Corporate Governance Recommendations issued by the Committee on Corporate Governance.
A statement is made in accordance with section 99 b of the Danish Financial Statements Act.
Royal Unibrew aims at promoting diversity, which includes achieving a reasonable representation of both genders, both on the Board of Directors and on the top management team. This is based on a wish to strengthen the versatility and total competences of the business and to improve decision-making processes.
The international management team of Royal Unibrew – comprising the Executive Board and the executives just below – comprises 65% (2014: 63%) men and 35% (2014: 37%) women. The target is at least 40% representation of each gender. When new executives are recruited, emphasis is placed on identifying candi-
Royal Unibrew complies with the Corporate Governance Recommendations issued by the Committee on Corporate Governance with the following two exceptions:
The Committee recommends that the board of directors establish an actual audit committee composed so that the chairman of the board of directors is not the chairman of the audit committee.
• The Board of Directors of Royal Unibrew has decided to take on the audit committee tasks jointly. As a result of this, the chairman of the Board of Directors is as the law allows also the chairman of the audit committee. The Board's decision to take on the audit committee tasks jointly should be viewed in light of the Company's size, transparency of reporting and clear procedures, due to which the Company's Board of Directors finds no need for a separate audit committee.
The Committee recommends that the total remuneration granted to each member of the board of directors and the executive board by the company and other companies in the group, including information on the most important contents of retention and retirement/resignation schemes, be disclosed in the annual report and that the linkage with the remuneration policy be explained.
• The remuneration of members of the Board of Directors is disclosed in the section "Remuneration". Disclosure of the remuneration of the individual members of the Executive Board is not at present considered material to stakeholders' assessment. The total remuneration of the Executive Board is disclosed in note 5. The remuneration of the Executive Board is considered in line with that of peer companies. The remuneration of the Executive Board is in accordance with the remuneration policy.
dates of both genders without discrimination, and Royal Unibrew is seeking to encourage female candidates' interest in taking on managerial tasks.
At present, six of the directors of Royal Unibrew elected by the general meeting are men and one is a woman, while the directors elected by the employees are three men and one woman. Since 2014 the Board of Directors has had two international members and five Danish members elected by the general meeting. The target is an approximate 20% share of female directors within four years. No directors elected by the general meeting have been replaced in 2015; therefore, the target of 20% has not yet been reached.
It is the Board of Directors' objective that its members 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 contribution to the board duties at Royal Unibrew. These matters are assessed when the nomination committee identifies new candidates for the Board of Directors, and it is an objective of the committee to identify both male and female candidates. However, recommendation of candidates will always be based on an assessment of the individual candidates' competences and how they match Royal Unibrew's needs and contribute to the overall efficiency of the Board.
Royal Unibrew's Management wants and works actively to maintain good and open communication and dialogue with its shareholders and other stakeholders. The Company believes that a high level of openness in the communication of information on the Company's development supports the Company's work and a fair valuation of the Company's shares. The Group's openness is limited only by the duties of disclosure of Nasdaq Copenhagen A/S and by competitive considerations.
The dialogue with and communication to shareholders and other stakeholders take place by the issuing of Interim Reports and other announcements by the Company, via audio casts, meetings with investors, analysts and the press. Interim Reports and other announcements are accessible 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 the Company, 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 so as to give 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 in such a way as 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 2 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 general meeting; such proposals for resolutions are to be received by the Board of Directors not later than six weeks prior to the date of the general meeting.
The Board of Directors handles overall strategic management, financial and managerial supervision of the Company as well as continuous evaluation of the work performed by the Executive Board on behalf of the shareholders.
The Board of Directors performs its work in accordance with the Rules of Procedure of the Company governing the Board of Directors and the Executive Board. These Rules of Procedure are reviewed and updated regularly by the full Board of Directors.
The directors usually meet for five annual ordinary board meetings, one of which focuses on the Company's strategic situation and prospects. In addition, the directors meet when required. In 2015 six board meetings were held and three absentees were noted.
The nomination committee consists of the Chairman and Deputy Chairman of the Board of Directors. In 2015 the primary activity of the nomination committee was the preparation of the evaluation of the Board of Directors. The committee held one meeting in 2015.
The remuneration committee consists of the Chairman and Deputy Chairman of the Board of Directors. In 2015 the primary activities of the remuneration committee were the assessment and recommendation of remuneration of the Board of Directors and the Executive Board. The committee held one meeting in 2015.
The Board of Directors of Royal Unibrew has decided to take on the audit committee tasks jointly. This should be viewed in light of the Company's size, transparency of reporting and clear procedures. Consequently, the Company's Board of Directors finds no need for a separate audit committee. It is the Board of Directors' objective to secure quality and integrity in the Company's presentation of Financial Statements, audit and financial reporting. At the same time, the Board of Directors monitors accounting and reporting processes, the audit of the Company's financial reporting, risk issues and the external auditors' performance and independence. The external auditors have participated in two meetings of the Board of Directors in connection with the Board of Directors' performance of audit committee tasks.
Annual evaluation of the work of the Board of Directors is performed. The evaluation is made 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 are presented and discussed at a meeting of the Board of Directors.
The evaluation in 2015 did not give rise to changing the composition of the Board of Directors as the necessary competences are considered to be in place. Moreover, the evaluation did not give rise to changing the working method of the Board of Directors.
The Executive Board and the cooperation between the Board of Directors and the Executive Board are evaluated on an annual basis as a minimum.
When composing the Board of Directors, we emphasise that the members have the competences required to solve the tasks. The Board of Directors assesses its composition annually, including 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 are described in the below section on the Board of Directors and the Executive Board. When joining Royal Unibrew, new members of the Board of Directors are given an introduction to the Group and to the markets in which it operates.
At present, the Board of Directors consists of seven members elected by the general meeting and four members elected by the employees. Election of members by the employees takes place in compliance 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.
All members of the Board of Directors elected by the general meeting are considered independent in accordance with the Corporate Governance Recommendations issued by the Committee on Corporate Governance.
Risk management plays a key role at Royal Unibrew, and it is Management's aim that the Group's risks should be adequately disclosed at all times. Policies and procedures have been determined to ensure efficient management, to the widest extent possible, of the identified risks.
At Royal Unibrew risk management is an integrated part of the operational activities with a view to reducing the uncertainty of the Group's strategic objectives being met.
The key risks are summarised by the following main areas:
A detailed description of the Company's risks is provided in note 2.
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 the key risks relating to the realisation of strategies in the short and long term and enables the taking of required measures to address the risks.
The full Board of Directors, which also performs the function of audit committee, has ultimate risk management responsibility. The auditors appointed at the general meeting participate in board meetings that concern the tasks of the audit committee. The audit committee monitors the total strategic risk exposure and the individual risk factors relating to Royal Unibrew's activities. The Board of Directors adopts guidelines for the key risk areas, monitors developments and ensures the existence of plans to manage the individual risk factors, including commercial and financial risks.
At least once a year, the Board of Directors assesses the overall risk factors relating to Royal Unibrew's activities. Risks are assessed under a two-dimensional "heat map" assessment system which
The overall risk management structure is outlined below.
| Board of Directors | • Approves the overall risk policy • Monitors the development in the total strategic risk exposures and the individual risk factors and verifies compliance with the overall risk policy |
|---|---|
| Executive Board | • Determines risk management policies and strategies for the individual risks and en sures implementation of these |
| • Ensures consistency between the risk management policy and the business objectives | |
| • Monitors risk management and the development in key risks | |
| • 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 addressing risks | |
| • Monitor risk management activities initiated | |
| • Report regularly to the Executive Board | |
| Local risk owners | • Continuous monitoring and/or reduction of risks through risk-mitigating activities |
In addition to financial risks, the following risk factors, which are unchanged from 2015, are considered key risks in 2016:
| Area | Description | Risk mitigation |
|---|---|---|
| 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. However, since the financial crisis, markets have been more volatile than previously experienced. Thus, considerable market fluc tuations have been seen for certain product categories and in certain markets. At the beginning of 2016, several of Royal Unibrew's markets are still affected by consumer restraint, see the Outlook 2016 section on page 14. |
By focusing on flexibility in its actions plans, Royal Unibrew is seeking to secure 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. |
| Macroeconomic uncertainty and low growth of long dura tion may affect earnings negatively. This could happen due to declining consumption or shifts in product mix towards products with lower earnings. |
||
| Industry and market |
In most markets, the product category beer and soft drinks is characterised by tough price competition and intensive marketing from a number of suppliers. At the same time, continuous consolidation is seen among cus tomers who handle the distribution of products to con sumers. Furthermore, Royal Unibrew's market area is characterised by considerable industry concentration on the supplier side. |
Royal Unibrew's earnings and competitiveness are ensured through constant focus on markets and seg ments in which Royal Unibrew holds or may achieve a significant position. Moreover, the Company focuses on value management through the development of products, containers and packaging, cooperation with customers and communication with consumers. The efforts directed at continuous improvements across the business will contribute towards limiting |
| the negative effect of industry concentration. | ||
| Weather | Usually, the consumption of Royal Unibrew's products is high in the summer months. However, this presupposes dry and fair weather. In the summer months of 2015, the weather in Royal Unibrew's markets in Northern Europe was unfavourable to the consumption of beer and soft drinks. This affected the Group's sales and net revenue, and thus earnings, negatively. |
Through focus on flexibility of action plans, Royal Unibrew aims at securing leeway to respond to lower earnings caused by unfavourable weather conditions in the summer months. |
| Commodity prices |
The prices of a large number of key commodities fluctuate in line with world market prices. To the extent that higher unit cost cannot be compensated for by higher selling pric es per unit or in other ways increasing the average selling price per unit correspondingly, Royal Unibrew's earnings will decrease. In order to maintain EBIT margin, selling prices per unit must increase more than the unit cost in crease. |
Royal Unibrew monitors the trend in commodity prices hedging against short-term price increases through agreements with suppliers and through commodity hedges if considered essential and economical. The Group's policy for hedging commodity risks involves a smooth and time-differentiated effect of commodity price increases. Moreover, there is systematic focus throughout the Group on streamlining the production and distribution process and on increasing net selling prices per unit. |
| Statutory restrictions |
Royal Unibrew's activities are subject to national legisla tion in the markets in which Royal Unibrew operates. Any legislative changes may impact the ability to operate, eg by way of restrictions in respect of the sale, marketing and production of Royal Unibrew's products or due to increas ing 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 en sure that conditions for producing and marketing beer and soft drinks do not deteriorate, and that consump tion taxes are applied in a balanced manner. |
estimates the significance of the risk in relation to EBITDA, damage to Royal Unibrew's reputation, violation of legislation or environmental implications as well as the probability of the risk resulting in an incident. Based on this assessment, the existing "heat map" is updated so as to reflect changes in the understanding of business risks. Following this registration of risks relating to Royal Unibrew's activities, the risks which may materially impact the strategic objectives in the short and long term are identified.
Local entities (staff functions and business units) are responsible for identifying, assessing, quantifying and recording risks as well as for reporting how risks are managed locally. The local-level risk assessment follows the same principles as the group-level assessment based on the "heat map" assessment system. Local risk owners have been appointed with responsibility for currently monitoring and/or reducing risks through risk-mitigating activities.
Royal Unibrew's Group Accounting is responsible for facilitating and following up on risk-mitigating activities/action plans for the key risks in accordance with the decisions made by the Board of Directors and the Executive Board.
In 2015 Royal Unibrew's Executive Board closely monitored the development in market-related risks and made the necessary changes to risk-mitigating activities to secure budgeted earnings. Moreover, local risk management workshops were held with participation by risk owners and other executives. Centrally, the identified risks and proposed action plans were reviewed and assessed by the Company's Executive Board. Based on this, the Executive Board presented the key risks to the Board of Directors and recommended the necessary risk-mitigating activities/action plans for approval by the Board of Directors. The Board of Directors then resolved to implement the necessary risk-mitigating measures with a view to ensuring optimum realisation of Royal Unibrew's strategic objectives.
Royal Unibrew's internal control and risk management systems relating to the financial reporting process are described below.
Royal Unibrew has established a formalised group reporting process comprising monthly reporting, including budget follow-up, assessment of performance and achievement of established targets.
Moreover, a central corporate function is responsible for controlling the financial reporting from the subsidiaries, which also includes a statement from each reporting group entity in relation to compliance with adopted group policies and internal control measures. In 2015 controlling visits were paid to the key subsidiaries. The Board of Directors has assessed that establishment of an actual internal audit department is not required at this time considering the moderate complexity of the Group and the transparency of its reporting.
The Board of Directors emphasises the importance of the Group communicating openly, with due regard to the confidentiality required for listed companies, and of the individual knowing his/her role with respect to internal control.
The individual business areas of the Group have been established as business units with responsibility for their own strategies, action plans and budgets. This division results in efficient follow-up and distribution of responsibilities in the Group.
Royal Unibrew's accounting manual as well as other reporting instructions are continuously updated and are available at Royal Unibrew's intranet, where they can be accessed by all relevant employees. The instructions include account coding instructions and procedures for financial reconciliation and analyses, verifying the existence of assets as well as policy for credit granting and approval of fixed asset investments. In the event of major changes, all responsible finance officers of the group enterprises are informed in writing of the key changes. Moreover, internal update courses are organised for accounting staff.
Royal Unibrew's information systems are designed with a view to continuously, with due regard to the confidentiality required for listed companies, identifying, capturing and communicating at relevant levels relevant information, reports, etc which enable the individual to perform tasks and controls efficiently and reliably.
Monitoring is effected by continuous assessments and controls at all group levels. The scope and frequency of the periodic assessments depend primarily on a risk assessment and the efficiency of the continuous controls.
The auditors appointed by the general meeting report in the Auditor's Longform Report to the Board of Directors material weaknesses in the Group's internal control systems in connection with the financial reporting process. Less material issues are reported in management letters to the Executive Board, after which the Executive Board informs the Board of Directors of the issues reported.
The Board of Directors meets twice annually with the auditors without the Executive Board attending.
The remuneration policy applying to Royal Unibrew's Board of Directors and Executive Board has been formulated so as to reflect shareholder and company interests. Moreover, the remuneration policy is intended to support the realisation of the Company's long-term objectives.
The following is a brief description of the elements of the remuneration, pension plans and severance programmes as well as other benefits offered to the Board of Directors and the Executive Board.
The complete remuneration policy for the Board of Directors and the Executive Board is disclosed at the Company's website http://investor.royalunibrew. com/documentdisplay.cfm?DocumentID=11831.
For a description of incentive pay, reference is made to the Overall Guidelines for Incentive Pay adopted at the Company's general meeting, which may be downloaded from http://investor.royalunibrew.com/payprogram.cfm.
Efforts are made to ensure that the Board of Directors remuneration matches the level of peer companies and to accommodate the requirements relating to members' competences, performance and scope of board work, including the number of meetings.
The annual remuneration paid to ordinary board members amounts to DKK 300,000. The Chairman and Deputy Chairman receive remuneration of 2.5 times (DKK 750,000) and 1.75 times (DKK 525,500) the remuneration paid to ordinary members. The total remuneration paid to the Board of Directors in 2015 amounted to DKK 4.0 million.
The Board of Directors remuneration is fixed and no remuneration is paid for participation in the committees set up by the Board of Directors.
The Board of Directors does not participate in any incentive schemes.
The remuneration for the financial year in progress is submitted for approval at the AGM.
The Board of Directors believes that a combination of fixed and performance-driven remuneration to the Executive Board contributes towards ensuring that Royal Unibrew can attract and retain the right employees. At the same time, the Executive Board is given an incentive to create shareholder value through partially incentive-based remuneration.
The Executive Board members are employed on individual service contracts, and the terms are fixed by the remuneration committee within the framework laid down in the contracts, see below.
The remuneration committee assesses the Executive Board remuneration annually to ensure that the remuneration matches the situation at peer companies.
The Executive Board is remunerated by a market-conforming and competitive remuneration package comprising four elements:
As part of Royal Unibrew's continued efforts to focus on value creation for shareholders, the Executive Board was in 2013 offered restricted (conditional) shares for no consideration. The programme replaced the previous cashbased, long-term bonus scheme and entered into force on 1 September 2013. A restricted share entitles the holder to receive one Royal Unibrew share of a nominal value of DKK 2 for no consideration when the Company's Annual Report for 2016 has been published in March 2017. The receipt of shares is conditional on continued employment in the period up to the Board of Directors' adoption of the Annual Report for 2016 and on the employee not having handed in notice. The number of shares depends on the extent to which the EBIT and free cash flow targets for the financial years 2013- 2016 defined by the Board of Directors are achieved in the vesting period. The maximum number of restricted shares is 300,000 shares, corresponding to a value of DKK 33 million at the time of granting, 28 August 2013.
The total remuneration of the three members of the Executive Board amounted to DKK 32 million in 2015. See also note 5.
In addition a number of work-related benefits are made available to the Executive Board, including a company car, and the Executive Board members are covered by Royal Unibrew's standard insurance schemes such as accident and life insurance.
Royal Unibrew A/S may terminate the employment of a member of the Executive Board at up to 24 months' notice, whereas the employment of other members of the Executive Board may be terminated at 12 months' notice. Severance pay agreed upon cannot exceed two years' salary according to the remuneration policy.
In case of a full or partial takeover of Royal Unibrew A/S, the Executive Board will receive no compensation. However, two members of the Executive Board may choose to consider themselves dismissed in such event.
| Remuneration component |
Purpose | Level of granting | Granting criteria |
|---|---|---|---|
| Fixed salary | Attract and retain the right ex ecutives by offering a salary that reflects their competences and experience. |
Must reflect the level of peer companies. |
Assessed annually on the basis of individual responsibilities, qualifica tions and results. |
| Benefits | Offer a competitive package that supports attraction and reten tion. |
Benefits corresponding to mar ket practice. |
N/A |
| Pension | The Executive Board members make their own pension contri butions. |
N/A | N/A |
| Ordinary bonus | Ensure the achievement of Royal Unibrew's short-term targets. |
May not exceed 60% of the fixed salary (gross salary). |
Bonus grants and their size depend on the achievement of targets agreed for one year at a time – primarily relating to the Company's budgeted targets and results, financial key figures or other measurable individual results. |
| Long-term bonus | Ensure the achievement of Royal Unibrew's long-term targets. |
May not exceed 300,000 shares for the period 2013-2016. Granted when Royal Unibrew's Annual Report for 2016 has been pub lished in March 2017. |
The number of shares granted is sub ject to the level of achievement in the vesting period of the EBIT and free cash flow targets determined by the Board of Directors for financial years 2013-2016. |
| Furthermore, a cash amount of 15-20% of the fixed salary for the period 2010-2015 to be paid when the Annual Report for 2015 has been published in March 2016. |
The payment of the cash bonus for the period 2010-2015 is conditional on employment at the time of payment |
||
| Extraordinary bonus | Encourage the generation of shareholder value and ensure that objectives of attracting and re taining key executives are met. |
May not exceed 100% of the fixed salary (gross salary), eg in the form of a retention bonus, restricted shares or performance bonus. |
The bonus is granted to remunerate a special effort. |
| Basic fee, DKK '000 | Additional fee, % of basic fee | |
|---|---|---|
| All members of the Board | 300 | |
| Chairman of the Board | 150 % | |
| Deputy Chairman of the Board | 75 % | |
| Members of the remuneration and nomination committees | 0 % |
Kåre Schultz Chairman of the Board Chairman of the nomination committee and the remuneration committee
CEO of H. Lundbeck A/S since May 2015
Special expertise in strategic management as well as experience of production, sales and marketing of brands on a global scale
Independence Considered independent
Member of the board of directors LEGO A/S
Professional board member in a number of enterprises since 2014
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
Considered independent
Alectia A/S Xilco Holding AG, Switzerland
German High Street Properties A/S (GERHSP)
Deputy Chairman of the nomination committee and the remuneration committee
Walther Thygesen Deputy Chairman of the Board
Professional board member in a number of Nordic enterprises since 2010
Special expertise in general management, including of international enterprises in the convenience goods and retail areas as well as FMCG (Fast Moving Consumer Goods)
Considered independent
Ambea Sweden Group AB, Sweden Bilia AB, Sweden Fiskars Ojy, Finland Martin & Servera AB, Sweden Matas A/S, Denmark Musti ja Mirri Grp Oy, Finland Orkla ASA, Norway ZetaDisplay AB, Sweden
Board member
Jens Due Olsen Board member
Professional board member in a number of Danish enterprises since 2008 Temporary CFO of Auris III Luxembourg S.A. since January 2016
Special expertise in economic, financial and capital market aspects as well as general management with experience from a variety of industries
Considered independent
Auris III Luxembourg S.A., Luxemburg Bladt Industries A/S The foundation BørneBasketFonden (non-profit organisation)
Professional board member in a number of enterprises, primarily in Finland, since 2013
Special expertise in general management, including of international enterprises within FMCG (Fast Moving Consumer Goods)
NKT Holding A/S
Cryptomathic A/S Gyldendal A/S Heptagon Advanced Micro Optics Inc. Pierre.dk A/S
Member of investment committee of LD Equity 2 K/S Member of the Committee on Corporate Governance
Considered independent
Fiskars Oyj, Finland Onninen Oy, Finland Onvest Oy, Finland RATOS AB, Sweden Scandi Standard Ab (publ), Sweden
Jais Valeur Board member
Group CEO of Danish Crown since November 2015
Special expertise in general management of international enterprises within FMCG (Fast Moving Consumer Goods)
Considered independent
Member of the board of directors Foss A/S
Hemming Van Board member
Special competences
Special expertise in retailing and marketing as well as production and general management
Independence Considered independent
CEO of Easy Holding A/S Executive officer of HV Holding ApS, Chri Van ApS, Ka Van ApS, Se Van ApS, The Van ApS
Easyfood A/S FHØ af 27.05.2011 A/S GOG Holding A/S Halberg A/S Mac Baren Tobacco Co. A/S
Easy Holding A/S Great Dane A/S HV Invest ApS
Martin Alsø Elected by the employees
Position Business Unit Manager
Jørgen-Anker Ipsen Elected by the employees
Position Export Area Manager
Kirsten Wendelboe Liisberg Elected by the employees
Position Brewery Hand
Søren Lorentzen Elected by the employees
Position Brewery Hand
| Name | Year of birth | Initially elected |
Term of office | Royal Unibrew shares held Position at 1 January 2016 |
Number of | Change from 1 January 2015 |
|---|---|---|---|---|---|---|
| Kåre Schultz | 1961 | 2010 | 2015 | Chairman | - | - |
| Walther Thygesen | 1950 | 2010 | 2015 | Deputy Chairman | 5,500 | - |
| Martin Alsø | 1974 | 2014 | 2014-2018 | Board member elected by the employees | 4,600 | +200 |
| Ingrid Jonasson Blank | 1962 | 2013 | 2015 | Board member | - | - |
| Jørgen-Anker Ipsen | 1958 | 2014 | 2014-2018 | Board member elected by the employees | 230 | - |
| Kirsten Wendelboe Liisberg | 1956 | 2006 | 2014-2018 | Board member elected by the employees | 810 | - |
| Søren Lorentzen | 1964 | 2010 | 2014-2018 | Board member elected by the employees | 860 | - |
| Jens Due Olsen | 1963 | 2010 | 2015 | Board member | - | - |
| Karsten Mattias Slotte | 1953 | 2013 | 2015 | Board member | - | |
| Jais Valeur | 1962 | 2013 | 2015 | Board member | - | - |
| Hemming Van | 1956 | 2004 | 2015 | Board member | 6,605 | - |
Henrik Brandt President and CEO as of November 2008
MSc (Economics and Business Administration), MBA Stanford University, California
Brandt Equity ApS Brandt Equity 2 ApS Uno Equity ApS
Toms Gruppen A/S Brandt Equity ApS Brandt Equity 2 ApS Uno Equity ApS
Ferd Holding AS, Norway Hansa Borg Holding AS including subsidiaries, Norway Gerda og Victor B. Strands Fond Gerda og Victor B. Strand Holding A/S
Chairman of the corporate law committee of the Confederation of Danish Industry
Lars Jensen CFO as of November 2011
Diploma in business economics, informatics and management accounting, Copenhagen Business School
Johannes F.C.M. Savonije COO as of September 2008
Qualifications
Dansk Retursystem Holding A/S including subsidiaries Hansa Borg Holding AS including subsidiaries, Norway Globalpraxis S.A., Barcelona, Spain
| Name | Year of birth | Position | Number of Royal Unibrew shares held at 1 January 2016 |
Change from 1 January 2015 |
|---|---|---|---|---|
| Henrik Brandt | 1955 | CEO | 384,000 | - |
| Lars Jensen | 1973 | CFO | 23,330 | - |
| Johannes F.C.M. Savonije | 1956 | COO | 113,500 | - |
Royal Unibrew directs targeted efforts at developing managers and employees to create the best possible basis for realising the strategy laid down and achieving our business objectives. Focus in 2015 has been on strengthening execution capabilities and willingness to change to enable the business as a whole to meet future challenges in the best possible way, including the ever intensifying competition in the individual markets and the need for innovation.
Royal Unibrew works strategically at developing our employees' competences to ensure that the overall organisation remains competitive and is capable of exploiting development opportunities and reading market trends. It is therefore important that our employees have job satisfaction and are proud ambassadors of Royal Unibrew.
Optimisation and integration of the total organisation are high on Royal Unibrew's agenda. This requires managers who are able to manage and implement strategies across countries and cultures. Royal Unibrew managers receive continuous management training, and the fundamental management principles of the business are adjusted currently to match business developments and changes in external demands. This ensures that the management culture is always based on the principles that can take the business further.
In 2015 manager development initiatives focused on the management and value DNA of Royal Unibrew – the platform ensuring that managers have a shared language and a common understanding of what it takes to practise good management.
Moreover, efforts were directed at strengthening organisational execution capabilities and willingness to change. The ever increasing pace of market changes requires that both the individual employee and the organisation as a whole are capable of adapting. It is crucial to ensure that our managers are prepared to take the lead and address changes in the best possible way. Therefore, continuous efforts are made to strengthen our managers' competences in these areas. One of the important things is that our managers have a clear understanding of the positive correlation between productivity and job satisfaction among our employees and the pivotal role the manager plays in this.
In Denmark efforts were directed in 2015 at developing broader competences among hourly-paid employees with a view to creating increased flexibility in the day-to-day work to enable employees to handle several functions and more readily replace each other. This is ensured through structured mapping of the individual employee's competences during appraisal interviews. In that connection, a pilot project with autonomous teams was furthermore initiated. Moreover, a number of industry instructors were trained with responsibility for, among other things, standardisation of the introductory process for new employees to ensure even better integration and training of these.
In 2015 the sales competences of the sales organisation within both on-trade and off-trade were strengthened through structured development programmes. Within on-trade, training focused on the psychology of sales with a view to ensuring efficient sales processes in markets characterised by tough competition and significant consolidation. The efforts within off-trade included individual coaching of managers with focus on sales management as well as sales training for the individual sales employee.
In Finland the organisation also directed efforts at creating broader competences. The work of implementing the Group's shared ERP-system, which is integrated across functions and processes to a much larger extent than Hartwall's previous system, contributed towards enhancing employees' knowledge of links between processes and their understanding of tasks throughout the organisation. In production, the competences of hourly-paid employees were developed enabling them to perform more functions.
In the Baltic countries efforts were directed at, among other things, Lean and 6sigma principles to ensure uniform and more productive work processes in the logistics area.
In Italy Royal Unibrew continued working with "Ceres Academy" in 2015, which is a platform for corporate culture training. Employees from all parts of the Italian organisation participated in the training, and subjects included marketing, cost accounting, IT as well as beer knowledge
Malt Beverages and Exports, which besides the general management team situated in Denmark comprises sales offices situated close to the local markets in the Americas, Africa, the UK and France, worked with understanding of local cultures and training in negotiating skills adapted to local conditions in 2015.
As part of the overall competence development work, Royal Unibrew carries out a systematic performance management process every year with focus on identifying and developing employee and manager potential. The primary purpose is to identify high performers in all parts of the organisation and to consider the potential among these employees in relation to both specialist roles and management positions. At the same time, the efforts in this area contribute towards retaining talents and key employees and ensuring that they are offered the right challenges and competence development.
As an element of the efforts to retain and develop employees, Royal Unibrew focuses on creating career development and career paths for the individual employees. Emphasis is on, among other things, job rotation and internal recruiting for key positions. This ensures rooting of knowledge of activities as well as optimisation of cooperation across the business.
Moreover, efforts are directed throughout the Group at ensuring that the incentive structure supports Royal Unibrew's strategy and business objectives.
In a market with increasing demand for the best talent, it is important for Royal Unibrew to onboard new employees in the best possible way. Therefore, Royal Unibrew directed efforts at improving the introduction of new employees to the organisation in 2015. In Italy efforts were directed at, among other things, improved introduction and training of new employees within sales and marketing; in the Baltic countries a new structured introductory programme was developed for new employees. In Denmark efforts are directed at, among other things, standardising the introduction of new hourly-paid employees.
To ensure great commitment among Royal Unibrew's employees, employee surveys are conducted throughout the Group every two years. The purpose of the survey is to create a forum for dialogue between managers and employees and to highlight the areas that leave room for improvement in order for Royal Unibrew to become an even better workplace. The follow-up work is performed locally with focus on local job satisfaction and health & safety at work, and initiatives and targets are also determined and initiated locally.
The 2015 survey was generally highly supported. The results of the survey are very positive as the scores for all countries and regions, except for Finland, are above benchmark, whereas Finland is at benchmark level. Moreover, the survey indicates that, as in the survey two years ago, Royal Unibrew employees exceed the employees of peer companies when it comes to loyalty, pride in being an employee of the company and the inclination to recommend the company as a workplace to others. Moreover, good customer service, diversified tasks and departmental cooperation are areas emphasised by employees in the survey. The focus areas identified by the survey vary from area to area. Therefore, the follow-up work based on the results of the survey was performed locally in 2015 with a number of initiatives being carried out in the individual subsidiaries and departments.
The autumn of 2014 saw the launch of a new intranet, UniWorld, which is a general platform for communication, knowledge sharing and document management across the entire Royal Unibrew organisation. The intranet is an important tool to strengthen the integration between the various entities, including to support a shared culture to form the basis of continued strengthening of Royal Unibrew. UniWorld has become an important part of the business and communication across Royal Unibrew through which Management communicates on new initiatives and results within the Group and employees share knowledge daily and communicate on local activities and success stories.
Royal Unibrew has continuous focus on implementing new and improving existing IT systems to increase the efficiency and to align business processes across the Group.
I 2015 the main priority was project One-SAP, which comprises development of a common SAP platform for the entire Royal Unibrew Group and the preparation for implementation of the platform in Hartwall.
As planned, the Group's common SAP platform was implemented in Hartwall in first quarter of 2016, after which all group entities use the same SAP platform. The common platform will create synergies through process standardisation as well as consolidation and optimisation of the Group's overall IT operations.
At Royal Unibrew, we want to make a positive difference for our consumers and to create value for our stakeholders. In order to do that, we must apply clear principles and strategies to the management of our business. Consumers in all our markets must be able to rely on our products being of a very high quality and produced under safe conditions. At the same time, we must continuously seek to reduce our environmental impact and contribute positively to the overall development of society.
Our corporate social responsibility (CSR) work is an integrated part of Royal Unibrew's business approach, and our efforts in this area are based on our values and the ten principles of the United Nations Global Compact in respect of human rights, labour standards, environment and anti-corruption as well as other relevant internationally recognised principles.
"Royal Unibrew's Code of Ethics" is Management's guidance to employees on ethical issues, including issues relating to corruption, human rights and environmental accountability.
Royal Unibrew has chosen to focus on continuous improvements rather than long-term objectives in relation to which focus and compliance by the individual employee in the day-to-day work may be difficult. It is the objective to be able at all times to deliver strong quality products with due consideration of our employees and Royal Unibrew's surroundings. This approach has resulted in satisfactory improvements in a number of areas for several years and will also form the basis of our future corporate social responsibility work.
The areas which we have selected as the focus areas of our social responsibility work are shown in the figure below.
Our CSR work supports a good dialogue with consumers, customers and suppliers, which contributes towards increasing production efficiency and decreasing wastage and towards reducing non-financial risks and creating and sustaining a strong corporate identity and culture. At the same time, these efforts contribute towards creating new business opportunities.
Royal Unibrew's values and ethical guidelines are included as an integrated part of the employment relationship agreed with the individual employee. Our ethical guidelines imply, among other things, that Royal Unibrew does not tolerate discrimination of its employees due to gender, race, religion or political affiliation.
Royal Unibrew accedes to the principles of human rights and labour standards including eg the principles on child labour laid down by UNICEF, the UNGC and Save the Children.
It is also Royal Unibrew's aim that suppliers and partners should comply with the ethical guidelines, and that these should be incorporated into the Company's terms of trading with key suppliers. Royal Unibrew is only exposed to suppliers outside the EU to a very limited extent.
Audits are performed regularly according to a customer-specific, international ethical standard at Royal Unibrew's brewery in Faxe.
• Continued training of Royal Unibrew employees in ethical values and guidelines.
Royal Unibrew works against all forms of corruption, including extortion and bribery, and the Company's activities must always be in full compliance with anti-corruption legislation irrespective of the place of operation.
According to Royal Unibrew's ethical guidelines, our employees are not allowed to offer or accept bribes or any improper payments for personal or corporate gain. Disciplinary actions will be taken if an employee is involved in bribery. The staff in all sales areas are trained annually in this aspect.
• Our position on anti-corruption to be stated in all contexts, both internally in the supply chain and externally in the cooperation with customers and suppliers.
• Anti-corruption training of new sales staff and follow-up training of other employees to be carried out.
Royal Unibrew's business should always be conducted in full compliance with applicable competition regulation irrespective of the place of operation. To ensure this, Royal Unibrew has a competition law compliance programme comprising a manual and guidelines as well as regular training and follow-up, eg through regular internal controls.
Royal Unibrew operates in a number of countries and is therefore subject to both national and international tax rules. At the same time, the nature of Royal Unibrew's business implies that both direct and indirect taxes are paid in the individual markets. Throughw its tax payments, Royal Unibrew contributes positively to society in the respective countries – as it does by creating jobs and using sub-suppliers.
The following general principles apply to Royal Unibrew's management of tax issues:
Royal Unibrew endeavours to live up to national and international tax legislation at all times and sets out to enter into an open and constructive dialogue with the tax authorities.
Royal Unibrew has developed an internal organisation and has laid down well-defined control procedures designed to ensure compliance with tax legislation.
In 2015 the effective tax rate was 22% of profit for the year. Royal Unibrew paid a corporation tax of DKK 253 million. In addition to that, Royal Unibrew's activities generate other considerable tax payments, including excise duties on beer, mineral water and other items, VAT, personal taxes and social security contributions. The total contribution through taxes in 2015 amounted to DKK 4.4 billion. (2014: 4.4 billion). Moreover, tax contributions from the Group's suppliers and customers are indirectly generated.
Royal Unibrew's commitment to responsible marketing and consumption of beverages is rooted in the following core principles:
Royal Unibrew supports The Brewers of Europe campaigns on responsible alcohol consumption and attaches great importance to responsible drinking.
Royal Unibrew employees engaged in product marketing are currently trained and instructed in compliance with existing marketing legislation. Compliance with existing marketing legislation is part of Royal Unibrew's agreements with customers and partners, eg in the ontrade segment.
In addition to complying with marketing legislation and the above-mentioned guidelines, Royal Unibrew gets involved in customers' communication on consumption of the Company's products in relation to advertising, sponsorships and campaigns.
Royal Unibrew also has a responsibility for preventing any abuse problems among its employees. In Denmark and Finland, a number of key individuals across the organisation have been trained in supporting colleagues with a potential over-consumption of alcohol/ intoxicants, including encouraging treatment, and in helping their colleagues get back to work again as easily as possible following treatment.
In Latvia Royal Unibrew along with other soft drinks producers supported the preparation of a joint code for responsible marketing of soft drinks, and in 2015 campaigns on balanced consumption of beverages were conducted.
Moreover, the Baltic countries have focus on promoting beer with a lower alcohol content, and non-alcoholic beer sales have gone up.
As an element in Royal Unibrew's responsibility with respect to reducing the consumption of soft drinks containing sugar, efforts are continuously directed at promoting calorie-reduced products such as Nikoline with 30% less sugar or sugar-free alternatives such as Jaffa Light, Faxe Kondi Free, Pepsi Next and Pepsi Max and a generally increasing range of water products.
Through a variety of sponsorships, Royal Unibrew supports sports and health initiatives at both national, regional and local level.
Royal Unibrew works in a targeted and structured manner to develop employee competences. These efforts are further described in the section "Organisation and Employees".
Royal Unibrew must be a safe and healthy place to work for its employees, and Royal Unibrew's health policy therefore focuses on preventive measures to avoid employees being worn out and incurring work-related injuries and on actively promoting safety, job satisfaction and efficiency.
The preventive measures at the breweries in 2015 included the following:
• In the Baltic countries working conditions at the distribution warehouses were considerably improved. Palletisation and order picking are now carried out far more efficiently and safely than previously by means of safe and ergonomic lifting equipment.
Royal Unibrew's increased focus on occupational accidents has also resulted in greater openness when it comes to reporting injuries. Consequently, the total number of registered accidents increased to a higher level in 2015 than in 2014; however, the number is still lower than in the years before 2014. Obviously, this is not an acceptable development, but it does, however, probably to some extent reflect the great focus on the area. Significant efforts will be directed at preventing occupational accidents also going forward.
Royal Unibrew's breweries have certification under the international standards. The efforts within quality and food safety also comprise requirements from customers and licensors, including Heinek-
en and PepsiCo. Moreover, applicable HACCP (Hazard Analysis and Critical Control Points) rules have been implemented.
| Cido, Latvia |
ISO22000 |
|---|---|
| Lacplesis, Latvia |
ISO22000 |
| Kalnapilis, Lithuania |
ISO22000 |
| Faxe, | FSSC22000, ISO9001, |
| Denmark | ISO14001 |
| Albani, Denmark |
FSSC22000, ISO9001, ISO14001 |
| Lahti, | FSSC22000, ISO9001, |
| Finland | ISO14001, OHSAS 18001 |
| Karijoki, | FSSC22000, ISO9001, |
| Finland | ISO14001, OHSAS 18001 |
The focus on and interest in food safety and quality among consumers, customers and the media are on the increase, which is also reflected in Royal Unibrew's efforts in the area. Among other things, a customer-specific quality standard for analysis work at the laboratories in Faxe was introduced in 2015.
Royal Unibrew assesses on a current basis how most appropriately to take responsibility for identifying and preventing risks relating to food safety and quality and how to communicate this. The priorities set are aligned with those of industry associations and Royal Unibrew's licensors.
• FSSC22000 certification of the Cido brewery is expected during 2016.
(Hectorliter per produced hectoliter)
• Continuation of the efforts relating to quality assurance of the Company's quality analyses according to Heineken standards, including implementation of the laboratory standard at the Albani brewery.
Royal Unibrew has always worked determinedly to limit the environmental impacts of the Company's production. As a result, Royal Unibrew is today among the industry's front-runners, when it comes to resource-efficient beverage production.
Our efforts to reduce the environmental footprint of our production will continue, primarily targeted at:
In 2015 energy consumption developed satisfactorily for Royal Unibrew as a whole. Energy consumption per unit produced decreased by 2.4% to 84.6 MJ/ hl. The reduced consumption is the resulting effect of measures implemented in 2015, especially at the Lahti brewery in Finland and the Kalnapilis brewery in Lithuania, as well as of a number of new measures introduced in 2015.
At the Faxe brewery replacement of all light sources with LED lights was commenced, and the wort separation process was changed to achieve savings in terms of heating and cooling. Both of these measures resulted in energy savings, but as there was a simultaneous opposite effect from the packaging mix, energy consumption per unit produced showed a small increase on a total basis.
In the Baltic countries the installation of a new energy-efficient cooling system reduced the energy consumption of the system by 11% as compared to 2014.
At the Hartwall brewery in Finland a new unit for filling beer on kegs was established which consumes less energy, beer filtration units were replaced by more modern and energy-efficient units and energy-optimisation of the production of PET bottles was implemented. Moreover, an electricity-saving project of replacing 10,000 light sources with LED lights continued.
2015 was to a certain extent affected by preparation for future, major investments in energy-conserving measures which will be implemented in 2016. These include:
Water is an important constituent of Royal Unibrew's production, and we are therefore always on the lookout for new methods to reduce our water consumption. For our business as a whole, water consumption in 2015 was marginally lower than in 2014.
This was achieved through, among other measures, improved control of the crate washer at the Faxe brewery in Denmark as well as optimisation of the CIP processes in Finland (CIP: Cleaning In Place) with a view to reducing the use of chemicals in water. Total water consumption and waste water discharge (m3 per hectolitre produced) were reduced by 1% in 2015 (in Finland 3%).
All production sites have strong, continuous focus on consumption, including recycling, of raw materials and other resources. Efforts are made to ensure the best possible utilisation of the raw materials and resources used in order to avoid unnecessary wastage. This applies to production as well as to the other parts of the supply chain.
Initiatives in 2015 included:
Minimisation of wastage from all process levels
Energy and water consumption reductions
Back in 2012 the carbon footprint of the Egekilde products was mapped throughout the chain from raw materials to delivery to Royal Unibrew's customers, and the Egekilde brand was launched as the first Danish CO2 neutral mineral water product.
CO2 neutrality is an ongoing process achieved by investing in environmentally sound energy through UN-certified carbon credits and by means of plastic containing up to 50% recycled material. This knowledge is also applied generally in making continuous efforts directed at reducing energy and resource consumption with suppliers and within production and logistics. Our efforts in this area are continuously optimised in cooperation with suppliers and other business partners.
CO2 neutrality contributed towards Egekilde becoming the market leader in 2015. Egekilde's CO2 neutrality provides consumers with a climate-friendly purchasing option.
• Updating of carbon footprint of packaging, containers and resources in the Egekilde production.
The Board of Directors and the Executive Board have today considered and adopted the Annual Report of Royal Unibrew A/S for 1 January - 31 December 2015.
The Annual Report is prepared in accordance with International 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 31 December 2015 as well as of the results of the Group and Company operations and cash flows for the financial year 1 January - 31 December 2015.
In our opinion, Management's Review gives a true and fair account of the development in the activities and financial circumstances of the Group and the Parent Company, of results of operations for the year, of the Parent Company's financial position and of the overall financial position of the enterprises comprised by the Consolidated Financial Statements, 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, 1 March 2016
| Henrik Brandt President & CEO |
Lars Jensen CFO |
Johannes F.C.M. Savonije COO |
|---|---|---|
| Board of Directors | ||
| Kåre Schultz Chairman |
Walther Thygesen Deputy Chairman |
|
| Martin Alsø | Ingrid Jonasson Blank | Jørgen-Anker Ipsen |
| Kirsten Liisberg | Søren Lorentzen | Jens Due Olsen |
| Karsten Mattias Slotte | Jais Valeur | Hemming Van |
We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of Royal Unibrew A/S for the financial year 1 January - 31 December 2015, which comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including summary of significant accounting policies, for the Group as well as for the Parent Company. The Consolidated Financial Statements and the Parent Company Financial Statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
Management is responsible for the preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies, and for such internal control as Management determines is necessary to enable the preparation of Consolidated Financial Statements and Parent Company Financial Statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Consolidated Financial Statements and the Parent Company Financial Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements and the Parent Company Financial Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Consolidated Financial Statements and the Parent Company Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Consolidated Financial Statements and the Parent Company Financial Statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
The audit has not resulted in any qualification.
In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position at 31 December 2015 of the Group and the Parent Company and of the results of the Group and Parent Company operations and cash flows for the financial year 1 January - 31 December 2015 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
We have read Management's Review in accordance with the Danish Financial Statements Act. We have not performed any procedures additional to the audit of the Consolidated Financial Statements and the Parent Company Financial Statements. On this basis, in our opinion, the information provided in Management's Review is consistent with the Consolidated Financial Statements and the Parent Company Financial Statements.
Faxe, 1 March 2016
CVR No 30700228 Godkendt Revisionspartnerselskab
Eskild N. Jakobsen State Authorised Public Accountant
Niels-Jørgen Andersen State Authorised Public Accountant
| DKK '000 | Note | 2015 | 2014 |
|---|---|---|---|
| Net revenue | 4 | 6,032,115 | 6,055,898 |
| Production costs | 5,6 | -2,857,459 | -2,906,089 |
| Gross profit | 3,174,656 | 3,149,809 | |
| Sales and distribution expenses | 5,6 | -1,922,282 | -1,987,350 |
| Administrative expenses | 5,6 | -335,418 | -336,241 |
| EBIT | 916,956 | 826,218 | |
| Income after tax from investments in associates | 13 | 31,061 | 34,808 |
| Financial income | 7 | 8,759 | 8,174 |
| Financial expenses | 8 | -54,470 | -68,596 |
| Profit before tax | 902,306 | 800,604 | |
| Tax on the profit for the year | 9 | -190,879 | -176,439 |
| Net profit for the year | 711,427 | 624,165 | |
| Earnings per share (DKK) | 18 | 13.0 | 11.3 |
| Diluted earnings per share (DKK) | 18 | 12.9 | 11.2 |
| DKK '000 | Note | 2015 | 2014 |
|---|---|---|---|
| Net profit for the year | 711,427 | 624,165 | |
| Other comprehensive income | |||
| Items that may be reclassified to the income statement | |||
| Exchange adjustment of foreign group enterprises | 5,374 | -14,184 | |
| Value adjustment of hedging instruments, beginning of year | 2 | 32,677 | 46,039 |
| Value adjustment of hedging instruments, end of year | 2 | -27,839 | -32,677 |
| Tax on other comprehensive income | 9 | -3,097 | -2,336 |
| Total | 10 | 7,115 | -3,158 |
| Items that may not be reclassified to the income statement | |||
| Revaluation of non-current assets | 39,000 | 70,000 | |
| Tax on revaluation of non-current assets | 9 | 2,461 | -16,100 |
| Actuarial gain on pension schemes | 7,398 | -2,791 | |
| Tax on actuarial gain on pension schemes | 9 | -1,544 | 558 |
| Total | 47,315 | 51,667 | |
| Other comprehensive income after tax | 54,430 | 48,509 | |
| Total comprehensive income | 765,857 | 672,674 |
| DKK '000 | Note | 2015 | 2014 |
|---|---|---|---|
| ASSETS AT 31 DECEMBER | |||
| NON-CURRENT ASSETS | |||
| Intangible assets | 11 | 2,920,162 | 2,941,247 |
| Project development properties | 12 | 197,506 | 238,439 |
| Other property, plant and equipment | 12 | 2,240,718 | 2,331,310 |
| Investments in associates | 13 | 135,371 | 136,249 |
| Other fixed asset investments | 14 | 11,725 | 16,768 |
| Non-current assets | 5,505,482 | 5,664,013 | |
| CURRENT ASSETS | |||
| Inventories | 15 | 316,708 | 312,041 |
| Receivables | 16 | 570,438 | 536,320 |
| Prepayments | 17 | 21,714 | 20,011 |
| Cash at bank and in hand | 333,185 | 491,453 | |
| Current assets | 1,242,045 | 1,359,825 | |
| Assets | 6,747,527 | 7,023,838 | |
| LIABILITIES AND EQUITY AT 31 DECEMBER | |||
| EQUITY | |||
| Share capital | 18 | 110,985 | 110,985 |
| Other reserves | 902,938 | 917,142 | |
| Retained earnings | 1,521,336 | 1,412,875 | |
| Proposed dividend | 399,546 | 377,349 | |
| Equity | 2,934,805 | 2,818,351 | |
| LIABILITIES | |||
| NON-CURRENT LIABILITIES | |||
| Deferred tax | 19 | 375,396 | 431,774 |
| Mortgage debt | 2 | 1,000,325 | 1,012,807 |
| Credit institutions | 2 | 461,675 | 859,108 |
| Other payables | 14,164 | 24,713 | |
| Non-current liabilities | 1,851,560 | 2,328,402 | |
| CURRENT LIABILITIES | 3,327,724 | 4,225,030 | |
| Mortgage debt | 2 | 14,203 | 164,480 |
| Credit institutions | 2 | 40,934 | 7,649 |
| Trade payables | 913,762 | 810,529 | |
| Corporation tax | 9 | 7,044 | 22,156 |
| Other payables | 20 | 985,219 | 872,271 |
| Current liabilities | 1,961,162 | 1,877,085 | |
| Liabilities | 23 | 3,812,722 | 4,205,487 |
| Liabilities and equity | 6,747,527 | 7,023,838 |
| DKK '000 | Note | 2015 | 2014 |
|---|---|---|---|
| Net profit for the year | 711,427 | 624,165 | |
| Adjustments for non-cash operating items | 22 | 523,750 | 515,677 |
| 1,235,177 | 1,139,842 | ||
| Change in working capital: | |||
| Receivables | -35,317 | -29,751 | |
| Inventories | -3,965 | 18,533 | |
| Payables | 207,867 | -22,967 | |
| Cash flows from operating activities before financial income and expenses | 1,403,762 | 1,105,657 | |
| Financial income | 6,511 | 1,669 | |
| Financial expenses | -53,099 | -60,759 | |
| Cash flows from operating activities | 1,357,174 | 1,046,567 | |
| Corporation tax paid | -197,397 | -151,126 | |
| Cash flows from operating activities | 1,159,777 | 895,441 | |
| Dividends received from associates | 26,660 | 24,346 | |
| Sale of property, plant and equipment | 100,601 | 135,278 | |
| Corporation tax paid, sale of project development properties | -56,020 | -24,500 | |
| Purchase of property, plant and equipment | -199,361 | -206,310 | |
| Free cash flow | 1,031,657 | 824,255 | |
| Acquisition/sale of intangible assets and fixed asset investments | 5,330 | 2,005 | |
| Cash flows from investing activities | -122,790 | -69,181 | |
| Debt financing: | |||
| Proceeds from increased drawdown on credit facilities | 200,000 | 425,788 | |
| Repayment on credit facilities | -730,352 | -1,004,674 | |
| Shareholders: | |||
| Dividends paid to shareholders | -373,957 | 0 | |
| Acquisition of shares for treasury | -292,548 | 0 | |
| Cash flows from financing activities | -1,196,857 | -578,886 | |
| Change in cash and cash equivalents | -159,870 | 247,374 | |
| Cash and cash equivalents at 1 January | 491,453 | 243,962 | |
| Exchange adjustment | 1,602 | 117 | |
| Cash and cash equivalents at 31 December | 333,185 | 491,453 |
| DKK '000 | Share capital |
Share premium account |
Reva- reserves |
luation Translation reserve |
Hedging reserve |
Total other reserves |
Retained earnings |
Proposed dividend for the year |
Total |
|---|---|---|---|---|---|---|---|---|---|
| Equity at 31 December 2014 | 110,985 | 855,839 | 126,616 | -32,636 | -32,677 | 917,142 | 1,412,875 | 377,349 | 2,818,351 |
| Changes in equity in 2015 | |||||||||
| Net profit for the year | 711,427 | 711,427 | |||||||
| Other comprehensive income | 39,000 | 5,374 | 4,838 | 49,212 | 7,398 | 56,610 | |||
| Tax on other comprehensive income | 2,461 | 2,461 | -4,641 | -2,180 | |||||
| Revaluation reserves realised | -65,877 | -65,877 | 65,877 | 0 | |||||
| Total comprehensive income | 0 | 0 | -24,416 | 5,374 | 4,838 | -14,204 | 780,061 | 0 | 765,857 |
| Dividends paid to shareholders | -373,957 | -373,957 | |||||||
| Dividend on treasury shares | 3,392 | -3,392 | 0 | ||||||
| Acquisition of shares for treasury | -292,548 | -292,548 | |||||||
| Share-based payments | 9,900 | 9,900 | |||||||
| Tax on changes in equity, shareholders | 7,202 | 7,202 | |||||||
| Proposed dividend | -399,546 | 399,546 | 0 | ||||||
| Total shareholders | 0 | 0 | 0 | 0 | 0 | -671,600 | 22,197 | -649,403 | |
| Total changes in equity in 2015 | 0 | 0 | -24,416 | 5,374 | 4,838 | -14,204 | 108,461 | 22,197 | 116,454 |
| Equity at 31 December 2015 | 110,985 | 855,839 | 102,200 | -27,262 | -27,839 | 902,938 | 1,521,336 | 399,546 | 2,934,805 |
The share capital at 31 December 2015 amounts to DKK 110,985,000 and is distributed on shares of DKK 2 each.
| Equity at 31 December 2013 | 110,985 | 855,839 | 136,505 | -18,970 | -46,039 | 927,335 | 1,094,657 | 0 | 2,132,977 |
|---|---|---|---|---|---|---|---|---|---|
| Changes in equity in 2014 | |||||||||
| Net profit for the year | 624,165 | 624,165 | |||||||
| Other comprehensive income | 70,000 | -13,666 | 13,362 | 69,696 | -5,087 | 64,609 | |||
| Tax on other comprehensive income | -16,100 | -16,100 | -16,100 | ||||||
| Revaluation reserves realised | -63,789 | -63,789 | 63,789 | 0 | |||||
| Total comprehensive income | 0 | 0 | -9,889 | -13,666 | 13,362 | -10,193 | 682,867 | 0 | 672,674 |
| Share-based payments | 9,900 | 9,900 | |||||||
| Tax on changes in equity, shareholders | 2,800 | 2,800 | |||||||
| Proposed dividend | -377,349 | 377,349 | 0 | ||||||
| Total shareholders | 0 | 0 | 0 | 0 | 0 | 0 | -364,649 | 377,349 | 12,700 |
| Total changes in equity in 2014 | 0 | 0 | -9,889 | -13,666 | 13,362 | -10,193 | 318,218 | 377,349 | 685,374 |
| Equity at 31 December 2014 | 110,985 | 855,839 | 126,616 | -32,636 | -32,677 | 917,142 | 1,412,875 | 377,349 | 2,818,351 |
| Note | Side | |
|---|---|---|
| Descriptive notes | ||
| 1 | Basis of preparation | 63-66 |
| 2 | Financial risk management | 67-72 |
| 3 | Segment reporting | 73-76 |
| Notes referring to Income Statement, Balance Sheet and Cash Flow Statement |
||
| 4 | Net revenue | 77 |
| 5 | Staff expenses | 77-78 |
| 6 | Expenses broken down by type | 79-80 |
| 7 | Financial income | 81 |
| 8 | Financial expenses | 81 |
| 9 | Tax on the profit for the year | 82 |
| 10 | Realised hedging transactions in the income statement | 83 |
| 11 | Intangible assets | 84-86 |
| 12 | Property, plant and equipment | 87-90 |
| 13 | Investments in associates | 91-92 |
| 14 | Other fixed asset investments | 93-94 |
| 15 | Inventories | 95 |
| 16 | Receivables | 96 |
| 17 | Prepayments | 97 |
| 18 | Equity and basis of earnings/cash flow per share | 98 |
| 19 | Deferred tax | 99 |
| 20 | Other current payables | 100 |
| 21 | Debt | 101 |
| 22 | Cash Flow Statement | 102 |
| 23 | Contingent liabilities and security | 103 |
|---|---|---|
| 24 | Related parties | 104 |
Royal Unibrew A/S is a limited liability company registered in Denmark. The Financial Statements for the period 1 January - 31 December 2015 presented in the Annual Report comprise both Consolidated Financial Statements of Royal Unibrew A/S and its subsidiaries (Group) and separate Parent Company Financial Statements.
The Financial Statements of Royal Unibrew for 2015 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 Board considered and adopted the Annual Report of Royal Unibrew A/S for 2015 on 1 March 2016. The Annual Report will be submitted for adoption by the shareholders of Royal Unibrew A/S at the Annual General Meeting on 27 April 2016.
The Financial Statements are presented in Danish kroner (DKK).
This section describes the general accounting policies applied and critical accounting estimates made 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.
New and amended standards and interpretations that have taken effect Royal Unibrew has during the year implemented all new IFRSs, amendments to existing standards and IFRICs adopted by the EU which take effect for the financial year 2015. There were no amendments in the financial year 2015.
interpretations that have not yet taken effect At the time of publication of this Annual Report, the IASB has issued the following new and amended financial reporting standards and interpretations which are not mandatory for Royal Unibrew A/S at the time of preparation of the Annual Report for 2015:
Amendments to IAS 16 and IAS 38, Amendments to IAS 16 and IAS 41, Amendments to IAS 27, Amendments to IFRS 11, Amendments to IAS 1 and Annual Improvements to IFRSs 2012-2014 Cycle have been adopted by the EU.
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 significant impact on recognition and measurement for Royal Unibrew A/S; however, the analysis of the expected impact of the implementation of IFRS 9 and IFRS 15 has not yet been completed, see below.
IFRS 15 "Revenue from Contracts with Customers", which replaces the existing revenue standards (IAS 11 and IAS 18) and interpretations, introduces a new model for recognising and measuring revenue from sales contracts with customers. The standard takes effect for financial years beginning on or after 1 January 2017. The IASB has, however, issued an exposure draft for amendment of IFRS 15 proposing a deferral of the effective date to financial years beginning on or after 1 January 2018.
The new model is based on a five-step process to be followed for all sales contracts with customers to determine when and how revenue is to be recognised in the income statement.
The key amendments to IFRS 15 as compared to the existing principles are:
Royal Unibrew A/S has not yet made an in-depth analysis of the implications of the new standard to the Group; however, based on preliminary analyses, the impact on recognition and measurement is assessed as immaterial given the current product mix and contract types.
IFRS 9 "Financial Instruments", which replaces IAS 39, changes the classification and, thus, the measurement of financial assets and liabilities
A more logical approach to the classification of financial assets is introduced driven by an entity's business model and underlying cash flow characteristics. At the same time, a new impairment model is introduced for all financial assets.
The so-called "expected loss" model will require more timely recognition of ex-
pected losses, both at inception and subsequently, than the existing model under which an impairment loss is not recognised until there are indications of a loss (incurred loss model).
Finally, new hedge accounting rules are introduced which, as compared to the existing rules, will make it possible to reflect in the accounting an entity's operational hedging strategy.
To entities that measure their financial liabilities at fair value, IFRS 9 implies that, going forward, fair value changes due to changes in the entity's own credit risk are no longer to be recognised in the income statement, but in other comprehensive income.
Royal Unibrew A/S expects the standard to have minor implications to the Group. The standard is expected to be mandatory for financial years beginning on or after 1 January 2018.
IFRS 16 "Leases" was issued in mid-January 2016. The standard, which takes effect for financial years beginning on or after 1 January 2019, implies a significant change to the accounting treatment of the leases that are now treated as operating leases. Thus, the standard requires that all leases irrespective of type – with few exceptions – should be recognised as an asset in the lessee's balance sheet with a corresponding lease liability. At the same time, the lessee's income statement will be affected as, going forward, the annual lease expense will comprise two elements — partly depreciation and partly an interest expense – as opposed to the current principle of recognising the annual operating lease expense as one amount in operating expenses.
Royal Unibrew A/S has not yet made an in-depth analysis of the implications of the new standard to the Group. It is, however, expected to have some impact as in 2015 the Group has operating leases with minimum lease payments in the order of DKK 151 million, corresponding to approx 2% of the balance sheet total, which will potentially have to be recognised in the balance sheet going forward.
Recognition and measurement Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Group, and the value of the asset can be measured reliably.
Liabilities are recognised in the balance sheet when they are probable and can be measured reliably. Assets and liabilities are initially measured at cost. Subsequently, assets and liabilities are measured as described for each item below.
Recognition and measurement take into account losses and risks occurring before the presentation of the Annual Report which confirm or invalidate affairs and conditions existing at the balance sheet date.
Revenues are recognised in the income statement as earned. Furthermore, value adjustments of financial assets and liabilities measured at fair value or amortised cost are recognised. Moreover, all expenses incurred to achieve the earnings for the year are recognised, including depreciation, amortisation, impairment losses and provisions as well as reversals due to changed accounting estimates in the income statement.
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 20% and 50% 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, unrealised intercompany profits and losses, balances and shareholdings. Comparative figures are not adjusted for newly acquired, sold or wound-up enterprises.
Acquired enterprises are recognised as of the date of acquisition. Enterprises disposed of are recognised in the consolidated income statement up until the date of disposal.
For each of the reporting entities of the Group, a functional currency is determined. The functional currency is the currency of the primary economic environment in which the reporting entity operates. Transactions in other currencies than the functional currency are transactions in foreign currencies.
Transactions in other currencies than the functional currency are initially translated into Danish kroner 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 expenses in the income statement. Property, plant and equipment and intangible assets, inventories and other non-monetary assets purchased 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 recognised 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 Consolidated 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.
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 2015, the following judgments have been made materially affecting the related items as described in relevant notes, see list below.
Management's estimates are based on assumptions which Management considers reasonable but which are inherently uncertain and unpredictable. In connection with the financial reporting for 2015, the following critical estimates have been made as desribed in the notes, see list below.
Accounting policies, judgements as an element in significant accounting policies as well as critical accounting estimates are described in the notes:
| Note | ||
|---|---|---|
| Derivative financial instruments | 2 | |
| Segment reporting | 3 | |
| Net revenue | 4 | |
| Share-based payments | 5 | |
| Expenses | 6 | |
| Financial income and expenses | 8 | |
| Corporation tax | 9 | |
| Intangible assets | 11 | |
| Property, plant and equipment | 12 | |
| Investments in associates | 13 | |
| Other fixed asset investments | 14 | |
| Inventories | 15 | |
| Receivables | 16 | |
| Prepayments | 17 | |
| Equity | 18 | |
| Deferred tax | 19 | |
| Repurchase obligation packaging in circulation | 20 | |
| Debt | 21 | |
| Cash Flow Statement | 22 | |
| Business combinations | 25 |
Comments to the note =
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.
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 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 0.5% 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. The risk is therefore monitored and hedged continually. The Group's cash flows are primarily in EUR, USD and GBP. The key currency risks are related to GBP and USD.
The total gross currency risk (before hedging) on the balance sheet items was calculated at 31 December 2015. The following table shows the sensitivity to a positive change in the cross rates at 31 December 2015 with all other variables remaining unchanged. A negative change has a corresponding effect merely with the sign reversed.
| DKK '000 | Change | Earnings impact before tax 2015 |
Earnings impact before tax 2014 |
Equity impact 2015 |
Equity impact 2014 |
|---|---|---|---|---|---|
| EUR | 0.1% | -347 | -676 | 2,936 | 2,586 |
| USD | 10% | 1,301 | 2,008 | 2,191 | 2,763 |
| GBP | 10% | -157 | 5 | 1,995 | 2,015 |
Royal Unibrews translation risk relates primarily to Finland, Latvia as well as Lithuania (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.
Royal Unibrew's interest rate risk is substantially related 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 liabilities. 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 payment flows and Royal Unibrew focuses only secondarily 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 2015, mortgage debt amounted to DKK 1,015 million (2014: DKK 1,157 million) with an average term to maturity of 13 years (2014: 13 years). Bank debt comprises committed bank credit facilities with an agreed term to maturity of up to 24 months (2014: 37 months). A one percentage point interest rate change will affect the Group's interest expenses by approx +/- DKK 6 million (2014: approx. +/- DKK 9 million), and the interest expenses of the Parent Company by approx +/- DKK 3 million (2014: approx +/- DKK 4 million).
The Group's credit risks relate primarily to trade receivables and counterparty 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 customers 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. There are no material credit risks on individual customers. In Finland, risks of individual large trade receivables are reduced by sale of the receivables. Credit risks relating to trade receivables are reduced by setting off accrued bonus. At 31 December 2015, accrued bonus amounts
to DKK 168 million (2014: DKK 152 million) set off against trade receivables.
The maximum credit risk corresponds to the carrying amount of the financial assets.
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.
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. At the end of 2015, it is assessed that the Group's net interest-bearing debt should not exceed 2.5 times EBITDA and that the equity ratio at year end should be 30%.
At the operational level, continuous efforts are directed at optimising working capital investments. Subject to adequate capacity, investments 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.
The commodity risk relates primarily to the purchasing of cans (aluminium), 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 fixedprice agreements with the relevant suppliers. As regards 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 12 months has, in accordance with Royal Unibrew's policy, been hedged by entering into supplier agreements and financial contracts. A +/-10% change in the price of aluminium would have a P/L effect at group level of approx +/- DKK 3 million.
Market risks have in 2015 affected Royal Unibrew's results materially, which may also be the case in future years. Currently, the economic development in many of the Group's markets and the resulting consumer reluctance have affected volume sales of the Group's products, and thus also earnings, negatively. Furthermore, competition has intensified resulting in limited possibilities of realising sales price increases.
Royal Unibrew has significant revenue in the Danish, Finnish and Italian markets. Finland is the single key market. In 2015 these markets accounted for 72% (2014: 73%) of consolidated revenue. Changes to the competitive situation in these markets could therefore influence Royal Unibrew's results materially. Changes to consumption patterns in the Group's markets, eg changed views on alcohol consumption and consumption of soft drinks, may also affect Royal Unibrew's development and results materially.
As a producer of alcoholic products, Royal Unibrew is sensitive to changes in the public alcohol policy – including indirect tax policies in the Group's respective markets. For example, a change of the Danish and Finnish indirect tax policy as compared to those of neighbouring countries could lead to a change of cross-border trading patterns. This applies primarily to Germany and Estonia.
Legislative changes with respect to permitted types of containers and returning of containers could also result in significant changes to consumption patterns. In Germany large parts of the Group's products are sold in cans, whereas sales in Italy are primarily related to products in non-returnable glass bottles.
The Group's Insurance Guidelines determine the framework of covering risks in general insurance areas (buildings, movables and trading losses) The risks are covered through insurance. The total risks are assessed by the Board of Directors on an annual basis and external specialists review the breweries for relevant risks on a regular basis.
Derivative financial instruments entered into to hedge expected future transactions and qualifying as hedge accounting under IAS 39:
| 2015 | 2014 | |
|---|---|---|
| Period | Deferred gain (+) / loss (-) |
Deferred gain (+) / loss (-) |
| Forward contracts: | ||
| GBP 0 - 1 year |
-475 | |
| Total | 0 | -475 |
| Commodity hedge: | ||
| 0 - 1 year | -18,041 | -3,898 |
| > 1 year | -1,060 | 0 |
| Total | -19,101 | -3,898 |
| Interest rate swaps: | ||
| Mortgage and bank loans 2016-2017 |
-8,738 | -28,304 |
| Total | -8,738 | -28,304 |
| Total hedging instruments | -27,839 | -32,677 |
The derivative financial instruments applied in 2015 and 2014 may all be classified as level-2 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.
| (DKK '000) | 31/12 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Contractual cash flows |
Maturity < 1 year |
Maturity > 1 year < 5 years |
Maturity > 5 years |
Carrying amount |
|||
| Non-derivative financial instruments: | |||||||
| Financial debt, gross | 1,517,137 | 55,137 | 637,048 | 824,952 | 1,517,137 | ||
| Interest expenses | 91,894 | 17,493 | 36,514 | 37,887 | |||
| Trade payables | 913,762 | 913,762 | 913,762 | ||||
| Other payables | 999,383 | 985,219 | 14,164 | 999,383 | |||
| Total | 3,522,176 | 1,971,611 | 687,726 | 862,839 | 3,430,282 |
The debt breaks down on the categories "debt at amortised cost" with DKK 3,421 million and "debt at fair value" with DKK 9 million. The fair value of the total debt is assessed to equal carrying amount.
| 31/12 2014 | |||||
|---|---|---|---|---|---|
| (DKK '000) | Contractual cash flows |
Maturity < 1 year |
Maturity > 1 year < 5 years |
Maturity > 5 years |
Carrying amount |
| Non-derivative financial instruments: | |||||
| Financial debt, gross | 2,044,044 | 173,010 | 993,102 | 877,932 | 2,044,044 |
| Interest expenses | 214,354 | 41,439 | 70,228 | 102,687 | |
| Trade payables | 810,529 | 810,529 | 810,529 | ||
| Other payables | 916,640 | 891,927 | 24,713 | 916,640 | |
| Total | 3,985,567 | 1,916,905 | 1,088,043 | 980,619 | 3,771,213 |
The debt breaks down on the categories "debt at amortised cost" with DKK 3,738 million and "debt at fair value" with DKK 33 million. The fair value of the total debt is assessed to equal carrying amount.
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.
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 ineffectiveness identified is recognised in the income statement.
The Group's results, assets and liabilities break down as follows on segments:
| Western | Malt Beverages |
||||
|---|---|---|---|---|---|
| mDKK | Europe | Baltic Sea | and Exports | Unallocated | Total |
| 2015 | |||||
| Net revenue | 2,727.9 | 2,852.5 | 451.7 | 6,032.1 | |
| Earnings before interest and tax (EBIT) | 493.3 | 355.4 | 101.8 | -33.6 | 916.9 |
| Net financials | -0.5 | -10.2 | -0.3 | -34.7 | -45.7 |
| Share of income from associates | 31.1 | 31.1 | |||
| Profit/loss before tax | 523.9 | 345.2 | 101.5 | -68.3 | 902.3 |
| Tax | -190.9 | -190.9 | |||
| Profit/loss for the year | 523.9 | 345.2 | 101.5 | -259.2 | 711.4 |
| Assets * | 1,285.1 | 5,090.6 | 38.9 | 197.5 | 6,612.1 |
| Associates | 135.4 | 135.4 | |||
| Total assets | 1,420.5 | 5,090.6 | 38.9 | 197.5 | 6,747.5 |
| Purchase of property, plant and equipment | 101.2 | 98.2 | 199.4 | ||
| Liabilities** | 804.9 | 1,825.9 | 6.3 | 1,175.6 | 3,812.7 |
| Sales (million hectolitres) | 3.6 | 4.8 | 0.7 | 9.1 |
* I ikke fordelte aktiver indgår projektudviklingsejendomme.
** I ikke fordelte forpligtelser indgår moderselskabets rentebærende gæld.
| Malt | |||||
|---|---|---|---|---|---|
| Western | Beverages | ||||
| mDKK | Europe | Baltic Sea | and Exports | Unallocated | Total |
| 2014 | |||||
| Net revenue | 2,674.6 | 2,974.8 | 406.5 | 6,055.9 | |
| Earnings before interest and tax (EBIT) | 483.7 | 295.3 | 83.9 | -36.7 | 826.2 |
| Net financials | -0.7 | -15.4 | -0.2 | -44.1 | -60.4 |
| Share of income from associates | 34.8 | 34.8 | |||
| Profit/loss before tax | 517.8 | 279.9 | 83.7 | -80.8 | 800.6 |
| Tax | -176.4 | -176.4 | |||
| Profit/loss for the year | 517.8 | 279.9 | 83.7 | -257.2 | 624.2 |
| Assets * | 1,552.6 | 5,064.3 | 32.3 | 238.4 | 6,887.6 |
| Associates | 136.2 | 136.2 | |||
| Total assets | 1,688.8 | 5,064.3 | 32.3 | 238.4 | 7,023.8 |
| Purchase of property, plant and equipment | 133.6 | 72.3 | 0.4 | 206.3 | |
| Purchase of property, plant and equipment on acquisition | |||||
| Purchase of intangible assets on acquisitiion | 0.0 | ||||
| Liabilities** | 883.9 | 1,816.7 | 4.7 | 1,500.2 | 4,205.5 |
| Sales (million hectolitres) | 3.7 | 4.7 | 0.6 | 9.0 t |
* Unallocated assets include project development properties.
** Unallocated liabilities include the Parent Company's interest-bearing debt.
Geographically, revenue and non-current assets break down as follows:
| 2015 | 2014 | ||||
|---|---|---|---|---|---|
| mDKK | Net revenue | Non-current assets |
Net revenue | Non-current assets |
|
| Denmark | 1,541.5 | 1,005.8 | 1,492.8 | 1,101.8 | |
| Finland | 2,211.7 | 3,638.6 | 2,320.5 | 3,829.0 | |
| Other countries | 2,278.9 | 663.6 | 2,242.6 | 494.8 | |
| Unallocated | 197.5 | 238.4 | |||
| Total | 6,032.1 | 5,505.5 | 6,055.9 | 5,664.0 |
The geographic breakdown is based on the geographic location of the Group's external customers and comprises countries that individually account for more than 10% 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 10% of the Group's net revenue.
The Group's activities break down as follows on segments:
| Malt | |||||
|---|---|---|---|---|---|
| mDKK | Western Europe |
Baltic Sea | Beverages and Exports |
Unallocated | Total |
| 2015 | |||||
| Net revenue | 2,727.9 | 2,852.5 | 451.7 | 6,032.1 | |
| Operating profit/loss | 493.3 | 355.4 | 101.8 | -33.6 | 916.9 |
| Assets | 1,420.5 | 5,090.6 | 38.9 | 197.5 | 6,747.5 |
| Liabilities | 804.9 | 1,825.9 | 6.3 | 1,175.6 | 3,812.7 |
| Sales (million hectolitres) | 3.6 | 4.8 | 0.7 | 9.1 | |
| 2014 | |||||
| Net revenue | 2,674.6 | 2,974.8 | 406.5 | 6,055.9 | |
| Operating profit/loss | 483.7 | 295.3 | 83.9 | -36.7 | 826.2 |
| Assets | 1,688.8 | 5,064.3 | 32.3 | 238.4 | 7,023.8 |
| Liabilities | 883.9 | 1,816.7 | 4.7 | 1,500.2 | 4,205.5 |
| Sales (million hectolitres) | 3.7 | 4.7 | 0.6 | 9.0 | |
| 2013 | |||||
| Net revenue | 2,650.3 | 1,450.2 | 380.5 | 4,481.0 | |
| Operating profit/loss | 424.0 | 101.6 | 81.3 | -46.8 | 560.1 |
| Assets | 1,605.0 | 4,986.2 | 42.8 | 290.5 | 6,924.5 |
| Liabilities | 898.0 | 1,371.4 | 6.2 | 2,515.9 | 4,791.5 |
| Sales (million hectolitres) | 3.6 | 2.8 | 0.6 | 7.0 | |
| 2012 | |||||
| Net revenue | 2,429.9 | 585.1 | 415.0 | 3,430.0 | |
| Operating profit/loss | 408.2 | 27.3 | 83.9 | -34.4 | 485.0 |
| Assets | 1,974.9 | 559.4 | 37.5 | 276.3 | 2,848.1 |
| Liabilities | 791.4 | 106.1 | 8.7 | 594.3 | 1,500.5 |
| Sales (million hectolitres) | 3.3 | 1.6 | 0.5 | 5.4 | |
| 2011 | |||||
| Net revenue | 2,410.1 | 629.1 | 391.4 | 3,430.6 | |
| Operating profit/loss | 405.0 | 45.1 | 53.3 | -29.2 | 474.2 |
| Assets | 1,688.1 | 701.0 | 89.7 | 411.5 | 2,890.3 |
| Liabilities | 790.2 | 133.9 | 33.3 | 611.7 | 1,569.1 |
| Sales (million hectolitres) | 3.3 | 2.0 | 0.4 | 5.7 | |
The Group's business segment is beer and soft drinks sales. Reporting on the business segment is by geographical markets. 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.
Non-current 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.
| tDKK | 2015 | 2014 |
|---|---|---|
| Beverage sales | 6,032,115 | 6,055,898 |
Net revenue from the sale of goods is recognised in the income statement if delivery has been made by the balance sheet date, and if revenues can be measured reliably and are expected to be received.
Net revenue is measured exclusive of VAT and net of discounts as well as excise duties on beer and mineral water. All types of discounts granted are recognised in net revenue.
Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows:
| tDKK | 2015 | 2014 |
|---|---|---|
| Fixed salaries to Executive Board | 13,450 | 12,850 |
| Short-term bonus scheme for Executive Board | 6,460 | 6,038 |
| Long-term bonus scheme for Executive Board | 2,108 | 2,108 |
| Share-based payments to Executive Board (restricted shares) | 9,900 | 9,900 |
| Remuneration of Executive Board | 31,918 | 30,896 |
| Remuneration of Board of Directors | 3,977 | 3,229 |
| 35,895 | 34,125 | |
| Wages and salaries | 712,736 | 760,610 |
| Contributions to pension schemes | 56,664 | 56,331 |
| 769,400 | 816,941 | |
| Other social security expenses | 6,926 | 7,839 |
| Other staff expenses | 26,125 | 25,186 |
| Total | 838,346 | 884,091 |
| Average number of employees | 2,314 | 2,374 |
The share-based payments to the Executive Board comprise a maximum of 300,000 restricted (conditional) shares allotted for no consideration vesting in the period 1 September 2013 to 31 December 2016.
The receipt of shares is conditional on continued employment in the period up until the Board of Directors' adoption of the Annual Report for 2016, and on the employee not having handed in notice. The number of shares depends on the extent to which the EBIT and free cash flow targets for the financial years 2013-2016 defined by the Board of Directors are achieved.
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. Subsequently, the estimate of the number of restricted shares is revised so that the total recognition is based on the actual number of shares allotted.
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 at the beginning of the vesting period has been calculated under the Black-Scholes model at DKK 110 per share of DKK 2, the Royal Unibrew A/S market price at the time of allotment, corresponding to DKK 33 million for the maximum number of shares. The market value is charged to the income statement on a straight-line basis over the vesting period, corresponding to the rate at which the conditions for the allotment of the shares are expected to be met. The conditions are expected to be fully (100%) met at 31 December 2015 (2014: 100%).
| tDKK | 2015 | 2014 |
|---|---|---|
| Aggregated production costs | 2,857,459 | 2,906,089 |
| Sales and distribution expenses | 1,922,282 | 1,987,350 |
| Administrative expenses | 335,418 | 336,241 |
| Total | 5,115,159 | 5,229,680 |
| break down by type as follows: | ||
| Raw materials and consumables | 2,273,633 | 2,304,645 |
| Wages, salaries and other staff expenses | 838,346 | 884,091 |
| Operating and maintenance expenses | 277,165 | 288,580 |
| Distribution expenses and carriage | 472,510 | 502,313 |
| Sales and marketing expenses | 751,855 | 749,535 |
| Bad trade debts | 3,511 | 11,399 |
| Office supplies etc | 189,817 | 185,393 |
| Depreciation and profit from sale of property, plant and equipment | 308,322 | 303,724 |
| Total | 5,115,159 | 5,229,680 |
Total depreciation and impairment losses as well as profit from sale of property, plant and equipment are included in the following items in the income statement:
| tDKK | 2015 | 2014 |
|---|---|---|
| Production costs | 186,618 | 195,182 |
| Sales and distribution expenses | 87,487 | 84,712 |
| Administrative expenses | 34,217 | 23,830 |
| Total | 308,322 | 303,724 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Fee for the audit of the Annual Report: | ||
| Ernst & Young | 1,900 | 2,060 |
| Total | 1,900 | 2,060 |
| Ernst & Young fee for non-audit services: | ||
| Tax assistance | 3 | 146 |
| Other assurance assistance | 0 | 50 |
| Other assistance | 559 | 576 |
| Total | 562 | 772 |
Production costs comprise direct and indirect expenses incurred to manufacture the finished goods representing 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 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 comprise expenses for management and administration of the Group, including expenses for administrative personnel, management, office supplies, insurance, depreciation and amortisation.
When entering into leases, Management makes a judgement based on the following factors in order to identify whether the leases should be classified as finance or operating leases.
At this time, Royal Unibrew has both finance and operating leases.
| tDKK | 2015 | 2014 |
|---|---|---|
| Finance income | ||
| Cash at bank and in hand | 62 | |
| Trade receivables | 1,452 | 1,507 |
| Other financial income | 4,833 | 1,482 |
| Exchange adjustments | ||
| Cash at bank and in hand and external loans | 805 | |
| Trade payables | 461 | |
| Trade receivables | 2,295 | 3,296 |
| Intercompany loans | 561 | |
| Forward contracts | 179 | |
| Total | 8,759 | 8,174 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Finance costs | ||
| Mortgage debt | 32,321 | 33,849 |
| Credit institutions | 18,510 | 33,033 |
| Exchange adjustments | ||
| Cash at bank and in hand and external loans | 3,441 | |
| Forward contracts | 170 | 1,585 |
| Other financial expenses | 28 | 129 |
| Total | 54,470 | 68,596 |
Financial income and financial expenses comprise interest, costs of factoring, 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.
| tDKK | 2015 | 2014 |
|---|---|---|
| Tax on the taxable income for the year | 197,559 | 208,968 |
| Adjustment of previous year | -13,505 | 2,580 |
| Adjustment of deferred tax | 1,803 | -20,031 |
| Total | 185,857 | 191,517 |
| which breaks down as follows: | ||
| Tax on profit for the year | 190,879 | 176,439 |
| Tax on other comprehensive income | 2,180 | 17,878 |
| Tax on changes in equity, shareholders | -7,202 | -2,800 |
| Total | 185,857 | 191,517 |
| Current Danish tax rate | 23.5 | 24.5 |
| Adjustment of previous year | -0.4 | 0.3 |
| Income from associates after tax | -0.8 | -1.0 |
| Effect on tax rate of permanent differences | 0.3 | 0.1 |
| Changes to tax rates | -0.6 | |
| Differences in effective tax rates of foreign subsidiaries | -1.5 | -1.3 |
| Effective tax rate | 21.1 | 22.0 |
Tax for the year consists of current tax for the year and movements in deferred tax for the year. The tax attributable to the profit for the year is recognised in the income statement, 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 allocated to the jointly taxed Danish enterprises in proportion to their taxable incomes (full allocation with credit for tax losses).
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.
| tDKK | 2015 | 2014 |
|---|---|---|
| Realised hedging transactions are included in the income statement as follows: | ||
| Net revenue includes currency hedges of | -13,821 | -4,697 |
| Production costs include foreign currency and commodity hedges of | -6,495 | 764 |
| Financial income and expenses include currency, commodity and interest rate hedges of | -20,810 | -15,941 |
| Total | -41,126 | -19,874 |
| tDKK | Goodwill | Trademarks | Distribution rights |
Customer relations |
Total |
|---|---|---|---|---|---|
| Cost at 1 January 2015 | 1,451,828 | 1,236,779 | 234,498 | 67,595 | 2,990,700 |
| Exchange adjustment | 3,948 | 3,422 | 565 | 172 | 8,107 |
| Cost at 31 December 2015 | 1,455,776 | 1,240,201 | 235,063 | 67,767 | 2,998,807 |
| Amortisation and impairment losses at 1 January 2015 | 0 | -3,438 | -27,730 | -18,285 | -49,453 |
| Exchange adjustment | -298 | -46 | -54 | -398 | |
| Amortisation for the year | -2,990 | -12,257 | -13,547 | -28,794 | |
| Amortisation and impairment losses at 31 December 2015 | 0 | -6,726 | -40,033 | -31,886 | -78,645 |
| Carrying amount at 31 December 2015 | 1,455,776 | 1,233,475 | 195,030 | 35,881 | 2,920,162 |
| Cost at 1 January 2014 | 1,430,378 | 1,239,438 | 229,776 | 67,747 | 2,967,339 |
| Exchange adjustment | -2,550 | -2,659 | -501 | -152 | -5,862 |
| Additions | 24,000 | 24,000 | |||
| Additions on acquisition, see note 25 | 5,223 | 5,223 | |||
| Cost at 31 December 2014 | 1,451,828 | 1,236,779 | 234,498 | 67,595 | 2,990,700 |
| Amortisation and impairment losses at 1 January 2014 | 0 | -3,336 | -15,184 | -4,777 | -23,297 |
| Amortisation for the year | -102 | 139 | 33 | 70 | |
| Disposals | -12,685 | -13,541 | -26,226 | ||
| Amortisation and impairment losses at 31 December 2014 | 0 | -3,438 | -27,730 | -18,285 | -49,453 |
| Carrying amount at 31 December 2014 | 1,451,828 | 1,233,341 | 206,768 | 49,310 | 2,941,247 |
Goodwill and trademarks with indefinite useful lives relating to Hartwall (Finland) and to Cido and Kalnapilis (the Baltic countries) each represents more than 10% of the total value of goodwill and trademarks.
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 are initially recognised in the balance sheet at cost. Subsequently, they are measured at cost less accumulated amortisation and less any accumulated impairment losses. Trademarks, 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 customers 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 20 years. Customer relations are amortised on a straigt-line basis over their estimated useful lives, maximum 5 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.
As in 2014, the impairment test in 2015 did not give rise to recognising any impairment losses.
The carrying amount of goodwill and trademarks with indefinite useful lives at 31 December is related to the cash-generating operational units and breaks down as follows:
| tDKK | Goodwill | Trademarks | Total | Share |
|---|---|---|---|---|
| 2015 | ||||
| Western Europe | 80,645 | 80,645 | 3% | |
| Baltic Sea* | 1,366,892 | 1,233,475 | 2,600,367 | 97% |
| Malt Beverages and Exports | 8,239 | 8,239 | 0% | |
| Total | 1,455,776 | 1,233,475 | 2,689,251 | 100% |
* the most significant value relates to Finlandd
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 2016-2018 approved by Management as well as estimated market driven discount rates and growth rates.
Only limited revenue growth is expected in the medium term as several of Royal Unibrew's markets are generally seeing minor structural declines in the total beverage market. The Baltic Sea segment is expected to see continuously declining consumption in Finland and stable consumption in the Baltic countries. Through increased focus on exploiting commercial opportunities and innovation, Royal Unibrew expects to be able to maintain its revenue at the current level in Finland and to realise limited revenue growth in the Baltic countries. Gross margins are assumed to remain stable at the current level through continued focus on continuous efficiency enhancement. The key assumptions underlying the calculation of recoverable amount are as indicated below.
| Western Europe |
Baltic Sea | Malt Beverages and Exports |
|
|---|---|---|---|
| Growth rate 2019-2022 | 1% | 0-4% | 0% |
| Growth rate on terminal value | 1% | 1% | 2% |
| Discount rate (WACC) | 7.3% | 7.2-8.4% | 18.9% |
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. In Baltic Sea, the lowest point of the range indicated for the 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.
| tDKK | Goodwill | Trademarks | Total | Share |
|---|---|---|---|---|
| 2014 | ||||
| Western Europe | 80,645 | 2,990 | 83,635 | 3% |
| North Eastern Europe (from 2014: Baltic Sea) | 1,363,431 | 1,230,351 | 2,593,782 | 97% |
| Malt Beverages and Exports | 7,752 | 7,752 | 0% | |
| Total | 1,451,828 | 1,233,341 | 2,685,169 | 100% |
The key assumptions underlying the calculation of recoverable amount in 2014 were:
| Western Europe |
Baltic Sea | Malt Beverages and Exports |
|
|---|---|---|---|
| Growth rate 2018-2021 | 1% | 0-4% | 0% |
| Growth rate on terminal value | 1% | 1% | 2% |
| Discount rate (WACC) | 7.9% | 7.9-9.9% | 18.9% |
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. In Baltic Sea, the lowest point of the range indicated for the 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.
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.
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 trademarks 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.
| Project development properties |
Land and buildings |
Plant and machinery |
and fittings, tools and equipment |
Property, plant and equipment in progress |
Total other property, plant and equipment |
|---|---|---|---|---|---|
| 4,550,659 | |||||
| 4,341 | |||||
| 7,373 | 4,749 | 60,721 | 68,104 | 58,414 | 191,988 |
| -35,410 | -181 | -3,940 | -56,735 | -60,856 | |
| 2,125 | 29,701 | 8,528 | -40,354 | 0 | |
| 66,498 | 1,728,388 | 2,171,074 | 723,010 | 63,660 | 4,686,132 |
| 143,904 41,008 Reversal of depreciation and impairment -53,904 131,008 |
-504,059 1,445 -67,005 142 -569,477 |
-1,251,895 1,367 -119,927 2,648 -1,367,807 |
-463,395 1,080 -94,642 48,827 -508,130 |
0 0 |
-2,219,349 3,892 -281,574 0 51,617 -2,445,414 |
| 2,240,718 | |||||
| 65,140 -16,405 |
65,140 -16,405 48,735 |
||||
| 94,535 197,506 |
1,720,136 1,559 1,158,911 |
2,082,567 2,025 803,267 48,735 |
Other fixtures 702,398 715 214,880 |
45,558 42 63,660 |
Land and buildings at a carrying amount of DKK 991 million have been provided as security for mortgage debt of DKK 1,021 million. Leased assets at a carrying amount of DKK 48.7 million have been provided as security for lease commitments totalling DKK 53.3 million.
| 4,404,459 | |||||
|---|---|---|---|---|---|
| -2,320 | -1,904 | -416 | -25 | -4,665 | |
| 203,405 | |||||
| -52,540 | |||||
| 0 | |||||
| 94,535 | 1,720,136 | 2,082,567 | 702,398 | 45,558 | 4,550,659 |
| 144,836 | -440,141 | -1,138,516 | -407,400 | 0 | -1,986,057 |
| 387 | 1,054 | 500 | 1,941 | ||
| -278,493 | |||||
| 70,000 | 0 | ||||
| -70,932 | 791 | 7,961 | 34,508 | 43,260 | |
| 143,904 | -504,059 | -1,251,895 | -463,395 | 0 | -2,219,349 |
| 238,439 | 1,216,077 | 830,672 | 239,003 | 45,558 | 2,331,310 |
| 65,140 | |||||
| -9,566 | -9,566 | ||||
| 55,574 | 55,574 | ||||
| 145,703 2,905 -54,073 Reversal of depreciation and impairment |
1,701,646 21,088 -2,780 2,502 -65,096 |
2,018,783 59,993 -8,930 14,625 -122,394 65,140 |
645,866 78,456 -40,830 19,322 -91,003 |
38,164 43,868 -36,449 |
Land and buildings at a carrying amount of DKK 1,017 million have been provided as security for mortgage debt of DKK 1,161 million. Leased assets at a carrying amount of DKK 55.6 million have been provided as security for lease commitments totalling DKK 60.1 million.
In 2011 the Company entered into a cooperation agreement based on an option model under which the purchaser may acquire the brewery site piece by piece in the period to the end of 2016. It remains Management's assessment as stated in connection with the presentation of the Financial Statements for the period 1 January - 31 December 2014 that the potential cash flow under the said cooperation agreement provides the best basis for estimating the fair value of the brewery site. Additionally 18,900 square metres of building rights were sold in 2015, and the purchaser has notified Royal Unibrew that he wishes to exercise his option to acquire the remaining 35,625 square metres of the total 140,000 square metres of building rights in 2016. 28,425 square metres of building rights were sold in January 2016, whereas the remaining 7,200 square metres of building rights are expected sold in Q4 2016 at carrying amount. In 2008, 2013, 2014 and 2015, the carrying amount was revalued by DKK 240 million, DKK 90 million, DKK 70 million and DKK 39 million, respectively. The revaluation less deferred tax is recognised in revaluation reserves in equity. The carrying amount of the remaining 35,625 square metres of building rights amounts to DKK 198 million at 31 December 2015 corresponding to the fair value of the net sales proceeds. The change in fair value from 30 June 2015 to 31 December 2015 of DKK 2 million has been recognised in financial income in the income statement.
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 are recognised in the income statement as an adjustment to depreciation in production costs, sales or distribution expenses or administrative expenses, respectively.
The expected useful lives of the assets remain unchanged from 2014 and are as follows:
| 25-40 years |
|---|
| max. 10 years |
| 5-15 years |
| 3-8 years |
| 3-10 years |
Management updates its estimate of the useful lives of property, plant and equipment annually.
For accounting purposes, lease obligations are classified as either finance or operating lease obligations. A lease is classified as a finance lease if it substantially transfers the risks and rewards of ownership of the leased asset. All other leases are classified as operating leases.
Payments made under operating leases are recognised in the income statement on a straight-line basis over the lease term.
Project development properties are measured at revalued amount based on Management's updated estimate.
If the carrying amount is increased because it differs materially from fair value, the increase is recognised directly in equity in revaluation reserves. The increase is, however, recognised in the income statement if it offsets an impairment previously recognised in the income statement as a result of revaluation of the same property.
If the carrying amount is impaired as a result of revaluation, the impairment is recognised in the income statement. The impairment is, however, recognised directly in equity in revaluation reserves if a reserve has been made for the property in question under revaluation reserves.
With a view to ensuring adequate disclosure of the value of the brewery site in Aarhus, Management has chosen to apply the exemption provision of IAS 16 which allows separate recognition of an item of property, plant and equipment as well as revaluation of the asset to fair value.
In connection with estimating whether project development properties should be revalued, Management has also in 2015 based its estimate of the fair value on a calculation of the present value of the cash flows expected to be generated under the agreements entered into.
The key elements of the calculation of the fair value of the brewery site are estimated selling prices and milestone dates under the cooperation agreement, estimated costs up until the date of sale (property taxes, project and selling costs) and the discount rate. The fair value measurement is classified in level 3 of the fair value hierarchy. At 31 December 2015, Management estimates the fair value per square metre of building rights at nominally approx DKK 5,500 (2014: DKK 5,000) based on average sales proceeds (selling price less costs), an average vacancy period of below 1 year (2014: 1-2 years) and a discount rate of 2% (2014: 6.5%) for the 35,625 square metres of building rights comprised by the unsold part of the site according to the existing local plan.
As the acquisition dates and selling price have been agreed in connection with the purchaser's notification of his wish to exercise his purchase option, the timing is not assessed to be subject to uncertainty; therefore, the currently estimated fair value is not expected to differ materially, as a result of this, from carrying amount at 31 December 2015.
| Note 13 Investments in associates |
|
|---|---|
| tDKK | Investments in associates |
| Cost at 1 January 2015 | 43,066 |
| Reclassification, beginning of year | 32,682 |
| Cost at 31 December 2015 | 75,748 |
| Value adjustments at 1 January 2015 | 93,183 |
| Reclassification, beginning of year | -32,682 |
| Exchange adjustment | -5,178 |
| Dividend, net | -26,660 |
| Share of profit for the year | 31,061 |
| Other comprehensive income | -101 |
| Value adjustments at 31 December 2015 | 59,623 |
| Carrying amount at 31 December 2015 | 135,371 |
| Cost at 1 January 2014 | 44,688 |
| Exchange adjustment | -1,622 |
| Cost at 31 December 2014 | 43,066 |
| Value adjustments at 1 January 2014 | 87,835 |
| Exchange adjustment | -5,648 |
| Dividend, net | -24,345 |
| Share of profit for the year | 34,808 |
| Other comprehensive income | 533 |
| Value adjustments at 31 December 2014 | 93,183 |
| Carrying amount at 31 December 2014 | 136,249 |
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 5% 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:
| tDKK | 2015 | 2014 |
|---|---|---|
| Profit from continuing operations for the year | 31,061 | 34,808 |
| Other comprehensive income | -101 | 533 |
| Comprehensive income | 30,960 | 35,341 |
| Total carrying amount at 31 December of the Group's total investments in associates, share of equity |
135,371 | 136,249 |
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 unrealised intercompany profits and losses and with addition of the carrying amount of goodwill.
Associates with a negative net asset value are measured at DKK 0. 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 unrealised intercompany gains and losses.
| t.DKK | Other investments |
Other receivables |
Total other fixed asset investments |
|---|---|---|---|
| Cost at 1 January 2015 | 66,704 | 2,682 | 69,386 |
| Exchange adjustment | 1,004 | 18 | 1,022 |
| Additions | 1,762 | 1,762 | |
| Disposals | -8,729 | -77 | -8,806 |
| Cost at 31 December 2015 | 58,979 | 4,385 | 63,364 |
| Value adjustments at 1 January 2015 | -52,255 | -363 | -52,618 |
| Exchange adjustment | -973 | -1 | -974 |
| Disposals | 1,715 | 1,715 | |
| Revaluations and impairment losses for the year | 238 | 238 | |
| Value adjustments at 31 December 2015 | -51,275 | -364 | -51,639 |
| Carrying amount at 31 December 2015 | 7,704 | 4,021 | 11,725 |
| Cost at 1 January 2014 | 68,503 | 8,718 | 77,221 |
| Exchange adjustment | -1,799 | 94 | -1,705 |
| Disposals | -6,130 | -6,130 | |
| Cost at 31 December 2014 | 66,704 | 2,682 | 69,386 |
| Value adjustments at 1 January 2014 | -52,772 | -364 | -53,136 |
| Exchange adjustment | 1,770 | 1 | 1,771 |
| Revaluations and impairment losses for the year | -1,253 | -1,253 | |
| Value adjustments at 31 December 2014 | -52,255 | -363 | -52,618 |
| Carrying amount at 31 December 2014 | 14,449 | 2,319 | 16,768 |
Other investments not included in the Group's trading portfolio (available for sale) are recognised in non-current assets at fair value at the trading date and are subsequently measured at fair value equal to the market price as regards listed securities and at estimated fair value calculated on the basis of market data and recognised valuation methods as regards unlisted securities. Unrealised value adjustments are recognised in other comprehensive 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-3 instruments.
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.
In connection with the presentation of the Financial Statements for 2011, Management estimated the fair value of its investments in the Polish brewery company Perla Browary Lubelskie at DKK 0 due to governance issues. Since 2011, Management has maintained its fair value estimate of DKK 0 as these issues have not subsequently been resolved. The fair value measurement of the investments in Perla Browary Lubelskie is classified in level 3 of the fair value hierarchy.
| t.DKK | 2015 | 2014 |
|---|---|---|
| Raw materials and consumables | 121,048 | 109,120 |
| Work in progress | 26,830 | 21,880 |
| Finished goods and goods for resale | 168,830 | 181,041 |
| Inventories | 316,708 | 312,041 |
Indirect production costs are recognised in the value of work in progress and finished goods at DKK 21 million (2014: DKK 21 million). As in 2014, inventories have not been written down materially.
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 addition 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.
| tDKK | 2015 | 2014 |
|---|---|---|
| Trade receivables | 516,953 | 473,569 |
| Other receivables | 53,485 | 62,751 |
| Receivables | 570,438 | 536,320 |
The total receivables belong to the category "assets measured at amortised cost".
Trade receivables fall due as follows:
| tDKK | 2015 | 2014 | ||
|---|---|---|---|---|
| Not due | 424,746 | 410,077 | ||
| Due: | ||||
| From 1-15 days | 86,998 | 65,036 | ||
| From 16-90 days | 12,981 | 7,636 | ||
| More than 90 days | 19,221 | 119,200 | 21,473 | 94,145 |
| Provisions for bad debts, not due | -6,202 | -9,080 | ||
| Provisions for bad debts, 1-15 days | -535 | -543 | ||
| Provisions for bad debts, 16-90 days | -1,599 | -2,098 | ||
| Provisions for bad debts, more than 90 days | -18,657 | -26,993 | -18,932 | -30,653 |
| Total | 516,953 | 473,569 | ||
| Provisions for bad debts, beginning of year | -30,653 | -30,334 | ||
| Bad debts realised during the year | 3,669 | 9,773 | ||
| Provision for the year | -9 | -10,092 | ||
| Total | -26,993 | -30,653 |
Current receivables, other than trade receivables, all fall due for payment in 2016.
Receivables are initially measured at cost and are subsequently measured at amortised cost or an estimated lower value at the balance sheet date. This lower value is calculated where there is an objective indication that an individual receivable or a portfolio of receivables has been impaired.
Receivables with no objective indication of impairment on an individual basis are assessed for objective indication of impairment on a portfolio basis. The portfolios are primarily based on the debtors' registered offices and credit rating in accordance with the Group's policy for credit risk management. The objective indicators used in connection with portfolios are determined based on Management's assessment and knowledge of the individual portfolios.
If there is an objective indication of impairment of a portfolio, an impairment test is made in connection with which the expected future cash flows are estimated based on the historical loss record adjusted for current market conditions and individual factors relating to the portfolio in question.
Write-downs are calculated as the difference between the carrying amount of the receivable and the present value of the expected cash flows, including the realisable value of any collateral received.
Receivables are written down on the basis of an individual assessment of the loss risk relating to the receivables or groups of receivables, including their maturity profiles and the current credit standing of the debtors.
| tDKK | 2015 | 2014 |
|---|---|---|
| Prepayments | 21,714 | 20,011 |
Prepayments
Prepayments recognised in assets comprise expenses incurred in respect of subsequent financial years.
Treasury shares held by the Parent Company:
| tDKK | Number | Nom. value | % of capital |
|---|---|---|---|
| Portfolio at 1 January 2015 | 300,000 | 600 | 0.5 |
| Acqusition for share buy-back programme | 1,192,118 | 2,384 | 2.1 |
| Portfolio at 31 December 2015 | 1,492,118 | 2,984 | 2.7 |
| Portfolio at 1 January 2014 | 300,000 | 600 | 0.5 |
| Portfolio at 31 December 2014 | 300,000 | 600 | 0.5 |
The Group holds no other treasury shares.
300,000 of the treasury shares has been acquired for a bonus scheme, while the residual number of shares relates to the share buy-back programme.
| 2015 | 2014 | |
|---|---|---|
| The Parent Company shareholders' share of profit for the year amounts to (DKK '000) | 711,427 | 624,165 |
| Cash flow from operating activities | 1,159,777 | 895,441 |
| The average number of treasury shares amounted to (number, DKK 2 each) | 777,421 | 300,000 |
| The average number of shares in circulation amounted to (number) | 54,715,079 | 55,192,500 |
| The average number of shares in circulation incl restricted shares amounted to (number) | 55,015,079 | 55,492,500 |
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 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 comprises amounts in excess of the nominal share capital paid up by shareholders in connection with capital increases.
Revaluation reserves 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 realised.
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 part realisation of the net investment in the foreign enterprises, exchange adjustments are recognised in the income statement.
The translation reserve was reset at 1 January 2004 in accordance with IFRS 1.
The hedging reserve comprises changes to fair values of derivative financial instruments that are designated and qualify as cash flow hedges.
On realisation, the hedging instrument is recognised in the income statement in the same item as the hedged transaction.
| tDKK | 2015 | 2014 |
|---|---|---|
| Deferred tax at 1 January | 431,774 | 457,571 |
| Additions on acquisition | -6,000 | |
| Change in deferred tax for the year | -1,093 | -9,469 |
| Change sale of project development property | -56,020 | -24,500 |
| Exchange adjustment | 710 | -1,201 |
| Changes to tax rates | -5,000 | |
| Adjustment of previous year | -2.161 | 1,435 |
| Deferred tax at 31 December | 375,396 | 431,774 |
| Expected realisation within 1 year | 33,957 | 14,239 |
| Deferred tax relates to: | ||
| Intangible assets | 264,274 | 267,952 |
| Property, plant and equipment | 157,767 | 185,583 |
| Current assets | 20,002 | -161 |
| Non current liabilities | -15,922 | -5,800 |
| Current liabilities | -50,725 | -15,800 |
| Total | 375,396 | 431,774 |
The utilisation of unutilised tax losses in one of the Group's foreign enterprises is not certain.
Therefore, the tax asset corresponding to approx DKK 2.4 million (2014: approx DKK 2.5 million) has not been capitalised.
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 realised, 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.
Deferred tax assets, including the value of tax losses that may be carried forward for set-off against positive taxable incomes in future years, are recognised if, in Management's judgement, the possibility hereof exists. The judgement is made annually.
| tDKK | 2015 | 2014 |
|---|---|---|
| VAT, excise duties, etc | 457,645 | 339,481 |
| Other payables | 397,824 | 399,848 |
| Repurchase obligation, returnable packaging | 129,750 | 132,942 |
| Total other current payables | 985,219 | 872,271 |
| Repurchase obligation, returnable packaging is specified as follows: | ||
| Balance at 1 January | 132,942 | 103,938 |
| Additions on acquisition | 30,000 | |
| Adjustment for the year | -3,192 | -996 |
| Balance at 31 December | 129,750 | 132,942 |
The change in the repurchase obligation for the year reflects net sales of returnable packaging for the year less estimated wastage of returnable packaging in circulation.
Plastic crates, bottles and kegs in circulation and held in inventory are recognised in property, plant and equipment, and the obligation to repurchase returnable packaging in circulation for which a deposit has been paid is recognised in provisions.
The repurchase obligation relating to packaging in circulation is calculated on the basis of the estimated total packaging volume less packaging held in inventory.
| tDKK | 2015 | 2014 |
|---|---|---|
| Mortgage debt | 1,014,528 | 1,177,287 |
| Credit institutions | 502,609 | 866,757 |
| Other debts | 1,920,189 | 1,729,669 |
| Debts | 3,437,326 | 3,773,713 |
Mortgage loans and loans from credit institutions are recognised initially at the proceeds received net of transaction expenses incurred. 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.
In connection with the acquisition of Hartwall in 2013, defined benefit liabilities were acquired relating to a pension scheme which has not been offered to new employees for a number of years. At 31 December 2015, the net liability amounted to approx DKK 8.5 million (2014: approx DKK 16 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 19.
Adjustments for non-cash operating items:
| tDKK | 2015 | 2014 |
|---|---|---|
| Dividends received from associates | ||
| Financial income | -8,759 | -8,174 |
| Financial expenses | 54,470 | 68,596 |
| Amortisation, depreciation and impairment of intangible assets and property, plant and equipment |
310,368 | 304,719 |
| Tax on the profit for the year | 190,879 | 176,439 |
| Income from investments in associates | -31,061 | -34,808 |
| Profit and loss from sale of property, plant and equipment | -2,047 | -995 |
| Share-based payments and remuneration | 9,900 | 9,900 |
| Total | 523,750 | 515,677 |
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 3 months that can readily be turned into cash and are only subject to an insignificant risk of value changes.
| mDKK | 2015 | 2014 |
|---|---|---|
| Rental and operating lease commitments | ||
| Total future payments: | ||
| Within 1 year | 47.0 | 48.4 |
| Between 1 and 5 years | 91.0 | 89.3 |
| Beyond 5 years | 8.5 | 7.7 |
| Total | 146.5 | 145.4 |
| Rental and operating lease commitments relate to properties and operating equipment, including cars and IT equipment. |
||
| Third-party guarantees | 12.1 | 11.0 |
| Finance lease commitments Total future payments: |
||
| Within 1 year | 8.1 | 7.9 |
| Between 1 and 5 years | 45.3 | 53.5 |
| Total | 53.4 | 61.4 |
The finance lease commitments relate to finance leases of plant and machinery.
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 12.
The outcome of pending legal actions is not expected to have any material impact on the financial position of the Group.
Related parties comprise the Board of Directors and the Executive Board as well as subsidiaries and associates, see the sections on Board of Directors and Executive Board on page 44 and Group Structure on page 118. No shareholder exercises control.
All transactions, including lending, are carried out on an arm's length basis.
The following transactions have been made with related parties:
| tDKK | 2015 | 2014 |
|---|---|---|
| Revenue | ||
| Sales to associates | 5,133 | 5,199 |
| Financial income and expenses | ||
| Dividends received from associates | 26,660 | 24,346 |
| Executive Board | ||
| Remuneration paid | 19,775 | 18,508 |
| Debt re cash-based bonus schemes | 19,108 | 16,578 |
| Liability re share-based bonus scheme measured at fair value at the time when granted |
23,100 | 13,200 |
| Board of Directors | ||
| Remuneration | 3,977 | 3,229 |
Transactions with subsidiaries are eliminated in the Consolidated Financial Statements in accordance with the accounting policies applied.
| Page |
|---|
| 109 |
| 109 |
| 110 |
| 110 |
| 111 |
| 112 |
| Descriptive notes | ||||
|---|---|---|---|---|
| 1 | Basis of preparation | 113-114 |
|---|---|---|
| 2 | Financial risk management | 115 |
| 3 | Staff expenses | 116 |
|---|---|---|
| 4 | Expenses broken down by type | 117 |
| 5 | Financial income | 118 |
| 6 | Financial expenses | 118 |
| 7 | Tax on the profit for the year | 119 |
| 8 | Realised hedging transactions | 120 |
| 9 | Intangible assets | 121 |
| 10 | Property, plant and equipment | 122 |
| 11 | Investments in subsidiaries and associates | 123 |
| 12 | Receivables from subsidiaries and | |
| other fixed asset investments | 124 | |
| 13 | Inventories | 125 |
| 14 | Receivables | 125 |
| 15 | Share capital | 125 |
| 16 | Deferred tax | 126 |
| 17 | Other current payables | 126 |
| 18 | Cash Flow Statement | 127 |
| 19 | Contingent liabilities and security | 128 |
|---|---|---|
| 20 Related parties | 129 |
| tDKK | Note | 2015 | 2014 |
|---|---|---|---|
| Net revenue | 3,043,822 | 2,945,891 | |
| Production costs | 3,4 | -1,414,996 | -1,412,923 |
| Gross profit | 1,628,826 | 1,532,968 | |
| Sales and distribution expenses | 3,4 | -883,579 | -854,777 |
| Administrative expenses | 3,4 | -196,049 | -162,024 |
| EBIT | 549,198 | 516,167 | |
| Dividends received from subsidiaries and associates | 296,929 | 271,588 | |
| Financial income | 5 | 10,837 | 13,653 |
| Financial expenses | 6 | -45,025 | -58,563 |
| Profit before tax | 811,939 | 742,845 | |
| Tax on the profit for the year | 7 | -121,049 | -113,201 |
| Net profit for the year | 690,890 | 629,644 | |
| Earnings per share (DKK) | 13.0 | 11.3 | |
| Diluted earnings per share (DKK) | 12.9 | 11.2 |
| tDKK | Note | 2015 | 2014 |
|---|---|---|---|
| Net profit for the year | 690,890 | 629,644 | |
| Other comprehensive income | |||
| Items that may be reclassified to the income statement | |||
| Value adjustment of hedging instruments, beginning of year | 29,990 | 42,678 | |
| Value adjustment of hedging instruments, end of year | -18,270 | -29,990 | |
| Tax on other comprehensive income | 7 | -4,546 | -2,664 |
| Total | 7,174 | 10,024 | |
| Items that may not be reclassified to the income statement | |||
| Revaluation of non-current assets | 39,000 | 70,000 | |
| Tax on revaluation of non-current assets | 7 | 2,461 | -16,100 |
| Total | 41,461 | 53,900 | |
| Other comprehensive income after tax | 48,635 | 63,924 | |
| Total comprehensive income | 739,525 | 693,568 |
| ASSETS AT 31 DECEMBER NON-CURRENT ASSETS Intangible assets 9 80,697 83,744 Project development properties 10 197,506 238,439 Other property, plant and equipment 10 841,121 849,801 Investments in associates 11 77,374 77,374 Investments in subsidiaries 11 3,484,365 3,484,159 Receivables from subsidiaries 12 164,125 163,709 Other fixed asset investments 12 6,574 4,642 Non-current assets 4,851,762 4,901,868 CURRENT ASSETS Inventories 13 123,049 115,029 Receivables 14 253,740 221,026 Receivables from subsidiaries 85,928 102,320 Corporation tax 1,069 25 Prepayments 19,185 18,238 Cash at bank and in hand 8,865 53,628 Current assets 491,836 510,266 Assets 5,343,598 5,412,134 LIABILITIES AND EQUITY AT 31 DECEMBER EQUITY Share capital 15 110,985 110,985 Other reserves 939,769 952,465 Retained earnings 1,603,943 1,523,322 Proposed dividend 399,546 377,349 Equity 3,054,243 2,964,121 LIABILITIES NON-CURRENT LIABILITIES Deferred tax 16 95,991 151,852 Mortgage debt 2 720,979 733,672 Credit institutions 2 416,412 806,076 Other payables 14,164 24,713 Non-current liabilities 1,247,546 1,716,313 CURRENT LIABILITIES Mortgage debt 2 14,203 14,106 Credit institutions 2 32,877 5 Trade payables 325,754 341,032 Payables to subsidiaries 363,312 111,466 Other current payables 17 305,663 265,091 Current liabilities 1,041,809 731,700 Liabilities 2,289,355 2,448,013 Liabilities and equity 5,343,598 5,412,134 |
tDKK | Note | 2015 | 2014 |
|---|---|---|---|---|
| tDKK | Note | 2015 | 2014 |
|---|---|---|---|
| Net profit for the year | 690,890 | 629,644 | |
| Adjustments for non-cash operating items | 18 | -25,531 | -18,405 |
| 665,359 | 611,239 | ||
| Change in working capital: | |||
| Receivables | -37,802 | 10,956 | |
| Inventories | -8,020 | -103 | |
| Payables | 132,152 | -34,800 | |
| Cash flows from operating activities before financial income and expenses | 751,689 | 587,292 | |
| Financial income | 8,590 | 16,611 | |
| Financial expenses | -45,707 | -60,192 | |
| Cash flows from operating activities | 714,572 | 543,711 | |
| Corporation tax paid | -116,818 | -109,701 | |
| Cash flows from operating activities | 597,754 | 434,010 | |
| Dividends received from subsidiaries and associates | 296,929 | 271,588 | |
| Sale of property, plant and equipment | 88,642 | 132,070 | |
| Corporation tax paid on project property | -56,020 | -24,500 | |
| Purchase of property, plant and equipment | -101,235 | -133,554 | |
| Free cash flow | 826,070 | 679,614 | |
| Increase of capital/Business acquisitions | -206 | -7,502 | |
| Acquisition/sale of intangible assets and fixed asset investments | -1,693 | 6,052 | |
| Cash flows from investing activities | 226,417 | 244,154 | |
| Debt financing: | |||
| Proceeds from increased drawdown on credit facilities | 200,000 | ||
| Repayment on credit facilities | -567,332 | -961,643 | |
| Change in financing of subsidiaries | 164,903 | 229,835 | |
| Shareholders: | |||
| Dividends paid to shareholders | -373,957 | ||
| Acquisition of shares for treasury | -292,548 | ||
| Cash flows from financing activities | -868,934 | -731,808 | |
| Change in cash and cash equivalents | -44,763 | -53,644 | |
| Cash and cash equivalents at 1 January | 53,628 | 107,272 | |
| Cash and cash equivalents at 31 December | 8,865 | 53,628 |
| Share capital |
Share premium account |
Reva- luation reserves |
Hedging reserve |
Total other reserves |
Retained earnings |
Proposed dividend for the year |
Total |
|---|---|---|---|---|---|---|---|
| 110,985 | 855,839 | 126,616 | -29,990 | 952,465 | 1,523,322 | 377,349 | 2,964,121 |
| 690,890 | 690,890 | ||||||
| 39,000 | 11,720 | 50,720 | -4,546 | 46,174 | |||
| 2,461 | 2,461 | 2,461 | |||||
| -65,877 | -65,877 | 65,877 | 0 | ||||
| 0 | 0 | -24,416 | 11,720 | -12,696 | 752,221 | 0 | 739,525 |
| -373,957 | -373,957 | ||||||
| 3,392 | -3,392 | 0 | |||||
| -292,548 | -292,548 | ||||||
| 9,900 | 9,900 | ||||||
| 7,202 | 7,202 | ||||||
| -399,546 | 399,546 | 0 | |||||
| 0 | 0 | 0 | 0 | 0 | -671,600 | 22,197 | -649,403 |
| 0 | 0 | -24,416 | 11,720 | -12,696 | 80,621 | 22,197 | 90,122 |
| 110,985 | 855,839 | 102,200 | -18,270 | 939,769 | 1,603,943 | 399,546 | 3,054,243 |
Share premium account, hedging reserve and retained earnings may be applied for distribution of dividend to the Parent Company shareholders.
The share capital at 31 December 2015 amounts to DKK 110,985,000 and is distributed on shares of DKK 2 each.
Proposed dividend for the year is DKK 7.40 per share.
| 629,644 |
|---|
| 63,924 |
| 0 |
| 693,568 |
| 9,900 |
| 2,800 |
| 0 |
| 12,700 |
| 706,268 |
| 2,964,121 |
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.
Dividend on investments in subsidiaries and associates is recognised in the Parent Company income statement in the financial year in which dividend is declared.
New and amended standards and interpretations that have taken effect Reference is made to note 1 to the Consolidated Financial Statements.
In connection with the preparation of the Parent Company and Consolidated 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.
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 2015, the following judgments have been made materially affecting the related items as described in relevant notes, see list below.
Management's estimates are based on assumptions which Management considers reasonable but which are inherently uncertain and unpredictable. In connection with the financial reporting for 2015, the following critical estimates have been made as desribed in relevant notes, see list below.
Accounting policies, judgements as an element in significant accounting policies as well as critical accounting estimates are described in the notes:
| Consolidated FS note |
Parent company FS note |
||
|---|---|---|---|
| Derivative financial instruments | 2 | ||
| Segment reporting | 3 | ||
| Net revenue | 4 | ||
| Share-based payments | 5 | ||
| Expenses | 6 | ||
| Financial income and expenses | 8 | ||
| Corporation tax | 9 | ||
| Intangible assets | 11 | ||
| Property, plant and equipment | 12 | ||
| Investments in associates | 13 | 11 | |
| Investments in subsidiaries | 11 | ||
| Other fixed asset investments | 14 | ||
| Inventories | 15 | ||
| Receivables | 16 | ||
| Prepayments | 17 | ||
| Equity | 18 | ||
| Deferred tax | 19 | ||
| Repurchase obligation packaging in circulation | 20 | ||
| Debt | 21 | ||
| Cash Flow Statement | 22 |
Comments to the note =
| 31/12 2015 | ||||||
|---|---|---|---|---|---|---|
| tDKK | Contractual cash flows |
Maturity < 1 year |
Maturity > 1 year < 5 years |
Maturity > 5 years |
Carrying amount |
|
| Non-derivative financial instruments: | ||||||
| Financial debt, debt financing, gross | 1,184,471 | 47,080 | 591,786 | 545,605 | 1,184,471 | |
| Financial debt, subsidiaries | 348,822 | 348,822 | 348,822 | |||
| Interest expenses | 73,364 | 15,342 | 28,911 | 29,111 | ||
| Trade payables and repayment obligation re packaging | 340,243 | 340,243 | 340,243 | |||
| Other payables | 319,827 | 305,663 | 14,164 | 319,827 | ||
| Total | 2,266,727 | 1,057,150 | 634,861 | 574,716 | 2,193,363 |
The debt breaks down on the categories "debt at amortised cost" with DKK 2,184 million and "debt at fair value" with DKK 9 million. The fair value of the total debt is assessed to equal carrying amount.
| 31/12 2014 | ||||||
|---|---|---|---|---|---|---|
| tDKK | Contractual cash flows |
Maturity < 1 year |
Maturity > 1 year < 5 years |
Maturity > 5 years |
Carrying amount |
|
| Non-derivative financial instruments: | ||||||
| Financial debt, debt financing, gross | 1,553,859 | 14,111 | 940,070 | 599,678 | 1,553,859 | |
| Financial debt, subsidiaries | 105,605 | 105,605 | 105,605 | |||
| Interest expenses | 167,431 | 36,541 | 53,619 | 77,271 | ||
| Trade payables and repayment obligation re packaging | 346,893 | 346,893 | 346,893 | |||
| Other payables | 289,804 | 265,091 | 24,713 | 289,804 | ||
| Total | 2,463,592 | 768,241 | 1,018,402 | 676,949 | 2,296,161 |
The debt breaks down on the categories "debt at amortised cost" with DKK 2,266 million and "debt at fair value" with DKK 30 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 2 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:
| tDKK | 2015 | 2014 |
|---|---|---|
| Fixed salaries to Executive Board | 13,450 | 12,850 |
| Ordinary bonus scheme for Executive Board | 6,460 | 6,038 |
| Long-term bonus scheme for Executive Board | 2,108 | 2,108 |
| Share-based payments to Executive Board (restricted shares) | 9,900 | 9,900 |
| Remuneration of Executive Board | 31,918 | 30,896 |
| Remuneration of Board of Directors | 3,977 | 3,229 |
| 35,895 | 34,125 | |
| Wages and salaries | 403,803 | 387,944 |
| Contributions to pension schemes | 31,563 | 30,999 |
| 435,366 | 418,943 | |
| Other social security expenses | 5,542 | 6,418 |
| Other staff expenses | 19,352 | 18,631 |
| Total | 496,155 | 478,117 |
| Average number of employees | 872 | 867 |
Reference is made to note 5 to the Consolidated Financial Statements for a description of share-based payments to the Executive Board.
| tDKK | 2015 | 2014 |
|---|---|---|
| Aggregated production costs | 1.414.996 | 1.412.923 |
| Sales and distribution expenses | 883.579 | 854.777 |
| Administrative expenses | 196.049 | 162.024 |
| Total | 2.494.624 | 2.429.724 |
| break down by type as follows: | ||
| Raw materials and consumables | 1.101.146 | 1.115.049 |
| Wages, salaries and other staff expenses | 496.155 | 478.117 |
| Operating and maintenance expenses | 141.343 | 136.880 |
| Distribution expenses and carriage | 114.796 | 105.600 |
| Sales and marketing expenses | 442.265 | 426.629 |
| Bad trade debts | -1.183 | 3.709 |
| Office supplies etc | 93.842 | 78.568 |
| Depreciation and profit from sale of property, plant and equipment | 106.260 | 85.172 |
| Total | 2.494.624 | 2.429.724 |
Total depreciation and impairment losses as well as profit from sale of property, plant and equipment are included in the following items in the income statement:
| tDKK | 2015 | 2014 |
|---|---|---|
| Production costs | 65,202 | 56,528 |
| Sales and distribution expenses | 23,177 | 18,632 |
| Administrative expenses | 17,881 | 10,012 |
| Total | 106,260 | 85,172 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Fee for the audit of the Annual Report: | ||
| Ernst & Young | 700 | 800 |
| Total | 700 | 800 |
| Ernst & Young fee for non-audit services: | ||
| Tax assistance | 3 | 47 |
| Other assurance assistance | 50 | |
| Other assistance | 171 | 216 |
| Total | 174 | 313 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Finance income | ||
| Cash at bank and in hand | 1 | 20 |
| Trade receivables | 40 | 5 |
| Receivables from subsidiaries | 5,298 | 6,724 |
| Other financial income | 2,997 | 13 |
| Exchange adjustments | ||
| Cash at bank and in hand and external loans | 2,422 | |
| Trade payables | 611 | |
| Trade receivables | 2,295 | 3,297 |
| Intercompany loans | 561 | |
| Forward contracts | 206 | |
| Total | 10,837 | 13,653 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Finance costs | ||
| Mortgage debt | 29,404 | 27,977 |
| Credit institutions | 11,281 | 27,030 |
| Payables to subsidiaries | 143 | 124 |
| Exchange adjustments | ||
| Cash at bank and in hand and external loans | 1,967 | |
| Trade payables | 442 | |
| Intercompany loans | 592 | |
| Forward contracts | 481 | 1,656 |
| Other financial expenses | 715 | 1,776 |
| Total | 45,025 | 58,563 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Tax on the taxable income for the year | 127,117 | 142,400 |
| Adjustment of previous year | -13,505 | 2,420 |
| Adjustment of deferred tax | 2,320 | -15,655 |
| Total | 115,932 | 129,165 |
| which breaks down as follows: | ||
| Tax on profit for the year | 121,049 | 113,201 |
| Tax on other comprehensive income | 2,085 | 18,764 |
| Tax on changes in equity, shareholders | -7,202 | -2,800 |
| Total | 115,932 | 129,165 |
| Current Danish tax rate | 23.5 | 24.5 |
| Dividends received from subsidiaries and associates | -8.6 | -9.0 |
| Effect on tax rate of permanent differences | 0.3 | 0.1 |
| Adjustment of previous year | -0.3 | 0.3 |
| Changes to tax rates | -0.7 | |
| Effective tax rate | 14.9 | 15.2 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Realised hedging transactions are included in the income statement as follows: | ||
| Net revenue includes currency hedges of | -13,821 | -4,697 |
| Production costs include foreign currency and commodity hedges of | -7,185 | 1,147 |
| Financial income and expenses include currency, commodity and interest rate hedges of | -21,093 | -17,356 |
| Total | -42,099 | -20,906 |
| Distribution | ||||
|---|---|---|---|---|
| tDKK | Goodwill | Trademarks | rights | Total |
| Cost at 1 January 2015 | 80,645 | 2,990 | 11,828 | 95,463 |
| Cost at 31 December 2015 | 80,645 | 2,990 | 11,828 | 95,463 |
| Amortisation and impairment losses at 1 January 2015 | 0 | 0 | -11,719 | -11,719 |
| Amortisation for the year | -2,990 | -57 | -3,047 | |
| Amortisation and impairment losses at 31 December 2015 | 0 | -2,990 | -11,776 | -14,766 |
| Carrying amount at 31 December 2015 | 80,645 | 0 | 52 | 80,697 |
| Cost at 1 January 2014 | 80,645 | 2,990 | 11,828 | 95,463 |
| Cost at 31 December 2014 | 80,645 | 2,990 | 11,828 | 95,463 |
| Amortisation and impairment losses at 1 January 2014 | 0 | 0 | -11,339 | -11,339 |
| Amortisation for the year | -380 | -380 | ||
| Amortisation and impairment losses at 31 December 2014 | 0 | 0 | -11,719 | -11,719 |
| Carrying amount at 31 December 2014 | 80,645 | 2,990 | 109 | 83,744 |
Reference is made to note 11 to the Consolidated Financial Statements for a description of impairment test.
| tDKK | Project development properties |
Land and buildings |
Plant and machinery |
Other fixtures and fittings, tools and equipment |
Property, plant and equipment in progress |
Total other property, plant and equipment |
|---|---|---|---|---|---|---|
| Cost at 1 January 2015 | 94,535 | 683,204 | 1,194,311 | 457,021 | 28,752 | 2,363,288 |
| Additions | 7,373 | 3,694 | 12,488 | 23,961 | 53,719 | 93,862 |
| Disposals | -35,410 | -181 | -3,748 | -34,131 | -38,060 | |
| Transfers for the year | 21,096 | 6,872 | -27,968 | 0 | ||
| Cost at 31 December 2015 | 66,498 | 686,717 | 1,224,147 | 453,723 | 54,503 | 2,419,090 |
| Depreciation and impairment losses at 1 January 2015 Revaluations for the year Depreciation for the year |
143,904 41,008 |
-351,429 -15,076 |
-839,390 -38,808 |
-322,668 -44,772 |
0 | -1,513,487 0 -98,656 |
| Reversal of depreciation and impairment of assets sold and discontinued |
-53,904 | 142 | 2,456 | 31,576 | 34,174 | |
| Depreciation and impairment losses at 31 December 2015 |
131,008 | -366,363 | -875,742 | -335,864 | 0 | -1,577,969 |
| Carrying amount at 31 December 2015 | 197,506 | 320,354 | 348,405 | 117,859 | 54,503 | 841,121 |
Land and buildings including plant and machinery at a carrying amount of DKK 663.8 million have been provided as security for mortgage debt of DKK 741.9 million.
| tDKK | Project development properties |
Land and buildings |
Plant and machinery |
Other fixtures and fittings, tools and equipment |
Property, plant and equipment in progress |
Total other property, plant and equipment |
|---|---|---|---|---|---|---|
| Cost at 1 January 2014 | 145,703 | 663,736 | 1,149,738 | 435,661 | 26,485 | 2,275,620 |
| Additions | 2,905 | 20,344 | 41,432 | 40,121 | 28,752 | 130,649 |
| Disposals | -54,073 | -923 | -7,603 | -34,455 | -42,981 | |
| Transfers for the year | 47 | 10,744 | 15,694 | -26,485 | 0 | |
| Cost at 31 December 2014 | 94,535 | 683,204 | 1,194,311 | 457,021 | 28,752 | 2,363,288 |
| Depreciation and impairment losses at 1 January 2014 |
144,836 | -337,204 | -811,394 | -316,013 | -1,464,611 | |
| Revaluations for the year | 70,000 | 0 | ||||
| Depreciation for the year | -14,520 | -35,006 | -36,476 | -86,002 | ||
| Reversal of depreciation and impairment of assets sold and discontinued |
-70,932 | 295 | 7,010 | 29,821 | 37,126 | |
| Depreciation and impairment losses at 31 December 2014 |
143,904 | -351,429 | -839,390 | -322,668 | 0 | -1,513,487 |
| Carrying amount at 31 December 2014 | 238,439 | 331,775 | 354,921 | 134,353 | 28,752 | 849,801 |
Land and buildings including plant and machinery at a carrying amount of DKK 678.7 million have been provided as security for mortgage debt of DKK 747.8 million.
Reference is made to note 12 to the Consolidated Financial Statements for a description of project development properties.
| tDKK | Investments in subsidiaries |
Investments in associates |
|---|---|---|
| Cost at 1 January 2015 | 3,573,194 | 77,374 |
| Additions | 206 | |
| Cost at 31 December 2015 | 3,573,400 | 77,374 |
| Revaluations and impairment losses at 1 January 2015 Revaluations and impairment losses at 31 December 2015 |
-89,035 -89,035 |
0 0 |
| Carrying amount at 31 December 2015 | 3,484,365 | 77,374 |
| Cost at 1 January 2014 | 3,565,692 | 75,931 |
| Reclassification, beginning of year | 1,443 | |
| Additions | 7,502 | |
| Cost at 31 December 2014 | 3,573,194 | 77,374 |
| Revaluations and impairment losses at 1 January 2014 | -89,035 | 0 |
| Revaluations and impairment losses at 31 December 2014 | -89,035 | 0 |
| Carrying amount at 31 December 2014 | 3,484,159 | 77,374 |
Dividend on investments in subsidiaries and associates is recognised in the Parent Company's income statement in the financial year in which dividend is declared.
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 recoverable amount.
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 11 to the Consolidated Financial Statements.
| tDKK | Receivables from subsidiaries |
Other investments |
Other receivables |
Total other fixed asset investments |
|---|---|---|---|---|
| Cost at 1 January 2015 | 163,709 | 54,833 | 2,121 | 56,954 |
| Exchange adjustment | 416 | 0 | ||
| Additions | 1,762 | 1,762 | ||
| Disposals | -69 | -69 | ||
| Cost at 31 December 2015 | 164,125 | 54,833 | 3,814 | 58,647 |
| Revaluations and impairment losses at 1 January 2015 | 0 | -52,312 | 0 | -52,312 |
| Revaluations and impairment losses for the year | 239 | 239 | ||
| Revaluations and impairment losses at 31 December 2015 | 0 | -52,073 | 0 | -52,073 |
| Carrying amount at 31 December 2015 | 164,125 | 2,760 | 3,814 | 6,574 |
| Cost at 1 January 2014 | 155,428 | 54,833 | 8,173 | 63,006 |
| Exchange adjustment | -367 | 0 | ||
| Additions | 8,648 | 78 | 78 | |
| Disposals | -6,130 | -6,130 | ||
| Cost at 31 December 2014 | 163,709 | 54,833 | 2,121 | 56,954 |
| Revaluations and impairment losses at 1 January 2014 | 0 | -52,312 | 0 | -52,312 |
| Revaluations and impairment losses at 31 December 2014 | 0 | -52,312 | 0 | -52,312 |
| Carrying amount at 31 December 2014 | 163,709 | 2,521 | 2,121 | 4,642 |
| tDKK | 2015 | 2014 |
|---|---|---|
| Raw materials and consumables | 50,025 | 42,291 |
| Work in progress | 14,611 | 12,872 |
| Finished goods and goods for resale | 58,413 | 59,866 |
| Inventories | 123,049 | 115,029 |
Indirect production costs are recognised in the value of work in progress and finished goods at DKK 9 million (2014: DKK 8 million). As in 2014, inventories have not been written down materially.
| tDKK | 2015 | 2014 |
|---|---|---|
| Trade receivables | 243,484 | 213,615 |
| Other receivables | 10,256 | 7,411 |
| Total receivables | 253,740 | 221,026 |
Reference is made to notes 2 and 16 to the Consolidated Financial Statements for a description of receivables.
Reference is made to note 18 to the Consolidated Financial Statements.
| tDKK | 2015 | 2014 |
|---|---|---|
| Deferred tax at 1 January | 151,852 | 166,072 |
| Change in deferred tax for the year | 2,320 | 13,845 |
| Change sale of project development property | -56,020 | -24,500 |
| Changes to tax rates | -5,000 | |
| Adjustment of previous year | -2,161 | 1,435 |
| Deferred tax at 31 December | 95,991 | 151,852 |
| Due within 1 year | 25,136 | 30,111 |
| Deferred tax relates to: | ||
| Intangible assets | 43 | 44 |
| Property, plant and equipment | 90,700 | 135,701 |
| Fixed asset investments | 15,052 | 18,996 |
| Current assets | 9,688 | 4,749 |
| Non-current liabilities | -12,940 | -2,800 |
| Current liabilities | -6,552 | -4,838 |
| Total | 95,991 | 151,852 |
| tDKK | 2015 | 2014 |
|---|---|---|
| VAT, excise duties, etc | 50,601 | 40,855 |
| Other payables | 225,375 | 197,153 |
| Repurchase obligation, returnable packaging | 29,687 | 27,083 |
| Total other current payables | 305,663 | 265,091 |
| Repurchase obligation, returnable packaging is specified as follows: | ||
| Balance at 1 January | 27,083 | 31,998 |
| Adjustment for the year | 2,604 | -4,915 |
| Balance at 31 December | 29,687 | 27,083 |
The change in the repurchase obligation for the year reflects net sales of returnable packaging for the year less estimated wastage of returnable packaging in circulation.
Adjustments for non-cash operating items:
| tDKK | 2015 | 2014 |
|---|---|---|
| Dividends received from subsidiaries and associates | -296,929 | -271,588 |
| Financial income | -10,837 | -13,653 |
| Financial expenses | 45,025 | 58,563 |
| Amortisation, depreciation and impairment of intangible assets and property, plant and equipment |
101,703 | 86,382 |
| Tax on the profit for the year | 121,049 | 113,201 |
| Profit and loss from sale of property, plant and equipment | 4,558 | -1,210 |
| Share-based payments and remuneration | 9,900 | 9,900 |
| Total | -25,531 | -18,405 |
| mDKK | 2015 | 2014 |
|---|---|---|
| Guarantees | ||
| Guarantees relating to subsidiaries | 528.6 | 703.6 |
| Total | 528.6 | 703.6 |
Total future payments:
| mDKK | 2015 | 2014 |
|---|---|---|
| Within 1 year | 24.8 | 25.2 |
| Between 1 and 5 years | 48.2 | 35.0 |
| Beyond 5 years | 5.6 | 4.6 |
| Total | 78.6 | 64.8 |
Rental and operating lease commitments relate to properties and operating equipment, including cars and IT equipment.
| Third-party guarantees | 12.1 | 11.0 |
|---|---|---|
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 10.
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.
Related parties comprise the Board of Directors and the Executive Board as well as subsidiaries and associates, see the sections on Board of Directors and Executive Board on page 44 and Group Structure on page 118. No shareholder exercises control.
All transactions, including lending, are carried out on an arm's length basis.
The following transactions have been made with related parties:
| tDKK | 2015 | 2014 |
|---|---|---|
| Revenue | ||
| Sales to subsidiaries | 533,981 | 504,069 |
| Sales to associates | 5,133 | 5,199 |
| Costs | ||
| Purchases from subsidiaries | 16,439 | 27,542 |
| Financial income and expenses | ||
| Dividends received from associates | 26,660 | 24,346 |
| Dividends received from subsidiaries | 270,269 | 247,242 |
| Interest received from subsidiaries | 5,298 | 6,724 |
| Interest paid to subsidiaries | 143 | 124 |
| Executive Board | ||
| Remuneration paid | 19,775 | 18,508 |
| Debt re cash-based bonus schemes | 19,108 | 16,578 |
| Liability re share-based bonus scheme measured at fair value at the time when granted |
23,100 | 13,200 |
| Board of Directors | ||
| Remuneration | 3,977 | 3,229 |
| Intercompany balances at 31 December | ||
| Loans to subsidiaries | 186,651 | 205,314 |
| Receivables from subsidiaries | 63,402 | 60,715 |
| Loans from subsidiaries | 342,410 | 105,605 |
| Payables to subsidiaries | 902 | 5,861 |
| Capital contributed to subsidiaries | 206 | 7,502 |
| Guarantees and security | ||
| Guarantee for subsidiaries | 528,600 | 703,590 |
| Q1 Q2 |
Q3 | Q4 | ||||||
|---|---|---|---|---|---|---|---|---|
| mDKK (unaudited) | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 |
| Sales (million hectolitres) | 1.9 | 1.8 | 2.5 | 2.6 | 2.5 | 2.5 | 2.2 | 2.1 |
| Income Statement | ||||||||
| Net revenue | 1,290 | 1,267 | 1,633 | 1,725 | 1,686 | 1,713 | 1,423 | 1,351 |
| Production costs | -632 | -634 | -745 | -800 | -760 | -779 | -720 | -693 |
| Gross profit | 658 | 633 | 888 | 925 | 926 | 934 | 703 | 658 |
| Gross margin ratio (%) | 51.0 | 50.0 | 54.4 | 53.6 | 54.9 | 54.5 | 49.4 | 48.7 |
| Sales and distribution expenses | -451 | -493 | -510 | -530 | -496 | -506 | -465 | -458 |
| Administrative expenses | -76 | -97 | -84 | -77 | -80 | -76 | -95 | -86 |
| EBITDA | 204 | 110 | 370 | 394 | 428 | 428 | 223 | 198 |
| EBITDA margin (%) | 15.8 | 8.7 | 22.7 | 22.8 | 25.4 | 25.0 | 15.7 | 14.7 |
| Earnings before interest and tax (EBIT) | 131 | 43 | 294 | 318 | 350 | 352 | 143 | 114 |
| EBIT margin (%) | 10.2 | 3.4 | 18.0 | 18.4 | 20.8 | 20.5 | 10.1 | 8.5 |
| Income from investments in associates | 1 | -1 | 11 | 19 | 6 | 9 | 13 | 8 |
| Financial income and expenses | -13 | -22 | -11 | -14 | -13 | -8 | -9 | -16 |
| Profit before tax | 119 | 20 | 294 | 323 | 343 | 353 | 147 | 106 |
| Net profit for the period | 92 | 14 | 229 | 252 | 267 | 273 | 123 | 85 |
| Balance Sheet | ||||||||
| Non-current assets | 5,641 | 5,800 | 5,552 | 5,744 | 5,505 | 5,652 | 5,505 | 5,664 |
| Total assets | 6,768 | 6,995 | 6,910 | 7,282 | 6,728 | 7,068 | 6,748 | 7,024 |
| Equity | 2,900 | 2,157 | 2,724 | 2,440 | 2,896 | 2,717 | 2,935 | 2,818 |
| Net interest-bearing debt | 1,710 | 2,638 | 1,627 | 2,042 | 1,323 | 1,606 | 1,184 | 1,553 |
| Net working capital | -555 | -567 | -721 | -756 | -742 | -757 | -990 | -814 |
| Cash Flows | ||||||||
| From operating activities | -96 | -207 | 472 | 568 | 422 | 390 | 362 | 144 |
| From investing activities | -27 | -52 | 54 | 29 | -27 | 48 | -123 | -94 |
| Free cash flow | -122 | -254 | 521 | 594 | 394 | 432 | 239 | 53 |
| Financial Ratios (%) | ||||||||
| Free cash flow as a percentage | ||||||||
| of net revenue | -9 | -20 | 32 | 34 | 23 | 25 | 17 | 4 |
| Cash conversion | -133 | -1,814 | 228 | 236 | 148 | 158 | 194 | 61 |
| Equity ratio | 43 | 31 | 39 | 34 | 43 | 38 | 43 | 40 |
Ratios comprised by the "Recommendations and Financial Ratios 2015" issued by the Danish Society of Financial Analysts have been calculated according to the recommendations.
Definitions of financial highlights and ratios are provided on page 117.
| Net interest-bearing debt | Mortgage debt and debt to credit institutions less cash at bank and in hand, inter est-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. |
| Free cash flow | Cash flow from operating activities less net investments in property, plant and equip ment and plus dividends from associates. |
| Dividend per share | Proposed dividend per share. |
| Earnings per share | Parent Company shareholders' share of profit for the year/average number of shares in circulation. |
| Cash flow per share | Cash flow from operating activities/average number of shares in circulation. |
| Diluted earnings and cash flow per share |
Parent Company shareholders' share of earnings and cash flow from operating activities/average number of shares in circulation including restricted shares "in-the-money". |
| EBITDA before special items | Earnings before special income and expenses, interest, tax, depreciation, amortisation and impairment losses as well as profit from sale of property, plant and equipment and amortisation of intangible assets. |
| EBITDA | Earnings before interest, tax, depreciation, amortisation and impairment losses as well as profit from sale of property, plant and equipment and amortisation of intan gible assets. |
| EBIT | Earnings before interest and tax. |
| Return on invested capital after tax including goodwill (ROIC) |
EBIT net of tax as a percentage of average invested capital (equity + minority interests + provisions + net interest-bearing debt - fixed asset investments). |
| Return on invested capital after tax excluding goodwill (ROIC) |
EBIT net of tax as a percentage of average invested capital (equity + minority interests + provisions + net interest-bearing debt - fixed asset investments - goodwill). |
| Profit margin | Operating profit before special items as a percentage of net revenue. |
| EBIT margin | EBIT as a percentage of net revenue. |
| Free cash flow as a percentage of net revenue |
Free cash flow 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. |
| Segment | Ownership | Currency | Capital | |
|---|---|---|---|---|
| Parent Company | ||||
| Royal Unibrew A/S, Denmark | DKK | 110,985,000 | ||
| 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 | |
| Associates | ||||
| Grønlandskonsortiet I/S, Denmark | 50% | DKK | ||
| Hansa Borg Holding AS, Norway | 25% | NOK | 54,600,000 | |
| Nuuk Imeq A/S, Godthåb, 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 | |
| Hartwa-Trade Oy Ab | 100% | EUR | 168,188 | |
| Helepark Oy | 100% | EUR | 6,761 | |
| 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 | |
| OÜ Royal Unibrew Eesti, Estonia | 100% | EUR | 2,000,000 | |
| Ferell sp. Z o.o., Poland | 100% | PLN | 120,200 | |
| MALT BEVERAGES AND EXPORTS | ||||
| Subsidiaries | ||||
| Centre Nordique d'Alimentation EURL, France | 100% | EUR | 131,000 | |
| Royal Unibrew Caribbean Ltd., Puerto Rico | 100% | USD | 200,000 | |
| Supermalt UK Ltd., the UK | 100% | GBP | 9,700,000 | |
| Vitamalt (West Africa) Ltd., the UK | 100% | GBP | 10,000 | |
| Royal Unibrew Nigeria Ltd., Nigeria | 100% | NGN | 10,000,000 | |
| The Danish Brewery Group Inc., USA | 100% | USD | 100,000 | |
Production, sales and distribution
Sales and distribution
Holding company
Other
Faxe Alle 1 DK-4640 Faxe Tel +45 56 77 15 00 Fax +45 56 71 47 64
CVR No. 41 95 67 12 Financial year: 1 January – 31 December Registered municipality: Faxe
Homepage: www.royalunibrew.com E-mail: [email protected]
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