Annual Report • Aug 12, 2013
Annual Report
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Alfa Laval has been in operation since the end of the 1800s, with the vision of creating better everyday conditions for people. Alfa Laval's products are particularly topical in today's world, where increasing focus is being placed on identifying ways to save energy and protect the environment. This involves treating water, reducing carbon emissions and minimizing water and energy consumption, as well as heating, cooling, separating and transporting food. With more than 1,900 patents in heat transfer, separation and fluid handling, Alfa Laval offers products and solutions in areas that are, and will remain, crucial for society.
Alfa Laval is a leading global supplier of products and solutions for heat transfer, separation and fluid handling. The company's products can be used in a multitude of ways. Alfa Laval's products are used in the manufacturing of food, chemicals, pharmaceuticals, starch, sugar and ethanol. They are also used in power stations, onboard vessels and in the engineering sector, mining industry and refinery sector, as well as for cleaning wastewater and creating a comfortable indoor climate, to name but a few sectors. They can also reduce the consumption of energy and water and minimize carbon emissions. In addition, Alfa Laval has a range of products and solutions aimed purely at environmental applications including the cleaning of ballast water, exhaust emissions from truck engines and for separating sulfur and nitrogen emissions from boats.
OPERATIONS
Alfa Laval has three sales divisions: Equipment, Process Technology and Marine & Diesel, as well as one division – Operations – which is responsible for production-related procurement, manufacturing and distribution. The three sales divisions have separate business models: the pace of business in the Equipment Division is fast since it involves the sale of components to customers with recurring requirements and well-defined needs, mainly through various sales channels. Process Technology is characterized by longer lead times and focuses on selling customized solutions, systems and modules directly to the end customer. Business in the Marine & Diesel Division is driven by the need for components, modules, systems and service for the marine and offshore markets and for land-based diesel power.
A link exists between new products and profitable growth. Accordingly, Alfa Laval works continuously on the research and development of new products and services. Maintaining a high rate of new development boosts competitiveness and enables the company to maintain its leading position. Alfa Laval launches between 35 and 40 new products every year. In 2012, 2.4 percent of the company's sales were invested in research and development initiatives.
Alfa Laval was listed for the first time on the Stockholm Stock Exchange in 1901 and remained listed for a period of 90 years, until the company was bought out and went private. The company relisted on May 17, 2002 and, accordingly, celebrated a decade as a listed company in 2012 – or a full century – depending on how you look at it.
Alfa Laval's worldwide organization helps customers in some 100 countries to optimize their processes. The company has 32 major production units (15 in Europe, 9 in Asia, 6 in the US and 2 in Latin America) in addition to a well-structured aftermarket organization to manage the need for spare parts and service for the installed base of products worldwide. In 2012, the aftermarket accounted for 26.4 percent of the Group's total order intake and Alfa Laval had 102 service centers at year-end.
16,060 employees, the majority of whom are located in Sweden (2,158), Denmark (1,715), India (1,462), China (2,831), the US (1,438) and France (894).
Alfa Laval's target is to achieve an average annual growth rate of at least 8 percent over a business cycle, with acquisitions accounting for 3–4 percentage points. The company's growth strategy focuses on organic growth through existing products and services, as well as acquisitions that contribute complementary products, application know-how and sales channels, thereby bolstering the company's leading position in selected markets. In 2012, sales rose by 4 percent to SEK 29,813 million.
Four acquisitions were completed and consolidated during the year:
Vortex Systems – a leading US manufacturer of mixing equipment for the oil and gas industry. Sales in the year prior to acquisition: about SEK 100 million.
Ashbrook Simon-Hartley – a US provider of belt filter presses for dewatering of municipal and industrial wastewater.
Sales in the year prior to acquisition: about SEK 500 million.
Gamajet Cleaning Systems – a leading supplier of tank cleaning machines and cleaning equipment for the industrial and sanitary markets in North America. Sales in the year prior to acquisition: about SEK 75 million.
Air Cooled Exchangers – a leading US manufacturer of custom-engineered air-cooled heat exchangers for the natural gas market as well as other energy-related end markets. Sales in 2012: about SEK 350 million.
| Alfa Laval in brief | 3 |
|---|---|
| Improving lives through innovation | 5 |
| 2012 in brief | 6 |
| President's comments | 8 |
| The share | 10 |
| Business concept, vision and strategy | 12 |
| Financial goals and benchmark values | 14 |
| Growth strategy | 16 |
| International trade | 18 |
| Key technologies | 20 |
| Energy | 24 |
| Research and development | 26 |
| Divisions | |
| Equipment Division | 28 |
| Process Technology Division | 30 |
| Marine & Diesel Division | 32 |
| Operations Division | 34 |
| Improving living standards | 36 |
| Parts & Service | 38 |
| Environmental focus | 40 |
| Employees | 42 |
Report 44
| Board of Directors' Report | 48 |
|---|---|
| Consolidated cash flows | 64 |
| Comments to the consolidated cash-flows | 65 |
| Consolidated comprehensive income | 66 |
| Comments to the consolidated | |
| comprehensive income | 67 |
| Consolidated financial position | 70 |
| Comments on the consolidated | |
| financial position | 72 |
| Changes in consolidated equity | 73 |
| Comments on changes | |
| in consolidated equity | 75 |
| Parent company cash flows | 76 |
| Parent company income | 76 |
| Parent company financial position | 77 |
| Changes in parent company equity | 78 |
| Notes to the financial statements | 79 |
| Accounting principles | 79 |
| Objectives, policies and processes | |
| for managing capital | 87 |
| Financial risks | 88 |
| Operational risks | 91 |
| Notes | 94 |
| Proposed disposition of earnings | 126 |
| Audit Report | 127 |
| Ten-year overview | 140 |
| Definitions | 142 |
| Introduction by the Chairman of the Board | 129 |
|---|---|
| Corporate Governance Report 2012 | 130 |
| Board of Directors and Auditors | 134 |
| Group management | 136 |
| Board of Directors' report on internal control | 138 |
| Auditor's report on the Corporate | |
| Governance Statement | 139 |
| Financial information | 143 |
| Annual General Meeting 2013 | 143 |
Facing a number of challenges to meet new legislation. Tackling reduced limits for sulphur emissions is probably the toughest one. The obvious, and expensive, solution is to switch to low-sulphur marine gas oil on a permanent basis. Fortunately, there is a much smarter alternative: continue to run on cheaper heavy fuel oil and install Alfa Laval's pioneering PureSOx scrubber system to clean the exhaust gases effectively. This will reduce the sulphur content in the smoke by over 98 per cent. Giving not only environmental benefits but also substantial economic advantages. The payback time is typically less than two years.
Pure Performance: Marine. Environment. Energy. Food. Engineering. Pharmaceutical. Chemical. You name the industry. Alfa Laval is helping all of them to purify and refine their processes and products. Time and time again. Our equipment, systems and service are hard at work in more than 100 countries. Helping to create better, more comfortable living conditions for all mankind. And – we are proud to say – we can see the light at the end of the funnel.
Alfa Laval has the vision of creating better everyday conditions for people – everywhere. Our products are used in industrial processes that are crucial for society, helping our customers optimize the performance of their processes to reduce energy use, protect the environment, and make food and pharmaceutical production safer.
Alfa Laval has grown to become a world leader within our key technology areas of heat transfer, separation and fluid handling. We have reached that position thanks to our innovative spirit, our early international expansion, and our ability to meet changing needs and conditions with new solutions.
The company was founded on a single brilliant invention and innovation remains at the heart of everything we do. Today we are recognized as one of the world's most innovative companies and have a truly global presence.
In a world where saving energy, protecting the environment and securing hygienic food processing are becoming ever more important, our expertise and technologies are helping thousands of companies, in dozens of industries, to contribute to creating better everyday conditions for people.
Alfa Laval wins an order to supply newly developed decanters for cleaning of industrial wastewater in Canada. The order value is approximately SEK 110 million and delivery is scheduled for 2012. "This is the second large order for these newly developed Alfa Laval decanters, and it confirms our ability to develop technical solutions that meet new customer demands in water treatment," said Lars Renström, President and CEO of the Alfa Laval Group.
Alfa Laval wins an order from Mitsubishi Heavy Industries Ltd to supply Alfa Laval Aalborg Exhaust Gas Economizers to vessels built for A.P. Møller - Mærsk. The order value is approximately SEK 230 million and delivery is scheduled to start in 2012 and be finalized during 2014. The waste heat recovery systems utilize the exhaust gases from the main engine to produce steam for the turbine which generates electrical power.
Alfa Laval in Tumba, Sweden, is visited by the Swedish ministers for infrastructure and environment. At the meeting, Alfa Laval's solutions for the cleaning and reduction of sulphur and nitrogen oxide emissions were presented: Pure SOx and Pure NOx. The International Maritime Organization (IMO) has signed an agreement to reduce these emissions and even stricter regulations will be introduced pertaining to the, so called, Emission Control Areas (ECAs).
Alfa Laval opens a new heat exchanger factory in Kunshan, China, during the month. The new factory will enable Alfa Laval to meet customers' growing demand for energy-efficient refrigeration products. Local production means shorter delivery times and competitive prices. The investment was driven by increased living standards, with a resulting increase in demand for refrigeration products. The factory will be able to serve customers in China and the rest of Asia as well as Oceania.
Alfa Laval continues its efforts to reduce its environmental impact and, accordingly, launched a new environmental strategy, which runs until 2015. Targets include a 3 percent reduction in annual energy use and carbon emissions as well as a 5 percent cut in annual water consumption. For further information about the new strategy and the new targets, go to the sustainability section on www.alfalaval.com.
Alfa Laval receives the award of "China's Best Corporate Brand Image 2012" at the 2012 China Finance Summit in Beijing. The awards were given by a group comprising representatives of leading media organizations and experts after several rounds of recommendation, nomination and selection, based on four criteria: green, innovation, integrity and development.
Alfa Laval acquires Vortex Systems, a leading U.S. manufacturer of mixing and blending solutions for the oil and gas industry. The acquisition expands and complements Alfa Laval's existing offering to said industry. Vortex had sales of about SEK 100 million in 2011 and some 20 employees at its location in Houston, Texas.
Alfa Laval acquires Ashbrook Simon-Hartley, a leading U.S. provider of belt filter presses, which is a complement and alternative to Alfa Laval's decanter range in the dewatering of municipal and industrial wastewater. Ashbrook Simon-Hartley was founded more than 100 years ago and has a global base of installed products. It had sales of approximately SEK 500 million in 2011 and was consolidated into the Group as of August 1, 2012.
Alfa Laval celebrates 75 years in India. Celebrations started in August with employees gathering to plant saplings at the company's factory in Dapodi, Pune. Additional saplings were planted at the sites in Satara, Sarole and Shirvar. More than 1,200 saplings were also distributed so that every employee in India could plant a sapling in their own gardens or local neighborhood.
Alfa Laval inaugurates its new manufacturing facility in Kunshan, China, producing decanter centrifuges for sludge dewatering and wastewater treatment. The new facility is an important step in improving and extending Alfa Laval's presence in the country in order to better serve the needs of Chinese customers.
Alfa Laval receives an order to supply Alfa Laval Packinox heat exchangers to one of the world's largest petrochemical complexes in Saudi Arabia. The order value is approximately SEK 120 million and delivery is scheduled to start in 2013 and be finalized in 2014.
Alfa Laval acquires the US-based company Air Cooled Exchangers, a leading manufacturer of custom-engineered air-cooled heat exchangers, used to cool air, natural gas, oil and water in the natural gas market as well as other energy-related end markets. The company had sales of about SEK 350 million in 2012.
Alfa Laval generated free cash flow amounting to SEK 326 million (-2,068) in 2012.
The adjusted EBITA margin, or operating margin, amounted to 16.5 percent in 2012, compared with 18.5 percent in 2011.
Order intake totalled SEK 30,339 million in 2012, com pared with SEK 27,464 million in 2008. Order intake rose 6 percent* in 2012 compared with 2011.
* Excluding exchange-rate variations.
| AMOUNTS IN SEK MILLION UNLESS OTHERWISE STATED | +/- %6) | 2012 | 2011 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|
| Order intake | 6 | 30,339 | 28,671 | 23,869 | 21,539 | 27,464 |
| Net sales | 4 | 29,813 | 28,652 | 24,720 | 26,039 | 27,850 |
| Adjusted EBITDA 1) | -7 | 5,357 | 5,736 | 5,107 | 4,976 | 6,464 |
| Adjusted EBITA 2) | -7 | 4,910 | 5,287 | 4,682 | 4,585 | 6,160 |
| Operating margin (adjusted EBITA 2)), % | 16.5 | 18.5 | 18.9 | 17.6 | 22.1 | |
| Profit after financial items | -4 | 4,505 | 4,676 | 4,364 | 3,760 | 5,341 |
| Return on capital employed, % | 26.1 | 31.3 | 37.4 | 33.6 | 53.8 | |
| Return on shareholders' equity, % | 21.6 | 22.9 | 24.4 | 24.5 | 42.8 | |
| Earnings per share, SEK | -1 | 7.61 | 7.68 | 7.34 | 6.42 | 8.83 |
| Dividend per share, SEK | 8 | 3.50 3) | 3.25 | 3.00 | 2.50 | 2.25 |
| Equity per share, SEK | 2 | 36.68 | 36.10 | 32.30 | 28.98 | 24.40 |
| Free cash flow per share, SEK 4) | 0.78 | -4.93 | 6.38 | 6.46 | 6.38 | |
| Equity ratio, % | 43.9 | 43.9 | 50 | 46.7 | 36.1 | |
| Debt/equity ratio, % | 28 | 22 | -4 | 4 | 20 | |
| Number of employees 5) | 2 | 16 419 | 16 064 | 12 618 | 11 390 | 12 119 |
1) Adjusted EBITDA – Operating income before depreciation, amortization of goodwill and amortization of other surplus values, adjusted for items affecting comparability.
4) Free cash flow is the sum of cash flow from operating and investing activities.
5) Number of employees at year-end.
2) Adjusted EBITA – Operating income before amortization of goodwill and other surplus values, adjusted for items affecting comparability.
3) Board proposal to the Annual General Meeting.
6) Percentage change between 2011 and 2012.
Demand was healthy in the first six months of 2012, despite the uncertainty prevailing in the global economy, and the value of our large orders reached record levels during the period. However, in the second half of the year, the prevailing economic uncertainty started to influence customers' decision-making and, accordingly, demand for our products. Nevertheless, at the end of the year, our order intake had risen 6 percent compared with 2011, to SEK 30.3 billion and revenues had increased 4 percent to SEK 29.8 billion.
The trend varied from a geographic perspective, the US, which had healthy demand in the energy, environment and food sectors, strengthened its position as Alfa Laval's largest market. In addition, we made four acquisitions that further strengthened our position in the country. In our second largest market, China, the order intake declined slightly due to a significant softening in demand from the shipbuilding industry. In parallel, our investments in boosting our presence in the country paid off and resulted in limited growth, despite the macroeconomic conditions. A positive effect, attributable to our investments, was also posted in South Korea and the country kept its fourth place, driven by its technically advanced shipbuilding and offshore industry as well as successful contracting companies in the process industry
8 Koncernchefen har ordet
and petrochemical segments. Russia posted a solid and widespread increase and advanced to fifth place, while the order intake in India declined somewhat due to a cautious investment climate linked to the political situation.
The Process Technology division posted a strong order intake, healthy profitability and built up a high-quality order book ahead of 2013. Particularly high activity levels were noted in the oil and gas exploration as well as refinery and petrochemicals sectors with new and replacement investments in energy-efficient solutions. In addition, the Equipment division posted a favorable profitability trend and a healthy order intake, in particular, with regard to the food and beverage industries. In parallel, the aftermarket trended favorably due to our increased focus on the area. In Marine & Diesel, new sales declined significantly as a result of a decreasing order intake for the shipbuilding industry. This development was attributable to the underlying imbalance between supply and demand for tonnage, which put pressure on shipowner's profitability.
The aftermarket business, which comprised fully 40 percent, remained unchanged – which is positive in light of the prevailing sentiment in the marine market. A substantial order backlog and the high proportion of aftermarket business contributed to healthy profitability for the division.
For the Group as a whole, the operating margin was 16.5 percent (18.5). The decline was attributable to a lower capacity utilization rate in certain plants, lower margins on new sales in the marine area, a changed product
mix and a stronger Swedish krona.
During the year we implemented a costsavings program, initiated already in 2011. The program applied to capacity adjustments and cost reductions in manufacturing as a consequence of a decline in demand for certain products, as well as cost reductions in the sales companies, primarily in Western Europe. The full impact of the measures came in the second half of the year, when sales and administration costs declined by 8 percent at an annual rate. At year-end, we had realized savings of a couple of hundred million Swedish kronor and we expect to generate additional savings of approximately 100 million kronor in the first half of 2013.
Despite the streamlining program, it is important to be selective and continue to invest in areas where we recognize potential for future growth. Accordingly, we continued our investments in research and development during the year, which is fundamental for achieving profitable growth. A number of exciting products were launched during the year, including PureDry, which enables recovery of oil that is otherwise lost onboard vessels. In total, we invested slightly more than 700 million kronor in research and development, an increase of nearly 8 percent compared with 2011, on a like-for-like basis.
We also continued our investments to boost our presence in the BRIC countries. In China, we opened plants for air heat exchangers and decanters, to enhance our ability to utilize growth opportunities for cooling and refrigeration solutions as well as water treatment. In addition, we continued to expand the country's sales organization. We invested in India and Brazil to increase the range produced for the local markets and in Sweden and France investments were made in increased capacity and productivity at a few highly specialized plants.
The transition from two to three selling divisions created a more focused and transparent Alfa Laval. Each of the three divisions has a clear business model and priorities that differ. For Process Technology, the focus areas are energy, the environment and increased presence in the fast-growing markets. In Equipment, the focus is both on increasing market presence in a cost-efficient manner, through more sales channels, as well as on increasing its presence in the aftermarket. In Marine & Diesel, the priorities are environment and energy efficiency.
Alfa Laval has a long tradition of innovation and we have a passion for products. The increased environmental requirements and higher fuel costs in the marine industry mean that Alfa Laval sees major opportunities for the new products we are launching, such as PureDry – our greatest innovation in many years in high-speed separation. In ballast water treatment, we already hold a leading
position and we envisage a major market potential in the next few years for the exhaust gas scrubber we launched in the autumn.
In addition, during the year, our new decanter, the largest we have produced thus far, was extremely successful in Canada. We booked a number of major orders for cleaning substantial quantities of oil-contaminated water and the new product offering for brazed plate heat exchangers has been successful, with increased market shares and increased margins.
The aftermarket business comprises another key area. It has healthy profitability, is less sensitive to economic fluctuations and its close customer relations help drive new sales. Without a doubt, Alfa Laval has the industry's best market coverage, with about 100 service centers, which is continuously improving as we add three to four additional workshops per year. We are also expanding existing service centers that serve growth areas, such as oil and gas exploration and extraction in Canada, Brazil and Qatar. Other services where we have strengthened our offering are service of equipment at the customer and rapid and reliable supply of spare parts.
Acquisitions comprise another key element of value creation as it is a rapid and efficient method for building new positions. During the year, four acquisitions were made in the US. The largest was Ashbrook Simon-Hartley, with sales of approximately SEK 500 million. The company is a leading provider of belt filter presses for cleaning municipal and industrial wastewater, an alternative technology to our decanters, where we already occupy a world-leading position. In other words, we can now offer our customers the two leading technologies. The other acquisitions added equipment that is used for drilling for oil, tank cleaning products for the food and beverage industries, as well as air-cooled heat exchangers for the natural gas market and other energyrelated markets. The acquisition strategy prioritizes the addition of new products to our range for sale through our global organization. We also want to strengthen our local presence in the US and Eastern Asia in addition to adding alternative sales channels.
The share price climbed 4 percent during the year, that is to say, not quite as much as the trend for the NASDAQ OMX Nordic Exchange as a whole and the engineering index. Alfa Laval's market capitalization at year-end amounted to SEK 56.8 billion. Interest in the share continues to be high and some 25 analysts track Alfa Laval on a regular basis, while the number of shareholders was about 34,600 at the end of the year.
Alfa Laval's goal is to be an attractive employer for motivated and committed employees, who form the foundation of our continued
success. In the end, the company's and the personnel's development goes hand-in-hand, or expressed slightly differently, when employees grow, the company also grows.
Accordingly, we work continuously to promote a safe, healthy and pleasant work environment, free from discrimination and with space for skills development. We have a number of different training initiatives: the Alfa Laval Academy, with programs aimed at most levels in the organization, as well as a learning portal with a large number of Internet-based and classroom-based programs. In parallel, under diversity, which improves the quality of decision-making, our work includes an open internal job market. More specifically, we have been focusing efforts on group diversity, international mobility at middle-management level and replacement planning during the year.
During the year, Alfa Laval's business principles were revised due to the new guidelines from the UN and OECD. Sustainability issues are highly prioritized by Alfa Laval's management and the review gave rise to extensive efforts with internal and external parties to gain their backing. We also created a Commercial Ethics Council with the CEO as Chairman to emphasize the importance of these issues, which are aimed at ensuring that we evaluate any risks and have appropriate guidelines and processes in place.
We also renewed our environmental goals for production. The goals, which apply until 2015, include items such as the reduction of energy and water consumption. We work internally with reducing the environmental impact of our operations, which we are not alone in doing. Other companies are also implementing initiatives to reduce environmental impact. This trend is one that bolsters Alfa Laval since we offer products that clean water and reduce emissions. In parallel, an increasing number of environmental laws and regulations are being passed, which further bolster demand for our products.
In conclusion, I would like to express my warm and sincere gratitude to all employees in the Alfa Laval Group for your valuable contribution to our efforts to build a successful company.
Lund, March 2013
Lars Renström President and Chief Executive Officer
Alfa Laval experienced a stable stock-exchange trend in 2012, the share price rose slightly, though slightly less than the industrial sector as a whole. The Alfa Laval share opened the year at SEK 130.3 and then increased 4 percent to SEK 135.3. The share is listed on the NASDAQ OMX Exchange Stockholm, which rose 12 percent during the year and is included in the index for industrial companies on the OMX Nordic Exchange Stockholm (SX Industrials Index), which rose 18 percent over the year. The highest price listed for the share was SEK 146.5 in February and the lowest price was SEK 110.4 at the beginning of September. The market capitalization for the company at year-end was SEK 56.8 billion (54.7).
Alfa Laval is included in the Large Cap segment of the OMX Nordic Exchange Stockholm. The share is also included in the OMX Nordic 40, an index comprising the 40 largest and most-traded shares on the Nordic exchanges, as well as the OMXS30 Index, which includes the companies with the NASDAQ OMX Exchange Stockholm's 30 most-traded shares.
Since Alfa Laval was relisted on the OMX Nordic Exchange Stockholm on May 17, 2002, the company's share, including reinvested dividends, has generated a yield of 632 percent. Measured over the 10.5-year period, the average annual yield amounts to 20.9 percent, compared with the SIX Return Index, which has generated an average annual yield of 8.3 percent.
Alfa Laval's share is not traded exclusively on the NASDAQ OMX Exchange Stockholm, but also on Bats Chi-X, Burgundy and Turquoise, to name a few of the largest marketplaces. However, the NASDAQ OMX Exchange Stockholm is the largest, accounting for 44 percent of all shares traded in 2012. The liquidity in the total trading of Alfa Laval's shares is favorable and 844 (957) million shares in the company were traded in 2012 at a combined value of SEK 108 billion (127). This corresponds to a turnover rate of 2.01 (2.28) times the company's total number of shares outstanding. During the year, an average of slightly more than 7,006 (6,862) share transactions were completed in Alfa Laval shares per day.
The Board of Directors' goal is to regularly propose a dividend that reflects the Group's performance, financial status and current and expected capital requirements. Taking into account the Group's cash-generating capacity, the goal is to pay a dividend of between 40 and 50 percent of net profit over a business cycle, adjusted for surplus value. For 2012, the Board has proposed that the Annual General Meeting approve a dividend of SEK 3.50 (3.25). The proposed dividend corresponds to 41.7 percent (38.6) of net profit, adjusted for surplus value.
The par value at year-end totaled SEK 2.84 (2.84) per share. All shares carry equal voting rights and equal right to the company's assets. Alfa Laval has no options outstanding that could create a dilution effect for shareholders. At the Annual General Meeting on April 23, 2012, the Board was granted a mandate to repurchase shares in the company, if the Board deems this to be necessary, up to the next Annual General Meeting. The mandate pertained to the repurchase of up to 5 percent of the shares outstanding for the purpose of cancelling the repurchased shares and reducing the share capital. The repurchase would be made through purchases on the NASDAQ OMX Exchange Stockholm.
Alfa Laval made no repurchases during the year or after the Annual General Meeting 2012. As of March 21, 2012, when the notice of the Annual General Meeting was issued, the number of repurchased shares held in treasury was zero. Accordingly, the total number of shares during the year was unchanged at 419,456,315.
At year-end 2012, Alfa Laval had about 34,600 (36,600) shareholders. A total of 5,631 new shareholders were added during the year, while 7,569 sold their stakes. The ten largest share holders at year-end 2012 held 51.3 percent (53.6) of the shares. The single largest shareholder was Tetra Laval B.V., whose holding remained unchanged at 26.1 percent. The new shareholders among the ten largest shareholders are Handelsbanken Funds, the Fourth AP Fund and Nordea Investment Funds.
| No. of share holders |
No. of share holders, % |
No. of shares |
Holding, % |
|
|---|---|---|---|---|
| 1 – 500 | 23,049 | 66.6 | 3,845,020 | 0.9 |
| 501 – 1,000 | 4,895 | 14.1 | 4,129,864 | 1.0 |
| 1,001 – 5,000 | 4,910 | 14.2 | 11,662 242 | 2.8 |
| 5,001 – 10,000 | 739 | 2.1 | 5,496,863 | 1.3 |
| 10,001 – 15,000 | 229 | 0.7 | 2,873,186 | 0.7 |
| 15,001 – 20,000 | 132 | 0.4 | 2,390,713 | 0.6 |
| 20,001 – | 675 | 2.0 | 389,058,427 | 92.7 |
| Total number of shareholders |
34,629 |
Source: Euroclear
| No. of shares | Holding, % | |
|---|---|---|
| Financial companies | 90,433,161 | 21.56 |
| Other financial companies | 25,394,549 | 6.05 |
| Social insurance funds | 12,343,466 | 2.94 |
| Government | 1,600,135 | 0.38 |
| Municipal sector | 68,667 | 0.02 |
| Trade organizations | 4,695,994 | 1.12 |
| Other Swedish legal entities | 8,696,279 | 2.07 |
| Shareholders domiciled abroad (legal entities and individuals) |
245,576,676 | 58.55 |
| Swedish individuals | 24,040,181 | 5.73 |
| Uncategorized legal entities | 6,607,207 | 1.58 |
Source: Euroclear
| No. of shares |
Capital/Voting rights, % |
Change in holding in 2012, percen tage points |
|
|---|---|---|---|
| Tetra Laval BV | 109,487,736 | 26.1% | +/-0 |
| Alecta | 28,290,000 | 6.7% | -0.4 |
| Foundation Asset Management AB |
25,100,000 | 6.0% | +/-0 |
| Swedbank Robur Funds | 16,906,377 | 4.0% | -1.2 |
| AMF Insurance and Funds | 14,208,000 | 3.4% | 0.4 |
| First AP Fund | 5,711,742 | 1.4% | 0.1 |
| Handelsbanken Funds | 4,710,310 | 1.1% | 0.4 |
| Fourth AP Fund | 4,533,659 | 1.1% | 0.2 |
| Folksam | 3,141,142 | 0.8% | -0.2 |
| Nordea Investment Funds | 2,979,265 | 0.7% | 0.2 |
| Total ten largest shareholders |
215 068 231 | 51.3% |
Source: Euroclear
| 2012 | 2011 | 2010 | 2009 | 2008 | |
|---|---|---|---|---|---|
| Market price at year-end, SEK | 135.30 | 130.30 | 141.70 | 99.00 | 67.50 |
| Highest paid, SEK | 146.50 | 147.70 | 142.60 | 100.20 | 107.25 |
| Lowest paid, SEK | 110.40 | 101.40 | 94.95 | 55.00 | 46.40 |
| Shareholders' equity, SEK | 36.68 | 36.10 | 32.40 | 29.00 | 24.40 |
| Earnings per share | 7.61 | 7.68 | 7.34 | 6.42 | 8.83 |
| Dividend, SEK | 3.501) | 3.25 | 3.00 | 2.50 | 2.25 |
| Unrestricted cash flow, SEK 2) | 0.78 | -4.93 | 6.38 | 6.46 | 6.38 |
| Price change during the year, % | 4 | -8 | +43 | +47 | -23 |
| Dividend as % of EPS, % | 46.0 | 42.3 | 40.9 | 38.9 | 25.5 |
| Direct return, % 3) | 2.59 | 2.5 | 2.1 | 2.5 | 3.3 |
| Market price/shareholders' | |||||
| equity, multiple | 3.7 | 3.6 | 4.4 | 3.4 | 2.8 |
| P/E ratio 4) | 18 | 17 | 19 | 15 | 8 |
| No. of shareholders | 34,629 | 36,567 | 33,565 | 33,780 | 28,078 |
Source: OMX Nordic Exchange Stockholm
1) Board proposal to the Annual General Meeting.
2) Free cash flow is the sum of cash flow from operating and investing activities.
3) Measured as proposed dividend in relation to closing price on last trading day.
4) Closing price on last trading day in relation to earnings per share.
TOTAL NUMBER OF SHAREHOLDERS
Source: Euroclear
Source: Euroclear
The core business concept, and the driving force behind daily operations, is to help create better everyday conditions for people. This is effected through the company's products, which meet the basic needs that arise in most operations for heating, cooling, separation and fluid handling. Alfa Laval's products are both efficient and environmentally friendly. They can reduce energy consumption – and thereby carbon emissions – or clean water and other fluids – which helps to limit the negative environmental effects of customers' processes. In addition, Alfa Laval offers a range of safe and hygienic products and solutions for the food and pharmaceutical industries. Accordingly, today, Alfa Laval's products are used in applications in a wide range of industries worldwide.
Alfa Laval's most crucial task is to offer customers profitable and efficient solutions. This is clearly reflected in the business concept, which is to optimize the performance of customers' processes, time and time again. Essentially, this entails supplying them with products and solutions that can help boost their productivity and competitiveness, while reducing their energy consumption and environmental impact.
Alfa Laval's reliable products in the areas of heat transfer, separation and fluid handling, in combination with the engineering expertise of its employees and its application know-how comprise key prerequisites for realizing the business concept. This is supported by the company's global production organization and its customer-focused new sales as well as aftermarket organization, which directly and indirectly operate in a total of more than 100 countries. Another key factor is Alfa Laval's continuous investment in the further development of products, markets and sales channels, as well as its aftermarket organization.
Alfa Laval's strategy is to develop and expand the company's leading positions in defined market segments. This can be achieved through both organic growth and acquisitions in the following key areas:
For more information on Alfa Laval's growth strategy, see pages 16–17.
Alfa Laval's operations are conducted according to its financial goals for growth, profitability and return. By achieving or exceeding these goals, Alfa Laval is able to create shareholder value in the form of an annual dividend and by increasing the value of the company. This also enables continuous investments in organic and acquired growth, in line with the company's strategy, as well as investments in research and development.
Alfa Laval's operations are conducted according to the financial goals and benchmark values set by the Board of Directors. These are based on the business Alfa Laval conducts and the markets in which it operates. The combination of the three financial goals indicates the company's ambition levels in terms of growth, profitability and capital utilization.
GOAL
Minimum average of 8 percent annually measured over a business cycle.
* Adjusted EBITA 5 10 15 20 25 08 09 10 11 12 0
15 percent measured over a business cycle.
GOAL FULFILLMENT IN 2012 16.5%
At least 25 percent. This level was set taking into account the relatively low level of capital tied up in operating activities.
GOAL FULFILLMENT IN 2012 26.1%
GOAL FULFILLMENT IN 2012 Invoicing rose 4.4 percent*. Organic growth was up 0.9 percent, while acquisitions added 3.5 percent.
* Excluding exchange-rate variations
To supplement the Group's financial goals, the Board of Directors has established benchmark values for three key financial ratios, which further specify the framework and goals for the operation of the company.
<75%
In the long term, the debt/equity ratio, meaning the capital the company borrows in relation to the carrying amount of shareholders' equity, shall be less than 75 percent. Although the ratio may exceed 100 percent in connection with major acquisitions, this should be viewed as merely temporary, since cash flow and earnings are expected to offset this effect. At year-end 2012, the debt/equity ratio was 28 percent.
This investment level creates scope for replacement investments and an expansion of capacity in line with organic growth for the Group's existing core products. During the year, the goal was lowered from 2.5 percent, in view of the capacity that had been built up over the past few years. Investments in 2012 amounted to 1.8 percent of sales.
BENCHMARK VALUE
10% of sales *Including investments in fixed assets.
The value is below the goal for the operating margin, since organic growth normally requires an increase in working capital. In addition, taxes are paid in an amount corresponding to approximately 28 percent of earnings before tax. In 2012, cash flow from current operations amounted to 10.2 percent.
In addition to the financial goals, Alfa Laval has a number of non-financial goals, which are addressed in other sections of the Annual Report. For example, refer to the section on sustainability on pages 44–46.
Alfa Laval's target is to have an average annual growth rate of at least 8 percent measured over a business cycle through a combination of organic growth and complementary acquisitions. Acquisitions are expected to account for 3-4 percentage points. Growth must be profitable and the target should therefore be viewed in combination with the profitability target of an operating margin of 15 percent.
17 Growth strategy
Organic growth is the foundation of Alfa Laval's growth strategy. This means growth of existing operations, for example through the identification of new application areas or new markets for existing products and key technologies, the development of complementary aftermarket services as well as the development of sales channels, new products or new market concepts to meet new needs, all around the world.
Alfa Laval's existing products and key technologies comprise an excellent base for continued profitable growth since the products' high quality and energy efficiency have become increasingly important criteria for customers. Another significant factor is the ongoing research and development work to continuously enhance the existing offering, not to mention, the company's strong market position and its broad geographic coverage for new and aftermarket sales.
Alfa Laval's goal is to add 3–4 percent in sales growth annually through complementary acquisitions. The acquisition strategy closely reflects the strategy for organic growth since acquisitions must be made with the aim of strengthening existing key technologies, developing the aftermarket business, adding new products to application areas where Alfa Laval is already active, as well as adding complementary sales and distribution channels. Acquisitions are a core component since they enable the company to rapidly meet changing needs with new offerings or to rapidly expand and strengthen its local presence.
Work on acquisitions is led by a special unit, which is also responsible for supporting the growth objectives of the various segments and developing new market concepts. The unit also includes the Group's patent division.
During the period from 2008 to 2012, Alfa Laval acquired 23 companies with combined sales of SEK 7,565 million, corresponding to average annual growth of SEK 1,513 million.
| ACQUISITION | REASON* | SALES, SEK MILLION** |
|---|---|---|
| Standard Refrigeration, USA | Product/geography | 220 |
| Ageratec, Sweden | Product | 50 |
| Høyer Promix, Denmark | Product | 20 |
| Pressko, Germany | Product | 50 |
| Hutchison Hayes, USA | Channel/geography | 150 |
| DIVESTMENTS | REASON* | SALES, SEK MILLION** |
| – | – | – |
| ACQUISITION | REASON* | SALES, SEK MILLION** |
|---|---|---|
| P&S Multibrand | Channel | 200 |
| P&S Multibrand | Channel | 100 |
| Onnuri, South Korea | Channel/geography | 150 |
| HES, Germany | Product | 85 |
| PHE, Brazil | Geography | 45 |
| LHE, South Korea | Channel/geography | 750 |
| Additional 12 percent of the share capital in Alfa Laval India. (Total holding 89 percent) |
Geography | Did not affect sales |
| DIVESTMENTS | REASON* | SALES, SEK MILLION** |
– ––
* The reason for divestment is either an assessment that the unit will not achieve the Group's financial goals or that it is no longer part of the Group's core operations.
** Refers to sales for the year preceding the acquisition or divestment. *** Sales in 2012.
| ACQUISITION | REASON* | SALES, SEK MILLION** |
|---|---|---|
| Champ Products Inc., USA | Product | 100 |
| Service company, USA | Channel | 100 |
| Astepo S.r.l., Italy | Product | 70 |
| Si Fang, China (65 percent) | Channel | 150 |
| Definox, France | Channel | 200 |
| Olmi S.p.A, Italy | Product | 700 |
| DIVESTMENTS | REASON* | SALES, SEK MILLION** |
| – | – | – |
2011
| ACQUISITION | REASON* | SALES, SEK MILLION** |
|---|---|---|
| P&S Multibrand | Channel | 100 |
| Aalborg Industries A/S, Denmark | Product | 3 300 |
| DIVESTMENTS | REASON* | SALES, SEK MILLION** |
| – | – | – |
2012
| ACQUISITION | REASON* | SALES, SEK MILLION** |
|---|---|---|
| Additional 8.5 percent of the share capital in Alfa Laval India. (Total holding 97.5 percent) |
Geography | Did not affect sales |
| Vortex Systems, USA | Product | 100 |
| Ashbrook Simon-Hartley, USA | Product | 500 |
| Gamajet Cleaning Systems, USA | Product/geography | 75 |
| Air Cooled Exchangers, LLC, USA | Product/geography | 350*** |
| DIVESTMENTS | REASON* | SALES, SEK MILLION** |
| – | – | – |
Growing international trade is driving demand for transport. Shipping, which carries 90 percent of the goods that are moved around the planet, has environmental benefits over airfreight, but tough legislation is still putting new demands on the industry. Alfa Laval offers a range of specialized products to reduce pollution and increase energy efficiency at sea.
Maritime transportation has quadrupled in the last four decades. The trend with increasing sea freight will continue, creating new challenges in many areas, not least for the environment. Alfa Laval's solutions for reducing emissions, cleaning ballast water and generating heat are today found on the majority of ocean-going vessels.
The zebra mussel, with its pretty patterned shell, is no bigger than a fingernail and relatively harmless in its native waters in Eastern Europe. But this tiny mollusc has been devastating – and extremely expensive – for its adopted home, the North American Great Lakes, where it was carried in the ballast water of a ship in the late 1980s. Since then zebra mussels have upset ecosystems, threatened native wildlife, damaged structures, and caused other serious problems, costing in excess of USD 1 billion to date.
Alfa Laval's PureBallast system, developed in cooperation with Wallenius Water, offers chemical-free water treatment that protects against the threat of invasive species such as the zebra mussel. It is one technology out of many in our Marine & Diesel Division's environmental product range, which helps shipyards and shipowners tackle ecological challenges and meet current and future legislation. But Alfa Laval's offer to the marine industry goes far beyond the environmental sphere, totalling 15 major product groups including waste heat recovery systems, boilers, high speed separators and freshwater generators. nd
Some Alfa Laval solutions used at sea are also trusted by customers in the onshore diesel power market, which uses similar engines. Diesel power plants bring electricity to remote areas or communities where the grid is unreliable. On land and at sea, such products help us fulfil our vision of creating better conditions for people. by
The percentage of the global ocean-going fleet equipped with Alfa Laval's range of specialized products for ships.
The Alfa Laval Aalborg scrubber removes harmful sulphur oxide and particulate matter from ships' exhaust gases.
Alfa Laval's operations are based on three key technologies for heat transfer, separation and fluid handling, which are of decisive importance for many industrial processes. In 2012, heat transfer products accounted for 54 percent (54) of sales, separation products for 22 percent (22) and fluid handling products for 10 percent (10). Alfa Laval is the global leader in all three technology areas.
Alfa Laval has been active in the field of heat transfer since 1931, when the company started to supply pasteurizing equipment for the dairy industry. Today, the company can supply heat exchangers that optimize energy use for heating, cooling, refrigeration, ventilation, evaporation and condensation. The offering comprises heat exchangers for applications that range from use in environments with lower pressures and temperatures to environments that require the handling of aggressive fluids at high and variable pressures and temperatures. Most industrial processes need some form of solution for heat transfer. Accordingly, Alfa Laval's customers can be found in such widely diverse industries as the chemical, food, oil, gas and power production, marine, construction and many, many more.
Thermal fluid systems
Air heat exchangers offer the most efficient method of transferring heat between air and liquid. They consist of a series of tubes threaded through corrugated lamellas. Fans force the air between the lamellas, while liquid (water or a cooling medium) flows in the tubes. The range includes air-cooled condensers, air-cooled liquid coolers, dry coolers, and unit coolers for commercial use, as well as industrial cooling, refrigeration and air-conditioning. They are used in applications ranging from industrial cold stores to power plants, industrial processes, breweries, dairies, office properties, etc.
A heat exchanger transfers heating or cooling, usually from one fluid to another, but also between various gases. These products are of vital importance in ensuring the efficiency of the customer's entire manufacturing process. Compact plate heat exchangers, the main product in Alfa Laval's offering, can offer the customer a very efficient energy utilization, which cuts costs and reduces the environmental impact. Their efficiency stems from their construction, plate heat exchangers are made up of a series of plates assembled closely to each other. Between the plates, there are two channels containing media at different temperatures. These pass on either side of the plates and in opposite directions to each other. Heating or cooling is then transferred via the plates and the temperatures balanced. Different types of plate heat exchangers have been designed to withstand various forms of pressure and a range of
A boiler is a closed vessel containing thin tubes. The larger the boiler, the more tubes it contains. The technology is extremely common onboard vessels but can also be utilized for industrial applications. Alfa Laval's product range includes two different types of boilers, in which the tubes are heated in different ways: one uses waste heat from the engine exhaust, while the other, which mainly operates when the engine is turned off, utilizes heat from an oil burner. The heat from the tubes is used, in turn, to heat and vaporize the water in the container, generating steam that can then be used for a number of processes, including heating, cooling, cleaning, generating electricity or producing hot water for people onboard a vessel.
Alfa Laval has a niche range of shell-and-tube heat exchangers, specially designed for applications in the food and pharmaceutical industries, as well as for cooling, but also for applications in the petrochemical, power, oil and gas, process and marine industries. A shell-and-tube heat exchanger is made up of a shell containing a bundle of tubes. The primary liquid (cooling medium) flows through the tubes, while the secondary liquid (normally water) flows through the shell around the tubes to enable heat to be transferred from one liquid to the other. Thanks to their robust configuration, shell-and-tube heat exchangers can withstand extremely high pressure and temperatures.
combustion process, and this heat is transferred to the synthetic oil, enabling it to remain in liquid form. Thermal fluid systems are generally used to generate heat for oil tanks, separators and systems for heating fuel. Other typical applications include delivering heat to steam generators, tank cleaning systems and the central heating of a vessel. These systems are also used to heat various types of cargo being transported, such as bitumen, oil-based products and chemicals.
A thermal fluid system is a closed system that permits the heating medium - synthetic oil – to circulate in a coiled heating surface. The surface then gathers the heat that is produced, either from waste steam or through a
PROCESS INDUSTRY
GEA (GERMANY)
MORE THAN 30 PERCENT OF THE WORLD MARKET
Ever since Alfa Laval was established in 1883; separation technology has been a central part of operations. The technology is used to separate different liquids from each other and solid particles from liquids. The technology can also be used to separate particles and liquids from gases.
Presses intended for the dewatering of municipal and industrial wastewater. This separation technology was added through the acquisition of Ashbrook Simon-Hartley and is a complement to our decanters.
Alfa Laval's products in this technology are dominated by high-speed separators. These separators have high rotation speeds and can rotate as quickly as 12,000 revolutions per minute. They are generally mounted vertically and are used primarily for separating liquids from one other. High-speed separators have many areas of application, including the treatment of fuel and lubricating oils onboard vessels, the processing of vegetable oil, the production of pharmaceuticals, milk, beer, wine, juice and other beverages, and in the chemical and oil and gas industry.
Another separation technology offered by Alfa Laval is membrane filtration, which is an established solution for separating very small particles.
Decanter centrifuges are normally based on horizontal separation technology, which works at a speed of 5,000 revolutions per minute. They are used to separate large particles and are thus commonly used in such applications as the dewatering of sludge in wastewater treatment plants, olive oil production, distilleries and handling drilling mud in conjunction with oil extraction.
25 TO 30 PERCENT OF THE WORLD MARKET
Transporting and regulating fluids in an efficient, safe and hygienic manner are crucial to processes in many industries. Alfa Laval focuses on fluid handling in industries with stringent hygiene requirements, such as the food and pharmaceutical industries. The company's pumps, valves and installation material are used in such applications as the production of beverages, dairy products, food, pharmaceutical products, and health and personal care products, in other words, in environments where any risk of contamination is precluded. Alfa Laval also offers equipment for tank cleaning.
Pumps drive the flow of liquids during a process and valves are used to guide and direct the flow by opening and closing. For hygienic applications, Alfa Laval mainly offers centrifugal, liquid ring and rotary lobe pumps. The most common types of valves include control valves, constant-pressure valves, butterfly valves and diaphragm valves.
Alfa Laval offers hygienic tank equipment primarily designed for use in the food and pharmaceutical industries. The company's range includes everything from mixers to cleaning equipment. Alfa Laval's mixers work well on both high and low-viscosity liquids, ranging from milk, wine and juice to yoghurt, desserts and fruit drinks. There is even a mixer that offers mixing of liquids and cleaning of the tank afterwards.
PROCESS INDUSTRY
GEA (GERMANY) SPX/APV/ WAUKESHA CHERRY BURRELL (USA)
Greater focus on the bottom line and high energy prices are driving companies to search for new ways to optimize their processes. At the same time, increased demand for energy is making new sources of energy, such as biofuels or deepwater oil fields, more attractive. Combined with more stringent environmental regulations, these trends will drive demand for Alfa Laval's solutions.
The world's growing energy needs can be addressed in two ways: by increased production and improved energy efficiency. Alfa Laval has an extensive range of energyrelated products for both approaches to this global challenge.
A large steel works consumes roughly the same amount of energy per year as a major European city. If such a plant could achieve just one percent reduction in energy consumption the savings in terms of cost and emissions would be huge. With the world's energy needs expected to rise by more than 30 percent between 2010 and 2030, demand for efficient solutions will become ever more important.
Combining the process know-how of Alfa Laval's engineers with the knowledge of plant operators may be one way to improve energy use in a plant's processes. Waste heat produced in one part of the process can often be used in another part of the plant by applying one of Alfa Laval's highly efficient heat exchangers, thereby lowering the overall energy use of the plant.
Energy accounts for a large part of Alfa Laval's business, from the extraction and refinement of oil and gas to power production. Our highly efficient heat exchangers and separators are crucial to these applications, making an important contribution to global energy production. They are also used in a large number of other processes where they help lower energy consumption and emissions.
The world's growing demand for energy is also encouraging the growth of alternative energy sources, such as making biofuel from waste. Alfa Laval's products are involved throughout the biofuel production process, from heating and cooling to mixing and separation.
We are proud to be playing our part in securing future energy supplies, making processes more energy efficient and reducing CO2 emissions, which reduces the environmental impact.
25%
The energy use reduction made possible for an oil refinery replacing shell-and-tube technology with Alfa Laval's compact plate heat exchangers.
Our Packinox design is the largest type of plate heat exchanger in the world, reducing both emissions and energy use.
At Alfa Laval, investment in innovation has been around from the start. Producing new products and solutions that meet customers' needs is decisive in maintaining and strengthening a company's competitiveness and, thereby, its positions, which enhance its opportunities of achieving profitable growth.
Alfa Laval focuses on the research and development of products and solutions in the fields of heat transfer, separation and fluid handling. This applies to the development of new products to meet indications of new market needs and to innovation as part of developing existing products to be manufactured in new materials and with higher capacities. It can also apply to changes in the actual production process. Every component is important and intended to ensure that Alfa Laval develops products and solutions that solve existing and future problems and needs. The identification of market needs and the rapid and efficient transformation of that knowledge into innovative products generate an advantage over the competition.
Research and development work has internal frameworks, requirements and target parameters. These include continuous measurement to ensure that the products reach the market and become profitable in the shortest time possible. In addition, launches are followed up by measurements to ascertain the proportion of new sales comprised by products younger than five years.
A few of the products launched in 2012:
In 2012, Alfa Laval invested SEK 707 (648) million, corresponding to 2.4 (2.3) percent of sales, in research and development. The number of projects is kept limited and results in 35 to 40 new products each year. The reasons behind these focused investments are that the company does not wish to split research and development resources between too many parallel projects and wants to ensure that the sales organization can manage all of the product launches in a professional manner.
Extensive work is carried out with securing patent protection to ensure that Alfa Laval derives the benefit of its investments. Currently, Alfa Laval holds in excess of 1,900 patents - protected and defended by the company's patent division.
Collaboration across boundaries is the foundation of successful innovation efforts. Accordingly, the new sales and aftermarket segments collaborate with the organizations managing manufacturing and procurement. Alfa Laval's product centers are at the core of the process and focus on the research and development of all main products, for example, gasketed and welded heat exchangers, air heat exchangers, boilers, separators, decanters, membranes and fluid handling equipment. These centers combine development and technological know-how with expertise in various applications.
In the coming years, the marine industry and shipowners are faced with challenges as a result of new environmental legislations with special focus on reducing emissions from fossil fuels. Alfa Laval Aalborg has therefore developed a compact and efficient exhaust gas economizer utilizing the heat in the exhaust gas from the auxiliary engines during voyage and port stays, which will significantly help reducing the oil consumption on the oil-fired boiler.
A new range of sampling valves for use in the dairy, food and beverage, personal care and biopharm industries. The Unique single and double-seat sampling valves offer high operational reliability, enhanced cleanability and ease of operation and maintenance.
In the course of fuel handling and fuel treatment, up to two percent of the fuel is lost. PureDry from Alfa Laval is a compact separation system offering efficient recovery of the fuel oil lost onboard ships and in diesel power plants, which enables substantial savings and a reduced carbon dioxide footprint.
A new range of simple, efficient and reliable air heat exchangers meeting the market's demand for better energy efficiency. Optimized for environmentally-friendly refrigerants, the range is specifically designed for small to medium-sized commercial applications such as supermarkets, restaurants and chilled food distribution depots. There are currently three models within the Optigo platform – all with the same DNA but varying in their air handling and scope of applications.
The Division's customers are characterized by a well-defined and regularly recurring requirement for Alfa Laval's products. In most cases, sales are conducted through system builders and contracting companies, as well as dealers, agents and distributors – direct sales to end-users are limited. The Equipment Division continuously increases its number of sales channels, since it is strategically important that its products are available through several channels worldwide. Given this focus on availability, it is natural that the Division also strives to further develop and strengthen the Group's e-commerce offering.
1
7
6
" During the year, we continued the development of our distributor network and other channels in parallel with the launch of a new e-commerce platform. These comprise two key factors for the division's continued success."
President, Equipment Division.
major district heating order in the U.S. helped boost comfort heating and cooling (HVAC), an end market that otherwise posted a fairly flat trend. A certain slowdown was noted for refrigeration, which was impacted by low investments in cooling applications in Western Europe.
Sales comprises heat exchangers for district heating and cooling, air conditioning of plants, offices and shopping malls, and cooling and freezing solutions for the food, beverage and pharmaceutical industries as well as supermarkets. In addition, the segment's customers come from the manufacturing industries to which Alfa Laval sells heat exchangers and separators for temperature regulation of and/or cleaning of liquids to enable their reuse, thus lowering operating costs and protecting the environment.
Activity levels in the construction industry, energy price trends, the need for energy-efficient solutions, shift toward demand for more environmentally friendly cooling media, environmental legislation, industry capacity utilization, commodity and energy price trends, increased environmental focus and expansion of power supply.
Alfa Laval's products are used to produce liquid and viscous foods, pharmaceuticals and hygiene products. Customers are active in the beverage, dairy, food and biotechnology industries, all of which have very stringent requirements in terms of hygiene and safety.
Change in consumption habits as a result of urbanization in growing economies, the development of new medicines, improved standard of living, demographic changes, the need for energy-efficient solutions and expanded food production.
Customers in this segment include manufacturers of air-conditioning systems, air compressors, heat pumps, air dryers and gas boilers. Among other products, Alfa Laval sells brazed plate heat exchangers, which are later integrated into customers' end-products.
Increased focus on the environment, the need for energy-efficient solutions, government subsidies and energy price trends.
ORDER INTAKE Change in order intake
Share of Division's order intake 10% - 2012 2010 = 2011 +
Customers are active in all of the Division's segments, with the exception of OEM. The aftermarket is a priority area and the overall strategy is to further develop and expand the spare parts and service operations.
The industrial capacity utilization rate and growth in the installed base.
This Division serves customers that require customized solutions to enhance the efficiency of their processes or boost their capacity. Sales are mainly conducted through the Group's own sales companies and contractors, and are made directly to customers. Alfa Laval combines expertise in its key technologies with solid knowledge about customer processes, and offers package solutions that cover everything from individual products to systems, complete solutions and efficient customer service.
" The positive trend was partly attributable to the investment climate, but also to the product launches we performed as well as the successful introductions of existing products in new areas."
President, Process Technology Division.
Alfa Laval's products are used for manufacturing petrochemical products, plastics, polymers, metals, minerals, biofuels, pharmaceuticals, starch, paper and sugar.
Global market prices for raw materials, such as sugar, ethanol, corn, oil and steel, energy price trends, environmental legislation, the need for energy-efficient solutions, the need for productivity enhancements, demand for fuel and a technological shift.
ORDER INTAKE
Share of Division's order intake 29%
Change in order intake
2011 2012 2010 + + -
In the energy sector, Alfa Laval's products, modules and systems play a major role in both the extraction of oil and gas and in the production of energy in power plants. Alfa Laval is also active in the environmental sector, since the company's products can help customers fulfill increasingly strict environmental requirements and legislation. In the waste treatment segment, Alfa Laval supplies products that reduce sludge volumes so that they can be managed in a cost-efficient manner in municipal treatment plants throughout the world.
Energy / Oil and gas prices, a growing need for energy in developing countries, national independence (LNG), development of energy production using renewable fuels, increased focus on nuclear power and the need for energy-efficient solutions.
Environment / New rules and regulations, increased need for freshwater due to a growing population and increased urbanization.
ORDER INTAKE
Alfa Laval supplies process solutions for the beverage and food industries. Among other applications, the Group's solutions are used in the production of beer, wine, fruit concentrates, food ingredients, milk proteins, sugars, prepared foods, vegetable/olive oil, meat and fish proteins.
Demographic changes, population growth, improved standard of living, changes in consumption patterns, increased focus on healthy food, subsidies and raw material price trends.
ORDER INTAKE
Share of Division's order intake 16%
Change in order intake
2011 2010 +
2010
+
Customers are active in all of the Division's segments. The aftermarket is a priority area and the overall strategy is to develop and expand the spare parts and service business. It offers customer value, brings customers closer to Alfa Laval and is less sensitive to variations in the business cycle. By creating continuous customer contacts, it facilitates new sales. Read more on pages 38–39.
The general activity level in various industries, the need to upgrade older equipment, an increased need for efficiency and the need for service and spare parts to prevent unplanned stoppages and minimize the time necessary for planned stoppages.
ORDER INTAKE
Share of Division's order intake 28%
Change in order intake
2012 =
2011 2010 + +
The division has a wide and varied range of products in the energy, environmental and safety areas, for customers in the marine industry, manufacturers of diesel engines and offshore customers. Sales are conducted through the Group's own sales organization directly to customers. The offering, which includes sales of 15 different main product groups, comprises components, modules and adapted systems, such as boilers, separators, heat exchangers, inert gas systems, freshwater generators, exhaust gas cleaning systems, heat recycling systems and ballast water treatment systems. In addition, the division has a well-developed aftermarket organization.
" We are very pleased with the environmental and energy-saving products launched during the year. Due to existing and expected regulation, we envisage quite a substantial market potential for them in the coming years."
Direktör, Marine & Dieseldivisionen.
The segment supplies shipowners, shipyards and manufacturers of diesel engines with a wide range of products in the energy, environment and power areas. The product portfolio includes separators, heat exchangers, freshwater generators, tank cleaning equipment, ballast treatment systems and much more.
Marine / Global transport requirements, consolidation in the shipbuilding industry, government initiatives to support local shipyards and environmental legislation.
Diesel / The need for electricity in remote locations, global energy demand, the need for power reserves, for example, for nuclear power plants and wind farms.
Supplies customers in the marine industry and the offshore sector with a raft of components, modules and adapted systems aimed at optimizing their processes, saving energy and reducing emissions. The offering includes boilers, inert gas systems, exhaust gas cleaning systems and thermal fluid systems.
Global transport requirements, governmental initiatives to support local shipyards, environmental legislation, increased focus on energy efficiency, safety regulations for transporting flammable cargoes, increased energy demand leading to investments in offshore oil and gas exploration and offshore drilling technology improvements.
ORDER INTAKE
Share of Division's order intake 22%
New customer segment, no corresponding data exists for previous years.
Has a wide offering to the division's customers comprising spare parts, service, repairs, upgrades and replacement products. The network is well-developed and ready to help customers whenever and wherever they need assistance. Read more on pages 38–39.
Increased trade and capacity utilization in the global ship fleet.
ORDER INTAKE
Share of Division's order intake 41%
Change in order intake
At Alfa Laval, the Operations Division is responsible for the Group's production-related procurement, as well as its manufacturing, logistics and distribution. In other words, Alfa Laval has a centralized supply chain that should deliver the right product, with the correct documentation at the desired moment, all over the world. Through a global and consolidated perspective on the coordination of procurement, production and logistics, reliable access is created to the company's products worldwide. Furthermore, the chosen structure enables procurement to be conducted at the best possible price, lower operating costs and a high level of efficiency.
Alfa Laval's need for raw materials and other material, necessary for production, is managed by a shared procurement organization. This unit is organized in groups that focus on different material needs, such as metals, electronics, gaskets and castings. The shared organization consolidates the company's total needs for material and makes Alfa Laval a customer with real purchasing power.
With a presence in nearly 60 countries, production on several continents and customers all over the world, Alfa Laval also has a global network of suppliers. Irrespective of geographic location, these suppliers must be able to meet the company's needs for material in terms of quality and price, as well as volume requirements and delivery precision. The existing suppliers are reviewed on a continuous basis in parallel with efforts to identify and evaluate new suppliers. In addition, other suppliers are added in conjunction with acquisitions. These are also subject to evaluation to see whether they can live up to requirements on quality, price and volumes. An active evaluation and development process also exists in fastgrowing economies aimed at ascertaining how well suppliers in these economies meet Alfa Laval's business principles with respect to health, safety, the environment and ethics. This comprises part of the sustainability work, which has been the responsibility of the line organizations for a number of years. Read more about Alfa Laval's sustainability work on pages 44–46.
Alfa Laval's production needs metals including steel, aluminum, copper and titanium. Since direct material comprises about 70 percent of the cost of goods sold, changes in the price and availability of these metals impacts the company. As part of reducing the effects of fluctuations in price and/or supply, Alfa Laval implements the following measures: customer price adjustments, price clauses in customer contracts and fixed-price agreements with suppliers. Another alternative is to enter long-term delivery commitments with the company's suppliers at fixed prices. Alfa Laval largely produces to order, which entails that the advance payments received from customers in large projects are used to purchase materials. This means that Alfa Laval generally does not maintain large inventories of raw materials and other materials.
Alfa Laval's production is distributed between 32 major manufacturing units, spread over four continents, and involves approximately 7,700 employees. Production is centralized and based on manufacturing technology, product group and size, not on the end-customer's application for the product. More than 50 percent of direct labor hours related to production now occur in so-called low-cost countries. From a historical perspective, however, the gradual establishment in the world's fastgrowing economies was largely the result of the demand that Alfa Laval noted at an early stage in these areas. Local demand is best
met through local production rather than by shipping products at the global level, which is costly, time consuming and less environmentally beneficial. The overall production structure is reviewed on a continuous basis to ensure optimal planning and distribution. Furthermore, a raft of different environmental targets comprising electricity and water consumption, the use of various chemicals, etc., apply to production. These targets are presented in more detail in the sustainability section at www. alfalaval.com.
Distribution and logistics is the unit that helps all segments in the sales divisions with their specific transport needs on a global basis. Focusing responsibility to a single unit enables the total transport need to be identified, thereby generating cost advantages with respect to procurement and simplifying the company's effort to limit the environmental impact of transportation. Transportation alone accounts for more than 40 percent of Alfa Laval's total carbon emissions. The efforts to reduce this focus on shipping more goods by sea, rather than by air. In 2012, new environmental targets were set using 2011 as the base year. One of these targets is to reduce carbon emissions by 3 percent per year by 2015. However, it is sometimes difficult for Alfa Laval to control the method of transportation. A customer needing spares is often in acute need, in which case, airfreight is the only alternative. During the year, about 7 (7) percent of distribution was by airfreight, 28 percent (29) by sea 65 (64) percent by road.
There are three regional and three central procurement offices. Approximately 80 percent (80) of the value of the total purchasing volume derives from some 497 suppliers (340) and about 68 percent (67) occurs within the framework of global contracts.
At the end of the year over 86 percent (92) of the total delivery value came from production sites certified under the ISO 14001 environmental management system. The reason for the decline compared to 2011, is that production sites have been added through acquisitions.
| 1 North and Latin America | 7% |
|---|---|
| 2 Asia | 15% |
| 3 Central and Eastern Europe | 3% |
| 4 Western Europe | 75% |
36 Xxxxxxxxxxxxxxxx
A higher standard of living for many people around the world is leading to lifestyle changes and more consumption. It is boosting demand for processed and prepared foods, healthcare products and pharmaceuticals. These trends mean more demand for Alfa Laval's products and solutions that improve shelf life, reduce waste and make pharmaceutical production hygienic and safe.
50% The average global life expectancy has risen to nearly 70 years. People are becoming healthier and enjoying a higher standard of living, which increases demand for processed foods, pharmaceuticals and healthcare. Alfa Laval supplies energy-efficient solutions that meet the highest hygiene and safety standards.
Grocery shopping in India is not what it used to be. Traditional markets selling fresh meat, vegetables and fruit are rapidly being replaced by supermarkets with shelves stocked with ready-made baby food, canned fruit and frozen meals. These new consumption patterns, driven by improved living standards and a growing middle class, are being repeated in fast-growing economies around the world. Shifts in shopping and consumption patterns are proving to be an important growth factor for Alfa Laval. Our pumps, valves, separators and heat exchangers are important components in food production, while our refrigeration solutions help keep food fresh during storage and distribution. This growth is not only being driven by increased demand, but higher safety standards being imposed on production processes. Alfa Laval has the technology and expertise to meet these needs while reducing costs and environmental impact; tank cleaning machines that use 30 percent less water than other solutions; decanter centrifuges used in winemaking that reduce operating costs by 20 percent; solutions for olive oil producers that save energy and water and improve flavour.
Longer lifespans and higher incomes are also creating demand in the pharmaceutical industry, which Alfa Laval has served for more than 125 years. Our key technologies are designed and documented for biotech and pharmaceutical use and meet or exceed requirements on cleanliness, reliability and performance. Our magnetic mixers increase yield and minimize product contamination; our coolers eliminate contamination and reduce water use. and in a echnologies ch requirements use.
The energy use reduction made possible for food and fruit processing plants using pumps from Alfa Laval.
A key component of Alfa Laval's operations is offering service and spare parts for the company's continuously expanding base of equipment and systems installed globally. Alfa Laval's products are of high quality and have a long service life. Performance can be maintained and service life extended even further, through regular maintenance. Accordingly, the aftermarket business is an extremely important factor in enabling Alfa Laval to realize its business concept. "to optimize the performance of customers' processes, time and time again."
However, the aftermarket business not only provides customer value, but also ties in the customers more closely to Alfa Laval. It generates a healthy profitability, supports new sales and involves frequent customer contact, thereby providing opportunities to identify new requirements and indications of future needs, which can be forwarded to the units for research and development. Furthermore, it is less sensitive to the business cycle and thus has a stabilizing effect on invoicing in periods of economic downturn. Alfa Laval prioritizes the continued development of the operations from a geographical perspective and in terms of products and service, both organically and through acquisitions. Alfa Laval's target is for aftermarket to display consistent growth in absolute terms. At present, Alfa Laval has slightly
more than 100 service centers, allocated over six continents, which accounted for 26.4 percent of the total order intake in 2012.
The offering of spare parts and service is extensive and the company's service centres have a wide geographical coverage. It is important to offer what the customer wants, in terms of content, time and location. In other words, the right product and service offering, at the right time and in the right place. Since many of Alfa Laval's products are found at the heart of various customer processes, performing critical tasks, rapid delivery is a necessity and is enabled by the company's global coverage. In addition, Alfa Laval's original parts contribute to low costs over product lifecycles and provide peace-of-mind, since they have undergone extensive testing to ensure they match the task. Sales of service and spare parts over the total lifetime of a product can be several times higher than the initial investment, which makes Alfa Laval's installed base of products highly valuable.
The aftermarket business is governed by the customers' needs. A demand for spare parts and service may arise just a few months after installation and can just as well arise after
several years – this all depends on which key technology is involved – heat transfer products, separation or fluid equipment. Furthermore, needs are strongly linked to how demanding customer processes are, as well as the tasks the product performs and how intensively it is run. Since each customer has unique needs, Alfa Laval's offering is extensive. It includes spare parts, available worldwide, as well as service agreements customized to meet each customer's specific situation. This means that they are flexible and can include everything from basic maintenance to upgrades, online monitoring, round-the-clock technical support seven days a week and complete maintenance plans. Upgrades in particular, pertain to making changes in the installed product to meet customer needs and wishes to, for example, lower energy consumption or enhance the quality of their end product. Upgrades are an efficient method of accomplishing the above through a moderate investment, which often has an extremely short payback time.
Even if in the final analysis many variables determine the customer's needs, certain minimum requirements must be met to maximize the service life of the product. Accordingly, regular preventive maintenance is always recommended.
Regular cleaning of a plate heat exchanger maximizes its energy efficiency and service life. However, the extent of this need is also determined by the environment in question. Products used in demanding environments, such as chemical processes with high pressures and temperatures, require more frequent service and cleaning than those used in "gentler" environments, that is an environment with lower pressures and temperatures. In addition, the adaptation of plate heat exchangers to changes in the operating conditions of customers' processes is easily performed and can be very profitable for the customer.
Separators
Since separators comprise rotating equipment, they require minor servicing after about 1,500 hours in operation. The first major servicing normally occurs once the product has been in operation for 12 months.
Decanters The recommendation for decanters is to have them serviced once they have been in operation for one year. A major overhaul should be carried out after two years.
Towards the end of 2012, Alfa Laval had established 102 service centers to meet customer demand, around the globe.
Large and mature installed base that needs to be maintained and renewed.
A combination of fast-growing markets and established niche applications.
Installed base that is growing rapidly.
0 1,000 2,000 3,000 4,000 5,000
Value of the aftermarket relative to new sales
More intense focus on environmental issues is driving tougher regulations, leading to increased demand for products that reduce energy and water consumption, as well as emissions to air and water. Alfa Laval's heat exchangers are renowned for their energysaving performance, while our decanters play a role in treating the wastewater of millions of people. And our environment-related offer does not stop there.
Mankind's negative impact on the environment is becoming ever clearer and individuals, businesses and governments are taking determined steps to green their activities. Alfa Laval supplies technologies to help them clean up their act.
Buildings account for between a quarter and a half of global CO2 emissions, so you don't need to go far from home to find opportunities to tackle climate change. With new studies published almost daily on the effects of global warming on our planet and its inhabitants, action is needed in all areas of human activity, from making buildings more energy efficient to increasing use of alternative fuels. Alongside voluntary steps taken by individuals and businesses, more legislation and regulations are being introduced which are driving demand for environmentally friendly technologies.
Alfa Laval is committed to the goals of saving energy and protecting the environment. Our products are involved in treating water, reducing carbon emissions and minimizing water and energy consumption. Over the past 60 years Alfa Laval has performed more than half a million heating installations and over 10,000 cooling installations. We provide energy-efficient district heating and cooling – often using waste heat from other processes, thermal storage solutions that save energy and money, and heat exchangers for zero-carbon geothermal heating systems.
Another pressing environmental challenge is access to fresh water. This crucial resource needs to be used more sparingly and reused where possible. Water treatment is another important process for which Alfa Laval has products and solutions. We supply complete systems, specially designed modules and individual components for use in wastewater processing. Our systems make a real difference. Alfa Laval has installed a total freshwater capacity of more than one million cubic metres per day.
The Alfa Laval PureVent compact centrifugal separator removes 98–99.9 percent of the oil in crankcase gases of diesel engines.
One million m3 per day
The total freshwater capacity installed by Alfa Laval.
Alfa Laval's goal is to be an attractive employer with a positive work environment for motivated and committed employees, the foundation of the company's continued success. Accordingly, continuous efforts are made to ensure that the work environment is attractive, safe and healthy, free from discrimination and with space for competence development. In the end, the development of the company goes hand-in-hand with the development of the employees, or expressed another way, when employees grow, so does the company.
To enable the perception of Alfa Laval as an attractive, potential employer, it is important that we highlight and showcase the company, our offering, what we do and what we stand for. Quite simply, this is about marketing to ensure that we continue to attract excellent and talented employees also in the future. During the year, a platform was launched to ensure a shared approach to the presentation of Alfa Laval to potential new employees. It focuses on showcasing some of the company's distinguishing features, including its focus on innovation and development of new products – which can contribute to reducing human impact on the environment – and, in addition, the opportunities for personal development. Recruitment is primarily associated with engaging new employees, but it is equally important that existing employees are aware of the opportunities that exist for career development and career change. Accordingly, at Alfa Laval, there is an open job market for internal recruitment. All available positions are published on the intranet, including managerial positions, and internal candidates are encouraged to apply. The goal is to broaden the base of applicants to thereby increase mobility and diversity and, by extension, promote development and innovation.
To get new employees off to a good start, a shared induction program has been developed for new employees and for personnel that join Alfa Laval through acquisitions. While induction programs already exist at a local level, the new program is intended to provide an overall image of Alfa Laval to demonstrate how the various parts fit together to make the whole – or in other words, how the work performed at a local level fits into the company's overriding goals. The program is Internet-based and includes seven self-tutorial modules.
Working actively with skills development is a key prerequisite for being an attractive employer. Through offering training and an organization that enables transfers between positions and countries, Alfa Laval tries to ensure that competence stays within the company. Over the past few years, the training program has been reviewed to optimally adapt it to the organization's needs. Alfa Laval Academy, with four different faculties, provides training at most levels within the organization. In 2012, the majority of Alfa Laval's employees underwent some form of training or course. The structure includes a learning portal, available via the intranet, which offers a substantial number of programs, both Internet-based and classroom-based, in areas including finance, project management, languages and leadership, as well as further training in various application areas for Alfa Laval's products and marketing.
Alfa Laval conducts international operations aimed at a diverse number of end markets. Therefore, diversity must characterize the company's recruitment, personnel development and managerial appointments. Diversity means that a spread of nationalities, ages, experience, knowledge, religious beliefs and genders is promoted. While the management of all the above is a challenge, if it is performed correctly it constitutes an invaluable asset. The interface between people of various genders, nationalities or with different experience can contribute to increased creativity and innovation, which comprise decisive elements for a company built on innovation like Alfa Laval. Today, more than 80 nationalities are represented at Alfa Laval. The proportion of female employees is 19 percent. The long-term ambition is to
broaden the recruitment base for female managers by increasing the proportion of female graduates recruited.
A basic prerequisite is that laws and regulations are met and complied with. In addition, Alfa Laval supplements the above with its own, more far-reaching policies in a number of different areas. As regards health and safety, the Health & Safety organization develops rules, sets targets and performs measurements to be able to follow trends. They prepare specific tools and offer training to support health and safety efforts in the various parts of the organization. A number of different targets are in place, which are followed up and reported on. For more information, please read our GRI report, which is published in the sustainability section at www.alfalaval.com.
However, there are also soft issues that are equally as important when it comes to creating a positive work environment. One factor is the atmosphere conveyed by management through the organization. Meeting each other with respect and kindness is decisive in creating a sense of well-being. This also includes continuously challenging personnel and offering them opportunities for development and further education as well as ensuring that nationality, religion, ethnic origin and gender do not comprise any barrier for the individual's career development. Experience, knowledge and commitment must be the most important factors.
The figures for 2008 were inflated by the high metal prices. The outcomes in 2009 and 2010 were affected by the financial crisis and the outcome in 2011 by the acquisition of Aalborg Industries and the Euro crisis. Aalborg industries has lower sales per employee than Alfa Laval.
"I would like all our managers to look in the mirror and ask themselves how they can manage our business in a more sustainable manner. Our review of the Business Principles in 2012 comprised a key component
of this reflection.
I am very pleased with the resulting document, but even more pleased by the positive engagement of everyone in this work. The review generated many helpful suggestions, comments and, at times, lively discussions. I am therefore
confident that the revised Business Principles have a strong ownership in the company's management.
But the real challenge of such a document is not in its production but in its implementation. Some of the Principles are simple instructions and unequivocal in their meaning. But, like some parts of the United Nations and OECD documents on which they are based, some of the Principles are more aspirational.
Whether an instruction or an aspiration, I am certain that by persistent implementation our revised Business Principles will help us find new opportunities to provide better everyday conditions for people."
Lars Renström
Alfa Laval's Business Principles form the basis for the company's work on sustainability.
Respect for human rights is fundamental
High ethical standards guide our conduct
The company's commitment to open dialogue builds trust
Optimizing the use of natural resources is our business
This Sustainability Report focuses on the revision of the Business Principles and the environmental targets that were developed in 2012. We also outline some of the expected implications from the changes in our Business Principles.
More detailed sustainability information can be found on www.alfalaval.com with the complete text of the Business Principles, the 2012 Progress Report and the data rich Global Reporting Initiative (GRI).
Alfa Laval's Business Principles were published in 2003. In the Annual Report for 2011, we gave a summary on the development since then – key goals, achievements and, in some cases, our underperformance.
The impetus to review our Business Principles came from the 2011 publication of the United Nations Guiding Principles on Business and Human Rights, the latest revision of the OECD Guidelines for Multi-National Enterprises, as well as our continued support for the United Nations Global Compact.
We believe it is critical to make the Principles come alive in our day-to-day business. Therefore, ever since the inception of the original Business Principles, our philosophy has been to incorporate management systems, goal setting and monitoring into normal line-management functions. Thus, input from line managers and employees has been an essential part of our consultation process.
Alfa Laval has a pragmatic "tell it as it is"
culture, and, accordingly, we have tried to follow the wording of the source documents as closely as possible. With these considerations in mind, comments to the various drafts were invited from employee representatives and management as well as SRI analysts and shareholders. Finally, the document was reviewed, improved and approved by the Group Management and Board of Alfa Laval.
Respect for human rights is fundamental In the past years, our social business principle has led to improved health and safety for our own employees, and has also focused on the labor conditions of workers at suppliers in low labor-cost countries. The revised OECD Guidelines encourage us to broaden this riskbased approach towards all business relationships. In response, we have added the "Protect, Respect and Remedy" concept of the United Nations Guiding Principles on Business and Human Rights, with the new clauses:
We expect these additional clauses to add new ethical and moral dilemmas to normal business decision making. At the moment, these paragraphs are aspirations and so we will proceed cautiously and gradually to introduce a broader human-rights risk assessment process into our operations.
Alfa Laval engages in many local community initiatives. However, inspired by the 2012 launch of the United Nation's Global Compact Children's Rights and Business Principles, we will be guiding group companies to focus initiatives on the development of human rights, education and health for children.
– Wherever it operates, Alfa Laval wants to make a positive contribution to local community activities commensurate with its relative size as an employer in the community. Contributions could be targeted at projects committed to the care and development of human rights, education and health for children.
Social responsibility is an important consideration when talented people are seeking employment. Our new community engagement focus does not mean we will immediately pull out of other existing community activities but we believe a unified focus will encourage more employees and management teams to engage in community activities with a consequent benefit to society as well as an enhancement of our attractiveness as an employer.
High ethical standards guide our conduct Eliminating bribery and corruption is essential for the continued development of international fair trade. Alfa Laval has conducted intensive training, internal auditing and reporting on this issue during the past years. This amended paragraph in the Business Principles includes quotes about agents and third parties which previously were to be found in training material and internal policies.
– Alfa Laval works against corruption in all its forms, including extortion and bribery. Alfa Laval companies or employees must not give, promise or offer anything of value to any customer, government employee or any person for the purpose of improperly securing a decision, securing an advantage, avoiding a disadvantage or obtaining or retaining business. Furthermore, Alfa Laval does not permit agents, suppliers, contractors, consultants or other third parties working on its behalf to engage in this kind of behavior.
To further strengthen the implementation of our Anti-Bribery and Corruption Policy we have created a "Commercial Ethics Council" which is chaired by the CEO. The Council has the responsibility of ensuring that there are adequate anti-bribery and corruption policies and processes in the company as well as of reviewing risk assessments.
The foundation on which our Transparency Principles stand is accurate factual information. Since 2003, we have implemented reporting systems to track essential non-financial indicators linked to the Business Principles. The inclusion of the following paragraph gives recognition to the importance of these systems as a part of "business-as-usual".
– All entities in Alfa Laval strive to measure and record relevant non-financial information relating to the implementation of the Business Principles. This helps to maintain a focus on the issues as well as provide key data by which targets can be set and progress can be tracked. Progress reports are published externally in the sustainability report section of www. alfalaval.com. and internally via the intranet and through meetings of the European Employee Council and other employee representative groups.
Whilst the initial reporting focus has been on employee and shareholder information, in recent years, sustainability information has become an important element of market communication. In 2012 we published a special sustainability issue of our customer magazine, Here.
During 2012, a new environmental improvement strategy was developed and announced together with new key targets.
During the past years, the Alfa Laval Environmental Management System (EMS) has been implemented in 34 sites. In 2006, when the last environmental targets were set, there were only 20 sites in the EMS. Each year, additional sites have also been added through organic growth and acquisitions. These changes make year-on-year comparisons of environmental data very difficult. Our new targets apply to all sites but, to facilitate tracking of progress, we will provide comparative data for the 23 sites that together accounted for over 85 percent of our manufacturing energy consumption in 2011.
In 2012, 3 energy-savings projects were completed and 19 started in the manufacturing sites that consume 85 percent of total energy. At the end of 2012, we recognized that we have not yet initiated enough projects in the year to achieve our challenging targets. We are taking actions to increase the number of projects in all areas. More details can be found in the 2012 Business Principles Progress Report.
| Board of Directors' Report | 48 | |||||
|---|---|---|---|---|---|---|
| Consolidated cash flows | ||||||
| Comments to the consolidated cash-flows | ||||||
| Consolidated comprehensive income | 66 | |||||
| Comments to the consolidated | ||||||
| comprehensive income | 67 | |||||
| Consolidated financial position | 70 | |||||
| Comments on the consolidated financial position |
72 | |||||
| Changes in consolidated equity | ||||||
| Comments on changes | ||||||
| in consolidated equity | 75 | |||||
| Parent company cash flows | 76 | |||||
| Parent company income | 76 | |||||
| Parent company financial position | ||||||
| Changes in parent company equity | ||||||
| Notes to the financial statements | ||||||
| Accounting principles | 79 | |||||
| Objectives, policies and processes | ||||||
| for managing capital | 87 | |||||
| Financial risks | 88 | |||||
| Operational risks | 91 | |||||
| Notes | 94 | |||||
| Proposed disposition of earnings | 126 | |||||
| Audit Report | 127 | |||||
| Ten-year overview | 140 142 |
|||||
| Definitions |
The Board of Directors and the President of Alfa Laval AB (publ) hereby submit their annual report for the year of operation January 1, 2012 to December 31, 2012.
The information in this annual report is such information that Alfa Laval AB (publ) must publish in accordance with the Securities Market Act and/or the Financial Instruments Trading Act. The information was made public by publishing the annual report on Alfa Laval's website on March 28, 2013 at 9.00 CET and by sending the printed annual report to the shareholders in week 14, 2013 starting at April 2, 2013.
Alfa Laval AB is a public limited liability company. The seat of the Board is in Lund and the company is registered in Sweden under corporate registration number 556587-8054. The visiting address of the head office is Rudeboksvägen 1 in Lund and the postal address is Box 73, 221 00 Lund, Sweden. Alfa Laval's website is: www.alfalaval.com.
The following parts of the annual report are financial statements: the Board of Directors' Report, the ten-year overview, the consolidated cash flows, the consolidated comprehensive income, the consolidated financial position, the changes in consolidated equity, the parent company cash flows, the parent company income, the parent company financial position, the changes in parent company equity and the notes. All of these have been audited.
The Corporate Governance Report, which also has been audited, is to be found on page 128.
Alfa Laval AB (publ) is the parent company of the Alfa Laval Group.
The company had 34,629 (36,567) shareholders on December 31, 2012. The largest owner is Tetra Laval B.V., the Netherlands who owns 26.1 (26.1) percent. Next to the largest owner there are nine institutional investors with ownership in the range of 6.7 to 0.7 percent. These ten largest shareholders own 51.4 (53.5) percent of the shares.
The Alfa Laval Group is engaged in the development, production and sales of products and systems based on three main technologies: separation/filtration, heat transfer and fluid handling.
Starting at January 1, 2012 a new business division Marine & Diesel has been added to Alfa Laval's two business divisions Equipment and Process Technology. It consists of the
absolutely greater part of the acquired Aalborg Industries that is engaged in marine applications and the former business segment Marine & Diesel and the marine part of Parts & Service from the Equipment division. The residual part of Aalborg Industries is included in Process Technology.
This means that Alfa Laval's business is divided into three business divisions "Equipment", "Process Technology" and "Marine & Diesel" that sell to external customers and one division "Other" covering procurement, production and logistics as well as corporate overhead and non-core businesses. These four divisions constitute Alfa Laval's four operating segments.
The three business divisions (operating segments) are in turn split into a number of customer segments. The customers to the Equipment division purchase products whereas the customers to the Process Technology division purchase solutions for processing applications. The customers to the Marine & Diesel division purchase products and solutions for marine and off-shore applications and for diesel power plants. The Equipment division consists of four customer segments: Industrial Equipment, OEM (Original Equipment Manufacturers), Sanitary Equipment and the aftermarket segment Parts & Service. The Process Technology division consists of four customer segments: Energy & Environment, Food Technology, Process Industry and the aftermarket segment Parts & Service. The Marine & Diesel division consists of three customer segments: Marine & Diesel Equipment, Marine & Offshore Systems and the aftermarket segment Parts & Service.
The main factors of risk and uncertainty facing the Group concern the price development of metals, fluctuations in major currencies and the business cycle. For additional information, see the sections on financial and operational risks and the section on critical accounting principles, the section on key sources of estimation uncertainty and the section on judgements under accounting principles.
The full information on the acquisitions is found in Note 16. Below follows a shorter summary of each acquisition.
Alfa Laval has acquired the US-based company Air Cooled Exchangers, LLC (ACE), a leading manufacturer of customengineered air-cooled heat exchangers, used to cool air, natural gas, oil and water in the natural gas market as well as other energy-related end markets. Lars Renström, President and CEO of the Alfa Laval Group, comments: "The acquisition of ACE brings a new product range into our heat transfer offering, at a time when demand for air-cooled heat exchangers is accelerating – especially in the natural gas industry. Together, Alfa Laval's overall position is further strengthened and we are even better positioned to serve the energy-related industries." The intention is to integrate Air Cooled Exchangers, LLC into Alfa Laval's Energy & Environment segment, within the Process Technology division. The company was acquired on December 31, 2012. The company is located in Broken Arrow, Oklahoma, the U.S. and has 230 employees.
On November 27, 2012 Alfa Laval acquired the remaining 10 percent of the shares in the subsidiary LHE Co Ltd in South Korea from the minority shareholder.
Alfa Laval has acquired Gamajet Cleaning Systems, Inc., a leading provider of tank cleaning machines as well as self-contained and portable cleaning systems for the industrial and sanitary markets in North America. Gamajet is headquartered in Exton, Pennsylvania. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "We have built the leading position within tank cleaning equipment over the past 10 years. Gamajet fits very well with our ambitions and it expands our product portfolio. It will especially extend our offer to the industrial market and also strengthen our position in North America." Gamajet Cleaning Systems will be integrated into Alfa Laval. The company is consolidated from August 23, 2012.
Alfa Laval has acquired Ashbrook Simon-Hartley, a leading provider of belt filter presses, which is a complement and alternative to Alfa Laval's decanter range in the dewatering of municipal and industrial wastewater. Ashbrook Simon-Hartley is headquartered in Houston, Texas, USA, with offices in the UK, Chile and Brazil, and has an installed base in many countries around the world. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "I'm very pleased that we have been able to acquire Ashbrook Simon-Hartley. With this acquisition we are adding a complementary and expanded range of products and solutions further strengthening our offer for municipal and industrial wastewater treatment applications." Ashbrook Simon-Hartley was founded more than 100 years ago. The intention is to integrate Ashbrook Simon-Hartley into Alfa Laval. The company is consolidated into Alfa Laval from August 1, 2012.
Alfa Laval has acquired the U.S. based company Vortex Systems, a leading manufacturer of innovative mixing and blending solutions for the oil and gas industry. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "The acquisition of Vortex Systems will further strengthen our offering to the interesting oil and gas industry, both for onshore and offshore applications." Vortex Systems is located in Houston, Texas, the U.S. The intention is to integrate Vortex Systems into Alfa Laval. The company is consolidated into Alfa Laval from June 30, 2012.
In a press release on September 19, 2011 Alfa Laval communicated its proposal to buy all outstanding shares in its subsidiary Alfa Laval (India) Ltd and seek delisting of the shares from Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The proposal came on the back of regulatory changes in India which requires Alfa Laval (India) Ltd to have a minimum public float of 25 percent or seek delisting. At the time, Alfa Laval held 88.8 percent of the share capital of Alfa Laval (India), meaning the public float was 11.2 percent. The objective is to achieve full ownership of the subsidiary, which will provide Alfa Laval with increased operational flexibility to support the business and meet the customers' needs. In a reverse book building process that was finalised on February 23, 2012 minority shareholders together holding more than the necessary 50 percent of the public float were willing to sell to Alfa Laval at a price of INR 4,000 per share. The Board of Directors of Alfa Laval AB therefore decided to proceed with the delisting process. Through the acquisition of the 1.03 million shares Alfa Laval has achieved an ownership of 94.5 percent, which enabled Alfa Laval (India) Ltd to apply for delisting from both stock exchanges. The applications have been approved and Alfa Laval (India) Ltd was delisted on April 12, 2012. The cost for the acquisition of the shares has been SEK 553 million. As a part of the process the remaining minority
owners can sell their shares to Alfa Laval for INR 4,000 during the next 12 months. During the first eight months until December 31, 2012 minority owners with an additional 0.55 million shares have sold their shares to Alfa Laval for SEK 278 million, which has increased Alfa Laval's ownership to 97.5 percent. If all shareholders in the end sell their shares to Alfa Laval at this exit price the acquisition will incur a consideration of approximately SEK 1,065 million.
If Alfa Laval had not succeeded in achieving an ownership of 94.4 percent the company would have been required to increase the public float to 25 percent latest in June 2013.
On May 1, 2011 Alfa Laval acquired a well established service company in the U.S. The company is a leading provider on the North American market specialized in serving equipment for centrifugal separation. "The acquisition is another step in the ambition to serve the market with alternative offerings", says Lars Renström, President and CEO of the Alfa Laval Group. The company will remain a separate organization as they will continue to offer their own products and services to the industry, under their own brand.
In a press release on December 21, 2010, Alfa Laval announced that an agreement had been signed to acquire Aalborg Industries Holding A/S from Altor 2003 Fund, LD Equity and the Company's management. Aalborg Industries had some 2,750 employees and generated sales of about SEK 3.3 billion in 2010. Clearances from all concerned regulatory authorities were received at the beginning of May 2011. Aalborg Industries are consolidated into the Alfa Laval Group as of May 1, 2011. Aalborg will be fully integrated into Alfa Laval. Non-recurring costs for the integration are estimated at SEK 80 million. During the latter part of 2013 the annual synergy is estimated at SEK 100 million. The acquisition, which adds complementary energy-efficient and environmental solutions, represents a significant business opportunity as it supports Alfa Laval's existing offer to the marine and offshore markets. Another opportunity lies in the introduction of Aalborg's products to customers in completely new end markets, through Alfa Laval's sales network.
"Aalborg Industries is an excellent fit and I'm very pleased to welcome a strong and well-run company into Alfa Laval", says Lars Renström, President and CEO of the Alfa Laval Group. The acquisition further strengthens Alfa Laval's product offering in
heat transfer. It adds market-leading positions with products such as boilers and thermal fluid systems, as well as inert gas systems, with significant barriers to entry. These include extensive certification processes, a strong innovation track record and a global service network. The company's strong manufacturing and engineering presence in fast-growing markets such as China, Vietnam and Brazil, as well as the aftermarket potential generated by a large installed base, are also highly attractive attributes.
On December 6, 2010 Alfa Laval acquired the Italian company Olmi S.p.A., a leading company specialized in the design and manufacture of shell & tube heat exchangers and air coolers for niche applications in the petrochemical, power and oil & gas industries. The acquisition expands Alfa Laval's product portfolio. Lars Renström, President and CEO of the Alfa Laval Group, commented: "The acquisition of Olmi will substantially strengthen our platform to expand into the high pressure, high temperature heat exchanger market. At the same time, Alfa Laval's strong global presence allows us to take the offering to new geographical markets and customers." The intention is to integrate Olmi into Alfa Laval as a competence centre based on their unique know-how. Olmi's turnover for 2010 amounted to SEK 971 million.
On November 1, 2010 Alfa Laval acquired the Definox activities from Defontaine. Definox designs and manufactures stainless steel valves and equipment for the food processing, pharmaceutical and cosmetic industries. Definox will continue to offer its own product range, under its own brand and through its own sales network. Lars Renström, President and CEO of the Alfa Laval Group commented: "The acquisition of Definox fits our strategy to capture growth opportunities, in this case driven by quality and safety demands from the food and pharmaceutical industries. We will drive profitable growth by adding an independent channel to the very interesting food and pharma market." Definox has offices and manufacturing in Gétigné close to Nantes in France and subsidiaries in the U.S. and China. Definox had a turnover in 2010 of SEK 239 million.
On April 1, 2010 Alfa Laval acquired Astepo S.r.l. in Italy. The company is recognized for its solid know-how in aseptic technology, with key products such as bag-in-box fillers and heat exchangers targeting the global fruit juice concentrate industry. Lars Renström, President and CEO of the Alfa Laval Group commented: "The acquisition of Astepo is in line with our strategy to continue to strengthen our position within the food business. The enhanced offering in combination with our strong local presence will create new opportunities." During 2010 Astepo's turnover was SEK 62 million.
On April 1, 2010 Alfa Laval acquired 65 percent of the shares in Si Fang Stainless Steel Products Co. Ltd in China, which is a leading fluid handling company in China. The company targets the food and beverage market in China with its sanitary product portfolio, including pumps, valves and fittings. Si Fang will continue to offer its own product range, under its own brand and through its own sales network. Lars Renström, President and CEO of the Alfa Laval Group commented: "Si Fang fits our strategy to capture structural growth opportunities, i.e. structural changes in demand. We will drive profitable growth by adding an independent channel to the expanding food and beverage market in China." Si Fang had a turnover in 2010 of SEK 167 million.
On January 6, 2010 Alfa Laval acquired a well established service company in the U.S., that is a leading service provider on the North American market specialized in plate heat exchangers. The company will remain a separate organisation as they will continue to offer their own products and services to the industry under their own brand. Lars Renström, President and CEO of the Alfa Laval Group commented: "The acquisition is another step in the ambition to serve the market with alternative offerings. The Parts and Service business is of high priority and we have during 2009 seen its resilience." The company's net sales for 2010 were SEK 163 million.
On January 5, 2010 Alfa Laval acquired Champ Products Inc., based in Sarasota, Florida, the U.S. The company is recognized for its deep knowledge of engine cooling and is today perceived as a leading company in the North American market. Lars Renström, President and CEO of the Alfa Laval Group commented: "By the acquisition of Champ Products we strengthen our position through an extended product range, reinforced application knowledge and further market penetration amongst engine and vehicle manufacturers in North America. In addition, we expect Champ's product range and application knowledge to create opportunities in Europe and Asia as well." Champ's turnover for 2010 amounted to SEK 111 million.
In addition one minor acquisition has been made during 2010:
On February 10, 2010 Alfa Laval acquired the German company G.S Anderson GmbH. The company had a turnover in 2010 of SEK 10 million.
During 2012 a property in Korea that has been used by Onnuri was sold for SEK 21 million with a realised loss of SEK -3 million.
In addition to the property that was sold during 2012 Onnuri has an additional property in South Korea that is empty and will be sold during the beginning of 2013. Due to this it has been re-classified as a current asset held for sale with SEK 9 (-) million.
Alfa Laval Aalborg BV in Spijkenisse in the Netherlands will leave its current premises during the first half of 2013 and move to Alfa Laval's office in Breda in the Netherlands. The vacated property is to be sold, but it is not expected to be sold within the next year. One small property in France is planned for sale. It is empty and has been for sale for several years. It is not expected to be sold within the next year. This means that none of these properties have been re-classified as current assets held for sale. The fair value of the concerned properties exceeds the book value by approximately SEK 4 (2) million.
During 2011 no major sale of properties took place. No property was re-classified as current assets held for sale.
During 2010 a property in France was sold for SEK 6 million with a realised gain of SEK 6 million and a property in India was sold for SEK 7 million with a realised gain of SEK 4 million. The French property was for sale already at the end of last year, but it was not expected to be sold in 2010. No property was re-classified as current assets held for sale.
These disposals are reported as comparison distortion items in Note 8 to the consolidated comprehensive income statement.
Orders received amounted to SEK 30,339 (28,671) (23,869) million during 2012.
| Consolidated | |||
|---|---|---|---|
| SEK millions, unless otherwise stated | 2012 | 2011 | 2010 |
| Order intake last year | 28,671 | 23,869 | 21,539 |
| Structural change 1) | 1.6% | 10.5% | 4.1% |
| Organic development 2) | 4.7% | 17.8% | 11.8% |
| Currency effects | -0.5% | -8.2% | -5.1% |
| Total | 5.8% | 20.1% | 10.8% |
| Order intake current year | 30,339 | 28,671 | 23,869 |
Orders received from the aftermarket Parts & Service constituted 26.4 (26.1) percent of the Group's total orders received for 2012. Excluding exchange rate variations, the order intake for Parts & Service increased by 7.2 percent during 2012 compared to last year.
1) Acquired businesses are:
Air Cooled Exchangers, LLC (ACE) at December 31, 2012, Gamajet Cleaning Systems Inc at August 23, 2012, Ashbrook Simon-Hartley at August 1, 2012, Vortex Systems at June 30, 2012, Aalborg Industries at May 1, 2011, a service company in the U.S. at May 1, 2011, Olmi at December 6, 2010, Definox at November 1, 2010, Si Fang Stainless Steel Products Co. Ltd at April 1, 2010, Astepo S.r.l. at April 1, 2010, a leading service provider on the North American market at January 6, 2010 and Champ Products Inc., at January 5, 2010.
2) Change excluding acquisition of businesses.
Large orders are orders with a value over EUR 5 million. The volume of large orders is an important indicator of the demand situation and is therefore monitored separately within Alfa Laval. A large volume of large orders normally also means a good load in the factories. During 2012 Alfa Laval has received large orders for SEK 2,475 (1,430) million. By quarter it has looked like the following:
During the first quarter 2012 Alfa Laval received large orders for SEK 950 (185) million:
– An order to supply newly developed decanters for cleaning of industrial waste water in Canada. The order value is approximately SEK 250 million, with delivery scheduled for 2013.
During the second quarter 2012 Alfa Laval received large orders for more than SEK 600 (500) million:
During the third quarter 2012 Alfa Laval received large orders for SEK 475 (525) million:
During the fourth quarter 2012 Alfa Laval received large orders for more than SEK 450 (220) million:
The order backlog at December 31, 2012 was SEK 14,468 (13,736) (11,552) million. Excluding exchange rate variations and adjusted for acquisitions of businesses the order backlog was 3.8 percent higher than the order backlog at the end of 2011.
The Equipment division consists of four customer segments: Industrial Equipment, OEM (Original Equipment Manufacturers), Sanitary Equipment and the aftermarket segment Parts & Service.
(all comments are after adjustment for exchange rate fluctuations)
Taking a quarterly view the development for Equipment division during 2012 has been as follows:
Order intake for the division was flat in the first quarter compared to both the corresponding period 2011 and the previous quarter. Industrial Equipment was down somewhat from the fourth quarter, mainly due to the seasonality in the comfort business. On the other hand, the market unit OEM engine grew significantly, boosted by increased demand in end markets such as the US, the UK and China and also as a result of new products getting a positive reception from customers, primarily in the US. The customer segment OEM was slightly up from the fourth quarter. Industries like boilers and HVAC were down due to seasonality, whereas demand from air conditioning and industrial refrigeration customers was good. Sanitary continued to grow compared to the previous quarter, mainly driven by increased demand for
Net sales amounted to SEK 29,813 (28,652) (24,720) million during 2012.
| SALES BRIDGE | |||
|---|---|---|---|
| Consolidated | |||
| SEK millions, unless otherwise stated | 2012 | 2011 | 2010 |
| Net sales last year | 28,652 | 24,720 | 26,039 |
| Structural change | 3.5% | 11.0% | 4.4% |
| Organic development | 0.9% | 12.7% | -5.2% |
| Currency effects | -0.3% | -7.8% | -4.3% |
| Total | 4.1% | 15.9% | -5.1% |
| Net sales current year | 29,813 | 28,652 | 24,720 |
Net invoicing relating to Parts & Service constituted 26.6 (25.9) percent of the Group's total net invoicing for 2012. Excluding exchange rate variations, the net invoicing for Parts & Service increased by 7.2 percent during 2012 compared to last year.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Orders received | 9,701 | 9,508 | 8,903 |
| Order backlog* | 1,583 | 1,385 | 1,447 |
| Net sales | 9,476 | 9,447 | 8,629 |
| Operating income** | 1,389 | 1,278 | 2,087 |
| Depreciation and amortisation | 162 | 156 | 164 |
| Investments | 46 | 67 | 43 |
| Assets* | 5,804 | 6,018 | 6,431 |
| Liabilities* | 986 | 1,063 | 1,414 |
| Number of employees* | 2,813 | 2,799 | 3,257 |
* At the end of the period. ** In management accounts.
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| Order intake | Net sales | |||||
| % | Structural change |
Organic develop ment |
Total | Structural change |
Organic develop ment |
Total |
| 2012/2011 | 0.5 | 1.6 | 2.1 | 0.6 | -0.1 | 0.5 |
| 2011/2010 | 2.9 | 10.4 | 13.3 | 3.0 | 13.3 | 16.3 |
| 2010/2009 | 5.6 | 15.5 | 21.1 | 5.2 | 9.1 | 14.3 |
prepared food. The traditional markets in Western Europe and North America were the main contributors to the growth, while the BRIC countries were flat. Order intake in Parts & Service grew significantly in the quarter to an all-time high level, mainly driven by developments in Western Europe and North America. Most applications contributed to the positive development.
Order intake for the division was up notably in the second quarter, compared to the first, driven by a positive development for both Sanitary and Industrial Equipment. Sanitary showed continued growth com-
Orders received by customer segment 2011
Compared to previous year, at constant rates adjusted for acquisition of businesses.
* New customer segment, no corresponding period last year exists.
pared to the previous quarter, due to a strong development for food & beverage, combined with a good recovery for pharmaceuticals and personal care. The base business* showed continued strength. Healthy volumes were maintained in Western Europe, North America and Latin America. In North America demand was driven by investments in increased capacities for yoghurt manufacturing while the Chinese dairy industry remained without large projects. Industrial Equipment increased significantly compared to the first quarter, mainly due to the seasonality of the HVAC business and a number of projects that were booked in the quarter. The refrigeration market unit also reported some continued growth, even as demand was on the weak side in the Nordic and Benelux countries, which limited the upside. OEM was unchanged compared to the first quarter. Demand from boiler and HVAC manufacturers grew, in spite of a slow start to the season. Demand from heat pump manufacturers was good and up compared to the first quarter, whereas the order intake from markets for air conditioning and industrial refrigeration decreased. The best performance was seen in China and Western Europe. In Parts & Service order intake was unchanged compared to the first quarter. The BRIC markets reported good growth, as did the markets in Western and Central Europe.
Order intake declined somewhat in the third quarter compared to the second. OEM faced lower demand, whereas all other segments were unchanged. From a geographical perspective China, India and South Korea all did well and the U.S. market had a continued stable development, whereas the overall European market declined. Sanitary was flat compared to the second quarter, as a result of the mixed picture seen in the different end markets. The food & beverage market unit had a strong quarter, while products targeting the personal care market saw lower demand. US, China and Western Europe were all up, but the Nordic market reported a decline in orders. Industrial Equipment was unchanged from the second quarter, mainly due to a major HVAC project landed in the third quarter in North America. In general, products for the HVAC markets developed well whereas order intake for products targeting refrigeration applications was below the previous quarter. U.S. and China were both developing well while the
European market, with a few exceptions, was slow. OEM faced lower demand in the third quarter than in the second, to a very large extent driven by lower order intake for air conditioning and heat pump applications. The demand in the European market was overall lower, while volumes were up in markets such as Japan and China. The demand for parts and services was flat from the second quarter, reflecting the capital sales activity of the different end markets. Demand for parts and services for dairy, ice cream and HVAC applications was up, while volumes connected to refrigeration and general manufacturing applications declined.
Order intake was stable in the fourth quarter compared to the third as Industrial Equipment declined due to seasonality, while both Sanitary and OEM reported growth. From a geographical perspective Benelux, Japan, the UK and India all did well. There was a decline in the U.S. as the large district heating order, booked in the third quarter, was not repeated. Still, the base business in the country remained unchanged. Sanitary saw an increase in the quarter and demand was strong for products targeting all applications, with products for brewery, health care and "other food" doing particularly well. Most major markets grew and most significant were the U.S., Benelux and India. Industrial Equipment declined compared to the third quarter, the main reason being seasonality in HVAC. Another factor was the non-repeat of a large district heating order in the U.S., something which also explained the decline in the U.S. The development for the market unit refrigeration was flat while demand was higher for both fluids & utility and engine. Geographically, Mid Europe, Benelux and the UK all had a positive development and significant growth was also reported from previous low activity levels in India, Japan and the Middle East. OEM came out well above the level seen in the third quarter, mainly through orders from customers producing air conditioning and air dryer products. Growth was reported in Japan, Benelux and China. Parts & Services declined somewhat compared to the third quarter reflecting a lower demand for parts and services for HVAC applications.
(excluding comparison distortion items) The increase in operating income during 2012 compared to last year is mainly explained by lower costs and a positive price/mix variation. The Equipment division has also benefitted from the higher utilization in the Group's factories.
The Process Technology division consists of four customer segments: Energy & Environment, Food Technology, Process Industry and the aftermarket segment Parts & Service.
Taking a quarterly view the development for Process Technology division during 2012 has been as follows:
Order intake in the first quarter was very strong and well above the previous quarter driven by a significant increase for large orders, especially related to applications for energy and environment. Parts & Service reported continued growth and the base business was stable and in line with the previous quarter. Geographically, all regions
recorded growth, with North America and Asia doing particularly well. Energy and Environment had a very strong quarter, securing two large orders for a newly developed decanter for cleaning of industrial waste water. Order intake within the oil & gas market unit was also at a high level, as the high energy prices continued to boost investment activity. The power market unit saw a very strong order activity, with a good mix between different power solutions. Process Industry was down somewhat from the fourth quarter, mainly due to non-repeats of contract orders in the market units refinery and life science. The market units inorganics, metals and paper as well as petrochemicals, however, showed good growth, largely due to a sustained strong base business. Food Technology was up somewhat from the previous quarter, particularly supported by the brewery sector, where investments were returning and vegetable oil, which was supported by continued capacity investments in Asia and Latin America. Parts & Service recorded further growth, supported by an above average activity level in the energy & environ-
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Orders received | 14,081 | 12,738 | 10,922 |
| Order backlog* | 8,358 | 6,889 | 6,568 |
| Net sales | 12,812 | 12,160 | 10,625 |
| Operating income** | 2,194 | 2,506 | 2,140 |
| Depreciation and amortisation | 230 | 208 | 197 |
| Investments | 110 | 127 | 85 |
| Assets* | 10,608 | 9,500 | 8,332 |
| Liabilities* | 4,304 | 4,167 | 4,152 |
| Number of employees* | 5,085 | 4,531 | 4,105 |
* At the end of the period. ** In management accounts.
Consolidated
| Order intake | Net sales | |||||
|---|---|---|---|---|---|---|
| % | Structural change |
Organic develop ment |
Total | Structural change |
Organic develop ment |
Total |
| 2012/2011 | 2.2 | 9.2 | 11.4 | 2.0 | 4.2 | 6.2 |
| 2011/2010 | 5.3 | 19.7 | 25.0 | 4.2 | 18.5 | 22.7 |
| 2010/2009 | 3.8 | 12.5 | 16.3 | 5.6 | -8.1 | -2.5 |
ment related industries. In general, most industry applications served with parts and services showed a positive development. Geographically, the strongest growth was recorded in the BRIC countries.
Order intake in the second quarter was in line with the strong level of the previous quarter as demand from energy-related applications continued to support the development. Geographically, Western Europe and Asia recorded significant growth while North America showed a decline compared to the previous quarter as large wastewater treatment orders taken in the first quarter were not repeated. The base business was stable and unchanged from the previous quarter. Energy and Environment was below the previous quarter, which included several very large orders of a non-repeat nature. The market unit oil & gas was affected by challenging comparison numbers, still the overall investment sentiment in the sector is continuously favourable. Process Industry noted strong growth compared to the first quarter, for all areas of activity, but predominantly in the refinery sector in Asia and the Middle East. The market units natural resources and inorganics, metals and paper also showed good growth, to a large extent deriving from several larger orders taken primarily in Eastern and Western Europe. Food Technology showed an increase compared to the first quarter, particularly driven by the development in the beverage and viscous food markets. The market units for brewery and vegetable oil remained in line with the previous quarter. Parts & Service was somewhat lower, since several very large orders of a non-repeat nature were booked in the first quarter. However, the underlying base business remained stable, not least in the energy and oil & gas related sectors.
Order intake in the third quarter was on a continued high level and in line with the second quarter, supported by a continued good development for the Energy & Environment segment. Geographically, North as well as Latin America recorded significant growth while Asia showed a decline compared to the previous quarter. The decline is due to large orders, taken primarily in Korea in the second quarter, were not repeated. Overall it was large orders that supported the development, while the base business declined somewhat. Energy & Environment rose, lifted by the environmental business, which continued to grow. The market unit power also developed favourably and noted a strong upturn due to increased demand for both conventional power applications and nuclear. Some of the uncertainty which has been affecting the nuclear industry seems to be easing. The oil & gas sector showed a continued positive development, albeit not as strong as the very high levels noted earlier in the year. In the Process Industry segment, the petrochemicals market unit benefitted from several large capacity-related projects in the U.S., Middle East and Asia. The market unit refinery did not repeat the very large orders taken in the previous quarter, but overall the refinery sector remains positive, not least in Asia and the Middle East. The market unit for metals and paper noted a decline. The segment as a total was down compared to the second quarter. In Food Technology there were fewer large projects contracted for vegetable oil in Asia and Eastern Europe. The brewery sector, however, continued to develop favourably. Parts & Service reported a continued stable development and grew slightly from the second quarter. The most significant development was noted in the energy and oil & gas related sectors followed by Food. Applications for the Process Industry, however, declined.
Demand was unchanged in the fourth quarter compared to the previous quarter. Large orders were slightly lower than in the third quarter, although still at a high level, while the base business reported growth. Geographically, North America was stable, Latin America was down somewhat and Asia, in particular India and the Middle East, showed strong growth. Energy & Environment declined as the level of large contracts booked for the market unit oil & gas was lower. Still, the strong demand seen throughout the year remained and the sector had a continued high activity level. At the same time, the environmental business recorded a strong increase in orders, in particular from the base business. Noteworthy within the power market unit, was the large order to supply a Packinox heat exchanger solution to a concentrated solar power plant in South Africa. Process Industry rose from the third quarter, with a positive development in most areas and the base business developed favourably across all market units. The refinery market unit saw a continued good development, driven by the Middle East and Asia. The market unit petrochemicals on the other hand declined somewhat due to a large non-repeat order in the third quarter, but the underlying sentiment remained positive. Market unit life science developed very well as the favourable development in Asia continued, to a large extent driven by demand from the biotech industry. Food Technology showed strong growth compared to the third quarter, caused by both the base business and an even stronger recovery in large orders, primarily for vegetable oil in Asia. The brewery sector remained stable, and within beverage & viscous food, a continued beneficial development for food solutions, including fruit processing, contributed to growth. Parts & Service grew in the quarter, with the most significant development seen in the Process Industry applications.
(excluding comparison distortion items) The decrease in operating income during 2012 compared to last year is mainly explained by a changed mix in capital sales towards delivery of lower margin contract orders and negative foreign exchange effects, mitigated by a higher sales volume.
The Marine & Diesel division consists of three customer segments: Marine & Diesel Equipment, Marine & Offshore Systems and the aftermarket segment Parts & Service.
exchange rate fluctuations) Taking a quarterly view the development
for Marine & Diesel division during 2012 has been as follows:
Order intake in the first quarter for the Marine & Diesel division was strong and well above the previous quarter, driven mainly by an increased demand for boiler systems. In Marine & Diesel Equipment order intake was down somewhat compared to the previous quarter. While increased awareness in the industry continued to drive up demand for environmental solutions, order intake for other marine capital equipment was on the same pace as in the fourth quarter. The financial turmoil in the industry among charterers, ship owners and shipyards continued in the first quarter, leading to very low contracting levels for new vessels at the shipyards. For diesel capital equipment, order intake was somewhat lower than the previous quarter due to non-repeats. The activity level is, however, still good and the general market outlook for diesel power plants is positive. Marine & Offshore Systems showed significantly higher order intake than the previous quarter, driven by higher demand for boiler systems. A major contribution was the large order to supply waste heat recovery boilers for A.P. Möller-Maersk vessels. In Parts & Service order intake grew compared to the previous quarter.
Order intake in the second quarter for the Marine & Diesel division was down compared to the previous quarter, mainly due to the non-repeat of a large order for boiler systems taken in the previous quarter. In the Marine & Diesel Equipment segment, orders were up, supported by a significantly higher demand for land-based diesel power solutions. Demand for environmental solutions also grew while demand for marine capital equipment was on about the same level as in the first quarter. The financial stress in the industry among charterers, ship owners and shipyards continued and contracting of new vessels at the shipyards continued at a very low level during the quarter. Order intake for Marine & Offshore Systems was significantly lower in the second quarter than in the first as the large waste heat recovery order taken in the previous quarter was not repeated. Order intake for Parts & Service showed a positive development compared to the previous quarter due to larger upgrading and repair orders.
Order intake for the Marine & Diesel Division was down in the third quarter compared with the second quarter, reflecting the low contracting levels seen at the yards earlier in the year. At the same time demand for land-based diesel power solutions declined, as large orders taken in the second quarter were not repeated in the third. Order intake for the Marine & Diesel Equipment segment was hence below the previous quarter, even as demand for environmental solutions showed growth. The Marine & Offshore Systems segment reported unchanged order intake compared to the second quarter. Demand for parts and services declined as large orders taken in the second quarter, were not repeated in the third. Orders for
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Orders received | 6,557 | 6,423 | 4,042 |
| Order backlog* | 4,527 | 5,462 | 3,537 |
| Net sales | 7,525 | 7,043 | 5,443 |
| Operating income** | 1,458 | 1,718 | 536 |
| Depreciation and amortisation | 224 | 196 | 93 |
| Investments | 38 | 44 | 32 |
| Assets* | 8,309 | 8,874 | 2,877 |
| Liabilities* | 2,043 | 2,256 | 766 |
| Number of employees* | 3,346 | 3,563 | 422 |
* At the end of the period. ** In management accounts.
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| Order intake | Net sales | |||||
| % | Structural change |
Organic develop ment |
Total | Structural change |
Organic develop ment |
Total |
| 2012/2011 | 3.3 | -0.8 | 2.5 | 11.8 | -5.1 | 6.7 |
| 2011/2010 | 33.9 | 36.6 | 70.5 | 27.6 | 10.1 | 37.7 |
| 2010/2009 | 2.6 | 8.6 | 11.2 | 2.5 | -14.2 | -11.7 |
Parts & Service still grew compared to the corresponding quarter last year.
Order intake for the division was down somewhat in the fourth quarter compared with the third, due to lower capital sales to marine as well as diesel power customers. The Marine & Diesel Equipment segment was below the previous quarter mainly driven by weaker demand for land-based diesel power solutions. Order intake for marine environmental solutions declined as well, as large orders booked in the third quarter were not repeated in the fourth. However, the base business recovered and showed a slight increase from the previous quarter. Marine & Offshore Systems reported lower order intake compared to the third quarter, reflecting the low contracting levels seen at the yards earlier in the year. The first commercial order for exhaust gas cleaning – the Alfa Laval PureSOx - was booked in the quarter at a value of SEK 60 million. Demand for parts and services showed growth compared to both the previous quarter and the fourth quarter last year, mainly due to a good repair activity.
(excluding comparison distortion items) The decrease in operating income during 2012 compared to last year is mainly explained by lower margins due to a normalization of the price level against the ship building industry and negative foreign exchange effects, mitigated by increased volume and lower costs for sales and administration.
Other is covering procurement, production and logistics as well as corporate overhead and non-core businesses.
| OTHER | |||
|---|---|---|---|
| Consolidated | |||
| SEK millions | 2012 | 2011 | 2010 |
| Orders received | 0 | 2 | 2 |
| Order backlog* | 0 | 0 | 0 |
| Net sales | 0 | 2 | 23 |
| Operating income** | -541 | -568 | -405 |
| Depreciation and amortisation | 318 | 315 | 342 |
| Investments | 337 | 317 | 269 |
| Assets* | 5,395 | 5,178 | 4,581 |
| Liabilities* | 2,188 | 2,284 | 2,247 |
| Number of employees* | 5,175 | 5,171 | 4,834 |
* At the end of the period. ** In management accounts.
All comments are reflecting the quarterly development during the year and are after considering exchange rate variations.
Order intake grew in the first quarter compared with the fourth quarter last year, with the best development reported in France, Nordic and the United Kingdom. Among the segments Sanitary and Energy & Environment had a particularly good development and Parts & Service remained on a stable level. Growth was mainly driven by large projects with the base business* slightly up compared with the previous quarter.
Order intake increased in the second quarter compared to the first quarter, mainly due to the development for large projects. The base business as well as Parts & Service was unchanged. The best development was reported in France, Iberica, Nordic and the Benelux countries. Industrial Equipment and Process Industry both had a good development and the demand from the diesel power market was also strong.
Order intake decreased in the third quarter compared with the second quarter impacted by the development in France, Benelux and the mid Europe sales region. The first two were down due to non-repeat large orders. There was an overall decline for both large orders and the base business, while demand for Parts & Service was flat. The decline from a segment perspective was wide with only Industrial Equipment and Sanitary reporting a positive development.
Order intake increased in the fourth quarter compared to the third quarter, as both the base business and large projects developed favourably. Sanitary, Food Technology, Energy & Environment and Process Industry all reported increases, as did Parts & Service, which saw a good development across the region. From a geographical view, most areas reported growth, Benelux being the only one declining.
In the first quarter Central & Eastern Europe repeated a strong quarter, boosted by a strong development for large orders in the Process Technology Division. Energy & Environment, which landed a large order from the nuclear industry, did particularly well as did Parts & Service. The Equipment Division showed a small decline. Russia
and the Baltics reported good growth.
Central and Eastern Europe reported an increase in order intake in the second quarter compared to the first. All segments in the Equipment Division developed well, with a good development for the base business, and Parts & Service also showed a good performance. The Marine & Diesel Division was also up, while the Process Technology Division decreased compared to the previous quarter due to non-repeat large orders. Many countries in Central and South East Europe saw a good development. Russia had growth in the base business, but still reported an overall decline due to large contracts in the first quarter, which were not repeated in the second.
Order intake was down somewhat in the third quarter compared to the second as the base business recorded a decline. Still, the overall drop was from a very strong level and large orders continued to grow in the quarter. The Process Technology Division did particularly well with good demand recorded in power as well as infrastructure applications. Russia in particular showed good growth in large orders.
Central and Eastern Europe had a weak fourth quarter compared to the third quarter, mainly due to fewer large orders. The base business, however, increased compared to the previous quarter. Looking at geographies, Russia declined, explained by the drop in large orders. The base business in the country was still unchanged as the general activity trend in the country was continued beneficial.
Order intake grew in the first quarter compared with the previous quarter. Sanitary was one of the segments to record the strongest growth, as was Energy & Environment, which was boosted by the large industrial waste water orders won in Canada during the period. Demand for Parts & Service was up across the region and a continued good development was also seen in the base business.
Order intake declined in the region in the second quarter compared with the first quarter, mainly due to fewer large projects. The base business however, showed a continued good development, particularly in the US, while the demand for Parts & Service was flat across the region. Industrial Equipment, Food and Process Industry
were the segments reporting the largest growth, while Energy & Environment declined as the large industrial waste water order won in Canada during the first quarter was not repeated.
Order intake grew in the region in the third quarter compared to the second quarter, mainly due to a continued high inflow of larger projects. The base business also reported continued growth. Industrial Equipment was one of the segments with the largest growth, boosted by a large order for heat exchanger systems to be used for district heating at a university in the U.S. Sanitary was another segment to do well and demand for parts and services grew.
Order intake was virtually unchanged in the region in the fourth quarter compared to the previous quarter, with an increase in the U.S., while Canada declined due to fewer large projects being booked. The base business continued to grow. Growth was recorded in the Sanitary and Food Technology segments and Parts & Service also continued to develop favourably.
Latin America showed growth across the line in the first quarter with increased demand reported for both the Equipment and the Process Technology Divisions. Energy & Environment booked large orders from the oil & gas sector and did particularly well, as did Industrial Equipment. Parts & Service benefited from a high activity level in the end markets of the Process Technology Division. Brazil did particularly well.
Order intake in Latin America was unchanged in the second quarter compared to the first quarter, with a good development for the base business while large orders declined. Both the Equipment and Marine & Diesel Divisions reported growth whereas the Process Technology Division showed a decline due to the non-repeat of large orders. Brazil reported a decline in the second quarter compared to the previous quarter due to large orders which were not repeated, but reported growth for the base business. Argentina and Chile reported good growth.
Order intake was on a continued strong level in Latin America in the third quarter compared to the second, benefitting from a positive development for large orders. The base business, however, showed a decline. The Process Technology Division
reported very good growth, particularly in the Energy and Environment segment. Within the Equipment Division, Industrial Equipment developed very well. In the region Brazil showed a good development, supported by strong demand within the oil & gas market unit as well as Parts & Service. The North Andean countries also had very good order development.
Order volumes dropped in the fourth quarter compared to the previous quarter as fewer large orders were booked in the Process Technology division. The base business still developed well, with strong growth reported both in the Marine & Diesel and the Process Technology divisions. Brazil was affected by non-repeats, while the base business' development was good. Mexico, Chile and Peru all developed well in the quarter.
Order intake showed a substantial increase in the first quarter compared to the fourth quarter last year, mainly due to a strong performance for the project business in the Process Technology Division as well as in the Marine & Diesel Division. The best performance was seen in the segment Marine & Offshore Systems, which experienced an increased demand for boiler systems and within Food Technology, which recorded a large contract from a brewery in Indonesia. Process Industry also reported a good development. Parts & Service showed a slight increase in the quarter. The Equipment Division was unchanged with Sanitary performing the best. The strongest performance from a geographical perspective was seen in South Korea, China, India and Malaysia.
Order intake showed a decline in the second quarter compared to the previous quarter as a very large marine order booked in the first quarter was not repeated. However, both the Equipment and the Process Technology Divisions reported growth. In the Process Technology Division there was growth both in the base business and for the project business compared to the first quarter, with Process Industry and Food Technology as the best performing segments. In the Equipment Division Sanitary was the best segment. Korea and India were both developing well and China showed a good development when excluding Marine.
Order intake showed a decline in the third quarter compared to the second quarter as large orders booked in the second quarter
for segments Process Industry and Food Technology were not repeated. The base business, however, held up on the same level as in the previous quarter. The best performing segments were Marine & Offshore Systems, boosted by a large order for boilers to an offshore oil production vessel in Vietnam, and Industrial Equipment. The best geographical development was reported for India and China.
Order intake showed an increase in the fourth quarter compared to the previous quarter, with Process Industry, Food Technology and OEM performing the best. The market units refinery, life science, vegetable oil and oil & gas were the end markets doing particularly well. Marine & Diesel Equipment also showed growth, but from a low level. From a geographical perspective, the sentiment among customers in China was in a wait-and-see mode, due to the general political and macro economic development in the country, which was reflected by a lower level of investments. India, however, delivered a good quarter, through a large order for a new insulin plant in Malaysia, but also by the Equipment division's nationwide development of distributors, which started to take effect. South East Asia also developed well, especially in Thailand, Indonesia and Malaysia, where the two latter saw good demand within vegetable oil applications among others. The Middle East reported substantial growth during the quarter. The development was partly explained by a good development for the base business, but also by a large order from a petrochemical plant in Saudi Arabia.
The parent company does not have any employees.
The Group has on average had 16,060 (14,667) (12,078) employees. At the end of December 2012 the Group had 16,419 (16,064) (12,618) employees. The employee turnover rate for 2012 is 10.3 (8.6) (9.5) percent and mainly relates to employees within manufacturing units and the sales organisation.
Alfa Laval has several internal training programmes for employees on different levels and in different functions within the Alfa Laval University framework, for instance the Booster programme for top managers reporting to Group Management, the Challenger programme for potential future managers, Adept for employees engaged in the sales process and Leading business through Finance @ Alfa Laval – a development program for financial managers and senior controllers.
Alfa Laval is working to achieve equal career opportunities independent of for instance gender or ethnic origin. The latter is not the least important in an international company. Likewise the number of female managers shall increase in order to better reflect the females' part of the total number of employees. To facilitate this, a mentor programme has started for women with capacity to become future leaders.
The distribution of employees per country and per municipality in Sweden and between males and females can be found in Note 5 in the notes to the financial statements. The specification of salaries, wages, remunerations, social costs and pension costs are provided in Note 6 in the notes to the financial statements.
The distribution of the number of employees by region is:
The distribution of the number of employees by personnel category is:
The productivity by employee has developed as follows:
The figures for 2007 and 2008 were inflated by the high metal prices. The outcome for 2009 and 2010 has been affected by the financial crisis and the outcome for 2011 and 2012 by the acquisition of Aalborg Industries and the Euro crisis. Aalborg Industries has a lower turnover per employee than Alfa Laval.
The guidelines for remunerations to executive officers are established by the Annual General Meeting, see further description in Note 6.
The Annual General Meeting 2012 decided to implement step two of a modified cash based long term incentive programme for maximum 85 senior managers in the Group including the Chief Executive Officer and the persons defined as executive officers. The Board of Directors will propose the Annual General Meeting 2013 to implement step three of this modified cash-based long term incentive programme for the period January 1, 2013 – December 31, 2015. No other changes of these guidelines are proposed by the Board of Directors.
As the result of an intensive and consistent commitment over many years to research and development, Alfa Laval has achieved a world-leading position within the areas of separation and heat transfer. The product development within fluid handling has resulted in a strong market position for a number of products. In order to strengthen the Group's position and to support the organic growth, by identifying new applications for existing products as well as developing new products, research and development is always an activity of high priority. Research and development is conducted at approximately twenty facilities around the world.
The costs for research and development have amounted to SEK 707 (648) (625) million, corresponding to 2.4 (2.3) (2.5) percent of net sales. Excluding currency effects and acquisition of businesses, the costs for research and development have increased by 7.6 percent compared to last year. The increase is entirely in line with the established plan for product development.
Two of Alfa Laval's four business principles are: "Respect for human rights is fundamental" and "High ethical standards guide our conduct". This means that Alfa Laval respects human rights and the very different social cultures in which the company works and supplies its products and services and that Alfa Laval conducts its business with honesty, integrity and respect for others.
Globalisation gives Alfa Laval new business opportunities for increased sales as well as lower costs for manufacturing the products. But when part of the supply chain is moved to countries with lower costs the company is often confronted with ethical questions in a more obvious manner. Health, security and working conditions for the employees at the company's suppliers are some of Alfa Laval's main topics. When Alfa Laval procures products from quickly growing economies like China and India it is important for the company to secure that the cost reduction opportunities are not at the expense of those performing the work in each country. Alfa Laval regards it as an obligation to make sure that its suppliers develop quickly if the work, health and security conditions are not acceptable.
Alfa Laval has developed an internal training programme to give sales people and purchase departments knowledge on legal business practice.
One of Alfa Laval's four business principles is: "Optimizing the use of natural resources in the most efficient manner is our business." The company's products make a significant contribution to reducing the environmental impact of industrial processes and are used to produce renewable energy.
Since 2004 the Group runs a project to improve the internal environmental management systems. Today all sites (except recent acquisitions) have an environmental management system in place. At the end of 2012 26 (25) (25) production sites with ISO 14001 certification accounted for about 86 (92) (95) percent of the delivery value. The decrease is due to the sites that have been added in connection with the acquisitions and that are not yet certified. Another two sites have ongoing certifications. The goal is to have a certification level of at least 95 percent.
The subsidiary, Alfa Laval Corporate AB, is involved in operational activities that are subject to an obligation to report and compulsory licensing according to Swedish environmental legislation. The permits mainly relate to the manufacturing of heat exchangers in Lund and Ronneby and the manufacturing of separators in Tumba and Eskilstuna. The external environment is affected through limited discharges into the air and water, through waste and noise.
The foreign manufacturing sites within the Alfa Laval Group are engaged in operational activities with a similar effect on the external environment. To what extent this activity is subject to an obligation to report and/or compulsory licensing according to local environmental legislation varies from country to country. Alfa Laval has an overall intention to operate well within the limits that are set by local legislation.
The Alfa Laval Group was as of December 31, 2012, named as a co-defendant in a total of 716 asbestos-related lawsuits with a total of approximately 802 plaintiffs. Alfa Laval strongly believes the claims against the Group are without merit and intends to vigorously contest each lawsuit.
Based on current information and Alfa Laval's understanding of these lawsuits, Alfa Laval continues to believe that these lawsuits will not have a material adverse effect on the Group's financial condition or results of operation.
The parent company's result after financial items was SEK 697 (2,187) (3,431) million, out of which dividends from subsidiaries were SEK - (1,679) (2,288) million, group contributions SEK 596 (405) (1,154) million, net interests SEK 115 (113) (16) million, realised and unrealised exchange rate gains and losses SEK -1 (-0) (-3) million, costs related to the listing SEK -3 (-3) (-2) million, fees to the Board SEK -6 (-5) (-5) million, costs for annual report and annual general meeting SEK -4 (-3) (-5) million and other operating costs the remaining SEK -0 (1) (-12) million. Change of tax allocation reserve has been made with SEK 283 (-115) (-232) million. Tax on this year's result amount to SEK -1 (-110) (-248) million while tax on paid Group contribution amount to SEK -262 (-) (-) million. Net income for the year was SEK 717 (1,962) (2,951) million.
The unrestricted equity of Alfa Laval AB (publ) was SEK 8,285 (9,668) (8,964) million. The figures have been affected by repurchase of shares by SEK - (-) (-253) million.
The Board of Directors propose a dividend of SEK 3.50 (3.25) (3.00) per share corresponding to SEK 1,468 (1,363) (1,258) million and that the remaining income available for distribution in Alfa Laval AB (publ) of SEK 6,817 (8,305) (7,706) million be carried forward, see page 126.
The Board of Directors are of the opinion that the proposed dividend is in line with the requirements that the type and size of operations, the associated risks, the capital needs, liquidity and financial position put on the company.
Paragraph 2a in chapter 6 of the Swedish Annual Accounts Act requires listed companies to disclose certain information relating to the company's shares in the Board of Directors' Report. This information is found in the following paragraphs, in the "Changes in consolidated equity" and in Note 6.
The Annual General Meeting 2012 gave the Board a mandate to decide on repurchase of the company's shares – if the Board deems this appropriate – until the next Annual General Meeting. The mandate referred to repurchase of up to 5 percent of the issued shares with the purpose to cancel the repurchased shares and reduce the share capital. The repurchase would be made through purchases on OMX Stockholm Stock Exchange. Until December 31, 2012 Alfa Laval has not made any repurchases.
Alfa Laval's financial position is very strong. In order to adjust this to a more efficient structure while maintaining financial flexibility, the Board of Directors will propose the Annual General Meeting to mandate the Board to decide on repurchase of the company's shares – if the Board deems this appropriate – until the next Annual General Meeting. The mandate will refer to repurchase of up to 5 percent of the issued shares with the purpose to cancel the repurchased shares and reduce the share capital. The repurchase will be made through transactions on OMX Stockholm Stock Exchange.
The statements on financial position and the comprehensive income statements will be adopted at the Annual General Meeting of shareholders on April 23, 2013.
In the fourth quarter and full year 2013 report issued on February 5, 2013, the President and Chief Executive Officer Lars Renström stated:
"We expect that demand during the first quarter 2013 will be on about the same level as in the fourth quarter."
Earlier published outlook (October 23, 2012): "We expect that demand during the fourth quarter 2012 will be in line with or somewhat lower than in the third quarter."
Alfa Laval will publish interim reports during 2013 at the following dates:
| Interim report for | |
|---|---|
| the first quarter | April 23 |
| Interim report for the second quarter |
July 18 |
| Interim report for the third quarter |
October 29 |
| CONSOLIDATED CASH FLOWS | |||
|---|---|---|---|
| SEK millions Note |
2012 | 2011 | 2010 |
| Operating activities | |||
| Operating income | 4,372 | 4,691 | 4,401 |
| Adjustment for depreciation | 934 | 875 | 796 |
| Adjustment for other non-cash items | 265 | 167 | 145 |
| 5,571 | 5,733 | 5,342 | |
| Taxes paid | -1,569 | -1,446 | -1,215 |
| 4,002 | 4,287 | 4,127 | |
| Changes in working capital: | |||
| Increase(-)/decrease(+) of receivables | -158 | -157 | 360 |
| Increase(-)/decrease(+) of inventories | -214 | -1,172 | -536 |
| Increase(+)/decrease(-) of liabilities | -25 | 611 | 332 |
| Increase(+)/decrease(-) of provisions | -19 | -140 | -185 |
| Increase(-)/decrease(+) in working capital | -416 | -858 | -29 |
| Investing activities | 3,586 | 3,429 | 4,098 |
| Investments in fixed assets (Capex) | -531 | -555 | -429 |
| Divestment of fixed assets | 49 | 14 | 31 |
| Acquisition of businesses | 16 -2,778 |
-4,956 | -1,019 |
| -3,260 | -5,497 | -1,417 | |
| Financing activities | |||
| Received interests and dividends | 97 | 91 | 52 |
| Paid interests | -252 | -271 | -139 |
| Realised financial exchange differences | 104 | 285 | 3 |
| Repurchase of shares | – | – | -253 |
| Dividends to owners of the parent | -1,363 | -1,258 | -1,055 |
| Dividends to non-controlling interests | -7 | -10 | -9 |
| Increase(-)/decrease(+) of financial assets | 5 | -17 | -389 |
| Increase(+)/decrease(-) of borrowings | 1,009 | 3,497 | -641 |
| -407 | 2,317 | -2,431 | |
| Cash flow for the period | -81 | 249 | 250 |
| Cash and bank at the beginning of the period | 1,564 | 1,328 | 1,112 |
| Translation difference in cash and bank | -79 | -13 | -34 |
| Cash and bank at the end of the period | 25 1,404 |
1,564 | 1,328 |
| Free cash flow per share (SEK) * | 0.78 | -4.93 | 6.38 |
| Capex in relation to sales | 1.8% | 1.9% | 1.7% |
| Average number of shares ** | 419,456,315 | 419,456,315 | 420,494,001 |
* Free cash flow is the sum of cash flows from operating and investing activities.
** Average number of shares has been affected by repurchase of shares.
For further comments on certain individual lines in the cash-flow statement, reference is made to Notes 16 and 25.
The increase in cash flows from operating activities in 2012 is explained by the lower increase in working capital.
The item cash and bank mainly consists of short term deposits of less than three months with banks.
Cash flow from operating and investing activities amounted to SEK 326 (-2,068) (2,681) million during 2012. Out of this, acquisitions of businesses were SEK -2,778 (-4,956) (-1,019) million whereas divestments generated cash of SEK 49 (14) (31) million.
Other non-cash items are mainly referring to realised gains and losses in connection with sale of assets. These have to be eliminated since the cash impact of divestments of fixed assets and businesses are reported separately under cash flow from investing activities.
Working capital increased by SEK 416 (858) (29) million during 2012.
Investments in property, plant and equipment amounted to SEK 531 (555) (429) million during 2012. The investments made for the individual product groups are as follows:
Investments have been made in machines for manufacturing of new products and in productivity enhancing equipment in Ronneby in Sweden and in Jiang Yin in China for brazed heat exchangers. Investments have been made in Jiang Yin in China, in Pune in India and in Lund in Sweden in equipment to increase capacity and widen the product range for gasketted heat exchangers. Investments in air heat exchanger manufacturing equipment have been completed in Sao Paulo in Brazil and in Kunshan in China.
During 2012 a new factory for decanters has been built in Kunshan in China.
Investments in machine capacity have been made during the year in Eskilstuna in Sweden and in Pune in India.
During 2012 no major investments have been made relating to fluid handling products.
Depreciation, excluding allocated step-up values, amounted to SEK 447 (449) (425) million during the year.
For a further analysis of the impact on the cash flow by acquisitions and disposals, see Note 16.
The free cash flow per share is SEK 0.78 (-4.93) (6.38).
| CONSOLIDATED COMPREHENSIVE INCOME | ||||
|---|---|---|---|---|
| SEK millions | Note | 2012 | 2011 | 2010 |
| Net sales | 1, 2, 3, 4 | 29,813 | 28,652 | 24,720 |
| Cost of goods sold | 9 | -19,169 | -17,829 | -15,029 |
| Gross profit | 10,644 | 10,823 | 9,691 | |
| Sales costs | 5, 6, 9 | -3,345 | -3,410 | -3,156 |
| Administration costs | 5, 6, 7, 9 | -1,656 | -1,601 | -1,224 |
| Research and development costs | 9 | -707 | -648 | -625 |
| Other operating income * | 8 | 384 | 403 | 494 |
| Other operating costs * | 8, 9 | -948 | -876 | -779 |
| Operating income | 4,372 | 4,691 | 4,401 | |
| Dividends and changes in fair value | 10 | 8 | 0 | 2 |
| Interest income and financial exchange rate gains | 11 | 501 | 436 | 327 |
| Interest expense and financial exchange rate losses | 11 | -376 | -451 | -366 |
| Result after financial items | 4,505 | 4,676 | 4,364 | |
| Tax on this year's result | 15 | -1,271 | -1,403 | -1,240 |
| Other taxes | 15 | -27 | -22 | -8 |
| Net income for the year | 3,207 | 3,251 | 3,116 | |
| Other comprehensive income: | ||||
| Cash flow hedges | 168 | -335 | 122 | |
| Translation difference | -858 | -206 | -554 | |
| Deferred tax on other comprehensive income | 15 | -50 | 120 | -36 |
| Comprehensive income for the year | 2,467 | 2,830 | 2,648 | |
| Net income attributable to: | ||||
| Owners of the parent | 3,190 | 3,223 | 3,088 | |
| Non-controlling interests | 17 | 28 | 28 | |
| Earnings per share (SEK) | 7.61 | 7.68 | 7.34 | |
| Average number of shares ** | 419,456,315 | 419,456,315 | 420,494,001 | |
| Comprehensive income attributable to: | ||||
| Owners of the parent | 2,454 | 2,812 | 2,625 | |
| Non-controlling interests | 13 | 18 | 23 |
* The line has been affected by comparison distortion items, see specification in Note 8.
** Average number of shares has been affected by repurchase of shares.
For comments on the individual lines in the consolidated comprehensive income statement, reference is made to Notes 1 to 15 and Note 28. For comments on the operating segments, see Note 1.
As a basis for comments on the various main items of the consolidated comprehensive income statement, please find a comparison between the last three years:
| INCOME ANALYSIS | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Net sales | 29,813 | 28,652 | 24,720 |
| Adjusted gross profit * | 11,131 | 11,249 | 10,062 |
| - in % of net sales | 37.3 | 39.3 | 40.7 |
| Expenses ** | -5,774 | -5,513 | -4,955 |
| - in % of net sales | 19.4 | 19.2 | 20.0 |
| Adjusted EBITDA | 5,357 | 5,736 | 5,107 |
| - in % of net sales | 18.0 | 20.0 | 20.7 |
| Depreciation | -447 | -449 | -425 |
| Adjusted EBITA | 4,910 | 5,287 | 4,682 |
| - in % of net sales | 16.5 | 18.5 | 18.9 |
| Amortisation of step up values | -487 | -426 | -371 |
| Comparison distortion items | -51 | -170 | 90 |
* Excluding amortisation of step up values. ** Excluding comparison distortion items.
The gross margin has been affected by negative exchange rate effects and a changed mix in capital sales towards delivery of lower margin contract orders. The gross margin has also been negatively affected by a normalization of the price level within the marine part of the Marine & Diesel division. A higher utilisation in certain factories based on the demand has influenced the margin positively.
Sales and administration expenses amounted to SEK 5,001 (5,011) (4,380) million. Excluding currency effects and acquisition of businesses, sales and administration expenses were 3.1 percent lower than last year. The decrease is a result of the measures initiated at the end of 2011.
The costs for research and development have amounted to SEK 707 (648) (625) million, corresponding to 2.4 (2.3) (2.5) percent of net sales. Excluding currency effects and acquisition of businesses, the
costs for research and development have increased by 7.6 percent compared to last year. The increase is entirely in line with the established plan for product development.
The net income attributable to the owners of the parent, excluding depreciation of step-up values and the corresponding tax, is SEK 8.39 (8.42) (8.02) per share.
Compared with last year Alfa Laval has been affected during 2012 by exchange rate differences, both through translation differences and through the net exposure when trading in foreign currencies. The effect on adjusted EBITA has been calculated to totally about SEK -139 (-468) (356) million for 2012 compared with last year. The effect of the exchange rate variations has been limited through exchange rate hedging and through the distribution of the company's financial debts in relation to its net assets in different currencies.
In order to illustrate the quarterly development, the last 12 quarters are shown below for four of the parameters in the income analysis:
The operating income has been affected by comparison distortion items of SEK -51 (-170) (90) million, which are specified below. In the consolidated comprehensive income statement these are reported gross as a part of other operating income and other operating costs, see summary in Note 8.
The comparison distortion cost during 2012 of SEK -51 million relates to write down of the goodwill relating to the acquisition of Onnuri with SEK -48 million and a realised loss on sale of a property in Korea that has been used by Onnuri with SEK -3 million.
The comparison distortion costs during 2011 of SEK -170 million related to structural costs for saving measures of SEK -90 million and non-recurring integration costs of SEK -80 million in connection with the acquisition of Aalborg Industries respectively. The saving measures were mainly relating to capacity adjustments and cost reductions in the manufacturing due to the demand for certain products as well as cost reductions in the sales companies primarily in Western Europe. The measures were expected to affect approximately 250 employees.
SEK 80 million of the comparison distortion income during 2010 related to reversal of unused parts of the provisions made in connection with the savings' measures that were initiated during 2009. Since the actual costs for the measures became SEK 80 million lower this amount was reversed. The remaining SEK 10 million related to realised gains on sale of properties in France and India.
The financial net has amounted to SEK -126 (-130) (-111) million, excluding realised and unrealised exchange rate losses and gains. The main elements of costs were interest on debt to the banking syndicate of SEK -25 (-34) (-1) million, interest on the bilateral term loans SEK -83 (-62) (-7) million, interest on the private placement of SEK -16 (-17) (-21) million and a net of dividends, other interest income and interest costs of SEK -2 (-17) (-82) million.
The net of realised and unrealised exchange rate differences amounts to SEK 259 (115) (74) million.
The item cash flow hedges in other comprehensive income almost entirely consist of fair value changes in cash flow hedges:
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Opening balance | -106 | 229 | 107 |
| Booked into other comprehensive income during the year | 124 | -326 | 123 |
| Reversed from other comprehensive income due to inefficiency: | |||
| booked against cost of goods sold | -40 | -4 | -57 |
| Reversed from other comprehensive income: | |||
| booked against cost of goods sold | 90 | -19 | 55 |
| booked against interest income/interest costs | -6 | 14 | 1 |
| Closing balance | 62 | -106 | 229 |
| Change reported against other comprehensive income | 168 | -335 | 122 |
The Group has not had any cash flow hedges that have affected the initially recognised carrying amount of non-financial assets.
In the item cash flow hedges in other comprehensive income the fair value changes in shares in external companies is also included with SEK 0 (0) (0) million for 2012. They are not material enough to render a separate line in the comprehensive income statement.
| Consolidated | ||||
|---|---|---|---|---|
| SEK millions | ||||
| Year | Main explanation to translation differences | Change | Accumulated | Pre-tax effect on change by hedging measures |
| Formation of the Group | ||||
| 2000 | The EUR was appreciated by 6 %, which affected the EUR based acquisition loans |
-94 | -94 | -312 |
| 2001 | The USD was appreciated by 10.7 % | 97 | 3 | -105 |
| 2002 | The USD was depreciated by 16.7 % | -190 | -187 | 165 |
| 2003 | The USD was depreciated by 17.5 % | -38 | -225 | 195 |
| 2004 | The USD was depreciated by 9.0 % | -103 | -328 | -19 |
| 2005 | The USD was appreciated by 20.3 % and the EUR was appreciated by 4.8 % |
264 | -64 | -65 |
| 2006 | The USD was depreciated by 13.5 % and the EUR was depreciated by 4.0 % |
-269 | -333 | 56 |
| 2007 | The USD was depreciated by 5.7 % whereas the EUR was appreciated by 4.7 % |
224 | -109 | 13 |
| 2008 | The USD was appreciated by 20.5 % and the EUR was appreciated by 16.2 % |
850 | 744 | -468 |
| 2009 | The USD was depreciated by 7.5 % and the EUR was depreciated by 6.0 % |
-392 | 352 | 220 |
| 2010 | The USD was depreciated by 5.7 %% and the EUR was depreciated by 12.9 % |
-554 | -202 | 99 |
| 2011 | The USD was appreciated by 1.4 % whereas the EUR was depreciated by 0.8 % |
-206 | -408 | 34 |
| 2012 | The USD was depreciated by 5.8 % and the EUR was depreciated by 3.6 % |
-858 | -1,266 | 214 |
* Reported against other comprehensive income. Prior to 2009 these translation differences were reported against equity.
| ASSETS | ||
|---|---|---|
| SEK millions Note |
2012 | 2011 |
| Non-current assets | ||
| Intangible assets 16, 17 |
||
| Patents and unpatented know-how | 1,943 | 1,327 |
| Trademarks | 1,819 | 2,130 |
| Licenses, renting rights and similar rights | 45 | 45 |
| Goodwill | 9,792 | 9,543 |
| 13,599 | 13,045 | |
| Property, plant and equipment 16, 18 |
||
| Real estate | 1,702 | 1,734 |
| Machinery and other technical installations | 1,430 | 1,439 |
| Equipment, tools and installations | 541 | 555 |
| Construction in progress and advances to suppliers | ||
| concerning property, plant and equipment | 150 | 208 |
| 3,823 | 3,936 | |
| Other non-current assets | ||
| Other long-term securities 13, 14, 19 |
9 | 25 |
| Pension assets 26 |
383 | 346 |
| Deferred tax assets 15 |
1,208 | 1,293 |
| 1,600 | 1,664 | |
| Total non-current assets | 19,022 | 18,645 |
| Current assets | ||
| Inventories 20 |
6,176 | 6,148 |
| Assets held for sale | ||
| Real estate | 9 | – |
| Current receivables | ||
| Accounts receivable 13, 21 |
5,211 | 5,080 |
| Current tax assets | 1,207 | 918 |
| Other receivables 13, 22 |
1,098 | 1,188 |
| Prepaid costs and accrued income 13, 23 |
200 | 174 |
| Derivative assets 13, 14 |
325 | 303 |
| 8,041 | 7,663 | |
| Current deposits | ||
| Other current deposits 13, 24 |
427 | 483 |
| Cash and bank 13, 25 |
1,404 | 1,564 |
| Total current assets | 16,057 | 15,858 |
| TOTAL ASSETS | 35,079 | 34,503 |
| EQUITY AND LIABILITIES | ||
|---|---|---|
| SEK millions Note |
2012 | 2011 |
| Equity | ||
| Attributable to owners of the parent | ||
| Share capital | 1,117 | 1,117 |
| Other contributed capital | 2,770 | 2,770 |
| Other reserves | -1,184 | -448 |
| Retained earnings | 12,623 | 11,543 |
| 15,326 | 14,982 | |
| Attributable to non-controlling interests 12 |
61 | 162 |
| Total equity | 15,387 | 15,144 |
| Non-current liabilities | ||
| Liabilities to credit institutions 28 |
2,051 | 1,353 |
| Swedish Export Credit 28 |
1,723 | 1,787 |
| European Investment Bank 28 |
1,120 | 1,162 |
| Private placement 28 |
714 | 758 |
| Provisions for pensions and similar commitments 26 |
829 | 852 |
| Provision for deferred tax 15 |
1,939 | 1,930 |
| Other provisions 27 |
473 | 520 |
| Total non-current liabilities | 8,849 | 8,362 |
| Current liabilities | ||
| Liabilities to credit institutions 28 |
395 | 132 |
| Advances from customers | 2,121 | 2,020 |
| Accounts payable | 2,198 | 2,529 |
| Notes payable | 135 | 139 |
| Current tax liabilities | 1,104 | 1,050 |
| Other liabilities 29 |
1,381 | 1,356 |
| Other provisions 27 |
1,603 | 1,612 |
| Accrued costs and prepaid income 30 |
1,719 | 1,731 |
| Derivative liabilities 13, 14 |
187 | 428 |
| Total current liabilities | 10,843 | 10,997 |
| Total liabilities | 19,692 | 19,359 |
| TOTAL EQUITY AND LIABILITIES | 35,079 | 34,503 |
| PLEDGED ASSETS AND CONTINGENT LIABILITIES | ||
| Pledged assets 31 |
10 | 51 |
| Contingent liabilities 31 |
2,015 | 1,722 |
For comments on the individual lines in the statement on financial position, reference is made to Notes 12 to 34. For comments on the operating segments, see Note 1.
The average capital employed including goodwill and step-up values amounted to SEK 18,636 (16,324) million during the year.
The return on average capital employed including goodwill and step-up values amounted to 26.1 (31.3) percent during the year.
The capital turnover rate calculated on the average capital employed including goodwill and step-up values amounted to 1.6 (1.8) times for the year.
Net income in relation to the average equity was 21.6 (22.9) percent during the year.
The solidity, that is the equity in relation to total assets, was 43.9 (43.9) percent at the end of the year.
The net debt was SEK 4,270 (3,264) million at the end of the year.
Net debt in relation to EBITDA was 0.8 (0.6) times at the end of December.
The debt ratio, that is the net debt in relation to equity, was 0.28 (0.22) times at the end of December.
| Attributable to: | Owners of the parent Non-controlling interests |
Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Other reserves | |||||||||||
| SEK millions | Share capital |
Other contributed capital |
Cash flow hedges |
Translation | differences Deferred tax | Retained earnings |
Subtotal | Translation differences |
Retained earnings |
Subtotal | |
| As of December 31, 2009 | 1,117 | 2,770 | 107 | 352 | -33 | 7,800 | 12,113 | 0 | 116 | 116 | 12,229 |
| 2010 | |||||||||||
| Comprehensive income | |||||||||||
| Net income | – | – | – | – | – | 3,088 | 3,088 | – | 28 | 28 | 3,116 |
| Other comprehensive income | – | – | 122 | -549 | -36 | – | -463 | -5 | – | -5 | -468 |
| Comprehensive income | – | – | 122 | -549 | -36 | 3,088 | 2,625 | -5 | 28 | 23 | 2,648 |
| Transactions with shareholders | |||||||||||
| Repurchase of shares | – | – | – | – | – | -253 | -253 | – | – | – | -253 |
| Decrease of non-controlling interests | – | – | – | – | – | -3 | -3 | – | -2 | -2 | -5 |
| Non-controlling interests in acquired | |||||||||||
| companies | – | – | – | – | – | – | – | – | 27 | 27 | 27 |
| Dividends to owners of the parent | – | – | – | – | – | -1,055 | -1,055 | – | – | – | -1,055 |
| Dividends to non-controlling interests | – | – | – | – | – | – | – | – | -9 | -9 | -9 |
| As of December 31, 2010 | 1,117 | 2,770 | 229 | -197 | -69 | 9,577 | 13,427 | -5 | 160 | 155 | 13,582 |
| 2011 | |||||||||||
| Comprehensive income | |||||||||||
| Net income | – | – | – | – | – | 3,223 | 3,223 | – | 28 | 28 | 3,251 |
| Other comprehensive income | – | – | -335 | -196 | 120 | – | -411 | -10 | – | -10 | -421 |
| Comprehensive income | – | – | -335 | -196 | 120 | 3,223 | 2,812 | -10 | 28 | 18 | 2,830 |
| Transactions with shareholders | |||||||||||
| Cancellation of repurchased shares | -7 | – | – | – | – | – | -7 | – | – | – | -7 |
| Bonus issue of shares | 7 | – | – | – | – | – | 7 | – | – | – | 7 |
| Decrease of non-controlling interests | – | – | – | – | – | 1 | 1 | – | -1 | -1 | 0 |
| Non-controlling interests in acquired | |||||||||||
| companies | – | – | – | – | – | – | – | – | 0 | 0 | 0 |
| Dividends to owners of the parent | – | – | – | – | – | -1,258 | -1,258 | – | – | – | -1,258 |
| Dividends to non-controlling interests | – | – | – | – | – | – | – | – | -10 | -10 | -10 |
| As of December 31, 2011 | 1,117 | 2,770 | -106 | -393 | 51 | 11,543 | 14,982 | -15 | 177 | 162 | 15,144 |
| 2012 | |||||||||||
| Comprehensive income | |||||||||||
| Net income | – | – | – | – | – | 3,190 | 3,190 | – | 17 | 17 | 3,207 |
| Other comprehensive income | – | – | 168 | -854 | -50 | – | -736 | -4 | – | -4 | -740 |
| Comprehensive income | – | – | 168 | -854 | -50 | 3,190 | 2,454 | -4 | 17 | 13 | 2,467 |
| Transactions with shareholders | |||||||||||
| Decrease of non-controlling interests | – | – | – | – | – | -747 | -747 | – | -107 | -107 | -854 |
| Dividends to owners of the parent | – | – | – | – | – | -1,363 | -1,363 | – | – | – | -1,363 |
| Dividends to non-controlling interests | – | – | – | – | – | – | – | – | -7 | -7 | -7 |
| As of December 31, 2012 | 1,117 | 2,770 | 62 | -1,247 | 1 | 12,623 | 15,326 | -19 | 80 | 61 | 15,387 |
| Change in | ||||||
|---|---|---|---|---|---|---|
| Year | Event | Date | Change in number of shares |
Total number of shares |
share capital SEK millions |
Total share capital SEK millions |
| 2000 | Company formation | March 27, 2000 | 10,000,000 | 10,000,000 | 0.1 | 0.1 |
| New issue of shares | August 24, 2000 | 27,496,325 | 37,496,325 | 0.3 | 0.4 | |
| 2002 | Bonus issue of shares | May 3, 2002 | 37,496,325 | 74,992,650 | 0.4 | 1 |
| Bonus issue of shares | May 16, 2002 | – | – | 749 | 750 | |
| New issue of shares | May 16, 2002 | 3,712,310 | 78,704,960 | 37 | 787 | |
| New issue of shares | May 17, 2002 | 32,967,033 | 111,671,993 | 330 | 1,117 | |
| 2008 | Cancellation of repurchased shares | May 27, 2008 | -4,323,639 | 107,348,354 | -43 | |
| Bonus issue of shares | May 27, 2008 | – | 107,348,354 | 43 | 1,117 | |
| Split 4:1 | June 10, 2008 | 322,045,062 | 429,393,416 | – | 1,117 | |
| 2009 | Cancellation of repurchased shares | July 9, 2009 | -7,353,950 | 422,039,466 | -19 | |
| Bonus issue of shares | July 9, 2009 | – | 422,039,466 | 19 | 1,117 | |
| 2011 | Cancellation of repurchased shares | May 16, 2011 | -2,583,151 | 419,456,315 | -7 | |
| Bonus issue of shares | May 16, 2011 | – | 419,456,315 | 7 | 1,117 |
The articles of association of Alfa Laval AB state that the share capital should be between SEK 745,000,000 and 2,980,000,000 and that the number of shares should be between 298,000,000 and 1,192,000,000.
At January 1, 2012 the share capital of SEK 1,116,719,930 was divided into 419,456,315 shares. Since then no changes have been made.
The Annual General Meeting 2012 gave the Board a mandate to decide on repurchase of the company's shares – if the Board deems this appropriate – until the next Annual General Meeting. The mandate referred to repurchase of up to 5 percent of the issued shares with the purpose to cancel the repurchased shares and reduce the share capital. The repurchase would be made through purchases on OMX Stockholm Stock Exchange. Until December 31, 2012 Alfa Laval has not made any repurchases.
The company has only issued one type of shares and all these have equal rights. There are no restrictions in law or in the articles of association in the negotiability of the shares.
The only shareholder holding more than 10 percent of the shares is Tetra Laval B.V., the Netherlands who owns 26.1 (26.1) percent. The employees of the company do not own any shares in the company through company pension trusts.
No restrictions exist in how many votes that each shareholder can represent at a general meeting of shareholders. The company has no knowledge of any agreements between shareholders that would limit the negotiability of their shares.
The articles of association stipulate that members of the Board are elected at the Annual General Meeting. Election or discharge of members of the Board is otherwise regulated by the provisions in the Swedish Companies Act and the Swedish Corporate Governance Code. According to the Companies Act changes in the articles of association are decided at general meetings of shareholders.
The senior credit facility with the banking syndicate, the private placement and the bilateral term loans with SHB, Swedish Export Credit and the European Investment Bank contain conditions that give the lenders the opportunity to terminate the loans and declare them due and payable if there is a change of control of the company through a public offering or otherwise.
The possibilities to distribute unappropriated profits from foreign subsidiaries are limited in certain countries due to currency regulations and other legislation.
| PARENT COMPANY CASH FLOWS | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Cash flow from operating activities | |||
| Operating income | -13 | -10 | -24 |
| Taxes paid | -214 | -198 | -202 |
| -227 | -208 | -226 | |
| Changes in working capital: | |||
| Increase(-)/decrease(+) of receivables | 1,444 | -1,772 | -1,691 |
| Increase(+)/decrease(-) of liabilities | -374 | 292 | 43 |
| Increase(-)/decrease(+) in working capital | 1,070 | -1,480 | -1,648 |
| 843 | -1,688 | -1,874 | |
| Cash flow from investing activities | |||
| Investment in subsidiaries | – | – | – |
| – | – | – | |
| Cash flow from financing activities | |||
| Financial net, paid | 115 | 113 | 16 |
| Repurchase of shares | – | – | -253 |
| Received dividends from subsidiaries | – | 1,679 | 2,288 |
| Paid dividends | -1,363 | -1,258 | -1,055 |
| Received group contribution | 405 | 1,154 | 878 |
| -843 | 1,688 | 1,874 | |
| Cash flow for the year | – | – | – |
| Cash and bank at the beginning of the year | – | – | – |
| SEK millions | Note | 2012 | 2011 | 2010 |
|---|---|---|---|---|
| Administration costs | -13 | -11 | -12 | |
| Other operating income | 3 | 6 | – | |
| Other operating costs | -3 | -5 | -12 | |
| Operating income | -13 | -10 | -24 | |
| Revenues from interests in group companies | 36 | 596 | 2,084 | 3,442 |
| Interest income and similar result items | 11 | 118 | 115 | 17 |
| Interest expenses and similar result items | 11 | -4 | -2 | -4 |
| Result after financial items | 697 | 2,187 | 3,431 | |
| Change of tax allocation reserve | 283 | -115 | -232 | |
| Tax on this year's result | -1 | -110 | -248 | |
| Tax on paid Group contribution | -262 | – | – | |
| Net income for the year | 717 | 1,962 | 2,951 |
* The parent company income statement also constitutes its comprehensive income statement.
| SEK millions | Note | 2012 | 2011 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Financial non-current assets | |||
| Shares in group companies | 19 | 4,669 | 4,669 |
| Current assets | |||
| Current receivables | |||
| Receivables on group companies | 8,035 | 9,287 | |
| Current tax assets | 249 | 37 | |
| Other receivables | 4 | 5 | |
| 8,288 | 9,329 | ||
| Cash and bank | – | – | |
| Total current assets | 8,288 | 9,329 | |
| TOTAL ASSETS | 12,957 | 13,998 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | |||
| Share capital | 1,117 | 1,117 | |
| Statutory reserve | 1,270 | 1,270 | |
| 2,387 | 2,387 | ||
| Unrestricted equity | |||
| Profit brought forward | 7,568 | 7,706 | |
| Net income for the year | 717 | 1,962 | |
| 8,285 | 9,668 | ||
| Total equity | 10,672 | 12,055 | |
| Untaxed reserves | |||
| Tax allocation reserve, taxation 2007 | – | 254 | |
| Tax allocation reserve, taxation 2008 | 350 | 379 | |
| Tax allocation reserve, taxation 2009 | 239 | 239 | |
| Tax allocation reserve, taxation 2010 | 224 | 224 | |
| Tax allocation reserve, taxation 2011 | 313 | 313 | |
| Tax allocation reserve, taxation 2012 | 140 | 140 | |
| 1,266 | 1,549 | ||
| Current liabilities | |||
| Liabilities to group companies | 1,018 | 393 | |
| Accounts payable | 1 | 0 | |
| Current tax liabilities | – | 1 | |
| Other liabilities | – | 0 | |
| 1,019 | 394 | ||
| TOTAL EQUITY AND LIABILITIES | 12,957 | 13,998 | |
| MEMORANDUM ITEMS | |||
| Pledged assets and contingent liabilities | |||
| PLEDGED ASSETS | None | None | |
| CONTINGENT LIABILITIES (for subsidiaries): | |||
| Performance guarantees | None | None | |
| Other contingent liabilities | None | None | |
| CHANGES IN PARENT COMPANY EQUITY | ||||
|---|---|---|---|---|
| SEK millions | Share capital | Statutory reserve | Unrestricted equity | Total |
| As of December 31, 2009 | 1,117 | 1,270 | 7,321 | 9,708 |
| 2010 | ||||
| Comprehensive income | ||||
| Net income | – | – | 2,951 | 2,951 |
| – | – | 2,951 | 2,951 | |
| Transactions with shareholders | ||||
| Repurchase of shares | – | – | -253 | -253 |
| Dividends | – | – | -1,055 | -1,055 |
| As of December 31, 2010 | 1,117 | 1,270 | 8,964 | 11,351 |
| 2011 | ||||
| Comprehensive income | ||||
| Net income | – | – | 1,962 | 1,962 |
| – | – | 1,962 | 1,962 | |
| Transactions with shareholders | ||||
| Cancellation of repurchased shares | -7 | – | – | -7 |
| Bonus issue of shares | 7 | – | – | 7 |
| Dividends | – | – | -1,258 | -1,258 |
| As of December 31, 2011 | 1,117 | 1,270 | 9,668 | 12,055 |
| 2012 | ||||
| Comprehensive income | ||||
| Net income | – | – | 717 | 717 |
| – | – | 717 | 717 | |
| Transactions with shareholders | ||||
| Dividends | – | – | -1,363 | -1,363 |
| Paid group contributions | – | – | -999 | -999 |
| Tax on paid group contributions | – | – | 262 | 262 |
| As of December 31, 2012 | 1,117 | 1,270 | 8,285 | 10,672 |
The share capital of SEK 1,116,719,930 (1,116,719,930) is divided among 419,456,315 (419,456,315) shares.
The accounting principles mentioned below are only the ones that are relevant for the parent company and the consolidated group.
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments including derivatives that are valued at fair value. The statements are presented in SEK millions, unless otherwise stated.
As from January 1, 2005 Alfa Laval applies International Financial Reporting Standards (IFRS) as adopted by the European Union. Furthermore recommendation RFR 1 "Supplementary accounting principles for consolidated groups" from the Council for Financial Reporting in Sweden is applied.
The accounting and valuation principles of the parent company comply with the Swedish Annual Accounts Act and the recommendation RFR 2 "Accounting for legal entities" issued by the Council for Financial Reporting in Sweden.
The company has chosen to only comment the changed accounting principles that are relevant for the company's financial reporting.
During 2012 the amendment to IFRS 7 "Financial Instruments: Disclosures" has been implemented. The amendment means that additional quantitative and qualitative disclosures that must be made when removing financial instruments from the statement of financial position. The amendment to IFRS 7 becomes effective for financial years beginning on or after July 1, 2011.
During 2011 the changes in the Swedish Annual Accounts Act were implemented. The changes meant that disclosures on sick leave among Swedish employees, tax assessment values for Swedish real estate and salaries, remunerations and social security costs per country no longer were required.
The change in IFRIC 14 "Prepayments of a Minimum Funding Requirement" was implemented during 2011. The change gave guidance when assessing the recoverable amount of a net pension asset. The change allowed a prepayment of a minimum funding requirement to be reported as an asset. The change did not have any consequence for Alfa Laval.
The changed IAS 24 "Related Party Disclosures" was implemented in 2011. The change clarified the definition of a related party and did not have any consequence for Alfa Laval.
During 2010 the changes in IFRS 3 "Business Combinations" and IAS 27 "Consolidated and Separate Financial Statements" were implemented. IASB had revised these in order to better converge with the rules in US GAAP. The changes meant that:
During 2010 the changes in the Annual Accounts Act concerning increased disclosures on the fees to the company's auditors were implemented. The fees must be presented divided on audit engagements, audit related services, tax services and other services.
During 2010 IFRIC 16 "Hedges of a Net Investment in a Foreign Operation" were implemented. The interpretation gives guidance on how foreign currency risks that qualify for hedge accounting of net investments in a foreign subsidiary is to be identified and which company within a group that can hold the hedging instrument.
IFRS 3 "Business Combinations" means that goodwill and intangible assets with indefinite useful life are not amortised. They are instead tested for impairment both annually and when there is an indication. The effect of IFRS 3 can be considerable for the Group if the profitability within the Group or parts of the Group goes down in the future, since this could trigger a substantial impairment write down of the goodwill. Such a write down will affect net income and thereby the financial position of the Group. The reported goodwill is SEK 9,792 (9,543) million at the end of the year. No intangible assets with indefinite useful life other than goodwill exist.
The Group has defined benefit plans, which are reported according to IAS 19 "Employee Benefits". This means that the plan assets are valued at fair value and that the present value of the benefit obligations in the defined benefit plans is decided through yearly actuarial calculations made by independent actuaries. If the value of the plan assets start to decrease at the same time as the actuarial assumptions increase the benefit obligations the combined effect could result in a substantial deficit. The monetary magnitude comes from the fact that the deficit is the difference between two large numbers. The risk for this happening is however decreased by Alfa Laval applying the 10 percent corridor approach described under "Employee benefits" below and the fact that many of these defined benefit schemes are closed for new participants and replaced by defined contribution schemes.
The Group's reporting of provisions according to IAS 37 means that SEK 2,076 (2,132) million is reported as other provisions. This constitutes 5.9 (6.2) percent of the Group's assets and is important for the assessment of the Group's financial position, not the least since provisions normally are based on judgements of probability and estimates of costs and risks. If the accounting principles for provision would be changed sometime in the future, this could have a substantial impact on the Group's financial position.
IAS 39 "Financial Instruments: Recognition and Measurement" has a considerable effect on the Groups comprehensive income and equity and may have a substantial effect on net income if the used derivatives turns out not to be effective.
The key source of estimation uncertainty is related to the impairment test of goodwill, since the testing is based on certain assumptions concerning future cash-flows. See the section on critical accounting principles above for further details.
In applying the accounting policies Management has made various judgements, apart from those involving estimations, that can significantly affect the amounts recognised in the financial statements. These judgements mainly relate to:
The Group does not own shares in any material companies that fulfil the definition of an associate in IAS 28 "Investments in Associates", that is where the ownership is between 20 and 50 percent.
Borrowing costs are accounted for according to IAS 23 "Borrowing Costs", which means that the borrowing costs are charged to the profit and loss in the period to which they relate.
Transaction costs that arise in connection with raising a loan are capitalised and amortised over the maturity of the loan according to IAS 39 "Financial Instruments: Recognition and Measurement". The capitalised amount is reported net against the raised loan.
The consolidated financial statements have been prepared according to IFRS 3 "Business Combinations" and IAS 27 "Consolidated and Separate Financial Statements".
The consolidated financial statements include the parent company Alfa Laval AB (publ) and the subsidiaries in which it holds more than 50 percent during the period.
The statement on consolidated financial position has been prepared in accordance with the purchase method, which means that the book value of shares in the subsidiaries is eliminated from the reported equity in the subsidiaries at the time of their acquisition. This means that the equity in the subsidiaries at the time of acquisition is not included in the consolidated equity.
The difference between the purchase price paid and the net assets of the acquired companies is allocated to the step-up values related to each type of asset, with any remainder accounted for as goodwill.
During the first 12 months after the acquisition the value of the goodwill is often preliminary. The reason to this is that experience has shown that there is some uncertainty linked to the different components of the purchase price allocation concerning:
Since the goodwill is a residual that emerges once all other parameters in the purchase price allocation have been established, it will be preliminary and open for changes until all other values are final.
At acquisitions where there is a goodwill it should be stated what the goodwill is relating to. Since goodwill by definition is a residual this is not always that easy. Generally speaking the goodwill is usually relating to estimated synergies in procurement, logistics and corporate overheads. It can also be claimed that the goodwill is relating to the acquired entity's ability to over time recreate its intangible assets. Since the value of the intangible assets at the time of acquisition only can be calculated on the assets that exist then, no value can be attached to the patents etc. that the operations manage to create in the future partially as a replacement for the current ones and these are therefore referred to goodwill.
Goodwill and intangible assets with indefinite useful life are not amortised. These assets are instead tested for impairment both annually and when there is an indication. The impairment test is made according to IAS 36 Impairment on assets.
Items that do not have any link to the normal operations of the Group or that are of a nonrecurring nature are classified as comparison distortion items. In the consolidated comprehensive income statement these are reported gross as a part of the most concerned lines, but are specified separately in Note 8. To report these together with other items in the consolidated comprehensive income statement without this separate reporting in a note would have given a comparison distortion effect that would have made it difficult to judge the development of the ordinary operations from an outside viewer. Comparison distortion items affecting operating income are reported as a part of operating income, while comparison distortion items affecting the result after financial items are reported as a part of the financial net.
Alfa Laval has chosen to report the items in other comprehensive income as a part of one statement over comprehensive income instead of reporting the result down to net income for the year in one statement and the result below this down to comprehensive income in a separate statement.
Other comprehensive income is referring to items that are not transactions with shareholders, but that before 2009 were reported directly against equity. Now they are instead reported in comprehensive income as a part of other comprehensive income. Other comprehensive income relates to for instance cash flow hedges and translation differences and deferred tax related to these.
Paragraph 2a in chapter 6 of the Swedish Annual Accounts Act requires listed companies to disclose certain information relating to the company's shares in the Board of Directors' Report. This information is found at the end of the Board of Directors' Report, in the "Changes in consolidated equity" and in Note 6.
Employee benefits are reported according to IAS 19 "Employee Benefits".
The present value of the benefit obligations in the defined benefit plans is decided through yearly actuarial calculations made by independent actuaries. The plan assets are valued at fair value. The net plan asset or liability is arrived at in the following way.
If the calculation gives a net asset, the lower of this asset and the sum of any cumulative unrecognised net actuarial losses and past service costs and the present value of refunds or reductions in future contributions is reported as the net plan asset.
If the net cumulative unrecognised actuarial gains and losses at the end of the previous year are outside a 10 percent corridor calculated on the greater of the present value of the defined benefit obligation or the fair value of the plan assets, then the excess is recognised over the remaining service period of the employees participating in the plan. This means that any deficits are amortised over time instead of being recognised at once.
The discount rate used to calculate the obligations is determined based on the market yields in each country at the closing date on high quality corporate bonds with a term that is consistent with the estimated term of the obligations. In countries that lack a deep market in such bonds the country's government bonds are used instead.
The costs for defined contribution plans are reported in Note 6.
The Swedish ITP plan is a multi-employer plan insured by Alecta. It is a defined benefit plan, but since the plan assets and liabilities cannot be allocated on each employer it is reported as a defined contribution plan according to item 30 in IAS 19. The construction of the plan does not enable Alecta to provide each employer with its share of the assets and liabilities or the information to be disclosed. The cost for the plan is reported together with the costs for other defined
contribution plans in Note 6. Alecta reported a collective consolidation level at December 31, 2012 of 129 (113) percent. The collective consolidation level is defined as the fair value of Alecta's plan assets in percent of the insured pension commitments calculated according to Alecta's actuarial assumptions, which are not in accordance with IAS 19. Such a surplus can be distributed among the employers or the beneficiaries, but there is no agreement concerning this that enables the company to report a receivable on Alecta.
Events after the closing date are reported according to IAS 10 under a separate heading in the Board of Directors' report.
The reporting of financial instruments is governed by three accounting and financial reporting standards:
IAS 39 means that financial derivatives, bonds and external shares are adjusted to fair value. IFRS 7 contains expanded disclosure requirements related to the significance of
financial instruments for the company's financial position and performance and the nature and extent of risks arising from financial instruments.
Both IAS 39 and IFRS 7 formally contain a considerable amount of information that should be presented. According to IFRS 7.B3 the company however should decide how much detail it provides in order not to overburden the financial statements with excessive details.
Financial assets are classified into four different portfolios:
The Financial assets at fair value through profit or loss are split on:
Financial liabilities are classified into two portfolios:
The Financial liabilities at fair value through profit or loss are split on:
The classification into different portfolios has a direct impact on the valuation of the instruments, i.e. if the instrument is valued at fair value or amortised cost. "Loans and receivables", "Held to maturity investments" and "Loans" are valued at amortised cost, whereas "Financial assets and Financial liabilities at fair value through profit or loss" and "Available for sale financial assets" are valued at fair value. Derivatives are always classified in the portfolios "Financial assets and Financial liabilities at fair value through profit or loss".
The amortised cost is normally equal to the amount recognised upon initial recognition, less any principal repayments and plus or minus any effective interest adjustments.
Prepaid costs, prepaid income and advances from customers are not defined as financial instruments since they will not result in future cash flows.
Disclosures must be made on the methods and, when a valuation technique is used, the assumptions applied in determining the fair value of each class of financial assets and liabilities. The methods are to be classified in a hierarchy of three levels:
Quoted prices in active markets,
The fair values of bonds are arrived at using market prices according to level 1. The effect of the measurement at fair value is reported in net income. The fair value adjustment of these instruments is reflected directly on the item bonds in the statement of financial position.
The fair values of shares in external companies are arrived at using market prices according to level 1 or other inputs according to level 2. The effect of the measurement at fair value is reported in other comprehensive income. The fair value adjustment of these instruments is reflected directly on the item other long-term securities in the statement of financial position.
The fair values of the Group's currency forward contracts, currency options, interestrate swaps, metal forward contracts and electricity futures are arrived at using market prices according to level 1. The fair value changes are arrived at by comparing the conditions of the derivative entered into with the market price for the same instrument at the closing date and with the same maturity date. The effect of the measurement at fair value is reported in other comprehensive income if the derivative constitutes an effective cash flow hedge and otherwise on the concerned line above net income. The fair value adjustment of these instruments is reported as derivative assets or derivative liabilities in the statement of financial position.
For each class of financial instruments disclosures shall be made on credit risk and an analysis of financial assets that are past due or impaired. Within Alfa Laval credit risk is in reality only related to accounts receivable. The disclosures just mentioned are therefore to be found in Note 22. The factors to be taken into account when providing for bad debts are:
Based on this the best estimate based on past experience is made on which amount that is probable to be received and the difference is provided for as unsecure.
Only at a final loss the receivable is written off.
Group contributions to the parent company are the equivalent to dividends and are reported as financial revenue in the income statement in accordance with UFR 2 issued by the Council for Financial Reporting in Sweden.
Alfa Laval has implemented documentation requirements to qualify for hedge accounting on derivative financial instruments.
The effect of the fair value adjustment of derivatives is reported as a part of other comprehensive income for the derivatives where hedge accounting is made (according to the cash flow hedging method) and above net income only when the underlying transaction has been realised. Hedge accounting requires the derivative to be effective within an 80 – 125 percent range. For the part of an effective derivative that exceeds 100 percent effectiveness the fair value adjustment is reported above net income. For the derivatives where hedge accounting is not made the fair value valuation is reported above net income. The fair value adjustment of derivatives is reported separately from the underlying instrument as a separate item called derivative assets/derivative liabilities in the statement of financial position.
In order to finance acquisitions of foreign operations loans are raised, if possible, in the same currency as the net investment. The loans thereby constitute a hedge of the net investment in each currency. Exchange rate differences relating to these loans are therefore booked to other comprehensive income.
Income taxes are reported in accordance with IAS 12 "Income Taxes".
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. Current tax liabilities (receivables) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the closing date. In essence, this means that current tax is calculated according to the rules that apply in the countries where the profit was generated.
Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences. Deferred tax liabilities are recognised for all taxable temporary differences, except for goodwill.
Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: (a) deductible temporary differences; (b) the carry-forward of unused tax losses; and (c) the carry-forward of unused tax credits. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable (>50 percent) that taxable profit will be available against which the deductible temporary difference can be utilised. Deferred tax assets are
recognised for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable (>50 percent) that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the closing date.
If it is not any longer probable that sufficient taxable profits will be available against which a deferred tax asset can be utilised, then the deferred tax asset is reduced accordingly.
The Group's inventory has been accounted for after elimination of inter-company gains. The inventory has been valued according to the "First-In-First-Out" (FIFO) method at the lowest of cost or net realisable value, taking into account obsolescence.
This means that raw material and purchased components normally are valued at the acquisition cost, unless the market price has fallen. Work in progress is valued at the sum of direct material and direct labour costs with a mark-up for the product's share in capital costs in the manufacturing and other indirect manufacturing costs based on a forecasted assumption on the capacity utilisation in the factory. Finished goods are normally valued at the delivery value (i.e. at cost) from the factory if the delivery is forthcoming. Spare parts that can be in the inventory during longer periods of time are normally valued at net realisable value.
Joint ventures are consolidated according to the proportional consolidation method in IAS 31 "Interests in Joint Ventures".
Leasing is accounted for in accordance with IAS 17 "Leases".
When Alfa Laval is the lessor, leased assets that are regarded as financial leases are accounted for as a financial receivable from the lessee in the statement on financial position. The leasing fee received from the lessee is accounted for as financial income calculated as interest on the outstanding receivable and as amortisation of the receivable.
When Alfa Laval is the lessee, leased assets that are regarded as financial leases are accounted for as capitalised assets and a corresponding financial payable to the lessor in the statement on financial position. The leasing fee to the lessor is accounted for as financial cost calculated as interest on the outstanding payable and as amortisation of the payable. Depreciation according to plan is done in the same manner as purchased assets.
Leased assets regarded as operational
leases are not capitalised. The leasing fees are expensed as incurred.
Revenue for projects is recognised using the percentage of completion method in IAS 11 "Construction Contracts". This means that when the outcome of a construction project can be calculated reliably, the revenue and the costs related to the project are recognised in relation of the percentage of completion at the closing date. An estimated loss is recognised immediately. The percentage of completion for a construction project is normally established through the relationship between incurred project costs for work performed at the closing date and the estimated total project costs.
Disclosures shall be made for:
The amount of recognised project sales revenue is the amount recognised in consolidated comprehensive income as a reflection of the percentage of completion of the projects. It has nothing to do with the volume of progress billing in the period. This figure shows how much of the net invoicing of the Group that originates from project sales.
The aggregated amount of costs incurred and recognised profits less recognised losses shows the total volume of work performed on ongoing projects at the closing date. It has nothing to do with the recognised costs in the consolidated comprehensive income statement.
Retentions are amounts of progress billing that are not paid according to the contract until conditions specified in the contract have been satisfied or until defects have been rectified. This has a negative effect on the profitability of the project. Progress billing is amounts billed for work performed on a project whether or not they have been paid by the customer.
The gross amount due from customers for work in progress on plant projects is the net amount of:
for each project in progress where the net of the first three items is higher than item 4. The figure shows how much progress billing is lacking behind the work performed. Advances are amounts received from the customer before the related work is performed and are usually very important for the overall profitability of the project.
The gross amount due to customers for work in progress on plant projects is the net amount of:
for each project in progress where the net of the first three items is smaller than item 4. The figure shows how much progress billing is ahead of the work performed.
Assets have been accounted for at cost, net after deduction of accumulated depreciation according to plan. Depreciation according to plan is based on the assets' acquisition values and is calculated according to the estimated useful life of the assets.
| Tangible: | |
|---|---|
| Computer programs, computers | 3.3 years |
| Office equipment | 4 years |
| Vehicles | 5 years |
| Machinery and equipment | 7–14 years |
| Land improvements | 20 years |
| Buildings | 25–33 years |
| Intangible: | |
| Patents and unpatented | |
| know-how | 10–20 years |
| Trademarks | 10–20 years |
| Licenses, renting rights and similar rights |
10–20 years |
| Goodwill, strategic | |
| Not amortised after January 1, 2004 | 20 years |
| Goodwill, other | |
| Not amortised after January 1, 2004 | 10 years |
Any additions to the purchase price in connection with investments in non-current assets or acquisitions of businesses are amortised over the same period as the original purchase price. This means that the time when the asset is fully depreciated is identical regardless of when payments are made. This is a reflection of the fact that the estimated useful life of the asset is the same.
Upon sale or scrapping of assets, the results are calculated in relation to the net book value after depreciation according to plan. The result on sales is included in operating income.
When there are indications that the value of a tangible asset or an intangible asset with a definite useful life has decreased, there is a valuation made if it must be written down according to IAS 36 "Impairment of Assets". If the reported value is higher than the recoverable amount, a write down is made
that burdens net income. When assets are up for sale, for instance items of real estate, a clear indication of the recoverable amount is received that can trigger a write down.
Goodwill and intangible assets with indefinite useful life are not amortised. These assets are instead tested for impairment both annually and when there is an indication. The impairment test is made according to IAS 36 "Impairment on assets".
The recoverable amount for goodwill and intangible assets with indefinite useful life is determined from the value in use based on discounted future cash flows. For other assets the recoverable amount is determined from the fair value less costs to sell based on an observable market price.
For the impairment testing of goodwill, three of Alfa Laval's operating segments, the divisions "Equipment", "Process Technology" and "Marine & Diesel" have been identified as the cash-generating units within Alfa Laval. Technically a recently acquired business activity could be followed independently during an initial period, but acquired businesses tend to be integrated into the divisions at a fast rate. This means that the independent traceability is lost fairly soon and then any independent measurement and testing becomes impracticable. The net present value is based on the projected EBITDA figures for the next twenty years, less projected investments and changes in operating capital during the same period. The used discount rate is the pre-tax weighted average cost of capital (WACC). The growth rate for the divisions during the period is the perceived expected average industry growth rate. No terminal value has been calculated since this would render a very large and uncertain value, which could give an erroneous impression that no impairment exists.
The Group is applying IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations". IFRS 5 specifies the accounting for assets held for sale and the disclosures to be made for discontinued operations.
Assets held for sale are to be measured at the lower of the carrying amount and fair value, less sales costs. No depreciation of such assets is made. An asset held for sale is an asset whose carrying amount will be recovered basically through a sale rather than through continuing use. It must be available for immediate sale in its current condition. The sale must be highly probable, that is a decision must have been made and an active sales effort must have been initiated. The sale must be expected to be finalised within one year. Non-current assets are reclassified to current assets and presented separately in the statement on financial position.
IAS 1 "Presentation of Financial Statements"
paragraphs 124 A-C contain disclosure requirements on the company's objectives, policies and processes for managing capital. This information is disclosed in a separate section after the description of the accounting principles.
Other operating income relates to for instance commission, royalty and license income. Other operating costs refer mainly to restructuring costs and to royalty costs.
Comparison distortion items that affect the operating income are reported in other operating income and other operating costs.
The Group is applying IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" for the reporting of provisions, contingent liabilities and contingent assets. A provision is recognised when and only when:
The amount recognised as a provision is the best estimate of the cost required to settle the present obligation at the closing date. In measuring the provision:
If a reimbursement of some or all of the costs to settle a provision is expected (e.g. through insurance contracts, indemnity clauses or supplier's warranties), the reimbursement is recognised:
Provisions are reviewed at each closing date and adjusted to reflect the current best estimate. If it is no longer probable that a payment to settle the obligation will be incurred, the provision is reversed.
A provision must only be used for the purpose it was originally recognised for. Provisions are not recognised for future operating losses. An expectation of future operating losses is though an indication that certain assets of the operation may be impaired. If a contract is onerous, the present obligation under the contract is recognised and measured as a provision, once the assets used in order to finalize the contract have been tested for impairment.
A provision for restructuring costs is recognised only when the general recognition criteria are met. A constructive obligation to restructure arises only when there is:
A management or board decision to restructure does not give rise to a constructive obligation at the closing date unless the company has, before the closing date:
When a restructuring involves the sale of an operation, no obligation arises for the sale until the company is committed to the sale, i.e. through a binding sales agreement.
A restructuring provision only includes the direct costs arising from the restructuring, which are those that are both:
Research costs are charged to the result in the year in which they are incurred. Development costs are charged to the result in the year in which they are incurred provided that they do not fulfil the conditions for instead being capitalised according to IAS 38 "Intangible Assets".
Revenue recognition is made according to IAS 18 "Revenue" and IAS 11 "Construction Contracts".
Revenues from sale of goods, services and projects are reported as "Net sales" in the statement of consolidated comprehensive income.
Revenue from sale of goods is recognised when all of the following conditions have been fulfilled:
The revenue recognition is usually governed by the delivery terms used in the sale. Net sales are referring to sales value less sales taxes, cancellations and discounts.
To the extent that Alfa Laval also delivers services the three last conditions above apply together with:
– the stage of completion at the closing date can be measured reliably.
Revenue for projects is recognised using the percentage of completion method in IAS 11 "Construction Contracts", see above under "Long-term construction projects".
IFRS 8 means that the reporting of operating segments must be made according to how the chief operating decision maker monitors the operations, which may deviate from IFRS. Furthermore information according to IFRS for the company as a whole must be given about products and services as well as geographical areas and information about major customers.
The difference between the operating income for the operating segments and the operating income according to IFRS for the company as a whole is explained by two reconciliation items.
Alfa Laval's operating segments are the divisions. The chief operating decision maker within Alfa Laval is its Board of Directors.
Receivables and liabilities denominated in
foreign currencies have been valued at year-end rates of exchange.
Within the Group, exchange gains and losses on loans denominated in foreign currencies that finance acquisitions of foreign subsidiaries are transferred to other comprehensive income as foreign currency translation adjustments if the loans act as a hedge to the acquired net assets. There they offset the translation adjustments resulting from the consolidation of the foreign subsidiaries. In the parent company, these exchange differences are reported above net income.
IAS 21 "The Effects of Changes in Foreign Exchange Rates" covers among other things the existence of functional currencies. Almost all of Alfa Laval's subsidiaries are affected by changes in foreign exchange rates for their procurement within the Group. They do however usually sell in their local currency and they have more or less all of their nonproduct related costs and their personnel related costs in their local currency. This means that none of Alfa Laval's subsidiaries qualify for the use of another functional currency than the local currency, with the following exception. Subsidiaries in highly inflationary countries report their closings in the functional hard currency that is valid in each country, which in all cases is USD. During 2012 Turkey and Venezuela are regarded as highly inflationary countries.
In the consolidation, the foreign subsidiaries have been translated using the current method. This means that assets and liabilities are translated at closing exchange rates and income and expenses are translated at the year's average exchange rate. The translation difference that arises is a result of the fact that net assets in foreign companies are translated at one rate at the beginning of the year and another at year-end and that the result is translated at average rate. The translation differences are part of other comprehensive income.
International Accounting Standards Board (IASB) has issued the following new or revised accounting pronouncements, which may be applicable on Alfa Laval and are effective for fiscal years beginning on or after January 1, 2013. Alfa Laval has chosen not to make any early adoption of any of these pronouncements.
IFRS 7 "Financial Instruments: Disclosures" has been amended. Disclosures must be made of financial assets and financial liabilities that have been netted in the report of financial position or that can be netted according to an agreement. The amendment to IFRS 7 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2013. The revised standard must be applied retroactively in accordance with IAS 8.
Alfa Laval's assessment is that the amendments to IFRS 7 will have limited impact on the financial statements of Alfa Laval and the disclosures in them.
IFRS 9 "Financial Instruments: Recognition and Measurement" is the first step of a complete revision of the current standard IAS 39. The standard means a reduction of the number of valuation categories for financial assets and contains the main categories reported at cost (amortised cost) and fair value through profit or loss. This first part of the standard will be complimented by rules on impairments, hedge accounting and valuation of liabilities. Any decision on when the final standard is going to be implemented does not exist. The European Union has not adopted any part for application.
Alfa Laval's assessment is that IFRS 9 will mean a reallocation of the financial assets on fewer categories, but otherwise will have limited impact on the financial statements of Alfa Laval and the disclosures in them.
IFRS 10 "Consolidated financial statements" replaces the part of IAS 27 "Consolidated and separate financial statements" that covers consolidation principles. What remains in IAS 27 going forward is the treatment of subsidiaries, joint ventures and associates in separate financial statements.
The consolidation principles have not been changed. The change is rather related to how an entity shall proceed to decide if a decisive influence is present and thus if an entity shall be consolidated. Control (decisive influence) is present when the investor has:
An investor is a party that has a potential influence over an entity. A decisive influence does not need to arise purely through ownership of shares (voting rights). An investor can have a decisive influence over another entity without holding the majority of the shares. An entity must be consolidated until the day the control ceases, even if the control is present only during a limited period.
IFRS 10 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2014. The standard must be applied retroactively in accordance with IAS 8, with certain modifications, that includes exceptions from consolidation where this is impracticable. Early application is allowed if the company also makes an early application
of IFRS 11 and IFRS 12 and the changes in IAS 27 and IAS 28.
Alfa Laval's assessment is that IFRS 10 will have limited impact on the financial statements of Alfa Laval and the disclosures in them, since Alfa Laval seldom is facing uncertainties on whether a decisive influence is present or not.
IFRS 11 "Joint arrangements" covers the accounting for joint arrangements, which is defined as a contractual arrangement where two or more parties have a joint decisive influence. IFRS 11 replaces IAS 31 "Interests in Joint Ventures" and SIC 13 "Jointly Controlled Entities – Non-Monetary Contributions by Ventures".
It is crucial to be able to judge whether a party has control over another party, that is decisive influence or if it rather is a substantial or common influence. If it is the latter, then it is a so called joint arrangement, which could be either:
Jointly owned assets and joint activities are called joint operations. Each owner or party accounts for his share of assets, liabilities, revenues and costs.
Joint ventures are no longer allowed to be consolidated according to the proportional consolidation method, but instead the equity method must be used. This means that the interest is accounted for on one line in the consolidated statement of financial position and that the share of the result is accounted for on one line in the consolidated statement of comprehensive income.
IFRS 11 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2014. The standard must be applied retroactively with certain transitional provisions. Early application is allowed if the company also makes an early application of IFRS 10 and IFRS 12 and the changes in IAS 27 and IAS 28.
Since the proportional consolidation method disappears Alfa Laval's assessment is that IFRS 11 will lead to that all amounts in note 33 "Interests in joint ventures" will disappear out of Alfa Laval's statements over consolidated comprehensive income and consolidated financial position. Instead the application of the equity method will mean that the net income before tax in the joint ventures will be booked into one line in other operating income and the corresponding tax on the tax line. The counter entry will be an increase or decrease of the value of shares in joint ventures. Alfa Laval is of the opinion that the deletion of the proportional consolidation method means a clear deterioration of accounting practice compared to before since the sales volume and other result items and the balance
items in the joint ventures no longer will be reported in the statements over consolidated comprehensive income and consolidated financial position in any the two owner companies. This does not give a correct representation of the operations, especially if the operations in the joint ventures are substantial. In such cases IFRS 11 might trigger changes in how the operations are organized in the joint ventures instead of just supplying accounting rules for reporting of the operations. In the case of Alfa Laval, the operations in these companies are however presently fairly limited, why IFRS 11 at least initially will have limited impact on the financial statements of Alfa Laval and the disclosures in them.
IFRS 12 "Disclosures of interest in other entities". Entities having interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities must disclose information about these in accordance with IFRS 12. The purpose with these disclosures is to enable the users of the financial reports to understand:
Substantial qualitative and quantitative disclosures must be made of each interest. The disclosure requirements include the following:
IFRS 12 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2014. The standard must be applied retroactively in accordance with IAS 8. Early application is allowed even if IFRS 10 and IFRS 11 and the changes in IAS 27 and IAS 28 are not applied early. Entities are encouraged to voluntarily provide certain information even if the entire standard is not applied early.
Alfa Laval's assessment is that IFRS 12 will result in a substantial increase of the amount of disclosures in the financial statements of Alfa Laval, which will further burden the presentation without corresponding benefit for the reader.
IFRS 13 "Fair Value Measurement" describes how a fair value is established when such value is to be or may be used in accordance with each IFRS standard. In accordance with IFRS a fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).
The standard presents elucidations on the fair value concept including the following areas:
New disclosures must be made to explain what valuation models that are used and what information that is used in these models and which effects the valuation has caused in the result.
IFRS 13 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2013. The standard must be applied prospectively. Early application is allowed.
Alfa Laval's assessment is that IFRS 13 will result in a substantial increase of the amount of disclosures in the financial statements of Alfa Laval, which will further burden the presentation without corresponding benefit for the reader.
IAS 1 "Presentation of Financial Statements" has been changed. The change means that the grouping of transaction reported in other comprehensive income is changed. The items that are recycled over the income statement are to be reported separately from the items that are not recycled over the income statement. The proposal does not change the actual content of other comprehensive income but only the format.
IAS 1 has been adopted by the European Union and becomes effective for financial years beginning on or after July 1, 2012. The changes must be applied retroactively in accordance with IAS 8. Early application is allowed.
Apart from the regrouping in other comprehensive income Alfa Laval's assessment is that the amendments to IAS 1 will have limited impact on the financial statements of Alfa Laval and the disclosures in them.
IAS 19 "Employee Benefits" has been changed. The changes mean substantial changes concerning the accounting for defined benefit pension schemes, for example:
IAS 19 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2013. The revised standard must be applied retroactively in accordance with IAS 8. Early application is allowed.
The consequences of the changes to IAS 19 are complex to calculate without new actuarial calculations, which are not present yet. Alfa Laval's assessment is though that the changes primarily will result in:
– The present value of the defined benefit
obligations will be fully booked in the statement of financial position, with a magnitude approximately corresponding to the unrecognised actuarial losses of SEK 1,038 million as per the end of 2011.
IAS 32 "Financial Instruments: Presentation" has been amended. The amendment contains clarifications on the legal right to net and items settled with a net amount.
IAS 32 has been adopted by the European Union and becomes effective for financial years beginning on or after January 1, 2014. The standard must be applied retroactively in accordance with IAS 8. Early application is allowed if disclosures are made on netting according to the amendment to IFRS 7.
Alfa Laval's assessment is that the amendments to IAS 32 will have limited impact on the financial statements of Alfa Laval and the disclosures in them.
The Swedish Financial Reporting Board has issued an opinion UFR 9 "Redovisning av avkastningsskatt" on how the Swedish tax on returns from pension funds is to be treated in light of the changes to IAS 19. The tax on returns from pension funds is to be reported currently as a cost in the profit and loss and must not be included in the actuarial calculation for defined benefit pension plans.
UFR 9 is to be applied at the same time as the changes in IAS 19, that is for financial years beginning on or after January 1, 2013.
Alfa Laval's assessment is that UFR 9 does not mean any change compared to how the Swedish tax on returns from pension funds is accounted for today. It is rather a clarification in order to establish that the tax should not be included in the actuarial calculations.
Otherwise Alfa Laval will further evaluate the effects of the application of the new or revised accounting standards before each time of application.
Alfa Laval defines its managed capital as the sum of consolidated net debt and equity including the part that is attributable to non-controlling interests. At the end of 2012 the managed capital was SEK 19,657 (18,408) million.
The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern and provide an adequate return for shareholders and benefits for other stakeholders.
When managing the capital the Group monitors several measures including:
| MEASURE | ||||||||
|---|---|---|---|---|---|---|---|---|
| Target | Target | Outcome | Average over last | |||||
| Goal | standard | not set | 2012 | 2011 | 3 years | 5 years | 8 years | |
| Invoicing growth per year * | ≥8% | 4.1% | 15.9% | 4.8% | 4.0% | 12.4% | ||
| Adjusted EBITA margin * | 15% | 16.5% | 18.5% | 18.0% | 18.7% | 17.5% | ||
| Return on capital employed | ≥25% | 26.1% | 31.3% | 31.6% | 36.4% | 36.9% | ||
| Debt ratio | <0.75 | 0.28 | 0.22 | 0.15 | 0.14 | 0.20 | ||
| Cash flow from operating activities including investments in fixed assets ** |
10% | 10.2% | 10.0% | 11.7% | 13.1% | 12.0% | ||
| Investments ** | 2.0% | 1.8% | 1.9% | 1.8% | 2.0% | 2.0% | ||
| Return on equity | X | 21.6% | 22.9% | 23.0% | 27.2% | 27.7% | ||
| Solidity | X | 43.9% | 43.9% | 45.9% | 44.1% | 40.9% | ||
| Net debt to EBITDA | X | 0.8 | 0.6 | 0.4 | 0.3 | 0.5 | ||
| Interest coverage ratio | X | 23.1 | 28.6 | 29.2 | 25.8 | 21.8 |
* average over a business cycle ** in % of sales
These measures are connected to each other as communicating vessels. This means that if actions are taken that primarily aim at a certain measure they will also have an impact on other measures to a varying degree. It is therefore important to consider the whole picture.
In the longer term the debt ratio should be less than 0.75. As a result of major acquisitions the ratio may temporarily exceed 0.75, but the ratio is then expected to soon decrease beneath 0.75 due to positive cash flows and results from the acquired activity.
During 2012 Alfa Laval has changed the target standard for investments from 2.5 percent of sales to 2.0 percent.
In order to maintain a good capital structure the Group may for instance raise new loans or amortise on existing loans, adjust the amount of dividends paid to shareholders, return capital to shareholders, repurchase own shares, issue new shares or sell assets.
As examples on the Group's active work with managing its capital the following can be mentioned:
– The bilateral term loan with Swedish Export Credit from June 2011.
The repurchases of shares should be viewed in light of that the consolidated cash flows from operations are large enough to finance the build up of working capital and the mid-size acquisitions of businesses that have been made as well as the dividend to the shareholders.
Financial risks are referring to financial instruments. Alfa Laval has the following instruments: cash and bank, deposits, trade receivables, bank loans, trade payables and a limited number of derivative instruments to hedge primarily currency rates or interests, but also the price of metals and electricity. These include currency forward contracts, currency options, interest-rate swaps, metal forward contracts and electricity futures. See Notes 13 and 14 for more information on these financial instruments.
In order to control and limit the financial risks, the Board of the Group has established a financial policy. The Group has an aversive attitude toward financial risks. This is expressed in the policy. It establishes the distribution of responsibility between the local companies and the central finance function in Alfa Laval Treasury International, what financial risks the Group can accept and how the risks should be limited.
There are three different types of price risks: currency risk, interest risk and market risk. See below.
Due to the Alfa Laval Group's international business activities and geographical spread the Group is exposed to currency risks. The exchange rate movements in the major currencies for the Group during the last years are presented below (SEK/foreign currency):
Currency risk is divided into transaction exposure that relates to exchange rate fluctuations that affects the currency flows that arise due to the business activities and translation exposure that relates to the translation of the subsidiaries' statements on financial position from local currency to SEK.
During 2012 Alfa Laval's sales to countries outside Sweden amounted to 97.1 (96.7) (96.6) percent of total sales.
Alfa Laval's local sales companies normally sell in domestic currency to local end customers and have their local cost base in local currency. Exports from production and logistical centres to other Group companies are invoiced in the exporting companies' domestic currencies, except for Sweden, Denmark and UK where the exports are denominated in EUR.
The Group is principally exposed to currency risk from potential changes in contracted and projected flows of payments and receipts. The objective of foreign exchange risk management is to reduce the impact of foreign exchange movements on the Group's income and financial position.
The Group normally has natural risk coverage through sales as well as costs in local currencies. The financial policy states that the local companies are responsible for identifying and hedging exchange rate exposures on all commercial flows via Alfa Laval Treasury International. Contract based exposures must be fully hedged. In addition, the balance of projected flows the next 12 months must be hedged to at least 50 percent. The remaining part of the projected flows can be partially hedged after conferring with the Group's central finance function. Alfa Laval Treasury International can add to or reduce the total hedging initiated by the local companies in the currencies that Alfa
Laval has commercial exposure up to but not exceeding 100 percent of one year's commercial exposure for each currency.
The Group's net transaction exposure at December 31, 2012 in different currencies before and after derivatives for the coming 12 months amounts to:
This is a reflection of the fact that a substantial part of the production within the Group is located in Sweden and Denmark with costs denominated in local currencies.
Currency contracts for projected flows are entered into continuously during the year with 12 months maximum duration. For contract based exposures the derivatives follow the duration of the underlying contract. This means that the company experiences the effects from the market currency rate movements with a varying degree of delay.
If the currency rates between SEK and the most important foreign currencies are changed by +/- 10 % it has the following effect on operating income, if no hedging measures are taken:
EFFECT ON OPERATING INCOME BY EXCHANGE RATE FLUCTUATIONS EXCLUDING HEDGING MEASURES
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 | |||
| Exchange rate change against SEK | + 10% | - 10% | + 10% | - 10% | + 10% | - 10% |
| USD | 245 | -245 | 225 | -225 | 167 | -167 |
| EUR | 72 | -72 | 99 | -99 | 165 | -165 |
| CAD | 47 | -47 | 30 | -30 | 24 | -24 |
| NOK | 31 | -31 | 28 | -28 | 24 | -24 |
| DKK | -98 | 98 | -102 | 102 | -101 | 101 |
| JPY | -14 | 14 | -15 | 15 | -22 | 22 |
| Other | 41 | -41 | 34 | -34 | 29 | -29 |
| Total | 324 | -324 | 299 | -299 | 286 | -286 |
Outstanding currency forward contracts and currency options for the Group amounted to the following at the end of the year:
OUTSTANDING CURRENCY FORWARD CONTRACTS AND CURRENCY OPTIONS
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| Millions | 2012 | 2011 | 2010 | ||||
| Original | Original | Original | |||||
| currency | SEK | currency | SEK | currency | SEK | ||
| Outflows: | |||||||
| USD | -577 | -3,750 | -593 | -4,093 | -405 | -2,754 | |
| EUR | -134 | -1,157 | -175 | -1,566 | -257 | -2,316 | |
| KRW | -93,436 | -567 | -80,469 | -480 | -73,831 | -441 | |
| AUD | – | – | -13 | -91 | -29 | -203 | |
| CAD | -50 | -329 | -19 | -128 | -26 | -176 | |
| JPY | – | – | – | – | -596 | -50 | |
| BRL | -2 | -6 | -3 | -12 | -11 | -43 | |
| RUB | -117 | -25 | – | – | – | – | |
| Other | -19 | -46 | -79 | ||||
| Total | -5,853 | -6,416 | -6,062 | ||||
| Inflows: | |||||||
| SEK | 5,480 | 5,480 | 5,751 | 5,751 | 6,243 | 6,243 | |
| DKK | 84 | 96 | 328 | 394 | 284 | 343 | |
| NOK | 104 | 121 | 38 | 44 | 32 | 37 | |
| SGD | 4 | 24 | 5 | 27 | 3 | 16 | |
| GBP | 14 | 148 | 16 | 164 | 1 | 13 | |
| JPY | 1,892 | 142 | 1,263 | 113 | 0 | 0 | |
| AUD | 8 | 53 | – | – | – | – | |
| Other | 5 | 7 | 8 | ||||
| Total | 6,069 | 6,500 | 6,660 |
When the subsidiaries' statements of financial position in local currency are translated into SEK a translation difference arises that is due to the current year being translated at a different closing rate than last year and that the income statement is translated at the average rate during the year whereas the statement of financial position is translated at the closing rate at December 31. The translation differences are reported against other comprehensive income. The translation exposure consists of the risk that the translation difference represents in terms of impact on comprehensive income. The risk is largest for the currencies where the Group has the largest net assets and where the exchange rate movements against SEK are largest. The Group's net assets or liabilities for the major currencies are distributed as follows:
The translation differences are a central responsibility and are managed by distributing the loans on different currencies based on the net assets in each currency and through currency forward contracts. Loans taken in the same currency as there are net assets in the Group, decrease these net assets and thereby decrease the translation exposure.
These hedges of net investments in foreign operations work in the following way. Exchange gains and losses on loans denominated in foreign currencies that finance acquisitions of foreign subsidiaries are reported as a part of other comprehensive income if the loans act as a hedge to the acquired net assets. In other comprehensive income they offset the translation adjustments resulting from the consolidation of the foreign subsidiaries. In the Group, net exchange differences of SEK 214 (34) (99) million relating to debts in foreign currencies have been charged to other comprehensive income as hedges of net investments in foreign operations. The loans that hedge net investments in foreign operations are denominated in EUR and USD since these foreign currencies have the largest impact on the statement of financial position. Since the Group uses part of its cash flows to amortise the loans in order to improve the financial net, the extent of this hedge tends to decrease over time.
By interest risk is meant how changes in the interest level affect the financial net of the Group and how the value of financial instruments vary due to changes in market interest rates. The Group attempts to manage interest-rate risk by matching fixed interest periods of financial assets and liabilities and through the use of derivative financial instruments such as interest-rate swaps.
The financial policy states that the interest rate risk and duration are measured by each main currency. The minimum interest duration for the loans should be 10 months and the maximum interest duration should be 24 months according to the policy.
The senior credit facility and the bilateral term loans accrue interest at floating rate. The Group has chosen to hedge 36 (45) (60) percent of the loans to fixed interest rate, with a duration of 26.3 months. The average interest and currency duration including derivatives is 12.8 (19.2) months at the end of 2012.
Calculated on an overall increase of market rates by 100 basis points (1 percentage unit), the interest net of the Group would change according to the bar chart below.
INTEREST SENSITIVITY ANALYSIS VERSUS HEDGING % OF FLOATING RATES
The reason for the positive effect during 2010 is the size of cash, bank and current deposits relative to the un-hedged part of total debt. Due to the increased loans in 2011 and 2012 the effect becomes negative.
In total this means that the Group has a comparably low interest risk.
Market risk is defined as the risk for changes in the value of a financial instrument due to changed market prices. This applies only to financial instruments that are listed or otherwise traded, which for Alfa Laval concern bonds and other securities and other long-term securities totalling SEK 140 (118) million. The market risk for these is perceived as low. For other financial instruments, the price risk only consists of currency risk and interest risk.
Liquidity risk is defined as the risk that the Group would incur increased costs due to lack of liquid funds.
Refinancing risk is defined as the risk that the refinancing of maturing loans becomes difficult or costly. The loans of the Group are mainly long term and only mature when the agreed loan period expires. This means that the Group during the foreseeable future does not need to refinance maturing loans. Since the maturity of the loans is distributed over time the refinancing risk is reduced.
In 2006 Alfa Laval made a private placement in the U.S. The offer was over-subscribed and was closed at USD 110 million, corresponding to SEK 714 million. The loan matures in April 2016.
In connection with the acquisition of Tranter Alfa Laval signed a bilateral term loan with SHB of EUR 25 million, corresponding to SEK 215 million. The loan matures in December 2013.
Alfa Laval has a senior credit facility of EUR 301 million and USD 420 million, corresponding to SEK 5,324 million with a banking syndicate. At December 31, 2012 SEK 1,784 million of the facility was utilised. The facility matures in April 2016, with a one-year extension option.
Alfa Laval has a bilateral term loan from Swedish Export Credit split on one loan of EUR 100 million that matures in 2014 and one loan of EUR 100 million that matures in 2021, corresponding to SEK 1,723 million in total.
Alfa Laval also has a bilateral term loan from the European Investment Bank of EUR 130 million, corresponding to SEK 1,120 million. The loan matures in 2018.
In summary the maturity structure of the loans and the loan facilities is as follows:
Cash flow risk is defined as the risk that the size of future cash flows linked to financial instruments is fluctuating. This risk is mostly linked to changed interest and currency rates. To the extent that this is perceived as a problem, different derivative instruments are used to fix rates. See description of exposure and hedging measures under interest risk. See the maturity structure of financial derivatives above.
Financial instruments that potentially subject the Group to significant concentrations of credit risk consist principally of cash, deposits and derivatives.
The Group maintains cash and bank and short and long-term investments with various financial institutions approved by the Group. These financial institutions are located in major countries throughout the
world and the Group's policy is designed to limit exposures to any one institution. The risk for a counterpart not fulfilling its commitments is limited through the selection of financially solid counterparts and by limiting the engagement per counterpart. The Group performs periodic evaluations of the relative credit standing of those financial institutions that are considered in its investment strategy. The Group does not require collateral on these financial instruments.
The Group is exposed to credit risk in the event of non-performance by counterparts to derivative instruments. The Group limits this exposure by diversifying among counterparts with high credit ratings and by limiting the volume of transactions with each counter party.
In total it is the Group's opinion that the counterpart risks are limited and that there is no concentration of risk in these financial instruments.
The risk for bad debts is referring to the risk that the customer cannot pay for delivered goods due to financial difficulties. The Group sells to a large number of customers in countries all over the world. That some of these customers from time to time face payment problems or go bankrupt is unfortunately part of reality in an operation of Alfa Laval's magnitude. All customers except Tetra Laval represent less than 1 percent of net sales and thereby represent a limited risk. Alfa Laval regularly collects credit information on new customers and, if needed, on old customers. Earlier payment habits have an impact on the acceptance of new orders. On markets with political or financial risks, the Group strives to attain credit insurance solutions. Accounts receivable constitutes the single largest financial asset according to Note 13. With reference to the above description it is management's opinion that there is no material concentration of risk in this financial asset.
The amount of accounts receivable being overdue is an indication of the risk the company runs for ending up in a bad debt situation.
The Group's costs for bad debts and the overdues in percent of accounts receivable are presented in the following graph:
The risk for claims refers to the costs Alfa Laval would incur to rectify faults in products or systems and possible costs for penalties. Alfa Laval strives to minimize these costs through an ISO certified quality assurance. The major risks for claim costs appear in connection with new technical solutions and new applications. The risks are limited through extensive tests at the manufacturing site and at the customer site. The Group's net claim costs and their relation to net sales are found in the following graph:
This risk refers to the risk that some competitor develops a new technical solution that makes Alfa Laval's products technically obsolete and therefore difficult to sell. Alfa Laval addresses this risk by a deliberate investment in research and development aiming at being in the absolute frontline of technical development.
The Group operates in competitive markets. In order to address this competition the Group has for instance:
– worked with securing the availability of strategic metals and components in order to maintain the ability to deliver.
In an overall economic downturn the Group tends to be affected with a delay of six to twelve months depending on customer segment. The same applies with an economic upturn. The fact that the Group is operating on a large number of geographical markets and within a wide range of customer segments means a diversification that limits the effects of fluctuations in the business climate. Historically, fluctuations in the business climate have not generated decreases in orders received by more than 10 percent. The downturn in the business climate in 2009 and 2010 however meant a considerably larger decline in order intake. This was partly due to the fact that the decline happened abruptly from a very high level of demand that was the culmination of a long-lasting boom and that the price level in connection with this peak was inflated by substantial increases in raw material prices.
The Group depends on deliveries of stainless steel, carbon steel, copper and titanium etc. for the manufacture of products. The prices in some of these markets are volatile and the supply of titanium has occasionally been limited. There are a limited number of possible suppliers of titanium. The risk for severely increased prices or limited supply constitutes serious risks for the operations. The possibilities to pass on higher input prices to an end customer vary from time to time and between different markets depending on the competition. The Group is addressing this risk by securing long-term supply commitments and through fixed prices from the suppliers during six to twelve months. During periods of large price increases the customer price on titanium products has been linked to Alfa Laval's procurement costs for titanium. Primarily in the period 2006 to 2011 the Group has experienced large price fluctuations for many raw materials, but in particular for stainless steel, carbon steel, copper and titanium.
NICKEL
USD/ton
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000
The price volatility for the most important metals is presented below:
The Group uses metal futures to secure the price on strategic metals. The graph below shows how much of the purchases of nickel, copper and aluminium that have been hedged during 2012 and how much of the expected purchases during 2013 that were hedged at the end of 2012. The graph also presents to what extent the Group's costs for these purchases would be affected if the prices would double from the current levels.
0 2,000 4,000 6,000 8,000 10,000 12,000
COPPER
USD/ton
This risk relates to the costs that the Group may incur to reduce emissions according to new or stricter environmental legislation, to restore land at previously or currently owned industrial sites, to arrange more effective waste disposal, to obtain prolonged or new concessions etc. The Group has an ambition to be well within the boundaries that local legislation sets, which should reduce the risks. The operations of the Group are not considered to have a significant environmental impact. For more information on Alfa Laval's environmental impact, see the section on "Sustainability" on page 44.
Political risk is the risk that the authorities, in the countries where the Group is operating, by political decisions or administration make continued operations difficult, expensive or impossible for the Group. The Group is mainly operating in countries where the political risk is considered to be negligible or minor. The operations that are performed in countries where the political risk is deemed to be higher are not material.
This risk pertains to the costs the Group may incur in managing litigations, costs in connection with settlements and costs for imposed penalties. The Group is involved in a few litigations, mainly with customers. Any estimated loss risks are provided for.
ALUMINIUM
The Alfa Laval Group was as of December 31, 2012, named as a co-defendant in a total of 716 asbestos-related lawsuits with a total of approximately 802 plaintiffs. Alfa Laval strongly believes the claims against the Group are without merit and intends to vigorously contest each lawsuit.
Based on current information and Alfa Laval's understanding of these lawsuits, Alfa Laval continues to believe that these lawsuits will not have a material adverse effect on the Group's financial condition or results of operation.
This risk refers to the costs Alfa Laval may incur in connection with a product delivered by the Group breaking down and causing damages to life and property. The main risk in this context concerns high-speed separators, due to the large forces that are involved when the bowl in the separator spins with a very high number of revolutions. In a breakdown the damages can be extensive. Alfa Laval addresses these risks through extensive testing and an ISO certified quality assurance. The Group has product liability insurance. The number of damages is low and few damages have occurred historically.
These risks refer to the risk that single units or functions within the Group can be hit by business interruption due to:
Alfa Laval has a well developed dialog with the local unions, which reduces the risk for conflicts and strikes where Alfa Laval is directly involved. It is however more difficult to protect the company against conflicts in other parts of the labour market, for instance within transportation.
Alfa Laval is minimizing the following two risks through an active preventive work at each site in line with the developed global policies in each area under supervision of manufacturing management, the Group's Risk Management function, Real Estate Management, IT and HR.
Problems at major sub-suppliers are minimized by Alfa Laval trying to use several suppliers of input goods that when needed can cover up for a drop in production somewhere else. The wish for long term and competitive delivery agreements however puts restrictions on the level of flexibility that can be achieved. When there is a shortage the total supply may be too limited to allow exchangeability.
HPR stands for "Highly Protected Risk" and is the insurance industry's highest rating for risk quality. This rating is reserved for those commercial properties where the exposure for physical damages is reduced to a minimum considering building construction, operations and local conditions. HPR means that all physical risks in and around the facility are documented and that these are kept within certain limits. Alfa Laval's production facility in Lund in Sweden, which is the Group's largest and most important facility is HPR classified, as well as the production facilities in Richmond and Newburyport in the U.S. A number of other key production facilities are being evaluated and may eventually become HPR classified.
A HPR classification means that the facility has state of the art fire and machinery protection systems and that the responsible personnel has adequate security routines to make sure that these protection systems are maintained and in function. In addition, known possible sources of ignition are under strict control to prevent a fire from starting. For an HPR facility the risk for a physical damage is brought to a minimum, which minimises the risk for business interruption that could have extensive consequences for Alfa Laval and its customers. For other production facilities, not HPR-classified, the aim is also to reduce the risk for damage and business interruption to a minimum by keeping, among other things, ignition sources under strict control. Loss prevention visits are conducted according to a schedule based on size and importance for Alfa Laval.
These risks refer to the costs that Alfa Laval may incur due to an inadequate insurance coverage for property, business interruption, liability, transport, life and pensions. The Group strives to maintain an insurance coverage that keeps the risk level at an acceptable level for a Group of Alfa Laval's size and is still cost efficient. As a part in this Alfa Laval has an own captive. At the same time a continuous work is going on to minimise the risks in the operations through proactive measures.
This risk is referring to the limited freedom of action that can be imposed on the Group through restrictions connected to credit terms in loan agreements. The loan agreement with the banking syndicate does not contain any such restrictions.
Starting at January 1, 2012 a new business division Marine & Diesel has been added to Alfa Laval's two business divisions Equipment and Process Technology. It consists of the absolutely greater part of the acquired Aalborg Industries that is engaged in marine applications and the former business segment Marine & Diesel and the marine part of Parts & Service from the Equipment division. The residual part of Aalborg Industries is included in Process Technology.
This means that Alfa Laval's business is divided into three business divisions "Equipment", "Process Technology" and "Marine & Diesel" that sell to external customers and one division "Other" covering procurement, production and logistics as well as corporate overhead and non-core businesses. These four divisions constitute Alfa Laval's four operating segments.
The three business divisions (operating segments) are in turn split into a number of customer segments. The customers to the Equipment division purchase products whereas the customers to the Process Technology division purchase solutions for processing applications. The customers to the Marine & Diesel division purchase products and solutions for marine and off-shore applications and for diesel power plants. The Equipment division consists of
| ORDERS RECEIVED | |||
|---|---|---|---|
| Consolidated | |||
| SEK millions | 2012 | 2011 | 2010 |
| Equipment | 9,701 | 9,508 | 8,903 |
| Process Technology | 14,081 | 12,738 | 10,922 |
| Marine & Diesel | 6,557 | 6,423 | 4,042 |
| Other | 0 | 2 | 2 |
| Total | 30,339 | 28,671 | 23,869 |
| ORDER BACKLOG | |||
| Consolidated | |||
| SEK millions | 2012 | 2011 | 2010 |
| Equipment | 1,583 | 1,385 | 1,447 |
| Process Technology | 8,358 | 6,889 | 6,568 |
| Marine & Diesel | 4,527 | 5,462 | 3,537 |
| Other | 0 | 0 | 0 |
NET SALES
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Equipment | 9,476 | 9,447 | 8,629 |
| Process Technology | 12,812 | 12,160 | 10,625 |
| Marine & Diesel | 7,525 | 7,043 | 5,443 |
| Other | 0 | 2 | 23 |
| Total | 29,813 | 28,652 | 24,720 |
| Consolidated | Assets | Liabilities | ||
|---|---|---|---|---|
| SEK millions | 2012 | 2011 | 2012 | 2011 |
| Equipment | 5,804 | 6,018 | 986 | 1,063 |
| Process Technology | 10,608 | 9,500 | 4,304 | 4,167 |
| Marine & Diesel | 8,309 | 8,874 | 2,043 | 2,256 |
| Other | 5,395 | 5,178 | 2,188 | 2,284 |
| Subtotal | 30,116 | 29,570 | 9,521 | 9,770 |
| Corporate | 4,963 | 4,933 | 10,171 | 9,589 |
| Total | 35,079 | 34,503 | 19,692 | 19,359 |
Corporate refers to items in the statement on financial position that are interest bearing or are related to taxes.
| INVESTMENTS | |||
|---|---|---|---|
| Consolidated | |||
| SEK millions | 2012 | 2011 | 2010 |
| Equipment | 46 | 67 | 43 |
| Process Technology | 110 | 127 | 85 |
| Marine & Diesel | 38 | 44 | 32 |
| Other | 337 | 317 | 269 |
| Total | 531 | 555 | 429 |
| four customer segments: Industrial Equipment, OEM (Original Equipment |
|---|
| Manufacturers), Sanitary Equipment and the aftermarket segment Parts & |
| Service. The Process Technology division consists of four customer seg |
| ments: Energy & Environment, Food Technology, Process Industry and the |
| aftermarket segment Parts & Service. The Marine & Diesel division consists |
| of three customer segments: Marine & Diesel Equipment, Marine & Offshore |
| Systems and the aftermarket segment Parts & Service. |
The operating segments are only responsible for the result down to and including operating income excluding comparison distortion items and for the operating capital they are managing. This means that financial assets and liabilities, pension assets, provisions for pensions and similar commitments and current and deferred tax assets and liabilities are a Corporate responsibility and not an operating segment responsibility. This also means that the financial net and income taxes are a Corporate responsibility and not an operating segment responsibility.
The operating segments are only measured based on their transactions with external parties.
Consolidated SEK millions 2012 2011 2010 Equipment 1,389 1,278 2,087 Process Technology 2,194 2,506 2,140 Marine & Diesel 1,458 1,718 536 Other -541 -568 -405 Total 4,500 4,934 4,358 Reconciliation with Group total: Comparison distortion items -51 -170 90 Consolidation adjustments -77 -73 -47 Total operating income 4,372 4,691 4,401 Financial net 133 -15 -37 Result after financial items 4,505 4,676 4,364
Operating income in management accounts is very close to operating income under IFRS. There are only two differences. Operating income in management accounts does not include comparison distortion items nor all the consolidation adjustments that are made in the official accounts.
| Total | 934 | 875 | 796 |
|---|---|---|---|
| Other | 318 | 315 | 342 |
| Marine & Diesel | 224 | 196 | 93 |
| Process Technology | 230 | 208 | 197 |
| Equipment | 162 | 156 | 164 |
| SEK millions | 2012 | 2011 | 2010 |
| Consolidated | |||
| DEPRECIATION |
Countries with more than 10 percent of either of net sales, non-current assets or investments are reported separately.
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2010 | |||||
| SEK | SEK | SEK | |||||
| millions | % | millions | % | millions | % | ||
| To customers in: | |||||||
| Sweden | 856 | 2.9 | 942 | 3.3 | 849 | 3.4 | |
| Other EU | 7,911 | 26.5 | 7,634 | 26.5 | 6,879 | 27.8 | |
| Other Europe | 2,521 | 8.5 | 2,313 | 8.1 | 1,953 | 7.9 | |
| USA | 4,626 | 15.5 | 3,832 | 13.4 | 3,354 | 13.6 | |
| Other North | |||||||
| America | 921 | 3.1 | 788 | 2.8 | 757 | 3.1 | |
| Latin America | 1,950 | 6.5 | 1,981 | 6.9 | 1,531 | 6.2 | |
| Africa | 330 | 1.1 | 216 | 0.8 | 242 | 1.0 | |
| China | 3,298 | 11.1 | 3,772 | 13.2 | 3,144 | 12.7 | |
| Other Asia | 6,969 | 23.4 | 6,774 | 23.6 | 5,648 | 22.8 | |
| Oceania | 431 | 1.4 | 400 | 1.4 | 363 | 1.5 | |
| Total | 29,813 | 100.0 | 28,652 | 100.0 | 24,720 | 100.0 |
Net sales are reported by country on the basis of invoicing address, which is normally the same as the delivery address.
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | |||||
| SEK | SEK | |||||
| millions | % | millions | % | |||
| Sweden | 1,504 | 7.9 | 1,553 | 8.3 | ||
| Denmark | 4,385 | 23.1 | 4,672 | 25.1 | ||
| Other EU | 4,057 | 21.3 | 4,361 | 23.4 | ||
| Other Europe | 312 | 1.6 | 329 | 1.8 | ||
| USA | 3,631 | 19.1 | 2,251 | 12.1 | ||
| Other North America | 120 | 0.6 | 121 | 0.6 | ||
| Latin America | 429 | 2.3 | 500 | 2.7 | ||
| Africa | 1 | 0.0 | 1 | 0.0 | ||
| Asia | 2,890 | 15.2 | 3,096 | 16.6 | ||
| Oceania | 93 | 0.5 | 97 | 0.5 | ||
| Subtotal | 17,422 | 91.6 | 16,981 | 91.1 | ||
| Other long-term | ||||||
| securities | 9 | 0.0 | 25 | 0.1 | ||
| Pension assets | 383 | 2.0 | 346 | 1.9 | ||
| Deferred tax asset | 1,208 | 6.4 | 1,293 | 6.9 | ||
| Total | 19,022 | 100.0 | 18,645 | 100.0 |
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2010 | |||||
| SEK | SEK | SEK | |||||
| millions | % | millions | % | millions | % | ||
| Sweden | 66 | 12.4 | 99 | 17.8 | 54 | 12.6 | |
| Denmark | 41 | 7.7 | 21 | 3.7 | 53 | 12.4 | |
| Italy | 27 | 5.1 | 54 | 9.8 | 68 | 15.9 | |
| Other EU | 72 | 13.5 | 84 | 15.2 | 73 | 16.9 | |
| Other Europe | 13 | 2.5 | 10 | 1.8 | 25 | 5.8 | |
| North America | 38 | 7.1 | 46 | 8.3 | 39 | 9.0 | |
| Latin America | 22 | 4.1 | 18 | 3.2 | 7 | 1.6 | |
| Africa | 0 | 0.1 | 1 | 0.1 | 0 | 0.0 | |
| China | 113 | 21.3 | 98 | 17.6 | 37 | 8.6 | |
| India | 103 | 19.4 | 82 | 14.8 | 36 | 8.3 | |
| Other Asia | 33 | 6.3 | 40 | 7.4 | 34 | 8.2 | |
| Oceania | 3 | 0.5 | 2 | 0.3 | 3 | 0.7 | |
| Total | 531 | 100.0 | 555 | 100.0 | 429 | 100.0 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Own products within: | |||
| Separation | 6,646 | 6,345 | 6,043 |
| Heat transfer | 16,010 | 15,480 | 13,092 |
| Fluid handling | 3,046 | 3,006 | 2,700 |
| Other | 919 | 670 | 550 |
| Associated products | 1,828 | 1,881 | 1,144 |
| Services | 1,364 | 1,270 | 1,191 |
| Total | 29,813 | 28,652 | 24,720 |
The split of own products within separation, heat transfer and fluid handling is a reflection of the current three main technologies. Other is own products outside these main technologies. Associated products are mainly purchased products that compliment Alfa Laval's product offering. Services cover all sorts of service, service agreements etc.
Alfa Laval does not have any customer that accounts for 10 percent or more of net sales. Tetra Pak within the Tetra Laval Group is Alfa Laval's single largest customer with about 3 percent of net sales. See Note 32 for more information.
Consolidated
| Number of female | Total number of | |||||
|---|---|---|---|---|---|---|
| employees | employees | |||||
| 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |
| Parent company | – | – | – | – | – | – |
| Subsidiaries in | ||||||
| Sweden (9) | 497 | 466 | 439 | 2,158 | 2,138 | 2,042 |
| Total in Sweden (9) | 497 | 466 | 439 | 2,158 | 2,138 | 2,042 |
| Total abroad (144) | 2,511 | 2,344 | 1,913 | 13,902 | 12,529 | 10,036 |
| Total (153) | 3,008 | 2,810 | 2,352 | 16,060 | 14,667 | 12,078 |
The figures in brackets in the text column state how many companies had employees as well as salaries and remunerations in 2012.
| Total | 2,158 | 2,138 | 2,042 |
|---|---|---|---|
| Other * | 91 | 93 | 71 |
| Vänersborg | 139 | 137 | 129 |
| Stockholm | 9 | 12 | 12 |
| Ronneby | 261 | 264 | 245 |
| Lund | 1,006 | 1,002 | 958 |
| Eskilstuna | 212 | 203 | 199 |
| Botkyrka | 440 | 427 | 428 |
| 2012 | 2011 | 2010 | |
| Consolidated |
* "Other" refers to municipalities with less than 10 employees and also includes employees at branch offices abroad.
Consolidated
| Number of female employees | Total number of employees |
|||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |
| Argentina | 10 | 9 | 7 | 38 | 35 | 33 |
| Australia | 17 | 14 | 12 | 110 | 93 | 64 |
| Belgium | 2 | 2 | 3 | 28 | 35 | 43 |
| Brazil | 52 | 42 | 25 | 579 | 430 | 162 |
| Bulgaria | 11 | 10 | 9 | 40 | 41 | 40 |
| Chile | 8 | 8 | 8 | 38 | 32 | 29 |
| Colombia | 8 | 6 | 4 | 19 | 17 | 16 |
| Denmark | 412 | 377 | 301 | 1,715 | 1,515 | 1,127 |
| Philippines | 3 | 3 | 2 | 11 | 11 | 11 |
| Finland | 43 | 41 | 35 | 250 | 236 | 205 |
| France | 159 | 157 | 144 | 894 | 876 | 787 |
| United Arab Emirates | 19 | 16 | 12 | 175 | 146 | 98 |
| Greece | ||||||
| 6 | 8 | 8 | 20 | 22 | 23 | |
| Hong Kong | 8 | 8 | 6 | 22 | 27 | 27 |
| India | 71 | 64 | 56 | 1,462 | 1,420 | 1,402 |
| Indonesia | 17 | 15 | 11 | 73 | 66 | 60 |
| Iran | 2 | 3 | 3 | 9 | 14 | 14 |
| Italy | 142 | 137 | 113 | 843 | 843 | 644 |
| Japan | 57 | 55 | 38 | 282 | 262 | 211 |
| Canada | 17 | 17 | 18 | 86 | 83 | 81 |
| Kazakhstan | 2 | 2 | - | 6 | 8 | - |
| China | 548 | 521 | 367 | 2,831 | 2,353 | 1,435 |
| Korea | 66 | 52 | 42 | 355 | 328 | 299 |
| Latvia | 6 | 7 | 7 | 14 | 14 | 13 |
| Malaysia | 27 | 23 | 22 | 87 | 74 | 65 |
| Mexico | 15 | 16 | 12 | 60 | 58 | 55 |
| Netherlands | 51 | 48 | 36 | 297 | 247 | 187 |
| Norway | 7 | 7 | 8 | 38 | 40 | 42 |
| New Zeeland | 5 | 3 | 4 | 18 | 18 | 18 |
| Panama | 3 | 3 | – | 7 | 8 | 1 |
| Peru | 7 | 7 | 6 | 28 | 27 | 25 |
| Poland | 46 | 44 | 36 | 229 | 231 | 195 |
| Portugal | 4 | 4 | 5 | 12 | 12 | 12 |
| Qatar | – | – | – | 8 | 4 | – |
| Romania | 5 | 5 | 5 | 13 | 14 | 15 |
| Russia | 116 | 112 | 101 | 333 | 315 | 279 |
| Switzerland | 4 | 5 | 5 | 15 | 17 | 18 |
| Singapore | 43 | 36 | 28 | 154 | 121 | 70 |
| Slovakia | 2 | 2 | 2 | 10 | 10 | 11 |
| Spain | 20 | 22 | 21 | 81 | 85 | 82 |
| UK | 48 | 41 | 38 | 312 | 281 | 281 |
| Sweden | 497 | 466 | 439 | 2,158 | 2,138 | 2,042 |
| South Africa | 4 | 6 | 8 | 36 | 36 | 38 |
| Taiwan | 13 | 12 | 10 | 39 | 37 | 32 |
| Thailand | 11 | 17 | 20 | 67 | 64 | 57 |
| Czech Republic | 8 | 8 | 12 | 39 | 37 | 56 |
| Turkey | 7 | 7 | 7 | 41 | 37 | 36 |
| Germany | 75 | 75 | 66 | 385 | 351 | 328 |
| Ukraine | 9 | 7 | 6 | 20 | 18 | 18 |
| Hungary | 4 | 5 | 5 | 15 | 15 | 14 |
| USA | 247 | 220 | 207 | 1,438 | 1,329 | 1,238 |
| Venezuela | 3 | 3 | 6 | 7 | 8 | 13 |
| Vietnam | 36 | 25 | – | 188 | 102 | – |
| Austria | 5 | 7 | 6 | 25 | 26 | 26 |
| Total | 3,008 | 2,810 | 2,352 | 16,060 | 14,667 | 12,078 |
| 2012 | 2011 | 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Total | Male | Female | Total | Male | Female | Total | Male | Female | |
| number | % | % | number | % | % | number | % | % | |
| Board members (excluding deputies) | 11 | 72.7 | 27.3 | 11 | 72.7 | 27.3 | 11 | 72.7 | 27.3 |
| President and other executive officers | 11 | 90.9 | 9.1 | 11 | 90.9 | 9.1 | 10 | 90.0 | 10.0 |
| Managers in Sweden | 241 | 82.2 | 17.8 | 244 | 82.8 | 17.2 | 241 | 83.4 | 16.6 |
| Managers outside Sweden | 1,664 | 84.7 | 15.3 | 1,534 | 84.7 | 15.3 | 1,394 | 84.8 | 15.2 |
| Managers total | 1,905 | 84.4 | 15.6 | 1,778 | 84.4 | 15.6 | 1,635 | 84.6 | 15.4 |
| Employees in Sweden | 2,158 | 77.0 | 23.0 | 2,138 | 78.2 | 21.8 | 2,042 | 78.5 | 21.5 |
| Employees outside Sweden | 13,902 | 81.9 | 18.1 | 12,529 | 81.3 | 18.7 | 10,036 | 80.9 | 19.1 |
| Employees total | 16,060 | 81.3 | 18.7 | 14,667 | 80.8 | 19.2 | 12,078 | 80.5 | 19.5 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Board of Directors, Presidents and Vice | |||
| Presidents | 220 | 218 | 180 |
| - out of which, variable | 32 | 34 | 20 |
| Other | 5,186 | 4,874 | 4,232 |
| Total salaries and remunerations | 5,406 | 5,092 | 4,412 |
| Social security costs | 953 | 878 | 775 |
| Pension costs, defined benefit plans | 178 | 160 | 188 |
| Pension costs, defined contribution plans | 340 | 345 | 305 |
| Total costs of personnel | 6,877 | 6,475 | 5,680 |
The Group's pension costs and pension liabilities relating to the Board of Directors, presidents and vice presidents amounts to SEK 34 (38) (34) million and SEK 274 (270) (277) million respectively. SEK 134 (139) (147) million of the pension liabilities is covered by the Alfa Laval Pension Fund.
During the period 2010 to 2012 no equity related benefits existed within Alfa Laval.
All employees have either a fixed salary or a fixed base salary. For certain personnel categories the remuneration package also includes a variable element. This relates to personnel categorises where it is customary or part of a market offer to pay a variable part. Variable remunerations are most common in sales related jobs and on higher managerial positions. Normally the variable part constitutes a minor part of the total remuneration package.
The Annual General Meetings 2008 to 2010 decided to implement step one to three of a cash-based long term incentive programme. The Annual General Meetings 2011 and 2012 decided to implement step one and two of a modified cash-based long term incentive programme. The difference between the programmes is that the modified programme allows a higher outcome and a more centred range within which an award is made.
The long term incentive programme is targeting maximum 85 senior managers in the Group including the Chief Executive Officer and the persons defined as executive officers.
Each of the steps stretches over three years and the awards under each step are divided into three tranches (one for each year). The award under each tranche is set independently from the other two tranches. Since each step stretches over three years, three steps of the programmes will always run in parallel. In 2012 step three of the original programme and step one and two of the modified programme are running in parallel.
The final award for each step is calculated on the employee's yearly base salary at the end of the three year period. The maximum award is set to a to the following:
| Maximum long term incentive in percent of base salary |
||||
|---|---|---|---|---|
| Original | Modified | |||
| programme | programme | |||
| Maximum variable remuneration per |
||||
| year in percent of | In total over the | In total over the | ||
| base salary | three year period | three year period | ||
| 60% | 30% | 45% | ||
| 40% | 20% | 30% | ||
| 30% | 15% | 25% | ||
| 25% | 12.5% | 20% | ||
| 15% | 7.5% | 12% |
The outcome of the programme is linked to the development of earnings per share (EPS) for Alfa Laval. The EPS targets for the three tranches within each step are set by the Board of Directors. The modified programme opens up for setting more aggressive EPS targets.
For the original programme the award is calculated in the following way. For each percent up to maximum 20 percent that the EPS exceeds the target EPS, the employee gets 5 percent of one third of the maximum outcome per year.
For the modified programme the award is calculated in the following way. When the EPS is within the range of -10 percent to +10 percent of the target EPS the employee gets 5 percent of one third of the maximum outcome per year for each percent that the EPS exceeds the bottom level of 90 percent of the target EPS up to the maximum level of 110 percent of the target EPS.
To be eligible for payout the employees must be in service on the award date and the vesting date (except in case of termination of employment due to retirement, death or disability). If the employee resigns or is dismissed before the end of the three year period, the awards will lapse and the employee will not be entitled to any payout. If the employee moves to a position that is not eligible for this programme the tranches that already have been earned are paid out upon the change of position. Paid remunerations from the long term incentive programme do not affect the pensionable income or the holiday pay.
Based on the reported EPS during the period 2008 to 2012, the different steps have resulted in the following awards:
| Consolidated | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK millions, unless otherwise stated | Per year | Accumulated | ||||||||||||
| Decided by | Covering period | Actual outcome in % of maximum outcome | Payable in per cent of base |
Awards | ||||||||||
| Annual General |
salary based on 15% in variable |
|||||||||||||
| Plan | Step | Meeting | January 1 – December 31 | Payable in | 2012 | 2011 | 2010 | 2009 | 2008 | To date | remuneration | Paid Estimated | ||
| Original plan | ||||||||||||||
| One | 2008 | 2008 | 2010 | April 2011 | N/A | N/A | 11.00% | 0.00% 100.00% | 37.00% | 2.78% | 5 | N/A | ||
| Two | 2009 | 2009 | 2011 | April 2012 | N/A | 51.92% | 80.25% | 58.50% | N/A | 63.56% | 4.77% | 9 | N/A | |
| Three | 2010 | 2010 | 2012 | April 2013 | 100.00% 100.00% 100.00% | N/A | N/A 100.00% | 7.50% | N/A | 16 | ||||
| Modified plan | ||||||||||||||
| One | 2011 | 2011 | 2013 | April 2014 | 100.00% 100.00% | N/A | N/A | N/A 100.00% | 8.00% | N/A | 19 | |||
| Two | 2012 | 2012 | 2014 | April 2015 | 99.83% | N/A | N/A | N/A | N/A | 99.83% | 3.99% | N/A | 10 | |
| Awards per year | 25 | 17 | 9 | 3 | 5 | Total | 14 | 45 |
The costs for the awards per step and per year are based on estimated base salaries at the future time of payment.
The remunerations to the Chief Executive Officer/Managing Director and other members of Group Management are decided by the Board of Directors based on proposals from the Remuneration Committee according to the guidelines established by the Annual General Meeting. The principle used when deciding the remunerations to executive officers is that the remuneration package is mainly based on a fixed monthly salary, with an option for a company car and in addition to that a variable remuneration of up to 40 percent of the salary (managing director up to 60 percent of the salary). The size of the variable remuneration depends on the outcome of a number of financial measurements and the result of special projects, all compared with the objectives that have been established for the year.
The Annual General Meetings 2008 to 2010 decided to implement step one to three of a cash-based long term incentive programme for maximum 85 senior managers in the Group including the Chief Executive Officer and the persons defined as executive officers. The Annual General Meetings 2011 and 2012 decided to implement step one and two of a modified cash-based long term incentive programme. The Board of Directors will propose the Annual General Meeting 2013 to implement step three of this modified cash-based long term incentive programme for the period January 1, 2013 – December 31, 2015. No other changes of these guidelines are proposed by the Board of Directors.
The Chief Executive Officer and Managing Director Lars Renström receives a remuneration of SEK 16,007,287 (14,304,290) (10,070,445), out of which SEK 5,100,000 (4,477,500) (2,139,750) represent the variable part and SEK 1,632,002 (832,500) (-) the payment from the cash-based long term incentive programme. The variable part refers to what was paid during the year. The remuneration contains the value of company car, taxable daily allowances, holiday pay and payment for vacation taken in cash.
Lars Renström has a base salary of SEK 8,840,000 (8,500,000) (7,500,000) per annum. In his remuneration package there is a variable element with an un-guaranteed target of 30 (30) (30) percent of the base salary and with a maximum opportunity of 60 (60) (60) percent. He is covered by both the original and the modified cash based long term incentive programme and based on the estimated base salary at the future time of payment the award for 2012 was SEK 3,656,535 (2,669,300) (1,498,106). The vested unpaid awards at December 31, 2012 amounted to SEK 6,790,316. He does not have an agreement on early retirement. The ordinary ITP up to a salary of 30 base amounts is funded in order to achieve full ITP benefits at the age of 64. If Lars Renström continues his work in Alfa Laval after the age of 64 he will not receive any pension during the time he receives salary. On top of the ordinary ITP he has a defined contribution benefit comprising 50 percent of the base salary. If Alfa Laval terminates his employment before the age of 62 he will receive twenty four months' remuneration, between 62 and 63.5 he will receive twenty four months' remuneration reduced with the number of months that has passed since this 62nd birthday and from 63.5 he will receive 6 months' remuneration. If the employment contract is prolonged beyond the age of 64, the termination remuneration will never exceed the salary and benefits between the date of termination and his 65th birthday.
During the year, Alfa Laval has recorded costs for pension premiums for retirement and survivors' pension of SEK 5,681,143 (4,263,124) (4,787,174). In addition the company has incurred costs for life insurance, disability insurance and health care insurance of SEK 174,286 (430,559) (449,775).
The employment contract for Lars Renström is valid until 2015.
Other executive officers are the ten members of Group Management in addition to the Chief Executive Officer. Their remunerations were SEK 38 (32) (25) million, out of which the variable part was SEK 9 (7) (3) million and SEK 3 (1) (-) million the payment from the cash based long term incentive programme. The variable part refers to what was paid during the year. They are covered by both the original and the modified cash based long term
incentive programme and based on estimated base salaries at the future time of payment the award for 2012 was SEK 6 (4) (2) million. The vested unpaid awards at December 31, 2012 amounted to SEK 12 million. During 2012, Alfa Laval has recorded costs for pension premiums for retirement and survivors' pension of SEK 16 (18) (18) million for them. In addition the company has incurred costs for life insurance, disability insurance and health care insurance of SEK 1 (1) (1) million.
For these executive officers, early retirement has in some cases been committed from the age of 62. From 2006 a defined contribution solution for early retirement is offered with a premium of 15 percent of the pensionable salary. Early retirement is offered selectively and only after a specific decision in the Remuneration Committee. For salaries above 30 base amounts a defined contribution pension solution with a premium of 30 percent of the pensionable salary above 30 base amounts is offered since 2006. Until May 1, 2012 the executive officers also had a special family pension that represented a supplement between the old age pension and the family pension according to ITP. For the persons that were executive officers on May 1, 2012 the special family pension has been converted to a premium based supplementary retirement pension based on the premium level in December 2011. In addition, they may exchange salary and variable remunerations for a temporary old age and family pension.
Alfa Laval has made commitments for severance pay to a limited group of senior executives. The commitments are restricted to a maximum amount of two annual salaries. The commitments define the conditions that must be fulfilled in order for them to become valid.
For 2012, the Board of Directors receive a total fixed remuneration of SEK 4,275,000 (4,075,000) (3,485,000), which is distributed among the members elected at the Annual General Meeting that are not employed by the company. These Directors do not receive any variable remuneration.
| Consolidated |
|---|
| -------------- |
| SEK | 2012 | 2011 | 2010 | |
|---|---|---|---|---|
| Fees by function: | ||||
| Chairman of the Board | 1,150,000 | 1,100,000 | 900,000 | |
| Other members of the Board | 450,000 | 425,000 | 360,000 | |
| Supplement to: | ||||
| Chairman of the Audit Committee | 125,000 | 125,000 | 125,000 | |
| Other members of the Audit Committee | 75,000 | 75,000 | 75,000 | |
| Chairman of the remuneration committee | 50,000 | 50,000 | 50,000 | |
| Other members of the remuneration | ||||
| committee | 50,000 | 50,000 | 50,000 | |
| Fees by name: | ||||
| Anders Narvinger | Chairman | 1,200,000 | 1,150,000 | 1,025,000 |
| Gunilla Berg | Member | 525,000 | 500,000 | 435,000 |
| Arne Frank | Member | 450,000 | 425,000 | 360,000 |
| Björn Hägglund | Member | 500,000 | 475,000 | 410,000 |
| Ulla Litzén | Member | 525,000 | 500,000 | 360,000 |
| Finn Rausing | Member | 575,000 | 550,000 | 485,000 |
| Jörn Rausing | Member | 500,000 | 475,000 | 410,000 |
| Total | 4,275,000 | 4,075,000 | 3,485,000 |
* Elected at the Annual General Meeting and not employed by the company
The reported remunerations refer to the period between two Annual General Meetings.
The Chairman of the Board does not have any agreement on future retirement or severance pay with Alfa Laval.
| 2012 | 2011 | 2010 | |
|---|---|---|---|
| Audit Committee: | |||
| Chairman | Finn Rausing | Finn Rausing | Finn Rausing |
| Other member | Gunilla Berg | Gunilla Berg | Gunilla Berg |
| Other member | Ulla Litzén | Ulla Litzén | Anders Narvinger |
| Remuneration | |||
| committee: | |||
| Chairman | Anders Narvinger | Anders Narvinger | Anders Narvinger |
| Other member | Björn Hägglund | Björn Hägglund | Björn Hägglund |
| Other member | Jörn Rausing | Jörn Rausing | Jörn Rausing |
The members of the committees are appointed at the constituent meeting of the Board of Directors directly after the Annual General Meeting.
The Annual General Meeting 2012 decided to re-elect Ernst & Young as the Group's auditors for the coming year.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Audit engagements | |||
| Ernst & Young | 29 | 29 | 30 |
| Other audit firms | 1 | 1 | 1 |
| Total | 30 | 30 | 31 |
| Audit related services | |||
| Ernst & Young | 16 | 4 | 5 |
| Other audit firms | 3 | 5 | 2 |
| Total | 19 | 9 | 7 |
| Tax services | |||
| Ernst & Young | 3 | 4 | 3 |
| Other audit firms | 4 | 4 | 3 |
| Total | 7 | 8 | 6 |
| Other services | |||
| Ernst & Young | 1 | 1 | 2 |
| Other audit firms | 3 | 2 | 2 |
| Total | 4 | 3 | 4 |
| Expenses | |||
| Ernst & Young | 1 | 1 | 1 |
| Other audit firms | 0 | 0 | 0 |
| Total | 1 | 1 | 1 |
| Total | |||
| Ernst & Young | 50 | 39 | 41 |
| Other audit firms | 11 | 12 | 8 |
| Total | 61 | 51 | 49 |
An audit engagement includes examining the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. It also includes an examination in order to give an opinion on the Board's discharge from liability. Audit related services are audit services that are outside the audit engagement. Tax services refer to advices given in connection with various tax matters. All other assignments are defined as other services. Expenses refer to reimbursements of travel costs, secretarial services etc.
Comparison distortion items are reported gross in the consolidated comprehensive income statement as a part of other operating income and other operating costs.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Operational | |||
| Other operating income | 384 | 403 | 404 |
| Comparison distortion items | – | – | 90 |
| Total other operating income | 384 | 403 | 494 |
| Other operating costs | -897 | -706 | -779 |
| Comparison distortion items | -51 | -170 | – |
| Total other operating costs | -948 | -876 | -779 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Gain on: | |||
| Sale of real estate | – | – | 10 |
| Loss on: | |||
| Write down of goodwill | |||
| in Onnuri | -48 | – | – |
| Sale of real estate | -3 | – | – |
| Cost for: | |||
| Restructuring programme | – | -90 | 80 |
| Aalborg integration | – | -80 | – |
| Subtotal losses/costs | -51 | -170 | 80 |
| Net total | -51 | -170 | 90 |
The comparison distortion cost during 2012 of SEK -51 million relates to write down of the goodwill relating to the acquisition of Onnuri with SEK -48 million and a realised loss on sale of a property in Korea that has been used by Onnuri with SEK -3 million.
The comparison distortion costs during 2011 of SEK -170 million was related to structural costs for saving measures of SEK -90 million and non-recurring integration costs of SEK -80 million in connection with the acquisition of Aalborg Industries respectively. The saving measures were mainly relating to capacity adjustments and cost reductions in the manufacturing due to the demand for certain products as well as cost reductions in the sales companies primarily in Western Europe. The measures were expected to affect approximately 250 employees.
SEK 80 million of the comparison distortion income during 2010 related to reversal of unused parts of the provisions made in connection with the savings' measures that were initiated during 2009. Since the actual costs for the measures became SEK 80 million lower this amount was reversed. The remaining SEK 10 million related to realised gains on sale of properties in France and India.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Cost of goods sold | -782 | -709 | -623 |
| Sales | -37 | -38 | -46 |
| Administration | -68 | -72 | -72 |
| Research and development | -7 | -7 | -10 |
| Other income and costs | -40 | -49 | -45 |
| Total | -934 | -875 | -796 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Patents and unpatented | |||
| know-how, trademarks, etc. | -439 | -392 | -303 |
| Machinery and equipment | -384 | -379 | -405 |
| Financial leasing machinery | |||
| and equipment | -4 | -4 | -4 |
| Buildings and ground | |||
| installations | -100 | -93 | -78 |
| Financial leasing buildings | -7 | -7 | -6 |
| Total | -934 | -875 | -796 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Dividends from other | 2 | 1 | 2 |
| Fair value changes in securities | 6 | -1 | 0 |
| Total | 8 | 0 | 2 |
| SPLIT ON TYPE OF INCOME/EXPENSE OR GAIN/LOSS | ||||||
|---|---|---|---|---|---|---|
| Consolidated | ||||||
| SEK millions | 2012 | 2011 | 2010 | |||
| Interest income | ||||||
| Financial leasing | 0 | 0 | – | |||
| Other interest | 112 | 71 | 35 | |||
| Exchange rate gains | ||||||
| Unrealised | 122 | 37 | 168 | |||
| Realised | 267 | 328 | 124 | |||
| Total | 501 | 436 | 327 | |||
| Interest expenses | ||||||
| Financial leasing | 0 | 0 | -1 | |||
| Other interest | -246 | -201 | -146 | |||
| Exchange rate losses | ||||||
| Unrealised | -72 | -196 | -141 | |||
| Realised | -58 | -54 | -78 | |||
| Total | -376 | -451 | -366 |
| Parent company | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Interest income | |||
| External companies | 0 | 0 | 0 |
| Subsidiaries | 115 | 113 | 16 |
| Exchange rate gains | |||
| Unrealised | 3 | 2 | 1 |
| Total | 118 | 115 | 17 |
| Interest costs | |||
| External companies | 0 | – | – |
| Exchange rate losses | |||
| Unrealised | -4 | -2 | -4 |
| Realised | – | 0 | 0 |
| Total | -4 | -2 | -4 |
In the Group, reported net exchange differences of SEK 214 (34) (99) million relating to debts in foreign currencies have been charged to other comprehensive income. These debts finance the acquisition of shares in foreign subsidiaries and act as a hedge to the acquired net assets. The amount is charged with tax resulting in a net after tax impact on other comprehensive income of SEK 158 (25) (73) million.
Non-controlling interests relates to eleven subsidiaries in Brazil, China, France, Germany, India, Kazakhstan, Russia and Singapore with owners with non-controlling interests.
| Consolidated | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Loans and | Available for sale | |||||||||
| Financial assets at fair value through profit or loss: | receivables | financial assets | ||||||||
| Designated upon | Derivatives used | |||||||||
| initial recognition | Held for trading | for hedging | ||||||||
| SEK millions | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 |
| Non-current assets | ||||||||||
| Other non-current assets | ||||||||||
| Other long-term securities | – | – | – | – | – | – | – | – | 9 | 25 |
| Current assets | ||||||||||
| Current receivables | ||||||||||
| Accounts receivable | – | – | – | – | – | – | 5,211 | 5,080 | – | – |
| Notes receivable | – | – | – | – | – | – | 304 | 286 | – | – |
| Other receivables | – | – | – | – | – | – | 783 | 900 | – | – |
| Accrued income | – | – | – | – | – | – | 39 | 33 | – | – |
| Derivative assets | – | – | 88 | 120 | 237 | 183 | – | – | – | – |
| Current deposits | ||||||||||
| Deposits with banks | – | – | – | – | – | – | 283 | 304 | – | – |
| Bonds and other securities | 131 | 93 | – | – | – | – | – | – | – | – |
| Other deposits | – | – | – | – | – | – | 13 | 86 | – | – |
| Cash and bank | – | – | – | – | – | – | 1,404 | 1,564 | – | – |
| Total financial assets | 131 | 93 | 88 | 120 | 237 | 183 | 8,037 | 8,253 | 9 | 25 |
The Group does not have any financial assets that represent held-to-maturity investments.
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| Financial liabilities at fair value | Loans | |||||
| through profit or loss: | ||||||
| Derivatives used | ||||||
| Held for trading | for hedging | |||||
| SEK millions | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 |
| Non-current liabilities | ||||||
| Liabilities to credit institutions | – | – | – | – | 4,894 | 4,302 |
| Private placement | – | – | – | – | 714 | 758 |
| Current liabilities | ||||||
| Liabilities to credit institutions | – | – | – | – | 395 | 132 |
| Accounts payable | – | – | – | – | 2,198 | 2,529 |
| Notes payable | – | – | – | – | 135 | 139 |
| Other liabilities | – | – | – | – | 1,284 | 1,238 |
| Accrued costs | – | – | – | – | 1,700 | 1,702 |
| Derivative liabilities | 60 | 187 | 127 | 241 | – | – |
| Total financial liabilities | 60 | 187 | 127 | 241 11,320 10,800 |
The Group does not have any financial liabilities at fair value through profit and loss designated upon initial recognition.
All of the financial instruments above sum up either to the corresponding item in the statement on financial position or to the item specified in the notes referred to in the statement on financial position. The risks linked to these financial instruments including any concentrations of risk are presented in the sections on risks on pages 88–93.
The result of the financial assets designated upon recognition is found in Note 10 as fair value changes in securities.
The result of the financial assets held for trading of SEK 45 (4) (275) million has affected cost of goods sold with SEK 2 (1) (47) million and exchange gains in Note 11 with SEK 43 (3) (228) million.
The result of the assets under loans and receivables is presented in Note 11 as other interest income for deposits with banks, other deposits and cash and bank. The other assets under loans and receivables do not generate a result but only a cash-in of the principal amount.
The result of the available for sale financial assets is reported as part of other comprehensive income in the consolidated comprehensive income statement.
The result of the financial liabilities held for trading of SEK -13 (-95) (-23) million has affected cost of goods sold with SEK -1 (-48) (-10) million, exchange losses in Note 11 with SEK -12 (-46) (-11) million and interest costs in Note 11 with the remaining SEK - (-1) (-2) million.
The result of the liabilities under loans is presented in Note 11 as other interest costs for the liabilities to credit institutions and the private placement. The other liabilities under loans do not generate a result but only a cash-out of the principal amount.
The result of the derivative assets and liabilities used for hedging is reported as part of other comprehensive income in the consolidated comprehensive income statement.
The fair value changes in shares in external companies are made under other comprehensive income and amounts to SEK -0 (0) (0) million, see the comments to the consolidated comprehensive income statement.
The fair value changes in marketable securities are made on the line dividends and changes in fair value in the consolidated comprehensive income statement and amounts to SEK 6 (-1) (0) million, see Note 10.
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| Difference between contracted rate and |
||||||
| current rate | ||||||
| SEK millions | Currency pairs | 2011 | ||||
| Derivative assets/liabilities | ||||||
| Foreign exchange | ||||||
| forward contracts: | EUR | USD | 40 | -85 | ||
| EUR | SEK | 62 | 45 | |||
| EUR | AUD | 0 | -6 | |||
| EUR | CAD | 0 | -5 | |||
| EUR | DKK | -2 | 2 | |||
| EUR | JPY | 1 | -4 | |||
| USD | CAD | -2 | 3 | |||
| USD | DKK | 3 | -39 | |||
| USD | GBP | -1 | -1 | |||
| USD | SEK | 36 | -67 | |||
| USD | JPY | -12 | 2 | |||
| DKK | SEK | 6 | 14 | |||
| USD | KRW | -17 | 26 | |||
| Other | Other | 1 | -5 | |||
| Subtotal | 115 | -120 | ||||
| Currency options | 3 | 3 | ||||
| Interest Rate Swaps | 15 | 38 | ||||
| Metal forward contacts | 5 | -47 | ||||
| Electricity futures | 0 | 1 | ||||
| Total, corresponding to a net derivative | ||||||
| asset (+) or liability (-) | 138 | -125 |
For currency options and electricity futures hedge accounting has not been applied. For foreign exchange forward contracts, interest rate swaps and metal forward contracts hedge accounting has been applied when the conditions for hedge accounting have been fulfilled.
The fair value adjustment of derivatives is made through other comprehensive income if hedge accounting can be applied and the derivatives are effective. In all other cases the fair value adjustment is made above net income. The corresponding entries are made on derivative assets and liabilities and not on the underlying financial instruments in the statement on financial position.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Major components of the Group's tax costs | |||
| Current tax cost | -1,418 | -1,404 | -1,356 |
| Adjustment for current taxes on prior periods | 4 | 22 | 110 |
| Deferred tax costs/income on changes in temporary differences | 44 | -40 | 9 |
| Deferred tax costs/income on changes in tax rates or new taxes | 99 | -1 | -5 |
| Tax income from previously unrecognised tax losses or tax credits on temporary differences of prior periods |
0 | 0 | 0 |
| Deferred tax income from previously unrecognised tax losses or tax credits on temporary differences of prior periods |
0 | 21 | 5 |
| Deferred tax cost from the write down or reversal of a previous write down of a deferred tax asset |
0 | -1 | -3 |
| Other taxes | -27 | -22 | -8 |
| Total tax cost | -1,298 | -1,425 | -1,248 |
The difference between the tax costs of the group and the tax cost based upon applicable tax rates can be explained as follows:
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Result after financial items | 4,505 | 4,676 | 4,364 |
| Tax according to applicable | |||
| tax rates | -1,349 | -1,315 | -1,279 |
| Tax effect of: | |||
| Non-deductible costs | -129 | -144 | -116 |
| Non-taxable income | 79 | 38 | 26 |
| Differences between reported official depreciation and depre ciation according to tax rules |
-8 | 3 | -2 |
| Differences between reported other official appropriations and other appropriations |
|||
| according to tax rules | 130 | 4 | -18 |
| Tax losses and tax credits | 2 | -11 | 39 |
| Other | -27 | -22 | -8 |
| Adjustment for current tax on | |||
| prior periods | 4 | 22 | 110 |
| Total tax costs | -1,298 | -1,425 | -1,248 |
Other taxes are mainly referring to wealth tax.
Temporary differences exist when there is a difference between the book value and the tax base of assets and liabilities. The Group's temporary differences have resulted in a deferred tax asset or a deferred tax liability relating to the following assets and liabilities:
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | |||||
| SEK millions | assets liabilities assets liabilities |
|||||
| Relating to: | ||||||
| Intangible non-current | ||||||
| assets | 33 | 927 | 2 | 1,069 | ||
| Tangible non-current | ||||||
| assets | 67 | 257 | 82 | 217 | ||
| Inventory | 187 | 19 | 168 | 10 | ||
| Other current assets | 4 | 6 | 18 | 4 | ||
| Financial assets | 15 | 5 | 1 | 0 | ||
| Short term liabilities | 944 | 119 | 1,073 | 51 | ||
| Tax losses and tax credits * | 39 | – | 22 | 0 | ||
| Other | 3 | 690 | 5 | 657 | ||
| Subtotal | 1,292 | 2,023 | 1,371 | 2,008 | ||
| Possible to net | -84 | -84 | -78 | -78 | ||
| Total deferred taxes | 1,208 | 1,939 | 1,293 | 1,930 |
* The Group has reported a deferred tax asset on unused tax losses and tax grants of SEK 92 (89) million. These unused tax losses and tax grants are essentially not restricted in time.
In the Group there are temporary differences and unused tax losses and tax credits of SEK 849 (895) million that have not resulted in corresponding deferred tax assets, since these are not likely to be used. The temporary differences are mainly relating to pensions, where the date of payment is so far into the future that considering discounting and uncertainty concerning future tax rules and profit levels no asset is deemed to exist. The unused tax losses and tax grants are essentially not restricted in time, but the tax losses that can be utilised per year can be restricted to a certain proportion of the taxable result or be limited by up-coming structural changes.
The nominal tax rate has changed in the following countries during 2010 to 2012.
| TAX RATES BY COUNTRY | |||
|---|---|---|---|
| Consolidated | |||
| Percent | 2012 | 2011 | 2010 |
| Chile | 20 | 17 | 17 |
| Finland | 25 | 26 | 26 |
| Greece | 20 | 20 | 24 |
| India | 32 | 32 | 33 |
| Japan | 38 | 40 | 41 |
| Canada | 26 | 28 | 31 |
| Netherlands | 25 | 25 | 26 |
| UK | 24 | 26 | 28 |
| South Korea | 22 | 22 | 24 |
| Thailand | 23 | 30 | 30 |
| Ukraine | 21 | 23 | 25 |
| Hungary | 10 | 19 | 19 |
| USA | 39 | 39 | 41 |
| Venezuela | 28 | 28 | 34 |
The Group's normal effective tax rate is approximately 29 (30) (30) percent based on taxable result, and it is calculated as a weighted average based on each subsidiary's part of the result before tax.
The allocation of step up values to tangible and intangible assets and the residual goodwill in effect means that all acquisitions are valued at market. In order to separate out this valuation effect Alfa Laval focuses on EBITA, where any amortisation of step up values is excluded. The development of these step up values and any goodwill is shown in the table below.
| MOVEMENT SCHEDULE | ||
|---|---|---|
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| Adjustment | |||||||
| Opening balance |
of last year's purchase price |
Planned depreciation/ |
Translation | Closing balance |
|||
| SEK millions | 2012 | allocation | Acquired | Write down | amortisation | difference | 2012 |
| Buildings | 532 | – | – | – | -32 | -30 | 470 |
| Land and land improvements | -78 | – | – | – | – | 19 | -59 |
| Equipment | 86 | – | – | – | -29 | -3 | 54 |
| Patents and unpatented | |||||||
| know-how | 1,301 | – | 866 | – | -193 | -52 | 1,922 |
| Trademarks | 2,130 | – | – | – | -233 | -78 | 1,819 |
| Subtotal step-up values | 3,971 | – | 866 | – | -487 | -144 | 4,206 |
| Goodwill | 9,543 | 9 | 725 | -48 | – | -437 | 9,792 |
| Total | 13,514 | 9 | 1,591 | -48 | -487 | -581 | 13,998 |
The Group has not recorded any impairment losses related to neither goodwill nor any other step up values in 2012 or prior years. There is no deferred tax liability calculated on the goodwill. The deferred tax liability on the other step-up values is SEK 830 (963) million.
For assets sold, net gains or losses are recognised on the costs basis including any related step-up value.
The next table shows each acquisition separately. Any later adjustments to the allocations are referred to the original year of the acquisition. The figures for the allocations are based on the prevailing rates at the time the transactions took place and any change in exchange rates until December 31, 2012 is shown as a translation difference. The corresponding presentation by asset type is found in Notes 17 and 18.
| Consolidated | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Land and | Patents and | |||||||||
| SEK millions | land impro | unpatented | Total step | |||||||
| Year/Businesses | Buildings | vements | Equipment | Inventory | know-how | Trademarks | Other | up values | Goodwill | Total |
| 2000 | ||||||||||
| Alfa Laval Holding | 1,058 | -228 | 452 | 340 | 1,280 | 461 | 660 | 4,023 | 3,683 | 7,706 |
| 2002 | ||||||||||
| Danish Separation Systems | – | – | – | – | – | – | – | – | 118 | 118 |
| 2003 | ||||||||||
| Toftejorg | 1 | – | – | – | – | – | – | 1 | 35 | 36 |
| bioKinetics | – | – | – | – | – | – | – | – | – | – |
| 2005 | ||||||||||
| Packinox | – | – | – | 6 | 99 | 183 | – | 288 | 253 | 541 |
| 2006 | ||||||||||
| Tranter | 17 | – | – | 6 | 180 | 265 | – | 468 | 530 | 998 |
| 2007 | ||||||||||
| AGC Engineering | – | – | – | – | – | 12 | – | 12 | 20 | 32 |
| Helpman | 9 | 8 | – | – | 36 | – | – | 53 | 4 | 57 |
| Public offer Alfa Laval (India) | – | – | – | – | – | – | – | – | 441 | 441 |
| DSO Fluid Handling | – | – | – | – | – | 39 | – | 39 | 42 | 81 |
| Fincoil | – | – | – | – | 233 | – | – | 233 | 241 | 474 |
| 2008 | ||||||||||
| Høyer Promix A/S | – | – | – | – | – | – | – | – | 16 | 16 |
| Nitrile India Pvt Ltd | – | – | – | – | – | – | – | – | 6 | 6 |
| Standard Refrigeration | – | – | – | 5 | 166 | – | – | 171 | 152 | 323 |
| Pressko AG | – | – | – | 1 | – | – | – | 1 | 69 | 70 |
| Hutchison Hayes Separation | – | – | – | 1 | 95 | 49 | – | 145 | 46 | 191 |
| P&D's Plattvärmeväxlarservice | – | – | – | – | – | – | – | – | 10 | 10 |
| Ageratec | – | – | – | – | – | – | – | – | 44 | 44 |
| 2009 | ||||||||||
| Two providers of parts & service | – | – | – | – | – | 291 | – | 291 | 210 | 501 |
| Onnuri Industrial Machinery | – | – | – | – | 40 | 39 | – | 79 | 48 | 127 |
| HES Heat Exchanger Systems | – | – | – | – | 83 | – | – | 83 | 59 | 142 |
| Public offer Alfa Laval (India) | – | – | – | – | – | – | – | – | 311 | 311 |
| Termatrans | – | – | – | – | – | 7 | – | 7 | 6 | 13 |
| Tranter acquisitions in Latin America | – | – | – | – | – | 20 | – | 20 | 16 | 36 |
| ISO Mix | – | – | – | – | 22 | – | – | 22 | – | 22 |
| LHE | – | – | – | – | 298 | 297 | – | 595 | 344 | 939 |
| 2010 | ||||||||||
| Champ Products | – | – | – | – | 15 | 14 | – | 29 | 2 | 31 |
| A leading U.S. service provider | – | – | – | – | – | 134 | – | 134 | 82 | 216 |
| G.S Anderson | – | – | – | – | 35 | – | – | 35 | 23 | 58 |
| Astepo | – | – | – | – | 24 | 15 | – | 39 | 8 | 47 |
| Si Fang Stainless Steel Products | – | – | – | – | 27 | 16 | – | 43 | 42 | 85 |
| Definox | – | – | – | – | 4 | 5 | – | 9 | 2 | 11 |
| Olmi | – | – | – | 37 | 58 | 32 | – | 127 | – | 127 |
| 2011 | ||||||||||
| Service company in the U.S. | – | – | – | – | – | 150 | – | 150 | 126 | 276 |
| Aalborg Industries | 248 | – | – | – | 430 | 860 | – | 1 538 | 3 630 | 5 168 |
| 2012 | ||||||||||
| Vortex Systems | – | – | – | – | 148 | – | – | 148 | 219 | 367 |
| Ashbrook Simon-Hartley | – | – | – | – | 86 | – | – | 86 | 112 | 198 |
| Gamajet Cleaning Systems | – | – | – | – | 47 | – | – | 47 | 37 | 84 |
| Air Cooled Exchangers (ACE) | – | – | – | – | 585 | – | – | 585 | 357 | 942 |
| Accumulated during the period | ||||||||||
| Realised | -524 | 122 | -24 | -397 | – | – | -99 | -922 | – | -922 |
| Write down | – | – | – | – | – | – | – | – | -48 | -48 |
| Planned depreciation/amortisation | -313 | – | -368 | – | -2,012 | -948 | -571 | -4,212 | -612 | -4,824 |
| Translation difference | -26 | 39 | -6 | 1 | -57 | -122 | 10 | -161 | -892 | -1,053 |
| Closing balance | 470 | -59 | 54 | – | 1,922 | 1,819 | – | 4,206 | 9,792 | 13,998 |
The acquisition of the Alfa Laval Holding AB group in connection with the acquisition by Industri Kapital of the Alfa Laval Group from Tetra Laval on August 24, 2000 is shown on the first row.
"Other" relates to step up values from 2000 for "Machinery" of SEK 548 million that has been fully depreciated or realised, for "Research and development" of SEK 54 million and "Capital gain (Industrial Flow)" of SEK 42 million that have been fully realised and for "Construction in process" of SEK 16 million that has been transferred to "Machinery".
Alfa Laval has acquired the US-based company Air Cooled Exchangers, LLC (ACE), a leading manufacturer of custom-engineered air-cooled heat exchangers, used to cool air, natural gas, oil and water in the natural gas market as well as other energy-related end markets. Lars Renström,
President and CEO of the Alfa Laval Group, comments: "The acquisition of ACE brings a new product range into our heat transfer offering, at a time when demand for air-cooled heat exchangers is accelerating – especially in the natural gas industry. Together, Alfa Laval's overall position is further strengthened and we are even better positioned to serve the energy-related industries." The intention is to integrate Air Cooled Exchangers, LLC into Alfa Laval's Energy & Environment segment, within the Process Technology division. The company was acquired on December 31, 2012. The company is located in Broken Arrow, Oklahoma, the U.S. The purchase price is SEK 1,027 million, out of which everything has been paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) come in addition to this and have amounted to SEK 1 million, which is reported as other operating costs. The impact on the cash flow is thus SEK -1,028 million. Out of the difference between the purchase price paid and the net assets acquired SEK 585 million is allocated to patents and
un-patented know-how, while the residual SEK 357 million is allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the company's ability to over time recreate its intangible assets. The value of the goodwill is still preliminary. The step up value for patents and un-patented know-how is amortised over 10 years. From the date of the acquisition the company has added SEK - million in orders received, SEK - million in invoicing and SEK - million in adjusted EBITA to Alfa Laval, since the acquisition was made at December 31, 2012. If the company had been acquired at January 1, 2012 the corresponding figures would have been SEK 410 million, SEK 394 million and SEK 124 million respectively. At the end of December 2012 the number of employees was 230.
On November 27, 2012 Alfa Laval acquired the remaining 10 percent of the shares in the subsidiary LHE Co Ltd in South Korea from the minority shareholder. The purchase price is SEK 102 million, out of which everything has been paid in cash. The impact on the cash flow is SEK -102 million. The difference of SEK 51 million between the purchase price paid and the net assets acquired is reported against equity.
Alfa Laval has acquired Gamajet Cleaning Systems, Inc., a leading provider of tank cleaning machines as well as self-contained and portable cleaning systems for the industrial and sanitary markets in North America. Gamajet is headquartered in Exton, Pennsylvania. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "We have built the leading position within tank cleaning equipment over the past 10 years. Gamajet fits very well with our ambitions and it expands our product portfolio. It will especially extend our offer to the industrial market and also strengthen our position in North America." Gamajet Cleaning Systems will be integrated into Alfa Laval. The company is consolidated from August 23, 2012. The purchase price is SEK 116 million, out of which SEK 82 million has been paid in cash and SEK 34 million is retained for a period of 1–2 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 34 million, but the probable outcome is SEK 34 million, which is also the fair value since the contingent consideration is to be paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) come in addition to this and have amounted to SEK 1 million, which is reported as other operating costs. The impact on the cash flow is thus SEK -83 million. Out of the difference between the purchase price paid and the net assets acquired SEK 47 million is allocated to patents and un-patented know-how, while the residual SEK 37 million is allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the company's ability to over time recreate its intangible assets. The value of the goodwill is still preliminary. The step up value for patents and un-patented know-how is amortised over 10 years. From the date of the acquisition the company has added SEK 23 million in orders received, SEK 24 million in invoicing and SEK 4 million in adjusted EBITA to Alfa Laval. If the company had been acquired at January 1, 2012 the corresponding figures would have been SEK 61 million, SEK 59 million and SEK 7 million respectively. At the end of December 2012 the number of employees was 31.
Alfa Laval has acquired Ashbrook Simon-Hartley, a leading provider of belt filter presses, which is a complement and alternative to Alfa Laval's decanter range in the dewatering of municipal and industrial wastewater. Ashbrook Simon-Hartley is headquartered in Houston, Texas, USA, with offices in the UK, Chile and Brazil, and has an installed base in many countries around the world. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "I'm very pleased that we have been able to acquire Ashbrook Simon-Hartley. With this acquisition we are adding a complementary and expanded range of products and solutions further strengthening our offer for municipal and industrial wastewater treatment applications." Ashbrook Simon-Hartley was founded more than 100 years ago. The intention is to integrate Ashbrook Simon-Hartley into Alfa Laval. The company is consolidated into Alfa Laval from August 1, 2012. The purchase price is SEK 318 million, out of which SEK 263 million has been paid in cash and SEK 55 million is retained for a period of 1-2 years. The retained part of the purchase price is contingent on that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 55 million, but the probable outcome is SEK 55 million, which is also the fair value since the contingent consideration is to be paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) come in addition to this and have amounted to SEK 5 million, which is reported as other operating costs. At the acquisition cash of SEK 11 million was taken over. The impact on the cash flow is thus SEK -257 million. Out of the difference between the purchase price paid and the net assets acquired SEK 86 million is allocated to patents and un-patented know-how, while the residual SEK 112 million is allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the company's ability to over time recreate its intangible assets. The value of the goodwill is still preliminary. The step up value for patents and un-patented know-how is amortised over 10 years. From the date of the acquisition the company has added SEK 171 million in orders received, SEK 170 million in invoicing and
SEK -19 million in adjusted EBITA to Alfa Laval. If the company had been acquired at January 1, 2012 the corresponding figures would have been SEK 462 million, SEK 398 million and SEK -25 million respectively. At the end of December 2012 the number of employees was 228.
Alfa Laval has acquired the US based company Vortex Systems, a leading manufacturer of innovative mixing and blending solutions for the oil and gas industry. Lars Renström, President and CEO of the Alfa Laval Group, comments on the acquisition: "The acquisition of Vortex Systems will further strengthen our offering to the interesting oil and gas industry, both for onshore and offshore applications." Vortex Systems is located in Houston, Texas, the U.S. The intention is to integrate Vortex Systems into Alfa Laval. The company is consolidated into Alfa Laval from June 30, 2012. The purchase price is SEK 350 million, out of which everything has been paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) come in addition to this and have amounted to SEK 3 million, which is reported as other operating costs. The impact on the cash flow is thus SEK -353 million. Out of the difference between the purchase price paid and the net assets acquired SEK 148 million is allocated to patents and un-patented know-how, while the residual SEK 219 million is allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the company's ability to over time recreate its intangible assets. The value of the goodwill is still preliminary. The step up value for patents and un-patented know-how is amortised over 10 years. From the date of the acquisition the company has added SEK 49 million in orders received, SEK 52 million in invoicing and SEK 23 million in adjusted EBITA to Alfa Laval. If the company had been acquired at January 1, 2012 the corresponding figures would have been SEK 109 million, SEK 111 million and SEK 32 million respectively. At the end of December 2012 the number of employees was 19.
In a press release on September 19, 2011 Alfa Laval communicated its proposal to buy all outstanding shares in its subsidiary Alfa Laval (India) Ltd and seek delisting of the shares from Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The proposal came on the back of regulatory changes in India which requires Alfa Laval (India) Ltd to have a minimum public float of 25 percent or seek delisting. At the time, Alfa Laval held 88.8 percent of the share capital of Alfa Laval (India), meaning the public float was 11.2 percent. The objective is to achieve full ownership of the subsidiary, which will provide Alfa Laval with increased operational flexibility to support the business and meet the customers' needs. In a reverse book building process that was finalised on February 23, 2012 minority shareholders together holding more than the necessary 50 percent of the public float were willing to sell to Alfa Laval at a price of INR 4,000 per share. The Board of Directors of Alfa Laval AB therefore decided to proceed with the delisting process. Through the acquisition of the 1.03 million shares Alfa Laval has achieved an ownership of 94.5 percent, which enabled Alfa Laval (India) Ltd to apply for delisting from both stock exchanges. The applications have been approved and Alfa Laval (India) Ltd was delisted on April 12, 2012. The cost for the acquisition of the shares has been SEK 553 million. As a part of the process the remaining minority owners can sell their shares to Alfa Laval for INR 4,000 during the next 12 months. During the first eight months until December 31, 2012 minority owners with an additional 0.55 million shares have sold their shares to Alfa Laval for SEK 278 million, which has increased Alfa Laval's ownership to 97.5 percent. If all shareholders in the end sell their shares to Alfa Laval at this exit price the acquisition will incur a consideration of approximately SEK 1,065 million.
The purchase price of SEK 830 million has been paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) come in addition to this and have amounted to SEK 8 million, which is reported as other operating costs. The impact on the cash flow is thus SEK -838 million. The difference of SEK 694 million between the purchase price paid and the net assets acquired is reported against equity.
If Alfa Laval had not succeeded in achieving an ownership of 94.4 percent the company would have been required to increase the public float to 25 percent latest in June 2013.
During 2012 an additional purchase price of SEK 2 million has been paid in cash to the former minority owner in a Bulgarian subsidiary, which has impacted the cash flow with SEK -2 million. The difference of SEK 2 million between the purchase price paid and the net assets acquired is reported against equity.
Payment of retained parts of the purchase price from previous acquisitions constitutes the remaining part of the cash flow related to acquisition of businesses.
The acquisitions during 2012 can be summarized as follows:
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| Minority in subsidiaries | Others | Total | |||||
| Adjustment to | Adjustment to | ||||||
| SEK millions | Book value | fair value | Fair value | Book value | fair value | Fair value | Fair value |
| Property, plant and equipment | – | – | – | 96 | – | 96 | 96 |
| Patents and unpatented know-how 1) | – | – | – | – | 866 | 866 | 866 |
| Inventory | – | – | – | 89 | – | 89 | 89 |
| Accounts receivable and other receivables | – | – | – | 220 | – | 220 | 220 |
| Liquid assets | – | – | – | 11 | – | 11 | 11 |
| Accounts payable and other liabilities | – | – | – | -134 | – | -134 | -134 |
| Deferred tax | – | – | – | – | -61 | -61 | -61 |
| Acquired net assets | – | – | – | 282 | 805 | 1,087 | 1,087 |
| Goodwill 2) | – | 725 | 725 | ||||
| Equity attributable to owners of parent | -747 | – | -747 | ||||
| Currency translation | -80 | – | -80 | ||||
| Equity attributable to non-controlling interests | -107 | – | -107 | ||||
| Purchase price | -934 | -1,812 | -2,746 | ||||
| Costs directly linked to the acquisitions 3) | -8 | -9 | -17 | ||||
| Retained part of purchase price 4) | – | 90 | 90 | ||||
| Liquid assets in the acquired businesses | – | 11 | 11 | ||||
| Payment of amounts retained in prior years | – | -115 | -115 | ||||
| Effect on the Group's liquid assets | -942 | -1,836 | -2,778 |
1) The step up values for patents and unpatented know-how are amortised over 10 years.
2) The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the companies' ability to over time recreate its intangible assets. The value of the goodwill is still preliminary.
3) Refers to fees to lawyers, due diligence and assisting counsel. Has been expensed as other operating costs.
4) Contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The probable outcome has been calculated.
All acquired assets and liabilities were reported according to IFRS at the time of the acquisition. The acquisitions of minority shares in different subsidiaries and other acquisitions are not reported per acquisition since such a reporting would have been too fragmented and rather would have burdened the presentation than increased clarity. Instead they are reported together split on acquisitions of minority shares in subsidiaries and other acquisitions.
On May 1, 2011 Alfa Laval acquired a well established service company in the U.S. The company is a leading provider on the North American market specialized in serving equipment for centrifugal separation. "The acquisition is another step in the ambition to serve the market with alternative offerings", says Lars Renström, President and CEO of the Alfa Laval Group. The company will remain a separate organization as they will continue to offer their own products and services to the industry, under their own brand. The purchase price was SEK 235 million, out of which SEK 175 million was paid in cash and SEK 60 million is retained for a period of 1-2 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 60 million, but the probable outcome was SEK 60 million, which was also the fair value since the contingent consideration is to be paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 2 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -177 million. Out of the difference between the purchase price paid and the net assets acquired SEK 150 million was allocated to the company's trademark, while the residual SEK 117 million was allocated to goodwill. The goodwill was relating to estimated synergies in procurement, logistics and corporate overheads and the company's ability to over time recreate its intangible assets. In connection with the finalisation of the purchase price allocation in 2012 the value of the goodwill has been increased by SEK 9 million to SEK 126 million. The step up value for the trademark is amortised over 10 years. From the date of the acquisition the company has added SEK 68 million in orders received, SEK 74 million in invoicing and SEK 20 million in adjusted EBITA to Alfa Laval during 2011. If the company had been acquired at January 1, 2011 the corresponding figures would have been SEK 102 million, SEK 110 million and SEK 30 million respectively. At the end of December 2011 the number of employees was 48.
In a press release on December 21, 2010, Alfa Laval announced that an agreement had been signed to acquire Aalborg Industries Holding A/S from Altor 2003 Fund, LD Equity and the Company's management. Aalborg Industries had some 2,750 employees and generated sales of about SEK 3.3 billion in 2010. Clearances from all concerned regulatory authorities were received at the beginning of May 2011. Aalborg Industries were consolidated into the Alfa Laval Group as of May 1, 2011. Aalborg will be fully integrated into Alfa Laval. Non-recurring costs for the integration were estimated at SEK 80 million. During the latter part of 2013 the annual synergy is estimated at SEK 100 million. The acquisition, which adds complementary energy-efficient and environmental solutions, represents a significant business opportunity as it supports Alfa Laval's existing offer to the marine and off-shore markets. Another opportunity lies in the introduction of Aalborg's products to customers in completely new end markets, through Alfa Laval's sales network.
"Aalborg Industries is an excellent fit and I'm very pleased to welcome a strong and well-run company into Alfa Laval", says Lars Renström, President and CEO of the Alfa Laval Group. The acquisition further strengthens Alfa Laval's product offering in heat transfer. It adds market-leading positions with products such as boilers and thermal fluid systems, as well as inert gas systems, with significant barriers to entry. These include extensive certification processes, a strong innovation track record and a global service network. The company's strong manufacturing and engineering presence in fastgrowing markets such as China, Vietnam and Brazil, as well as the aftermarket potential generated by a large installed base, are also highly attractive attributes.
The purchase price was SEK 5,003 million, out of which all was paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 22 million, which was reported as other operating costs. Liquid assets of SEK 421 million in the acquired businesses were taken over. The impact on the cash flow was thus SEK -4,604 million. Out of the difference between the purchase price paid and the net assets acquired SEK 248 million was allocated to properties, SEK 430 million was allocated to patents and un-patented know-how and SEK 860 million was allocated to the Aalborg trademark, while the residual SEK 3,630 million was allocated to goodwill. The goodwill was relating to estimated synergies in procurement, logistics and corporate overheads and the Aalborg's ability to over time recreate its intangible assets. The value of the goodwill has been finalised in 2012. The step up value for properties is depreciated over 20 years. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. From the date of the acquisition Aalborg has added SEK 1,765 million in orders received, SEK 2,143 million in invoicing and SEK 532 million in adjusted EBITA to Alfa Laval during 2011. If Aalborg had been acquired at January 1, 2011 the corresponding figures would have been SEK 2,915 million, SEK 3,242 million and SEK 776 million respectively. At the end of December 2011 the number of employees was 2,692. Four business segments are concerned by the integration: Marine & Diesel, Process Industry and Parts & Service for both Equipment and Process Technology. For the period May to December 2011 the orders received for Aalborg is referring to Marine & Diesel to 61%, to Process Industry to 7 %, to Equipment Parts & Service to 28 % and to Process Technology Parts & Service to 4 %.
Payment of retained parts of the purchase price from previous acquisitions constitutes the remaining part of the cash flow related to acquisition of businesses.
The acquisitions during 2011 can be summarized as follows:
| Consolidated | |
|---|---|
| -------------- | -- |
| Aalborg Industries | Others | Total | |||||
|---|---|---|---|---|---|---|---|
| Adjustment to | Adjustment to | ||||||
| SEK millions | Book value | fair value | Fair value | Book value | fair value | Fair value | Fair value |
| Property, plant and equipment 1) | 160 | 248 | 408 | – | – | – | 408 |
| Patents and unpatented know-how 2) | – | 430 | 430 | – | – | – | 430 |
| Trademarks 2) | – | 860 | 860 | – | 150 | 150 | 1,010 |
| Licenses, renting rights and similar rights | 1 | – | 1 | – | – | – | 1 |
| Inventory | 253 | – | 253 | 29 | – | 29 | 282 |
| Accounts receivable | 596 | – | 596 | 9 | – | 9 | 605 |
| Other receivables | 306 | – | 306 | – | – | – | 306 |
| Current deposits | 22 | – | 22 | – | – | – | 22 |
| Liquid assets | 421 | – | 421 | – | – | – | 421 |
| Provisions for pensions and similar commitments | – | – | – | – | – | – | – |
| Other provisions | -194 | – | -194 | -1 | – | -1 | -195 |
| Loans | -421 | – | -421 | – | – | – | -421 |
| Accounts payable | -325 | – | -325 | -4 | – | -4 | -329 |
| Advance payments and other liabilities | -304 | – | -304 | – | – | – | -304 |
| Other liabilities | -286 | – | -286 | -4 | – | -4 | -290 |
| Tax liabilities | -46 | – | -46 | – | – | – | -46 |
| Deferred tax | 51 | -399 | -348 | – | -61 | -61 | -409 |
| Acquired net assets | 234 | 1,139 | 1,373 | 29 | 89 | 118 | 1,491 |
| Goodwill 3) | 3,630 | 117 | 3,747 | ||||
| Purchase price | -5,003 | -235 | -5,238 | ||||
| Costs directly linked to the acquisitions 4) | -22 | -2 | -24 | ||||
| Retained part of purchase price 5) | – | 60 | 60 | ||||
| Liquid assets in the acquired businesses | 421 | – | 421 | ||||
| Payment of amounts retained in prior years | – | -175 | -175 | ||||
| Effect on the Group's liquid assets | -4,604 | -352 | -4,956 | ||||
1) The step up value for property in Aalborg is amortised over 20 years.
2) The step up values for patents and unpatented know-how as well for trademarks are amortised over 10 years.
3) The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and the companies' ability to over time recreate its intangible assets. The value of the goodwill is still preliminary.
4) Refers to fees to lawyers, due diligence and assisting counsel. Has been expensed as other operating costs.
5) Contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The probable outcome has been calculated.
All acquired assets and liabilities were reported according to IFRS at the time of the acquisition.
On December 6, 2010 Alfa Laval acquired the Italian company Olmi S.p.A., a leading company specialized in the design and manufacture of shell & tube heat exchangers and air coolers for niche applications in the petrochemical, power and oil & gas industries. The acquisition expands Alfa Laval's product portfolio. The intention is to integrate Olmi into Alfa Laval as a competence centre based on their unique know-how. The purchase price was SEK 714 million, out of which SEK 546 million was paid in cash and SEK 168 million is retained for a period of 1-6 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 168 million, but the probable outcome was SEK 168 million, which was also the fair value since the contingent consideration is to be paid in cash. The probable outcome was during 2011 revised to SEK 15 million. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 2 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -548 million. Initially, out of the difference between the purchase price paid and the net assets acquired SEK 171 million was allocated to patents and un-patented know-how, SEK 85 million was allocated to the Olmi trademark and SEK 37 million to accrued gross margin in work in progress, while the residual SEK 14 million was allocated to goodwill. The goodwill was relating to estimated synergies in procurement, logistics and corporate overheads and Olmi's ability to over time recreate its intangible assets. In connection with the finalisation of the purchase price allocation in 2011 the step up value for patents and un-patented know-how has been decreased by SEK 113 million to SEK 58 million, the step up value for the Olmi trademark has been decreased by SEK 53 million to SEK 32 million and value of the goodwill has been decreased by SEK 14 million to SEK - million. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. The step up for accrued gross margin in work in progress is expensed when the inventory is turned over. Olmi's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 302 million and SEK 24 million respectively. If Olmi had been acquired at January 1, 2010 the corresponding figures would have
been SEK 971 million and SEK 164 million respectively. At the end of 2010 the number of employees was 247.
On November 1, 2010 Alfa Laval acquired the Definox activities from Defontaine. Definox designs and manufactures stainless steel valves and equipment for the food processing, pharmaceutical and cosmetic industries. Definox will continue to offer its own product range, under its own brand and through its own sales network. Definox has offices and manufacturing in Gétigné close to Nantes in France and subsidiaries in the U.S. and China. The purchase price was SEK 49 million, out of which all was paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 4 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -53 million. Out of the difference between the purchase price paid and the net assets acquired SEK 4 million was allocated to patents and un-patented know-how and SEK 5 million was allocated to the Definox trademark, while the residual SEK 3 million was allocated to goodwill. The goodwill is relating to Definox's ability to over time recreate its intangible assets. In connection with the finalisation of the value of the goodwill in 2011 it has been decreased by SEK 1 million. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. Definox's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 33 million and SEK 1 million respectively. If Definox had been acquired at January 1, 2010 the corresponding figures would have been SEK 239 million and SEK 12 million respectively. At the end of 2010 the number of employees was 111.
On April 1, 2010 Alfa Laval acquired Astepo S.r.l. in Italy. The company is recognized for its solid know-how in aseptic technology, with key products such as bag-in-box fillers and heat exchangers targeting the global fruit juice concentrate industry. The purchase price was SEK 61 million, out of which SEK 34 million was paid in cash and SEK 27 million is retained for a period of 1-2 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome could be anything between SEK 0 million and SEK 27 million, but the probable outcome was SEK 27 million, which was also the fair value since the contingent consideration is to be paid in cash. The probable outcome was during 2011 revised to SEK 10 million.
The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 3 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -37 million. Out of the difference between the purchase price paid and the net assets acquired SEK 24 million was allocated to patents and un-patented know-how and SEK 15 million was allocated to the Astepo trademark, while the residual SEK 26 million was allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and Astepo's ability to over time recreate its intangible assets. In connection with the finalisation of the value of the goodwill in 2011 it has been decreased by SEK 18 million. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. Astepo's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 49 million and SEK 1 million respectively. If Astepo had been acquired at January 1, 2010 the corresponding figures would have been SEK 62 million and SEK -1 million respectively. At the end of 2010 the number of employees was 23. During 2010 the company has been renamed to Alfa Laval Parma S.r.l.
On April 1, 2010 Alfa Laval acquired 65 percent of the shares in Si Fang Stainless Steel Products Co. Ltd in China, which is a leading fluid handling company in China. The company targets the food and beverage market in China with its sanitary product portfolio, including pumps, valves and fittings. Si Fang will continue to offer its own product range, under its own brand and through its own sales network. The purchase price was SEK 121 million, out of which SEK 82 million was paid in cash and SEK 39 million was retained for a period of 1 year. The retained part of the purchase price was contingent on certain warranties in the contract not being triggered. The outcome could be anything between SEK 0 million and SEK 39 million. The probable outcome was SEK 39 million, which was also the fair value since the contingent consideration is to be paid in cash. The amount was paid in cash in 2011. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 13 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -95 million. Out of the difference between the purchase price paid and the net assets acquired SEK 27 million was allocated to patents and un-patented know-how and SEK 16 million was allocated to the Si Fang trademark, while the residual SEK 37 million was allocated to goodwill. The goodwill is relating to Si Fang's ability to over time recreate its intangible assets. In connection with the finalisation of the value of the goodwill in 2011 it has been increased by SEK 5 million. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. Si Fang's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 138 million and SEK 19 million respectively. If Si Fang had been acquired at January 1, 2010 the corresponding figures would have been SEK 167 million and SEK 23 million respectively. At the end of 2010 the number of employees was 420.
On January 6, 2010 Alfa Laval acquired a well established service company in the U.S., that is a leading service provider on the North American market specialized in plate heat exchangers. The company will remain a separate organisation as they will continue to offer their own products and services to the industry under their own brand. The purchase price was SEK 226 million, out of which SEK 145 million was paid in cash and SEK 81 million is retained for a period of 1-2 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 81 million, but the probable outcome is SEK 81 million, which was also the fair value since the contingent consideration is to be paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 3 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -148 million. Out of the difference between the purchase price paid and the net assets acquired SEK 134 million was allocated to the company's trademark, while the residual SEK 82 million was allocated to goodwill. The goodwill is relating to the company's ability to over time recreate its intangible assets. The value of the goodwill has been finalised in 2011. The step up value for the trademark is amortised over 10 years. The company's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 163 million and SEK 40 million respectively. If the company had been acquired at January 1, 2010 the corresponding figures would have been SEK 163 million and SEK 40 million respectively. At the end of 2010 the number of employees was 76.
On January 5, 2010 Alfa Laval acquired Champ Products Inc., based in Sarasota, Florida, the U.S. The company is recognized for its deep knowledge of engine cooling and is today perceived as a leading company in the North American market. The purchase price was SEK 70 million, out of which SEK 35 million was paid in cash and SEK 35 million is retained for a period of 1-2 years. The retained part of the purchase price is contingent on certain warranties in the contract not being triggered or that certain profitability goals are fulfilled. The outcome could be anything between SEK 0 million and SEK 35 million, but the probable outcome was SEK 35 million, which was also the fair value since the contingent consideration is to be paid in cash. The probable outcome was during 2011 revised to SEK 22 million. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 2 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -37 million. Out of the difference between the purchase price paid and the net assets acquired SEK 15 million was allocated to patents and un-patented know-how and SEK 14 million was allocated to the Champ trademark, while the residual SEK 15 million was allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and Champ's ability to over time recreate its intangible assets. In connection with the finalisation of the value of the goodwill in 2011 it has been decreased by SEK 13 million. The step up value for patents and un-patented know-how as well as the step up value for the trademark are amortised over 10 years. Champ's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 111 million and SEK 11 million respectively. If Champ had been acquired at January 1, 2010 the corresponding figures would have been SEK 111 million and SEK 11 million respectively. At the end of 2010 the number of employees was 88. During 2010 the company has been renamed to Alfa Laval Champ Inc.
In addition yet one minor acquisition has been made during 2010: On February 10, 2010 Alfa Laval acquired the German company G.S. Anderson GmbH. The purchase price was SEK 49 million, out of which SEK 26 million was paid in cash and SEK 23 million is retained for a period of 1-5 years. The retained part of the purchase price is contingent on that certain profitability goals are fulfilled. The outcome can be anything between SEK 0 million and SEK 45 million, but the probable outcome is SEK 23 million, which was also the fair value since the contingent consideration is to be paid in cash. The costs directly linked to the acquisition (fees to lawyers, due diligence and assisting counsel) came in addition to this and amounted to SEK 1 million, which was reported as other operating costs. The impact on the cash flow was thus SEK -27 million. Out of the difference between the purchase price paid and the net assets acquired SEK 35 million was allocated to patents and un-patented know-how, while the residual SEK 23 million was allocated to goodwill. The goodwill is relating to estimated synergies in procurement, logistics and corporate overheads and G.S. Anderson's ability to over time recreate its intangible assets. The value of the goodwill has been finalised in 2011. The step up value for patents and un-patented know-how is amortised over 10 years. G.S. Anderson's net sales and adjusted EBITA for 2010 from the date of the acquisition are SEK 10 million and SEK -8 million respectively. If G.S. Anderson had been acquired at January 1, 2010 the corresponding figures would have been SEK 10 million and SEK -8 million respectively. At the end of 2010 the number of employees was 10. During 2010 the company has been renamed to Alfa Laval Dortmund GmbH.
Payment of retained parts of the purchase price from previous acquisitions constitutes the remaining part of the cash flow related to acquisition of businesses. The acquisitions during 2010 can be summarized as follows:
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| Olmi | Others | Total | |||||
| Adjustment to | Adjustment to | ||||||
| SEK millions | Book value | fair value | Fair value | Book value | fair value | Fair value | Fair value |
| Property, plant and equipment | 247 | – | 247 | 53 | – | 53 | 300 |
| Patents and unpatented know-how | – | 171 | 171 | – | 105 | 105 | 276 |
| Trademarks | – | 85 | 85 | – | 184 | 184 | 269 |
| Licenses, renting rights and similar rights | – | – | – | 1 | – | 1 | 1 |
| Inventory | 285 | 37 | 322 | 158 | – | 158 | 480 |
| Accounts receivable | 160 | – | 160 | 70 | – | 70 | 230 |
| Other receivables | 56 | – | 56 | 31 | – | 31 | 87 |
| Current deposits | 116 | – | 116 | – | – | – | 116 |
| Liquid assets | – | – | – | 10 | – | 10 | 10 |
| Other provisions | – | – | – | – | – | – | – |
| Accounts payable | -105 | – | -105 | -38 | – | -38 | -143 |
| Advance payments and other liabilities | -261 | – | -261 | -90 | – | -90 | -351 |
| Tax liabilities | – | – | – | -3 | – | -3 | -3 |
| Deferred tax | – | -91 | -91 | -1 | -87 | -88 | -179 |
| Acquired net assets | 498 | 202 | 700 | 191 | 202 | 393 | 1,093 |
| Goodwill | 14 | 204 | 218 | ||||
| Purchase price | -714 | -597 | -1,311 | ||||
| Costs directly linked to the acquisitions | -2 | -26 | -28 | ||||
| Retained part of purchase price | 168 | 212 | 380 | ||||
| Liquid assets in the acquired businesses | – | 10 | 10 | ||||
| Payment of amounts retained in prior years | – | -70 | -70 | ||||
| Effect on the Group's liquid assets | -548 | -471 | -1,019 |
All acquired assets and liabilities were reported according to IFRS at the time of the acquisition. With the exception of the acquisition of Olmi the many minor acquisitions during 2010 are reported together since a split per acquisition would have been too fragmented and rather would have burdened the presentation than increased clarity.
An impairment test has been performed at the end of 2012 indicating that there is not any need to write down the goodwill.
Three of Alfa Laval's operating segments, the three divisions "Equipment", "Process Technology" and "Marine & Diesel" have been identified as the cash-generating units within Alfa Laval. Technically a recently acquired business activity could be followed independently during an initial period, but acquired businesses are normally integrated into the divisions at a fast rate. This means that the independent traceability is lost fairly soon and then any independent measurement and testing becomes impracticable. Although Tranter is operating as a separate sales channel it is subject to a considerable co-ordination related to purchasing and some support functions.
The recoverable amount of the cash-generating units is based on their value in use, which is established by calculating the net present value of future cash flows. The net present value is based on the projected EBITDA figures for the next twenty years, less projected investments and changes in operating capital during the same period. This projection for the coming 20 years is based on the following components:
The reason why a longer period than 5 years has been used for the calculation of the net present value is that Management considers 5 years to be a too short period for an operation where applying the going concern concept can be justified.
The assumptions used for the projections reflect past experiences or information from external sources.
The used discount rate is the pre-tax weighted average cost of capital (WACC) of 7.36 (7.92) (11.23) percent.
There exists no reasonably possible change in a key assumption in the impairment test that would cause the carrying amount to exceed the recoverable amount. The reason is that the recoverable amounts with a very good margin exceed the carrying amounts. Due to this a sensitivity analysis is not presented.
Alfa Laval does not have any intangible assets with indefinite useful lives other than goodwill.
The three cash-generating units have been allocated the following amounts of goodwill:
| Total | 9,792 | 9,543 |
|---|---|---|
| Marine & Diesel | 3,346 | 4,357 |
| Process Technology | 4,175 | 2,790 |
| Equipment | 2,271 | 2,396 |
| SEK millions | 2012 | 2011 |
| Consolidated |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 3,129 | 2,803 |
| Purchases | 0 | 1 |
| Sales/disposals | -3 | – |
| Reclassifications | – | -1 |
| Step-up values | 866 | 317 |
| Translation difference | -116 | 9 |
| Closing balance | 3,876 | 3,129 |
| Accumulated amortisation | ||
| Opening balance | -1,802 | -1,623 |
| Sales/disposals | 2 | – |
| Reclassifications | 0 | – |
| Amortisation of step-up value | -193 | -168 |
| Amortisation for the year | -3 | -5 |
| Translation difference | 63 | -6 |
| Closing balance | -1,933 | -1,802 |
| Closing balance, net book value | 1,943 | 1,327 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 223 | 185 |
| Purchases | 11 | 18 |
| Acquisition of businesses | – | 44 |
| Sales/disposals | -6 | -20 |
| Reclassifications | 3 | 1 |
| Translation difference | -7 | -5 |
| Closing balance | 224 | 223 |
| Accumulated amortisation | ||
| Opening balance | -178 | -141 |
| Acquisition of businesses | – | -41 |
| Sales/disposals | 4 | 20 |
| Reclassifications | -23 | -1 |
| Amortisation for the year | -10 | -18 |
| Translation difference | 28 | 3 |
| Closing balance | -179 | -178 |
| Closing balance, net book value | 45 | 45 |
Alfa Laval does not have any internally generated intangible assets.
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 2,858 | 1,881 |
| Step-up values | – | 957 |
| Translation difference | -108 | 20 |
| Closing balance | 2,750 | 2,858 |
| Accumulated amortisation | ||
| Opening balance | -728 | -524 |
| Amortisation of step-up values | -233 | -201 |
| Translation difference | 30 | -3 |
| Closing balance | -931 | -728 |
| Closing balance, net book value | 1,819 | 2,130 |
| Closing balance, net book value | 9,792 | 9,543 |
|---|---|---|
| Closing balance | -526 | -552 |
| Translation difference | 26 | 1 |
| Opening balance | -552 | -553 |
| Accumulated amortisation | ||
| Closing balance | 10,318 | 10,095 |
| Translation difference | -463 | -116 |
| Write down of goodwill | -48 | – |
| Goodwill in connection with acquisition of businesses |
734 | 3,706 |
| Opening balance | 10,095 | 6,505 |
| Accumulated acquisition values | ||
| SEK millions | 2012 | 2011 |
| Consolidated |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 2,755 | 2,243 |
| Purchases | 106 | 67 |
| Acquisition of businesses | 41 | 208 |
| Sales/disposal | -37 | -15 |
| Reclassifications | 69 | 4 |
| Step-up values | – | 247 |
| Translation difference | -132 | 1 |
| Closing balance | 2,802 | 2,755 |
| Accumulated depreciation | ||
| Opening balance | -1,152 | -969 |
| Sales/disposals | 7 | 7 |
| Acquisition of businesses | – | -90 |
| Reclassifications | -38 | -1 |
| Depreciation of step-up value | -32 | -29 |
| Depreciation for the year | -68 | -64 |
| Translation difference | 61 | -6 |
| Closing balance | -1,222 | -1,152 |
| Closing balance, net book value | 1,580 | 1,603 |
Within Alfa Laval these assets are normally relating to real estate.
In addition to the property that was sold during 2012 Onnuri has an additional property in South Korea that is empty and will be sold during the beginning of 2013. Due to this it has been re-classified as a current asset held for sale with SEK 9 (-) million.
Alfa Laval Aalborg BV in Spijkenisse in the Netherlands will leave its current premises during the first half of 2013 and move to Alfa Laval's office in Breda in the Netherlands. The vacated property is to be sold, but it is not expected to be sold within the next year. One small property in France is planned for sale. It is empty and has been for sale for several years. It is not expected to be sold within the next year. This means that none of these properties have been re-classified as current assets held for sale.
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 4,494 | 4,305 |
| Purchases | 192 | 224 |
| Acquisition of businesses | 37 | 177 |
| Sales/disposal | -108 | -262 |
| Reclassifications | 227 | 83 |
| Translation difference | -228 | -33 |
| Closing balance | 4,614 | 4,494 |
| Accumulated depreciation | ||
| Opening balance | -3,073 | -2,963 |
| Sales/disposals | 88 | 214 |
| Acquisition of businesses | -33 | -98 |
| Reclassifications | -80 | -6 |
| Depreciation for the year | -249 | -253 |
| Translation difference | 149 | 33 |
| Closing balance | -3,198 | -3,073 |
| Closing balance, net book value | 1,416 | 1,421 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 2,033 | 1,951 |
| Purchases | 122 | 112 |
| Acquisition of businesses | 9 | 58 |
| Sales/disposal | -71 | -107 |
| Reclassifications | 20 | 16 |
| Translation difference | -81 | 3 |
| Closing balance | 2,032 | 2,033 |
| Accumulated depreciation | ||
| Opening balance | -1,480 | -1,382 |
| Sales/disposals | 58 | 95 |
| Acquisition of businesses | -5 | -49 |
| Reclassifications | 8 | -14 |
| Depreciation of step-up value | -29 | -28 |
| Depreciation for the year | -106 | -98 |
| Translation difference | 61 | -4 |
| Closing balance | -1,493 | -1,480 |
| Closing balance, net book value | 539 | 553 |
| Closing balance, net book value | 150 | 208 |
|---|---|---|
| Closing balance | 150 | 208 |
| Translation difference | -8 | 1 |
| Reclassifications | -150 | -92 |
| Sales/disposal | – | -1 |
| Acquisition of businesses | – | 1 |
| Purchases | 100 | 133 |
| Opening balance | 208 | 166 |
| Accumulated acquisition values | ||
| SEK millions | 2012 | 2011 |
| Consolidated |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 150 | 151 |
| Reclassifications | 2 | – |
| Translation difference | -5 | -1 |
| Closing balance | 147 | 150 |
| Accumulated depreciation | ||
| Opening balance | -19 | -13 |
| Depreciation for the year | -7 | -7 |
| Translation difference | 1 | 1 |
| Closing balance | -25 | -19 |
| Closing balance, net book value | 122 | 131 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 34 | 34 |
| Reclassifications | 0 | 1 |
| Translation difference | -1 | -1 |
| Closing balance | 33 | 34 |
| Accumulated depreciation | ||
| Opening balance | -16 | -13 |
| Depreciation for the year | -3 | -3 |
| Translation difference | 0 | 0 |
| Closing balance | -19 | -16 |
| Closing balance, net book value | 14 | 18 |
LEASED EQUIPMENT, TOOLS AND INSTALLATIONS
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accumulated acquisition values | ||
| Opening balance | 6 | 6 |
| Purchases | – | 1 |
| Acquisition of businesses | – | 1 |
| Sales/disposal | -4 | -1 |
| Reclassifications | 0 | -1 |
| Translation difference | 1 | 0 |
| Closing balance | 3 | 6 |
| Accumulated depreciation | ||
| Opening balance | -4 | -4 |
| Sales/disposals | 3 | 1 |
| Acquisition of businesses | – | -1 |
| Reclassifications | 1 | 1 |
| Depreciation for the year | -1 | -1 |
| Translation difference | 0 | 0 |
| Closing balance | -1 | -4 |
| Closing balance, net book value | 2 | 2 |
Leased real estate, machinery and equipment relate to fixed assets which are leased and where the leasing agreement has been considered to be a financial lease. These financial leases are capitalised in the statement on financial position.
| Consolidated | Parent company | |||
|---|---|---|---|---|
| SEK millions | 2012 | 2011 | 2012 | 2011 |
| Shares in subsidiaries | – | – | 4,669 | 4,669 |
| Shares in other companies | 9 | 25 | – | – |
| Total | 9 | 25 | 4,669 | 4,669 |
The below specification of shares contains some simplifications, for instance in connection with ownership in multiple layers or when the ownership is split on several owners or at cross-holdings. This is in order not to unnecessarily burden the presentation. A complete specification of shares can be ordered by contacting Alfa Laval's head office in Lund or via the Swedish Companies Registration Office (Bolagsverket).
| Registration | Number of | Share of | Book value | ||
|---|---|---|---|---|---|
| Company name | number | Domicile | shares | capital % | SEK millions |
| Alfa Laval Holding AB | 556587-8062 | Lund, Sweden | 8,191,000 | 100 | 4,461 |
| Alfa Laval NV | Maarssen, Netherlands | 887,753 | 100 | – | |
| Alfa Laval Inc. | Newmarket, Canada | 1,000,000 | 67 | – | |
| Alfa Laval S.A. DE C.V. | Tlalnepantla, Mexico | 45,057,057 | 100 | – | |
| Alfa Laval S.A. | San Isidro, Argentina | 1,223,967 | 95 | – | |
| Alfa Laval Ltda | Sao Paulo, Brazil | 21,129,068 | 100 | – | |
| Alfa Laval S.A.C.I. | Santiago, Chile | 2,735 | 100 | – | |
| Ashbrook Chile S.A. | Santiago, Chile | 579,999 | 100 | – | |
| Ashbrook Do Brasil Ltda | Pinhais, Brazil | 1,000 | 100 | – | |
| Alfa Laval S.A. | Bogota, Colombia | 12,195 | 100 | – | |
| Alfa Laval S.A. | Lima, Peru | 4,346,832 | 100 | – | |
| Alfa Laval Venezolana S.A. | Caracas, Venezuela | 10,000 | 100 | – | |
| Alfa Laval Oilfield C.A. | Caracas, Venezuela | 203 | 81 | – | |
| Alfa Laval Taiwan Ltd | Taipei, Taiwan | 1,499,994 | 100 | – | |
| Alfa Laval (China) Ltd | Hong Kong, China | 79,999 | 100 | – | |
| Alfa Laval (Jiangyin) Manufacturing Co Ltd | Jiang Yin, China | 100 | – | ||
| Alfa Laval Flow Equipment (Kunshan) Co Ltd | Jiangsu, China | 75 | – | ||
| Alfa Laval Flow Equipment (Kunshan) Co Ltd | Jiangsu, China | 25 | – | ||
| Alfa Laval (Shanghai) Technologies Co Ltd | Shanghai, China | 100 | – | ||
| Wuxi MCD Gasket Co Ltd | Jiang Yin, China | 100 | – | ||
| Tranter Heat Exchangers (Beijing) Co Ltd | Beijing, China | 100 | – | ||
| Liyang Sifang Stainless Steel Products Co., Ltd | Liyang City, China | 65 | – | ||
| Changzhou Henghao Packaging Machinery Co., Ltd | Liyang City, China | 65 | – | ||
| Jiangsu Fu Li Stainless Steel Precision Welded Pipe Co., Ltd | Liyang City, China | 65 | – | ||
| Jiangsu Wintech Stainless Steel Products Co., Ltd | Liyang City, China | 65 | – | ||
| Alfa Laval Iran Ltd | Teheran, Iran | 2,199 | 100 | – | |
| Alfa Laval Industry (PVT) Ltd | Lahore, Pakistan | 119,110 | 100 | – | |
| Alfa Laval Philippines Inc. | Makati, Philippines | 72,000 | 100 | – | |
| Alfa Laval Singapore Pte Ltd | Singapore | 5,000,000 | 100 | – | |
| Alfa Laval (Thailand) Ltd | Bangkok, Thailand | 792,000 | 100 | – | |
| Alfa Laval Middle East Ltd | Nicosia, Cyprus | 40,000 | 100 | – | |
| Alfa Laval Service Operations Qatar LLC | Doha, Qatar | 9,800 | 49 | – | |
| Alfa Laval Benelux NV/SA | Brussels, Belgium | 98,284 | 100 | – | |
| Alfa Laval Ltd | Sofia, Bulgaria | 100 | 100 | – | |
| Alfa Laval Slovakia S.R.O. | Bratislava, Slovakia | 1 | – | ||
| Alfa Laval Spol S.R.O. | Prague, Czech Republic | 20 | – | ||
| Alfa Laval Nordic OY | Espoo, Finland | 20,000 | 100 | – | |
| Alfa Laval Vantaa OY | Vantaa, Finland | 7,000 | 100 | – | |
| Alfa Laval Nederland BV | Maarssen, Netherlands | 10,000 | 100 | – | |
| Alfa Laval Benelux BV | Maarssen, Netherlands | 20,000 | 100 | – | |
| Helpman Capital BV | Breda, Netherlands | 35,578 | 100 | – | |
| Helpman Holding BV | Naarden, Netherlands | 80 | 100 | – | |
| Alfa Laval Groningen BV | Groningen, Netherlands | 15,885 | 100 | – | |
| Alfa Laval Holding A/S | Oslo, Norway | 520,000 | 100 | – | |
| PHE Holding AB | 556306-2404 | Lund, Sweden | 2,500 | 100 | – |
| Tranter Heat Exchangers Canada Inc. | Edmonton, Canada | 100 | 100 | – | |
| Tranter Latin America S.A. de C.V. | Queretaro, Mexico | 49,999 | 100 | – | |
| Tranter Indùstria de Máquinas e Equipamentos Ltda | Sao Paulo, Brazil | 100 | – | ||
| MCD Nitrile India Pvt Ltd | Falta, India | 2,432 | 9 | – | |
| Tranter India Pvt Ltd | Poona, India | 3,009,999 | 100 | – | |
| Alfa Laval Korea Ltd | Seoul, South Korea | 36,400 | 10 | – | |
| Alfa Laval Korea Holding Company Ltd | Chungnam, South Korea | 13,318,600 | 100 | – | |
| Alfa Laval Korea Ltd | Seoul, South Korea | 327,600 | 90 | – | |
| Alfa Laval Aalborg Ltd | Pusan, South Korea | 550 | 100 | – | |
| Onnuri Industrial Machinery Co. Ltd | Masan, South Korea | 100,000 | 100 | – | |
| LHE Co. Ltd | Gim Hae, South Korea | 4,560,000 | 100 | – | |
| LHE (Qingdao) Heat Exchanger Co. Ltd | Jiaozhou City, China | 100 | – | ||
| Kenus LLP | Almaty, Kazakhstan | 90 | – | ||
| Tranter Heat Exchangers Middle East (Cyprus) Ltd | Nicosia, Cyprus | 20,000 | 100 | – | |
| MCD SAS | Guny, France | 7,130 | 10 | – | |
| Tranter International AB | 556559-1764 | Vänersborg, Sweden | 100,000 | 100 | – |
| Ageratec AB | 556662-3988 | Norrköping, Sweden | 2,723 | 100 | – |
| Breezewind AB | 556773-6532 | Lund, Sweden | 1,000 | 100 | – |
| OOO Tranter CIS | Moscow, Russia | 100 | – | ||
| Alfa Laval Nordic AB | 556243-2061 | Tumba, Sweden | 1,000 | 100 | – |
| Alfa Laval Corporate AB | 556007-7785 | Lund, Sweden | 13,920,000 | 100 | – |
| Alfa Laval S.A. | San Isidro, Argentina | 64,419 | 5 | – | |
| Definox (Beijing) Stainless Steel Equipment Ltd | Beijing, China | 100 | – |
| Registration | Number of | Share of | Book value | ||
|---|---|---|---|---|---|
| Company name | number | Domicile | shares | capital % | SEK millions |
| Alfa Laval (Kunshan) Manufacturing Co Ltd | Kunshan, China | 100 | – | ||
| Alfa Laval (India) Ltd | Poona, India | 17,703,076 | 97.5 | – | |
| Alfa Laval Support Services Pvt Ltd | Poona, India | 10 | 0 | – | |
| Tranter India Pvt Ltd | Poona, India | 1 | 0 | – | |
| PT Alfa Laval Indonesia | Jakarta, Indonesia | 1,249 | 100 | – | |
| Alfa Laval (Malaysia) Sdn Bhd | Shah Alam, Malaysia | 10,000 | 100 | – | |
| Alfa Laval Kolding A/S | Kolding, Denmark | 40 | 100 | – | |
| Alfa Laval Nordic A/S | Rödovre, Denmark | 1 | 100 | – | |
| Alfa Laval Copenhagen A/S | Söborg, Denmark | 1 | 100 | – | |
| Alfa Laval Nakskov A/S | Nakskov, Denmark | 242,713 | 100 | – | |
| Alfa Laval Tank Equipment A/S | Ishoej, Denmark | 61 | 100 | – | |
| Alfa Laval Aalborg A/S | Aalborg, Denmark | 2,560,972 | 100 | – | |
| Alfa Laval Aalborg Ltda | Petrópolis, Brazil | 5,969,400 | 99.5 | – | |
| Aalborg Industries Ltda | Itu, Brazil | 4,644,373 | 100 | – | |
| Alfa Laval Aalborg Ltd | Shanghai, China | 100 | – | ||
| Alfa Laval Qingdao Ltd | Jiaozhou City, China | 100 | – | ||
| Alfa Laval Aalborg Ltd | Hong Kong, China | 99 | 100 | – | |
| Alfa Laval Aalborg KK | Osaka, Japan | 4,000 | 100 | – | |
| Aalborg Industries Engineering Bhd | Kuala Lumpur, Malaysia | 100 | – | ||
| Alfa Laval Aalborg Pte Ltd | Singapore | 500,000 | 100 | – | |
| Aalborg Industries Water Treatment Pte Ltd | Singapore | 4,800,000 | 60 | – | |
| Alfa Laval Aalborg (FPS) Pte Ltd | Singapore | 2,250,000 | 100 | – | |
| Alfa Laval HaiPhong Co. Ltd | HaiPhong, Vietnam | 100 | – | ||
| Alfa Laval Aalborg Oy | Rauma, Finland | 3,000 | 100 | – | |
| Alfa Laval Aalborg BV | Spijkenisse, Netherlands | 7,500 | 100 | – | |
| Alfa Laval Aalborg Nijmegen BV | Nijmegen, Netherlands | 182 | 100 | – | |
| Alfa Laval Aalborg Nijmegen2 BV | Nijmegen, Netherlands | 200 | 100 | – | |
| Alfa Laval Aalborg Holding Pty Ltd | North Wyong, Australia | 11,500,000 | 100 | – | |
| Alfa Laval Aalborg Pty Ltd | North Wyong, Australia | 225,000 | 100 | – | |
| Alfa Laval SAS | Saint-Priest, France | 46,700 | 7.7 | – | |
| Alfa Laval Olmi SpA | Suisio, Italy | 500,000 | 100 | – | |
| Alfa Laval Italy Srl | Milano, Italy | 100 | – | ||
| Alfa Laval Nordic A/S | Oslo, Norway | 100 | 100 | – | |
| Tranter Poland Sp.z.o.o. | Pruszków, Poland | 2,000 | 100 | – | |
| AlfaWall AB | 556723-6715 | Botkyrka, Sweden | 500 | 50 | – |
| Alfa Laval Oilfield C.A. | Caracas, Venezuela | 47 | 19 | – | |
| Alfa Laval Treasury International AB | 556432-2484 | Lund, Sweden | 50,000 | 100 | – |
| Alfa Laval Europe AB | 556128-7847 | Lund, Sweden | 500 | 100 | – |
| Alfa Laval Lund AB | 556016-8642 | Lund, Sweden | 100 | 100 | – |
| Alfa Laval International Engineering AB | 556039-8934 | Lund, Sweden | 4,500 | 100 | – |
| Alfa Laval Tumba AB | 556021-3893 | Tumba, Sweden | 1,000 | 100 | – |
| Alfa Laval Makine Sanayii ve Ticaret Ltd Sti | Istanbul, Turkey | 27,001,755 | 99 | – | |
| Alfa Laval SIA | Riga, Latvia | 125 | 100 | – | |
| Alfa Laval UAB Ltd | Vilnius, Lithuania | 2,009 | 100 | – | |
| Alfa Laval Australia Pty Ltd | Homebush, Australia | 2,088,076 | 100 | – | |
| Tranter Heat Exchanger Pty Ltd | Sydney, Australia | 600,000 | 100 | – | |
| Alfa Laval New Zeeland Pty Ltd | Hamilton, New Zeeland | 1,000 | 100 | – | |
| Alfa Laval Holding BV | Maarssen, Netherlands | 60,035,631 | 100 | – | |
| Alfa Laval (Pty) Ltd | Isando, South Africa | 2,000 | 100 | – | |
| Alfa Laval Slovakia S.R.O. | Bratislava, Slovakia | 99 | – | ||
| Alfa Laval Spol S.R.O. | Prague, Czech Republic | 80 | – | ||
| Alfa Laval France SAS | Saint-Priest, France | 2,000,000 | 100 | – | |
| Alfa Laval SAS | Saint-Priest, France | 560,000 | 92.3 | – | |
| Alfa Laval Moatti SAS | Elancourt, France | 24,000 | 100 | – | |
| Alfa Laval Spiral SAS | Nevers, France | 79,999 | 100 | – | |
| MCD SAS | Guny, France | 64,170 | 90 | – | |
| Alfa Laval Vicarb SAS | Grenoble, France | 200,000 | 100 | – | |
| Canada Inc. | Newmarket, Canada | 480,000 | 100 | – | |
| Alfa Laval Inc. | Newmarket, Canada | 481,600 | 33 | – | |
| SCI du Companil | Grenoble, France | 32,165 | 100 | – | |
| Alfa Laval HES SA | Lentilly, France | 150,000 | 100 | – | |
| Packinox SA | Paris, France | 348,115 | 100 | – | |
| Ziepack SA | Paris, France | 37,701 | 51 | – | |
| Tranter SAS | Nanterre, France | 100 | – | ||
| Definox SAS | Lyon, France | 10,000 | 100 | – | |
| Alfa Laval Holding GmbH | Glinde, Germany | 1 | 100 | – | |
| Alfa Laval Mid Europe GmbH | Wiener Neudorf, Austria | 1 | 100 | – | |
| Tranter Warmetauscher GmbH | Guntramsdorf, Austria | 100 | – | ||
| Alfa Laval Mid Europe GmbH | Glinde, Germany | 1 | 100 | – | |
| Alfa Laval Dortmund GmbH | Artern, Germany | 1 | 100 | – | |
| Tranter GmbH | Artern, Germany | 1 | 100 | – | |
| Tranter Solarice GmbH | Artern, Germany | 67 | – | ||
| Company name | Registration number |
Domicile | Number of shares |
Share of capital % |
Book value SEK millions |
|---|---|---|---|---|---|
| Alfa Laval Mid Europe AG | Dietlikon, Switzerland | 647 | 100 | – | |
| Alfa Laval AEBE | Holargos, Greece | 807,000 | 100 | – | |
| Alfa Laval Kft | Budapest, Hungary | 1 | 100 | – | |
| Tranter Kft | Budapest, Hungary | 100 | – | ||
| Alfa Laval SpA | Monza, Italy | 1,992,276 | 99 | – | |
| Tranter Srl | Monza, Italy | 100 | – | ||
| Alfa Laval Parma Srl | Parma, Italy | 114,000 | 100 | – | |
| Alfa Laval Polska Sp.z.o.o. | Warsaw, Poland | 7,600 | 100 | – | |
| Alfa Laval Kraków Sp.z.o.o. | Krakow, Poland | 80,080 | 100 | – | |
| Alfa Laval (Portugal) Ltd | Linda-A-Velha, Portugal | 1 | – | ||
| Alfa Laval SRL | Bucharest, Romania | 38,566 | 100 | – | |
| Alfa Laval Iberia SA | Madrid, Spain | 99,999 | 100 | – | |
| Alfa Laval (Portugal) Ltd | Linda-A-Velha, Portugal | 1 | 99 | – | |
| Alfa Laval Holdings Ltd | Camberley, UK | 14,053,262 | 100 | – | |
| Alfa Laval Eastbourne Ltd | Eastbourne, UK | 10,000 | 100 | – | |
| Alfa Laval 2000 | Camberley, UK | 28,106 | 100 | – | |
| Alfa Laval Ltd | Camberley, UK | 11,700,000 | 100 | – | |
| Rolls Laval Heat Exchangers Ltd | Wolverhampton, UK | 5,000 | 50 | – | |
| Tranter Ltd | Doncaster, UK | 10,000 | 100 | – | |
| Ashbrook Simon-Hartley Ltd | Newcastle-under-Lyme, UK | 2 | 100 | – | |
| Alfa Laval Makine Sanayii ve Ticaret Ltd Sti | Istanbul, Turkey | 1 | 1 | – | |
| Alfa Laval USA Inc. | Richmond, Virginia, USA | 1,000 | 100 | – | |
| Alfa Laval US Holding Inc. | Richmond, Virginia, USA | 180 | 100 | – | |
| Alfa Laval Inc. | Richmond, Virginia, USA | 44,000 | 100 | – | |
| Alfa Laval Air Cooled Exchangers Inc | Broken Arrow, Oklahoma, USA | 1,000 | 100 | – | |
| Clearview ACE Acquisition Company LLC | Broken Arrow, Oklahoma, USA | 948,306 | 96 | – | |
| Clearview ACE Holdings Inc | Broken Arrow, Oklahoma, USA | 1,000 | 100 | – | |
| Clearview ACE Acquisition Company LLC | Broken Arrow, Oklahoma, USA | 36,694 | 4 | – | |
| Alfa Laval US Treasury Inc. | Richmond, Virginia, USA | 1,000 | 100 | – | |
| DSO Fluid Handling Inc. | Irvington, New Jersey, USA | 100 | 100 | – | |
| AGC Heat Transfer Inc. | Bristow, Virginia, USA | 1,000 | 100 | – | |
| Tranter Inc. | Wichita Falls, Texas, USA | 1,000 | 100 | – | |
| MCD Gaskets Inc. | Richmond, Virginia, USA | 1,000 | 100 | – | |
| Hutchison Hayes Separation Inc. | Houston, Texas, USA | 1,000 | 100 | – | |
| Alfa Laval Champ Inc. | Sarasota, Florida, USA | 1,000 | 100 | – | |
| Definox Inc. | New Berlin, Wisconsin, USA | 1,000 | 100 | – | |
| Alfa Laval Aalborg Inc. | Miramar, Florida, USA | 200 | 100 | – | |
| Vortex Ventures Inc | Houston, Texas, USA | 1,000 | 100 | – | |
| Ashbrook Simon-Hartley Operations LP | Houston, Texas, USA | 1 | 100 | – | |
| Alfa Laval Tank Equipment Inc | Exton, Pennsylvania, USA | 1,000 | 100 | – | |
| AO Alfa Laval Potok | Koroljov, Russia | 31,077,504 | 100 | – | |
| Alfa Laval Försäkrings AB | 516406-0682 | Lund, Sweden | 50,000 | 100 | – |
| Alfdex AB | 556647-7278 | Botkyrka, Sweden | 1,000 | 50 | – |
| Alfa Laval Support Services Pvt Ltd | Poona, India | 99,990 | 100 | – | |
| MCD Nitrile India Pvt Ltd | Falta, India | 24,593 | 91 | – | |
| Alfa Laval Ukraine | Kiev, Ukraine | 100 | – | ||
| Alfa Laval SpA | Monza, Italy | 20,124 | 1 | – | |
| Alfa Laval KK | Tokyo, Japan | 1,200,000 | 100 | 208 | |
| Total | 4,669 |
| Company name | Domicile | Number of shares | Share of capital % | Book value SEK thousands |
|---|---|---|---|---|
| Alfa Laval Aalborg Ltda | ||||
| Tractebel | Brazil | 1,268 | 121 | |
| Elektrobras | Brazil | 3,981 | 337 | |
| Alfa Laval KK | ||||
| Chugairo | Japan | 5,000 | 84 | |
| Orugano | Japan | 769 | 28 | |
| ADEKA | Japan | 18,992 | 1,060 | |
| LHE Co. Ltd | ||||
| KME | South Korea | 10,700 | 30 | 0 |
| Alfa Laval Philippines Inc. | ||||
| Philippine Long Distance Telephone | Philippines | 820 | 13 | |
| Alfa Laval Nordic OY | ||||
| As Oy Koivulantie 7A | Finland | 1 | 267 | |
| Suomen Talotekniikka KK | Finland | 10 | 26 | |
| Helsinki Halli | Finland | 4 | 121 | |
| Alfa Laval Vantaa OY | ||||
| Länsi-Vantaan Tenniskeskus | Finland | 4 | 0 | |
| Mikkelin Puhelin Oyj | Finland | 5 | 34 | |
| Alfa Laval Aalborg OY | ||||
| Lännen Puhelin | Finland | 1 | 52 | |
| Alfa Laval France SAS | ||||
| SEMACLA | France | 10 | 0 | |
| Alfa Laval HES SA | ||||
| Thermothec | France | 9,130 | 0 | |
| Alfa Laval Parma Srl | ||||
| Parmalat | Italy | 4,413 | 84 | |
| Alfa Laval Benelux BV | ||||
| Bordewes | Netherlands | 1 | 146 | |
| Helpman Holding BV | ||||
| Helpman Sofia OOD | Bulgaria | 500 | 49 | 5,763 |
| Alfa Laval NV | ||||
| Dalian Haven Automation Co Ltd | China | 102 | 43 | 767 |
| Alfa Laval Nordic A/S | ||||
| Storebrand ASA | Norway | 7,629 | 0 | |
| Alfa Laval Corporate AB | ||||
| European Development Capital | ||||
| Corporation (EDCC) NV | Curacao | 36,129 | 0 | |
| Multiprogress | Hungary | 100 | 3 | 0 |
| Kurose Chemical Equipment Ltd | Japan | 180,000 | 11 | 0 |
| Poljopriveda | former Yugoslavia | 0 | ||
| Tecnica Argo-Industrial S.A. | Mexico | 490 | 49 | 0 |
| Adela Investment Co S.A. (preference) | Luxembourg | 1,911 | 0 | 0 |
| Adela Investment Co S.A. | Luxembourg | 1,911 | 0 | 0 |
| Mas Dairies Ltd | Pakistan | 125,000 | 5 | 0 |
| Total | 8,903 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Raw materials and consumables | 2,113 | 2,371 |
| Work in progress | 2,137 | 1,955 |
| Finished goods & goods for resale, new sales | 1,112 | 1,090 |
| Finished goods & goods for resale, spare parts | 690 | 579 |
| Advance payments to suppliers | 124 | 153 |
| Total | 6,176 | 6,148 |
A considerable part of the inventory for spare parts is carried at fair value.
Obsolescence related to inventories amounts to and has changed as follows:
| Consolidated | ||
|---|---|---|
| Translation | Reversal of previous |
|||||
|---|---|---|---|---|---|---|
| SEK millions | January 1 | difference | Acquired | Write-down | write-down | December 31 |
| Year: | ||||||
| 2011 | 957 | -6 | 26 | 212 | -330 | 859 |
| 2012 | 859 | -26 | 2 | 203 | -185 | 853 |
The Group's inventories have been accounted for after deduction for inter-company gains in inventory due to internal sales within the Group. The inter-company profit reserve at the end of 2012 amounts to SEK 419 (420) million.
Accounts receivable with a maturity exceeding one year of SEK 230 (214) million have not been accounted for as non-current assets as they are not intended for permanent use.
Accounts receivable are reported net of provisions for bad debts. The provision for bad debts amounts to and has changed as follows:
| SEK millions | January 1 | Translation difference |
Acquired | New provisions and increase of existing provisions |
Amounts used |
Unused amounts reversed |
Change due to | discounting December 31 |
|---|---|---|---|---|---|---|---|---|
| Year: | ||||||||
| 2011 | 280 | -4 | 25 | 151 | -41 | -59 | 0 | 352 |
| 2012 | 352 | -12 | 1 | 106 | -54 | -53 | 0 | 340 |
The amount of accounts receivable being overdue is an indication of the risk the company runs for ending up in bad debts. The percentage is in relation to the total amount of accounts receivable.
| Consolidated | ||||
|---|---|---|---|---|
| SEK millions | 2012 | % | 2011 | % |
| Overdue: | ||||
| Maximum 30 days | 494 | 9.5 | 504 | 9.9 |
| More than 30 days | ||||
| but maximum 90 days | 315 | 6.0 | 269 | 5.3 |
| More than 90 days | 350 | 6.7 | 330 | 6.5 |
| Total | 1,159 | 22.2 | 1,103 | 21.7 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Notes receivable | 304 | 286 |
| Financial leasing receivables | 11 | 2 |
| Other receivables | 783 | 900 |
| Total | 1,098 | 1,188 |
| Of which, not due within one year: | ||
| Notes receivable | 4 | 2 |
| Other receivables | 21 | 23 |
| Total | 25 | 25 |
| Accrued income Total |
39 200 |
33 174 |
|---|---|---|
| Prepaid expenses | 161 | 141 |
| SEK millions | 2012 | 2011 |
| Consolidated | ||
| SPLIT ON TYPE |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Deposits with banks | 283 | 304 |
| Bonds and other securities | 131 | 93 |
| Other deposits | 13 | 86 |
| Total | 427 | 483 |
| Of which, not due within one year: | ||
| Deposits with banks | 94 | 42 |
| Other deposits | 5 | 10 |
| Total | 99 | 52 |
The item cash and bank in the statement on financial position and in the cash-flow statement is mainly relating to bank deposits. Cash and bank includes a bank deposit in the previously publicly listed subsidiary Alfa Laval (India) Ltd of about SEK 59 (68) million. The company is not a wholly owned subsidiary of the Alfa Laval Group. It is owned to 97.5 (88.8) percent.
The Group has defined benefit commitments to employees and former employees and their survivors. The benefits are referring to old age pension, survivor's pension, disability pension, health care and severance pay.
The defined benefit plans are in place in Austria, Belgium, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Netherlands, Norway, Philippines, South Africa, Sweden, Taiwan, the United Kingdom and the United States. Most plans have been closed for new participants and replaced by defined contribution plans for new employees. The amounts reported as reclassified are referring to plans that have been reclassified between defined benefit plans and defined contribution plans under IAS 19.
The following table presents how the net defined benefit liability is arrived at out of the present values of the different defined benefit plans, less the unrecognised actuarial losses, the unrecognised past service costs and the fair value of the plan assets.
If the net cumulative unrecognised actuarial gains and losses at the end of the previous year are outside a 10 percent corridor calculated on the greater of the present value of the defined benefit obligation or the fair value of the plan assets, then the excess is recognised over the remaining service period of the employees participating in the plan.
| Consolidated | |||||
|---|---|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 | 2009 | 2008 |
| Present value of defined benefit obligation, unfunded | -1,005 | -928 | -873 | -934 | -1,141 |
| Present value of defined benefit obligation, funded | -3,171 | -2,976 | -2,702 | -2,838 | -2,429 |
| Present value of defined benefit obligation at year end | -4,176 | -3,904 | -3,575 | -3,772 | -3,570 |
| Unrecognised actuarial losses | 1,223 | 1,038 | 727 | 814 | 745 |
| Unrecognised past service cost | 3 | 3 | 3 | 8 | 1 |
| Fair value of plan assets | 2,504 | 2,357 | 2,233 | 2,166 | 1,974 |
| Defined benefit liability | -446 | -506 | -612 | -784 | -850 |
| Less amount disallowed | – | 0 | 0 | 0 | 0 |
| (-) liability/(+) asset at December 31 | -446 | -506 | -612 | -784 | -850 |
Alfa Laval does not have any material experience adjustments relating to the defined benefit obligations or the plan assets.
The net plan cost for the defined benefit plans describes the different cost elements of the plans and the expected return on the plan assets. The net plan cost is reported in the consolidated comprehensive income statement on the lines where personnel costs are reported. The interest cost and the expected return are not part of the financial net, but instead just a way to categorize the components of the net plan cost.
The following table presents how the present value of the defined benefit liability has changed during the year and lists the different components of the change.
| (-) liability at December 31 | -4,176 | -3,904 | -3,575 |
|---|---|---|---|
| Benefit payments | 172 | 181 | 197 |
| Effect of any curtailments or settlements | 10 | 11 | 3 |
| Past service cost | 0 | 0 | 0 |
| Current year change in actuarial losses | -383 | -277 | -61 |
| Employee contributions | -3 | -4 | -4 |
| Interest cost | -158 | -170 | -176 |
| Current service cost | -54 | -43 | -33 |
| Translation difference | 144 | -27 | 271 |
| Present value of defined benefit liability at January 1 | -3,904 | -3,575 | -3,772 |
| SEK millions | 2012 | 2011 | 2010 |
| Consolidated |
The following table presents how the fair value of the plan assets has developed during the year and lists the components of the change.
| FAIR VALUE OF PLAN ASSETS | |||
|---|---|---|---|
| Consolidated | |||
| SEK millions | 2012 | 2011 | 2010 |
| Fair value of plan assets at January 1 | 2,357 | 2,233 | 2,166 |
| Translation difference | -75 | 14 | -162 |
| Employer contributions | 183 | 230 | 201 |
| Employee contributions | 3 | 4 | 4 |
| Actual return on plan assets | 208 | 57 | 221 |
| Benefit payments | -172 | -181 | -197 |
| (+) asset at December 31 | 2,504 | 2,357 | 2,233 |
The expected employer contributions to the plans for 2013 amount to SEK 117 million.
The table below presents how the net defined benefit liability has changed and the factors affecting the change.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Defined benefit liability/asset at January 1 | -506 | -612 | -784 |
| Translation difference | 29 | -6 | 115 |
| Net plan cost | -176 | -130 | -147 |
| Employer contributions | 183 | 230 | 201 |
| Change in unrecognised actuarial gains/losses | 24 | 12 | 3 |
| Change in unrecognised past service cost | – | 0 | 0 |
| Change in disallowed asset amount | – | 0 | 0 |
| (-) liability/(+) asset at December 31 | -446 | -506 | -612 |
The gross plan assets and gross defined benefit liabilities of each plan are to be reported as a net amount. The following table shows how the net asset and the net liability are calculated.
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Assets | |||
| Fair value of plan assets | 2,504 | 2,357 | 2,233 |
| Less amount disallowed | – | 0 | 0 |
| 2,504 | 2,357 | 2,233 | |
| Netting | -2,121 | -2,011 | -1,998 |
| Assets in statement on financial position | 383 | 346 | 235 |
| Liabilities | |||
| Present value of defined benefit obligation at year end | -4,176 | -3,904 | -3,575 |
| Unrecognised actuarial losses | 1,223 | 1,038 | 727 |
| Unrecognised past service costs | 3 | 3 | 3 |
| -2,950 | -2,863 | -2,845 | |
| Netting | 2,121 | 2,011 | 1,998 |
| Provision in statement on financial position | -829 | -852 | -847 |
The weighted averages for the more significant actuarial assumptions that have been used at the year-end are:
| Consolidated | |||
|---|---|---|---|
| Percent | 2012 | 2011 | 2010 |
| Discount rate | 4 | 4 | 5 |
| Expected return on investment | 6 | 6 | 6 |
| Expected wage increase | 3 | 3 | 3 |
| Change in health care costs | 8 | 8 | 8 |
| Change of index for future increase of remunerations | 3 | 3 | 3 |
Changes in the health care costs have a significant impact on the costs and the level of the obligations for defined benefit obligations. If the health care costs change by one percent, it gives the following profit and loss effect calculated on the conditions as of the end of the year:
| Consolidated | ||||
|---|---|---|---|---|
| SEK millions | 2012 | 2011 | ||
| Change | 1% increase | 1% decrease | 1% increase | 1% decrease |
| Effect on: | ||||
| Current service costs and interest costs | -2 | 2 | -2 | 2 |
| Present value of the defined benefit obligation | -48 | 37 | -46 | 39 |
The following table presents how the defined benefit pension schemes are distributed on different countries.
| United States |
United Kingdom |
Nether lands |
Germany | Norway | Italy | Belgium | Other | Total |
|---|---|---|---|---|---|---|---|---|
| -589 | – | – | -169 | – | -35 | – | -212 | -1,005 |
| -939 | -1,638 | -290 | – | -116 | – | -72 | -116 | -3,171 |
| -1,528 | -1,638 | -290 | -169 | -116 | -35 | -72 | -328 | -4,176 |
| 594 | 483 | 54 | 41 | 38 | – | 15 | -2 | 1,223 |
| – | – | – | – | – | – | 0 | 3 | 3 |
| 704 | 1,284 | 264 | – | 90 | – | 56 | 106 | 2,504 |
| -230 | 129 | 28 | -128 | 12 | -35 | -1 | -221 | -446 |
| 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| -230 | 129 | 28 | -128 | 12 | -35 | -1 | -221 | -446 |
| -61 | -44 | -10 | -29 | -5 | -1 | -4 | -22 | -176 |
| -506 | ||||||||
| -68 | ||||||||
| -48 | ||||||||
| -2 | ||||||||
| -33 | ||||||||
| -5 | ||||||||
| 564 | 0 | 122 | 12 | 26 | – | 34 | 2,723 | 3,481 |
| 155 | 148 | – | – | – | 478 | – | 14 | 795 |
| 298 | 568 | 190 | 21 | – | – | 43 | 4 | 1,124 |
| 2,037 | 578 | 65 | 333 | 34 | – | – | 125 | 3,172 |
| 3,054 | 1,294 | 377 | 366 | 60 | 478 | 77 | 2,866 | 8,572 |
| 13 | 11 | 22 | 4 | 10 | – | 18 | 14 | 14 |
| -73 -19 -48 -2 -12 -2 |
-292 -23 – – -11 0 |
-63 -6 – – -3 0 |
-20 -5 – – – 0 |
-20 -2 – – -1 0 |
– – – – – 0 |
-6 -1 – – -1 0 |
-32 -12 – – -5 -3 |
* all other things being equal
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| SEK millions | January 1 | Translation difference |
Acquired | New provisions and increase of existing provisions |
Amounts used |
Unused amounts reversed |
December 31 |
| 2011 | |||||||
| Claims & warranty | 1,233 | 0 | 146 | 543 | -581 | -165 | 1,176 |
| Deferred costs | 195 | -1 | 2 | 52 | -37 | -19 | 192 |
| Restructuring | 166 | 0 | – | 154 | -77 | -23 | 220 |
| Onerous contracts | 90 | 0 | – | 31 | -54 | -1 | 66 |
| Litigations | 212 | -2 | 5 | 10 | -57 | -1 | 167 |
| Other | 232 | -1 | 51 | 212 | -123 | -60 | 311 |
| Total | 2,128 | -4 | 204 | 1,002 | -929 | -269 | 2,132 |
| Of which: | |||||||
| current | 1,496 | 1,612 | |||||
| non-current | 632 | 520 | |||||
| 2012 | |||||||
| Claims & warranty | 1,176 | -28 | 1 | 503 | -382 | -114 | 1,156 |
| Deferred costs | 192 | -6 | – | 50 | -35 | -34 | 167 |
| Restructuring | 220 | -2 | – | 100 | -106 | -21 | 191 |
| Onerous contracts | 66 | -2 | – | 27 | -15 | -10 | 66 |
| Litigations | 167 | -3 | – | 45 | -21 | -1 | 187 |
| Other | 311 | -9 | – | 151 | -130 | -14 | 309 |
| Total | 2,132 | -50 | 1 | 876 | -689 | -194 | 2,076 |
| Of which: | |||||||
| current | 1,612 | 1,603 | |||||
| non-current | 520 | 473 |
Unused amounts reversed refer to, among other items, changed classifications and reversals of provisions made in prior years that have not been used. Each type of provision entails everything from a few up to a large number of different items. It is therefore not practicable or particularly meaningful to specify the provisions item by item. As indicated above a clear majority of the provisions will result in disbursements within the next year.
Claims & warranty refers to claims from customers according to the conditions in issued warranties. The claims concern technical problems with the delivered goods or that promised performance has not been achieved.
Deferred costs are partly costs that are known but not yet debited at the time of invoicing, partly costs that are unknown but expected at the time of invoicing. The provision for deferred costs is charged to costs of goods sold in order to get a correct phasing of the gross margin.
Provisions for restructuring are usually relating to closure of plants or closure or move of production lines, businesses, functions etc. or reduction of the number of employees in connection with a downturn in the business climate. The provisions for restructuring are affecting approximately 320 (550) employees.
The provision for onerous contracts is relating to orders where a negative gross margin is expected. Provisions are made as soon as a final loss on the order can be expected. This can in exceptional cases happen already at the time when the order is taken. Normally this provision is relating to larger and complex orders where the final margin is more uncertain.
The provision for litigations refers to ongoing or expected legal disputes. The provision covers expected legal costs and expected amounts for damages or settlements. Other refers to miscellaneous provisions that do not fall within any of the above categories.
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Credit institutions | 2,446 | 1,485 |
| Swedish Export Credit | 1,723 | 1,787 |
| European Investment Bank | 1,120 | 1,162 |
| Private placement | 714 | 758 |
| Capitalised financial leases | 97 | 118 |
| Interest-bearing pension liabilities | 1 | 1 |
| Total debt | 6,101 | 5,311 |
| Cash, bank and current deposits | -1,831 | -2,047 |
| Net debt | 4,270 | 3,264 |
Cash, bank and current deposits include bank and other deposits in the previously publicly listed subsidiary Alfa Laval (India) Ltd of SEK 174 (139) million. The company is not a wholly owned subsidiary of the Alfa Laval Group. It is owned to 97.5 (88.8) percent.
The loans from credit institutions and the private placement are distributed among currencies as follows:
| Consolidated | ||||
|---|---|---|---|---|
| Current | Non-current | |||
| SEK millions | 2012 | 2011 | 2012 | 2011 |
| Currency: | ||||
| BRL | 12 | 11 | – | – |
| CNY | 4 | 38 | – | – |
| DKK | 1 | 2 | 11 | 12 |
| EUR | 178 | 34 | 3,257 | 4,443 |
| INR | 11 | 8 | – | 14 |
| SEK | 95 | – | – | – |
| USD | 94 | 38 | 2,340 | 591 |
| Other | 0 | 1 | – | – |
| Total | 395 | 132 | 5,608 | 5,060 |
| Of which, not due within five years: | 1,981 | 2,055 |
The maturity structure of the loans is presented in the bar chart in the section "Liquidity risk and refinancing risk" under Financial risks.
Loan from credit institutions
Alfa Laval has a senior credit facility of EUR 301 million and USD 420 million, corresponding to SEK 5,324 million with a banking syndicate. At December 31, 2012 SEK 1,784 million of the facility was utilised. The facility matures in April 2016, with a one-year extension option.
The interest is based on applicable IBOR plus a mark up based on the relation between net debt and EBITDA and how much of the facility that is utilised as described below.
| Mark up at | |||||
|---|---|---|---|---|---|
| Net debt/EBITDA | 0-33% utilisation |
>33-66% utilisation |
>66% utilisation |
||
| >2.50 - ≤2.75 | 1.00% | 1.15% | 1.30% | ||
| >2.00 - ≤2.50 | 0.75% | 0.90% | 1.05% | ||
| ≤2.00 | 0.55% | 0.70% | 0.85% |
At year end the mark up is 55 basis points. The corresponding mark up at year end in 2011 and 2010 was 55 and 25 basis points respectively.
In connection with the acquisition of Tranter Alfa Laval signed a bilateral term loan with SHB of EUR 25 million, corresponding to SEK 215 million. The loan matures in December 2013. The interest is based on IBOR plus a mark up based on the relation between net debt and EBITDA as described below.
| Net debt/EBITDA | Mark up at |
|---|---|
| >2.50 - ≤2.75 | 0.525% |
| >2.00 - ≤2.50 | 0.450% |
| ≤2.00 | 0.375% |
At year end the mark up is 37.5 (37.5) (37.5) basis points.
The transaction costs in connection with raising the loans have been capitalised and are being amortised over the maturity of the loans. At the end of the year the capitalised amount was SEK 17 (21) million. The current year's cost for the fee amortisation is SEK -4 (-3) (-0) million.
Alfa Laval has a bilateral term loan from Swedish Export Credit split on one loan of EUR 100 million that matures in 2014 and one loan of EUR 100 million that matures in 2021, corresponding to SEK 1,723 million in total. The loans accrue interest at floating rate based on IBOR plus a mark up of 55 basis points and 95 basis points respectively.
Alfa Laval also has a bilateral term loan from the European Investment Bank of EUR 130 million, corresponding to SEK 1,120 million. The loan matures in 2018. The loan accrues interest at floating rate based on IBOR plus a mark up of 70 basis points.
The senior credit facility and the bilateral term loans accrue interest at floating rate. At the end of 2012 and 2011 the loans were accruing interest in the range of 0.74 % - 1.27 % and 1.71 % - 2.63 % respectively. At the end of 2010 the interest for the bilateral term loan was 1.65 percent. The average interest rate at the end of 2012 was 1.74 (2.74) (2.50) percent. The Group has chosen to hedge 36 (45) (60) percent of the loans to fixed interest rate, with a duration of 26.3 months. The average interest and currency duration including derivatives is 12.8 (19.2) months at the end of 2012.
In 2006 Alfa Laval made a private placement in the U.S. The offer was over-subscribed and was closed at USD 110 million, corresponding to SEK 714 million. The loan matures in April 2016. The interest was based on U.S. Treasury bills plus a mark-up of 95 basis points, which gave a fixed interest of 5.75 percent. The loan was raised on April 27, 2006.
The transaction costs in connection with raising the loan have been capitalised and are being amortised over the maturity of the loan. At the end of the year the capitalised amount was SEK 1 (2) million. The current year's cost for the fee amortisation is SEK -0 (-0) (-0) million.
The syndicated loan and the bilateral term loans are linked to three financial covenants that must be fulfilled throughout the life of the loans. These covenants refer to the relationship between net debt and EBITDA and between EBITDA and total interest expense as well as the debt ratio, see table below.
The private placement is linked to two financial covenants that must be fulfilled throughout the life of the loan. These covenants refer to the relationship between net debt and EBITDA and between EBITDA and total interest expense, see table below.
If the covenants are not fulfilled, the lenders are entitled to demand immediate repayment of the loans, provided that the breach is not temporary. Alfa Laval has fulfilled the covenants with a good margin ever since the loans were raised.
| Consolidated | Financial covenants | Outcome | |||
|---|---|---|---|---|---|
| Times | Syndicated loan & bilateral term loans |
Private place ment |
2012 | 2011 | 2010 |
| Net debt / EBITDA |
<2.75 | < 3.00 | 0.8 | 0.6 | -0.1 |
| EBITDA / total interest expense |
>3.00 | >3.00 | 21.6 | 27.7 | 35.4 |
| Debt ratio | <1.70 | N/A | 0.28 | 0.22 | -0.04 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Financial lessee payable | 97 | 118 |
| Other non-interest bearing liabilities | 1,284 | 1,238 |
| Total | 1,381 | 1,356 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Accruals for social security | 272 | 286 |
| Reserve for severance pay | 139 | 141 |
| Accrued interest expenses | 13 | 19 |
| Other accrued expenses | 1,276 | 1,256 |
| Prepaid income | 19 | 29 |
| Total | 1,719 | 1,731 |
| Of which, not due within one year: | ||
| Accruals for social security | 29 | 28 |
| Reserve for severance pay | 97 | 98 |
| Other accrued expenses | 2 | 34 |
| Total | 128 | 160 |
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Pledged assets | ||
| Other pledges and similar commitments | 10 | 51 |
| Total | 10 | 51 |
| Contingent liabilities | ||
| Discounted bills | 38 | 42 |
| Performance guarantees | 1,338 | 1,305 |
| For joint ventures | 33 | 33 |
| Other contingent liabilities | 606 | 342 |
| Total | 2,015 | 1,722 |
As of December 31, 2012 the Group had sold receivables with recourse
totalling SEK 38 (42) million. These are disclosed as discounted bills above. Other contingent liabilities are among other items referring to bid guarantees, payment guarantees to suppliers and retention money guarantees.
Tetra Pak within the Tetra Laval Group is Alfa Laval's single largest customer with 3.3 (3.9) (4.0) percent of net sales. In June 1999, Tetra Pak entered into a purchasing agreement with Alfa Laval that governs the distribution, research and development, market and sales information, use of trademarks and intellectual property. The following areas shall be agreed upon from time to time between representatives of the parties: products that are subject to the agreement, prices and discounts of such products, geographical markets and product areas where Tetra Pak is Alfa Laval's preferred distributor, the right of Tetra Pak to affix its trademarks to Alfa Laval products, sales goals for Tetra Pak in defined geographical markets, products and technologies that are the focus of joint research and development and the ownership rights of the research and development result and use of market and sales information. The agreement aims at the applications within liquid food where Tetra Pak has a natural market presence through the deliveries of packaging equipment and packaging material.
The agreement was prolonged by two years from December 31, 2012. It has a 12 month period of notice. The prices Tetra Pak receives are not lower than the prices Alfa Laval would obtain when selling to a comparable third party. The prices are fixed on a calendar year basis.
Alfa Laval rents premises to DeLaval in Russia. The total rent income for this amounts to SEK 2 (2) (4) million.
The Board of Directors for Alfa Laval AB has two representatives from Tetra Laval - Jörn Rausing and Finn Rausing.
At year-end, Alfa Laval has the following balance items against companies within the Tetra Laval group (Tetra Pak and DeLaval).
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Receivables: | ||
| Accounts receivable | 140 | 64 |
| Other receivables | 3 | 74 |
| Liabilities: | ||
| Accounts payable | 0 | 1 |
| Other liabilities | 16 | 24 |
Alfa Laval has had the following transactions with companies within the Tetra Laval group (Tetra Pak and DeLaval).
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Net sales | 974 | 1,121 | 985 |
| Other operating income | 2 | 2 | 4 |
Alfa Laval owns 50 percent in three different joint ventures: Rolls Laval Heat Exchangers Ltd with Rolls Royce as partner, Alfdex AB with Haldex as partner and AlfaWall AB with Wallenius as partner.
These joint ventures are part of the consolidated financial position with the following assets and liabilities and of the consolidated comprehensive income with the following revenues and expenses:
| Consolidated | ||
|---|---|---|
| SEK millions | 2012 | 2011 |
| Current assets | 54 | 51 |
| Non-current assets | 11 | 6 |
| Current liabilities | 30 | 32 |
| Non-current liabilities | 8 | 6 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Net sales | 131 | 119 | 1 |
| Other operating income | 29 | 16 | 26 |
| Other operating costs | -57 | -44 | -25 |
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Result items | |||
| Amount of recognised project | |||
| sales revenue | 2,024 | 1,827 | 641 |
| Work performed on | |||
| ongoing projects | |||
| Aggregate amount of costs | |||
| incurred and recognised profits | |||
| (less recognised losses) | 2,364 | 1,958 | 926 |
| Assets | |||
| Retentions | 72 | 71 | 46 |
| Gross amount due from | |||
| customers for work in progress | 392 | 404 | 301 |
| Liabilities | |||
| Advances received | 705 | 484 | 353 |
| Gross amount due to cus | |||
| tomers for work in progress | 175 | 241 | 45 |
Alfa Laval has entered into non-cancellable operating leases mainly relating to premises and finance lease agreements regarding machinery and equipment with leasing periods of 1-20 years. The leasing fees for non-cancellable operating leases for premises were SEK 326 (304) (284) million. During the year, the Group has entered into finance leases with a capitalised value of SEK - (1) million. See Note 18 for information on the capitalised value of finance leases.
The future minimum leasing fees concerning non-cancellable operating leases, distributed on maturity dates, amount to:
FUTURE MINIMUM LEASING FEES FOR OPERATING LEASES
| Consolidated | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Maturity in year: | |||
| 2011 | N/A | N/A | 256 |
| 2012 | N/A | 321 | 217 |
| 2013 | 312 | 274 | 176 |
| 2014 | 250 | 205 | 140 |
| 2015 | 209 | 169 | 125 |
| 2016 | 139 | 117 | N/A |
| 2017 | 114 | N/A | N/A |
| Later | 157 | 195 | 187 |
| Total | 1,181 | 1,281 | 1,101 |
The future minimum leasing fees concerning financial leasing agreements and their net present value, distributed on maturity dates, amount to:
| Consolidated | ||||||
|---|---|---|---|---|---|---|
| Future minimum leasing | Present value of | |||||
| fees for financial leases | financial leases | |||||
| SEK millions | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 |
| Maturity in | ||||||
| year: | ||||||
| 2011 | N/A | N/A | 21 | N/A | N/A | 21 |
| 2012 | N/A | 18 | 18 | N/A | 18 | 17 |
| 2013 | 17 | 17 | 17 | 16 | 16 | 16 |
| 2014 | 15 | 16 | 16 | 15 | 14 | 14 |
| 2015 | 14 | 15 | 15 | 13 | 13 | 13 |
| 2016 | 13 | 13 | N/A | 12 | 11 | N/A |
| 2017 | 10 | N/A | N/A | 10 | N/A | N/A |
| Later | 28 | 39 | 51 | 24 | 31 | 44 |
| Total | 97 | 118 | 138 | 90 | 103 | 125 |
SPLIT BY TYPE
| Parent company | |||
|---|---|---|---|
| SEK millions | 2012 | 2011 | 2010 |
| Dividends from subsidiaries | – | 1,679 | 2,288 |
| Received group contributions | 596 | 405 | 1,154 |
| Total | 596 | 2,084 | 3,442 |
| THE UNRESTRICTED EQUITY IN ALFA LAVAL AB (PUBL) IS SEK: | |
|---|---|
| Profit brought forward | 8,304,831,976 |
| Paid group contribution, net after tax | -736,367,418 |
| Net income 2012 | 717,006,897 |
| 8,285,471,455 |
The Board of Directors propose a dividend of SEK 3.50 (3.25) per share corresponding to SEK 1,468,097,102 (1,363,233,024) and that the remaining income of SEK 6,817,374,353 (8,304,831,976) be carried forward.
The undersigned certify that the annual report for the Group and the Parent company has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the European Union, and generally accepted accounting principles respectively, and gives a true and fair view of the financial positions and results of the Group and the Parent company, and that the Board of Directors' report gives a fair review of the development of the operations, financial positions and results of the Group and the Parent company and describes substantial risks and uncertainties that the Group companies face.
Jörn Rausing Lars Renström Director President and CEO
Our Auditors' Report concerning this Annual Report has been issued on March 4, 2013.
Staffan Landén Håkan Olsson Reising Authorised Public Accountant Authorised Public Accountant
To the annual meeting of the shareholders of Alfa Laval AB (publ), corporate identity number 556587-8054
We have audited the annual accounts and consolidated accounts of Alfa Laval AB (publ) for the year 2012. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 47–127.
Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2012 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders adopt the statement of income and statement of financial position for the parent company and statement of comprehensive income and statement of financial position for the group.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the Managing Director of Alfa Laval AB (publ) for the year 2012.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the Managing Director are responsible for administration under the Companies Act.
Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.
As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
Lund March 4, 2013
Staffan Landén Authorized Public Accountant
Håkan Olsson Reising Authorized Public Accountant
| Introduction by the Chairman of the Board | 129 |
|---|---|
| Corporate Governance Report 2012 | 130 |
| Regulations | 130 |
| Share and ownership structure | 130 |
| Annual General Meeting | 130 |
| Annual General Meeting for the 2011 fiscal year |
130 |
| Nominating Committee | 131 |
| Board of Directors | 131 |
| Committees | 133 |
| The company's auditors | 133 |
| Remuneration to auditors | 133 |
| Board of Directors and Auditors | 134 |
| President and Group management | 136 |
| Areas of responsibility | 136 |
| Group management meetings in 2012 | 136 |
| Remuneration of senior executives | 137 |
| Board of Directors' report on internal control | 138 |
| Control environment | 138 |
| Risk assessment | 138 |
| Control structures | 138 |
| Information and communication | 139 |
| Follow-up | 139 |
| Auditor's report on the Corporate | |
| Governance Statement | 139 |
2012 was a year of continued turbulence in the financial markets as well as of macroeconomic issues in various parts of the world and, accordingly, a challenging operating environment. For Alfa Laval, this meant a year of management with one foot on the accelerator and one on the brake. The cost-cutting program announced at the end of 2011 was implemented in parallel with our continued investment in markets we expect to post long-term growth. This was all as part of our efforts and ambitions of securing a profitable growth trend for the company. The structural driving forces in the world at large, in the form of an increased standard of living in fast-growing regions, continued world trade, an increased need for energy and increased environmental regulation, all comprise driving forces that will benefit Alfa Laval moving forward. Accordingly, we are investing in various initiatives to ensure that we optimally utilize the opportunities that arise in these areas, both organic and acquired, in parallel with investing in creating our own opportunities through continued focus on research and development. During the year,
Board work has been characterized by these considerations. Sustainability issues are of the highest priority at Alfa Laval and, during the year, we revised our business principles and created a Commercial Ethics Council with the CEO as Chairman to ensure its implementation. The review of the business principles was performed against the background of the new UN and OECD guidelines. We carried out a consultation process, both internally and externally, as part of establishing ownership, which included union representatives, shareholders, the management and sustainability analysts before the new guidelines were finally approved. In addition, the environmental targets were renewed for manufacturing.
In a changing operating environment that is characterized by uncertainty, transparency is particularly important. It is crucial for companies to show that they act ethically, in compliance with the law and with the owners' interests in mind. Our corporate governance report aims to highlight how governance is applied at Alfa Laval, clarify the structure, explain the division of responsibility and explain which control measures are in place to protect the company's assets and thus the owners' investments. In other words, we hope to convey the information the owners need to determine how we manage the responsibility entrusted to us.
Lund, March 2013
Anders Narvinger Chairman of the Board
Alfa Laval's Corporate Governance Report for 2012 is presented below, and has been reviewed by the company's auditors. The report provides a detailed description of the division of responsibility in Alfa Laval and also how the company's three decision-making bodies – the Annual General Meeting, the Board of Directors and the President – act and interact.
Alfa Laval is a public company listed on the NASDAQ OMX Exchange Stockholm and as such, its governance is subject to a number of laws and regulations. The most important of these are the Swedish Companies Act, the Swedish Annual Accounts Act, the rules of the exchange and the Swedish Corporate Governance Code ("the Code"). Alfa Laval's corporate governance complies with the Code, with only one exception. The exception and its explanation can be found in the Nominating Committee section, on page 131.
The external regulations are supplemented by internal ones, which include the company's Business Principles, governing documents, such as guidelines and instructions as well as procedures for control and risk management. In addition, the work of the Board and the president is governed by formal work plans.
At December 31, 2012, Alfa Laval had 419,456,315 shares outstanding, allocated among 34,629 shareholders according to Euroclear Sweden's shareholders' register. Each share corresponds to one vote. Tetra Laval was the largest owner with 26.1 percent
The registered name of the company is Alfa Laval AB (publ) and the registered office of the Board of Directors shall be in Lund Municipality in Sweden. The company's share capital shall amount to not less than SEK 745,000,000 and not more than SEK 2,980,000,000. The number of shares shall be not less than 298,000,000 and not more than 1,192,000,000. The fiscal year is the calendar year. The objective of the company's operations is to, directly or through subsidiaries and joint venture companies in and outside Sweden, develop, manufacture and sell equipment and installations, primarily in the areas of separation, heat transfer and fluid handling, and to administer fixed and movable property, and other related operations. The Articles of Association do not include any limitations regarding the number of votes a shareholder can cast at an Annual General Meeting. Nor does it include any specific rules regarding the appointment and dismissal of Board members or changes in the Articles of Association. The currently prevailing Articles of Association were adopted on the Annual General Meeting on April 20, 2009 and are available in their entirety on Alfa Laval's website: www.alfalaval.com.
Alfa Laval's corporate governance report and business principles are published on www.alfalaval.com.
and the only owner with a stake larger than 10 percent. The second largest owner was Alecta Pensionsförsäkring with 6.7 percent, followed by Foundation Asset Management with 6.0 percent. Legal entities accounted for about 94 percent of holdings, while individuals accounted for the remainder. From a geographic perspective, the following countries were represented by the five largest shareholders: Sweden, the Netherlands, the US, the UK and Luxembourg. For more information about Alfa Laval's share and ownership structure, refer to the Share section on pages 10 and 11.
The Annual General Meeting is Alfa Laval's highest decision-making body at which all shareholders are entitled to participate and each share has one vote. The majority of proposals dealt with at the general meeting are decided by a simple majority. However, certain points require a qualified majority; these include resolutions to amend the company's Articles of Association or resolutions to buy back shares. The Annual General Meeting is to be held annually within six months of the close of the fiscal year in either Lund or Stockholm. Normally, the Annual General
Meeting takes place in late April or early May in Lund. The date and location is notified by the time of publication of the interim report for the third quarter.
To be entitled to participate in the general meeting and vote, shareholders must be registered in the shareholders' register maintained by Euroclear Sweden AB. Any shareholder who is unable to attend in person, may participate through a proxy with a power of attorney. Shareholders with nomineeregistered shares must have the shares temporarily registered under their own name.
The Annual General Meeting is held in Swedish and all documentation is available in Swedish and English. Alfa Laval endeavors to ensure that all Board members participate, as well as, in so far as it is possible, all members of the Group management. The company's auditors are always present.
The Annual General Meeting for the 2011 fiscal year was held at Färs och Frosta Sparbank Arena in Lund on April 23, 2012. The Annual General Meeting was attended by 466 share holders, including owners, proxies, assistants,
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guests and officials – representing 61.6 percent of the total number of shares and votes.
Both of the company's external auditors attended, as did all Board members elected by the Annual General Meeting. Chairman of the Board Anders Narvinger was elected as the Meeting Chairman. The resolutions passed at the Annual General Meeting included the following:
short-term and long-term programs for variable remuneration.
The work of the Nominating Committee The Nominating Committee prepares and submits proposals regarding candidates for Board members and, if applicable, auditors. The supporting documentation utilized by the Nominating Committee for its work includes the annual evaluation of the work of the Board, which is initiated by the Chairman of the Board. Other key factors to be considered, against the background of the company's strategy, include the type of competence required. The Nominating Committee can call upon the assistance of external resources in its search for suitable candidates and can also conduct interviews with individual Board members. Its duties also comprise the submission of motions in respect of remuneration to the Board and members of the Board committees.
Composition of the Nominating Committee The Nominating Committee shall not comprise more than five members, of which the majority may not be Board members. In addition, the Nominating Committee can decide to include the Chairman of the Board and other Board members. According to the Code, a majority of the members of the Nominating Committee are to be independent of the company and management. At least one member must be independent of the company's largest shareholders in terms of votes or the group of shareholders that jointly administer the company. The Chairman of the Nominating Committee may not be the Chairman of the Board or a Board member.
Ahead of the 2013 Annual General Meeting In accordance with a resolution passed by the Annual General Meeting, the Chairman of the Board contacted representatives of the company's largest shareholders at the end of the third quarter and requested that they each appoint one member of the Nominating Committee. The composition of the Nominating Committee was communicated by a press release and on Alfa Laval's website on October 15, 2012.
Jörn Rausing (appointed by Tetra Laval,) Bo Selling (appointed by Alecta), Claes Dahlbäck (appointed by Foundation Asset Management), Jan Andersson (appointed by Swedbank Robur Fonder) and Lars-Åke Bokenberger (appointed by AMF Pension).
The holdings of the Nominating Committee represented 44.89 percent of the number of shares outstanding at September 30, 2012. The Chairman of the Board Anders Narvinger was elected a member and secretary and Jörn Rausing was elected Chairman of the Nominating Committee. The position of the latter as Board member is a direct deviation from the Code and is explained as Jörn Rausing was viewed as particularly well-suited to lead the work of the committee in an effective manner and obtain the best possible results for the company's owners.
of the 2013 Annual General Meeting The Nominating Committee had three meetings, which continued for an average of two hours. The focus of these meetings included discussions and evaluation relating to the composition of the Board and the type of competence that is necessary and may be required in the future on the basis of the company's strategy.
The Board's work and responsibilities The Board bears the ultimate responsibility for the organization and administration of the company. Its work and responsibilities are governed by the Swedish Companies Act, the Swedish Board Representation (Private Sector Employees) Act, the Articles of Association, the Board's own formal work plan, NASDAQ's Rule Book for Issuers and the Swedish Corporate Governance Code.
The Board prepares and evaluates Alfa Laval's overall long-term objectives and strategies. This includes establishing business and financial plans, checking and approving financial statements, adopting guidelines, making decisions on issues relating to acquisitions and divestments, and deciding on major investments and
| Name | Representing | Shareholding in Alfa Laval, %* |
|---|---|---|
| Jörn Rausing | Tetra Laval | 26.10 |
| Bo Selling | Alecta | 6.98 |
| Claes Dahlbäck | Foundation Asset Management | 5.98 |
| Jan Andersson | Swedbank Robur Funds | 3.22 |
| Lars-Åke Bokenberger | AMF Pension | 2.61 |
Shareholders wishing to submit proposals to the Nominating Committee prior to the Annual General Meeting may contact Alfa Laval's Chairman of the Board Anders Narvinger, or one of the owner representatives.
Contact may also take place directly via e-mail at [email protected].
* As of September 30, 2012
significant changes in Alfa Laval's organization and operations. The Board (through its Audit Committee) procures auditing services and maintains ongoing contact with the company's auditors. In addition, the Board works to ensure that the company has a sound internal control function and formalized procedures. The Board also appoints the President and defines the instructions that the President must follow. Through the Remuneration Committee, the Board determines salaries and remuneration to the President and members of the executive management.
The Board of Directors shall comprise a minimum of four and maximum of ten members, with a maximum of four deputy members. At present, the Board comprises eight members and no deputies. The members are elected annually for the period until the conclusion of the next Annual General Meeting and are obligated to dedicate the requisite time and diligence to the assignment, as well as have the necessary knowledge to best look after the interests of the company and its owners. In addition, the trade-union organizations appoint three employee representatives and three deputy employee representatives. Salaried employees in the company are invited to Board meetings as presenters and experts. The company's Chief Financial Officer participates in all meetings and Alfa Laval's Chief Legal Counsel serves as Board Secretary.
Independence of Board members All members of the Alfa Laval Board elected by the Annual General Meeting are considered independent of the company, except Lars Renström, who is President and CEO of the company. All members are also considered independent of the company's major shareholders, except Finn Rausing and Jörn Rausing, who cannot be considered independent due to their relation to Tetra Laval, which, on December 31, 2012, owned 26.1 percent of the shares in the company.
The work of the Board is governed by a formal work plan that is determined annually at the statutory meeting. This formal work plan describes the Board's work assignments and the division of responsibility between the Board, its committees and the President. It also defines the role of the Chairman of the Board and includes a separate instruction for the company's President regarding the financial reporting required to be submitted to the Board to enable ongoing assessment of the financial position.
In 2012, 11 Board meetings were held, of which eight were scheduled and lasted an average of approximately three hours. Four meetings were held by phone and the other meetings were held in Lund, Stockholm and Söborg (Denmark). The normal agenda items for Board meetings include earnings results, order trends, investments and acquisitions. The company's President prepares an agenda for each meeting in consultation with the Chairman of the Board. Board members who wish to discuss a particular matter must inform the Chairman of the Board well in
advance, so that the requisite material on which to base decisions can be prepared. Notices of meetings, including the meeting agenda and the requisite information or documentation on which to base decisions, must reach the Board members not later than one week prior to the date of the meeting. Board decisions are made based on open discussions led by the Chairman.
All new Board members receive an extensive induction program. In addition, each year, a combined training course and field trip is made to one of Alfa Laval's facilities. In 2012, the trip went to Alfa Laval's facility in Söborg, Denmark.
The Chairman of the Board ensures that an annual evaluation is conducted of the work of the Board. This is carried out through open discussions and interviews with the individual members. The evaluation focuses on the Board's work methods, its work climate and the access to and need for particular Board competence. The goal is to ensure a well-functioning Board. The evaluation forms part of the supporting documentation for the Nominating Committee when nominating Board members and proposing remuneration levels.
The Chairman of the Board directs the work of the Board in a manner that ensures it complies with the Swedish Companies Act, the Articles of Association, the formal work plan of the Board and the Code. In addition, the Chairman
| Board | Remuneration Committee | Audit Committee | ||||||
|---|---|---|---|---|---|---|---|---|
| Name | Present | Remuneration | Present | Remuneration | Present | Remuneration | ||
| Appointed by the Annual General Meeting |
Anders Narvinger | 11 | 1 150 000 | 3 | 50 000 | |||
| Gunilla Berg | 10 | 450 000 | 5 | 75 000 | ||||
| Arne Frank | 10 | 450 000 | ||||||
| Björn Hägglund | 8 | 450 000 | 3 | 50 000 | ||||
| Ulla Litzén | 10 | 450 000 | 5 | 75 000 | ||||
| Finn Rausing | 11 | 450 000 | 5 | 125 000 | ||||
| Jörn Rausing | 10 | 450 000 | 3 | 50 000 | ||||
| Lars Renström | 11 | |||||||
| Total | 3 850 000 | 150 000 | 275 000 | |||||
| Employee representatives | Arne Kastö* | 6 | ||||||
| Jan Nilsson | 11 | |||||||
| Susanna Norrby | 10 | |||||||
| Bror Garcia Lantz** | 4 | |||||||
| Number of meetings | 11 | 3 | 5 |
* Stepped down on May 31 **Joined on June 26
must ensure that the work is well organized and is conducted efficiently, so that the Board fulfills its tasks. In dialog with the company's President, the Chairman monitors operational developments and is responsible for ensuring that the other members receive, on an ongoing basis, information necessary for Board work to be performed in the most effective manner. The Chairman is responsible for evaluating the Board's work, participates in evaluation and development matters with respect to the Group's senior executives and ensures that the Board's decisions are executed. The Chairman represents the company in ownership issues.
Remuneration to the Board members is determined by the Annual General Meeting based on the motions submitted by the Nominating Committee. The Chairman and members of the Audit Committee and the Remuneration Committee receive supplementary remuneration. No Board member is entitled to pension payments from the company, except Lars Renström, who is President and CEO.
Alfa Laval's Articles of Association stipulate that there must be a Remuneration Committee and an Audit Committee that report to the Board. Committee members are drawn from Board members for a period of one year.
The Audit Committee is tasked with ensuring compliance with the principles for financial reporting and internal control among other items. The Committee formulates guidelines for the company's financial reporting and follow-up, and has the right to determine the focus of the internal audit. The Committee also examines the procedures for reporting and financial controls, the work of the external auditors, their qualifications and independence. For additional information on the tasks of the Audit Committee, see "the Board of Directors' report on internal control" on page 138.
Members are appointed annually at the Board's statutory meeting. In 2012, the Committee comprised Finn Rausing (Chairman), Gunilla Berg and Ulla Litzén. Alfa Laval's Chief Legal Counsel, Mikael Wahlgren, served as the Committee's secretary. In 2012, five meetings were held, of which two by phone, and lasted an average of approximately two hours. The company's Chief Financial Officer, the Head of the Internal Audit Function and the company's auditors were also present at the meetings. During the year, the following items were dealt with at the Committee meetings: review of the procedures for corporate governance, review and follow up of the results of the annual feedback from, at present, about 288 managers regarding
Alfa Laval's business principles were published in of Alfa Laval 2003. Since which time, both the UN and OECD have published and revised guidelines pertaining to human rights and business principles for multinational companies. Against this background, in 2012, Alfa Laval reviewed its business principles and carried out a consultation process with union representatives, shareholders, management and sustainability analysts. The new business principles were adopted by the Board and are available at www.alfalaval.com.
controls (see page 139), updates of developments in IFRS, amendments to the Code as well as the review of Group provisions and allocations.
The Remuneration Committee acts in conjunction with recruitment and appointments, and is involved when other conditions of employment relating to the President or members of Group Management require discussion. The Committee's assignment is to prepare the guidelines for remuneration to senior executives to be resolved on by the Annual General Meeting and to submit proposals to the Board of Directors regarding salary and employment terms and conditions for the President. In addition, the Committee handles matters for the Board regarding salary and employment terms and conditions for senior executives who report directly to the President.
The Remuneration Committee is appointed annually at the Board's statutory meeting. In 2012, the Committee comprised Anders Narvinger (Chairman), Jörn Rausing and Björn Hägglund. The Remuneration Committee held three meetings, at which all members were in attendance. A number of phone meetings were also held to address ongoing issues. Minutes are taken at all meetings and the contents are distributed to the Board members. Items dealt with at the Committee meetings included conditions of employment for senior executives, along with remuneration terms, and proposals for conditions for the Group's incentive program.
The auditors comprise a supervisory body appointed by the Annual General Meeting. Their assignment includes the examination of the accounting and financial statements of individual companies, evaluation of the accounting policies applied, assessment of
the administration of the company management, the review of interim reports for the third quarter and evaluation of the overall presentation in the Annual Report. The result of the audit – the Audit Report – is communicated to shareholders in the Annual Report and at the Annual General Meeting. Additionally, the auditors present a statement regarding the discharge of liability of the Board of Directors, a statement regarding the adoption of the income statement and balance sheet by the Annual General Meeting and a statement regarding the Corporate Governance Report. The number of auditors must be a minimum of one and maximum of two, with not more than two deputies. An authorized public accountant or registered auditing firm is appointed as the company's auditor and, where applicable, as deputy auditor.
At the Annual General Meeting on April 23, 2012, the following were elected or reelected respectively as the company's auditors, Authorized Public Accountants Staffan Landén and Håkan Olsson Reising. In addition, the auditors Johan Thuresson and Karoline Tedevall were appointed the company's deputy auditors. According to Alfa Laval's assessment, none of these auditors has any relationship to Alfa Laval, or any company related to Alfa Laval, that could affect their independent status in relation to the company. All of the auditors also possess the requisite competence to be able to execute their assignment. In 2012, the entire Board received reports from the company's external auditors on three occasions. On one occasion, this was conducted without the presence of the President or other members of Group management. The Board's Audit Committee received separate reports from the company's external auditors on five occasions.
(see Note 7, on page 99)
Born: 1948.
Formerly President of Teknikföretagen and formerly President and CEO of ABB Sweden.
Education: BSc. Eng from the Faculty of Engineering at Lund University, BSc. Econ from Uppsala University. Chairman of the Board of TeliaSonera AB, Trelleborg AB, Coor Service Management AB and Capio AB. Board member of JM AB, ÅF AB and Pernod Ricard SA. Independent of company and major shareholders. Number of shares in Alfa Laval: 40,000* (40,000**).
Finn Rausing Board member since 2000.
Born: 1955. Education: B.L., MBA from Insead. Board member of Tetra Laval Group, De Laval Holding AB and Swede Ship Marine AB. Independent of company.
Gunilla Berg Board member since 2004.
Executive Vice President and CFO of the Teracom Group. Former positions include Executive Vice President and CFO of the SAS Group and Executive Vice President and CFO of the KF Group.
Education: BSc. Econ from the Stockholm School of Economics. Board member of L E Lundbergföretagen AB and Vattenfall AB. Independent of company and major shareholders. Number of shares in Alfa Laval: 3,400* (1,000**).
Jörn Rausing Board member since 2000.
Born: 1960. Head of Mergers and Acquisitions (M&A) in the Tetra Laval Group. Education: BSc. Econ. Board member of the Tetra Laval Group, Ocado Ltd. and De Laval Holding AB.
Board member since 2005.
Born: 1951.
President and CEO of Alfa Laval. Education: BSc. Eng, BSc. Econ. Chairman of the Board of ASSA ABLOY AB. Board member of TeliaSonera AB. Independent of major shareholders. Number of shares in Alfa Laval: 40,400* (40,400**).
Arne Frank Board member since 2010.
President and CEO of AarhusKarlshamn AB. Education: BSc. Eng in industrial economics from Linköping
Institute of Technology. Chairman of the Board of Contex Holding A/S Independent of the company and major shareholders. Number of shares in Alfa Laval: 16,000* (8,000**).
Board member since 2005.
Born: 1945.
Former positions include Deputy CEO of Stora Enso.
Education: PhD (For.) Chairman of the Board of SweTree Technologies and the World Wide Fund for Nature, Sweden.
Board member of, among others, Bergvik Skog AB, the Knut and Alice Wallenberg Foundation, the UN Global Compact and AB Karl Hedin.
Independent of company and major shareholders. Number of shares in Alfa Laval: 12,000* (12,000**).
Ulla Litzén
Board member since 2006.
Former positions include President of W Capital Management and various executive positions at Investor. Education: BSc. Econ from the Stockholm School of Economics, MBA from the Massachusetts Institute of Technology. Board member of, among others, Atlas Copco AB, Boliden AB, Husqvarna AB, NCC AB and SKF AB. Independent of company and major shareholders.
Number of shares in Alfa Laval: 15,600* (15,600**).
Jan Nilsson Employee representative since 2000. Born: 1952.
Employed by Alfa Laval since 1974. Employee representative for the Swedish Metal Workers' Union (IF Metall).
Arne Kastö* Employee representative since 2000.
Born: 1948. Employed by Alfa Laval since 1980. Employee representative for the Swedish Union of Clerical and Technical Employees in Industry (Unionen).
* Stepped down on May 31.
Susanna Norrby Employee representative since 2003.
Employed by Alfa Laval since 1992. Employee representative for the Swedish Association of Graduate Engineers (CF). Number of shares in Alfa Laval: 5,000* (5,000**).
Bror Garcia Lantz* Employee representative since 2012.
Born: 1965. Employed by Alfa Laval since 1990. Employee representative for the Swedish Union of Clerical and Technical Employees in Industry (Unionen).
* Joined on June 26.
Employee representatives Deputy employee representatives
135
* Holdings as of December 31, 2012. ** Holdings as of December 31, 2011.
Lars Renström President and CEO.
Born: 1951. CEO since October 1, 2004. Former positions include President and CEO of Seco Tools AB, Division Manager at Ericsson AB and Atlas Copco AB. Chairman of the Board of ASSA ABLOY AB Board member of TeliaSonera AB. Education: BSc. Eng, BSc. Econ. Number of shares in Alfa Laval: 40,400* (40,400**).
Thomas Thuresson Chief Financial Officer.
Born: 1957. Employed by Alfa Laval since 1988. CFO since 1995. Former assignments include Controller of the Flow business area and Group Controller of the Alfa Laval Group. Board member of PartnerTech AB. Education: BSc. Econ., IMD (BPSE). Number of shares in Alfa Laval: 130,800* (130,800**).
Göran Mathiasson
President, Operations Division.
Employed by Alfa Laval since 1979. President of the Operations Division since April 2003. Previously in charge of Alfa Laval Manufacturing and Thermal Technology, including Research and Development, production development, system development and purchasing. Board member of Heatex AB. Education: BSc. Eng. Number of shares in Alfa Laval: 6,588* (6,588**).
Svante Karlsson
President, Process Technology Division.
Born: 1955. Employed by Alfa Laval since 1984. Former President of the Equipment Division, head of the Thermal business area and President of Marine & Power. Education: BSc. Econ. Number of shares in Alfa Laval: 62,744* (72,744**).
Susanne Pahlén Åklundh President, Equipment Division.
Born: 1960. Employed by Alfa Laval since 1983. President of the Equipment Division since 2009. Previously responsible for Mid Europe, Nordic and the Process Industry segment. Education: MSc. Eng. Number of shares in Alfa Laval: 756* (756**).
Peter Leifland President of the Marine & Diesel Division.
Employed by Alfa Laval since 1985. President of the Marine & Diesel Division since 2011. Formerly Regional manager in charge of the Western Europe and North America Region 2004-2011, the Asia and Latin America Region 2001-2004 and the Eastern Europe and Latin America Region 1999-2001. Education: B.L., lic.spec. IMD (PED).
Number of shares in Alfa Laval: 460,000* (460,000**).
The President directs the daily operations and is responsible for ensuring that the Board receives information and the necessary supporting documentation for its decisionmaking purposes. The President is also responsible for ensuring that the company's accounting complies with applicable laws and provisions. In support of sound corporate governance and to ensure that the company's actions follow the requisite ethical guidelines, Alfa Laval has a number of Business Principles. These affect how the company and its
employees act with respect to the Group's environmental impact, social responsibility, business ethics and transparency. The principles are described in full on Alfa Laval's website, www.alfalaval.com.
The President has the support of the Group management, to which responsibilities and authority are delegated. The members of the Group management are responsible for their respective areas of operation, which comprise divisions or geographic regions, and collectively for the Group as a whole. Group management comprises the CEO and those individuals
who, on the CEO's recommendation, have been appointed by the Board.
The Group management held six meetings in 2012, during which minutes were taken. In addition, quarterly reviews are held of all business developments in the company's divisions and geographic regions, which address such items as the business climate, earnings, earnings projections for the next 12 months and other specific issues affecting the respective business areas. In addition,
Executive Vice President in charge of the Central and Eastern Europe, Latin America, Middle East and Africa Region.
Employed by Alfa Laval since 1977. Regional manager since September 1, 2004. Prior to this, he was President of Alfa Laval Inc. in Canada and held executive positions in Alfa Laval in Sweden, Spain and Brazil. Education: BSc. Eng.
Number of shares in Alfa Laval: 16,500* (24,000**).
Executive Vice President in charge of the Asia, India and Oceania Region.
Employed by Alfa Laval since 1985. Regional manager since September 1, 2004. Prior to this, he served as President of Alfa Laval China for more than ten years. Education: BSc. Eng. Number of shares in Alfa Laval: 54,588* (54,588**).
Executive Vice President in charge of the Western Europe and North America Region.
Born: 1962. Employed by Alfa Laval since 1984. Regional manager since 2011. Prior to this, he served as head of India and the UK. Education: BSc. Eng. Number of shares in Alfa Laval: 47,552* (47,552**).
Peter Torstensson Senior Vice President, Corporate
Born: 1955. Employed by Alfa Laval since 1999. Senior Vice President, Corporate Communications since 1999. Formerly held such positions as President of Borstahusen Informationsdesign.
Number of shares in Alfa Laval: 76,000* (76,000**).
Peter Bailliere Senior Vice President, Human Resources.
Born: 1963. Employed by Alfa Laval since 2007. Senior Vice President, Human Resources, since July 1, 2007. Many years of experience with Volvo Cars, most recently as Head of Group Human Resources. Education: Master of Sociology, Bachelor in Fiscal Law.
Lars Henriksson retired on January 1, 2013. From that date, Joakim Vilson took up the position as Executive Vice President in charge of the Central and Eastern Europe, Latin America, Middle East and Africa Region.
separate strategy meetings were held that addressed the following areas: the management's proposals concerning future direction with regard to organic growth and growth through acquisition. The review focused on risks and opportunities in individual segments, application areas and geographic regions, in addition, it contained a review of the consequences of the above on the company's supply chain. Furthermore, a review was performed of the direction for acquisitions with regard to product, technology, channel and location.
The remuneration principles for the President and other members of Group management are determined by the Annual General Meeting. For additional information, see pages 97 and 98.
The Board is responsible for ensuring that a sound internal control function is in place to safeguard the company's assets and thus the shareholders' investments. The internal control function shall ensure the reliability of Alfa Laval's financial reporting, and its compliance with legislation, regulations, the applicable accounting policies and the company's business principles. In turn, the communication of financial information and reporting must be correct, relevant, objective and transparent and be performed simultaneously, to thereby facilitate assessment of the company by our owners and operating environment.
The control environment includes the internal governance instruments set by the Board to ensure sound internal control. A number of policy documents are utilized as governance instruments in the company's daily operations. These are tested annually as well as reviewed and updated on an ongoing basis and encompass such instruments as the Board's formal work plan, the President's instructions, reporting instructions, the company's finance policy, its business principles, investment policies and communication policy.
The Board is also responsible for ensuring that the company's organizational structure is logical and transparent, with clearly defined roles, responsibilities and processes. In addition, clear operating processes and formal work plans that cover the work of the Board and its committees are in place with a clear internal distribution of tasks.
The Board has overriding responsibility for financial reporting and, accordingly, must assess the performance and earnings of the operations through a package of reports including results, forecasts and analyses of key indicators. The Board also reviews the company's interim reports and year-end report.
The Board's Audit Committee is tasked with ensuring compliance with the principles for financial reporting and internal control. It follows up the effectiveness of the internal control system, evaluates and discusses significant issues in the areas of accounting and financial reporting, as well as reviews the financial procedures to ensure that the financial information can be traced back to underlying financial systems and that it is in line with legislation and the relevant standards. It also examines procedures for reporting and financial controls as well as processes the company's financial reports.
The Committee monitors, evaluates and discusses significant issues in the areas of accounting and financial reporting. It evaluates and manages information pertaining to disputes and potential improprieties as well as assists the management with identifying and evaluating the primary risks that are relevant for operations to ensure that the management focuses work to manage these risks.
The Audit Committee has the right to determine the focus of the internal audit and also examines the procedures for reporting and financial controls, the work of the external auditors, their qualifications and independence. Reports are provided to the Board on these internal committee meetings and meetings with the internal auditors, the external auditors and various specialists in the Group management and its support functions.
The President is subject to instructions issued by the Board and is responsible for ensuring the existence of an efficient control environment. The President is also responsible for regular work on the internal control and that the company's accounting complies with legislation and that the management of assets is adequately performed. Group management is responsible for managing and maintaining the internal control systems required to manage significant risks in the company's operating activities. Management is also responsible for clearly ensuring that all employees understand the requirements for, and the individual's role in, maintaining sound internal control.
The internal auditors report to the CFO and comprise the function that reviews and implements improvements to the internal control function, reports these results to the Audit Committee and proposes plans for the coming six to eight months. The internal auditors also issue reports from individual audits to the members of Group management concerned. Procedures are in place for performing regular reviews of the agreed actions to ensure that specific actions are taken following the internal audit. These are based on a schedule agreed on with the
party responsible for the individual activities. The internal audit function comprises two internal auditors, supplemented by internal specialist resources and auditors from the auditing company KPMG. In 2012, 31 internal audits were performed. These encompassed a broad spectrum of functions and areas of inquiry. The scope was determined by the Board and involved examining such aspects as:
Within the framework of the company's operating activities and review functions, procedures are in place for risk assessments pertaining to the financial reporting. These procedures aim to identify and evaluate the risks that may affect internal control. The procedures encompass risk assessments in conjunction with strategic planning, forecasts and acquisition activities, as well as processes for identifying amendments to the accounting policies to ensure that these amendments are accurately reflected in the financial reporting.
The control structures are designed to manage those risks that the Board and management consider to be significant to the business operations, internal control and financial reporting. The control structures comprise (i) an organization with clearly defined roles that enable an effective, and from an internal control perspective, appropriate division of responsibility, and (ii) specific control activities
that enable the identification and timely prevention of risks becoming reality. Examples of control activities include clearly defined decision-making processes and the policy for decision-making in relation to, for example, investments, agreements, acquisitions and divestments, earnings analyses and other forms of analytical reviews, reconciliations, inventory-taking and automatic controls in the IT systems.
The company's regulations, guidelines and manuals are communicated through several internal channels to ensure sound control. The effectiveness of this communication is monitored continuously to ensure that the information is sufficiently accessible. There are also formal and informal information channels that enable employees to communicate important information to relevant recipients and ultimately, if necessary, to the Board of Directors. For communication with external parties, a clearly defined policy has been formulated. The aim is to ensure that all obligations with regard to information are met in a correct and complete manner.
The internal control process is mainly followed up by two entities: the Audit Committee and the internal audit function. The Audit Committee establishes the principles that apply for the company with respect to accounting and financial reporting, and monitors compliance with these regulations. The Audit Committee also meets with the external auditors to secure information about the focus and scope of the audit and to discuss results and coordination of the external and internal audits. The Audit Committee establishes the direction, extent and time schedules for the internal audit team's work. The internal audit team reports the results of its audits to the Audit Committee and continuously to Group management so that any necessary measures may be taken. The scope of the internal audit includes operational efficiency, compliance with regulations and guidelines, and the quality of financial reporting from the subsidiaries.
An annual feedback function is also in place, which is geared toward the company's senior executives. This feedback function is designed to ensure that Alfa Laval's internal instructions and rules are fully implemented. All managers who report directly to Group management are expected to review the guidelines and rules that apply to their respective areas. They must sign and submit a document confirming their understanding of the significance of these guidelines and compliance with these guidelines in their area of responsibility. If there are any deviations compared with the instructions, they must specify what actions they intend to take to ensure compliance. This process also aims to increase transparency and thus facilitate assessments by external and internal auditors.
Lund, March 2013 The Board of Directors
To the annual meeting of the shareholders of Alfa Laval AB (publ), corporate identity number 556587-8054
We have audited the corporate governance statement for the year 2012 on pages 129–139. It is the board of directors who is responsible for the corporate governance statement and that it has been prepared in accordance with the Annual Accounts Act. Our responsibility is to express an opinion on the corporate governance statement based on our audit.
We conducted our audit in accordance with Fars auditing standard RevU 16, The auditor's examination of the corporate governance statement. That standard require that we have planned and performed the audit to obtain reasonable assurance that the corporate governance statement is free of material misstatements. An audit includes examining, on a test basis, evidence supporting the
information included in the corporate governance statement. We believe that our audit procedures provide a reasonable basis for our opinion set out below.
In our opinion, the corporate governance statement has been prepared and is consistent with the annual accounts and the consolidated accounts.
Staffan Landén Håkan Olsson Reising Authorized Public Accountant Authorized Public Accountant
| Consolidated | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK millions, | ||||||||||
| unless otherwise stated | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 * | 2003 ** |
| Profit and loss | ||||||||||
| Net sales | 29,813 | 28,652 | 24,720 | 26,039 | 27,850 | 24,849 | 19,802 | 16,330 | 14,986 | 13,909 |
| Comparison distortion items | -51 | -170 | 90 | -225 | -168 | 54 | -120 | -73 | 37 | 6 |
| Operating income | 4,372 | 4,691 | 4,401 | 4,030 | 5,736 | 4,691 | 2,552 | 1,377 | 1,438 | 1,138 |
| Financial net | 133 | -15 | -37 | -270 | -395 | -134 | -177 | -278 | -177 | -321 |
| Result after financial items | 4,505 | 4,676 | 4,364 | 3,760 | 5,341 | 4,557 | 2,375 | 1,099 | 1,261 | 817 |
| Non-controlling interests | -41 | |||||||||
| Taxes | -1,298 | -1,425 | -1,248 | -1,023 | -1,534 | -1,377 | -650 | -171 | -421 | -130 |
| Net income for the year | 3,207 | 3,251 | 3,116 | 2,737 | 3,807 | 3,180 | 1,725 | 928 | 840 | 646 |
| Financial position | ||||||||||
| Goodwill | 9,792 | 9,543 | 5,952 | 6,143 | 5,383 | 4,459 | 3,706 | 3,531 | 2,978 | 3,099 |
| Other intangible assets | 3,807 | 3,502 | 2,581 | 2,490 | 1,890 | 1,275 | 1,191 | 1,067 | 924 | 1,101 |
| Property, plant and equipment | 3,823 | 3,936 | 3,512 | 3,548 | 3,546 | 2,824 | 2,514 | 2,553 | 2,480 | 2,756 |
| Financial long-term assets | 1,600 | 1,664 | 1,568 | 1,542 | 1,376 | 1,128 | 784 | 676 | 601 | 671 |
| Inventories | 6,176 | 6,148 | 4,769 | 4,485 | 5,972 | 5,086 | 3,793 | 3,091 | 2,453 | 2,218 |
| Current receivables | 8,050 | 7,663 | 6,884 | 6,584 | 9,238 | 7,420 | 5,987 | 4,467 | 3,976 | 3,631 |
| Current deposits | 427 | 483 | 575 | 302 | 544 | 190 | 229 | 342 | 257 | 659 |
| Cash and bank | 1,404 | 1,564 | 1,328 | 1,112 | 1,083 | 856 | 546 | 479 | 415 | 555 |
| TOTAL ASSETS | 35,079 | 34,503 | 27,169 | 26,206 | 29,032 | 23,238 | 18,750 | 16,206 | 14,084 | 14,690 |
| Equity | 15,387 | 15,144 | 13,582 | 12,229 | 10,493 | 7,937 | 6,831 | 5,811 | 5,269 | 4,897 |
| Non-controlling interests | 104 | |||||||||
| Provisions for pensions etc. | 829 | 852 | 847 | 920 | 990 | 877 | 941 | 903 | 789 | 755 |
| Provisions for taxes | 1,939 | 1,930 | 1,617 | 1,390 | 1,161 | 1,090 | 949 | 767 | 760 | 817 |
| Other provisions | 2,076 | 2,132 | 2,128 | 2,365 | 2,252 | 1,810 | 1,281 | 957 | 948 | 891 |
| Non-current liabilities | 5,608 | 5,060 | 1,041 | 1,626 | 3,394 | 3,068 | 2,006 | 2,702 | 2,307 | 3,492 |
| Current liabilities | 9,240 | 9,385 | 7,954 | 7,676 | 10,742 | 8,456 | 6,742 | 5,066 | 4,011 | 3,734 |
| TOTAL EQUITY & LIABILITIES | 35,079 | 34,503 | 27,169 | 26,206 | 29,032 | 23,238 | 18,750 | 16,206 | 14,084 | 14,690 |
* Restated to IFRS. ** 2003 in accordance with Swedish GAAP.
A reader of the ten-year overview should observe that accounting standards have changed repeatedly over this period of time.
All listed companies within the European Union were obliged to change to IFRS as of January 1, 2005. International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB).
Alfa Laval was a first time applicant under IFRS 1 in 2005. IFRS 1 covered the transitional provisions for the implementation of IFRS. The adoption to IFRS was however already in place since Alfa Laval had implemented all relevant IAS standards since year 2000, except IAS 39 that was implemented as of January 1, 2005.
| Koncernen | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK millions, | ||||||||||
| unless otherwise stated | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 * | 2003 ** |
| Key ratios | ||||||||||
| Orders received | 30,339 | 28,671 | 23,869 | 21,539 | 27,464 | 27,553 | 24,018 | 18,516 | 15,740 | 14,145 |
| Order backlog at year end | 14,468 | 13,736 | 11,552 | 11,906 | 14,310 | 14,730 | 12,359 | 7,497 | 4,763 | 4,021 |
| EBITA | 4,859 | 5,117 | 4,772 | 4,360 | 5,992 | 5,034 | 2,891 | 1,692 | 1,732 | 1,633 |
| EBITDA | 5,306 | 5,566 | 5,197 | 4,751 | 6,296 | 5,299 | 3,153 | 1,957 | 1,993 | 1,926 |
| EBITA-margin % | 16.3% | 17.9% | 19.3% | 16.7% | 21.5% | 20.3% | 14.6% | 10.4% | 11.6% | 11.7% |
| EBITDA-margin % | 17.8% | 19.4% | 21.0% | 18.2% | 22.6% | 21.3% | 15.9% | 12.0% | 13.3% | 13.8% |
| Adjusted EBITA | 4,910 | 5,287 | 4,682 | 4,585 | 6,160 | 4,980 | 3,010 | 1,765 | 1,695 | 1,627 |
| Adjusted EBITDA | 5,357 | 5,736 | 5,107 | 4,976 | 6,464 | 5,245 | 3,273 | 2,030 | 1,956 | 1,920 |
| Adjusted EBITA-margin % | 16.5% | 18.5% | 18.9% | 17.6% | 22.1% | 20.0% | 15.2% | 10.8% | 11.3% | 11.7% |
| Adjusted EBITDA-margin % | 18.0% | 20.0% | 20.7% | 19.1% | 23.2% | 21.1% | 16.5% | 12.4% | 13.1% | 13.8% |
| Profit margin % | 15.1% | 16.3% | 17.7% | 14.4% | 19.2% | 18.3% | 12.0% | 6.7% | 8.4% | 5.9% |
| Excl. goodwill and step-up values: | ||||||||||
| Capital turnover rate, times | 5.7 | 6.3 | 5.6 | 5.2 | 5.6 | 6.4 | 6.3 | 5.5 | 5.3 | 5.0 |
| Capital employed | 5,233 | 4,560 | 4,399 | 5,052 | 4,973 | 3,863 | 3,137 | 2,958 | 2,822 | 2,807 |
| Return on capital employed % | 92.9% | 112.2% | 108.5% | 86.3% | 120.5% | 130.3% | 92.2% | 57.2% | 61.4% | 58.2% |
| Incl. goodwill and step-up values: | ||||||||||
| Capital turnover rate, times | 1.6 | 1.8 | 1.9 | 2.0 | 2.5 | 2.7 | 2.5 | 2.2 | 2.0 | 1.8 |
| Capital employed | 18,636 | 16,324 | 12,752 | 12,976 | 11,144 | 9,289 | 8,062 | 7,470 | 7,317 | 7,667 |
| Return on capital employed % | 26.1% | 31.3% | 37.4% | 33.6% | 53.8% | 54.2% | 35.9% | 22.7% | 23.7% | 21.3% |
| Return on equity % | 21.6% | 22.9% | 24.4% | 24.5% | 42.8% | 44.1% | 25.3% | 16.0% | 15.9% | 13.2% |
| Solidity % | 43.9% | 43.9% | 50.0% | 46.7% | 36.1% | 34.2% | 36.4% | 35.9% | 37.4% | 33.3% |
| Net debt | 4,270 | 3,264 | -551 | 533 | 2,074 | 2,397 | 1,478 | 2,013 | 1,884 | 2,401 |
| Net debt to EBITDA, times | 0.8 | 0.6 | -0.1 | 0.1 | 0.3 | 0.5 | 0.5 | 1.0 | 0.9 | 1.2 |
| Debt ratio, times | 0.28 | 0.22 | -0.04 | 0.04 | 0.20 | 0.30 | 0.22 | 0.35 | 0.36 | 0.49 |
| Interest coverage ratio, times | 23.1 | 28.6 | 35.9 | 15.2 | 26.2 | 23.7 | 14.4 | 6.9 | 7.4 | 5.0 |
| Cash flow from: | ||||||||||
| operating activities | 3,586 | 3,429 | 4,098 | 5,347 | 4,062 | 3,264 | 2,619 | 1,617 | 1,203 | 1,654 |
| investing activities | -3,260 | -5,497 | -1,417 | -2,620 | -1,333 | -1,676 | -1,578 | -665 | 36 | -457 |
| financing activities | -407 | 2,317 | -2,431 | -2,667 | -2,599 | -1,291 | -935 | -973 | -1,353 | -1,167 |
| Investments | 531 | 555 | 429 | 451 | 747 | 556 | 373 | 324 | 388 | 259 |
| Average number of employees | 16,060 | 14,667 | 12,078 | 11,773 | 11,821 | 10,804 | 9,923 | 9,524 | 9,400 | 9,194 |
| Earnings per share, SEK *** | 7.61 | 7.68 | 7.34 | 6.42 | 8.83 | 7.12 | 3.78 | 1.98 | 1.78 | 1.45 |
| Free cash flow per share, SEK *** | 0.78 | -4.93 | 6.38 | 6.46 | 6.38 | 3.60 | 2.33 | 2.13 | 2.78 | 2.68 |
* Restated to IFRS. ** 2003 in accordance with Swedish GAAP. *** The figures for 2008 until 2003 have been recalculated due do the 4:1 split.
Alfa Laval AB (publ) Box 73 SE-221 00 Lund Corporate registration:
556587-8054
Visiting address: Rudeboksvägen 1 Phone: + 46 46 36 65 00 Website: www.alfalaval.com
Revenues from goods sold and services performed that are part of the ordinary operations of the Group, after deduction for given discounts, value added tax and other tax directly linked to the sales.
Items that do not have any link to the normal operations of the Group or that are of a non-recurring nature, where a reporting together with other items in the consolidated comprehensive income statement would have given a comparison distortion effect that would have made it difficult to judge the development of the ordinary operations for an outside viewer.
Incoming orders during the year, calculated in the same way as net sales. The orders received give an indication of the current demand for the Group's products and services, that with a varying delay appear in net sales.
Incoming orders that not yet have been invoiced. The order backlog at the end of the year is equal to the sum of the order backlog at the beginning of the year plus the orders received during the year less the net sales for the year. It gives an indication of how the net sales can be expected to develop in the future.
"Earnings Before Interest, Taxes and Amortisation" or operating income before amortisation of step-up values. This measure of result is fully comparable over time independent of the financing costs and the amortisation of step-up values that from time to time burden the Group.
"Earnings Before Interest, Taxes, Depreciation and Amortisation" or operating income before depreciation and amortisation of step-up values. This measure of result is fully comparable over time independent of the financing costs and the depreciation and amortisation of step-up values that from time to time burden the Group.
Operating income before amortisation of step-up values (EBITA) in relation to net sales, expressed in percent.
Operating income before depreciation and amortisation of step-up values (EBITDA) in relation to net sales, expressed in percent.
Same as EBITA, but adjusted for comparison distortion items.
Same as EBITDA, but adjusted for comparison distortion items.
Same as EBITA-margin, but adjusted for comparison distortion items.
Same as EBITDA-margin, but adjusted for comparison distortion items.
Result after financial items in relation to net sales, expressed in percent.
Net sales in relation to average capital employed, expressed as a multiple of capital employed. Shown excluding and including goodwill, step-up values and the corresponding deferred tax liability.
Average total assets less liquid funds, other long-term securities, accrued interest income, operating liabilities and other non-interest bearing liabilities, including tax and deferred tax, but excluding accrued interest costs. Shown excluding and including goodwill and step-up values and the corresponding deferred tax liability. Shows the capital that is used in the operations. The capital employed for the Group differs from the net capital for the segments concerning taxes, deferred taxes and pensions.
EBITA in relation to average capital employed, expressed in percent. Shown excluding and including goodwill and step-up values and the corresponding deferred tax liability.
Net income for the year in relation to average equity, expressed in percent.
Equity in relation to total assets, expressed in percent.
Interest-bearing liabilities including interest-bearing pension liabilities and capitalised finance leases less liquid funds.
Net debt in relation to EBITDA is one of the covenants of Alfa Laval's syndicated loan and an important key figure when reviewing the proposed dividend.
Net debt in relation to equity, expressed as a multiple of the equity.
EBITDA plus financial net increased by interest costs in relation to interest costs. Expressed as a multiple of interest costs. Gives an expression for the Group's ability to pay interest. The reason EBITDA is used as the starting point is that this forms the starting point for a cash flow perspective on the ability to pay interest. Financial items classified as comparison distorting are excluded from the calculation.
Shows the Group's cash flow from operating activities, that is the cash flow generated in the daily operational activities.
Shows the Group's cash flow from investing activities, i.e. the cash flow generated by mainly the Group's divestments and acquisitions of businesses and divestments of real estate.
Shows the Group's cash flow from financing activities, that is mainly the cash flow impact of the Group's loans in terms of interest payments and amortisation.
Investments represent an important component in the cash flow for the Group. The level of investments during a couple of years gives a picture of the capacity build up in the Group.
The costs that are related to the number of employees represent a large part of the total costs for the Group. The development of the average number of employees over time in relation to the development of the net sales therefore gives an indication of the cost rationalisation that is taking place.
Net income for the year attributable to the equity holders of the parent divided by the average number of shares.
The sum of cash flows from operating and investing activities for the year divided by the average number of shares. This represents the cash flow available for interest payments, amortisation and dividends to investors.
Alfa Laval uses a number of channels to provide information about the company's operations and financial development. The website – www.alfalaval.com/ investors – is updated continuously with annual reports, quarterly reports, press releases and presentations. Annual reports are also sent to those shareholders who have notified the company that they wish to receive a copy.
Press conferences, analyst meetings and/or conference calls are arranged by Alfa Laval in conjunction with the publication of the company's quarterly reports and a capital markets day is organized each year, during which representatives from the financial market are offered more in-depth information regarding the company's operations. In addition, representatives
of Group management meet with analysts, investors and journalists on an ongoing basis to ensure that these parties have correct and current information. Pursuant to the company's agreement with NASDAQ OMX Stockholm, information that could have an effect on the share price and that is not yet publicly known is never disclosed in conjunction with these types of meetings or contacts. Alfa Laval employs a so-called silent period of three weeks prior to publication of a quarterly report. The President and Chief Financial Officer do not meet or speak to representatives from the financial market during this period.
Alfa Laval will publish quarterly reports on the following dates in 2013:
Year-end report 2012 February 5 First-quarter report April 23 Second-quarter report July 18 Third-quarter report October 29
Gabriella Grotte Investor Relations Manager Tel: +46 (0)46 36 74 82 Mobile: +46 (0)709 78 74 82 E-mail: [email protected] or [email protected]
ABG Sundal Collier Anders Idborg +46 (0)8 56 62 86 74 [email protected]
Bank of America Merrill Lynch Ben Maslen +44 (0)207 996 4783 [email protected]
Barclays Capital Allan Smylie +44 (0)207 773 4873 [email protected]
Carnegie Kenneth Toll Johansson [email protected] +46 (0)8 58 86 89 11
Cheuvreux Joakim Höglund [email protected] +46 (0)8 723 51 63
Commerzbank Sebastian Growe [email protected] +49 69 136 89800
Credit Suisse Andre Kukhnin [email protected] +44 (0)207 888 0350
Danske Bank Oscar Stjerngren [email protected] +46 (0)8 568 806 06
Deutsche Bank Johan Wettergren [email protected] +46 (0)8 463 55 18
DNB Markets Lars Brorson [email protected] +44 (0)207 621 6149
Exane BNP Paribas Alexis Denaud [email protected] +44 (0)207 039 9488
Goldman Sachs International Aaron Ibbotson [email protected] +44 (0)207 774 6661
Handelsbanken Capital Markets Jon Hyltner [email protected] +46 (0)8 701 12 75
HSBC Bank Colin Gibson [email protected] +44 (0)207 991 6592
JP Morgan Glen Liddy [email protected] +44 (0)207 155 6113
Morgan Stanley Stephanie Tan [email protected] +44 207 425 2044
Nordea Bank Andreas Koski [email protected] +46 (0)8 534 917 20
Sanford C. Bernstein Limited Martin Prozesky [email protected] +44 (0)207 170 0577
SEB Enskilda Daniel Schmidt [email protected] +46 (0)8 52 22 96 75
Swedbank Anders Roslund [email protected] +46 (0)8 58 59 00 93
Pareto Öhman David Jacobsson [email protected] +46 (0)8 402 52 72
UBS Sven Weier [email protected] +49 69 1369 8278
Ålandsbanken Lars Söderfjell [email protected] +46 (0)8 791 46 57
The Annual General Meeting of Alfa Laval AB (publ) will be held on Tuesday, April 23, 2013 at 4:00 p.m. at Färs & Frosta Sparbank Arena, Klostergården's sports area, Stattenavägen, in Lund. Light refreshments will be served after the Meeting. In accordance with the company's Articles of Association, notice of the Annual General Meeting will be inserted as an announcement in the Swedish Official Gazette and on the company's website not more than six and not less than four weeks prior to the Meeting. An announcement that notification has been issued will be placed in Dagens Nyheter. As a service to existing shareholders, information about the Annual General Meeting will be sent to them by mail. The following information concerning the Meeting does not constitute legal notice.
Shareholders who wish to participate in the Meeting and be entitled to vote must be entered in the share register maintained by Euroclear AB not later than Wednesday, April 17, 2013, and register their intention to participate, along with any assistants, not later than Wednesday, April 17, 2013 at 12:00 noon. Shareholders whose shares are held in trust must temporarily re-register their shares in their own names not later than April 17. Shareholders must request such registration a few working days prior to the deadline.
– Alfa Laval AB, Group Staff Legal, Box 73, SE-221 00 Lund, Sweden
Shareholders must state their name, personal ID number and telephone number on the notice of participation. If participation is by proxy, a power of attorney or authorization must be submitted to the company prior to the Meeting.
1:30 p.m. Bus departs from Färs & Frosta Sparbank Arena for Alfa Laval's production unit for heat exchangers in Lund
3:30 p.m. Registration starts
4:00 p.m. Start of Meeting
Prior to the Annual General Meeting, participants will have an opportunity to view the production of plate heat exchangers at the plant in Lund. The tour will begin with assembly at Färs & Frosta Sparbank Arena, Klostergården's sports area, Stattenavägen in Lund not later than 1:30 p.m. Buses will be provided for transportation to the plant and back to the Meeting venue. Registration for the tour must be made in conjunction with registration for participation in the Annual General Meeting. Please note that the number of participants is limited.
The Board of Directors and the President propose to the Annual General Meeting that a dividend of SEK 3.50 per share be paid. The proposed record date for this dividend is Friday, April 26, 2013. If the Meeting approves the proposal, the dividend is expected to be distributed on Thursday, May 2, 2013. However, the record date and dividend payment date may be postponed due to the technical procedures required for executing the payment.
Alfa Laval is a leading global provider of specialized products and engineered solutions.
The company's equipment, systems and services are dedicated to helping customers optimize the performance of their processes. Time and time again.
Alfa Laval helps customers to heat, cool, separate and transport products such as oil, water, chemicals, beverages, foodstuffs, starch and pharmaceuticals.
Alfa Laval's worldwide organization works closely with customers in 100 countries to help optimize their processes.
Alfa Laval's website is continuously updated with new information, including contact details for all countries.
Read more at www.alfalaval.com and www.alfalaval.com/investors
CC00248EN 1303
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