Management Reports • Mar 21, 2016
Management Reports
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TRANSLATORS EXPLANATORY NOTE The following document is a free translation of the report of the above-mentioned Company. In the event of any discrepancy in interpreting the terminology, the Polish version is binding.
| Arctic Paper profile 3 | |
|---|---|
| General information 3 | |
| Business activities 3 | |
| Subsidiaries 3 | |
| Changes in the capital structure of the Arctic Paper | |
| Group 5 | |
| Services provided by the Company 5 | |
| Changes in basic management principles 5 | |
| Shareholder structure 5 | |
| Market environment 6 | |
| Development directions and strategy 7 | |
| Sales structure 7 | |
| Explanations regarding business seasonality and | |
| cycles 8 | |
| Research & Development 8 | |
| Natural environment 8 | |
| Summary of financial results 9 | |
| Income statement 9 | |
| Profitability analysis 11 | |
| Report on financial situation 12 | |
| Debt analysis 13 | |
| Liquidity analysis 14 | |
| Statement of cash flows 15 | |
| Relevant information and factors influencing |
|
| financial results and evaluation of financial standing 16 | |
| Key factors affecting performance results 16 | |
| Unusual events and factors 16 Other material information 16 |
|
| Factors influencing development of the Company 18 | |
| Risk factors 18 | |
| Supplementary information 20 | |
| Management Board position on the possibility to achieve the projected financial results published |
|
| earlier 20 | |
| Information on dividend 20 | |
| Changes in Arctic Paper S.A. company governing | |
| and supervising bodies 20 | |
| Changes of the share capital of Arctic Paper S.A. 23 | |
| Purchase of treasury shares 23 | |
| Remuneration paid to Management Board and | |
| Supervisory Board Members 25 | |
| Agreements with Management Board Members on | |
| financial compensation 25 Statement of changes in the issuer's shareholding |
|
| or rights to shares of persons managing and | |
| supervising Arctic Paper S.A. 26 |
| Capital investment and investment 26 Bank and other loan agreements 26 Information on guarantees and contingent liabilities 26 Significant off-balance sheet items 27 Evaluation of the possibility to implement |
|
|---|---|
| investment plans 27 Information on court and arbitration proceedings and proceedings pending before public administrative authorities 27 Information on transactions with related parties executed on non-market terms and conditions 27 Information on agreements resulting in shareholding changes 27 Information on acquisition of treasury shares 27 Information on entity authorized to audit the financial statements 27 Employment 27 |
|
| Statement on application of corporate governance | |
| rules 28 Corporate governance rules 28 Information on the extent to which the Issuer does not apply corporate governance rules 28 Internal control and risk management system with regard to the process of preparing financial statements 29 Shareholders holding directly or indirectly significant blocks of shares 30 Securities carrying special control rights 31 Restrictions on transfer of ownership of the Issuer's securities any restrictions on exercise of the voting right 31 Principles of amending the Issuer's Articles of Association 31 Description of the action manner of the Shareholders Meeting 31 Activities of the Issuer's managing and supervisory authorities and their committees, and information on the composition of those authorities 33 |
|
| Information pursuant to the Swedish Code of | |
| Corporate Governance 42 | |
| Management Board's representations 44 Accuracy and reliability of presented reports 44 Appointment of the Licensed Auditor of the Financial Statements 44 |
Arctic Paper S.A. is a holding company established in April 2008. As a result of capital restructuring carried out in 2008, Arctic Paper Kostrzyn (Poland) and Arctic Paper Munkedals (Sweden) paper mills, Distribution Companies and Sales Offices have become the properties of Arctic Paper S.A. Previously they were owned by Trebruk AB (formerly Arctic Paper AB), the parent company of the Issuer. In addition, under the expansion, the Group acquired Arctic Paper Mochenwangen (Germany) paper mill in December 2008 and Grycksbo (Sweden) paper mill in March 2010.
In 2012 and 2013, Arctic Paper S.A. acquired shares in Rottneros AB, a company listed on NASDAQ stock exchange in Stockholm, Sweden. Rottneros AB holds 100% of shares in two Pulp Mills, a Purchase Office and a company producing food packaging.
The main area of the Company's statutory activities is holding activity including management of the entities
belonging to the controlled Capital Group. Operating activity is conducted by Paper and Pulp Mills, Distribution Companies, Sales Offices and a Purchase Ofice. Detailed information regarding business activities of the Arctic Paper Capital Group is included in the Management Board report on the operations of the Arctic Paper S.A. Capital Group included in the annual consolidated report for the year ended 31st December 2015.
The Company is entered in the Register of Entrepreneurs kept by the District Court Poznań – Nowe Miasto i Wilda in Poznań, VIII Commercial Department of the National Court Register, Entry No. KRS 0000306944. The Parent Company was granted statistical REGON number 080262255.
The main area of Arctic Paper S.A. business is holding activity.
Since 23rd October 2009 Arctic Paper S.A. has been listed on the primary market of the Warsaw Stock Exchange and since 20th December 2012 on NASDAQ OMX stock exchange in Stockholm, Sweden. The Company carries out business through its Paper Mills and Pulp Mills, Distribution Companies, Sales Offices and a Purchase Office.
In September and October 2008, the Issuer acquired paper mills in Poland and Sweden and distribution companies and sales offices dealing in distribution and sales of paper produced in Europe by the Group. Three distribution companies – in Sweden, Norway and Denmark – were engaged in distribution activity, offering our products and, to a limited extent, products of other paper producers.
Arctic Paper S.A. acquired shares in Arctic Paper Kostrzyn, Arctic Paper Munkedals, Distribution Companies and Sales Offices from Trebruk AB (formerly Arctic Paper AB) and Nemus Holding AB, currently the Issuer's majority shareholder.
Under the expansion, the Group also acquired Arctic Paper Mochenwangen (Germany) paper mill in December 2008 and Arctic Paper Grycksbo (Sweden) paper mill in March 2010.
In 2012 and 2013, Arctic Paper S.A. acquired shares in Rottneros AB, a company listed on NASDAQ stock exchange in Stockholm, Sweden. Rottneros AB holds 100% shares in two Pulp Mills, one Purchase Office and a company which produces food packaging. The acquisition of Rottneros was performed mainly in the form of exchange of Rottneros AB shares to Arctic Paper S.A. shares. Arctic Paper S.A. took the control over Rottneros Group on 20th December 2012. From that day, Arctic Paper S.A. shares have been listed on NASDAQ stock exchange in Stockholm.
In connection with the Profitability Improvement Programm, which have been introduced in Arctic Paper Group, at the end of 2015 Distribution Companies in Sweden, Norway and Denmark ceased their distribution operations and from the beginning of 2016 they have been operating as Sales Offices. Distribution has been transferred to the mills.
As on 31st December 2015, Arctic Paper S.A. had investments in the following subsidiaries:
Information about percentage share in capital of particular subsidiaries is included in note 5 of the financial statements of the Company.
In 2015, no changes in the capital structure of the Group occurred.
As a holding company Arctic Paper S.A. receives dividends, interest on loans granted and income from management services provided for related entities operating within the Arctic Paper S.A. Capital Group.
Moreover, the Company provides agency services for pulp procurement to the entities of the Group. The services are provided in the following two manners:
In connection with restructuring of Arctic Paper Group, from the beginning of 2015 a central logistics department has been operating within Arctic Paper S.A. structures. The logistics department renders services of planning and coordination of transportation for mills in Kostrzyn, Grycksbo, Munkedals, and until December 2015 it rendered the services for Mochenwangen mill.
Detailed information about the range of products produced by Paper Mills of Arctic Paper Group was included in the consolidated annual report for the year 2015.
There were no important changes in basic management principles in 2015.
Nemus Holding AB, a company under Swedish law (and which is indirectly held by Mr Thomas Onstad), is the majority shareholder of Arctic Paper S.A., holding as on 31st December 2015 40,006,449 shares of the Company, which constitute 57.74% of its share capital and representing 57.749% of total number of votes in the Shareholders Meeting. Thus Nemus Holding AB is the parent entity of the Issuer.
Moreover, Mr. Thomas Onstad, an indirect shareholder of Nemus Holding AB, directly holds 5,848,658 Shares constituting 8.44% of total number of the Company's shares.
On 8th July 2015, the Company received information concerning sales of 1,350,000 shares of the Company, constituting 1.95% of total number of the Company's Shares, performed by Nemus Holding AB to a third party indirectly held by Mr Thomas Onstad.
| as at 21.03.2016 | as at 13.11.2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Of total number | ||||||||
| Share capital | Of total number of votes | Number of | Share capital | Number of | of votes | |||
| Shareholder | Number of shares | [% ] | Number of votes | [% ] | shares | [% ] | votes | [% ] |
| Thomas Onstad | 47 205 107 | 68,13% | 47 205 107 | 68,13% | 47 205 107 | 68,13% | 47 205 107 | 68,13% |
| - indirectly via | 41 356 449 | 59,69% | 41 356 449 | 59,69% | 41 356 449 | 59,69% | 41 356 449 | 59,69% |
| Nemus Holding AB | 40 006 449 | 57,74% | 40 006 449 | 57,74% | 40 006 449 | 57,74% | 40 006 449 | 57,74% |
| other subsidiary | 1 350 000 | 1,95% | 1 350 000 | 1,95% | 1 350 000 | 1,95% | 1 350 000 | 1,95% |
| - directly | 5 848 658 | 8,44% | 5 848 658 | 8,44% | 5 848 658 | 8,44% | 5 848 658 | 8,44% |
| Others | 22 082 676 | 31,87% | 22 082 676 | 31,87% | 22 082 676 | 31,87% | 22 082 676 | 31,87% |
| Total | 69 287 783 | 100,00% | 69 287 783 | 100,00% | 69 287 783 | 100,00% | 69 287 783 | 100,00% |
| Treasury shares | - | 0,00% | - | 0,00% | - | 0,00% | - | 0,00% |
| Total | 69 287 783 | 100,00% | 69 287 783 | 100,00% | 69 287 783 | 100,00% | 69 287 783 | 100,00% |
Data in the table above are given as on the date of approval of the hereby report and as on the date of publication of the quarterly report for 3Q 2015.
The Company does not provide services directly to external parties. Its financial situation and ability to pay dividend is influenced mainly by the market environment in which Paper Mills and Pulp Mills controlled by the Company operate.
Information about the main products offered by the Group together with description regarding the values and the quantities, particular products' shares in the Group's sales revenue structure, the market information divided with regard to domestic and foreign markets, as well as information about sources of supply of raw materials and services is included in the consolidated annual report.
Main strategies of the Group, for which the Company is the parent entity, include:
Our strategic goal for the next few years is to maintain our present leading position in the field of fine papers intended for Western European markets and also to take advantage of the expected growth on the paper market in Central and Eastern Europe. Given their size, the Western European markets will remain our strategic target although we believe that the paper market in Central and Eastern Europe will grow faster than in Western Europe. We expect this growth to be founded
on the long-term rise in paper use per citizen, comparably low at present, and on the expected move of printing houses' production capacity from Western Europe to Central and Eastern Europe. The key elements of this strategy are to take advantage of the competitive edge which we gained thanks to the location and efficient operation of our paper mill in Kostrzyn nad Odrą and our well-developed sales network in Central and Eastern Europe.
One of the key elements for the success of our business will be the ability to sustain cost efficiency. Therefore, we have been taking initiatives to, inter alia:
carefully manage human resources,
take advantage of our strong bargaining position to negotiate lower prices of pulp for Paper Mills and of other raw materials,
In 2015, sales structure by main sources of the Company's income was as follows:
| PLN thousand | 2015 share % | 2014 share % | ||
|---|---|---|---|---|
| Services | 40 410 | 38% | 37 640 | 97% |
| Dividends | 65 359 | 61% | 140 | 0% |
| Loan interest | 937 | 1% | 999 | 3% |
| Total | 106 706 | 100% | 38 779 | 100% |
The Company provides management services to its subsidiaries in accordance with the agreements concluded with these entities.
| PLN thousands | 2015 share % | 2014 share % | ||
|---|---|---|---|---|
| Arctic Paper Kostrzyn S.A. | 55 717 | 52% | 19 406 | 50% |
| Rottneros AB | 27 972 | 26% | - | - |
| Arctic Paper Munkedals AB | 9 994 | 9% | 10 477 | 27% |
| Arctic Paper Grycksbo AB | 9 129 | 9% | 8 740 | 23% |
| Other | 3 893 | 4% | 155 | 0% |
| Total | 106 706 | 100% | 38 779 | 100% |
Demand for the Group's products fluctuates slightly during the year. A lower demand for paper is reported each year during the summer holidays and in Christmas season when a number of printing houses, particularly those in Western Europe, are closed for business. The changes in demand for paper are not significant compared to the demand in other periods of the year. Fluctuations of paper demand are to a great extent reflected in fluctuations of pulp demand.
The Company does not bear directly any expenditures related to research and development.
R&D in Arctic Paper Group is primarily intended to advance and upgrade production processes and to improve product quality and increase product assortment. In the period covered by this report, Paper
Mills carried out R&D work to streamline the production process, particularly by shortening machine idle time, and to improve paper quality along with expanding the assortment range.
An important goal of R&D in 2015 was development of new products.
Information about the impact of regulations related to the environment protection on the operations of Paper Mills and Pulp Mills controlled by the Company was included in the consolidated annual report.
| Change % | |||
|---|---|---|---|
| PLN thousand | 2015 | 2014 | 2014/2013 |
| Revenues: | 106 706 | 38 779 | 175,2 |
| including: | |||
| Sales of services | 40 410 | 37 640 | 7,36 |
| Interest on loans | 937 | 999 | (6,25) |
| Dividend income | 65 359 | 140 | 46 745,60 |
| Gross profit on sales | 95 325 | 29 362 | 224,7 |
| Sales revenues % | 89,33 | 75,72 | 13,6 p.p. |
| Selling expenses | (4 069) | (4 036) | 0,8 |
| Administrative expenses | (31 517) | (29 196) | 7,9 |
| Other operating income | 398 | 270 | 47,5 |
| Other operating cost | (51 701) | (18 614) | 177,8 |
| EBIT | 8 436 | (22 215) | (138,0) |
| Sales revenues % | 7,91 | (57,29) | 65,2 p.p. |
| EBITDA | 8 702 | (22 105) | (139,4) |
| Sales revenues % | 8,16 | (57,00) | 65,2 p.p. |
| Financial income | 666 | 156 | 326,4 |
| Financial cost | (4 026) | (3 018) | 33,4 |
| EBT | 5 077 | (25 077) | (120,2) |
| Corporate income tax | (167) | (34) | 399,5 |
| Net profit | 4 909 | (25 110) | (119,6) |
| Sales revenues % | 4,60 | (64,75) | 69,4 p.p. |
Main area of statutory activity of the Company is holding activity including management of the entities belonging to the controlled Capital Group. Operating activity is conducted by Paper and Pulp Mills, Distribution Companies, Sales Offices and a Purchase Office. In 2015 standalone revenue of the Company amounted to PLN 106,706 thousand and comprised dividend income (PLN 65,359 thousand), income from services rendered to entities of the Group (PLN 40,410 thousand) and interest income from loans granted (PLN 937 thousand). In 2014 standalone sales revenue of the Company amounted to PLN 38,779 thousand and comprised dividend income (PLN 140 thousand), income from sales of services (PLN 37,640 thousand) and interest income (PLN 999 thousand).
In 2015 and 2014, the Company did not render services to Pulp Mills of Rottneros Group.
Cost of sales includes interest cost on loans taken from other Group companies and, starting from 2015, also
In 2015, administrative expenses amounted to PLN 31,517 thousand. They include administrative expenses related to the operations of the Company, costs of services provided to the Group entities and other costs incurred by the Company for the purpose of holding activity. Among these costs the following can be the cost of logistics services rendered (PLN 3,449 thousand).
distinguished as connected solely to statutory activity, and which comprise, among others: auditing costs, costs related to the activity of Supervisory Board, costs of periodical corporate controls in the Company, and other.
In 2015, the Company reported selling expenses in the amount of PLN 4,069 thousand, solely related to cost connected with pulp procurement agency for Arctic Paper Kostrzyn S.A.
Other operating income amounted to PLN 398 thousand in 2015 which represents an increase by PLN 128 thousand compared to the previous year. At the same time, other operating expenses increased and amounted to PLN 51,701 thousand (2014: PLN 18,614 thousand).
In 2015 financial income amounted to PLN 666 thousand and was higher compared to income generated in the previous year by PLN 510 thousand. Meanwhile, an increase of financial expenses occurred from PLN 3,018 thousand in 2014 to PLN 4,026 thousand.
Changes in financial income and financial expenses result also from foreign exchange differences which are presented net, that is as a difference between positive Such a material increase of other operating expenses in 2015 results mainly from the recognition of impairment write-off on shares, loans and investments in Arctic Paper Investment GmbH, Arctic Paper Mochenwangen GmbH, and Arctic Paper Norge AB.
and negative foreign exchange differences recognized as financial income in case of the excess of positive exchange differences, or as financial expenses in case of the excess of negative exchange differences. While in 2015 the Company recorded the excess of positive exchange differences recognized as financial income, in 2014 the situation was inversed and the Company recognized the excess of negative exchange differences in financial expenses.
EBITDA in 2015 amounted to PLN 8,702 thousand, whereas in 2014 it was equal to PLN -22,105 thousand.
EBIT in 2015 amounted to PLN 8,436 thousand compared to PLN -22,215 thousand in the previous year.
| Change % | |||
|---|---|---|---|
| PLN thousand | 2015 | 2014 | 2015/2014 |
| Gross profit on sales | 95 325 | 29 362 | 224,7 |
| Sales revenues % | 89,33 | 75,72 | 13,6 p.p. |
| EBITDA | 8 702 | (22 105) | (139,4) |
| Sales revenues % | 8,16 | (57,00) | 65,2 p.p. |
| EBIT | 8 436 | (22 215) | (138,0) |
| Sales revenues % | 7,91 | (57,29) | 65,2 p.p. |
| Net profit/ (loss) from continuing operations | 4 909 | (25 110) | (119,6) |
| Sales revenues % | 4,60 | (64,75) | 69,4 p.p. |
| ROE - Return on equity (% ) | 0,7 | (3,8) | 4,5 p.p. |
| ROA - Return on assets (% ) | 0,5 | (2,7) | 3,2 p.p. |
In 2015 return on equity amounted to 0.7%, whereas in 2014 it was equal to -3.8%. Return on assets rose from -2.7% in 2014 to 0.5% in 2015.
Net profit in 2015 amounted to PLN 4,909 thousand compared to loss of PLN -25,110 thousand in 2014.
| PLN thousand | 31/12/2015 | 31/12/2014 Change % 2014/2013 | |
|---|---|---|---|
| Non-current assets | 843 274 | 830 055 | 13 219 |
| Receivables | 82 121 | 45 487 | 36 634 |
| Other current assets | 15 371 | 42 485 | (27 114) |
| Cash and equivalents | 9 435 | 18 607 | (9 172) |
| Total assets | 950 202 | 936 635 | 13 567 |
| Equity | 668 959 | 664 893 | 4 066 |
| Short-term liabilities | 76 242 | 44 632 | 31 610 |
| Long-term liabilities | 205 001 | 227 109 | (22 109) |
| Total equity and liabilities | 950 202 | 936 635 | 13 567 |
As on 31st December 2015 total assets amounted to PLN 950,202 thousand compared to PLN 936,635 thousand as at the end of 2015.
As at the end of December 2015 non-current assets represented about 88.7% of total assets and and their share in total assets slightly increased compared to December 2014 (88.6%).
Current assets amounted to PLN 106,927 thousand as at the end of December 2015 compared to PLN 106,579 thousand as at the end of 2014.
Equity amounted to PLN 668,959 thousand as at the end of December 2015 compared to PLN 664,893 thousand as at the end of 2014.
Increase in equity resulted mainly from net profit recorded in 2015.
As at the end of December 2015 short-term liabilities amounted to PLN 76,242 thousand (8.0% of total equity & liabilities) compared to PLN 44,632 thousand as at the end of 2014 (4.8% of total equity & liabilities).
Increase in short-term liabilities resulted primarily from rise of trade liabilities as well as of accruals.
As at the end of December 2015 long-term liabilities amounted to PLN 205,001 thousand (21.6% of total equity & liabilities) compared to PLN 227,109 thousand as at the end of 2014 (24.2% of total equity & liabilities). Decrease in long-term liabilities resulted mainly from decrease of liabilities to related entities – on the grounds of a loan from Arctic Paper Kostrzyn S.A.
| Change % | |||
|---|---|---|---|
| 2015 | 2014 | 2014/2013 | |
| Debt-to-equity ratio (% ) | 42,0 | 40,9 | 1,2 p.p. |
| Equity-to-non-current assets ratio (% ) | 79,3 | 80,1 | (0,8) p.p. |
| Interest-bearing debt-to-equity ratio (% ) | 33,9 | 34,1 | (0,2) p.p. |
As at the end of December 2015 debt to equity ratio amounted to 42.0% and was higher by 1.2 p.p. compared to the end of December 2014.
Equity to non-current assets decreased from 80.1% as at the end of 2014 to 79.3% as at the end of December 2015. Interest-bearing debt to equity ratio as at the end of 2015 amounted to 33.9% and was lower by 0.2 p.p. compared to the level of this factor calculated at end of December 2014.
| Change % | |||
|---|---|---|---|
| 2015 | 2014 | 2014/2013 | |
| Current liquidity ratio | 1,4x | 2,4x | (1,0) |
| Quick liquidity ratio | 1,4x | 2,4x | (1,0) |
| Acid test ratio (cash liquidity) | 0,1x | 0,4x | (0,3) |
Current and quick liquidity ratios amounted as at the end of 2015 to 1.4x and were lower by 1.0x compared to the end of December 2014. Cash liquidity ratio amounted to 0.1x as at the end of December 2015 and decreased compared to the end of December 2014 by 0.3x.
| Change % | |||
|---|---|---|---|
| PLN thousand | 2015 | 2014 | 2014/2013 |
| Cash flow from operations | (11 111) | (10 388) | 7,0 |
| including: | |||
| EBT | 5 077 | (25 077) | (120,2) |
| Amortization and depreciation | 266 | 110 | 142,8 |
| ∆ in working capital | (7 285) | 3 534 | (306,2) |
| Interest and dividend (net) | 2 529 | 8 360 | (69,7) |
| Other corrections | (11 699) | 2 686 | (535,6) |
| Cash flow investing activities | 4 468 | (21 405) | (120,9) |
| Cash flow financing activities | (2 529) | 41 381 | (106,1) |
| Total Cash Flow | (9 172) | 9 589 | (195,7) |
In 2015 net cash flows from operating activities amounted to PLN -11,111 thousand compared to PLN -10,388 thousand in 2014. The greatest influence on
In 2015 cash flows from investing activities amounted to PLN 4,468 thousand compared to PLN -21,405 thousand in 2014.
Negative cash flows from investing activities in 2014 were related mainly to allocation of funds from a loan
In 2015 cash flows from financing activities reached a level of PLN -2,529 thousand compared to PLN 41,381 thousand in 2014. In 2014 cash flows from high cash flows from operating activities in 2015 came from repayment of the loan to Arctic Paper Kostrzyn S.A.
taken from Arctic Paper Finance AB to short-term deposits.
Meanwhile in 2015 this amount was reversed and corrected for the increase in shares in subsidiaries.
financing activities were mostly connected with taking a loan from Mr. Thomas Onstad (via Arctic Paper Finance AB) in the amount of EUR 10,000 thousand.
The operating activity of the Company is affected indirectly by the factors which have direct influence on the activity of the main entities of the Group – Paper Mills, and these factors particularly include:
Information about the impact of the above factors on the Group's business activity has been described in detail in the consolidated annual report for the year 2015.
During the reported period there were no unusual events and/or factors concerning Arctic Paper S.A.
On 11th March 2015, Arctic Paper S.A. and its subsidiary, Arctic Paper Grycksbo AB, finalized the next stage of negotiations with banks which finance the Issuer's group entities. As a result of the negotiations, Svenska Handelsbanken AB set new levels of solidity ratio and interest coverage ratio for the existing loan agreement.
On 28th December 2015, Arctic Paper Grycksbo AG received a waiver from its financing bank - Svenska Handelsbanken AB – from keeping interest coverage ratio (determined by the loan agreement) as on 31st December 2015.
In connection with ongoing restructuring in Arctic Paper Group, in the beginning of 2015 a centralized logistics department started its operations within the structures of Arctic Paper S.A. The logistics department provides transportation planning and coordination services to paper mills in Kostrzyn, Grycksbo, Munkedals, and – until December 2015 – Mochenwangen.
Profitability improvement program for Arctic Paper Group 2015/2016 – Arctic Paper Mochenwangen GmbH
On 28th July 2015, the Management Board of Arctic Paper S.A. made public the schedule of profitability improvement program ("Program") for Arctic Paper S.A. Capital Group ("Group"), aimed at reduction of cost of operations by app. PLN 50 million annually.
The adopted Program is going to be realized until no sooner than June 2016.
According to the assumptions of the Program, main actions shall be: creation of common services centers for Group companies, introduction of individual programs for profitability improvement in mills and revision of cost of services rendered by external parties.
As the result of the Program conducted, the Management Board expects improved profitability of the Group's operations and improved effectiveness of all operational support functions.
Simultaneously, Arctic Paper has begun to actively search for a buyer of Arctic Paper Mochenwangen mill.
On 15th November 2015, the Management Board of Arctic Paper Mochenwangen ("APMW") finished negotiations with the Works Council. The negotiations concerned, among other subjects, the agreement on severance pays for employees of Arctic Paper Mochenwangen in connection with shutting down the production in this mill in December 2015.
In consideration of the above, the Management Board started the assessment of costs related to shutting down the production and created a provision thereof in the fourth quarter of 2015, which will amount to app. EUR 9.3 million (app. PLN 39 million). These costs will be charged to discontinued operations of the Group.
At the same time, the Management Board confirms that the process of searching for a buyer for APMW is being continued, therefore the operations of Arctic Paper Mochenwangen GmbH has been deemed discontinued operations in the consolidated financial statements of the Group.
Profitability improvement program for Arctic Paper Group 2015/2016 – Arctic Paper Grycksbo AB
On 19th January 2016, the Management Board of the Issuer's subsidiary – Arctic Paper Grycksbo AB (Sweden) started negotiations with trade unions of the mill, the purpose of which is thhe reduce fixed costs by app. SEK 12 million (app. PLN 5.8 million) in 2016 and by app. SEK 25 million (app. PLN 12 million) in 2017, as well as improvement of Grycksbo mill's productivity. For this purpose, the facility can potentially reduce employment by app. 40 people during 2016.
Information on market tendencies and factors which have an impact on the financial results of the Group in the perspective of the next year are provided in the consolidated annual report. Below presented are the risk factors which have a direct impact on the Company's
operations. Other risk factors which have an impact on the Company through the activity of its subsidiaries have been described in details in the consolidated annual report.
The order in which the following risk factors are presented does not reflect the likelihood of their occurrence, scope or significance of the risks.
The Company operates in a legal environment characteristic of a high level of uncertainty. Regulations concerning our activities are often amended and there is no uniform interpretation, which involves a risk of a breach of applicable regulations and related consequences, even if the breach of law is inadvertent.
Risk connected with the unfavorable economic situation The global economic situation is influenced by the results of the recent financial crisis, in particular lingering deterioration of consumers' and entrepreneurs' trust, fears regarding loan availability and the increase of its costs, decrease in consumer spending and investments, variability and strength of capital markets. We expect that harsh global economic conditions may still lead to reduction in demand for fine paper and reduction in average prices of fine paper which in turn may have an adverse influence on dividends received from subsidiaries.
The Company's revenues, costs and results are exposed to risk of currency exchange rates, in particular PLN to EUR, SEK and other currencies, because the Company receives dividends partially in EUR and in SEK. Currency exchange rates may have an adverse effect on the Group's results, financial standing and outlook.
The Company is exposed to the risk of changes in interest rates, mainly due to an existing coupon debt. This risk results from fluctuation in the benchmark interest rate such as WIBOR for debt in PLN. Negative changes in interest rates may adversely affect the results, financial situation and prospects of the Company.
The order in which the following risk factors are presented does not reflect the likelihood of their occurrence, scope or significance of the risks.
Risk connected with maintaining and recruiting management and qualified staff
The achievement of strategic goals by the Company depends on the expertise and experience of the professional management and the ability to employ and maintain qualified professionals. The Company may not be able to keep the existing management or other key employees or recruit new specialists. If the Company is not able to recruit and maintain management and staff, this may have an adverse effect on our business, operating results and financial standing.
Risk connected with the Company's ability to pay dividend
The Issuer is a holding company, thus its ability to pay dividend depends on the level of distributions it receives from operational subsidiaries and the level of its cash balances. Some of the subsidiaries conducting operating activity may in certain periods be subject to limitations concerning distributions to the Issuer. It is not certain that such limitations will not have a material adverse effect on the Group's activities, operating results and the ability to pay dividend.
Moreover, by the power of the Annex no 3 dated 20th December 2013 to the Loan Agreement dated 6th November 2012 concluded by Arctic Paper S.A. together with its subsidiaries, i.e. Arctic Paper Kostrzyn S.A., Arctic Paper Investment GmbH and Arctic Paper Mochenwangen GmbH and the consortium of banks (Bank Pekao S.A., Bank Zachodni WBK S.A. and mBank S.A.), Arctic Paper S.A. bound itself not to declare or pay dividend when a breach of the agreement occurred or in case declaration or payment of dividend would have caused a breach of the agreement.
The Management Board of Arctic Paper S.A. did not publish projections of financial results for 2015, and has not published projections of financial results for 2016 and does not plan to publish forecast for 2016.
In 2015, the Company did not pay any dividend.
On 21st December 2015, the Extraordinary Shareholders Meeting appointed the Supervisory Board for the next term of office in its hitherto composition, that is:
In 2015, no changes in the composition of the Management Board of Arctic Paper S.A. occurred.
As on the day of publishing of the hereby report, the Management Board of the Company comprises:
■ Wolfgang Lübbert – President of the Management Board
■ Małgorzata Majewska - Śliwa – Member of the Management Board
■ Jacek Łoś – Member of the Management Board
■ Per Skoglund – Member of the Management Board
■ Michał Sawka - Member of the Management Board
In 2015, no changes of the share capital of the Company occurred.
On 28th June 2012, the Company's Ordinary Shareholders Meeting adopted a resolution (current report 12/2012), in which it authorizes the Management Board of the Company to purchase the Company's treasury shares for the purpose of its redemption and decrease of the share capital or for the purpose of further relocation or resale of the treasury shares on conditions and in the course determined as below:
e) purchase of treasury shares may occur with the mediation of investment company, in stock and non-stock transactions.
The Management Board, acting for the benefit of the Company, upon the opinion of the Supervisory Board, may:
In case of a decision being made as mentioned above, the Management Board is bound to submit the information regarding the decision for public knowledge in a manner determined in the Public Offering Act.
The conditions of purchase of treasury shares for the purpose of its redemption or further relocation or resale shall be in compliance with the principles of Commission Regulation (EC) No 2273/2003 dated 22nd December 2003.
After the process of purchase of the Company's treasury shares, in compliance with conditions determined by the Shareholders Meeting, has ended, the Management Board will call a Shareholders Meeting for the purpose of adopting resolution regarding redemption of the Company's treasury shares and adequate decrease of share capital, or – in case of
assignment of the purchased shares to further relocation or resale – the Management Board will make a decision regarding further relocation or resale of treasury shares. Redemption of the Company's treasury shares and adequate decrease of share capital is acceptable also before the end of the process of purchase of the Company's treasury shares.
The Ordinary Shareholders Meeting, acting by virtue of article 362 § 2 item 3 of the Code of Commercial Codes, 348 § 1 in connection with article 396 § 4 and 5 of the Code of Commercial Companies, for the purpose of financing of the purchase of the Company's treasury shares on conditions and within confines of the authorization granted by the resolution, decides to establish a reserve capital under the name of "Fundusz Programu Odkupu" for the purchase of treasury shares. The amount of "Fundusz Programu Odkupu" is set to PLN 27,500,000. "Fundusz Programu Odkupu" is assigned to purchase of treasury shares together with the cost of the purchase. The Ordinary Shareholders Meeting decides to distinguish the "Fundusz Programu Odkupu" from the reserve capital.
Until the day of the hereby report, the Management Board of the Company has not performed any purchase of treasury shares by the Company for the purpose of its redemption and decrease of the share capital or for the purpose of further relocation or resale on conditions and in the course determined as mentioned above.
The table below presents the information on total remuneration and other benefits paid or to be paid to members of the Management Board and Supervisory Board of the Parent Entity for the period from 1st January 2015 to 31st December 2015 (in PLN).
| Managing and | Remuneration (including other contributions paid | |||
|---|---|---|---|---|
| supervising personnel | by the employer) for working in Arctic Paper S.A. | Pension plan | Other | Total |
| Management Board | ||||
| Wolfgang Lübbert | 1 512 309 | - | - | 1 512 309 |
| Per Skoglund | 531 765 | 290 125 | 28 883 | 850 773 |
| Jacek Łoś | 931 305 | - | 5 051 | 936 356 |
| Małgorzata Majewska-Śliwa | 1 156 113 | - | 3 430 | 1 159 543 |
| Michał Sawka | 937 649 | - | 5 051 | 942 700 |
| Supervisory Board | ||||
| Rolf Olof Grundberg | 391 015 | - | - | 391 015 |
| Rune Roger Ingvarsson | 150 009 | - | - | 150 009 |
| Thomas Onstad | 120 034 | - | - | 120 034 |
| Mariusz Grendowicz | 180 000 | - | - | 180 000 |
| Roger Mattsson | 152 811 | - | - | 152 811 |
| Dariusz Witkowski | 150 000 | - | - | 150 000 |
As on 31st December 2015 and as on the date this annual report is approved, Members of the Management Board are entitled to severance pay in the event of their resignation or removal from their positions without good cause, or if their removal or resignation is due to the Issuer's merger through acquisition. The severance pay corresponds to 6-24 months' salary.
| Number of shares or rights thereto |
Number of shares or rights thereto |
Number of shares or rights thereto |
||
|---|---|---|---|---|
| Managing and supervising personnel | as at 21/03/2016 | as at 31/12/2015 | as at 13/11/2015 | Change |
| Management Board | ||||
| Wolfgang Lübbert | - | - | - | |
| Jacek Łoś | - | - | - | |
| Per Skoglund | - | - | - | |
| Małgorzata Majewska-Śliwa | - | - | - | |
| Michał Sawka | - | - | - | |
| Supervisory Board | ||||
| Rolf Olof Grundberg | 12 000 | 12 000 | 12 000 | - |
| Rune Roger Ingvarsson | - | - | - | - |
| Thomas Onstad | 5 848 658 | 5 848 658 | 5 848 658 | - |
| Roger Mattsson | - | - | - | - |
| Dariusz Witkowski | - | - | - | - |
| Mariusz Grendowicz | - | - | - | - |
In 2015, the Company took loans and borrowings as described in section "Loans and borrowings".
As on the day of preparation of the hereby report the Company held sufficient cash and creditability to guarantee financial liquidity of Arctic Paper S.A.
In 2015, the Company used its cash resources only to the standard short-term investments, including overnight deposits.
Information regarding agreements concluded and concerning loans and borrowings has been included in explanatory note no 24 to standalone financial statements for 2015.
On 6th November 2012 the following companies: Arctic Paper Kostrzyn S.A. and Arctic Paper S.A. concluded an agreement regarding guarantee of debt of a bank loan, under which Arctic Paper S.A. acceded, by way of cumulative accession, to a loan agreement dated 6th November 2012 concluded by and between Arctic Paper Kostrzyn S.A. and Bank Polska Kasa Opieki S.A., Bank Zachodni WBK S.A. and mBank S.A., for the total amount of PLN 359,000 thousand.
During the period covered by this report, Arctic Paper S.A. and its subsidiaries did not give or receive other
Information regarding off-balance sheet items is given in the standalone financial statements for 2015 in note 27.
Arctic Paper S.A. does not plan significant investments for realization in 2016. Major investments are conducted by subsidiaries of the Issuer, in particular Paper Mills, which has been disclosed in the Consolidated Annual Report.
During the period covered by this report, Arctic Paper S.A. and its subsidiaries were not a party to any proceedings pending before a court, arbitration or public administrative authority, the unit or joint value of which would equal to or exceed 10% of the Company's equity.
During the period covered by this report, Arctic Paper S.A. and its subsidiaries did not execute any significant transactions with related entities on non-market terms and conditions.
The Issuer is not aware of any agreements which may in the future lead to changes in the present shareholding of shareholders and bondholders.
In 2015 the Company did not acquire any treasury shares.
Information on the entity authorized to audit the financial statements is given in the additional information in note 30 of the standalone financial statements for 2015.
Information regarding employment is given in the additional information in note 33 of the standalone financial statements for 2015.
guarantee for a loan or borrowing and did not receive or give guarantees jointly to one entity or subsidiary of such entity, the total value of which represented the equivalent of at least 10% of the Company's equity.
Pursuant to § 29 item 2 of the Warsaw Stock Exchange Rules adopted by Resolution no. 19/1307/2012 by the Stock Exchange Board on 21st November 2012, Arctic Paper S.A. is obliged to apply corporate governance
rules contained in the document – "Best practices of companies listed on the SE", available on the website http://www.gpw.pl/WSE_corporate_governance
Arctic Paper S.A. has been doing its very best to apply corporate governance rules contained in the document – "Best practices of companies listed on the SE". In 2015 Arctic Paper S.A. did not comply to the following rules:
Recommendation no I.5:
A company should have a remuneration policy and rules of defining the policy. The remuneration policy should in particular determine the form, structure, and level of remuneration of members of supervisory and management bodies. Commission Recommendation of 14 December 2004 fostering an appropriate regime for the remuneration of directors of listed companies (2004/913/EC) and Commission Recommendation of 30 April 2009 complementing that Recommendation (2009/385/EC) should apply in defining the remuneration policy for members of supervisory and management bodies of the company.
Explanation: The principles of granting remuneration to members of the Management Board as well as its level are determined by the Supervisory Board. Remuneration of the Management Board members is subject to negotiations, while remuneration of the Supervisory Board is decided by Shareholders Meeting (General Meeting). The amount of remuneration should be dependent on scope of duties and responsibilities entrusted to particular members of supervisory and management bodies of the Company. Information regarding remuneration of members of the Company's organs are presented in annual reports.
Recommendation no I.9:
The WSE recommends to public companies and their shareholders that they ensure a balanced proportion of women and men in management and supervisory functions in companies, thus reinforcing the creativity and innovation of the companies' economic business.
Explanation: This recommendation is not being applied in the Company at the moment. It results from the fact that the functions of supervisory and management bodies' members have been entrusted to particular persons regardless of their gender and based on qualifications and professional experience. Nevertheless, the composition of the Company's bodies depends to a great extent on the Company's shareholders, therefore it cannot be excluded that this recommendation will be applied in the future.
A company should enable its shareholders to exercise the voting right during a General Meeting either in person or through a plenipotentiary, outside the venue of the General Meeting, using electronic communication means.
Explanation: Taking into account the necessity of conducting of many actions of technical and organizational nature, the costs and risk related, as well as little experience of the market in this subject, the Company has not yet decided to ensure shareholders with the possibility of participation in Shareholders Meetings via means of electronic communication. When the application of this solution is widespread and the security is assured, the Company will consider to apply it.
A company should operate a corporate website and publish on it, in addition to information required by legal regulations, a record of the General Meeting in audio or video format.
Explanation: Publishing of full minutes of Shareholders Meeting in audio or video format could infringe best interests of particular shareholders. When the application of this solution is widespread and the security is assured, the Company will consider to apply it.
Principle no IV.10:
A company should enable its shareholders to participate in a General Meeting using electronic communication means through:
Explanation: In 2015 Arctic Paper S.A. did not apply this principle, as introduction of the possibility of electronic participation in Shareholders Meeting would in the present situation translate to high cost of Shareholders Meeting organization. Because of the actual threats of technical and legal nature to proper and effective execution of Shareholders Meeting, it is not possible for the Management Board to ensure shareholders with participation in Shareholders Meeting via means of electronic communication.
The Management Board does not exclude the possibility of execution of Shareholders Meetings via means of electronic communication.
Starting from 1st January 2016 a new set of corporate governance rules has been introduced as "Best practices of companies listed on the SE 2016", which is an appendix to Resolution no 26/1413/215 of the Supervisory Board of Warsaw Stock Exchange, dated 13th October 2015.
Pursuant to § 29 item 3 of the Warsaw Stock Exchange Rules, on 25th January 2016 the Management Board of Arctic Paper S.A. published the EBI report concerning exclusion of some provisions of corporate governance rules.
The Management Board of Arctic Paper S.A. is responsible for internal control system in the company and within the Group, as well as for its effectiveness in the process of preparing consolidated financial statements and periodical reports prepared and published in accordance with the Regulation of Minister of Finance dated 19th February 2009 on current and periodical information submitted by issuers of securities and terms and conditions of classifying as equivalent information required by the law of a non-member state. The Group's consolidated financial statements and periodical reports are the responsibility of the Company's financial department managed by the Chief Financial Officer. Financial data constituting the basis for preparing the Group's consolidated financial statements come from monthly reporting blocks and extended quarterly blocks sent to the Issuer by the Group companies. After the accounts of each calendar month are closed, senior management of the Group companies analyzes the financial results of the companies in the light of the budget projections and results achieved in the previous financial year.
The Group carries out an annual review of its strategies and growth perspectives. The process of establishing the budget is supported by medium-level and senior management of the Group companies. The budget for the following year is adopted by the Company's Management Board and approved by its Supervisory Board. During the year, the Company's Management Board compares the financial results achieved with the budget projections.
The Company's Management Board systematically evaluates the internal control and risk management system quality in reference to the process of preparing consolidated financial statements. Based on the evaluation the Company's Management Board states that as on 31st December 2015 there were no weaknesses which could materially impact the effectiveness of internal control in financial reporting.
Information regarding shareholders holding directly or indirectly significant blocks of shares is given in the table below – the table presents the situation as on the day of publishing of the annual report (21st March 2016).
| Share capital | Of total number of votes | |||
|---|---|---|---|---|
| Shareholder | Number of shares | [% ] | Number of votes | [% ] |
| Thomas Onstad | 47 205 107 | 68,13% | 47 205 107 | 68,13% |
| - indirectly via | 41 356 449 | 59,69% | 41 356 449 | 59,69% |
| Nemus Holding AB | 40 006 449 | 57,74% | 40 006 449 | 57,74% |
| other subsidiary | 1 350 000 | 1,95% | 1 350 000 | 1,95% |
| - directly | 5 848 658 | 8,44% | 5 848 658 | 8,44% |
| Others | 22 082 676 | 31,87% | 22 082 676 | 31,87% |
| Total | 69 287 783 | 100,00% | 69 287 783 | 100,00% |
| Treasury shares | - | 0,00% | - | 0,00% |
| Total | 69 287 783 | 100,00% | 69 287 783 | 100,00% |
The Company does not have any securities which carry special control rights, and the Company's shares are nonpreferred.
The Company's Articles of Association do not provide for any restrictions on the transfer of the ownership of the Issuer's securities. Such restrictions follow from legal regulations, including Chapter 4 of the Act on Offering, articles 11 and 19 and Section VI of the Act on Trading in Financial Instruments of 29th July 2005, the Act on Protection of Competition and Consumers of 16th February 2007, and the (EC) Council Regulation no. 139/2004 of 20th January 2004 on control of concentrations between undertakings.
Each Arctic Paper S.A. share carries one vote in Shareholders Meeting. The Company's Articles of Association do not provide for any restrictions on the exercise of a vote from Arctic Paper S.A. shares, e.g. restriction on vote by holders of a certain part or number of votes, time restrictions on exercising the voting right, or provisions under which, with the Company's cooperation, equity rights related to securities are separated from possession of securities.
A prohibition on a shareholder to vote may arise from article 89 of the Act on Public Offering and on Terms and Conditions of Introducing Financial Instruments to Organized Trading System and on Public Companies of 29th July 2005 (the "Act on Offering") if the shareholder violates certain regulations contained in Chapter 4 of the Act on Offering. Furthermore, according to article 6 § 1 of the Code of Commercial Companies, if a parent company does not inform a capital subsidiary company that a controlling relationship has arisen within two weeks of such relationship arising, the voting right attached to the shares of the parent company representing more than 33% of the subsidiary's share capital is suspended.
The Company's Articles of Association may be amended by the Shareholders Meeting only.
If the Code of Commercial Companies or the Company's Articles of Association do not provide otherwise, Shareholders Meeting resolutions are adopted by a simple majority of votes.
The operating procedure of a Shareholders Meeting and its basic rights arise directly from legal regulations which are partly included in the Company's Articles of Association.
The Company's Articles of Association are available at:
http://www.arcticpaper.com/Global/IR%20Documents/Dokumenty%20korporacyjne/Statut%20tekst%20jednolity_akt ualny_2013_PL_new.pdf
Shareholders Meetings are held in accordance with the following basic rules:
A Shareholders Meeting may adopt resolutions in the presence of shareholders representing at least half of the Company's share capital.
A Shareholders Meeting adopts resolutions by an absolute majority of votes cast unless the Articles of Association or legal regulations require a qualified majority of votes.
Shareholders' rights and the way in which they are exercised basically arise directly from the legal regulations which have been partly incorporated into the Company's Articles of Association.
To all other extent, particular Management Board members are liable individually for running the Company's affairs in accordance with the internal allocation of duties and functions set out in a Management Board decision.
The Management Board may adopt resolutions at meetings or without holding a meeting in writing or with the use of distance communication. The Management Board adopts resolutions by a majority of votes cast. Resolutions are valid if at least half the Management Board members are present at the meeting. In the case of a voting deadlock, the President of the Management Board has the casting vote.
The special Management Board procedure is set out in the Management Board By-laws which are available at: http://www.arcticpaper.com/Global/IR%20Documents/Cororate%20Documents/Regulamin%20Zarzadu%20AP%20S A.pdf
As on the day of publishing of the hereby report, the following persons constitute the Company's Management Board:
consent for the Company or its subsidiary to execute a key agreement with an entity related to the Company, Supervisory Board member or Management Board member and their related entities, other than agreements executed during the normal course of the Company's business on regular terms applied by the Company;
election of a certified auditor to audit the Company's financial statements.
submitting to the Shareholders Meeting an annual written report on the results of the evaluations;
appointing and removing Management Board members, including the President and Vice Presidents, and setting remuneration for Management Board members;
The Supervisory Board may adopt resolutions in writing or with the use of direct distance communication. A resolution so adopted is valid if all Board members have been informed of the wording of the draft resolution. The date on which such a resolution is adopted is the date on which the last Supervisory Board member signs it.
Supervisory Board resolutions may be adopted if all members have been notified by registered mail, fax or e-mail, sent at least 15 days in advance and most of the Board members are present at the meeting.
Resolutions may be adopted without a formal convening of a meeting if all Board members consent to a vote on a given issue or to the wording of the resolution which is to be adopted.
Supervisory Board resolutions are adopted by a simple majority of votes cast; in the case of a voting deadlock, the Supervisory Board Chairman has the casting vote.
The detailed operations of the Supervisory Board are laid down in the Supervisory Board By-laws which are available at:
http://www.arcticpaper.com/Global/IR%20Documents/Dokumenty%20korporacyjne/Regulamin%20Rady%20Nadzor czej%20ArcticPaper%20SA.pdf
As on the day of publishing of the hereby report, the Supervisory Board was composed of the following persons:
On 21st December 2015 the Extraordinary Shareholders Meeting appointed the Supervisory Board in the aforementioned composition for the next term of office (current report 17/2016).
giving recommendations to the Supervisory Board on issues concerning election, appointment, reappointment and removal of the entity performing the function of a certified auditor,
inspection of independence and objectiveness of the entity performing the function of a certified auditor, especially with regard to change of the certified auditor, remuneration received, and other relations with the Company,
Audit Committee meetings are held at least twice a year.
Since 27th November 2013, the following persons constituted the Audit Committee:
In connection with the fact that on 21st December 2015 the Extraordinary Shareholders Meeting appointed the Supervisory Board for the next term of office, in the first meeting of the Supervisory Board, held on 3rd February 2016, it appointed the Audit Committee in the following composition:
The detailed operations of the Audit Committee are laid down in the Audit Committee By-laws.
■ The Remuneration Committee implements its tasks by presenting to the Supervisory Board, in the form of resolutions motions, opinions, recommendations, and reports on issues which are within its powers.
Remuneration Committee meetings are held at least twice a year, on a date set by the Chairman.
Since 17th September 2014, the following persons constituted the Remuneration Committee:
In connection with the fact that on 21st December 2015 the Extraordinary Shareholders Meeting appointed the Supervisory Board for the next term of office, in the first meeting of the Supervisory Board, held on 3rd February 2016, it appointed the Remuneration Committee in the following composition:
The detailed operating procedure of the Remuneration Committee is laid down in the Remuneration Committee Bylaws.
Risk Committee meetings are held at least twice a year.
Since 27th November 2013, the following persons constitute the Risk Committee:
In connection with the fact that on 21st December 2015 the Extraordinary Shareholders Meeting appointed the Supervisory Board for the next term of office, in the first meeting of the Supervisory Board, held on 3rd February 2016, it appointed the Risk Committee in the same composition:
Arctic Paper S.A. is a Polish company whose shares are admitted to trading on Warsaw Stock Exchange as well as on NASDAQ OMX Stockholm. The primary listing is on Warsaw Stock Exchange, and the Company is secondary listed on NASDAQ OMX Stockholm. Non-Swedish companies whose shares are admitted to trading on NASDAQ OMX Stockholm are required to apply
As Arctic Paper S.A. is a Polish company with its primarily listing on Warsaw Stock Exchange, Arctic Paper S.A. applies the Code of Best Practice for WSE Listed Companies (the "Best Practices") applicable for companies listed on Warsaw Stock Exchange, and not the Swedish Code. As a consequence thereof, Arctic Paper S.A.'s conduct deviates from what is stipulated in the Swedish Code in the following material aspects.
The main documentation in relation to a Shareholders Meeting, such as notices, minutes and adopted resolutions, are prepared in Polish as well as in English, but not in Swedish.
The Polish corporate governance model provides for a two-tier board system, comprising the Management Board, an executive body which is appointed by the Supervisory Board, which in turn is supervising the company's activities and is appointed by the shareholders' meeting. The statutory auditor is elected by the Supervisory Board.
Neither the Best Practices nor other applicable Polish rules require a company to establish a nomination committee, and therefore Arctic Paper S.A. does not have such committee. Each shareholder in the Company is entitled to propose a candidate for the Supervisory Board. Relevant information about proposed Supervisory Board members is published on the Company's website within a timeframe sufficiently long to enable the shareholders to make an informed decision in relation to a resolution.
In accordance with the principles of the Polish two-tier board system, the tasks typically performed by the board of a Swedish company are performed either by the Company's Supervisory Board or its Management Board.
Pursuant to Polish law, the members of the Management Board, including the chief executive officer who is the chairman of the Management Board, are prohibited from engaging in competitive activities outside the Company. Other activities are not regulated by the Best Practices or other applicable Polish regulations, but restrictions are generally included in the individual employment agreements.
The composition of the Supervisory Board complies with the independence criteria set out in the Swedish Code. However, as the Management Board – being the executive corporate body – consists of persons holding executive positions within Arctic Paper S.A., such persons cannot be considered independent of the Company. The term of office for Management Board members as well as Supervisory Board members is three years.
The Supervisory Board, and not the shareholders' meeting, elects the chairman and vice chairman of the Supervisory Board.
The rules of procedure for the Management Board are adopted by the Supervisory Board, and the Supervisory Board's rules of procedure are adopted by the shareholders' meeting. The rules of procedure are not reviewed annually, but are reviewed and changed when appropriate. The same applies for rules of procedure for committees within the Supervisory Board, which are adopted by the Supervisory Board. There is no separate instruction for the chief executive officer, as the chief executive officer is the chairman of the Management Board. The Management Board is responsible for ensuring that the company has proper internal control, including e.g. internal control as regards financial reporting. The financial reports are prepared in accordance with applicable rules and regulations and instructions from the company's auditor and audit committee, although there are no internal written routines in relation to internal control as regards financial reporting.
Polish rules do not provide any limitation as to the size of salary during an employment notice period or the size of severance pay, and the company may from time to time have employees who are entitled to receive notice period salary and severance pay in excess of two years fixed salary.
Polish corporate governance rules do not require the same level of detail of the information to be published as is required in the Swedish Code. However, information about board members, articles of association, internal bylaws and a summary of relevant differences between Swedish and Polish corporate governance and shareholder rights and a statement on the company's compliance with the Best Practices are published on the Company's website.
Members of the Management Board of Arctic Paper S.A. declare that according to their best knowledge:
The Management Board Members of Arctic Paper S.A. hereby declares that Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością sp.k. - a company entitled to audit financial statements, the licensed auditor of the financial statements of Arctic Paper S.A., has been appointed in compliance with the relevant regulations and that both the auditor and the chartered accountants carrying out the audit meet the requirements to develop an impartial and independent opinion on the audited statements in compliance with the relevant regulations and professional standards.
Signatures of the Management Board Members
| Position | Name and surname | Date | Signature |
|---|---|---|---|
| President of the Management Board Chief Executive Officer |
Wolfgang Lübbert | 21 March 2016 | |
| Member of the Management Board Chief Financial Officer |
Malgorzata Majewska-Śliwa | 21 March 2016 | |
| Member of the Management Board Chief Procurement Officer |
Jacek Łoś | 21 March 2016 | |
| Member of the Management Board Chief Operating Officer |
Per Skoglund | 21 March 2016 | |
| Member of the Management Board Sales Director |
Michał Sawka | 21 March 2016 |
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