Annual Report • Feb 21, 2014
Annual Report
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Release no. 01 – 2014 To NASDAQ OMX Nordic Exchange Copenhagen A/S This is a translation of the Danish version. Only the Danish version is legally binding.
ROCKWOOL International A/S Hovedgaden 584, Entrance C DK-2640 Hedehusene Phone: +45 4656 0300 www.rockwool.com Danish CVR no: 54879415
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21 February 2014
The Board of ROCKWOOL International A/S has at its meeting today discussed and approved the Annual Report for the financial year that ended 31 December 2013.
Highlights
Further information: Gilles Maria
Chief Financial Officer ROCKWOOL International A/S +45 46 56 03 00
Released 21 February 2014
| The ROCKWOOL Group 2 | |
|---|---|
| Leaving the crisis behind 3 | |
| Key figures 4 | |
| Five-year summary 5 | |
| Bringing better buildings into the world 6 | |
| Sales, markets and performance 8 | |
| - Highlights 9 | |
| - Business areas - Insulation segment 10 | |
| - Business areas - Systems segment13 | |
| - Financial performance 16 | |
| Risk Management 18 | |
| CSR – acting as a good citizen 20 | |
| Our people agenda 22 | |
| The ROCKWOOL Foundation 24 | |
| Board 26 | |
| Group Management 27 | |
| Corporate Governance 28 |
| Management's report 30 | |
|---|---|
| Independent auditors' report 31 |
| Income statement and statement of | |
|---|---|
| comprehensive income 33 | |
| Balance sheet – Assets 34 | |
| Balance sheet – Equity and liabilities 35 | |
| Cash flow statement 36 | |
| Statement of changes in equity 37 | |
| Notes 38 | |
| Definition of key figures and ratios 62 | |
| Group companies 63 |
| Quarterly follow-up 64 | |
|---|---|
| -- | ------------------------ |
The ROCKWOOL Group is the world's leading supplier of innovative products and systems based on stone wool, improving the environment and the quality of life for millions of people.
The Group is one of the global leaders in the insulation industry with products and solutions for all major application areas for both residential and non-residential buildings. Together with other construction-related products, such as acoustic ceilings and cladding boards, the Group ensures energy efficient and fire safe buildings with good acoustics and a comfortable indoor climate. We also create green solutions for the horticultural industry, special fibres for industrial use, effective insulation for the process industry
and marine & offshore as well as noise and vibration systems for modern infrastructure.
Our more than 10,500 employees in more than 30 countries cater for customers in a large part of the world. The Group's head office is located close to Copenhagen. In 2013 the Group generated sales of DKK 14,903 million. The company is listed on the NASDAQ OMX Nordic Exchange Copenhagen.
The Group's operations have a large presence in Europe and we are expanding production, sales and service activities in Russia, North America and Asia. Together with a broad network of business partners, this ensures a global presence of the Group's products and systems.
Cover: From skyscrapers as here in New York to timber houses in Canada, the North American business showed strong growth in 2013 and is becoming increasingly important for the ROCKWOOL Group. Soon, our third stone wool factory on the continent will be operational, located in the state of Mississippi, US.
"We are determined to move the ROCKWOOL Group onto a broader strategic platform"
European decision makers in the building industry are starting to feel more confident, with building owners and investors becoming more optimistic about the longer term prospects. At last there are indications that the building industry in Europe is moving out of the crisis which has dominated the past few years. Our scenario is not that of a strong and quick recovery, rather a gradual improvement over the coming years which will slowly increase the market for new buildings from the recently low level we have seen in several European countries.
This is good news for the ROCKWOOL Group. Our manufacturing base in Europe is being re-engineered with new technologies which can support fresh market segmentation and positioning strategies.
As the new build construction markets recover, we can be confident that the volumes of insulation products needed will be significant. Since 2008, when the latest crisis set in, the regulations for new buildings have been substantially tightened, meaning a significant increase for insulation volume per square metre constructed.
So far, our level of sales in the refurbishment market has maintained a strong position. We expect this to continue in line with the strengthening of consumer and general market confidence.
While insulation still accounts for more than three quarters of our total business and Western Europe currently generating close to 60% of sales, we are determined to move the ROCKWOOL Group onto a broader strategic platform. To this
end, we are expanding our other stone wool and associated businesses, as well as developing our total activities globally. This is a major cornerstone of our Rock the Globe strategy.
During 2013, two significant acquisitions were made. The acquisition of the American ceiling system company Chicago Metallic and the German facade system provider HECK Wall Systems considerably increased our geographical coverage in the respective business segments. Even more importantly, these acquisitions enable us to supply the market with full system solutions which is exactly what today's construction market decision makers expect from their top class supplier.
Organic growth, however, continues to be our preferred way to increase the performance of the ROCKWOOL Group. With the commissioning of our third North American factory early summer 2014, we will be able to meet the increasingly high demand for our ROCKWOOL stone wool solutions. The recently commissioned fourth factory in Russia is already completely sold out and elsewhere in the world we are also making satisfactory headway.
After some challenging years, we could now be in for more welcome tailwinds. The organisation has been streamlined and is well prepared, so we stand stronger than ever to reap the benefits of our efforts. I sincerely look forward to all our stakeholders joining us on this journey.
Eelco van Heel CEO of the ROCKWOOL Group
Net sales (DKK million) Profit for the year (DKK million)
| Income statement items in DKK million | 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|
| Net sales | 14,903 | 14,664 | 13,748 | 11,732 | 11,168 |
| EBITDA | 2,336 | 2,253 | 1,817 | 1,791 | 1,552 |
| Depreciation, amortisation and write-downs | 1,076 | 1,112 | 913 | 998 | 976 |
| EBIT | 1,260 | 1,141 | 904 | 793 | 576 |
| Financial items | -46 | -55 | -47 | -17 | -42 |
| Profit before tax | 1,225 | 1,098 | 899 | 812 | 556 |
| Profit for the year | 863 | 774 | 623 | 537 | 350 |
| Balance sheet items in DKK million | |||||
| Non-current assets | 10,228 | 9,484 | 9,452 | 9,179 | 8,184 |
| Current assets | 3,623 | 3,505 | 3,226 | 3,057 | 3,142 |
| Total assets | 13,851 | 12,989 | 12,678 | 12,236 | 11,326 |
| Equity | 9,576 | 9,428 | 8,635 | 8,775 | 8,205 |
| Non-current liabilities | 1,000 | 1,033 | 1,368 | 1,200 | 1,196 |
| Current liabilities | 3,275 | 2,528 | 2,675 | 2,261 | 1,902 |
| Others in DKK million | |||||
| Cash flow from operating activities | 1,885 | 1,785 | 1,539 | 1,303 | 1,983 |
| Investments and acquisitions | 1,979 | 995 | 1,212 | 1,430 | 1,203 |
| Free cash flow | -94 | 790 | 327 | -127 | 780 |
| Net interest-bearing debt | 748 | 68 | 550 | 426 | -141 |
| Research and development costs | 222 | 226 | 213 | 210 | 260 |
| Number of employees | |||||
| Number of employees at year-end | 10,562 | 9,778 | 9,368 | 8,808 | 7,843 |
| Ratios | |||||
| Profit ratio | 8% | 8% | 7% | 7% | 5% |
| Earnings per share of DKK 10 | 40 | 36 | 30 | 24 | 15 |
| Dividend per share of DKK 10 | 10.4 | 10.2 | 9.6 | 9.6 | 9.6 |
| Payout ratio | 26% | 28% | 32% | 40% | 64% |
| Cash earnings per share of DKK 10 | 88 | 83 | 71 | 60 | 92 |
| Book value per share of DKK 10 | 435 | 428 | 392 | 390 | 362 |
| Return on invested capital | 13% | 12% | 10% | 9% | 7% |
| Return on equity | 9% | 9% | 7% | 6% | 4% |
| Equity ratio | 69% | 73% | 68% | 72% | 73% |
| Financial gearing | 0.08 | 0.01 | 0.06 | 0.05 | -0.02 |
| Stock market information | |||||
| Share capital (DKK million) | 220 | 220 | 220 | 220 | 220 |
| Price per A share (DKK) | 956 | 629 | 458 | 726 | 651 |
| Price per B share (DKK) | 956 | 634 | 461 | 700 | 652 |
| Number of A shares (10 votes) | 11,231,627 | 11,231,627 | 11,231,627 | 13,072,800 | 13,072,800 |
| Number of B shares (1 vote) | 10,743,296 | 10,743,296 | 10,743,296 | 8,902,123 | 8,902,123 |
For definitions of key figures and ratios see page 62. For main figures in EUR see page 57.
The statements on the future in this report, including expected sales and earnings, are associated with risks and uncertainties and may be affected by factors influencing the activities of the Group, e.g. the global economic environment, including interest and exchange rate developments, the raw material situation, production and distribution-related issues, breach of contract or unexpected termination of contract, price reductions due to market-driven price reductions, market acceptance of new products, launches of competitive products and other unforeseen factors. In no event shall ROCKWOOL International A/S be liable for any direct, indirect or consequential damages or any other damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other action, arising out of or in connection with the use of information in this report.
The future of the ROCKWOOL Group is closely linked to the need for better buildings in all corners of the globe. The mega-trend of sustainability in all its many forms - such as better energy efficiency, fewer carbon emissions, safer materials and durable constructions – sets the scene for our expansion and for a wider deployment of our leadership technologies within stone wool. It provides the growth opportunity for achieving the Group's target of an average sales increase of 8% per year, well above the average rate for our key European construction markets.
The ROCKWOOL Group is by far the world's leading stone wool supplier with a size several times that of the second biggest player. Our leadership status has grown over the years as the company has expanded into new regions. We are the only stone wool company capable of servicing Europe, North America and Asia from local plants.
Having a big global network of production units offers advantages in terms of scale and international benchmarking against other plants. The Group is convinced that the size and efficiency of its most advanced plants are significantly ahead of its closest competitors and far beyond the global average. When acquiring plants, even relatively new ones, it is our experience that - thanks to our know-how and core technologies – we can lift output and efficiency levels by double-digit figures within a relatively short time and at very reasonable cost.
The insulation of buildings is subject to the forces of the construction industry. Both the construction of new buildings and the refurbishment of existing buildings are drivers behind market growth. However, in recent years, when new construction has been at historically low levels in many countries, the importance of the refurbishment market has increased. Today the Group estimates that roughly 70% of sales in the core EU markets are for refurbishment projects, with only 30% for new construction.
In EU countries, the energy refurbishment of buildings is supported by both EU and national legislation. Combined with accompanying support programmes, the aim is to harvest the multiple benefits of lower energy consumption, reduced carbon emissions and the creation of local jobs in the construction sector. Essential for the EU Energy Efficiency Directive, launched in 2012, is the binding obligation for member states to save 1.5% energy in the end-use sector annually starting from 2014. Two other main elements are the request to establish long-term national strategies for mobilising investments for building renovation and the introduction of a renovation requirement of 3% annually for all central government buildings based on square metres. This Directive came into force on 1 January 2014. National programmes – such as the KfW-programme in Germany and the Grenelle de l'Environnement in France - have been underpinning the energy refurbishment of buildings for several years now.
New buildings are also subject to more stringent EU energy requirements but the effect on the insulation market has been dampened by the low level of new construction since the financial crisis. Once house building returns to normal levels, the more stringent building codes in the wake of the EU Energy Performance of Buildings Directive should show their full impact on volume sales. The Directive is targeted on bringing new buildings in the EU to low energy levels by 2020. In order to achieve the energy improvements, national roadmaps must be defined to move gradually towards the target - in 2013 it implied more stringent building codes in the Czech Republic and Spain.
In many ways, the EU is the frontrunner in the development of low energy buildings but countries like Russia, the US and China are also moving in the same energy efficient direction.
The ROCKWOOL Group has deliberately resolved to focus on stone wool as the core material of its products and systems. Some major insulation producers have decided to offer a wider range of basic insulation materials (glass wool, plastic foam, stone wool etc.). However we believe that the total combination of stone wool properties – in terms of thermal performance, fire safety, acoustics and durability – makes it the right choice on which to focus to deliver safe buildings with a comfortable indoor climate and strong energy performance.
On the other hand, the acquisition of products and materials complementary to stone wool is very much part of our strategy to develop more complete system solutions for buildings with stone wool as the core material. This is a clear market trend; the building industry is increasingly looking for total system solutions to optimise the construction process. Our acquisition of Chicago Metallic - the American producer of metal grids for ceilings - and the acquisition of HECK Wall Systems within facade insulation were part of this strategy.
In recent years, the Group has expanded significantly in North America and Asia but its traditional core markets in the EU still account for approximately 60% of revenues.
It is our strategy to expand the global reach of stone wool as a serious insulation alternative in North America, by reintroducing it to the market which is currently dominated by glass wool and plastic foams. On top of aiming for a bigger
share of the market, the total size of the market is expected to grow over the coming years as more stringent energy efficiency requirements are introduced. The Group therefore expects to grow organically in the US as there are no obvious major acquisition targets.
In Asia and other regions of the world the insulation market is nascent, especially in the subtropical and tropical regions. Even here, however, the need for insulation will be significant in order to reduce the energy required to keep buildings cool. Due to rapid industrialisation and urbanisation, this is where the world's most buoyant construction markets are to be found. The Group's industrial and technical insulation is normally the first to be successful in these markets and offer pipe and duct insulation for power plants and process industry. However the Group's strategy is also to take a sizeable part of the building insulation market in these regions. Entering into dialogue with local authorities to ensure quality standards and a level playing field in the insulation market is part of the market development process.
Today, the ROCKWOOL Group can see many more potential opportunities for expansion on the global front. However, we will be selective in our approach and keep our focus firmly on entering only the most promising new markets.
High-rise buildings as here in London, UK are an important part of the ROCKWOOL projects where the non-combustible nature of the stone wool insulation can be decisive.
88
Sales in the ROCKWOOL Group grew by 1.6% in 2013 and reached DKK 14,903 million. The growth was 0.5% organic and 1.1% derived from the acquisition of the American ceiling company Chicago Metallic. A significant negative currency effect of 1.8% was also part of the picture.
Strong headwinds from the European economy in general and the building construction sector in particular began to ease during the summer months and the high season produced a decent recovery with sales in the second half of 2013 up 3.3% compared to the year before. The growth in sales varied considerably from region to region. In the core markets of Western Europe, which account for 59% of our global net sales, sales were significantly down in the first quarter due to harsh winter weather but recovered during the year and ended slightly below 2012. Once again, the German and French markets accounting for almost a third of Group turnover - showed good development driven by the refurbishment market. However, some of the most crisis-stricken construction markets - such as Spain, Italy and Scandinavia - also started to show improved levels of activity in the second half of the year, whereas the Benelux and UK insulation markets continued to struggle.
The Eastern European region, including Russia, performed well with a sales increase of 4.8% compared to 2012. A negative currency effect of 3.7%, primarily caused by the depreciation of the RUB, partly conceals the positive development. ROCKWOOL Russia continued to grow market share on the back of new product launches and an improved logistic set-up following the 2012 opening of a new plant in the Kazan region. The strong growth meant that imports had to be resumed from neighbouring countries to satisfy the demand in Russia. Poland also benefitted from improved market conditions after the summer and a major upgrade of the factory facilities was decided. The DKK 492 million investments will be finalised in 2015 providing the factory with state-of-the-art melting, spinning and compression technology. This upgrade will enable improved product quality and product variety, as well as lower production costs and better environmental performance.
Markets outside Europe also showed contrasting trends resulting in an overall growth of 8.1% compared to 2012. The strong expansion pace in North America continued throughout the year with good achievements across all strategic business areas. This meant that the Group's two Canadian factories were sold out and
Energy renovation of buildings by adding an extra layer of insulation on the outside and covering it with either render or facade boards like the ROCKPANEL boards is increasingly popular. In 2013, the ROCKWOOL Group acquired the German company HECK Wall Systems, specialised in rendered facade solutions.
imports from the UK had to be organised to keep customers supplied. This continues to be the case until the new factory, currently being built in Mississippi, starts operating in May 2014. Asia showed a somewhat more varied picture with a healthy activity level in Southeast Asia but a disappointing sales curve in Northern China. The Indian operations did well with regard to domestic orders and export to the Gulf region. All our factories in the Asian region, with the exception of China, were sold out towards the end of the year.
Sales in our insulation business ended at level with last year with an upward trend towards the latter part of the year. Sales reached DKK 11,966 million. Owing to the combination of stable prices, improved production efficiency and an overall low inflation, there was a decent increase in margins. EBIT reached DKK 843 million, corresponding to a profit ratio of 6.2%, well above last year.
Sales in the major Western European markets were again well stimulated by significant energy efficiency programmes. These have been established by national governments to improve energy efficiency and create jobs in the ailing construction sector. Of the major economies in the EU, the well-established programmes in Germany and France continued and new schemes were launched in the Netherlands and the UK.
| DKK million | 2013 | 2012 |
|---|---|---|
| External net sales | 11,966 | 11,991 |
| Internal net sales | 1,601 | 1,560 |
| EBITDA | 1,824 | 1,835 |
| Depreciation, amortisation and write-downs | 981 | 1,069 |
| EBIT | 843 | 766 |
Sales of general building insulation stayed relatively subdued in Western Europe but developed strongly in Russia and North America. In Russia, a new insulation product SCANDIC® was launched from the new factory and gained a significant share in the single-family house market. Meanwhile in the US, the distribution through DIY chains like Home Depot and Lowe's increased dramatically with more than 1,600 stores having our products in stock by year-end.
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One of the most promising segments in the market is insulation systems for external facades. With the appropriate system applied to, for example, a concrete facade, the building is given an aesthetic facelift while simultaneously improving the energy standard. To establish a strong position in the important German market, the ROCKWOOL Group acquired the facade system company HECK Wall Systems with an annual turnover of DKK 507 million. With the acquisition of the Polish company FAST in 2010, the Group now has the necessary key technologies in e.g. render, mortar and paints to build an international facade system business.
The external facade insulation market was also driving the strong 2012 development in Chinese building insulation sales following an increased focus on the fire safety of high-rise buildings. This was an important factor behind the decision to establish a new factory in the Tianjin area. The expected legislative tightening of fire safety requirements did, however, not materialise in 2013 and there has been a trend in the market to return to cheaper, more combustible insulation. As a consequence, the factory project has been delayed until more progress is seen on the legislative front.
With regard to roof insulation, significant advances were made into the North American roofing market where the Group's market share was far below its European levels. Partnerships were formed with a number of coast-to-coast roofing system suppliers in order to have non-combustible stone wool roofing boards included in their portfolio to meet customer demands for alternatives to the usual plastic foam insulation. Sales increased in high double-digit figures as a number of major factory projects were secured, for instance within the automotive industry.
Building insulation aside, the Group is world leader in the market for industrial and technical insulation where stone wool products are used to insulate pipes, boilers and ducts – often in high temperature applications such as industrial plants and power stations. Another important segment is the marine and offshore market where the non-combustible
properties of stone wool insulation are extremely important to avoid accidents in ships or on oil rigs. Sales in Europe were off to a slow start but gathered pace over the year. Outside Europe the business was positive with significant projects in South Africa, the Middle East and Southeast Asia. Overall volumes receded compared to 2012 but profitability improved due to better quality projects.
12
An increasingly important business area is that of ceiling solutions to improve aesthetics, acoustics, and indoor climate. In 2013, the Group acquired the American producer of ceiling grids and metal ceilings Chicago Metallic and is now able to offer a full ceiling system and a wider product range. It also gave an important channel into the suspended ceiling market in North America and Asia.
Sales in our Systems business progressed well and reached DKK 2,937 million, up 9.9% compared to 2012. Of this growth, the acquisition of the American ceiling company Chicago Metallic, which was fully integrated by 1 October, contributed 6.3% during the last quarter.
| DKK million | 2013 | 2012 |
|---|---|---|
| External net sales | 2,937 | 2,673 |
| Internal net sales | 2 | 0 |
| EBITDA | 319 | 301 |
| Depreciation, amortisation and write-downs | 14 | 2 |
| EBIT | 305 | 299 |
EBIT reached DKK 305 million, up 2.0% compared to 2012. As our Systems segment is undergoing strategic development with significant expansion outside the traditional Western European market, we are investing heavily in sales and marketing organisations. Understandably this has a negative short-term effect on profitability but, in the longer term, will more than pay back due to increased sales.
The biggest business area in the segment, ROCKFON acoustic ceilings, showed solid growth. The ROCKFON ceiling products cater for the high end ceilings market where their acoustic performance, firesafe properties and aesthetic design are much valued.
The exposure to relatively weak Western European nonresidential markets did not provide the best background for players in the ceilings market. The ROCKFON companies showed modest sales growth, which reflected an increased market share in most Western European countries. Of the
major markets outside the EU, Russia showed particularly good growth whereas sales in China and North America were still at a very early stage. A new production line in Poland will be able to support our ambitions for future growth in these new markets.
In recent years, there has been a trend in the market to offer integrated ceiling systems rather than just ceiling panels. To address this market demand, the ROCKWOOL Group in August acquired one of the major producers of metal grids for suspended ceilings, the American ceiling company Chicago Metallic. We are now able to provide total ceiling systems consisting of both panels and grids. In addition, our product range now includes metal ceilings which are quite popular in the high end of the market. With the help of Chicago Metallic's strong organisation in North America and Asia, the geographical expansion of our ceiling business has been significantly advanced.
Sales of ROCKPANEL cladding boards developed reasonably in a tough market. A growing number of architects and installers are appreciating the innovative and unique properties of the ROCKPANEL cladding boards. Despite the decline in European construction activity, the ROCKPANEL business has not been affected quite as much as many other parties in the building industry. In 2013, there was further expansion into new geographical markets in accordance with the ROCKPANEL growth strategy. At the same time there has been an improvement in our market position in existing markets such as the Netherlands, Belgium, Germany and the UK.
During 2013, a new production facility was opened in support of the ROCKPANEL growth strategy. In addition, the focus is on markets where the building concept of aesthetic cladding is well known, and where the ROCKWOOL Group is already present. This approach enables quicker access to customers, by drawing on the knowledge and contacts of local wellestablished ROCKWOOL Group companies.
The GRODAN company, the world leader in horticultural substrates for professional growers, gave a fine performance. All major markets recorded solid growth, including the North American market which was equipped with its own manufacturing facility in Toronto in 2012. However, the horticultural market in Europe is still depressed as growers continue to receive low prices for their products.
Sales of engineered fibres for, among other things, brake linings, paints and gaskets, benefitted from positive market conditions in the automotive industry in 2013. As this industry is the main market for the LAPINUS FIBRES company, it was a good year, especially outside Europe. Sales reached doubledigit figures, while in other segments, progress was more mixed.
The ROCKWOOL Group total sales in 2013 were DKK 14,903 million, including a three-month effect from the acquired Chicago Metallic business, an increase of 1.6% compared to 2012. Adjusted for the negative exchange rate effect and for acquisitions, the net sales increased by 2.3% on a like-for-like basis compared to the previous year. Net sales for the fourth quarter are up by 5.0% including a negative impact by 2.0% from exchange rates and the positive effect from Chicago Metallic.
EBITDA for the Group for 2013 amounted to DKK 2,336 million, which is DKK 83 million better than in 2012. The EBITDA ratio was 15.7% - an improvement of 0.4% compared to the previous year. This result was primarily due to low inflation and improved factory performance. EBITDA for the fourth quarter amounted to DKK 647 million, which is DKK 36 million better than the same period in 2012. The result for the quarter was positively impacted by continued lower inflation on raw materials compared to last year while the sales prices remained stable. In addition the quarter was impacted by significant write-down of inventories due to the Group's strict rules for ageing.
In 2013, EBIT reached DKK 1,260 million or a ratio of 8.5%. This is an increase of DKK 119 million or 10.4% compared to the previous year. Exchange rates had only limited impact on the EBIT for the Group. The fourth quarter EBIT amounted to DKK 374 million, which is DKK 48 million better than 2012. The fourth quarter in 2012 was negatively impacted by assets write-downs.
Net financial costs ended at DKK 46 million, which is DKK 9 million lower than in 2012. During the year, the level of borrowing and the interest costs have remained low. The effective tax rate was 29.5%, equivalent to a tax amount for the
Average sales growth of 8%
year of DKK 362 million. The effective tax rate was stable compared to 2012.
The Group profit after tax was DKK 863 million, an increase of DKK 89 million compared to 2012. This figure - predicted in March 2013 to be around DKK 700 million and in November 2013 to be around DKK 800 million - exceeded expectations. The Group profit after tax for the fourth quarter has also been better than expected in November 2013 primarily due to good trading conditions in December. Profit after tax for the parent company amounted to DKK -225 million, a decrease of DKK 892 million compared to 2012, mainly due to the significant write-down of shares in subsidiaries.
Cash flow from operating activities amounted to DKK 1,885 million, an increase of 5.6% resulting from improved operational results. Working capital at end 2013 was at the same level as the previous year with only limited impact on the Group's cash flow. The negative effect from the good business conditions in December was set off against increase in other debt. The net cash tied up in working capital as a percentage of net sales amounted to 7.9% against 7.8% in 2012. The acquisition of Chicago Metallic had no significant effect on the working capital.
Investments reached DKK 1,979 million in 2013, of which DKK 362 million was due to the acquisition of Chicago Metallic and DKK 264 million to the prepayment of HECK Wall Systems. Of the operational investments, DKK 734 million was dedicated to capacity improvement of which the green field factory in Memphis, US accounted for DKK 431 million. Free cash flow in 2013 amounted to DKK -94 million, a decrease of DKK 884 million, chiefly because of higher investments and acquisitions.
At the end of 2013, total assets amounted to DKK 13,851 million; an increase of DKK 862 million compared to 2012. This figure
reflects increased intangible and tangible assets from the acquisition of Chicago Metallic and the prepayment of the HECK Wall Systems acquisition. Debtors increased due to the better conditions in the fourth quarter. Average 'debtor days' decreased by 0.3 days compared to 2012.
The ROCKWOOL Group equity was DKK 9,576 million at 2013 year end, an increase of DKK 148 million compared to the previous year and corresponding to an equity ratio of 69.1%. The equity increased by DKK 646 million from profit for the year net of dividend payments, but decreased by DKK 510 million from the negative impact of exchange rates primarily from RUB and CAD.
Net cash at the end of 2013 amounted to DKK -266 million, a decrease of DKK 455 million compared to the year before. By the end of 2013, the Group had unused committed credit facilities of DKK 3,111 million. At the end of 2013, net interest-bearing debt amounted to DKK 748 million, an increase of DKK 680 million compared to 2012 primarily due to payments for the acquisitions.
The gradual recovery observed in the Western European markets during the last quarter of 2013 is expected to continue during 2014. We believe that the number of government incentive programmes to support the energy renovation of existing buildings will increase, such as those already operating in Germany and France for quite some time now. The recent decision of the European Commission to go for a CO2 reduction target of 40% by 2030 is seen as a positive sign supporting insulation markets in the long term. In the eastern part of Europe, trading conditions are expected to keep improving and in Russia energy refurbishment initiatives should remain at a high level. However, new build activities in Europe are not expected to recover in the foreseeable future.
In North America, the Group sales are expected to continue developing at the same pace as in previous years, well supported by our increased commercial presence and by the new green field factory in Mississippi, US, due to be commissioned in May 2014. Additionally the overall recovery of the US economy will support better market conditions for insulation.
In South East Asia, market conditions are expected to remain positive, especially in the core industrial and technical insulation segment. In China, where the Group is reinforcing its commercial base, we expect to see a gradual movement towards stricter fire safety regulations. However, these changes may be disappointingly slower than was previously forecasted.
Overall sales prices are expected to remain stable. Including acquisitions of Chicago Metallic and HECK Wall Systems, we expect Group sales in 2014 to increase by about 12% compared to 2013. Like-for-like, our expectation for sales growth is 5%.
Raw materials and energy prices are expected to remain at their present level. The Group will continue the re-engineering of its European production platform in order to offer customers the highest quality products and to improve competitiveness through increased production efficiencies. On a like-for-like basis, the Group EBIT ratio is expected to remain at the same level as in 2013.
Profit for the year 2014 is forecasted to be around DKK 950 million. Investment expenditure, excluding acquisitions, is expected to be DKK 1,400 million. The US capacity increase and major re-engineering projects in Poland and Denmark represent DKK 800 million. Cash outbound in 2014 for the second instalment of the Chicago Metallic acquisition will be approximately DKK 200 million. A similar amount remains to be paid in 2015.
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Risk management is a central part of the ROCKWOOL Group's business operations. It is fundamental to the way we conduct our business, taking a long-term perspective while minimising avoidable risks. The aim is to ensure that these risks are addressed in a proactive and efficient manner and that appropriate control systems are in place considering the company's current activities and operations. The Group is working systematically to identify and control risks with proper procedures which involve all relevant parts of the organisation, from subsidiaries to Group functions, and at Group management and Board level.
Risk management is organised under the CFO function and reports are made to the Board's audit committee. Based on a risk management system introduced in 2012, schematic overview of the Group's risk portfolio is established. All managing directors of the subsidiaries and Group functions are asked to ensure that risks within their areas of responsibility are described, scored for severity and likelihood, and quantified in terms of actual financial impact. The review includes, but is not limited to, 16 pre-defined categories. Appropriate mitigation actions to control the risks are part of the information described by the subsidiaries and these mitigation actions will be evaluated to ensure appropriate risk management at Group level.
A number of areas have been singled out as being particularly important from a risk management perspective.
The ROCKWOOL Group is exposed to legal frameworks which can be changed by the political system. This can pose a risk at several levels.
In a number of countries, the insulation market is stimulated through various incentive systems which support the demand for energy efficient buildings. However, the likelihood of these support programmes being rolled back in many jurisdictions at the same time – leading to a significantly lower demand for insulation - is not very high.
In a number of countries where the Group has established production facilities, the democratic tradition is less established and the rule of law less developed. However, the risk is considered low and assets in each identified country are below 20% of Group assets. The political climate in these countries is monitored closely.
Politically determined production costs imposed on e.g., raw materials or emissions pose a risk - especially with regard to the cost of energy and CO2 emissions. The Group is working actively to help legislators establish programmes which will not counteract the competitiveness of stone wool insulation or encourage producers to allocate production facilities outside the taxation area. Furthermore, the challenge is addressed by the development of new process technologies with lower energy and CO2 impact.
One of the Group's strengths, compared to its competitors, is the proprietary technology which secures lower production costs and a strong product portfolio. Therefore, considerable attention is focused on protecting access to our production facilities, especially those factories which are equipped with our latest and most sensitive equipment, likewise the handling of secret information outside our facilities.
IT systems are increasingly central to the running of our operations, and major break-downs are to be avoided through proper risk management. Over the last few years, both to enhance security and avoid system failures, the Group has consolidated many local IT platforms into one integrated and centrally organised system which can be better protected. This process is on-going.
The ROCKWOOL Group production facilities are of significant size and, as with other heavy industries, are subject to strict environmental supervision by local authorities and stakeholders. This is especially a concern in densely populated areas. When new factories are constructed, these will normally be located in industrial zones or well separated from major residential areas. However, for a number of our older plants, increasing urbanisation has brought residential areas
closer. The Group invests heavily in cleaner technologies and advanced solutions to address potential nuisances and ensure – as a minimum – that compliance with local regulations is assured. Furthermore, we undertake a determined process of understanding and communicating with local stakeholders.
The stone wool production process relies on substantial amounts of energy to melt the volcanic rock and recycled materials - and in most factories this is done via a coke-fired cupola oven. The price of coke – which has highly fluctuated over the years - is thus an essential element behind the cost levels and profitability of the Group. To limit this risk factor, the Group has focused on researching alternative energy sources for the cupola oven, as well as developing new melting technology using other energy sources than coke.
The ROCKWOOL Group has a strong company culture closely related to the principles put forward by the founding Kähler
family over many years. Our culture encompasses values such as honesty and responsibility which help secure the ethical running of our business according to the expectations of society, authorities and ourselves.
To enhance the Group's proper business conduct further, a business ethics policy guides the employees. Measures such as awareness seminars and 'dawn raid' exercises are conducted at regular intervals. Furthermore, it has been decided to increase the efforts on training and to inform our employees about appropriate business ethics through an e-learning training. This will be rolled out in 2014.
Identification, evaluation and mitigation of financial risks are described in more detail in note 26.
The Flower Dome is a spectacular attraction in Singapore, where ROCKWOOL products have been used for the air conditioning and ventilation system to improve the sound and thermal performance and the fire protection.
20
The ROCKWOOL Group's efforts within Corporate Social Responsibility build on the wish to act as a good citizen and to contribute to positive social development as stated in our Social Charter. The essence of our business activities – using the important characteristics of stone wool to create safer and better buildings – is inherently beneficial to society yet our responsibilities go beyond this.
Our CSR approach aims to manage the environmental, social and business ethics aspects of our operations beyond reproach. By keeping our full focus on these areas and reporting regularly to demonstrate transparency, we will continue to develop our business in a profitable, honest and responsible way. Some of the key focus areas in 2013 were as follows.
Work continued towards meeting the ambitious 2015 goal of improving the energy and CO2 efficiency in our factories by 15% compared to 2009. The key measures for reaching this goal have been determined and include improvements to the existing cupola-oven based melting process, the development of new melting technologies, and the best practice use of recycled materials and other alternative materials.
In 2013, the Group issued its first Sustainability Report based on the framework of the Global Reporting Initiative which has increasingly become the recognised standard for reporting on the environmental, social and business ethics performance of major companies. For a number of years, the Group has also been reporting in accord with the Carbon Disclosure Project (CDP). The CDP provides transparency for international investors and analysts trying to understand the CO2 profile of listed companies. In 2013, CDP ranked the ROCKWOOL Group as the 5th best climate reporter in Denmark.
An improved code of conduct for our key suppliers was introduced in 2013. The code introduces a number of new obligations on suppliers regarding good business ethics. It also increases the rights of the ROCKWOOL Group to conduct more thorough audits.
In 2013, our business ethics policy was updated and improved. Among the changes were restrictions for the use of third party commercial partners.
Our CSR performance and actions are described in more detail on our website where it is also possible to access the annual Sustainability Report. See more at:
www.rockwool.com/sustainability+reports
Progress report according to Danish Financial Statements Act, art. 99a + 99b
www.rockwool.com/csr+reports
Social charter of the ROCKWOOL Group
www.rockwool.com/social+charter
www.rockwool.com/cdp
Throughout 2013, 'the ROCKWOOL Way' has been the solid foundation for the Group's employees and the bar has been set high when it comes to strengthening our global people agenda. Performance Management and Succession Management processes are at the core of these efforts. The importance of securing our shared value base and culture, as well as promoting a unified way of working, has increased as the ROCKWOOL Group expands its businesses in America, Asia and Europe - both through organic growth and by acquisitions. Strengthening cross-cultural understanding is an important area for key managers and functional leaders who are charged with supporting the development of our operations.
In order to meet future business challenges successfully, it is key that we find the optimal balance between complementing internal capabilities with external talent versus developing internal skills and competencies, especially in our rapidly growing markets. The ROCKWOOL Group is working towards a systematic development of people, providing a healthy pipeline of internal successors for key future roles.
In 2013 we deployed our renewed global employee survey, RockPulse with a focus on developing an engaging, high-
performance work environment. The survey measures the ROCKWOOL Group's employee engagement, their views on strategic direction, development opportunities, organisational effectiveness and, not least, our ability to live up to Trust and Empowerment at the core of the ROCKWOOL Way. The process is owned and actively driven by the business and will be an integral part of the Group's annual cycle. The survey allows for valuable, externally-focused benchmark comparisons, which will enable the business to focus on improvement efforts with high impact.
In ROCKWOOL Russia the systematic talent development has proven a success on more than one level. For the new factory near Kazan, 8 out of 10 new functional head positions in Production, Logistics and Finance have successfully been filled with internal candidates.
Similarly, the recent appointment of Marina Potoker as the new head of ROCKWOOL Russia continues to set a good example of living 'the ROCKWOOL Way'. Such success rests on offering our capable and committed people further growth by challenging and supporting them to broaden their knowledge and skills beyond their core areas of expertise. As a final step in preparation for her role of Managing Director, Marina Potoker left her position early as Technical Director to instead 'step down in the hierarchy' to Deputy Sales Director in order to gain experience in sales. On 1 January 2014, the reporting lines reverse as she steps into the role of Managing Director. It is testament to the strength of trust and respect between management team members that they are able to work together in such a constructive way to reach our business goals.
22
The RockPulse 2013 survey was completed with a very good response rate at 91% and overall very positive results confirming our strong culture and our solid platform to build on. The categories with highest impact on driving employee engagement in the ROCKWOOL Group are Organisational Effectiveness, Performance Management and the intrinsic Trust and Empowerment.
In 2013, the ROCKWOOL Group continued the low frequency rate of accidents across the entire business from previous years. This is the result of dedicated efforts by all concerned. To complement local initiatives, the ROCKWOOL Group has initiated activities linked to safety throughout 2013 such as
best practise sharing, training and our preventive reporting system.
Our management approach and working culture is further enhanced by driving production efficiencies based on the LEAN methodology. This involves analysing business processes and continuously optimising them in order to avoid unnecessary steps while, at the same time, ensuring quality. This development initiative is all about people and development of their skills in order to be able to see the problem, understand it, offer solutions and make decisions. All this is necessary for optimisation and continuous improvement of our operations; and simultaneously incorporating Trust & Empowerment in our way of working at all levels.
| 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|
| 4.5% | 5.1% | 4.4% | 4.2% | 3.5% |
| 3.1 | 3.9 | 3.2 | 3.3 | 2.2 |
| 2.4 | 3.2 | 3.1 | 2.4 | 2.6 |
| 161 | 218 | 121 | 66 | 133 |
| 4.4* | 3.8 | 4.2 | 8.2 | 10.8 |
* including contractors
The ROCKWOOL Foundation is the largest single shareholder of ROCKWOOL International A/S with approximately 23% of the shares. It is a charitable Foundation which was established by six members of the Kähler family in 1981 to support socioeconomic research and deliver practical interventions.
The socio-economic studies are conducted by the Foundation's Research Unit and by external researchers. Currently the research is primarily focused around migration and integration, undeclared work, work and the welfare state, as well as families, children and health.
The practical interventions address societal challenges within the four programme areas of food security and poverty alleviation, social capacity building, improved health for children and international peace building. The interventions both benefit developing and developed countries.
Read more about the ROCKWOOL Foundation (in English) at > www.rockwoolfonden.dk
In 2013 the ROCKWOOL Foundation's Research Unit published a study on the integration of immigrant families with non-western backgrounds living in Denmark. The study examines their living conditions, their work situation and their patterns of consumption. The study also covers immigrant participation in clubs and societies in Denmark – a topic of which, prior to the study, knowledge was very limited.
The results of the study were presented at a press conference in September 2013. In the commenting panel the government was represented by the then Minister for Social Affairs, Children and Integration, Annette Vilhelmsen from the Socialist People's Party, and the opposition by the spokesperson for Immigration and Integration, Inger Støjberg from The Liberal Party of Denmark.
24
Sub-Saharan Africa remains the world's most challenged region with regard to food security despite its abundant agricultural potential. Since 2006, in an attempt to contribute to a solution to this problem, the ROCKWOOL Foundation in collaboration with the Tanzanian NGO, RECODA, have developed a flexible agricultural extension programme known as RIPAT (Rural Initiatives for Participatory Agricultural Transformation) involving a series of projects in northern Tanzania. RIPAT aims to close the agricultural technology gap between small-scale farmers and research stations as a means of improving the farmers' livelihoods and their ability to support themselves. So far RIPAT has been implemented in 42 villages involving nearly 3,000 farmers.
In 2013, an evaluation of the RIPAT programme was published in the book 'Farmer's Choice'. Among the findings, was the fact that the RIPAT implementation had a significant effect on the food security of the families involved. On average, the reduction in prevalence of hunger was benchmarked at 25% and, among the young children, the risk of their growth being stunted dropped by 27%. At the time of data collection it was not possible to establish a statistically significant impact on poverty alleviation. Nevertheless there were indications that the structure of labour supply and demand had been positively affected. The RIPAT families were less likely to take on casual labour and more likely to hire people to work for them. The RIPAT model has now become part of the curriculum at the Agricultural University in Tanzania.
Learn more about RIPAT > www.ripat.org
Thomas Kähler, Second Deputy Chairman Born in 1970. Nationality: Danish Managing Director of ROCKWOOL Scandinavia. Other positions related to the company: Member of the Chairmanship. Member of the Audit Committee. Member of the Kähler Family Meeting.
Born in 1961. Nationality: Danish CEO of Zeno ApS. Other positions related to the company: Chairman of the Audit committee. In accordance with legislation for audit committees in Denmark, Bjørn Høi Jensen is the member of the Audit Committee who is independent and possesses the required insight concerning auditing and accounting.
Positions in other Danish public limited companies: Deputy Chairman of the Board of Erhvervsinvest Management A/S. Other positions:
Member of the Board of the Bevica Foundation.
Chairman of the Board of CEPOS.
26
Born in 1972. Nationality: Danish Elected by employees Programme Manager, Group R&D, ROCKWOOL International A/S. Other positions related to the company: Member of the Board of the ROCKWOOL Foundation.
Born in 1950. Nationality: Danish Other positions related to the company: Member of the Remuneration Committee. Member of the Board of the ROCKWOOL Foundation. Member of the Kähler Family Meeting. Positions in other Danish public limited companies: Member of the Board of A/S Saltbækvig. Other positions: Member of the Board of the Foundation Sagnlandet
Lejre.
Born in 1951. Nationality: Danish Other positions related to the company: Member of the Chairmanship. Member of the Remuneration Committee. Positions in other Danish public limited companies: Chairman of the Boards of ALK-Abelló A/S and Cowi Holding A/S. Member of the Boards of CAT Science Park A/S and Novo A/S. Other positions: Chairman of the Board of WWF (World Wildlife Fund) Denmark. Vice Chairman of the Board of the Egmont Foundation. Member of the Boards of the Novo Nordisk Foundation, the Villum Foundation and the University of Aarhus.
Born in 1962. Nationality: Danish Elected by employees Vice President, Group Public Affairs, ROCKWOOL International A/S. Other positions: Vice Chairman of the Board of EURIMA (European Insulation Manufacturers' Association). Member of the Board of The Alliance for a Fire Safe Europe. Member of the FM Approvals Advisory Council.
Born in 1958. Nationality: German CEO of Symrise AG. Other positions related to the company: Member of the Audit Committee. Other positions: Member of the Boards of Nord/LB - Region Holzminden, Deutsche Bank - Region Hannover, and Indevex AB – Stockholm.
Born in 1959. Nationality: Danish Other positions related to the company: Member of the Chairmanship. Member of the Remuneration Committee. Positions in other Danish public limited companies: Member of the Board of Vestas Wind Systems A/S. Other positions:
Chairman of the Board of the Market Maturation Fund. Member of the General Council of the Confederation of Danish Industries. Member of the Board of the Federation of Employers in the Provincial Industry.
Born in 1960. Nationality: Danish Elected by employees International Market Intelligence Manager Residential, ROCKWOOL International A/S.
www.rockwool.com/board
Theo Kooij Division Managing Director, East Division Born in 1960. Nationality: Dutch
Division Managing Director, Systems Division Born in 1962. Nationality: Dutch
Camilla Grönholm Senior Vice President, HR, Legal and Communication & PR Born in 1964. Nationality: Finnish
Eelco Dudok van Heel President and CEO Born in 1955. Nationality: Danish Gilles Maria Senior Vice President and CFO, Group Finance & Corporate Affairs Born in 1958. Nationality: French
Henrik Frank Nielsen Division Managing Director, Europe Division Born in 1961. Nationality: Danish
Further information is available at
www.rockwool.com/group+management
The aim of our Corporate Governance efforts is to secure that the structure and function of our decision making bodies are optimal for our business and our stakeholders.
ROCKWOOL International A/S' corporate governance framework is based on various principles and rules. This includes mandatory regulation from Danish authorities and recommendations from the Danish committee on Corporate Governance, as well as our internal instructions such as the Articles of Association, the Business Procedure for the Board and the Management Instructions for the Management Board, and is in accordance with our value base and 'Principles of Leadership' and business rules applied in the ROCKWOOL Group.
Pursuant to the provisions of the Danish Companies Act and ROCKWOOL International A/S' Articles of Association, the supervision and management of the ROCKWOOL Group is divided among Group Management, the Board (with welldefined functional committees) and the General Meeting of shareholders.
Group Management is responsible for the management of the company and the compliance with the guidelines and recommendations set forth by the Board. The responsibility of Group Management covers organisation of the company as well as allocation of resources, producing and implementing strategies and policies and ensuring timely reporting to the Board. Group Management consists of the President and CEO and five other executives. In total two Dutchmen, two Danes, one Frenchman and one Finn. See more info on page 27.
The CEO and CFO are registered as the Management Board according to Danish law.
The Board decides on matters of strategic importance to the Group. These include decisions on strategic guidelines, approval of periodic plans and major acquisitions or divestments. An important part is also monitoring the risk factors associated with the company's operations.
The Board currently consists of nine members, six of which are elected by the shareholders at general meetings for a
period of one year and may be re-elected. Of these, four members, including the chairman, are deemed independent according to the recommendations issued by the Danish Committee on Corporate Governance. The remaining three members are elected by the employees pursuant to the Danish Companies Act. See more details on the Board members on page 26.
The Board evaluates its performance every year. Further, the Board annually evaluates the work and performance of Group Management.
The Board has established a Chairmanship consisting of the Chairman and two vice-chairmen. The Chairmanship prepares the board meetings and serves as a nomination committee for the composition of the board as well as the Management Board of the company.
The Board has set up an audit committee and a remuneration committee. The committees report to the Board. The majority of the members of the committees are independent members of the Board. Details about committee members are available on the corporate website.
The Audit Committee monitors accounting and audit policies and conditions, which, if determined by the Board or the Audit Committee, should be subject to a thorough evaluation. Further, the Audit Committee evaluates the company's internal control and risk systems.
The Remuneration Committee ensures that the company maintains a remuneration policy for the members of the Board and Group Management and that the guidelines for Group pay schemes support the strategy. The remuneration policy and the long-term incentive schemes and all changes hereto are all approved by the Board as well as the General Meeting. The Remuneration Committee evaluates and brings forward recommendations for the remuneration of the Board. The Remuneration Committee is also authorised to approve remuneration for senior executives.
The General Meeting is the supreme body of ROCKWOOL International A/S and convenes the shareholders of the
company. The ordinary general meeting is held once a year and the meeting is broadcasted live in Danish and English on our corporate website.
The company's shareholders can own 2 types of ROCKWOOL shares: A shares (51.1% of the capital) carrying ten votes each, and B shares (48.9% of the capital) carrying one vote each.
The current share structure is deemed well-functioning to secure strategic room for developing the company and creating long-term value. Together with the high equity ratio – currently 69% - it provides independency of lenders and a good stability which can counterbalance the highly fluctuating market conditions in the building sector as well as the high operational leverage of our production model. The high operational leverage is linked to the capital intensive nature of our plants – one new plant will often cost more than EUR 100 million and must operate with sufficiently high capacity utilisation to pay back the investment.
The ROCKWOOL Foundation – the company's biggest shareholder with approximately 23% of the share capital – works for the benefit of society, but also duly considers the long-term interests of the company. ROCKWOOL International A/S Board member Søren Kähler and one of the three
employee-elected members, Dorthe Lybye, are also members of the Board of the ROCKWOOL Foundation.
An agreement exists between certain members of the Kähler family to the effect that they meet regularly to coordinate the family's interests in the company, including their voting strategy at the company's General Meetings, although the agreement in no way requires them to vote jointly. Søren Kähler and Thomas Kähler – both members of the Board – participate in these meetings.
The company's Board and Group Management are not aware of the existence of any shareholders' agreements containing pre-emption rights or restrictions in voting rights.
For a detailed 2013 review of the ROCKWOOL Group's compliance with the recommendations for corporate governance issued by the Danish Committee on Corporate Governance, visit > www.rockwool.com/corporate+governance+recommendations
For 2013, the ROCKWOOL Group publishes a mandatory statement on management governance according to the Danish Financial Statements Act, Art. 107b.
www.rockwool.com/management+governance
Today the Board and Management Board have discussed and approved the Annual Report of ROCKWOOL International A/S for the financial year ended 31 December 2013.
The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
In our opinion the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's financial position at 31 December 2013 and of the results of the Group's and the parent company's operations and cash flows for the financial year then ended.
In our opinion the Management's review includes a true and fair review about the development in the parent company's and the Group's operations and financial matters, the results for the year and the Group's and the parent company's financial position and the position as a whole for the entities included in the consolidated financial statements, as well as a review of the more significant risks and uncertainties faced by the Group and the parent company.
We recommend that the Annual Report be approved at the Annual General Meeting.
Eelco van Heel Gilles Maria
| Steen Riisgaard | Carsten Bjerg | Thomas Kähler | Heinz-Jürgen Bertram | Claus Bugge Garn |
|---|---|---|---|---|
Bjørn Høi Jensen Søren Kähler Dorthe Lybye Connie Enghus Theisen
To the Shareholders of ROCKWOOL International A/S
We have audited the consolidated financial statements and the parent company financial statements of ROCKWOOL International A/S for the financial year 1 January – 31 December 2013, which comprise an income statement, statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, including a summary of significant accounting policies for the group as well as 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's responsibility for the consolidated financial statements and parent company financial statements 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. Further, management is responsible for such internal control as it 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 according to Danish audit regulations. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 judgement, including an 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 entity's preparation of consolidated financial statements and parent company financial statements that give a true and fair view. The purpose is to design audit procedures that are appropriate in the circumstances, but not to express an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management as well as 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.
Our 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 group's and the company's financial position at 31 December 2013 and of the results of the group's and the company's operations and cash flows for the financial year 1 January – 31 December 2013 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
In accordance with the Danish Financial Statements Act, we have read the management's review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information provided in the management's review is consistent with the consolidated financial statements and the parent company financial statements.
Copenhagen, 21 February 2014
Ernst & Young Godkendt Revisionspartnerselskab
Eskild Jakobsen Jan C. Olsen State Authorised Public Accountant State Authorised Public Accountant
This is more than a rock… > www.morethanarock.rockwool.com
| 1 January - 31 December | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | Note | 2013 | 2012 | 2013 | 2012 |
| Net sales | 14,903 | 14,664 | 678 | 420 | |
| Other operating income | 3 | 191 | 189 | 857 | 704 |
| Operating income | 15,094 | 14,853 | 1,535 | 1,124 | |
| Raw material costs and production material costs | 5,502 | 5,521 | 591 | 293 | |
| Delivery costs and indirect costs | 2,039 | 2,083 | 70 | 71 | |
| Other external costs | 1,554 | 1,449 | 403 | 369 | |
| Personnel costs | 4 | 3,663 | 3,547 | 286 | 272 |
| Depreciation, amortisation and write-downs | 5 | 1,076 | 1,112 | 90 | 52 |
| Operating costs | 13,834 | 13,712 | 1,440 | 1,057 | |
| Operating profit before financial items (EBIT) | 1,260 | 1,141 | 95 | 67 | |
| Income from investments in subsidiaries | 6 | 0 | 0 | -236 | 603 |
| Income from investments in associated companies | 11 | 12 | 9 | 13 | |
| Financial income | 7 | 103 | 115 | 90 | 84 |
| Financial expenses | 8 | 149 | 170 | 152 | 82 |
| Profit before tax | 1,225 | 1,098 | -194 | 685 | |
| Tax on profit for the year | 9 | 362 | 324 | 31 | 18 |
| Profit for the year | 863 | 774 | -225 | 667 | |
| Attributable to: | |||||
| Minority interests | 1 | 2 | |||
| Shareholders in the parent company | 862 | 772 | |||
| 863 | 774 | ||||
| Dividend per share of DKK 10 | 10.4 | 10.2 | |||
| Earnings per share of DKK 10 | 10 | 40.1 | 35.8 | ||
| Earnings per share of DKK 10, diluted | 10 | 39.9 | 35.7 | ||
| Statement of comprehensive income | |||||
| Profit for the year Items that may not be reclassified to the income statement: |
863 | 774 | -225 | 667 | |
| Actuarial gains and losses of pension obligations | 16 | 10 | 0 | 0 | |
| Tax on other comprehensive income | 9 | -6 | 12 | 0 | 0 |
| Items that may be reclassified to the income statement: | |||||
| Exchange rate adjustments of foreign subsidiaries | -510 | 223 | 0 | 0 | |
| Hedging instruments, value adjustments | 20 | -7 | 0 | 0 | |
| Tax on other comprehensive income | 9 | -6 | 2 | 0 | 0 |
| Total other comprehensive income | -486 | 240 | 0 | 0 | |
| Comprehensive income for the year | 377 | 1,014 | -225 | 667 | |
| Attributable to: | |||||
| Minority interests | -1 | 3 | |||
| Shareholders in the parent company | 378 | 1,011 | |||
| 377 | 1,014 |
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| DKK million | Note | 2013 | 2012 | 2013 | 2012 |
| Goodwill | 11 | 251 | 136 | 0 | 0 |
| Software | 11 | 160 | 180 | 165 | 178 |
| Customer relationships | 11 | 237 | 162 | 0 | 0 |
| Other intangible assets | 11 | 249 | 110 | 167 | 188 |
| Total intangible assets | 897 | 588 | 332 | 366 | |
| Buildings and sites | 12 | 3,624 | 3,653 | 110 | 81 |
| Plant and machinery | 12 | 3,660 | 3,990 | 0 | 0 |
| Other operating equipment | 12 | 135 | 95 | 11 | 10 |
| Prepayments and assets in course of construction | 12 | 1,022 | 507 | 0 | 0 |
| Total tangible assets | 8,441 | 8,245 | 121 | 91 | |
| Shares in subsidiaries | 13 | 0 | 0 | 6,518 | 7,645 |
| Shares in associated companies | 13 | 329 | 334 | 35 | 35 |
| Loans to subsidiaries | 13, 28 | 0 | 0 | 1,715 | 1,523 |
| Long term deposits and debtors | 297 | 47 | 0 | 0 | |
| Deferred tax assets | 18 | 264 | 270 | 0 | 0 |
| Total financial assets | 890 | 651 | 8,268 | 9,203 | |
| Total non-current assets | 10,228 | 9,484 | 8,721 | 9,660 | |
| Inventories | 15 | 1,206 | 1,175 | 18 | 3 |
| Work in progress | 0 | 0 | 40 | 0 | |
| Trade receivables | 16 | 1,575 | 1,509 | 0 | 0 |
| Receivables from subsidiaries and associated companies | 28 | 12 | 11 | 870 | 665 |
| Other receivables | 250 | 249 | 93 | 59 | |
| Prepayments | 77 | 69 | 18 | 14 | |
| Company tax | 22 | 1 | 8 | 9 | 4 |
| Cash | 25 | 502 | 484 | 0 | 0 |
| Total current assets | 3,623 | 3,505 | 1,048 | 745 | |
| Total assets | 13,851 | 12,989 | 9,769 | 10,405 |
As at 31 December
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| DKK million | Note | 2013 | 2012 | 2013 | 2012 | |
| Share capital | 17 | 220 | 220 | 220 | 220 | |
| Foreign currency translation | -641 | -131 | 0 | 0 | ||
| Proposed dividend | 224 | 220 | 224 | 220 | ||
| Retained earnings | 9,759 | 9,119 | 6,797 | 7,260 | ||
| Hedging | -10 | -24 | 0 | 0 | ||
| Equity before minority interests | 9,552 | 9,404 | 7,241 | 7,700 | ||
| Minority interests | 24 | 24 | 0 | 0 | ||
| Total equity | 9,576 | 9,428 | 7,241 | 7,700 | ||
| Deferred tax liabilities | 18 | 360 | 447 | 124 | 151 | |
| Pension obligations | 19 | 205 | 224 | 0 | 0 | |
| Other provisions | 20 | 194 | 158 | 3 | 2 | |
| Loans from subsidiaries | 21 | 0 | 0 | 93 | 875 | |
| Bank loans and other loans | 21 | 241 | 204 | 188 | 108 | |
| Total non-current liabilities | 1,000 | 1,033 | 408 | 1,136 | ||
| Short-term portion of long-term debt | 21 | 341 | 153 | 297 | 3 | |
| Bank debt Work in progress |
21,25 | 768 0 |
295 0 |
350 0 |
117 15 |
|
| Trade payables | 21 | 1,166 | 1,044 | 65 | 83 | |
| Payables to subsidiaries and associated companies | 21 | 0 | 0 | 1,350 | 1,241 | |
| Other provisions | 20 | 83 | 98 | 0 | 0 | |
| Other payables | 21 | 917 | 938 | 58 | 110 | |
| Total current liabilities | 3,275 | 2,528 | 2,120 | 1,569 | ||
| Total liabilities | 4,275 | 3,561 | 2,528 | 2,705 | ||
| Total equity and liabilities | 13,851 | 12,989 | 9,769 | 10,405 |
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| DKK million | Note | 2013 | 2012 | 2013 | 2012 |
| Operating profit before financial items | 1,260 | 1,141 | 95 | 67 | |
| Adjustments for depreciation, amortisation and write-downs | 1,076 | 1,112 | 90 | 52 | |
| Other adjustments | 23 | 24 | -7 | 542 | 612 |
| Change in net working capital | 24 | -12 | -159 | -274 | 341 |
| Cash flow from operations before financial items and tax | 2,348 | 2,087 | 453 | 1,072 | |
| Finance income etc. received | 111 | 128 | 90 | 84 | |
| Finance costs etc. paid | -149 | -170 | -152 | -82 | |
| Taxes paid | -425 | -260 | -57 | 18 | |
| Cash flow from operating activities | 1,885 | 1,785 | 334 | 1,092 | |
| Purchase of tangible assets | -1,284 | -929 | -37 | -37 | |
| Purchase of intangible assets | -69 | -66 | -49 | -74 | |
| Acquisition of new activities | 30 | -362 | 0 | 0 | 0 |
| Additions of subsidiaries and associated companies | 0 | 0 | -688 | -639 | |
| Dividend and capital decrease in subsidiaries and | |||||
| associated companies | 0 | 0 | 1,052 | 312 | |
| Prepayments | 30 | -264 | 0 | 0 | 0 |
| Cash flow from investing activities | -1,979 | -995 | 278 | -438 | |
| Cash flow from operating and investing activities | |||||
| (free cash flow) | -94 | 790 | 612 | 654 | |
| Dividend paid | -217 | -207 | -217 | -207 | |
| Purchase of own shares | -74 | -25 | -74 | -25 | |
| Sale of own shares | 52 | 0 | 52 | 0 | |
| Purchase of minority interests | 0 | -2 | 0 | 0 | |
| Change in non-current debtors | 12 | 25 | -192 | 0 | |
| Installments of non-current debt | -152 | -258 | -738 | -103 | |
| Increase in non-current debt | 10 | 2 | 324 | 0 | |
| Cash flow from financing activities | -369 | -465 | -845 | -335 | |
| Changes in cash available | -463 | 325 | -233 | 319 | |
| Cash available 1/1 | 189 | -128 | -117 | -436 | |
| Exchange rate adjustments | 8 | -8 | 0 | 0 | |
| Cash available 31/12 | 25 | -266 | 189 | -350 | -117 |
| Unutilised, committed credit facilities 31/12 | 3,111 | 3,442 | 3,111 | 3,442 |
Individual items in the cash flow statement cannot be directly deduced from the consolidated balance sheet, as balance sheet items of the foreign companies have been converted at average exchange rates for the year.
Group
| Equity | ||||||||
|---|---|---|---|---|---|---|---|---|
| Foreign | before | |||||||
| DKK million | Share | currency | Proposed | Retained | minority | Minority | Total | |
| capital | translation | dividend | earnings | Hedging | interests | interests | equity | |
| Equity 1/1 2013 | 220 | -131 | 220 | 9,119 | -24 | 9,404 | 24 | 9,428 |
| Profit for the year | 0 | 0 | 224 | 638 | 0 | 862 | 1 | 863 |
| Other comprehensive income | 0 | -510 | 0 | 11 | 14 | -485 | -1 | -486 |
| Comprehensive income for the year | 0 | -510 | 224 | 649 | 14 | 377 | 0 | 377 |
| Sale and purchase of own shares | 0 | 0 | 0 | -22 | 0 | -22 | 0 | -22 |
| Expensed value of options issued | 0 | 0 | 0 | 10 | 0 | 10 | 0 | 10 |
| Dividend paid to the shareholders | 0 | 0 | -220 | 3 | 0 | -217 | 0 | -217 |
| Equity 31/12 2013 | 220 | -641 | 224 | 9,759 | -10 | 9,552 | 24 | 9,576 |
| Equity 1/1 2012 | 220 | -354 | 207 | 8,569 | -19 | 8,623 | 12 | 8,635 |
| Profit for the year | 0 | 0 | 220 | 552 | 0 | 772 | 2 | 774 |
| Other comprehensive income | 0 | 223 | 0 | 21 | -5 | 239 | 1 | 240 |
| Comprehensive income for the year | 0 | 223 | 220 | 573 | -5 | 1,011 | 3 | 1,014 |
| Sale and purchase of own shares | 0 | 0 | 0 | -24 | 0 | -24 | 0 | -24 |
| Expensed value of options issued | 0 | 0 | 0 | 10 | 0 | 10 | 0 | 10 |
| Dividend paid to the shareholders | 0 | 0 | -207 | 0 | 0 | -207 | 0 | -207 |
| Addition/disposal of minority interests | 0 | 0 | 0 | -9 | 0 | -9 | 9 | 0 |
| Equity 31/12 2012 | 220 | -131 | 220 | 9,119 | -24 | 9,404 | 24 | 9,428 |
ROCKWOOL International A/S aims to pay a stable dividend taking into consideration the Group's profitability and development in equity. In 2012 a dividend of DKK 10.20 per share was decided. At the Annual General Meeting on 9th April 2014, the Board will propose a dividend of DKK 10.40 per share for the financial year 2013.
The Management assesses the Groups capital requirements on an ongoing basis. At the end of 2013 the equity ratio was 69% (2012: 73%). The Group aims at having an equity ratio of at least 50%.
| Foreign | ||||||
|---|---|---|---|---|---|---|
| Share | currency | Proposed | Retained | Total | ||
| DKK million | capital | translation | dividend | earnings | Hedging | equity |
| Equity 1/1 2013 | 220 | 0 | 220 | 7,260 | 0 | 7,700 |
| Profit for the year | 0 | 0 | 224 | -449 | 0 | -225 |
| Other comprehensive income | 0 | 0 | 0 | 0 | 0 | 0 |
| Comprehensive income for the year | 0 | 0 | 224 | -449 | 0 | -225 |
| Sale and purchase of own shares | 0 | 0 | 0 | -22 | 0 | -22 |
| Expensed value of options issued | 0 | 0 | 0 | 5 | 0 | 5 |
| Dividend paid to the shareholders | 0 | 0 | -220 | 3 | 0 | -217 |
| Equity 31/12 2013 | 220 | 0 | 224 | 6,797 | 0 | 7,241 |
| Equity 1/1 2012 | 220 | 0 | 207 | 6,834 | 0 | 7,261 |
| Profit for the year | 0 | 0 | 220 | 447 | 0 | 667 |
| Other comprehensive income | 0 | 0 | 0 | 0 | 0 | 0 |
| Comprehensive income for the year | 0 | 0 | 220 | 447 | 0 | 667 |
| Sale and purchase of own shares | 0 | 0 | 0 | -25 | 0 | -25 |
| Expensed value of options issued | 0 | 0 | 0 | 4 | 0 | 4 |
| Dividend paid to the shareholders | 0 | 0 | -207 | 0 | 0 | -207 |
| Equity 31/12 2012 | 220 | 0 | 220 | 7,260 | 0 | 7,700 |
In connection with the practical application of the accounting policies described, management must carry out estimates and set out assumptions concerning future events affecting assets and liabilities as well as contingent liabilities. Management bases its estimates on historical experience and a number of other assumptions deemed reasonable under the given circumstances.
Impairment testing. When there is an indication of a reduction in the profitability of an asset an impairment test is performed for the assets in question and write-downs are made if necessary. For goodwill annual impairment tests are made. In performing the impairment test the value is based on budgets, business plans and projections for 5 years and takes into account previous experiences and represent Management's best estimate of future developments. Key parameters are growth in sales, margin, future investments and capacity utilisation. Please refer to note 5/6.
Expected lifetime for assets. The expected lifetime for intangible and tangible assets is determined based on past experience and expectations for future use of the assets. Reassessments of the expected future lifetime are also made in connection with changes in production structures. Please refer to note 32.
Deferred tax assets. A tax asset is recognised if it is assessed that the asset can be utilised in a foreseeable future. The judgment is made annually and is based on budgets and Management's expectations for the coming 3-5 years taxable income and whether this is sufficient to utilise the temporary differences and cover unused tax losses including the Group's future tax planning. Please refer to note 18.
Trade receivables. Trade receivables are valued including write-down for non-collectable debtors. The write-downs reflect Managements judgement and review of the individual receivables based on individual customer knowledge, the historical payments, the compliance to previous agreements and current economic trends. Please refer to note 16.
Business Combinations. Management makes estimates of the fair value of acquired assets, liabilities and contingent liabilities. The determined fair value of an item may be associated with uncertainty and adjusted subsequently. The unallocated purchase price is recognised in the balance sheet as goodwill, which is allocated to the Group's cash-generating units. Management makes estimates of the acquired cash-generating units and the allocation of goodwill. Please refer to note 30.
There are not any identified special areas in the accounting principles applied for the Group where the Management has made judgements when applying policies.
| Business segments | ||
|---|---|---|
| Group eliminations and | ||||||||
|---|---|---|---|---|---|---|---|---|
| Group | Insulation segment | Systems segment | holding companies | The ROCKWOOL Group | ||||
| DKK million | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Income statement | ||||||||
| External net sales | 11,966 | 11,991 | 2,937 | 2,673 | 0 | 0 | 14,903 | 14,664 |
| Internal net sales | 1,601 | 1,560 | 2 | 0 | -1,603 | -1,560 | 0 | 0 |
| EBITDA | 1,824 | 1,835 | 319 | 301 | 193 | 117 | 2,336 | 2,253 |
| Depreciation, amortisation | ||||||||
| and write-downs | 981 | 1,069 | 14 | 2 | 81 | 41 | 1,076 | 1,112 |
| EBIT, segment profit | 843 | 766 | 305 | 299 | 112 | 76 | 1,260 | 1,141 |
| Non-current | ||||||||
| asset investments | 1,060 | 662 | 948 | 191 | 72 | 111 | 2,080 | 964 |
| Intangible and | ||||
|---|---|---|---|---|
| Group | tangible assets | Net sales | ||
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Western Europe | 3,633 | 3,604 | 8,858 | 8,970 |
| Eastern Europe and Russia | 2,932 | 3,169 | 3,543 | 3,380 |
| North America, Asia and others | 2,773 | 2,060 | 2,502 | 2,314 |
| Total | 9,338 | 8,833 | 14,903 | 14,664 |
| The net sales information above is based on the location of the customers. | ||||
| Hereof ROCKWOOL International A/S and ROCKWOOL Denmark A/S | 733 | 732 | 867 | 882 |
No customers exceed 10% of the Group's net sales neither this year nor last year.
| 3. Other operating income | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Plant and machinery produced by the Group | 149 | 132 | 0 | 0 | |
| Royalties and other income | 48 | 47 | 857 | 704 | |
| Net profit and loss on sale/scrapping of assets | -6 | 10 | 0 | 0 | |
| Total | 191 | 189 | 857 | 704 |
| 4. Personnel costs | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Wages and salaries | 3,073 | 2,955 | 252 | 245 | |
| Expensed value of options issued | 11 | 10 | 7 | 4 | |
| Pension contributions | 149 | 151 | 25 | 21 | |
| Other social security costs | 430 | 431 | 2 | 2 | |
| Total | 3,663 | 3,547 | 286 | 272 | |
| Average number of employees | 10,066 | 9,411 | 318 | 298 | |
| The above items include to Board and Management: | |||||
| Remuneration to Group Management | 29.6 | 24.9 | 29.6 | 24.9 | |
| Pension contribution | 3.0 | 2.7 | 3.0 | 2.7 | |
| Expensed value of options issued | 6.9 | 3.3 | 6.9 | 3.3 | |
| Board's remuneration | 5.1 | 4.6 | 5.1 | 4.6 | |
| Total | 44.6 | 35.5 | 44.6 | 35.5 | |
| Hereof remuneration to Management Board | 13.1 | 9.9 | 13.1 | 9.9 | |
| Hereof expensed value of options issued to Management Board | 2.8 | 1.4 | 2.8 | 1.4 | |
| Hereof pension to Management Board | 1.2 | 1.2 | 1.2 | 1.2 | |
| Total to Management Board | 17.1 | 12.5 | 17.1 | 12.5 |
Share options programme
Management and senior managers receive share options to retain them in the ROCKWOOL Group. The share option schemes for retaining executives fulfil the criteria provided for in the Corporate Governance recommendations. The share options are exercisable 3 years after the issue date and will expire between 6 and 8 years after the issue date. The exercise price is based on the market price of the ROCKWOOL International share at the date of grant corrected for the estimated future dividend and interest costs.
The vesting conditions for the share option programme are a minimum of 12 months service with the ROCKWOOL Group at senior management level. There are no cash settlement alternatives and the Group does not have a past practice of cash settlements for these.
| 2013 | ||||
|---|---|---|---|---|
| Year | Agreements | Number of shares | Price | Exercise period |
| 2008 | 65 | 53,250 | 827-844-862 | 1/8 2011-31/7 2014* |
| 2009 | 79 | 64,650 | 421 | 1/11 2013-31/10 2016 |
| 2011 | 147 | 101,400 | 642-644-646 | 1/9 2014 - 31/8 2017* |
| 2012 | 92 | 107,000 | 515 | 1/9 2015 - 31/8 2020 |
| 2013 | 60 | 102,700 | 900 | 23/9 2016 - 22/9 2021 |
| 443 | 429,000 |
* Share options can be exercised by employees in the Group at the lower value in the beginning of the period and at the higher value at the end of the period.
Of the number of shares 51,850 belongs to Management Board and 377,150 to senior managers.
| Share options programme | ||||
|---|---|---|---|---|
| 2012 | ||||
| Year | Agreements | Number of shares | Price | Exercise period |
| 2007 | 99 | 102,200 | 1,997-2,071 1/11 2010 - 31/10 2013* | |
| 2008 | 118 | 105,700 | 827-844-862 | 1/8 2011-31/7 2014* |
| 2009 | 133 | 106,400 | 421 | 1/11 2013-31/10 2016 |
| 2011 | 153 | 104,610 | 642-644-646 | 1/9 2014-31/8 2017* |
| 2012 | 94 | 108,500 | 515 | 1/9 2015-31/8 2020 |
| 597 | 527,410 |
* Share options can be exercised by employees in the Group at the lower value in the beginning of the period and at the higher value at the end of the period.
Of the number of shares 58,756 belongs to Management Board and 468,660 to senior managers.
| 2013 2012 |
||||
|---|---|---|---|---|
| Share options | Number of shares | Average price Number of shares | Average price | |
| Options outstanding 1/1 | 527,410 | 889 | 420,160 | 971 |
| Issued during the year | 102,700 | 900 | 108,500 | 515 |
| Exercised during the year | 85,500 | 650 | 0 | 0 |
| Expired/cancelled during the year | 115,610 | 1,903 | 1,250 | 539 |
| Options outstanding 31/12 | 429,000 | 666 | 527,410 | 889 |
Share options issued during 2013 were, at the time they were issued, valued at DKK 20 million (2012: DKK 16 million). The market value of the share options has been calculated using the Black-Scholes option pricing model with assumptions as shown below, where the volatility is based on a 3 year historical average of volatility of the ROCKWOOL International A/S B-share:
| 2013 | 2012 | |
|---|---|---|
| Expected life of the option in years (average) | 5 | 5 |
| Expected volatility | 29.7% | 37.2% |
| Expected dividend per share | 1.13% | 1.86% |
| Risk-free interest rate | 1.14% | 0.68% |
| ROCKWOOL B share price at the date of grant (DKK) | 904 | 525 |
| 5. Depreciation, amortisation and write-downs | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Amortisation of intangible assets | 112 | 80 | 83 | 66 | |
| Reversal of previous write-down of intangible assets | 0 | -23 | 0 | -23 | |
| Depreciation of tangible assets | 921 | 957 | 7 | 9 | |
| Write-down of tangible assets | 43 | 98 | 0 | 0 | |
| Total | 1,076 | 1,112 | 90 | 52 |
The impairment tests for goodwill are based on value in use and calculated using the expected future cash flows. The assessment of future cash flows is based on 5-year management approved budgets and business plans where the last year is used as a normalized terminal year. The discount rates in the insulation segment range from 7%-11% (2012: 7%-12%%) and in the System segment from 10%-11% (in 2012 no impairment test was made for the System segment). The average growth rate in the terminal period has been set at zero both this year and last year in both the insulation and System segment. The impairment test for goodwill did not lead to any impairment write-downs of goodwill.
Key assumptions used in impairment testing for both segments are growth in sales, gross margin, future investments, capacity utilisation and discount rates. Growth in sales is estimated to be between 2%-8% depending on the businesses. Gross margins are based on average values the last 3 years and adjusted over the budget period for efficiency improvements and expected raw material inflation based on past actual price movements. Future investment is derived from the management approved investment budget and the capacity utilization are based on the current situation including investment plans. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC).
As a consequence of impairment tests and other assets evaluations in 2012 the Group made write-downs of the booked value of some of the tangible assets in the Insulation segment, at an amount of DKK 98 million. The discount rate used in the impairment test was set at 10% (2011: 10%). Furthermore some of the previous write-downs of development projects have been reversed at an amount of DKK 23 million due to improvement of performance in the specific projects.
In 2013 the value of the Group businesses in Western Europe was assessed considering the difficulties in some markets as well as the low capacity utilization of some Western European factories in the Insulation segment. Consequently, the impairment calculation shows the need for a write-down of tangible assets by DKK 43 million. The recoverable amount of the businesses amounts to DKK 480 million (2012: DKK 1,163 million) and was calculated as the value in use. The discount rate used in the impairment test was set at 10% (2012: 10%).
| 6. Income from investments in subsidiaries | Parent Company | |
|---|---|---|
| DKK million | 2013 | 2012 |
| Dividends received from subsidiaries | 532 | 603 |
| Write-down of shares in subsidiaries | -768 | 0 |
| Total | -236 | 603 |
In the parent company an impairment test of subsidiaries has been made, which has led to a write-down of DKK 768 million due to difficult Western European market conditions . The recoverable amount of the subsidiaries amounts to DKK 480 million (2012: DKK 1,183 million) and was calculated as the value in use. The discount rate used in the impairment test was set at 10% (2012: 10%).
| 7. Financial income | Group | Parent Company | ||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Interest income | 20 | 36 | 4 | 3 |
| Interest income from subsidiaries | 0 | 0 | 43 | 55 |
| Exchange gains | 83 | 79 | 43 | 26 |
| Total | 103 | 115 | 90 | 84 |
| Financial income on financial assets at amortised cost | 45 | 40 | 4 | 2 |
| 8. Financial expenses | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Interest expenses etc. | 42 | 67 | 42 | 28 | |
| Interest expenses to subsidiaries | 0 | 0 | 5 | 1 | |
| Exchange losses | 107 | 103 | 105 | 53 | |
| Total | 149 | 170 | 152 | 82 | |
| Financial expenses on financial liabilities at amortised cost | 73 | 74 | 42 | 28 |
| 2013 448 |
2012 299 |
2013 | 2012 |
|---|---|---|---|
| 57 | 4 | ||
| -11 | -9 | 0 | 0 |
| -63 | 48 | -26 | 14 |
| 0 | 0 | 0 | 0 |
| 374 | 338 | 31 | 18 |
| 362 | 324 | 31 | 18 |
| 0 | |||
| 12 14 0 |
| Group | |
|---|---|
| 2013 | 2012 |
| 25.0% | 25.0% |
| 3.3% | 5.0% |
| -0.2% | -0.2% |
| -0.4% | -1.1% |
| 1.8% | 0.8% |
| 29.5% | 29.5% |
| 10. Earnings per share | Group | |
|---|---|---|
| DKK million | 2013 | 2012 |
| Profit for the year excluding minority interests | 862 | 772 |
| Average number of shares (million) | 22.0 | 22.0 |
| Average number of own shares (million) | 0.5 | 0.4 |
| Average number of shares outstanding (million) | 21.5 | 21.6 |
| Dilution effect of share options | 0.1 | 0.0 |
| Diluted average number of outstanding shares (million) | 21.6 | 21.6 |
| Earnings per share of DKK 10 | 40.1 | 35.8 |
| Earnings per share of DKK 10, diluted | 39.9 | 35.7 |
| DKK million | Group Parent Company |
|||||||
|---|---|---|---|---|---|---|---|---|
| Customer relation |
||||||||
| 2013 | Goodwill | Software | ships | Other | Total | Software | Other | Total |
| Cost: | ||||||||
| Accumulated 1/1 2013 | 295 | 431 | 198 | 147 | 1,071 | 394 | 232 | 626 |
| Exchange rate adjustment | -8 | -1 | -9 | -5 | -23 | 0 | 0 | 0 |
| Additions for the year | 0 | 52 | 0 | 3 | 55 | 49 | 0 | 49 |
| Business combinations | 123 | 1 | 100 | 164 | 388 | 0 | 0 | 0 |
| Disposals for the year | 0 | -1 | 0 | -2 | -3 | 0 | 0 | 0 |
| Accumulated 31/12 2013 | 410 | 482 | 289 | 307 | 1,488 | 443 | 232 | 675 |
| The above costs include: | ||||||||
| Intangible assets under construction | 0 | 37 | 0 | 0 | 37 | 37 | 0 | 37 |
| Amortisation and write-downs: | ||||||||
| Accumulated 1/1 2013 | 159 | 251 | 36 | 37 | 483 | 216 | 44 | 260 |
| Exchange rate adjustment | 0 | 0 | -2 | -1 | -3 | 0 | 0 | 0 |
| Amortisation for the year | 0 | 71 | 18 | 23 | 112 | 62 | 21 | 83 |
| Disposals for the year | 0 | 0 | 0 | -1 | -1 | 0 | 0 | 0 |
| Accumulated 31/12 2013 | 159 | 322 | 52 | 58 | 591 | 278 | 65 | 343 |
| Net book value 31/12 2013 | 251 | 160 | 237 | 249 | 897 | 165 | 167 | 332 |
| Customer | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2012 | Goodwill | Software | relation ships |
Other | Total | Software | Other | Total |
| Cost: | ||||||||
| Accumulated 1/1 2012 | 291 | 358 | 189 | 174 | 1,012 | 322 | 232 | 554 |
| Exchange rate adjustment | 4 | 1 | 9 | 0 | 14 | 0 | 0 | 0 |
| Additions for the year | 0 | 74 | 0 | 0 | 74 | 74 | 0 | 74 |
| Disposals for the year | 0 | -2 | 0 | -27 | -29 | -2 | 0 | -2 |
| Accumulated 31/12 2012 | 295 | 431 | 198 | 147 | 1,071 | 394 | 232 | 626 |
| The above costs include: | ||||||||
| Intangible assets under construction | 0 | 65 | 0 | 0 | 65 | 65 | 0 | 65 |
| Amortisation and write-downs: | ||||||||
| Accumulated 1/1 2012 | 158 | 204 | 15 | 76 | 453 | 170 | 49 | 219 |
| Exchange rate adjustment | 1 | 0 | 1 | 0 | 2 | 0 | 0 | 0 |
| Amortisation for the year | 0 | 49 | 20 | 11 | 80 | 48 | 18 | 66 |
| Reversal of write-downs for the year | 0 | 0 | 0 | -23 | -23 | 0 | -23 | -23 |
| Disposals for the year | 0 | -2 | 0 | -27 | -29 | -2 | 0 | -2 |
| Accumulated 31/12 2012 | 159 | 251 | 36 | 37 | 483 | 216 | 44 | 260 |
| Net book value 31/12 2012 | 136 | 180 | 162 | 110 | 588 | 178 | 188 | 366 |
Goodwill is allocated to the business segment Insulation at an amount of DKK 128 million (2012: DKK 136 million) and to the System segment at an amount of DKK 123 million (2012: DKK 0 million). Goodwill has been impairment tested in 2013 and 2012, which did not lead to any impairment write-downs.
The impairment test of goodwill is based on current and future results for the segments to where allocated. Most of the goodwill in the Group is related to the acquisition of CMC in 2013 and CSR in 2010 and this part of the Group is performing according to plan. For a description of impairment test on intangible assets please refer to note 5.
The net book value of other intangible assets includes development projects amounting to DKK 67 million (2012: DKK 76 million) and brands amounting to DKK 167 million (2012: DKK 14 million).
| DKK million | Group | |||||
|---|---|---|---|---|---|---|
| Other | and tangible | |||||
| Buildings | Plant and | operating | assets under | Investment | ||
| 2013 | and sites | machinery | equipment | construction | grants | Total |
| Cost: | ||||||
| Accumulated 1/1 2013 | 6,188 | 13,437 | 692 | 509 | -590 | 20,236 |
| Exchange rate adjustment | -271 | -440 | -22 | -36 | 3 | -766 |
| Additions for the year | 45 | 84 | 14 | 1,240 | -21 | 1,362 |
| Business combinations | 103 | 136 | 27 | 9 | 0 | 275 |
| Transfer of assets under construction | 215 | 446 | 39 | -700 | 0 | 0 |
| Disposals for the year | -123 | -545 | -82 | 0 | 21 | -729 |
| Accumulated 31/12 2013 | 6,157 | 13,118 | 668 | 1,022 | -587 | 20,378 |
| Depreciation and write-downs: | ||||||
| Accumulated 1/1 2013 | 2,457 | 9,376 | 597 | 2 | -441 | 11,991 |
| Exchange rate adjustment | -60 | -239 | -14 | 0 | 2 | -311 |
| Depreciation for the year | 166 | 740 | 30 | 0 | -15 | 921 |
| Write-downs for the year | 0 | 43 | 0 | 0 | 0 | 43 |
| Disposals for the year | -112 | -527 | -80 | -2 | 14 | -707 |
| Accumulated 31/12 2013 | 2,451 | 9,393 | 533 | 0 | -440 | 11,937 |
| Net book value 31/12 2013 | 3,706 | 3,725 | 135 | 1,022 | -147 | 8,441 |
| Investment grants | -82 | -65 | 0 | 0 | 147 | 0 |
| Net book value after investment grants 31/12 2013 | 3,624 | 3,660 | 135 | 1,022 | 0 | 8,441 |
| 2012 | ||||||
| Cost: | ||||||
| Accumulated 1/1 2012 | 5,630 | 12,456 | 746 | 954 | -609 | 19,177 |
| Exchange rate adjustment | 111 | 226 | 13 | 45 | -10 | 385 |
| Additions for the year | 18 | 110 | 14 | 794 | -2 | 934 |
| Transfer of assets under construction | 446 | 828 | 5 | -1,279 | 0 | 0 |
| Disposals for the year | -17 | -183 | -86 | -5 | 31 | -260 |
| Accumulated 31/12 2012 | 6,188 | 13,437 | 692 | 509 | -590 | 20,236 |
| Depreciation and write-downs: | ||||||
| Accumulated 1/1 2012 | 2,248 | 8,546 | 639 | 2 | -434 | 11,001 |
| Exchange rate adjustment | 38 | 150 | 10 | 0 | -3 | 195 |
| Depreciation for the year | 181 | 761 | 33 | 0 | -18 | 957 |
| Write-downs for the year | 0 | 98 | 0 | 0 | 0 | 98 |
| Disposals for the year | -10 | -179 | -85 | 0 | 14 | -260 |
| Accumulated 31/12 2012 | 2,457 | 9,376 | 597 | 2 | -441 | 11,991 |
| Net book value 31/12 2012 | 3,731 | 4,061 | 95 | 507 | -149 | 8,245 |
| Investment grants | -78 | -71 | 0 | 0 | 149 | 0 |
| Net book value after investment grants 31/12 2012 | 3,653 | 3,990 | 95 | 507 | 0 | 8,245 |
44
Of the total net book value of buildings and sites, DKK 522 million (2012: DKK 512 million) represents sites not subject to depreciation. Costs for building and machinery acquired as finance lease at DKK 49 million (2012: DKK 45 million) represents a net book value of DKK 6 million (2012: DKK 11 million).
Accumulated capitalised interests amounting to DKK 46 million (2012: DKK 48 million) are included in the cost of tangible assets. The range of interests rates used is 1%-10% (2012: 2%-9%).
For the recognised investment grants the attached conditions are fulfilled or are expected to be fulfilled. Some of the received investment grants are subject to repayment obligations provided that the attached conditions are not fulfilled within a number of years. The Group's investment grants are for the main part received in Poland, Spain, the UK and Germany. The investment grants are in most cases linked to expansion of the Group including the amount of investment in tangible assets and the creation of jobs - and is given as cash, tax holiday or loans. Only limited contingent liabilities exists.
For a description of impairment tests on tangible assets please see note 5.
Contractual obligations for the purchase of tangible assets amounts to DKK 131 million (2012: DKK 74 million).
| DKK million | Parent Company | |||||
|---|---|---|---|---|---|---|
| Prepayments | ||||||
| Other | and tangible | |||||
| Buildings | Plant and | operating | assets under | Investment | ||
| 2013 | and sites | machinery | equipment | construction | grants | Total |
| Cost: | ||||||
| Accumulated 1/1 2013 | 171 | 0 | 88 | 0 | 0 | 259 |
| Additions for the year | 33 | 0 | 4 | 0 | 0 | 37 |
| Disposals for the year | 0 | 0 | 0 | 0 | 0 | 0 |
| Accumulated 31/12 2013 | 204 | 0 | 92 | 0 | 0 | 296 |
| Depreciation and write-downs: | ||||||
| Accumulated 1/1 2013 | 90 | 0 | 78 | 0 | 0 | 168 |
| Depreciation for the year | 4 | 0 | 3 | 0 | 0 | 7 |
| Disposals for the year | 0 | 0 | 0 | 0 | 0 | 0 |
| Accumulated 31/12 2013 | 94 | 0 | 81 | 0 | 0 | 175 |
| Net book value 31/12 2013 | 110 | 0 | 11 | 0 | 0 | 121 |
| Investment grants | 0 | 0 | 0 | 0 | 0 | 0 |
| Net book value after investment grants 31/12 2013 | 110 | 0 | 11 | 0 | 0 | 121 |
| 2012 | ||||||
| Cost: | ||||||
| Accumulated 1/1 2012 | 134 | 0 | 99 | 0 | 0 | 233 |
| Additions for the year | 37 | 0 | 0 | 0 | 0 | 37 |
| Disposals for the year | 0 | 0 | -11 | 0 | 0 | -11 |
| Accumulated 31/12 2012 | 171 | 0 | 88 | 0 | 0 | 259 |
| Depreciation and write-downs: | ||||||
| Accumulated 1/1 2012 | 87 | 0 | 83 | 0 | 0 | 170 |
| Depreciation for the year | 3 | 0 | 6 | 0 | 0 | 9 |
| Disposals for the year | 0 | 0 | -11 | 0 | 0 | -11 |
| Accumulated 31/12 2012 | 90 | 0 | 78 | 0 | 0 | 168 |
| Net book value 31/12 2012 | 81 | 0 | 10 | 0 | 0 | 91 |
| Investment grants | 0 | 0 | 0 | 0 | 0 | 0 |
| Net book value after investment grants 31/12 2012 | 81 | 0 | 10 | 0 | 0 | 91 |
| DKK million | Group | ||||
|---|---|---|---|---|---|
| Shares in | Shares in | ||||
| associated | Shares in | Loans to | associated | ||
| 2013 | companies | subsidiaries | subsidiaries | companies | Total |
| Cost: | |||||
| Accumulated 1/1 2013 | 66 | 8,536 | 1,560 | 35 | 10,131 |
| Exchange rate adjustment | 0 | 0 | 0 | 0 | 0 |
| Additions for the year | 0 | 688 | 758 | 0 | 1,446 |
| Reductions for the year | 0 | -1,052 | -566 | 0 | -1,618 |
| Accumulated 31/12 2013 | 66 | 8,172 | 1,752 | 35 | 9,959 |
| Adjustments: | |||||
| Accumulated 1/1 2013 | 268 | -891 | -37 | 0 | -928 |
| Exchange rate adjustment | -5 | 0 | 0 | 0 | 0 |
| Profit for the year | 8 | 0 | 0 | 0 | 0 |
| Write-down for the year | 0 | -763 | 0 | 0 | -763 |
| Dividend | -8 | 0 | 0 | 0 | 0 |
| Accumulated 31/12 2013 | 263 | -1,654 | -37 | 0 | -1,691 |
| Net book value 31/12 2013 | 329 | 6,518 | 1,715 | 35 | 8,268 |
| 2012 | |||||
| Cost: | |||||
| Accumulated 1/1 2012 | 66 | 7,897 | 1,860 | 35 | 9,792 |
| Exchange rate adjustment | 0 | 0 | 0 | 0 | 0 |
| Additions for the year | 0 | 639 | 519 | 0 | 1,158 |
| Reductions for the year | 0 | 0 | -819 | 0 | -819 |
| Accumulated 31/12 2012 | 66 | 8,536 | 1,560 | 35 | 10,131 |
| Adjustments: | |||||
| Accumulated 1/1 2012 | 268 | -891 | -37 | 0 | -928 |
| Exchange rate adjustment | 3 | 0 | 0 | 0 | 0 |
| Profit for the year after tax | 12 | 0 | 0 | 0 | 0 |
| Dividend | -15 | 0 | 0 | 0 | 0 |
| Accumulated 31/12 2012 | 268 | -891 | -37 | 0 | -928 |
| Net book value 31/12 2012 | 334 | 7,645 | 1,523 | 35 | 9,203 |
| Associated companies, main figures (100%) | Transys | RESO SA | Flumroc AG | |||
|---|---|---|---|---|---|---|
| Shares owned in the Group | 30% | 20% | 42.3% | |||
| DKK million | 2012 | 2011 | 2013 | 2012 | 2012 | 2011 |
| Net sales | 27 | 26 | 791 | 798 | 500 | 518 |
| Profit for the year | 2 | 1 | 19 | 19 | 4 | 22 |
| Total assets | 15 | 11 | 329 | 332 | 857 | 895 |
| Liabilities | 8 | 7 | 243 | 249 | 151 | 160 |
In 'Loans to subsidiaries' an amount of DKK 490 million (2012: DKK 532 million) is recognised as an addition to the share investment. Reference is made to the list of Group companies page 63.
In the parent company impairment tests have been made of the value of the shares in subsidiaries and the loans to subsidiaries. Please refer to note 6.
In connection with the raising of loans and credit facilities, the parent company has accepted restrictions of its rights of disposal of the shares in subsidiaries representing a book value of DKK 1,494 million (2012: DKK 2,283 million).
| 14. Own shares (A and B shares) | Group | |||||||
|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | |||||||
| Average | Average | |||||||
| Number of | purchase/ | % of share | Number of | purchase/ | % of share | |||
| shares | sales price | capital | shares | sales price | capital | |||
| Own shares 1/1 | 427,310 | 1.9 | 379,702 | 1.7 | ||||
| Purchase | 93,925 | 790 | 0.4 | 47,608 | 514 | 0.2 | ||
| Sale | 83,989 | 651 | 0.3 | 0 | 0 | 0 | ||
| Own shares 31/12 | 437,246 | 2.0 | 427,310 | 1.9 |
Own shares are acquired and sold in connection with hedging of the Group's options programme, etc. Own shares are purchased based on authorisation from the Generel Assembly.
| 15. Inventories | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Inventory before write-downs | 1,331 | 1,233 | 18 | 3 | |
| Write-downs 1/1 | -58 | -35 | 0 | 0 | |
| Change in the year | -67 | -23 | 0 | 0 | |
| Write-downs 31/12 | -125 | -58 | 0 | 0 | |
| Inventories 31/12 | 1,206 | 1,175 | 18 | 3 |
In 2013 the Group has made a write-down to a lower net realisable value of a specific inventory in the Insulation segment which amounts to DKK 67 million.
| Specification of inventories | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Raw material and consumables | 575 | 590 | 18 | 3 | |
| Work in progress | 65 | 61 | 0 | 0 | |
| Finished goods | 566 | 524 | 0 | 0 | |
| Inventories 31/12 | 1,206 | 1,175 | 18 | 3 |
| 16. Trade receivables | Group | |
|---|---|---|
| DKK million | 2013 | 2012 |
| Trade receivables before write-downs (maximum credit risk) | 1,663 | 1,601 |
| Write-downs 1/1 | -92 | -89 |
| Movements during the year | -14 | -14 |
| Realised losses during the year | 18 | 11 |
| Write-downs 31/12 | -88 | -92 |
| Trade receivables 31/12 | 1,575 | 1,509 |
| Trade receivables (gross) can be specified as follows: | Group | |
|---|---|---|
| DKK million | 2013 | 2012 |
| Not due | 1,347 | 1,233 |
| Overdue by: | ||
| 1-60 days | 226 | 282 |
| 60-360 days | 52 | 42 |
| Older | 38 | 44 |
| Trade receivables before write-downs | 1,663 | 1,601 |
Primarily trade receivables overdue more than 90 days are written off.
| 17. Share capital | Parent Company | |||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | ||
| A shares - 11,231,627 shares of DKK 10 each | 112 | 112 | ||
| B shares - 10,743,296, shares of DKK 10 each | 108 | 108 | ||
| Total | 220 | 220 |
Each A share of a nominal value of DKK 10 carries 10 votes, and each B share of a nominal value of DKK 10 carries 1 vote. The total share capital has been unchanged for the last 15 years.
| 18. Specification of tax assets and deferred tax | Group | |||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | ||
| Assets | Liabilities | Assets | Liabilities | |
| Non-current assets | 208 | 391 | 135 | 414 |
| Current assets | 75 | 2 | 86 | 6 |
| Non-current liabilities | 94 | 0 | 125 | 0 |
| Current liabilities | 44 | 22 | 35 | 43 |
| Tax loss carried forward | 57 | 0 | 90 | 0 |
| Retaxable amounts | 0 | 159 | 0 | 185 |
| Total | 478 | 574 | 471 | 648 |
| Set-off within legal tax entities and jurisdictions | -214 | -214 | -201 | -201 |
| Deferred tax 31/12 | 264 | 360 | 270 | 447 |
The tax assets expire as follows:
| Recognised | Unrecognised | Recognised | Unrecognised | |
|---|---|---|---|---|
| assets | assets | assets | assets | |
| Within 1 year of balance sheet date | 2 | 0 | 3 | 0 |
| Within 1-5 years of balance sheet date | 32 | 35 | 52 | 18 |
| After 5 years of balance sheet date | 35 | 15 | 38 | 24 |
| Do not expire | 195 | 164 | 177 | 177 |
| Total | 264 | 214 | 270 | 219 |
Tax assets not recognised amount to DKK 214 million (2012: DKK 219 million). The tax assets have not been recognised as they have arisen in subsidiaries that have been loss-making for some time and there is no evidence of recoverability in the near future.
Deferred tax assets and liabilities are offset in the consolidated balance sheet if the Group has a legally enforceable right to set off and the deferred tax assets and liabilities relate to the same legal tax entity/consolidation. Of the total deferred tax assets recognised, DKK 57 million (2012: DKK 90 million) relate to tax loss carry forwards. The valuation of tax assets is done on a yearly basis and is based on expected positive taxable income within the next 3-5 years.
A number of the Group's employees and former employees participate in pension schemes. The pension schemes are primarily defined contribution plans. However, defined benefit plans are used for Belgium and for past services only in UK and for small groups of employees in Norway, Switzerland and Germany.
Under a defined benefit plan the Group carries the risk associated with the future development in e.g. interest rates, inflation, salaries, mortality and disability. Defined benefit plan typically guarantee the employees a retirement benefit based on the final salary at retirement.
The retirement benefit plans in the UK and Belgium have assets placed in independent pension funds. A number of plans in Germany and Norway are unfunded. For these plans the retirement benefit obligations amount to approximately 24% (2012: 25%) of the total gross liability. Except for the UK plan, the mentioned defined benefit plans are not subject to regulatory requirements regarding minimum funding.
The granted retirement payments of the mentioned defined benefit plans are based upon the salary of the participating employees during the period of employment. The Groups contributions are derived from the split of the pension premium between the employee and employer.
| Group | ||
|---|---|---|
| DKK million | 2013 | 2012 |
| Defined contribution plans | ||
| Pension costs for the year, total | 140 | 135 |
| Defined benefit plans | ||
| Pension costs | 4 | 3 |
| Interest costs | 31 | 35 |
| Interest income | -24 | -24 |
| Pension costs for the year, total | 11 | 14 |
| Net value of pension plans | Group | ||||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2011 | 2010 | 2009 |
| Present value of pension liabilities | 794 | 773 | 727 | 700 | 669 |
| Fair value of plan assets | -589 | -549 | -493 | -488 | -457 |
| Net value of pension plans 31/12 | 205 | 224 | 234 | 212 | 212 |
The actuarial assessment of the pension obligation is based on assumptions specific to each country. The lastest actuarial calculation is prepared by authorised experts. The valuation of the assets are based on the composition and the expectations to the economical development. The assumptions used are weighted averages:
| Group | ||
|---|---|---|
| 2013 | 2012 | |
| Increase in salaries and wages | 2.9% | 2.4% |
| Discount rate | 4.2% | 4.3% |
| Remaining life expectancy (years) | 40.1 | 39.7 |
| Development in the present value of the defined benefit obligation | Group | |
|---|---|---|
| DKK million | 2013 | 2012 |
| Balance 1/1 | 773 | 727 |
| Exchange rate adjustments | -11 | 15 |
| Pension costs | 4 | 3 |
| Interests costs | 31 | 35 |
| Actuarial gains/losses from changes in demographic assumptions | -21 | 0 |
| Actuarial gains/losses from changes in financial assumptions | 51 | 22 |
| Benefits paid | -33 | -29 |
| Total 31/12 | 794 | 773 |
A sensitivity analysis for significant assumptions as at 31 December 2013 is shown below:
| Group | |||||||
|---|---|---|---|---|---|---|---|
| Assumptions | Discount rate | Salary increase | Life expectancy | ||||
| -0,5% | +0,5% | -0,25% | +0,25% | -1 year | + 1 year | ||
| Impact on obligation | 75 | -67 | -1 | 1 | -15 | 19 |
The sensitivity analysis above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions.
The following payments are expected contributions to the defined benefit plan obligation:
| Group | ||
|---|---|---|
| DKK million | 2013 | 2012 |
| 0-1 year | 13 | 14 |
| 1-5 years | 57 | 53 |
| Falling due after 5 years | 89 | 55 |
| Total | 159 | 122 |
The expected duration of the defined benefit plan obligation is 18 years (2012: 20 years) as at year end.
| Development in the fair value of the plan assets: | Group | ||
|---|---|---|---|
| DKK million | 2013 | 2012 | |
| Balance 1/1 | 549 | 493 | |
| Exchange rate adjustments | -11 | 13 | |
| Interest income | 24 | 24 | |
| Actuarial gains/losses | 46 | 32 | |
| Employer's contribution | 5 | 5 | |
| Benefits paid | -24 | -18 | |
| Total 31/12 | 589 | 549 | |
| Plan assets in major categories held as a percentage of total plan assets | Group | ||
|---|---|---|---|
| 2013 | 2012 | ||
| Assets quoted in active markets: | |||
| Equities in European markets | 59% | 58% | |
| Bonds in European markets | 41% | 39% | |
| Assets unquoted: | |||
| Cash | 0% | 3% |
| 20. Other provisions | Group | Parent Company | ||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Provision for employees 1/1 | 119 | 132 | 2 | 2 |
| Exchange rate adjustments | -2 | 2 | 0 | 0 |
| Additions for the year | 16 | 15 | 1 | 0 |
| Used during the year | -5 | -29 | 0 | 0 |
| Reversed during the year | 0 | -1 | 0 | 0 |
| Total 31/12 | 128 | 119 | 3 | 2 |
| Provisions for claims and legal proceedings 1/1 | 30 | 25 | 0 | 0 |
| Exchange rate adjustments | 0 | 0 | 0 | 0 |
| Additions for the year | 21 | 16 | 0 | 0 |
| Used during the year | -9 | -4 | 0 | 0 |
| Reversed during the year | -10 | -7 | 0 | 0 |
| Total 31/12 | 32 | 30 | 0 | 0 |
| Other provisions 1/1 | 107 | 103 | 0 | 8 |
| Exchange rate adjustments | -2 | 1 | 0 | 0 |
| Additions for the year | 51 | 60 | 0 | 0 |
| Used during the year | -27 | -45 | 0 | -8 |
| Reversed during the year | -12 | -12 | 0 | 0 |
| Total 31/12 | 117 | 107 | 0 | 0 |
| Total provisions | 277 | 256 | 3 | 2 |
| Specification of provisions: | ||||
| Non-current liabilities | 194 | 158 | 3 | 2 |
| Current liabilities | 83 | 98 | 0 | 0 |
| Total provisions | 277 | 256 | 3 | 2 |
Provisions relate primarily to jubilee obligations and retirement benefits and ongoing disputes, lawsuits etc.
As at 31 December 2013 other provisions include a provision of DKK 71 million (2012: DKK 66 million) for restructuring measures. This provision is expected to be utilized within 1-3 years.
| 21. Bank loans and other financial liabilities | Group | Parent Company | ||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Redemption | ||||
| Redemption within 1 year | 3,192 | 2,430 | 2,120 | 1,569 |
| Redemption between 1 and 3 years | 210 | 174 | 281 | 983 |
| Redemption between 3 and 5 years | 22 | 20 | 0 | 0 |
| Falling due after 5 years | 9 | 10 | 0 | 0 |
| Total non-current | 241 | 204 | 281 | 983 |
| Interest assessment time | ||||
| Reassessed less than 12 months | 49 | 49 | 93 | 875 |
| Reassessed after more than 12 months or is fixed-interest | 192 | 155 | 188 | 108 |
| Total | 241 | 204 | 281 | 983 |
| Yield | ||||
| Non-interests bearing | 0 | 100 | 0 | 100 |
| Below 4% | 189 | 5 | 281 | 875 |
| Between 4% and 6% | 52 | 99 | 0 | 8 |
| Between 6% and 8% | 0 | 0 | 0 | 0 |
| Total | 241 | 204 | 281 | 983 |
Of the total debt DKK 1 million (2012: DKK 2 million) comprise capitalised finance lease commitments.
| 22. Company tax | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Balance 1/1 | -8 | -27 | -4 | -83 | |
| Exchange rate adjustment | 0 | -3 | 0 | 0 | |
| Adjustment of deferred tax previous years | 0 | 0 | 0 | 58 | |
| Tax paid during the year | -408 | -260 | -57 | 18 | |
| Current tax provided in the year | 425 | 289 | 52 | 4 | |
| Other taxes provided in the year | -10 | -7 | 0 | -1 | |
| Total 31/12 | -1 | -8 | -9 | -4 |
| 23. Adjustments | Group | Parent Company | ||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Provisions | 20 | -7 | 1 | -8 |
| Expensed value of options issued | 10 | 10 | 5 | 4 |
| Gain/loss on sale of intangible and tangible assets | -6 | -10 | 0 | 0 |
| Income from subsidiaires and associated companies | 0 | 0 | 536 | 616 |
| Total adjustments | 24 | -7 | 542 | 612 |
| 24. Change in net working capital | Group | Parent Company | |||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Change in inventories | -15 | -117 | -70 | 104 | |
| Change in trade receivables | 41 | 61 | 0 | 0 | |
| Change in other receivables | -17 | -44 | -243 | 111 | |
| Change in trade payables | 41 | -92 | -18 | 43 | |
| Change in other debt | -62 | 33 | 57 | 83 | |
| Change in net working capital | -12 | -159 | -274 | 341 |
| 25. Cash available | Group | Parent Company | ||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Cash | 502 | 484 | 0 | 0 |
| Bank debts | -768 | -295 | -350 | -117 |
| Cash available 31/12 | -266 | 189 | -350 | -117 |
As a consequence of the ROCKWOOL Group's extensive international activities the Group's income statement and equity are subject to a number of financial risks. The Group manages these risks in the following categories:
The Group's policy is to identify and hedge significant financial risks on an ongoing basis. This is the responsibility of the individual companies in which financial risks might arise. The parent company continuously monitors the Group's financial risks in accordance with a framework determined by Group Management.
As a consequence of the Group's structure, net sales and expenditure in foreign currency are to a significant degree set off against each other, so that the Group is not exposed to major exchange-rate risks.
Commercial exchange-rate risks in the companies which cannot be set off are hedged on a continuous basis, to the extent that they may significantly affect the results of the individual company in a negative direction, using currency loans, currency deposits and/or financial derivatives. Exchange-rate risks are hedged in the individual companies.
The Group's net sales and expenditures will be subject to exchange-rate fluctuations on translation into to Danish Kroner; however, the risk is assessed to be limited. A sensitivity analysis showing the exchange rate effect on the result and equity has been made. The sensitivity analysis shows the impact of a 1% change in the exchange rates on the net result and the equity without taking any hedging activity into consideration:
| Effect on | Effect on | Effect on | Effect on | |
|---|---|---|---|---|
| Result | Equity | Result | Equity | |
| DKK million | 2013 | 2013 | 2012 | 2012 |
| CAD | +/-1.1 | +/-4.6 | +/-2.1 | +/-5.0 |
| RUB | +/-15.8 | +/-20.5 | +/- 4.2 | +/-20.3 |
| USD | +/-3.3 | +/-11.2 | +/-4.0 | +/-1.0 |
| PLN | +/-0.7 | +/-13.6 | +/-0.7 | +/-23.6 |
The impact on the net sales of the difference between average rate and year-end rate amounts to DKK -210 million (2012: DKK -21 million) for the 4 largest currencies except for Euro, which is a change of 1.5%.
The Group's policy is not to hedge exchange rate risks in long-term investments in subsidiaries.
When relevant external investment loans and Group loans are, as a general rule, established in the local currency of the company involved, while cash at bank and in hand are placed in the local currency. In the few countries with ineffective financial markets loans can be raised and surplus liquidity placed in DKK, EUR or USD, subject to the approval of the parent company's finance function.
Group loans that are not established in DKK or EUR are hedged in the parent company via forward agreements, currency loans and cash pools or via the SWAP market.
The Group's interest-rate risk primarily comprises interest-bearing debt since the Group does not currently have significant interest-bearing assets of longer duration. The Group's policy is that necessary financing of investments should primarily be affected by raising 5 to 7 year loans at fixed or variable interest rates.
Drawings on credit facilities at variable interest rates generally match the liquid assets, and all Group loans are symmetrical in terms of interest rates. As a consequence, changes in interest rates will not have a significant effect on the result of the Group.
The current surplus and deficit liquidity in the Group's companies is set off, to the extent that this is profitable, via the parent company acting as intra-Group bank and via cash pool systems. When considered appropriate, underlying cash pool systems are established in foreign companies. To the extent that the financial reserves are of an appropriate size, the parent company also acts as lender to the companies in the Group.
In order to ensure financial reserves of an acceptable size, investment loans can be raised on a continuous basis to partly cover new investments and to refinance existing loans. The parent company has guaranteed for some credit facilities and loans. Please refer to note 13 for further specification of the loans.
The parent company has issued ownership clauses and/or deed of postponements in connection with intercompany loans.
The parent company ensures on an ongoing basis that flexible, unutilised committed credit facilities of an adequate size are established with major solid banks. The Group's financial reserves also consist of cash at bank and in hand, and unused overdraft facilities.
As a consequence of the considerable customer spread in terms of geographical location and numbers the credit risk is fundamentally limited. To a minor degree, when considered necessary, insurance or bank guarantees are used to hedge outstanding debtors.
As a consequence of the international diversification of the Group's activities there are business relations with a number of different banks in Europe, North America and Asia. In order to minimise the credit risk on placement of liquid funds and on entering into agreements on derived financial instruments, only major sound financial institutions are used.
No customers exceed 10% of the Group's net sales neither this year nor last year.
Financial assets and liabilities at fair value are related to foreign exchange rate forward contracts, foreign exchange rate swaps or interest rates swaps all of which has been valued using a valuation technique with market observable inputs (level 2).
The Group enters into derivative financial instruments with financial institutions. Derivatives valued using valuation techniques with market observable inputs are mainly foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing models using present value calculations. The models incorporate various inputs including the credit quality of counterparties and foreign exchange spot rates. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Group's own nonperformance risk.
| Group | Parent Company | |||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Financial instruments for hedging of future cash flows | 8 | 10 | 0 | 0 |
| Fair value hedges | 0 | 0 | 0 | 0 |
| Financial assets at fair value | 8 | 10 | 0 | 0 |
| Trade receivables | 1,575 | 1,509 | 0 | 0 |
| Other receivables | 250 | 249 | 2,678 | 2,247 |
| Cash | 502 | 484 | 0 | 0 |
| Receivables at amortised costs | 2,327 | 2,242 | 2,678 | 2,247 |
| Financial instruments for hedging of future cash flows | 6 | 14 | 0 | 0 |
| Fair value hedges | 0 | 0 | 0 | 0 |
| Financial liabilities at fair value | 6 | 14 | 0 | 0 |
| Bank loans incl. short term | 582 | 357 | 485 | 111 |
| Bank debt | 768 | 295 | 350 | 117 |
| Trade payables | 1,166 | 1,044 | 65 | 83 |
| Other payables | 917 | 938 | 1,501 | 2,226 |
| Financial liabilities at amortised costs | 3,433 | 2,634 | 2,401 | 2,537 |
The carrying value of the Group's and the parent company's financial assets and liabilities measured at amortised costs are assessed to be a reasonable approximation of fair value.
Fees to auditors elected at the Annual General Meeting consist of:
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Statutory audit | 8 | 9 | 2 | 2 | |
| Other opinions | 0 | 0 | 0 | 0 | |
| Tax consultancy | 2 | 2 | 1 | 1 | |
| Other services | 2 | 2 | 1 | 0 | |
| Total | 12 | 13 | 4 | 3 |
For the Group, commitments comprise DKK 3 million (2012: DKK 95 million). Contingent liabilities amounts to DKK 11 million (2012: DKK 11 million). Contractual obligations for purchase of tangible assets are mentioned in note 12. The Group is engaged in a few legal proceedings. It is expected that the outcome of these legal proceedings will not impact the Group's financial position in excess of what has been provided for in the balance sheet as at 31 December 2013 (as well as at 31 December 2012).
Operational lease commitments expiring within the following periods as from the balance sheet date:
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 | |
| Within 1 year | 106 | 102 | 2 | 2 | |
| Between 1 and 5 years | 106 | 123 | 3 | 1 | |
| After 5 years | 0 | 1 | 0 | 0 | |
| Total | 212 | 226 | 5 | 3 |
Lease costs amounting to DKK 123 million (2012: DKK 102 million) are included in the income statement.
For certain loans provided by the parent company amounting to DKK 1,318 million (2012: DKK 642 million) deeds of postponement have been given.
ROCKWOOL International A/S has registered the following shareholders holding more than 5% of the share capital or the votes
| 2013 | 2012 | |||
|---|---|---|---|---|
| Share capital | Votes Share capital | Votes | ||
| ROCKWOOL Foundation, DK-1360 Copenhagen K | 23% | 25% | 23% | 25% |
| 15th June Foundation, DK-1553 Copenhagen K | 6% | 10% | 6% | 10% |
| Gustav Kähler, DK-2942 Skodsborg | 6% | 9% | 7% | 9% |
| Dorrit Eegholm Kähler, DK-2830 Virum | 4% | 6% | 4% | 6% |
| Jan Kähler, DK-2630 Taastrup | 4% | 6% | 4% | 6% |
| Tom Kähler, DK-3540 Lynge | 3% | 5% | 3% | 5% |
The Company has no related parties with controlling interests.
The Group's related parties comprise the Company's shareholder the ROCKWOOL Foundation, the Company's Board and Management and associated companies. Apart from dividends no transactions were carried out with the shareholders during the year. For transactions with the Board and Management please refer to note 4.
The parent company's related parties also include the subsidiaries and associated companies listed as Group companies on page 63. Transactions with these companies include consultancy work - including support on establishing and expanding production capacity, use of know-how, use of central IT and procurement resources etc. - and financing.
As a management company, the parent company is jointly taxed with other Danish group entities and is jointly and severally liable for payment of corporate income taxes as from the fiscal year 2013 as well as for payments of withholding taxes on dividend, interests, royalties etc. falling due for payment on or after 1 July 2012.
The income statement and balance sheet include the following transactions with other companies in the Group:
| Group | Parent Company | |||
|---|---|---|---|---|
| DKK million | 2013 | 2012 | 2013 | 2012 |
| Transactions with subsidiaries: | ||||
| Income from the engineering business | 149 | 132 | ||
| Royalty and services | 509 | 441 | ||
| Dividend from subsidiaries | 532 | 603 | ||
| Loans to subsidiaries | 1,715 | 1,523 | ||
| Receivables from subsidiaries | 870 | 665 | ||
| Loans from subsidiaries | 93 | 875 | ||
| Payables to subsidiaries | 1,339 | 1,230 | ||
| Transactions with associated companies: | ||||
| Dividend from associated companies | 11 | 12 | 9 | 12 |
| Receivable from associated companies | 11 | 11 | 11 | 11 |
The Group has in 2012 not acquired any significant businesses.
On 1 October 2013 the ROCKWOOL Group took over 100% control of Chicago Metallic (CMC). CMC is a global provider of architectural building products and services - including metal panels and ceiling systems, suspended grid systems, and acoustical and sustainable ceiling panels. It has a network of sales and distribution channels throughout North America, Europe and Asia supported by production facilities in China, Malaysia, Belgium and the US. The acquisition is part of the ROCKWOOL Group's strategy to globalise and develop its ceiling business which today accounts for approx. 10% of Group revenues.
The total consideration was DKK 823 million, of which DKK 439 million was paid in cash in 2013. The remainder around DKK 383 million will be equally paid in 2014 and 2015.
Net assets at fair value amount to DKK 623 million. The assessment of the fair value of sites and buildings is based on an independent valuation by external appraisers. The fair value of plant and machinery is based on an internal valuation and the fair value of customer relationships is based on an excess earnings model with estimates for future cash flows and customer attrition rates etc. After recognition of identifiable assets and liabilities at fair value, goodwill was recognized with a fair value of DKK 123 million. Goodwill represents the value of employees and knowhow and expected synergies from the merger with ROCKWOOL International A/S. The goodwill recognized is partly tax deductible. The tax deductible part of goodwill amounts to approximately DKK 75 million.
The fair value of the trade receivables amounts to DKK 97 million. The gross amount of trade receivables is DKK 99 million. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected. Cash flow on acquisition amounts to DKK 362 million, comprised of consideration paid cash of DKK 439 million and cash acquired in subsidiaries of DKK 77 million. In addition transaction costs amounting to DKK 8 million are paid.
From the date of acquisition, CMC has contributed DKK 168 million of net sales and DKK 4 million to the profit before tax of the Group. If the combination had taken place at the beginning of the year, net sales for the Group would have been approx. DKK 15,800 million and the profit before tax for the Group would have been approx. DKK 1,275 million.
After the financial year has ended the Group has acquired 100% of HECK Wall Systems, a leading German system holder for external facade insulation (ETICS). The acquisition covers 100% of HECK Wall Systems including the state of art render production facility in Marktredwitz and the well-established brands HECK and RAJASIL. The acquired business complements very well the existing ROCKWOOL ETICS strategy in Europe - primarily in Germany where we have seen good growth in the facade insulation markets in recent years. The acquisition date is 1 January 2014.
The total consideration paid was DKK 286 million and is included in the 2013 cash flow as prepayments. Transactions cost amounts to DKK 4 million.
At the time the financial statements are authorized for issue, the initial accounting for the business combination is incomplete as the fair value of assets and liabilities acquired has not yet been determined. The disclosed amounts of fair value of acquired assets and liabilities are therefore only determined provisionally due to the timing of the business combination.
The provisional fair values of the acquired assets and liabilities at the acquisition date are:
| 2014 | 2013 | |
|---|---|---|
| HECK Wall systems | CMC Group | |
| DKK million | Fair value at the acquisition date |
Fair value at the acquisition date |
| Intangible assets | 176 | 265 |
| Tangible assets | 115 | 275 |
| Deferred tax | -54 | 36 |
| Inventories | 18 | 81 |
| Receivables | 32 | 97 |
| Other current assets | 8 | 12 |
| Non-current liabilities | -25 | -1 |
| Current liabilities | -43 | -142 |
| Net assets | 227 | 623 |
| Goodwill | 37 | 123 |
| Cash consideration for the company | 264 | 746 |
| Cash less interest-bearing debt | 22 | 77 |
| Total consideration | 286 | 823 |
| 31. Main figures in EUR | ||
|---|---|---|
| Main figures in EUR million | 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|
| Net sales | 1,998 | 1,969 | 1,845 | 1,575 | 1,501 |
| Profit before tax | 164 | 147 | 121 | 109 | 75 |
| Profit for the year | 116 | 104 | 83 | 72 | 47 |
| Total assets | 1,857 | 1,741 | 1,705 | 1,642 | 1,522 |
| Equity | 1,284 | 1,263 | 1,162 | 1,176 | 1,103 |
| Investments and acquisitions | 265 | 133 | 163 | 192 | 162 |
| Depreciation, amortisation and write-down | 144 | 149 | 123 | 134 | 131 |
| Exchange rate (year end rates) | 7.46 | 7.46 | 7.43 | 7.45 | 7.44 |
57
The Annual Report for ROCKWOOL International A/S has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for listed companies. Danish disclosure requirements for listed companies are those laid down by the statutory order on the adoption of IFRS issued pursuant to the Danish Financial Statements Act and the reporting requirements of NASDAQ OMX Copenhagen A/S for listed companies.
The fiscal year for the Group is 1 January – 31 December 2013.
The accounting policies are unchanged compared to last year except for the changes in the IFRS standards and interpretations as described below:
The following EU adopted IFRS standards and interpretations with relevance for the Group were implemented with effect from 1 January 2013:
The new and changed standards and interpretations have not impacted the recognition and measurement, besides the change in the classification of service materials, and have only lead to additional information.
Due to implementation of amendment of IAS16, the classification of spare parts and servicing equipment have been reclassified to tangible assets instead of included in inventories. Changes have been applied retrospectively, resulting in the restatement of prior year financial information.
The change is a reclassification and has no effect on EBIT, profit for the year, free cash flow and equity. EBITDA in 2013 is positively impacted by DKK 12 million (2012: DKK 13 million). Inventories are reduced by DKK 95 million (2012: DKK 93 million) and tangible assets are increased with a corresponding amount
Due to immateriality a third balance is not presented.
There have been no other changes to accounting policies applied.
Standards and amendments issued by IASB with effective date after 31 December 2013, or not adopted by the EU and therefore not implemented, comprise:
Implementation of these will lead to further specifications in the Notes and reclassifications but no material changes in recognition and measurement.
The consolidated financial statements comprise ROCKWOOL International A/S and the enterprises in which this company and its subsidiaries hold the majority of the voting rights.
The consolidated financial statements have been prepared as a consolidation of the parent company's and the individual subsidiaries' financial statements, determined according to the Group's accounting policies, and with elimination of dividends, internal revenue and expenditure items, internal profits as well as intercompany balances and intercompany shareholdings.
Besides shares, capital investments in subsidiaries include longterm loans to subsidiaries if such loans constitute an addition to the shareholding.
Newly acquired or newly established enterprises are recognised in the consolidated financial statements at the time such enterprises are taken over. Divested or terminated enterprises are recognised in the consolidated income statement until the time of disposal. No adjustments are made to the comparative figures for newly acquired or divested enterprises.
On acquisitions of new enterprises the acquisition method is used. The newly acquired enterprises' identifiable assets and liabilities are recognised in the balance sheet at fair values at the date of acquisition. Identifiable intangible assets are recognised if they are separable or arise from a contractual right, and the fair value can be reliably measured. Deferred tax on revaluations is recognised.
The acquisition date is the date when the ROCKWOOL Group effectively obtains control of the acquired subsidiary, enters the management of the joint venture or obtains significant influence over the associate. Acquisition costs are included in operating costs.
Minority interests are recognised as a relative share of the acquired enterprises identifiable assets and liabilities.
Any outstanding positive difference between the cost of the enterprise and the Group's share of the fair value of the identifiable assets and liabilities is goodwill and is recognised in the balance sheet. Goodwill is not amortised but is tested annually for impairment. The first impairment test is performed before the end of the acquisition year. Goodwill is allocated to the cash-generating units upon acquisition, which subsequently form the basis for the impairment test.
In case of any uncertainties regarding measurement of acquired identifiable assets, liabilities and contingent liabilities at the acquisition date, initial recognition will take place on the basis of preliminary fair values. In case identifiable assets, liabilities and contingent liabilities subsequently are determined to have a different fair value at the acquisition date than that first assumed, goodwill is adjusted up until 12 months after the acquisition. The effect of the adjustments is recognised in the opening balance of equity and comparative figures are restated accordingly.
Minority interests are recognised at the minority's share of the net assets.
58
On acquisition of minority interests acquired net assets are not remeasured at fair value. The difference between the costs and the minority interests' share of the total carrying amount including goodwill is transferred from the minority interests' share of the equity to the equity belonging to the shareholders of ROCKWOOL International A/S.
The Annual Report has been presented in Danish kroner (DKK), which is the parent company's functional currency. Each company in the Group determines its own functional currency.
Transactions in foreign currency are translated using the exchange rate at the transaction date or a hedged rate. Monetary items in foreign currency are translated using the exchange rates at the balance sheet date. Accounts of foreign subsidiaries are translated using the exchange rates at the balance sheet date for balance sheet items, and average exchange rates for items of the income statement.
All exchange rate adjustments are recognised in the income statement under financial items, apart from the exchange rate differences arising on:
These value adjustments are recognised directly under other comprehensive income.
Derivative financial instruments are initially recognised in the balance sheet at cost price and are subsequently measured at fair value. Derivative financial instruments are recognised in other receivables and other debt.
Changes to the fair value of derivative financial instruments, which meet the conditions for hedging the fair value of a recognised asset or liability, are recognised in the income statement together with any changes in the fair value of the hedged asset or liability.
Changes to the fair value of derivative financial instruments, which meet the conditions for hedging future cash flow, are recognised in other comprehensive income provided the hedge has been effective. The accumulated value adjustment related to these hedge transactions is transferred from other comprehensive income when the position is realised, and is included in the value of the hedged position e.g. the adjustment follows the cash flow.
For derivative financial instruments, which do not qualify as hedging instruments, changes to the fair value are recognised on an ongoing basis in the income statement as financial income or financial expenses.
Net sales are recognised in the income statement provided that delivery and risk transition has taken place before year-end. Net sales are calculated excluding VAT, duties and sales discounts. Royalty and licence fees are recognised when earned according to the terms of the agreements.
Investment grants are recognised as income in step with the writedown against the equivalent tangible assets. Investment grants not yet recognised as income are set off against the assets to which the grant is related.
The costs of research activities are carried as expenditure in the year in which they are incurred. The costs of development projects which are clearly defined and identifiable, and of which the potential technical and commercial exploitation is demonstrated, are capitalised to the extent that they are expected to generate future revenue. Other development costs are recognised on an ongoing basis in the income statement under operating costs.
Financial income and expenses include interest, financial expenditure on finance lease, fair value adjustments and realised and unrealised foreign exchange gains and losses.
Dividends on capital investments in subsidiaries and associated enterprises are recognised as income in the parent company's income statement in the financial year in which the dividends are declared.
The parent company is taxed jointly with all Danish subsidiaries. Income subject to joint taxation is fully distributed.
Tax on the profit for the year, which includes current tax on the profit for the year as well as changes to deferred tax, is recognised in the income statement. Tax on changes in other comprehensive income is recognised directly under equity.
Intangible assets, apart from goodwill, are stated at cost less accumulated amortisation and write-downs. Amortisation of the following intangible assets is made on a straight-line basis over the expected future lifetime of the assets, which is:
| Development projects 2-10 years |
|---|
| Patents up to 20 years |
| Software 2-4 years |
| Trademarks up to 20 years |
| Customer relationships 15 years |
Goodwill arisen from acquisition of enterprises and activities are stated at cost. The carrying amount of goodwill is allocated to the Group's cash-generating units at the acquisition date. Identification of cash-generating units is based on the management structure and internal financial control.
Acquired CO2 rights are capitalised under intangible assets. Granted CO2 rights are not capitalised.
Tangible assets are stated at cost less accumulated depreciation and impairment losses.
The cost of technical plant and machinery manufactured by the Group comprises the acquisition cost, expenditure directly related to the acquisition, engineering hours, including indirect production costs and borrowing costs.
Financial leased assets are recognised in the balance sheet at market value at the date of acquisition, and are written off at depreciation rates equivalent to those for the same category of owned assets.
Depreciation is carried out on a straight-line basis, based on current assessment of their useful lives and scrap value. The expected lifetimes are:
| Buildings 20-40 years | |
|---|---|
| Technical plant and machinery 5-15 years | |
| Operating equipment and fixtures and fittings 3-10 years |
On sale or scrapping of assets, any losses or gains are included under other operating income for the year.
Capital investments in subsidiaries and associated enterprises The parent company's shares in subsidiaries and associated enterprises are measured at cost less write-downs as a result of permanent decreases in the earning capacity of the enterprises in question.
Investments in associates are measured in the balance sheet of the Group at equity value in accordance with the Group's accounting principles applied after proportional elimination of intra group profit and losses.
The relative share of the associated enterprises' profit after tax is recognised in the Group income statement.
Goodwill is tested annually for impairment and the book value of other assets is reviewed on indications of impairment. When testing for impairment, the value is written down to the estimated net sales price or the useful value, if greater. Other assets are tested for impairment when there are indications of change in the structural profitability.
Inventories are valued at the lowest value of historical cost calculated as a weighted average or the net realisation value. The cost of finished goods and work in progress include the direct costs of production materials and wages, as well as indirect production costs.
Receivables are measured after deduction for write-downs to meet losses on the basis of an individual assessment.
Dividend is included as a liability at the time of adoption by the Annual General Meeting. Dividend that is expected to be paid for the year is shown separately in the equity.
Acquisition and sales prices as well as dividends on own shares are recognised under retained earnings in the equity.
The reserve for foreign currency translation consists of exchange rate differences that occur when translating the foreign subsidiaries' financial statements from their functional currency into DKK.
Hedging adjustments comprise changes in the fair value of hedging transactions that qualify for recognition as cash flow hedges and where the hedged transaction has not yet been realised.
Pension payments concerning defined contribution plans are recognised on an ongoing basis in the income statement. Defined benefit plans are stated at the net present value at the balance sheet date and included in the consolidated financial statements. Adjustments of the plans are carried out on a regular basis in accordance with underlying actuarial assessments. Actuarial gains or losses for defined benefit plans are recognized in full in the period in which they occur in other comprehensive income. The actuarial assessment is carried out every year.
For certain defined benefit plans the related assets are placed in pension funds not included in the consolidated financial statements. The payments to the pension funds are based on the usual actuarial assessments and are recognised in the income statement after maturity. Provided that the actuarial assessments of pension obligations show noticeable excess solvency or insolvency in relation to the pension fund's assets, the difference is entered to the balance sheet and the future payments are adjusted accordingly. With regard to these schemes, the actuarial assessment is also carried out every year.
An equity-based share option programme has been established, which is offered to Management and senior managers. The share option programme is not considered as part of remuneration, as the Board of ROCKWOOL International A/S will, from time to time, decide whether share options are to be offered.
On issuing of share options, the value of the allotted options is estimated in compliance with the formula of Black & Scholes at the time of allotment and is expensed under staff costs over the expected life of the option. The amount charged is set off against equity.
The effect of void options is adjusted continuously over the income statement and set off against equity, respectively.
Provisions for deferred tax are calculated on all temporary differences between accounting and taxable values, calculated using the balance-sheet liability method. Deferred tax provisions are also made to cover the retaxation of losses in jointly taxed foreign companies previously included in the Danish joint taxation. Deferred tax assets are recognised when it is probable that the assets will reduce tax payments in coming years and they are assessed at the expected net realisable value.
Deferred tax is stated according to current tax regulations. Changes in deferred tax as a consequence of changes in tax rates are recognised in the income statement
Liabilities are recognised if they are certain or probable at the balance sheet date, and if the size of the liability can be measured on a reliable basis. The liability is calculated as the amount expected to be paid.
Interest-bearing debt is valued at amortised cost measured on the basis of the effective interest rate at the time of borrowing. The proceeds from the loan are compiled less transaction costs.
Lease commitments concerning finance lease are assessed at the current value of the remaining lease instalments, including any possible guaranteed residual value based on the internal interest rate of each lease agreement.
The cash flow statement is presented using the indirect method on the basis of operating profit before financial items. The cash flow statement shows cash flows for the year, as well as cash and cash equivalents at the beginning and at the end of the financial year. Cash flows from operating activities are calculated as operating profit before financial items adjusted for non-cash operating items and working capital changes. Cash flows from investing activities comprise payments in connection with acquisition and divestment of enterprises and other asset investments. Cash flows from financing activities comprise the raising of loans, instalments on loans, payment of dividends and increases of the share capital.
Cash and cash equivalents include cash and bonds less short-term bank debt.
Segmental data is stated for business areas and geographical areas. The division by business areas is in accordance with the Group's internal reporting. The segmental data is presented according to the same principle as the consolidated financial statements. The segmental EBIT includes Net Sales and expenditure operationally related to the segment.
Systems Segment is primarily defined as non-thermal insulation products.
The ratios have been calculated in accordance with "Anbefalinger & Nøgletal 2010" (Recommendations & Ratios 2010) issued by the Danish Society of Financial Analysts. The ratios mentioned in the five-year summary are calculated as described in the notes.
| EBIT | Profit before financial items and tax | |
|---|---|---|
| EBITDA | Profit before depreciation, write-downs, amortisations, financial items and tax |
|
| Profit ratio (%) | Operating profit Net sales |
× 100 |
| Earnings per share of DKK 10 | Profit for the year after minority interests Average number of outstanding shares |
|
| Diluted earnings per share of DKK 10 | Profit for the year after minority interests Diluted average number of outstanding shares |
|
| Cash earnings per share of DKK 10 | Cash flows from operating activities Average number of outstanding shares |
|
| Dividend per share of DKK 10 | Dividend percentage × nominal value of the share 100 |
|
| Book value per share of DKK 10 | Equity end of the year before minority interests Number of shares at the end of the year |
|
| Return on invested capital (ROIC) | Operating profit Average invested assets |
× 100 |
| Return on equity (%) | Profit for the year after minority interests Average equity excluding minority interests |
× 100 |
| Equity ratio (%) | Equity end of the year Total equity and liabilities at the end of the year |
× 100 |
| Financial gearing | Net interest-bearing debt Equity end of the year |
× 100 |
| Payout ratio (%) | Dividend for the year Profit for the year after minority interests |
× 100 |
| Country | Shares owned % |
|
|---|---|---|
| Parent company | ||
| ROCKWOOL International A/S | Denmark | |
| Subsidiaries | ||
| Insulation | ||
| ROCKWOOL Handelsgesellschaft | Austria | 100 |
| m.b.H. | ||
| ROCKWOOL N.V. | Belgium | 100 |
| s.a. Etablissements N.V. Charles Wille & Co |
Belgium | 100 |
| ROXUL Brazil Parts Ltda. | Brazil | 100 |
| ROCKWOOL Bulgaria Ltd. | Bulgaria | 100 |
| ROXUL Inc. | Canada | 100 |
| ROCKWOOL Building Materials (Tianjin) Co. Ltd. |
China | 100 |
| ROCKWOOL Firesafe Insulation (Guangzhou) Co. Ltd. |
China | 94.84 |
| ROCKWOOL Firesafe Insulation (Shanghai) Co. Ltd. |
China | 100 |
| ROCKWOOL Adriatic d.o.o. | Croatia | 100 |
| ROCKWOOL a.s. | Czech | 100 |
| Republic | ||
| ROCKWOOL A/S | Denmark | 100 |
| ROXUL ROCKWOOL Technical Insulation Middle East FZE |
Dubai | 100 |
| ROCKWOOL EE Oü | Estonia | 100 |
| ROCKWOOL Finland OY | Finland | 100 |
| ROCKWOOL France S.A.S | France | 100 |
| Deutsche ROCKWOOL Mineralwoll GmbH & Co. OHG |
Germany | 100 |
| ROCKWOOL Mineralwolle GmbH Flechtingen |
Germany | 100 |
| ROCKWOOL Limited | Great Britain |
100 |
| ROCKWOOL Building Materials Ltd. | Hong Kong | 100 |
| ROCKWOOL Hungary Kft. | Hungary | 100 |
| ROXUL ROCKWOOL Insulation India Ltd. | India | 100 |
| ROXUL ROCKWOOL Technical Insulation India Pvt. Ltd. |
India | 100 |
| ROCKWOOL Ltd. | Ireland | 100 |
| ROCKWOOL Italia S.p.A. | Italy | 100 |
| SIA ROCKWOOL | Latvia | 100 |
| ROCKWOOL UAB | Lithuania | 100 |
| ROCKWOOL Malaysia Sdn. Bhd. | Malaysia | 94.84 |
| ROCKWOOL Insulation Sdn. Bhd. | Malaysia | 100 |
| Breda Confectie B.V. | Netherlands | 100 |
| ROCKWOOL B.V. | Netherlands | 100 |
| A/S ROCKWOOL | Norway | 100 |
| Malkinia Sp. z o.o. | Poland | 100 |
| ROCKWOOL Polska Asset | Poland | 100 |
| Management Sp. z o.o. | ||
| ROCKWOOL Polska Sp. z o.o. | Poland | 100 |
| FAST Sp. z o.o. | Poland | 100 |
| ROCKWOOL Romania s.r.l. | Romania | 100 |
| Shares | ||
|---|---|---|
| Country | owned % | |
| CSJC Mineralnaya Vata | Russia | 100 |
| LLC ROCKWOOL North | Russia | 100 |
| LLC ROCKWOOL Ural | Russia | 100 |
| LLC ROCKWOOL Volga | Russia | 100 |
| ROCKWOOL Building Materials (Singapore) Pte Ltd. |
Singapore | 100 |
| ROCKWOOL Slovensko s.r.o. | Slovakia | 100 |
| ROCKWOOL Peninsular S.A. | Spain | 100 |
| ROCKWOOL AB | Sweden | 100 |
| ROCKWOOL GmbH | Switzerland | 100 |
| ROCKWOOL Limited | Thailand | 94.84 |
| ROCKWOOL Insaat ve Yelitim Sistemleri San. Ve Tic. Ltd. Sti. |
Turkey | 100 |
| LLC ROCKWOOL Ukraine | Ukraine | 100 |
| ROXUL USA Inc. | USA | 100 |
| Systems Division | ||
| Chicago Metallic Continental BVBA | Belgium | 100 |
| Chicago Metallic Canada ULC | Canada | 100 |
| Chicago Metallic (Shenzhen) Co., Ltd. | China | 100 |
| Chicago Metallic Continental (Deutschland) GmbH |
Germany | 100 |
| ROCKWOOL ROCKFON GmbH | Germany | 100 |
| Chicago Metallic Limited | Great | 100 |
| Britain | ||
| Chicago Metallic (Asia Pacific) Ltd. | Hong Kong | 100 |
| Chicago Metallic (Malaysia) Sdn. Bhd. | Malaysia | 100 |
| GRODAN S. de R.L de C.V. | Mexico | 100 |
| Chicago Metallic B.V. | Netherlands | 100 |
| Consmat Metallic Pte. Ltd. | Singapore | 100 |
| Fortalan Asesores S.L. in liquidation | Spain | 55 |
| GRODAN MED S.A. | Spain | 100 |
| CMC Equipment LLC | USA | 100 |
| Other subsidiaries | ||
| BuildDesk A/S | Denmark | 100 |
| ROCKWOOL LAT S.A.S. | France | 100 |
| ROCKWOOL Beteiligungs GmbH | Germany | 100 |
| ROCKWOOL Solutions GmbH | Germany | 100 |
| Rockwool.com GmbH | Germany | 100 |
| ROCKWOOL Benelux Holding B.V. | Netherlands | 100 |
| BuildDesk Polska Sp. z o.o. | Poland | 100 |
| Chicago Metallic Company LLC | USA | 100 |
| ROXUL Holding USA, Inc. | USA | 100 |
| Associated companies | ||
| Transys spol. s r. o. | Czech Republic |
30 |
| RESO SA | France | 20 |
| Flumroc AG | Switzerland | 42.3 |
Contact information can be found at www.rockwool.com/near+you
| DKK million 1st qtr. 2nd qtr. 3rd qtr. 4th qtr. 1st qtr. 2nd qtr. 3rd qtr. 4th qtr. Unaudited Income statement Net sales 3,145 3,686 3,937 4,135 3,249 3,603 3,875 3,937 Operating income 3,194 3,725 3,987 4,188 3,295 3,633 3,909 4,016 Operating costs 3,041 3,438 3,541 3,814 3,141 3,356 3,525 3,690 EBITDA 414 564 711 647 411 540 691 611 Operating profit before financial items (EBIT) 153 287 446 374 154 277 384 326 Income from investments associated companies 3 3 1 4 4 2 2 4 Financial items -16 -15 -6 -9 -16 -18 -14 -7 Profit before tax 140 275 441 369 142 261 372 323 Tax on profit for the period 41 81 132 108 42 81 115 86 Profit for the period 99 194 309 261 100 180 257 237 EBITDA ratio 13.2% 15.3% 18.1% 15.7% 12.6% 15.0% 17.8% 15.5% EBIT ratio 4.9% 7.8% 11.3% 9.0% 4.7% 7.7% 9.9% 8.3% Statement of comprehensive income Profit for the period 99 194 309 261 100 180 257 237 Exchange rate adjustments of foreign subsidiaries -26 -215 -117 -152 176 -50 117 -20 Change in pension obligation 0 0 0 16 0 0 0 10 Hedging instruments, value adjustments 10 -7 4 13 6 -3 5 -15 Tax on comprehensive income -2 2 -1 -11 -1 0 -1 16 Total comprehensive income 81 -26 195 127 281 127 378 228 Cash flow statement Operating profit before financial items 153 287 446 374 154 277 384 326 Adjustments for depreciation, amortisation and write-downs 261 277 265 273 257 263 307 285 Other adjustments 6 6 2 10 -19 5 23 -16 Change in net working capital -395 -48 115 316 -242 -168 248 3 Cash flow from operations before financial items and tax 25 522 828 973 150 377 962 598 Cash flow from operating activities -31 387 703 826 56 295 895 539 Cash flow from investing activities -251 -341 -777 -610 -265 -160 -298 -272 Cash flow from operating and investing activities (free cash flow) -282 46 -74 216 -209 135 597 267 Cash flow from financing activities -79 -302 22 -10 -60 -305 -28 -72 Change in cash available -361 -256 -52 206 -269 -170 569 195 Segment reporting Insulation segment: External net sales 2,548 3,044 3,279 3,095 2,660 2,986 3,236 3,109 Internal net sales 337 358 397 509 335 364 385 476 EBIT 64 215 347 217 67 195 294 210 EBIT ratio 2.2% 6.3% 9.4% 6.0% 2.2% 5.8% 8.1% 5.9% Systems segment: External net sales 597 642 658 1,040 589 617 639 828 Internal net sales 0 0 0 2 0 0 0 0 EBIT 68 77 84 76 63 66 72 98 EBIT ratio 11.4% 12.0% 12.8% 7.3% 10.7% 10.7% 11.3% 11.8% Geographical split of external net sales: Western Europe 1,979 2,235 2,304 2,340 2,164 2,229 2,290 2,287 Eastern Europe including Russia 582 877 1,038 1,046 565 827 1,008 980 North America, Asia and others 584 574 595 749 520 547 577 670 Total external net sales 3,145 3,686 3,937 4,135 3,249 3,603 3,875 3,937 |
2013 | 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
ROCKWOOL®, ROXUL®, ROCKFON®, ROCKPANEL®, GRODAN®, LAPINUS FIBRES®, RockDelta®, CREATE AND PROTECT®, SCANDIC® and REDArt™ are registered trademarks of the ROCKWOOL Group.
Photos: (Cover) Skyscrapers in New York, USA / kropic1, Shutterstock.com; (3) CEO Eelco van Heel / Magnus Klitten; (6) Shanghai, China / zhangyang, Shutterstock.com; (8) The Leadenhall Building (the Cheesegrater), London, United Kingdom / Malcolm Chapman, Shutterstock.com; (10) REDArt™ facade project, Denmark / Uffe Johansen; (11) Eiffel tower renovation, Paris, France / Patrick Charrière; (12-13) ROCKFON acoustic ceiling on a Chicago Metallic systems grid, Hema store, Katwijk, The Netherlands / Defijn+Vernimmen; (14) ROCKPANEL facade panels, 'Bureau Fahrenheit' in Montpellier, France / Benoît Wehrlé; (15) GRODAN Horticultural / Gerard-Jan Vlekke; (19) Production worker, Vamdrup, Denmark / Niclas Jessen; (20) The Flower Dome, Gardens by the bay, Singapore / R.A.R. de Bruijn Holding BV, Shutterstock.com; (22) Marina Potoker, Managing Director in ROCKWOOL Russia / Vladimir Verkhovsky; (23) Production worker, Vamdrup, Denmark / Niclas Jessen; (24) ROCKWOOL Foundation project, Integration of immigrants with non-western backgrounds, Denmark / Stig Stasig; (25) ROCKWOOL Foundation project, A new approach to agricultural development, Tanzania / Eva Kaas Pedersen; (26) Board / Alexander Aleshkin; (27) Group Management / Magnus Klitten; (29) Denmark's new aquarium, The blue planet / Adam Mørk – 3XN; (32) The ROCKWOOL campaign 'More than a rock' / Christian Gravesen.
Layout and production: Boje Mobeck A/S Released: 21 February 2014 ISSN number: 1904-8661 (online)
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