Annual Report • Apr 12, 2013
Annual Report
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| Page |
|---|
| Directors' Report4 |
| Consolidated Income Statement 8 |
| Consolidated Statement of Comprehensive Income 8 |
| Consolidated Cash Flow Statement 9 |
| Consolidated Balance Sheet 10 |
| Consolidated Changes in Shareholders' Equity 12 |
| Income Statement – Parent Company 13 |
| Statement of Comprehensive Income – Parent Company 13 |
| Balance Sheet – Parent Company 14 |
| Changes in Shareholders' Equity – Parent Company 16 |
| Cash Flow Statement – Parent Company 17 |
| Notes 18 |
| Financial Risk Management 25 |
| Corporate Governance Report 47 |
| Auditors' Report54 |
| Definitions 55 |
| The AAK share 56 |
| AarhusKarlshamn AB (publ) – Board of Directors 58 |
| AarhusKarlshamn AB (publ) – Group Management 60 |
| Financial Calendar, Annual General Meeting 62 |
| Address 63 |
All amounts are denominated in SEK million unless otherwise stated.
Directors' Report For the financial year 1 January to 31 December 2012
The Board of Directors and the Chief Executive Officer of AarhusKarlshamn AB (publ), corporate identity number 556669-2850, with its registered office in Malmö, herewith present the Financial Statements for the financial year January - December 2012 and Consolidated Financial Statements for the financial year 1 January - 31 December 2012.
The Company's largest business area, Food Ingredients, reported a record operating profit, adjusted for the effects of Hurricane Sandy, of SEK 703 million (518), improvement of 36 percent. Operating profit per kilo increased from SEK 0.62 to SEK 0.75, an improvement of 21 percent. The business area Chocolate & Confectionery Fats reported a decrease in volume of 3 percent and continued pressure on margins as a result of the low price of cocoa butter. Operating profit adjusted for the effect of Hurricane Sandy decreased from SEK 378 million to SEK 316 million. Operating profit for the company's smallest business area, Technical Products & Feed, was SEK 88 million (103) as a result of challenging market conditions and high raw material prices.
The Group's profit after financial items amounted to SEK 866 million (816). Net financial items amounted to negative SEK 109 million (negative SEK 98 million). This increase was primarily due to increased interest expense. Income tax (deferred tax) during the year was affected by a positive one-off effect of SEK 20 million as a result of the reduction in Swedish corporation tax from 26.3 to 22 percent. The Swedish tax reduction is not expected to have any significant impact on AAK's average tax rate in the future.
The equity/assets ratio was 40 percent as of 31 December 2012 (36 percent as of 31 December 2011). Consolidated net debt as of 31 December 2012 was SEK 2,521 million (SEK 3,141 million as of 31 December 2011). On 31 December 2012, the Group had total credit facilities of around SEK 5,600 million.
Cash flow from operating activities before changes in working capital amounted to SEK 950 million (902). Working capital decreased by SEK 589 million (in the preceding year, working capital increased by SEK 613 million) primarily as a consequence of a successful capital rationalisation programme, along with lower raw material prices. Cash flow from operating activities, including changes in working capital, amounted to SEK 1.539 million (289). After investments, including the acquisitions of Oasis Foods Company (Oasis) in the USA and Crown-Foods A/S (Crown) in Denmark, cash flow amounted to SEK 745 million (negative 381).
The Group's net investments in noncurrent assets and business combinations totalled SEK 794 million (670), mainly comprising ongoing maintenance investments and the acquisitions of Oasis and Crown.
AAK's two plants in New Jersey, US, were shut down temporarily on 29 October as a result of Hurricane Sandy. No personnel were injured at either of the facilities. The production at the Oasis Foods plant restarted on 5 November 2012. The factory in Port Newark restarted at reduced capacity on 26 November 2012, and had returned to almost full capacity by the end of the year. AAK has insurance policies which cover damage to property and business interruptions. The negative impact on operating profit of Sandy was estimated to amount to SEK 21 million, representing among other things estimated self deductible amounts and qualifying periods. The effect on Food Ingredients' operating profit has been estimated at SEK 6 million, and on Chocolate and Confectionery Fats at SEK 5 million. The estimated additional effect on the Group functions was SEK 10 million. The reported volumes have been adjusted to take account of the lost deliveries covered by insurance compensations, to reflect normalised operation. Additional insurance claims will be submitted during 2013. AAK has insurance which covers business interruptions for 24 months, and it is, therefore, not likely that the final claims adjustment will be made until after the end of financial year 2013.
Our business areas are: Food Ingredients, Chocolate & Confectionery Fats and Technical Products & Feed. Group-wide functions are included in the Group Functions segment.
Food Ingredients maintains its strong regional positions in both Europe and North America, but will gradually strengthen its positions in other regions. Two acquisitions were made during the year, Oasis Foods Company and Crown-Foods A/S.
Chocolate & Confectionery Fats has worldleading positions, and these will gradually be expanded on an increasingly global arena.
Technical Products & Feed has a strong local position in Northern Europe and will continue to focus its growth efforts in these geographical segments through its given location at the Karlshamn factory in Sweden.
The AAK Acceleration programme which was launched in the autumn of 2010 is based on our specialisation strategy, but with great focus on practical implementation, as well as growth and earnings improvement in the medium and long term.
AAK Acceleration has continued to generate very positive effects in 2012, in terms of organic growth in speciality products, acquisition-based growth and increased productivity.
During the year, AAK expanded its production capacity for InFat™ at the company's factory in Karlshamn. The product has been successfully introduced to the Infant Nutrition industry by Advanced Lipids, a joint venture between AAK and Enzymotec. InFat™ is produced using an unique enzymatic interesterification process, and has proved to be a highly effective and welcome ingredient in infant formulas.
AAK and L'Oréal, one of the world's leading companies in cosmetics and personal care, signed an agreement during the year to develop the trade in shea kernels. AAK's aim is that the agreement will increase volumes and improve the quality of the raw materials, and will also lead to better living standards for women in Burkina Faso, in West Africa. The agreement is linked to an initiative which AAK announced during 2012, which will triple the company´s activities in the area and will involve more than 30,000 women in Burkina Faso.
During the second quarter of 2012 AAK strengthened its position in the North American Food Service market by acquiring Oasis Foods Company (Oasis).
Oasis provides an expansive variety of quality products such as edible oils, margarine, spreads, shortenings, mayonnaise, sauces and vinegars.
Founded in 1975 Oasis employed approximately 160 people at Hillside, New Jersey, US and had revenues of approximately SEK 925 million in 2011.
Oasis is a well-run company and it represents an excellent platform for our North American ambitions. The company´s wide variety of established Food Service products and brands significantly broadens AAK's product offerings in one of the largest food service markets in the world. The New Jersey location close to our Port Newark plant provides easy access to some of the largest population centres in the country.
During the second quarter of 2012 AAK also strengthened its position in the Scandinavian Food Service market by acquiring Crown-Foods A/S in Denmark (Crown). The acquisition will strengthen AAK's ability to supply a broad portfolio of Food Service products to Scandinavian customers.
Crown is a local market leader producing sauces and dressings. Founded in 1988 and located in Mørkøv, Denmark, Crown employed approximately 20 people and had a turnover of approximately SEK 60 million in 2011.
AAK's financial goals are to grow faster than the underlying market and to generate strong cash flows. We also intend to continually improve the return on net assets.
The objective of the Board of Directors, taking into account the development of Group earnings, its financial position and future development opportunities, is to propose annual distribution of profits equivalent to 30-50 percent of the profit for the year, after tax, for the Group.
No significant events occurred subsequent to year-end.
The impact on our industry from the more difficult general economy in Europe is, as we all know, really difficult to predict. However, based on AAK's customer value propositions for health and reduced costs, our customer product co-development and solutions approach, and the AAK Acceleration program, we continue to remain prudently optimistic for the future. The main drivers are expected to be our strong Food Ingredients business and the expected recovery in our Chocolate & Confectionary Fats business. The performance of the Chocolate & Confectionary Fats business is expected to stabilize in the first part of 2013 and, provided the cocoa butter price remains at the current more normal level, it is expected to start improving significantly during the second half of 2013.
In preparation for the Annual General Meeting for 2013, the Nomination Committee has proposed the re-election of Melker Schörling, Märit Beckeman, Ulrik Svensson and Arne Frank, and the election of Märta Schörling and Lillie Li Valeur. Carl Bek-Nielsen, Martin Bek-Nielsen, Mikael Ekdahl and Harald Sauthoff have declined re-election. The Nomination Committee proposes, in addition, that Melker Schörling be re-elected Chairman of the Board. In total, the Nomination Committee represents 56 percent of the shares and votes in AAK as at 31 December 2012.
The total number of shares in AAK as of 31 December 2012 was 40,898,189. There is one class of shares in AAK, and each share entitles the holder to one vote. There are no limits as regards to how many votes each shareholder may cast at an Annual General Meeting. Nor are there any limitations regarding the transfer of the shares resulting from provisions in law or in the Articles of Association.
Of the Company's shareholders, only BNS Holding AB has a shareholding which represents at least one-tenth of the number of votes of all shares in AAK. The largest shareholder in BNS Holding AB is Melker Schörling AB (publ) which, on the date of the 2012 Annual General Meeting, held 58.5 percent of the shares and votes in BNS Holding AB. On 20 July 2012, Melker Schörling AB (publ) acquired the remaining shares and votes in BNS Holding AB. As part of the transaction, BNS Holding AB transferred shares equivalent to approximately 5 percent of the shares and votes in AAK. BNS Holding AB's shareholding as at 31 December 2012 amounted to 35 percent of the shares and votes.
AAK is not aware of any agreement between direct shareholders of AAK that would involve limitations in the right to transfer shares.
Ownership circumstances are described further in the section on the AAK Share, page 56-57.
The Articles of Association stipulate that appointment of Board members shall be made by the Annual General Meeting of AAK. The Articles of Association contain no provisions regarding dismissal of Board members or regarding amendment of the Articles of Association.
The Group's long-term financing agreement contains stipulations that, in certain cases, give the lender the right to request advance payment if control of AAK changes substantially. Such a substantial change in control can occur as a result of an official take-over bid.
AAK's assessment is that it has been necessary to accept these stipulations in order to obtain financing on terms which are otherwise acceptable.
Guidelines for the remuneration of the CEO and other senior executives were established by the 2012 Annual General Meeting. No deviations from these guidelines have been made. The Board of Directors of AAK proposes that the 2013 Annual General Meeting adopt the same guidelines for 2013 as 2012 for the remuneration of senior management, but with an adjustment so that the variable portion of salary shall comprise no more than 70 percent of the fixed salary instead of 60 percent, which was set as a cap in the guidelines adopted by the 2012 AGM. The present guidelines are contained in Note 8 Remuneration of the Board of Directors and Senior Executives.
These guidelines shall cover those persons who are in senior management positions during the period of time to which the guidelines apply. The guidelines apply to agreements entered into after the resolution of the Annual General Meeting, and in the event that changes are made to existing agreements after this point in time. The Board shall be entitled to diverge from the guidelines if there are particular reasons to do so in an individual case.
Please refer to page 11 and 17 in AAK Report for 2012 for further information concerning the Group's product development by business areas.
The environmental impact from our plants includes emissions of odorous substances, solvents, smoke and gases into the atmosphere, as well as discharging fats, oxygenconsuming material, and nutrients into water, and also creating organic waste and noise. We continually review our impact on all levels to further improve environmental performance at AAK. We operate all our plants with appropriate official permits in all countries in which we operate. In Sweden, the operations in Karlshamn are licensable under Swedish law.
The recruitment of skilled and competent personnel is an important component in maintaining competitiveness for the AAK Group. The Group therefore has continuous active programmes for personnel development.
All business operations involve risk – a controlled approach to risk-taking is a prerequisite for maintaining good profitability. Risks may depend on events in the operating environment and may affect a certain sector or market. A risk may also be purely company-specific or country-specific. At AAK, effective risk management is a continual process which is conducted within the framework of operational management and forms a natural part of the day-to-day monitoring of operations.
For more detailed information, please refer to the section on Risks on pages 18-19, in AAK's Report 2012 and Note 3 Financial Risk Management.
The AAK Group is exposed to the fierce competition which characterises the industry, as well as fluctuations in raw material prices which affect capital tied up.
The raw materials used in operations are agricultural products, and availability may therefore vary due to climatic and other external factors.
The Group's management of financial risks is described in Note 3, Financial Risk Management.
For information on the composition and work, etc., of the Board of Directors, see the Corporate Governance Report on page 47-52.
The Company is the holding company of the AAK Group, and its activities consist mainly of joint Group functions connected to the development and management of the Group. The Parent employs personnel with skills and competencies to execute group-wide financing, accounting, information, human resources and IT. The Parent is also responsible for Group strategy and
risk management, and provides legal and tax-related services to Group companies.
The Parent's invoicing in 2012 amounted to SEK 50 million (47).
Profit after financial items amounted to SEK 120 million (111). Interest-bearing liabilities minus cash and cash equivalents and interest-bearing assets were SEK 626 million (SEK 101 million at 31 December 2011). Investments in intangible assets and property, plant and equipment amounted to SEK 0 million (0).
The Parent had a total of 17 (13) employees at 31 December 2012.
No significant events occurred after the end of the reporting period.
The Board of Directors has proposed that the 2013 Annual General Meeting approve an appropriation of profits under which the shareholders will receive a dividend of SEK 5.25 per share. The proposed dividend therefore totals SEK 215 million. The objective for the dividend in the long term is to correspond to 30 - 50 percent of consolidated profits after tax, while always considering AAK's long-term financing requirements. The Parent has no financial instruments valued under Chap. 4 §14a of the Swedish Annual Accounts Act (1995:1554). The Board of Directors hereby makes the following statement regarding the proposed dividend, in accordance with Chap. 18 § 4 of the Swedish Companies Act (2005:551).
Retained profits from the previous year total SEK 3,490 million and the profit for the 2012 financial year totals SEK 116 million (SEK 647 million for the Group). Provided that the 2013 Annual General Meeting approves the Board's proposed appropriation of profits, a total of SEK 3,392 million will be carried forward. The Company's restricted equity will be fully covered after distribution of the dividend.
In the Board's judgement, the Company and the Group will retain sufficient equity after distribution of the proposed dividend in relation to the nature, scope and risks associated with its business operations. In making this assessment, the Board has taken account of the historical development of the Company and the Group, budgeted performance and economic situation.
In the view of the Board, the Company and the Group are in a position and have the capacity, in both the short and long term, to meet all their obligations. The proposed dividend represents a total of 5.3 percent of the Company's equity and 5.5 percent of the Group's equity attributable to the Parent's shareholders.
After payment of the dividend, the equity/ assets ratio of the Company and the Group will be 53 percent and 38 percent, respectively. These ratios are good in relation to other businesses in our industry. The Board of Director's judges that the Company is in a good position to meet future business risk as well as withstand possible losses. Distribution of the dividend will not negatively affect the ability of the Company to make further investment as planned by the Board of Directors.
The proposed dividend distribution will have a temporary negative effect on the Company's and Group's ability to meet certain current liabilities. However, the Company and Group have sufficient access to both short and long-term credit that can be obtained at short notice.
The Board of Directors therefore considers that the Company and the Group are prepared for likely changes to liquidity, as well as unforeseen events. In addition, the Board of Directors has considered other known circumstances that may materially affect the financial position of the Company and the Group. No circumstance has arisen that makes the proposed dividend distribution appear unjustifiable.
It is proposed that the record date for the dividend shall be 8 May 2013, and it is estimated that the dividend will be received by the shareholders on 14 May 2013.
The Board of Directors and Chief Executive Officer propose that
| The disposable profit brought forward profit/loss for the year |
SEK SEK |
3,490,381,079 115,893,943 |
|---|---|---|
| Total | SEK | 3,606,275,022 |
| be appropriated as follows: | ||
| To be distributed to shareholders, | ||
| a dividend of SEK 5.25 per share | SEK | 214,715,492 |
| To be carried forward | SEK | 3,391,559,530 |
| Total | SEK | 3,606,275,022 |
The consolidated and Parent's financial statements will be presented for adoption by the Annual General Meeting of the Shareholders on 3 May 2013.
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| Net sales | 28 | 16,911 | 16,695 |
| Other operating income Total operating income |
10 | 108 17,019 |
106 16,801 |
| Raw materials and consumables and changes in inventories | |||
| of finished goods and work in progress | -12,807 | -12,866 | |
| Goods for resale | -581 | -484 | |
| Other external expenses | 5, 29 | -1,173 | -1,077 |
| Employee benefits expense | 6, 7, 8, 9 | -1,119 | -1,099 |
| Depreciation, amortisation and impairment loss | 15, 16 | -347 | -350 |
| Other operating expenses | -17 | -11 | |
| Total operating expenses | -16,044 | -15,887 | |
| Operating profit | 975 | 914 | |
| Result from financial items | 11 | ||
| Financial income | 16 | 12 | |
| Financial expenses | -125 | -110 | |
| Net financial items | -109 | -98 | |
| Profit before tax | 866 | 816 | |
| Income tax | 12 | -219 | -212 |
| Profit for the year | 647 | 604 | |
| Attributable to: | |||
| Non-controlling interests | 7 | 2 | |
| Parent company shareholders | 640 | 602 | |
| 647 | 604 | ||
| Earnings per share from profits attributable | |||
| to the Parent's shareholders | |||
| (SEK per share) – before and after dilution | 13 | 15.66 | 14.72 |
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| Profit for the period | 647 | 604 | |
| Translation differences | -98 | -35 | |
| Fair-value changes for the year in cash flow hedges. | -13 | -19 | |
| Tax attributable to fair-value changes in cash flow hedges. | 3 | 5 | |
| Total comprehensive income for the period | 539 | 555 | |
| Attributable to: | |||
| Non-controlling interests | 6 | -1 | |
| Parent company shareholders | 533 | 556 |
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| OPERATING ACTIVITIES | 30 | ||
| Profit after financial items | 865 | 816 | |
| Recoveries on amortisation and impairment losses | 347 | 350 | |
| Adjustment for items not included in cash flow | 30 | 5 | 4 |
| Income tax paid | -267 | -268 | |
| Cash flow from operations before changes to working capital | 950 | 902 | |
| Changes in working capital | |||
| Net change in inventories | 295 | -536 | |
| Net change in other current receivables | 298 | -31 | |
| Net change in other current operating liabilities | -4 | -46 | |
| Cash flow from operating activities | 1,539 | 289 | |
| INVESTING ACTIVITIES | |||
| Acquisition of intangible assets | -7 | -7 | |
| Acquisition of property, plant and equipment | -367 | -343 | |
| Acquisition of operations and shares, net of cash acquired | 27 | -424 | -321 |
| Proceeds from sale of property, plant and equipment | 4 | 1 | |
| Cash flow from investing activities | -794 | -670 | |
| FINANCING ACTIVITIES | |||
| Loans raised | - | 356 | |
| Amortisation of loans | -549 | - | |
| Issue of stock options | 13 | 11 | |
| Dividends paid | -194 | -184 | |
| Cash flow from financing activities | -730 | 183 | |
| Cash flow for the year | 15 | -198 | |
| Cash and cash equivalents at beginning of year | 331 | 540 | |
| Exchange rate difference for cash equivalents | -16 | -11 | |
| Cash and cash equivalents at year-end | 19 | 330 | 331 |
| SEK million | Note | 31 Dec 2012 | 31 Dec 2011 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Intangible assets | 16 | ||
| Goodwill | 1,045 | 733 | |
| Patents and other intangible assets | 87 | 94 | |
| 1,132 | 827 | ||
| Property, plant and equipment | 15 | ||
| Land and buildings | 569 | 557 | |
| Plant and machinery | 1,951 | 1,827 | |
| Equipment, tools, fixtures and fittings | 92 | 75 | |
| Fixed assets under construction | 188 | 342 | |
| 2,800 | 2,801 | ||
| Financial assets | |||
| Shares in associates | 9 | 12 | |
| Financial investments | 1 | 1 | |
| Deferred tax assets | 12 | 115 | 119 |
| Other non-current receivables | 10 | 12 | |
| 135 | 144 | ||
| Total non-current assets | 4,067 | 3,772 | |
| Current assets | |||
| Inventories | 18 | 2,583 | 2,884 |
| Accounts receivables | 3 | 1,906 | 2,037 |
| Current tax assets | 12 | 173 | 102 |
| Other receivables | 151 | 212 | |
| Derivative instruments | 3 | 402 | 575 |
| Prepaid expenses and accrued income | 148 | 61 | |
| Cash and cash equivalents | 19 | 330 | 331 |
| Total current assets | 5,693 | 6,202 | |
| TOTAL ASSETS | 9,760 | 9,974 |
| SEK million | Note | 31 Dec 2012 | 31 Dec 2011 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Shareholders' equity | 20 | ||
| Share capital | 409 | 409 | |
| Reserves | -521 | -414 | |
| Retained profit | 4,011 | 3,552 | |
| Equity attributable to Parent's shareholders | 3.899 | 3,547 | |
| Non-controlling interests | 24 | 18 | |
| Total equity | 3,923 | 3,565 | |
| Non-current liabilities | |||
| Interest-bearing liabilities | |||
| Liabilities to banks and credit institutions | 21 | 2,774 | 3,400 |
| Pension provisions | 9 | 14 | 10 |
| 2,788 | 3,410 | ||
| Non-interest-bearing liabilities | |||
| Deferred tax liabilities | 12 | 310 | 328 |
| Other provisions | 22 | 53 | 57 |
| Other non-current liabilities | 19 | 4 | |
| 382 | 389 | ||
| Total non-current liabilities | 3,170 | 3,799 | |
| Current liabilities | |||
| Interest-bearing liabilities | |||
| Liabilities to banks and credit institutions | 21 | 68 | 72 |
| Other current liabilities | 1 | 2 | |
| 69 | 74 | ||
| Non-interest-bearing liabilities | |||
| Accounts payables | 3 | 1,480 | 1,331 |
| Current tax liabilities | 12 | 146 | 103 |
| Other current liabilities | 101 | 76 | |
| Other current provisions | 22 | 23 | 38 |
| Derivative instruments | 3 | 322 | 503 |
| Accrued expenses and prepaid income | 23 | 526 | 485 |
| 2,598 | 2,536 | ||
| Total current liabilities | 2,667 | 2,610 | |
| TOTAL EQUITY AND LIABILITIES | 9,760 | 9,974 | |
| Pledged assets | 24 | 532 | 611 |
| Contingent liabilities | 25 | 1 | 12 |
| Attributable to the Parent | |||||
|---|---|---|---|---|---|
| Company's shareholders | |||||
| Retained | Non- controlling |
Total | |||
| SEK million | Share capital | Reserves | earnings | interests | equity |
| Opening balance at | |||||
| 1 January 2011 | 409 | -368 | 3,123 | 24 | 3,188 |
| Profit for the year | - | - | 602 | 2 | 604 |
| Other comprehensive income | - | -46 | - | -3 | -49 |
| Total comprehensive income | - | -46 | 602 | -1 | 555 |
| Transactions with shareholders | |||||
| Redemption of non-controlling interests | - | - | -5 | -5 | |
| Issue of stock options | - | - | 11 | - | 11 |
| Dividend | - | - | -184 | - | -184 |
| Total transactions with shareholders | - | - | -173 | -5 | -178 |
| Closing balance | |||||
| at 31 December 2011 | 409 | -414 | 3,552 | 18 | 3,565 |
| Attributable to the Parent Company's shareholders |
Non- | ||||
|---|---|---|---|---|---|
| SEK million | Share capital | Reserves | Retained earnings |
controlling interests |
Total equity |
| Opening balance at | |||||
| 1 January 2012 | 409 | -414 | 3,552 | 18 | 3,565 |
| Profit for the year | - | - | 640 | 7 | 647 |
| Other comprehensive income | - | -107 | - | -1 | -108 |
| Comprehensive income | - | -107 | 640 | 6 | 539 |
| Transactions with shareholders | |||||
| Issue of stock options | - | - | 13 | - | 13 |
| Dividend | - | - | -194 | - | -194 |
| Total transactions with shareholders | - | - | -181 | - | -181 |
| Closing balance at | |||||
| 31 December 2012 | 409 | -521 | 4,011 | 24 | 3,923 |
1) For further information, see Note 20.
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| Net sales | 26 | 50 | 47 |
| Other operating income | 10 | 5 | 4 |
| Total operating income | 55 | 51 | |
| Other external expenses | 5 | -72 | -55 |
| Personnel costs | 6, 7, 8, 9 | -47 | -36 |
| Depreciation, amortisation and impairment loss | -1 | -2 | |
| Other operating expenses | 0 | 0 | |
| Total operating expenses | -120 | -93 | |
| Operating profit | -65 | -42 | |
| Result from financial items | 11 | ||
| Result from interests in Group companies | 185 | 149 | |
| Interest income and similar items | 156 | 164 | |
| Interest expense and similar items | -156 | -160 | |
| Net financial items | 185 | 153 | |
| Profit before tax | 120 | 111 | |
| Income tax | 12 | -4 | -3 |
| Profit for the year | 116 | 108 |
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| Profit for the period | 116 | 108 | |
| Other comprehensive income | - | - | |
| Total comprehensive income for the period | 116 | 108 |
| SEK million | Note | 31 Dec 2012 | 31 Dec 2011 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Intangible non-current assets | 1 | 1 | |
| 1 | 1 | ||
| Property, plant and equipment | 2 | 3 | |
| 2 | 3 | ||
| Financial non-current assets | 17 | ||
| Shares in Group companies | 4,005 | 3,995 | |
| Receivables from Group companies | 3,055 | 3,060 | |
| 7,060 | 7,055 | ||
| Total fixed assets | 7,063 | 7,059 | |
| Current assets | |||
| Receivables from Group companies | 131 | 27 | |
| Other receivables | 2 | 3 | |
| Prepaid expenses and accrued income | 1 | 5 | |
| Cash and cash equivalents | - | 0 | |
| Total current assets | 134 | 35 | |
| TOTAL ASSETS | 7,197 | 7,094 |
| SEK million | Note | 31 Dec 2012 | 31 Dec 2011 |
|---|---|---|---|
| EQUITY | 20 | ||
| Restricted equity | |||
| Share capital | 409 | 409 | |
| Statutory reserve | 5 | 5 | |
| 414 | 414 | ||
| Non-restricted equity | |||
| Retained earnings | 3,490 | 3,576 | |
| Profit/loss for the year | 116 | 108 | |
| 3,606 | 3,684 | ||
| Total equity | 4,020 | 4,098 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Interest-bearing liabilities | |||
| Liabilities to Group companies | 2,500 | 2,900 | |
| 2,500 | 2,900 | ||
| Current liabilities | |||
| Non-interest-bearing liabilities | |||
| Accounts payables | 3 | 14 | |
| Income tax liabilities | 12 | 4 | 1 |
| Liabilities to Group companies | 636 | 54 | |
| Other current liabilities | 5 | 4 | |
| Accrued expenses and prepaid income | 23 | 29 | 23 |
| 677 | 96 | ||
| Total liabilities | 3,177 | 2,996 | |
| TOTAL EQUITY AND LIABILITIES | 7,197 | 7,094 | |
| Pledged assets | 24 | - | - |
| Contingent liabilities | 25 | - | - |
| SEK million | Share capital | Statutory reserve | Retained profit | Total equity |
|---|---|---|---|---|
| Opening balance at 1 January 2011 | 409 | 5 | 3,760 | 4,174 |
| Profit for the year | - | - | 108 | 108 |
| Other comprehensive income | - | - | - | - |
| Total comprehensive income | - | - | 108 | 108 |
| Dividend | - | - | -184 | -184 |
| Closing balance at 31 December 2011 | 409 | 5 | 3,684 | 4,098 |
| Opening balance at1 January 2012 | 409 | 5 | 3,684 | 4,098 |
| Profit for the year | - | - | 116 | 116 |
| Other comprehensive income | - | - | - | - |
| Total comprehensive income | - | - | 116 | 116 |
| Dividend | - | - | -194 | -194 |
| Closing balance at 31 December 2012 | 409 | 5 | 3,606 | 4,020 |
Total shares outstanding were 40,898,189 at quota value of SEK 10 per share.
| Jan-Dec | Jan-Dec | ||
|---|---|---|---|
| SEK million | Note | 2012 | 2011 |
| OPERATING ACTIVITIES | 30 | ||
| Profit after financial items | 120 | 111 | |
| Recovering of amortisation and impairment losses | 1 | 1 | |
| Adjustment for items not included in cash flow | 30 | 0 | -11 |
| Income tax paid | -4 | 1 | |
| Cash flow from operations before changes to working capital | 117 | 102 | |
| Changes in working capital | |||
| Net change in other current receivables | -99 | 30 | |
| Net change in other current operating liabilities | -1 | -56 | |
| Cash flow from operating activities | 17 | 76 | |
| INVESTING ACTIVITIES | |||
| Acquisition of property, plant and equipment | 0 | 0 | |
| Establishment of subsidiaries | -10 | - | |
| Divestment of shares in subsidiaries | - | - | |
| Cash flow from investing activities | -10 | 0 | |
| FINANCING ACTIVITIES | |||
| Amortisation of loans | -396 | -902 | |
| Loans raised from Group companies | 583 | 1,010 | |
| Issue of stock options | - | 0 | |
| Dividend | -194 | -184 | |
| Cash flow from financing activities | -7 | -76 | |
| Cash flow for the year | 0 | 0 | |
| Cash and cash equivalents at beginning of year | 0 | 0 | |
| Cash and cash equivalents at year-end | 0 | 0 |
NOTE 1 – GENERAL INFORMATION
AarhusKarlshamn AB (publ), corporate identity number 556669-2850, is a Swedish registered limited liability company domiciled in Malmö, Sweden. The shares of the Parent are listed on NASDAQ OMX Stockholm, in the Mid Cap list and under Consumer Commodities. The head office is located at Jungmansgatan 12, 211 19 Malmö, Sweden.
These consolidated financial statements for 2012 are for the Group consisting of the Parent and all subsidiaries. The Group also has ownership interests in associates and joint ventures. The Board of Directors approved these consolidated financial statements for publication on 25 March 2013.
The principal accounting policies applied in the preparation of these consolidated financial accounts are set out below.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standard Boards (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) as adopted within the EU, the Swedish Annual Accounts Act, The Swedish Financial Reporting Board's recommendation RFR 1 "Supplementary accounting rules for groups of companies". The Parent company has prepared its financial statements in accordance with the Swedish Annual Accounts Act (Årsredovisningslagen) and the Swedish Financial Reporting Board's recommendation RFR 2 "Accounting for legal entities."
The annual and consolidated financial statements have been prepared on a historical cost basis, with the exception of currency, fixed-income and commodity derivative instruments, which are measured at fair value through profit and loss. Preparing these financial statements requires that the Board of Directors and the Company management use certain critical accounting estimates and assumptions. These estimates and assumptions can materially affect the income statement, balance sheet and other information contained herein, including contingent liabilities; see also disclosure Note 4. Actual outcome can vary from these estimates under different assumptions or circumstances.
The following new standards, which is not expected to have any material impact on the consolidated financial statements, and changes in and interpretations of existing standards have been published and are compulsory for the financial statements for financial goals starting on 1 January 2012 or later:
The most significant change is the requirement for items recognised in "Other comprehensive income" to be presented with a breakdown into two groups. The breakdown is based on whether or not the items may be reclassified to profit or loss (reclassification adjustments). This change does not affect the choice of items to be included in "other comprehensive income". Effective from 1 July 2012.
This amendment eliminates the corridor method approach and calculates financial expense based on the net surplus or the net deficit in the the defined benefit plan. The effect of this has not yet been assessed. Effective from 1 January 2013.
The following new standards, changes in and interpretations of existing standards have been published and are obligatory for the consolidated financial statements for financial years starting 1 January 2013 or later:
This standard is the first stage in the process of replacing IAS 39 Financial Instruments: Valuation and Classification. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories: amortised cost and fair value. This classification is made based on the company's business model and characteristics of contractual cash flows. This standard is not effective until 2015.
The aim of IFRS 10 is to establish principles for the preparation and presentation of consolidated financial statements where one company controls one or more companies. The standard defines the concept of control and establishes control as the determining factor for consolidation. The standard also sets out the accounting requirements for the preparation of consolidated financial statements and is effective from 1 January 2013.
This standard includes the disclosure requirements for subsidiaries, joint arrangements, associates and non-consolidated structured entities. Effective from 1 January 2013.
The aim of this standard is for fair-value measurement to be more consistent and less complicated by providing an exact definition and a common source under IFRS for fair-value measurement and related disclosure requirements. The standard provides guidance on fair-value measurement for all types of assets and liabilities, both financial and non-financial. Effective from 1 January 2013.
IAS 27 (revised 2011) contains the provisions on separate financial statements that are left after the control provisions have been included in IFRS 10. Effective from 1 January 2013.
IAS 28 (revised 2011) includes the requirements for joint ventures and associates to be equity accounted in accordance with IFRS 11. Effective from 1 January 2013.
The amendments affect the guidance for the application of IAS 32 Financial Instruments: Presentation, and clarify some of the rules for offsetting financial assets and liabilities in the balance sheet. Effective from 1 January 2014 or later.
The following interpretations of and changes to existing standards have been published and are obligatory for the Group for financial years starting 1 January 2012 or later, but are not relevant to the Group:
IAS 12 (revised) Income taxes (effective from 1 January 2012).
IFRS 1 (revised) The first time IFRS is applied (effective from 1 January 2013)
IFRS 7 Financial instruments: disclosures (applicable as from 1 January 2013).
IFRS 11 Joint arrangements (effective from 1 January 2013)
The consolidated financial statements cover AarhusKarlshamn AB and all its subsidiaries. Such subsidiaries are all companies in which the Group exercises a controlling influence in determining financial and operational strategies to the extent usually associated with a shareholding of more the 50 percent of the voting rights. Subsidiaries are consolidated as of the date of acquisition (the date when the controlling influence is transferred to the Group) and to the date of disposal (date when the controlling influence terminates).
The acquisition of subsidiaries is recognised using the purchase method of accounting. The cost of acquisition is measured as the fair value of the assets provided as consideration, liabilities incurred and shares issued by the Group. Transaction costs relating to acquisitions are expensed as they are incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date. For each acquisition, the Group determines whether all non-controlling interests in the acquired companies are to be recognised at fair value or according to the proportional share of the acquired company's net assets. The excess of the purchase price, any noncontrolling interests and the fair value of previous shareholdings at the acquisition date over the fair value of the Group's interest in identifiable net assets is recognised as goodwill. If this amount is less than the fair value for the acquired subsidiary's assets, the difference is reported directly in the statement of comprehensive income.
All intra-group transactions, balances and unrealised gains on transactions are eliminated, unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The Group handles transactions with holders of non-controlling interests in the same ways as transactions with the Group's shareholders. In the event of acquisitions from holders of non-controlling interests, the company recognises the difference between the purchase price paid and the actual acquired portion of the carrying amount of the subsidiary's net assets in equity. Gains and losses on disposals to holders of non-controlling interests are also recognised in equity.
When the Group no longer holds a controlling or significant influence, each shareholding is revalued at fair value and the change in the carrying amount is recognised in the income statement. Fair value is used as the primary carrying amount and forms the basis for ongoing recognition of the remaining ownership interest as an associate company, joint venture or financial asset. All amounts relating to divested units previously recognised under "Other comprehensive income" are recognised as though the Group had directly disposed of the respective assets or liabilities. This can result in amounts previously recognised in "Other comprehensive income" being reclassified as earnings..
If the equity interest in an associate is reduced but significant influence still remains, where relevant only a proportional share of the amounts previously recognised in "Other comprehensive income" is recognised in as earnings.
Associates are those companies where the Group has significant influence, but not a controlling influence over operational and financial management, usually through an ownership interest of between 20 percent and 50 percent of the voting rights. As of the date at which the significant influence is acquired, investments in associated companies are recognised in the consolidated financial statements using the equity method. The equity method means that the value of the shares in the associated companies recognised for the Group corresponds to the Group's interest in the equity of the associated companies plus Group-related goodwill and any residual values of Group-related surplus or shortfall in value. The consolidated income statement reports the Group's share of profit of associated companies, adjusted for any amortisation, impairment or dissolution of acquired surplus or shortfall values, as other financial revenue. Dividends received from associated companies reduce the carrying amount of the investment.
The equity method is used until significant influence ceases.
Items included in the financial statement of each of the Group's subsidiaries are measured using the currency of the primary economic environment in which they operate (functional currency). The consolidated financial statements are presented in Swedish krona, which is the Parent company´s functional and presentation currency. Exchange rate differences that arise in translation of Group companies are recognised as a separate item in comprehensive income.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rate are recognised as of the end of the reporting period in the income statement.
The results and financial position of foreign subsidiaries (none of which has the currency of a hyperinflationary economy) that have a functional currency other than the presentation currency are translated into the presentation currency as follows:
Goodwill and fair value adjustments arising in the acquisition of foreign operations are treated as assets and liabilities of the entity and translated at the closing day rate.
The following rates were used to translate currency:
| Currency | Average rate | Closing rate |
|---|---|---|
| EUR | 8.62 | 8.63 |
| DKK | 1.15 | 1.16 |
| GBP | 10.30 | 10.07 |
| LKR | 0.05 | 0.05 |
| MXN | 0.50 | 0.50 |
| USD | 6.43 | 6.35 |
An operating segment is the part of the group that conducts business operations from which it may generate revenue and incur expenses for which separate financial information is available. The operating results of an operating segment are followed up by the Group's Chief operating decision-maker in order to evaluate its performance and to allocate resources to the operating segment. The Group's operations are divided up into operating segments based on which parts of the operations the Group's Chief operating decision-maker monitors, that is, according to the management approach. AAK's business operations are organised in such a way that the Group's Chief operating decision-maker, that is the CEO, monitors performance, returns and cash flows generated by the Group's various products. Each operating segment has a manager who is responsible for day-to-day operations and who regularly reports to the CEO on the outcome of the operating segment's performance and its resource requirements. Where the CEO monitors profit and determines resource allocations based on the product that the Group produces and sells, these constitute the Group's operating segments.
The Group's operations are organically divided into business segments based on product. The marketing organisation also reflects this structure. The business areas therefore make up the Group's primary segments and the geographical markets are the secondary segments. Segment reporting is submitted in accordance with IFRS 8 for the Group only. For each segment, the results, assets and liabilities directly attributable to or items that can reliably be attributed to the segment are included in that segment. Items not attributable in this way include interest and dividend revenues, gains and losses from the sale of financial investments, interest expenses, and tax expenses. Assets and liabilities not attributed to a segment include income taxes recoverable and income tax liabilities, financial investments and financial liabilities.
Revenue comprises the fair value of goods sold excluding VAT and discounts after eliminating intra-group sales. Sales are recognised on delivery of the goods, after customer acceptance and the receivable can reasonably be deemed as safe. Interest income is recognised allocated over the maturity of the security using the effective interest method. Insurance compensation is recognised as revenue when the amount can be measured in a reliable way and it is probable that the revenue will flow to the Group.
Group companies operate various pension schemes. These schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and remuneration. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate legal entity. The Group has no legal or constructive obligations to pay further contributions if this legal entity does not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior periods.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. This calculation is made annually since the obligations are negligible. The present value of the defined benefit obligation is determined by discounting the estimated future cash our flows using interest rates of high-quality corporate bonds that are denominated in the same currency in which the benefits will be paid, and that have terms of maturity approximating the terms in the related pension liability.
Actuarial gains and losses araising from of experience-based adjustments and changes in actuarial assumptions are recognised in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time. In this case, the past-service costs are amortised on a straight-line basis over the vesting period.
Employees receive compensation on termination before normal retirement age or when they voluntarily accept termination in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed, formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Annual variable remuneration is based on the meeting of set targets determined on an annual basis. These targets are related to the performance of the Company. The Group recognises costs as and when earnings occur.
The Group has introduced an incentive programme for senior managers and key personnel within the Group. The company assesses that the incentive programme should be treated under IAS 32 as it is not covered by the regulations in IFRS 2. In making this assessment, the company has taken account of the fact that options have not been issued as market-based remuneration and that the programme lacks conditions for repurchase by the company upon termination of employment or that the options may only be used if the holder is still employed by the company.
Leasing is classified as operating leasing when the risks and benefits of ownership are retained by the lessor. All leasing agreements within the Group are classified as operating leases. Operating lease payments are recognised in the income statement on a straight-line basis over the period of the lease.
Product development work is an integral part of production relating to process improvement measures that is expensed on a continuous basis as a part of the product cost as it arises. Research and development expenses are those related to work whose purpose is primarily to optimise the attributes and function of oils and speciality fats, either for the finished product in which these oils and fats are ingredients or to add value to the finished product through greater efficiency in the production process.
Assets with indefinite useful lives are tested for impairment annually rather than being depreciated. All assets are assessed in terms of impairment whenever events or changes in circumstances indicate that an asset's carrying costs exceeds its recoverable amount. Impairment reflects the excess of an asset's carrying costs over its recoverable amount. The recoverable amount is either the asset's fair value less any selling costs or its value in use, whichever is greater. For the purposes of assessment, assets are grouped on the basis of the lowest level at which there are separate identifiable cash flows (cashgenerating units). Assets, other than financial assets and goodwill, for which impairment loss was previously recognised, are tested at every balance sheet date to ascertain whether any reversal should be made.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill recognised separately is allocated to cash-generating units for the purpose of annual impairment testing. Goodwill is allocated to the cash-generating units that are expected to benefit from the acquisition. Goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the remaining carrying amount of goodwill relating to the entity sold.
When acquiring operations where cost is less than the net value of the acquired assets, borrowings, and any contingent liabilities, the difference is recognised directly in income.
Other intangible assets include such assets as capitalised expenditure on IT, patents and trademarks. These assets have a defined useful life and are carried at cost less accumulated amortisation and impairment losses. The cost associated with maintaining an intangible asset is recognised as part of the carrying value or as a separate asset only when it is probable that the future economic benefit associated with the asset will flow to the Group and the cost of the asset can be reliably measured. Other expenditures are expensed as they arise. Other intangible assets are amortised using the straight-line method over their estimated useful lives, normally 5 to 10 years.
Land and buildings comprise mainly factory buildings and offices. All property, plant and equipment is carried at cost, less accumulated depreciation. Acquisition cost includes expenditure that is directly attributable to the acquisition of an asset.
Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the assets will flow to the Group and the cost of the asset can be measured reliably. All other repairs and maintenance are expensed in the financial period in which they arise.
Land is not depreciated. Depreciation of other property, plant and equipment is allocated on a straight-line basis over the estimated useful lives of the assets to reduce their cost to residual values. Depreciation periods of between 3 and 15 years are used for plant and machinery, equipment, tools, fixtures and fittings. Industrial buildings and research laboratories are depreciated over 20 and 25 years, respectively, and office buildings over 50 years. When an asset's carrying amount may not be recoverable, the asset is immediately impaired to its recoverable amount.
Assets' residual values and useful life are reviewed at the end of every reporting period and adjusted as required.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement.
Inventories are stated at cost or net selling price, whichever is lowest. Cost is calculated using the first-in-first-out principle (FIFO) or weighted average prices. The nature and area of use of the product determines the method used. The cost of finished goods and products in progress includes direct material costs, direct labour and other direct manufacturing costs and a reasonable allocation of indirect manufacturing expenses based on normal production capacity, excluding borrowing costs. Net selling price is the estimated sale price in the ordinary course of business, less costs of completion and applicable variable selling expenses. For valuation of inventory hedged by financial derivatives, see Note 3, page 29 and Note 18, page 40.
Financial income consists of interest income on funds invested (including, where applicable, financial assets available for sale), dividend income, gains on the sale of financial assets available for sale, and gains on hedging instruments recognised in profit or loss. Dividend income is recognised when the right to receive payment has been established. Results from the sale of financial investments are recognised when the risks and benefits associated with ownership of the instruments have been transferred to the buyer and the Group no longer has control of the instrument. Financial expenses consist of interest expenses on loans, the effect of the resolution of present value calculations for provisions, impairment of financial assets and those losses on hedging instruments recognised in profit or loss. Borrowing expenses are recognised in profit or loss, except where they are directly attributable to the acquisition, construction or production of assets that take considerables time to complete for their intended use or sale, in which case they are included in the cost of those assets. Exchange rate gains and losses are reported as net amounts.
The Group classifies its financial assets in the following categories: financial assets and liabilities measured at fair value in profit or loss, loan receivables and accounts receivables, and financial assets available for sale. The classification is dependent on the purpose for which the financial asset was acquired. Management establishes the classification of financial assets at initial recognition.
Financial assets recognised at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired principally for the purpose of selling in the short term. Derivatives are classified as being held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled within 12 months, otherwise they are classified as non-current assets.
Loan receivables and accounts receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, with the exception of items with a maturity of more than 12 months after the end of the reporting period, which are classified as non-current assets. The Group's loan receivables and accounts receivables consist of accounts receivables and other receivables, as well as cash and cash equivalents in the balance sheet.
Financial assets available for sale are non derivatives where the assets are identified as being able to be sold or have not been classified in one of the other categories. They are included in non-current assets unless the investments matures or management intends to dispose of it within 12 months of the end of the reporting period.
A financial asset or financial liability is recognised in the balance sheet when the Company enters a contract for the instrument (i.e., on the relevant business day).
A financial liability is recognised when the counterparty has performed and a contractual duty to pay arises, even if no invoice is received.
A financial asset is derecognised when the rights to cash flow in the contract mature or the rights are transferred in a transaction that transfers essentially all risks and remunerations from ownership to the assets transferred. This also applies to parts of financial assets.
A financial liability is removed from the balance sheet when the duty in the contract is performed or otherwise extinguished. This also applies to parts of financial liabilities. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They arise when the Group provides money, goods or services directly to a debtor (usually a customer) with no intention of trading the receivable. These are recorded as current assets when the maturity is less than 12 months from the transaction date. Loans and receivables are recognised in "Accounts receivable" and "Other receivables" in the balance sheet.
Loan receivables and accounts receivables are recognised after the acquisition date at amortised cost using the effective interest rate method. Financial instruments are initially recognised at fair value plus transaction costs, which applies to all financial assets that are not recognised at fair value through profit or loss, for which attributable transaction costs are instead recognised in the income statement.
Hedging of fair value or a change in fair value of the hedging instrument is recognised on the same line of the income statement as the change in fair value of the hedged risk. Gain or loss attributable to the ineffective portion is recognised with immediate effect in profit or loss for the year "Raw materials and consumables and changes in inventory".
The gain or loss attributable to the ineffective portion is recognised with immediate effect in the income statement item "Net financial items".
Derivative instruments are initially recognised at fair value on the date a derivate contract is entered into and are subsequently re-measured at their fair value. The method of recognising gain or loss arising from revaluation depends on whether the derivative is identified as a hedging instrument, and, in such event, the nature of the item being hedged. The Group identifies certain derivatives as either:
(a) hedging of fair value regarding a recognised asset or liability or a firm commitment (fair-value hedging),
(b) hedging of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedging),
The Group documents at the inceptionof the transaction the relationship between hedging instrument and hedged items, as well as the hedge's role in the Group's risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both when it enters into hedging contracts and on an ongoing basis, as to whether the derivative instruments used in hedging transactions are effective in terms of offsetting changes in fair values or cash flows that the hedged item.
The Company's derivative instruments consist of OTC or "over-the-counter" derivatives concluded with financial counterparties, listed standardised derivatives and sales and purchase contracts that do not meet the exemption criteria for being recognised as a derivative (that is, that are not deemed to be for own use). According to IAS 39, only contracts not designed for physical delivery may be measured at market price. AAK's business model permits (enables) the net settlement of purchase and sales contracts entered into for physical delivery. Derivatives that are not used as hedging instruments for which hedge accounting is applied are recognised at fair value in the income statement..
The hedging instruments used to hedge inventory are partly forward contracts, partly sales contracts and purchase contracts, which do not qualify for the exemption from derivative accounting (i.e., the so called own use exemption). As the quality of the commodity used as a hedging instrument may vary from the quality of the hedged inventory, some hedge ineffectiveness is likely. AAK aim at reducing this ineffectiveness by minimizing the basic risks between the hedged inventory and the commodity used as a hedge instrument. Due to the basic risks involved, AAK uses the "dollar offset" method for the hedge efficiency test of the fair value hedge of inventories. The hedge efficiency test prepared on 2012 confirmed that the fair value hedge of inventories qualify for hedge accounting. For the full year 2012 there was a hedge efficiency of 107 percent (113 percent).
The hedging instruments used are currency forward contracts and purchase contracts. As the currency risk of the hedge instruments are identical to the currency risk of the hedged contracts no material basic risk exists. AAK therefore only uses the "critical match" method to test the hedge efficiency of currency risk on sales contracts qualifying for "own use exemption". The hedge efficiency test prepared on 2012 confirmed a perfect critical match.
The hedging instruments used are interest rate swaps with AAK paying a fixed rate and receiving a floating rate. Some minor hedge inefficiency exists, as the fixing dates on the floating rate received on the hedge do not perfectly match the fixing dates on the floating rate paid on our loans. Due to this minor hedge inefficiency, AAK uses the "dollar offset" method for the retrospective test of hedge efficiency of the cash flow hedge of floating rate loans. The hedge efficiency test prepared on 2012 confirmed that the cash flow hedge of floating rate based loans qualify for hedge accounting. At year-end 2012 there was an unrealized loss of SEK 13 million (19) on the hedge instruments. This loss will be released to the income statement within finance cost until the repayment of the bank loans.
The risk management procedures and net exposures relating to raw material and foreign currency are described in more detail under "Raw material price risk" and "Exposure to foreign currency".
The fair value of instruments that do not have listed prices is determined using valuation techniques such as discounted cash flow models, in which all assessed and determined cash flows are discounted using a zero coupon yield curve.
The fair value of derivatives is determined using valuation techniques. The valuation is based on models that discount cash flows using forward curves for underlying variables such as raw materials and exchange rates. The assessed and determined cash flows are discounted by a zero coupon interest rate curve.
Accounts receivables are recognised initially at fair value and thereafter at amortised cost using the effective interest method, less provisions for impairment. Provision for impairment of accounts receivables is recognised when there is objective evidence that the Company will not receive all the cash flow due according to the original amounts of the receivables. Provisions are measured as the difference between the assets' carrying amount and the present value of future cash flows discounted at the financial asset's original effective interest rate. Such provisions are recognised in profit or loss as "Other external expenses."
Ordinary shares are classified as share capital. Transaction expenses that are directly attributable to new share issues or options are recognised, net of tax, in equity as a deduction from the proceeds.
Borrowings are initially recognised at fair value, net of transaction costs. Borrowings are subsequently stated at amortised cost and any difference between proceeds (net of transaction costs) and redemption value is recognised in the income statement, allocated over the period of the borrowing using the effective interest method.
Accounts payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of past events, and it is more likely than not that an outflow of resources will be required to settle the obligations and the amount can be estimated reliably. No provisions are made for future operating losses. If the effect of when in time payment is made is significant, provisions are calculated through discounting the expected future cash flow at an interest rate before tax that reflects current market assessments of the time value of money and, if applicable, the risks associated with the debt. A provision for restructuring is recognised when the Group has adopted a comprehensive and formal restructuring plan, and the restructuring has either been started or published.
Tax expenses for the period comprise both current tax due and deferred income tax. Tax is recognised in the income statement, apart from when tax is attributable to items recognised in other comprehensive income or directly in equity. In such cases, tax is also recognised in other comprehensive income. Income tax is determined using the tax rates and laws that have been enacted or announced by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Tax expenses stated include both current tax due and deferred income tax.
Deferred tax is provided in full, using the liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the balance sheet. The principal temporary differences arise from depreciation of property, plant and equipment, provisions for pensions and other post-retirement benefits and tax losses carried forward. The tax rates enacted in each country are used in determining deferred income tax.
Deferred income tax assets relating to temporary differences and loss carry-forwards are recognised only to the extent it is likely that it will be possible to utilise these items. The value of deferred income tax assets is derecognised when it is no longer deemed likely that they can be utilised.
Deferred income tax assets are recognised on temporary differences arising from investments in subsidiaries, except where the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the difference will not be reversed in the foreseeable future.
Cash equivalents comprise balances with less than three months' maturity, including cash, bank deposits and other current securities.
Payments in and out have been divided up into three categories: operating activities, investing activities and financing activities. The indirect method is used for flows from operating activities.
The changes during the year in operating assets and operating liabilities have been adjusted for the effects of changes in exchange rates. Acquisitions and disposals are recognised under investing activities. The assets and liabilities that acquired and divested companies had at the time of the change are not included in the analysis of the changes in operating capital, nor in changes to balance sheet items recognised under investing and financing activities.
The calculation of earnings per share is based on the Group profit for the year attributable to the Parent company shareholders and the weighted average number of shares outstanding during the year.
When determining earnings per share after dilution, a company must base its calculations on the company's shares and stock options, which could result in dilution, being exercised. Compensation from these instruments shall be deemed to have been received from the issuing of ordinary shares at the average market price for ordinary shares during the period. The difference between the number of issued ordinary shares and the number of ordinary shares that should have been issued at the average market price for ordinary shares during the period shall be treated as an issue of ordinary shares without remuneration. According to IAS 33 paragraph 47, options and stock options shall only have a dilutive effect when the average market price for ordinary shares during the period exceeds the exercise price for options or stock options. As the exercise price for options did not exceed the average market price during the period, they will not affect the calculation of earnings per share.
Pricing between Group companies is carried out on market terms.
The dividend to shareholders in the Parent company is recognised as a liability in the Group financial statements in the period when the dividend was approved by the shareholders.
The Parent company has prepared its financial statements in accordance with the Swedish Annual Accounts Act (Årsredovisningslagen) and the Swedish Financial Reporting Board's recommendation RFR 2 "Accounting for legal entities." No differences with the Group's accounting policies have been identified.
The AAK Group's operations expose it to various financial risks, including market price risks (on raw materials, currencies and interest rates), liquidity risk and credit risk. Since our products are sold throughout the world, our sales revenues are exposed to market fluctuations in the exchange rates of the currencies involved. Moreover, the Group buys its raw materials on international markets, so its cost of raw materials is exposed to market fluctuations in both the price of the raw materials and the exchange rates of the currencies involved.
Exposure to such significant financial risks makes managing these risks a significant factor in successful operations. We believe that we are largely successful in managing risks owing to the policies and procedures established for the Group.
The Group's management of price risk and other risks related to purchasing of raw materials is regulated by AAK's policy and principles on the management of market risk for raw materials, while currency risks and other financial risks are regulated by AAK's financial policy and principles. Policies and principles are established by AAK's Board of Directors, which also monitors, evaluates and updates these policies and principles annually.
The Group's annual costs for raw materials are two-thirds of the sales value of the finished products. AAK hedges both operational raw material price risk and the underlying operational currency risk when sales agreements are signed with customers.
Raw material prices fluctuate, so the Group has assigned a high priority to raw material procurement and to managing this exposure. Raw material procurement is managed by the Group procurement organisation, which continually monitors and controls raw material market exposure for the Group. However, to maintain an effective organisation, the Group's procurement organisation is permitted to take limited price risks within the framework of our trading policy established by the Board of Directors. Since these raw material positions are managed appropriately, AAK's profitability is affected only marginally by price changes. The effect on total sales and requirements for working capital is, however, significantly larger.
Hedge contracts are used to hedge raw material price risk. Inventory and sales contracts are hedged using standard commodity futures traded on commodity exchanges, or using OTC hedge contracts or physical purchase contracts.
Exotic raw materials (of which shea is by far the most important) must be sourced when they are available right after the harvest season. No efficient hedge market exists for exotic raw materials. Therefore the Group is typically left with unhedged volumes of exotic raw materials in the months following the harvest season.
| Exposure to raw material price risk 31 December 2012 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Thousand tons) | Inventory | Sales contracts | Purchase contracts | Net exposure | |||||
| Oils and fats | 191 | -937 | 749 | 3 | |||||
| Exposure to raw material price risk 31 December 2011 | |||||||||
| (Thousand tons) | Inventory | Sales contracts | Purchase contracts | Net exposure | |||||
| Oils and fats | 188 | -859 | 676 | 5 |
With the stocks and commercial contracts hedged by raw material hedge contracts, leaving a very limited net exposure, changes in raw material prices have no significant effect on the Group's profit margin. A 10 percent change in all raw material prices would therefore have a negligible effect on Group operating profit, even though the annual effect on net sales is ± SEK 1,250 million (1,250) and ± SEK 250 million (250) on working capital.
As explained above, our policies and procedures for risk management in general imply that our profit margin is not affected by changes in raw material prices. However, AAK can not eliminate its exposure to market price fluctuations in relation to rapeseed crushing. The crushing margin (the value of the oil plus the value of the meal after crushing less the price of seed) can therefore vary significantly over time and can thereby directly affect profitability within the Technical Products & Feed business area.
A significant portion of the Group's buy and selling of raw materials is denominated in foreign currency. Moreover, most of the Group's operational subsidiaries are located outside Sweden. Changes in exchange rates therefore affect AAK in several ways:
AAK hedges all its currency transaction risks. Gross contribution on all sales contracts is thereby hedged in the local currency of the subsidiaries that have entered into such sales contracts.
Exchange rate risk related to translating equity and profit/loss in our foreign subsidiaries to SEK is not hedged.
| Sales Purchase |
Currency contracts | Net | |||||
|---|---|---|---|---|---|---|---|
| SEK million | Assets | Liabilities | contracts | contracts | Sold | Bought | exposure |
| USD | 2,250 | -2,007 | 1,756 | -2,667 | -598 | 1,216 | -50 |
| EUR | 898 | -502 | 2,524 | -1,592 | -1,643 | 322 | 7 |
| Other | 367 | -243 | 614 | -139 | -2,047 | 1,503 | 55 |
| Total | 3,515 | -2,752 | 4,894 | -4,398 | -4,288 | 3,041 | 12 |
| Sales Purchase |
Currency contracts | Net | |||||
|---|---|---|---|---|---|---|---|
| SEK million | Assets | Liabilities | contracts | contracts | Sold | Bought | exposure |
| USD | 1,096 | -1,288 | 1,756 | -1,646 | -746 | 811 | -17 |
| EUR | 484 | -275 | 1,223 | -416 | -1,406 | 318 | -72 |
| Other | 324 | -59 | 416 | -157 | -850 | 362 | 36 |
| Total | 1,904 | -1,622 | 3,395 | -2,219 | -3,002 | 1,491 | -53 |
With all foreign currency transaction risk hedged by currency hedge contracts, leaving a very limited net exposure, changes in foreign currencies will have an insignificant effect on each subsidiary's profit margin. However, changes in foreign currencies relative to SEK do affect Group profit when the profit of each foreign subsidiary is translated into SEK. A 10 percent change in the exchange rates of all foreign currencies relative to SEK would have an effect of ± SEK 70 million (65) on Group operating profit. Furthermore, a 10 percent change in the exchange rates of all foreign currencies relative to SEK would affect Group net sales by SEK 900 million (1,000) and Group net working capital by SEK 200 million (200).
AAK's policy on interest rate risk management is to minimise volatility in cash flow and net profit caused by fluctuations in interest rates. This is accomplished when the Group's net interest-bearing debt is floating rate. However, during abnormal market conditions – e.g. a financial crisis – short-term interest rates can rise to extreme levels. In order to protect the Group's interest costs against such abnormal scenarios, the interest rate on part of the Group's net interest-bearing debt can be fixed or capped.
At year-end 2012, the Group's interest-bearing net debt amounted to SEK 2,521 million (3,141). Of which SEK 1,800 million (1800) has been swapped into fixed-rate loans with an average maturity of 3 (4) years.
AAK has applied cash flow hedging with interest rate swaps since 1 October 2011.
| SEK | DKK | GBP | MXN | USD | ||
|---|---|---|---|---|---|---|
| 2012 | 2.44 | 1.36 | 1.64 | 6.00 | 1.36 | |
| 2011 | 3.78 | 2.04 | 2.12 | 6.04 | 1.68 |
At the closing date, the Group had a floating rate-based net debt of SEK 721 million (1,341). A 1 percent change in interest rates would therefore have a full-year effect of SEK 7 million (13) on the Group's interest costs before tax.
AAK's policy on capital structure is to maximise debt financing, though not to a level that would threaten the Company's investment grade profile.
| Results for | Results for | ||
|---|---|---|---|
| AAK's target key ratios are as follows: | Target | 2012 | 2011 |
| 1. Net interest-bearing debt/EBITDA | < 3.00 | 1.84 | 2.39 |
| 2. EBITDA/interest cost | > 5.00 | 14.59 | 14.90 |
| 3. Net interest-bearing debt/equity | < 1.25 | 0.65 | 0.88 |
The Group's policy is to allocate total net borrowings per subsidiary relative to each subsidiary's share of the Group's total cash flow. This minimises the currency risk in relation to the Group's ability to pay interest on and amortise its borrowings, which in turn strengthens the Group's debt capacity.
| SEK million | 2012 | 2011 |
|---|---|---|
| SEK | 714 | 1,025 |
| DKK | 615 | 1,114 |
| GBP | 171 | 290 |
| MXN | 121 | 213 |
| USD | 1,221 | 830 |
| Total | 2,842 | 3,472 |
Liquidity risk concerns the Group's ability to meet its financial commitments as they fall due.
The table below shows all of the Group's financial commitments, listed by the earliest contractual maturity date at the balance sheet date. All liabilities to banks and credit institutions are based on variable interest rates, which means the year-end carrying amount reflects the present value of these liabilities. All liabilities in foreign currency are translated into SEK at year-end closing rates.
| Between | Between | ||||
|---|---|---|---|---|---|
| Total | Less than 1 | 1 and 2 | 2 and 5 | ||
| amount | year | years | years | Over 5 years | |
| Non-current liabilities | |||||
| Financial liabilities | |||||
| Liabilities to banks and credit institutions | 2,774 | - | 61 | 2,375 | 338 |
| Other non-current liabilities | 19 | - | - | - | 19 |
| Total non-current liabilities | 2,793 | - | 61 | 2,375 | 357 |
| Interest on liabilities to banks and credit institutions | 488 | 83 | 97 | 249 | 59 |
| Total non-current liabilities and interest | 3,281 | 83 | 158 | 2,624 | 416 |
| Current liabilities | |||||
| Financial liabilities | |||||
| Liabilities to banks and credit institutions | 68 | 68 | - | - | - |
| Accounts payables | 1,480 | 1,480 | - | - | - |
| Derivative financial instruments | 322 | 322 | - | - | - |
| Accrued expenses | 526 | 526 | - | - | - |
| Other current liabilities | 101 | 101 | - | - | - |
| Total current liabilities | 2,497 | 2,497 | - | - | - |
| Interest on liabilities to banks and credit institutions | 2 | 2 | - | - | - |
| Total current liabilities and interest | 2,499 | 2,499 | - | - | - |
Future payments for derivative instruments amount to SEK 8,206 million and future receipts amount to SEK 11,120 million.
| Less than | Between | Between | More than 5 | ||
|---|---|---|---|---|---|
| Total amount | 1 year | 1-2 years | 2 and 5 years | years | |
| Unused credit facilities | 2,748 | - | - | 2,748 | - |
| Between | Between | ||||
|---|---|---|---|---|---|
| Total | Less than 1 | 1 and 2 | 2 and 5 | ||
| amount | year | years | years | Over 5 years | |
| Non-current liabilities | |||||
| Financial liabilities | |||||
| Liabilities to banks and credit institutions | 3,400 | - | 42 | 3,094 | 264 |
| Other non-current liabilities | 4 | - | - | - | 4 |
| Total non-current liabilities | 3,404 | - | 42 | 3,094 | 268 |
| Interest on liabilities to banks and credit institutions | 488 | 83 | 93 | 276 | 36 |
| Total non-current liabilities and interest | 3,892 | 83 | 135 | 3,370 | 304 |
| Current liabilities | |||||
| Financial liabilities | |||||
| Liabilities to banks and credit institutions | 72 | 72 | - | - | - |
| Accounts payables | 1,331 | 1,331 | - | - | - |
| Derivative financial instruments | 503 | 503 | - | - | - |
| Accrued expenses | 485 | 485 | - | - | - |
| Other current liabilities | 76 | 76 | - | - | - |
| Total current liabilities | 2,467 | 2,467 | - | - | - |
| Interest on liabilities to banks and credit institutions | 12 | 12 | - | - | - |
| Total current liabilities and interest | 2,479 | 2,479 | - | - | - |
Future payments for derivative instruments amount to SEK 10,547 million and future receipts amount to SEK 13,094 million.
| Less than | Between | Between | More than 5 | ||
|---|---|---|---|---|---|
| Total amount | 1 year | 1-2 years | 2 and 5 years | years | |
| Unused credit facilities | 2,362 | - | - | 1,362 | 1,000 |
The Group's cash and cash equivalents of SEK 330 million, available credit facilities of SEK 2,748 million and future cash generated by the business are together deemed sufficient for the Group to meet its financial commitments.
The Company is exposed to credit risk primarily in relation to accounts receivables and customer contracts. Risk in the latter case is represented by customers' failure to meet their commitments due to changes in market prices.
Generally, AAK's credit risks are significantly limited due to the stable, long-term business relationships we have with our customers and suppliers.
The customer structure for the Group is such that its single largest customer is responsible for less than 5 percent of its total sales, and the average customer corresponds to less than 1 percent.
Nearly a quarter of the Group's sales occur in countries where the political and commercial risks are deemed to be higher than in Western economies. However, we experience only a limited need for impairments even in these countries. This is largely due to the fact that a significant portion of our business in these countries is with large multi-national companies that also do business worldwide. The partners with whom we do business are also primarily companies with which we have stable, long-term relationships.
Each business segment is responsible for managing its customer credit risks, while our large production facilities are responsible for managing their counter-party risk in relation to raw material procurement.
| 2012 | 2011 | |||
|---|---|---|---|---|
| Gross amount | Gross amount | |||
| SEK million | underlying rec. | Provisions | underlying rec. | Provisions |
| Provisions at 1 January | 21 | 18 | 28 | 16 |
| Provisions for potential losses | 8 | 8 | 10 | 10 |
| Unused amount reversed | 0 | 1 | -14 | -5 |
| Actual credit losses | -7 | -7 | -3 | -3 |
| Exchange differences | 0 | 0 | 0 | 0 |
| Provisions at 31 December | 22 | 20 | 21 | 18 |
Provisions for impairments are entirely related to accounts receivable. Total accounts receivable excluding provisions were SEK 1,926 million (2,055).
| SEK million | 2012 | 2011 |
|---|---|---|
| 1-30 days | 314 | 346 |
| 31-120 days | 24 | 42 |
| 121-360 days | 3 | 14 |
| Over 360 days | 0 | 0 |
| 341 | 402 |
The Group has three classes of financial instruments (hedging instruments): raw material hedge contracts, currency hedge contracts and interest rate hedge swaps. In December 2012 the Group had only derivative financial instruments that were measured at fair value. The fair value of the derivative financial instruments is measured using valuation methods and observable market data (methodology: level 2). The valuation methods applied are described in the accounting policy.
| SEK million | 2012 | 2011 | ||
|---|---|---|---|---|
| Financial instruments | Assets | Liabilities | Assets | Liabilities |
| Raw material Sales/Purchase contracts | 324 | 1 | 130 | 112 |
| Currency hedge contracts | 74 | 62 | 362 | 337 |
| Interest rate hedge swaps | - | 68 | - | 54 |
| 398 | 131 | 492 | 503 | |
| Fair value of changes in inventories | 4 | 191 | 83 | 0 |
| Total | 402 | 322 | 575 | 503 |
Futures contracts, purchase and sales contracts not deemed to be assets for own use are used for hedging, which means that they cannot be exempted from derivative accounting. Since the quality of the underlying raw materials used for hedging differs from the quality of the hedged raw materials, some inefficiency is likely (basis risk). Due to the basis risk involved, AAK uses the "dollar offset" method for testing the hedge efficiency of the fair value of raw materials. Hedge efficiency testing in 2012 confirmed that the fair-value hedge of raw materials qualifies for hedge accounting. Hedge efficiency for the full-year 2012 was 107 percent (113).
The hedging instruments used are futures contracts and purchase contracts. As the currency risk of the hedge instruments is identical to the currency risk of the hedged contracts, no material basic risk exists. AAK therefore only uses the "critical match" method to test the hedge efficiency of currency risk on sales contracts that qualify for own use exemption and that may consequently be exempted from derivative accounting. The hedge efficiency testing in 2012 confirmed a perfect critical match.
The hedging instruments used are interest rate swaps, with AAK paying a fixed rate and receiving a floating rate. Some minor hedge inefficiency exists, as the fixing dates on the floating rate received on the hedge do not perfectly match the fixing dates on the floating rate paid on our loans. Due to this minor hedge inefficiency, AAK uses the dollar offset method for retrospective measuring of hedge efficiency of the cash flow hedge of floating-rate loans. Hedge efficiency testing in 2012 confirmed that the cash flow hedge of floating-rate loans qualifies for hedge accounting. At year-end 2012 there was an unrealized loss of SEK 13 million (19) on hedge instruments.
The risk management procedures and net exposures relating to raw material and foreign currency are described in more detail under "Raw material price risk" and "Exposure to foreign currency."
In preparing these financial statements, the Group management and Board of Directors must make estimates and assumptions that affect the recognised amounts of assets and liabilities, revenues and expenses, and other information, especially regarding contingent liabilities. The estimates and assumptions for accounting purposes dealt with in this section are deemed the most critical for a proper understanding of the financial statements, in view of their degree of significance in judgements and uncertainty. Our estimates and assumptions in this regard change as the circumstances for AAK's operations change.
The Group tests goodwill for any impairment on an annual basis or whenever events or objective circumstances indicate that the fair value of acquisition-related goodwill may have declined – for example, because of changes in the business climate or decisions to dispose of or discontinue certain operations. To determine whether the value of goodwill has decreased, the cash-generating unit to which the goodwill is attributable must be valued and this is done by discounting the cash flow of the unit. In applying this method, the Company relies on several factors, such as profit/loss, business plans, financial forecasts and market data.
AAK's tangible and intangible assets, excluding goodwill, are recognised at cost less accumulated amortisation/depreciation and any impairment. Besides goodwill, AAK recognises no intangible assets with unlimited useful life. Depreciation/ amortisation is applied over the estimated useful life to an estimated residual value. Both the useful life and residual value are reviewed at least once at the end of each financial period.
The carrying amount of the Group's non-current assets is tested whenever events or changes in circumstances indicate that the carrying amount cannot be recovered. The carrying amount of intangible assets not yet finished for use is tested each year. If such an analysis indicates that the carrying amount is too high, the recovery value of the asset is established, which is either the net sales value or the value in use, whichever is greatest. Value in use is measured as the expected future discounted cash flow from the assets or the cash-generating unit to which the asset belongs.
The carrying amount is also tested if a fixed asset is classified as being held for sale; in such event, it is recognised at the lower of carrying amount or fair value after deduction for costs to sell.
The Group is liable to pay taxes in many countries. Extensive reviews and testing are necessary to establish world-wide provisions for income tax liabilities. There are many transactions and calculations for which the final tax is uncertain. The Group recognises a liability for anticipated tax audit issues based on assessment of whether an additional tax liability will arise. In cases where the final tax for these matters differs from the amounts first recognised, these differences will impact current and deferred tax assets and tax liabilities in the period when these determinations are made.
AAK is involved in a number of disputes and legal processes relating to current operations. Senior management provides legal expertise in matters relating to legal disputes along with other experts both inside and outside the Company in matters relating to current business operations. According to our best assessment, neither the Parent company nor any subsidiary is currently involved in any legal procedure or arbitration proceedings that are deemed to have any significant impact on the business, its financial position or its performance.
Futures contracts or fixed price contracts are used to hedge raw material price risk. Moreover, the Group employs currency hedging on all of its transaction risks. This means that the gross contribution of every sales contract is hedged. As part of internal monitoring, the market value of all sales contracts and raw material purchases (including inventory) is valued with respect to both raw material prices and currency prices, which is not possible under IAS 39 without applying hedge accounting based on fair-value hedging.
The majority of purchase and sales contracts for physical delivery are deemed to be derivative instruments and are valued at fair value in the income statement. The introduction of hedge accounting of inventory in accordance with the rules on fair-value hedging means that what was previously known as the "IAS 39 effect" will no longer occur.
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Audit | ||||
| PwC | 5,504 | 4,822 | 981 | 1,044 |
| Other | 159 | 68 | - | - |
| Subtotal, audit | 5,563 | 4,890 | 981 | 1,044 |
| Other audit assignments | ||||
| PwC | 783 | 1.207 | 254 | 645 |
| Other | 7 | - | - | - |
| Subtotal, other audit assignments | 790 | 1.207 | 254 | 645 |
| Tax consulting | ||||
| PwC | 580 | 726 | - | - |
| Other | 42 | - | - | - |
| Subtotal, tax consulting | 622 | 726 | - | - |
| Other assignments | ||||
| PwC | 2,629 | 3,717 | 1,959 | 3,367 |
| Other | - | 71 | - | - |
| Subtotal, other assignments | 2,629 | 3,788 | 1,959 | 3,367 |
| Total | 9,704 | 10,611 | 3,194 | 5,056 |
The audit assignment refers to fees for the statutory audit, i.e. work that has been necessary in order to issue the Auditors' Report, and what is referred to as audit consulting, which is submitted in conjunction with the audit assignment.
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Wages and salaries | 883,326 | 831,271 | 31,404 | 25,034 |
| Social security contributions | 238,520 | 215,349 | 18,182 | 10,600 |
| (of which pension costs) | (74,303) | (79,062) | (6868) | (4136) |
SEK 3 million (2) of the Group pension costs relates to the Board of Directors, the CEO and other senior managers.
| 2012 | 2012 2011 |
||||||
|---|---|---|---|---|---|---|---|
| Board of Directors, CEO | Other | Board of Directors, CEO | 2011 Other |
||||
| and other senior managers | employees | and other senior managers | |||||
| Wages | Of which vari | Wages and | Wages and | Of which vari | employees Wages and |
||
| and salaries | able salaries | salaries | salaries | able salaries | salaries | ||
| Parent, Sweden | 14,490 | 2,627 | 16,914 | 13,384 | 2,721 | 11,650 | |
| Subsidiaries, Sweden | 3,839 | 409 | 243,043 | 3,306 | 352 | 245,242 | |
| 18,329 | 3,036 | 259,957 | 16,690 | 3,073 | 256,892 | ||
| Foreign subsidiaries: | 23,648 | 5,313 | 581,392 | 18,288 | 2,136 | 539,401 | |
| Group total | 41,977 | 8,349 | 841,349 | 34,978 | 5,209 | 796,293 |
| NOTE 7 – AVERAGE NUMBER OF EMPLOYEES, ETC. | ||||||
|---|---|---|---|---|---|---|
| 2012 | 2012 | 2012 | 2011 | 2011 | 2011 | |
| Average number of | Number of | Of which | Of which | Number of | Of which | Of which |
| employees | employees | men | women | employees | men | women |
| Parent Company, | ||||||
| Sweden | 17 | 11 | 6 | 13 | 8 | 5 |
| Subsidiaries in | ||||||
| Sweden | 517 | 394 | 123 | 535 | 402 | 133 |
| 534 | 405 | 129 | 548 | 410 | 138 | |
| Foreign subsidiaries: | ||||||
| Brazil | 6 | 4 | 2 | 6 | 4 | 2 |
| Denmark | 277 | 203 | 74 | 285 | 219 | 66 |
| Finland | 2 | 2 | - | 2 | 2 | - |
| Ghana | 2 | 2 | - | 2 | 2 | - |
| China | 13 | 7 | 6 | 6 | 4 | 2 |
| Lithuania | 4 | 3 | 1 | 4 | 3 | 1 |
| Malaysia | 19 | 8 | 11 | 18 | 7 | 11 |
| Mexico | 355 | 292 | 63 | 362 | 302 | 60 |
| The Netherlands | 70 | 60 | 10 | 62 | 52 | 10 |
| Norway | 1 | 1 | - | 1 | 1 | - |
| Poland | 4 | 2 | 2 | 4 | 2 | 2 |
| Russia | 17 | 5 | 12 | 16 | 5 | 11 |
| United Kingdom | 514 | 415 | 99 | 501 | 405 | 96 |
| Czech Republic | 2 | 1 | 1 | 2 | 1 | 1 |
| Germany | 1 | - | 1 | 1 | - | 1 |
| Uruguay | 12 | 5 | 7 | 12 | 5 | 7 |
| USA | 378 | 289 | 89 | 233 | 182 | 51 |
| 1,677 | 1,299 | 378 | 1,517 | 1,196 | 321 | |
| Group total | 2,211 | 1,704 | 507 | 2,065 | 1,606 | 459 |
| 2012 | 2012 | 2011 | 2011 | |||
| Board members | Total at | Total at | ||||
| and senior managers | reporting date | Of which men (%) | reporting date | Of which men (%) | ||
| Group (incl. subsidiaries) | ||||||
| Board members | 148 | 92 | 147 | 94 | ||
| Chief Executive Officer and other | ||||||
| senior managers | 77 | 88 | 68 | 93 | ||
| Parent | ||||||
| Board members 1) Chief Executive Officer and other |
8 | 88 | 9 | 89 | ||
| senior managers | 3 | 67 | 3 | 67 |
1) And 2 employee representatives, 1 of whom is male.
The principles for the remuneration of senior executives (Group Management) at AAK, in both the Parent Company and the Group, are designed to ensure that AAK can offer internationally competitive remuneration that can attract and retain qualified managers.
Compensation of the Chief Executive Officer and other senior managers is considered by the Remuneration Committee of the Board of Directors and all decisions are made by the Board as a whole.
Total remuneration includes salary, annual variable remuneration, pension, car allowance, and termination benefit. Senior managers have had the opportunity of investing in share warrants at market price.
Fixed salary, individually determined and differentiated according to responsibility and performance, is determined on competitive principles and reviewed annually. The applicable date for the annual performance review is 1 January.
Annual variable remuneration is based on meeting set targets determined on an annual basis. These targets are related to the performance of the Company. Senior management are entitled to up to 60 percent of their annual fixed salary in variable remuneration.
The Group introduced an incentive programme for senior managers and key personnel within the Group in 2010. 1,500,000 share warrants entitling holders to subscribe for the corresponding number of new shares in AarhusKarlshamn AB, whereby the share capital may be increased by up to SEK 15,000,000.
Each stock option entitles the holder to subscribe for one (1) new share in AarhusKarlshamn AB with a quota value of SEK 10. The subscription for shares in AarhusKarlshamn AB through the use of share warrants must take place during the period 1 December 2013 up to and including 1 December 2015.
If exercised in full, this programme could result in an overall dilution effect of up to approximately 3.54 percent in relation to share capital after full dilution, calculated on the basis of the number of additional shares in relation to the number of existing and additional shares. Senior managers and key personnel have purchased share warrants at market value, valued in accordance with Black & Scholes.
Pensions for senior management are in line with the Swedish KTP plan (corresponding to ITP).
The Company has separate agreements with the Chief Executive Officer and senior managers for termination compensation of one year's salary (fixed cash amount per month x 12 months) on termination by the Company. Neither the Chief Executive Officer nor any senior manager can independently assert the right to termination compensation.
The period of notice of termination by the Chief Executive Officer and senior managers is agreed as 6 months. Termination notice by the Company is agreed as 12 months.
Fees are paid to the elected members of the Board in accordance with the resolution of the Shareholder's Annual General Meeting.
No other compensation or benefits have been paid to members of the Board, except travel expenses. The CEO, the secretary to the Board and employee representatives on the Board do not receive any compensation other than reimbursement of their expenses in connection with their participation in Board activities.
Under a resolution of the Annual General Meeting, total compensation of elected external members of the Board is set at SEK 2,775,000, including compensation for committee work. Of this amount, the Chairman receives SEK 500,000, the Vice-Chairman SEK 375,000 and external members SEK 250,000. Compensation for committee work is distributed, in accordance with a decision of the AGM, as SEK 200,000 to the Chairman of the Audit Committee, SEK 100,000 to other members of the Audit Committee, SEK 100,000 to the Chairman of the Remuneration Committee, and SEK 50,000 to other members of the Remuneration Committee.
| Salary/Board | Annual | |||||
|---|---|---|---|---|---|---|
| SEK | of Directors' fees |
variable salary |
Other benefits 2) |
Pension cost | Change in reserve |
Total |
| Board of Directors | ||||||
| Melker Schörling, | ||||||
| Chairman | 500,000 | - | - | - | - | 500,000 |
| Carl Bek-Nielsen, | ||||||
| Vice-Chairman | 375,000 | - | - | - | - | 375,000 |
| Martin Bek-Nielsen | 400,000 | - | - | - | - | 400,000 |
| Mikael Ekdahl | 450,000 | - | - | - | - | 450,000 |
| Ulrik Svensson | 450,000 | - | - | - | - | 450,000 |
| Harald Sauthoff | 350,000 | - | - | - | - | 350,000 |
| Märit Beckeman | 250,000 | - | - | - | - | 250,000 |
| Subtotal for Board | 2,775,000 | - | - | - | - | 2,775,000 |
| Senior Managers | ||||||
| Arne Frank, | ||||||
| Chief Executive Officer 3) | 7,103,962 | 1,341,600 4) | 129,500 | 1,950,000 | - | 10,525,062 |
| Jerker Hartwall, former | ||||||
| Chief Executive Officer 3) | 4,314,899 | - | - | - | -4,314,899 5) | 0 |
| Other senior | ||||||
| managers | 20,083,779 | 4,531,573 4) | 1,175,302 | 3,235,345 | 29,025,999 | |
| Subtotal, | ||||||
| Senior managers | 31,502,640 | 5,873,173 | 1,304,802 | 5,185,345 | -4,314,899 | 39,551,061 6) |
| Total | 34,277,640 | 5,873,173 | 1,304,802 | 5,185,345 | -4,314,899 | 42,326,061 7) |
1) Refers to items carried as an expense in 2012.
2) Other benefits refer primarily to company cars.
3) Arne Frank started as Chief Executive Officer on 6 April 2010. Jerker Hartwall was Chief Executive Officer up to and including 5 April 2010.
4) Charged in the income statement in 2012 and estimated to be paid in 2013. During the year, variable remuneration expensed in 2011 of SEK 8,372,112 was paid.
5) A cost provision was made for the 2009 financial year in AarhusKarlshamn AB, corresponding to severance pay and other benefits relating to Jerker Hartwall, which are expected to be paid during the period 2010-2012.
6) Refers to the following for 2012: Anders Byström (until 31 May 2012), Peter Korsholm (1 June 2012), Renald Mackintosh, Bo Svensson, David Smith, Torben Friis Lange, Anne Mette Olesen, Karsten Nielsen, Edmond Borit, Octavio Diaz de Léon and Jean-Marc Rotseart (until 23 May 2012).
7) Of the amount of SEK 42,326,061, SEK 21,006,454 relates to the Parent Company, AarhusKarlshamn AB.
Arne Frank, President and Chief Executive Officer, is currently paid an annual fixed salary of SEK 6,987,504 plus the value of a company car. In addition, variable remuneration may be paid up to a maximum of 60 percent of the fixed salary. In 2012, SEK 1,341,600 was carried as an expense for variable remuneration. Arne Frank's retirement age is 65. To fund the pension obligation, the Company pays annual premiums to a selected insurance company. This premium is set in the Company's agreement with Arne Frank at 30 percent of his annual fixed salary. The retirement age for other senior managers is either 62 years or 65 years.
The Group maintains defined benefit retirement plans in which employees earn the right to payment of benefits after completing their employment, based on their final salary and period of service. These defined benefit retirement plans exist primarily in Sweden and the Netherlands. There are further commitments for retirement and survivors' pensions for managers and officers in Sweden that are insured through KP Pensionskassa.
The obligations for retirement and survivors' pension for professional employees in Sweden are insured through policies with Alecta or correspondingly in KP Pensionskassa. According to a statement by the Swedish Financial Reporting Board (Emerging Issues Task Force), UFR 3, this is a defined benefit plan that involves several different employers. For the period from 1 January to 31 December 2012, AarhusKarlshamn AB (publ) and AarhusKarlshamn Sweden AB have not had access to sufficient information to enable the Company to recognise this plan as such. The ITP occupational pension plan secured through KP Pensionskassa is, therefore, recognised as a defined contribution plan. Alecta's excess can be allocated to the insured individual or their beneficiaries. Corresponding provisions also apply to insurance policies with KP Pensionskassa. Charges for pensions insured through KP Pensionskassa during the current year are SEK 14 million (14). At year-end 2012, Alecta's and KP Pensionkassa's surplus in the form of their collective consolidation levels was 100 percent and 116 percent, respectively (113 percent and 100 percent, respectively).
| Defined benefit plans | ||
|---|---|---|
| 2012 | 2011 | |
| The amounts recognised in the consolidated balance sheet are | ||
| determined as follows: | ||
| Present value of funded obligations | 560 | 457 |
| Fair value of plan assets | -448 | -425 |
| 112 | 32 | |
| Present value of unfunded obligations | - | - |
| Unrecognised actuarial gains (-) and losses (+) | -98 | -22 |
| Net liability in the balance sheet | 14 | 10 |
| Defined benefit plans | |||
|---|---|---|---|
| 2012 | 2011 | ||
| The amounts recognised in the consolidated income statement are as follows: | |||
| Costs pertaining to service during the current year | 11 | 10 | |
| Interest expenses | 21 | 19 | |
| Expected return on plan assets | -18 | -16 | |
| Actuarial gains (+) and losses (-) | 2 | 1 | |
| Past service cost | - | - | |
| Employees' contributions paid | -1 | -1 | |
| Total, included in employee costs (Note 6) | 15 | 13 |
| Defined benefit plans | |||
|---|---|---|---|
| 2012 | 2011 | ||
| Total pension costs recognised in the consolidated income statement are as follows: |
|||
| Total costs for defined benefit plans including employer's contribution | 14 | 13 | |
| Total costs for defined contribution plans including employers' contribution | 60 | 66 | |
| Total | 74 | 79 |
| Defined benefit plans | |||
|---|---|---|---|
| 2012 | 2011 | ||
| Movement in the net pension provision recognised in the consolidated | |||
| balance sheet: | |||
| Net provision at start of year | 10 | 4 | |
| Net cost recognised in the income statement | 14 | 13 | |
| Benefits paid | -10 | -7 | |
| Contributions by employer to funded obligations | - | - | |
| Exchange difference on foreign plans | - | - | |
| Net provision at year-end | 14 | 10 |
| Defined benefit plans | |||
|---|---|---|---|
| 2012 | 2012 | ||
| The Netherlands | Sweden | ||
| The principal actuarial assumptions used at reporting date (%): | |||
| Discount rate | 3.40 | 3.50 | |
| Expected return on plan assets | 3.40 | 3.50 | |
| Future annual salary increases | 2.50 | 3.00 | |
| Future annual pension increases | 2.00 | 3.00 | |
| Staff turnover | 5.00 | 5.00 | |
| Defined benefit plans | |||
| 2011 | 2011 | ||
| The Netherlands | Sweden | ||
| The principal actuarial assumptions used at reporting date (%): | |||
| Discount rate | 5.25 | 4.00 | |
| Expected return on plan assets | 4.60 | 4.00 | |
| Future annual salary increases | 2.50 | 3.00 | |
| Future annual pension increases | 2.00 | 3.00 | |
| Staff turnover | 5.00 | 5.00 |
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Insurance compensation | 39 | 65 | - | - |
| Other operating income | 69 | 41 | 5 | 4 |
| Total | 108 | 106 | 5 | 4 |
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Interest income | 8 | 6 | 0 | 0 |
| Interest income, Group companies | - | - | 155 | 164 |
| Other financial income | 8 | 6 | 1 | 0 |
| Divided, Group companies | - | - | 115 | 103 |
| Group contributions | - | - | 70 | 46 |
| Financial income | 16 | 12 | 341 | 313 |
| Interest expense | -102 | -94 | -156 | -160 |
| Changes in exchange rates | -17 | -4 | - | - |
| Changes in fair value – derivative instruments | 0 | 1 | - | - |
| Other financial expense | -6 | -13 | 0 | 0 |
| Financial expense | -125 | -110 | -156 | -160 |
| Net financial items | -109 | -98 | 185 | 153 |
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Current tax | -230 | -196 | 0 | 0 |
| Deferred tax | 11 | -16 | -4 | -3 |
| Total | -219 | -212 | -4 | -3 |
The Group's weighted average underlying tax rate is approximately 27 percent. The Group's weighted average tax rate for 2012, based on the tax rates in each of the various countries involved, was 25 percent. The tax rate in Sweden is 26.3 percent (26.3). The Parent's current tax rate for 2012 is lower than the nominal tax rate, which is primarily an effect of taxfree dividends.
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Profit before taxes | 866 | 816 | 120 | 111 |
| Weighted average tax rate | ||||
| based on the tax rates in each country | -232 | -222 | -32 | -29 |
| Tax effect of various tax rates in other countries | 0 | 0 | - | - |
| Tax effect of non-deductible expenses | -8 | -4 | -1 | -1 |
| Tax effect of tax-exempt income | 1 | 7 | 29 | 27 |
| Net effect of loss carry-forwards | 0 | 0 | - | - |
| Effect of tax rate changes | 20 | 6 | - | - |
| Adjustment for current tax for previous years | 0 | 1 | - | - |
| Tax expense | -219 | -212 | -4 | -3 |
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset recognised tax assets and liabilities and when the deferred taxes refer to the same tax authority. The offset amounts are as follows:
| Group | Parent | |||
|---|---|---|---|---|
| Deferred tax assets | 2012 | 2011 | 2012 | 2011 |
| Tax loss carry-forwards | 0 | 0 | - | - |
| Property, plant and equipment | 63 | 56 | - | - |
| Inventory | 1 | 10 | - | - |
| Current assets | 4 | -8 | - | - |
| Provisions | 15 | 17 | - | - |
| Non-current liabilities | 6 | 8 | - | - |
| Current liabilities | 26 | 36 | - | - |
| Other temporary differences | - | - | - | - |
| At year-end | 115 | 119 | - | - |
| Group | Parent | |||
|---|---|---|---|---|
| Deferred tax liabilities | 2012 | 2011 | 2012 | 2011 |
| Intangible assets | 24 | 15 | - | - |
| Property, plant and equipment | 236 | 231 | - | - |
| Inventory | 5 | 20 | - | - |
| Current assets | 24 | 24 | - | - |
| Provisions | 10 | 9 | - | - |
| Untaxed reserves | 7 | 8 | - | - |
| Current liabilities | 4 | 21 | - | - |
| At year-end | 310 | 328 | - | - |
The Company has no loss carry-forwards not reflected in deferred tax assets.
In addition to deferred tax assets and liabilities, AarhusKarlshamn has the following current tax liabilities and tax recoverable:
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Current tax liabilities | -146 | -103 | -4 | -1 |
| Current tax receivables | 173 | 102 | - | - |
| Income tax liabilities/tax assets | 27 | -1 | -4 | -1 |
| Group | ||
|---|---|---|
| 2012 | 2011 | |
| Earnings attributable to equity holders of in the Parent (SEK million) | 640 | 602 |
| Weighted average number of ordinary shares outstanding | 40,898,189 | 40,898,189 |
| Earnings per share, SEK | 15.66 | 14.72 |
| Earnings per share after dilution, (SEK) | 15.56 | - |
| Earnings per share after full dilution, (SEK) | 15,18 | - |
Earnings per share are calculated for 2012 based on net profit for the year attributable to equity holders in the Parent Company – SEK 640 million (602) – and on a weighted average number of ordinary shares in issue of 40,898,189 (40,898,189).
Outstanding stock options (see Note 8), if fully exercised, may generate a total dilution effect of a maximum of 3.54 percent. The calculation of earnings per share is based on a weighted average number of outstanding shares in issue after dilution resulting from outstanding share warrants in accordance with IAS 33.
Earnings per share after full dilution have been calculated by dividing the net profit for the period by the total number of shares in issue during the period, and by converting all outstanding share options to ordinary shares.
For the 2012 financial year, the Board of Directors and Chief Executive Officer propose the distribution of a dividend of SEK 5.25 per share. A decision will be made at the Annual General Meeting on 3 May 2013. It is proposed that the record date for the dividend will be 8 May and the dividend is expected to be distributed to shareholders by 14 May.
| Land and | Plant and | Equipment, tools and fixtures and |
Fixed assets under con |
||
|---|---|---|---|---|---|
| Group | buildings | machinery | fittings | struction | Total |
| Cost at 1 January 2011 | 1,389 | 4,972 | 342 | 219 | 6,922 |
| Investments | 7 | 132 | 14 | 190 | 343 |
| Acquired through business combinations | 13 | 59 | - | - | 72 |
| Disposals | -4 | -4 | -10 | - | -18 |
| Reclassifications | 31 | 21 | 18 | -70 | 0 |
| Exchange differences | -5 | 11 | 1 | 3 | 10 |
| Accumulated cost at 31 December 2011 | 1,431 | 5,191 | 365 | 342 | 7,329 |
| Cost at 1 January 2012 | 1,431 | 5,191 | 365 | 342 | 7,329 |
| Investments | 28 | 251 | 24 | 64 | 367 |
| Acquired through business combinations | 4 | 34 | 20 | 2 | 60 |
| Disposals | -29 | -52 | -4 | - | -85 |
| Reclassifications | 29 | 154 | 14 | -197 | 0 |
| Exchange differences | -33 | -112 | -10 | -23 | -178 |
| Accumulated cost at 31 December 2012 | 1,430 | 5,466 | 409 | 188 | 7,493 |
| Depreciation at 1 January 2011 | 819 | 3,082 | 271 | - | 4,172 |
| Disposals | -3 | -4 | -6 | - | -13 |
| Depreciation for the year | 46 | 250 | 25 | - | 321 |
| Exchange differences | -2 | 8 | 0 | - | 6 |
| Accumulated depreciation at | |||||
| 31 December 2011 | 860 | 3,336 | 290 | - | 4,486 |
| Depreciation at 1 January 2012 | 860 | 3,336 | 290 | - | 4,486 |
| Acquired through business combinations | 15 | - | 13 | - | 28 |
| Disposals | -16 | -39 | -3 | - | - 58 |
| Depreciation for the year | 26 | 275 | 25 | - | 326 |
| Exchange differences | -35 | -77 | -8 | - | -120 |
| Accumulated depreciation at | |||||
| 31 December 2012 | 850 | 3,495 | 317 | - | 4,662 |
| Impairment loss at 1 January 2011 | 7 | 25 | - | - | 32 |
| Impairment for the year | 7 | 3 | - | - | 10 |
| Reclassification | - | - | - | - | - |
| Exchange differences | - | - | - | - | - |
| Accumulated impairment loss at 31 December 2011 |
14 | 28 | - | - | 42 |
| Impairment loss at 1 January 2012 | 14 | 28 | - | - | 42 |
| Impairment for the year | - | - | - | - | - |
| Reversed impairment | -3 | -8 | - | - | -11 |
| Reclassification | - | - | - | - | - |
| Exchange differences | - | - | - | - | - |
| Accumulated impairment loss at 31 | |||||
| December 2012 | 11 | 20 | - | - | 31 |
| Residual value according to plan | |||||
| at 31 December 2010 | 557 | 1,827 | 75 | 342 | 2,801 |
| of which land | 75 | ||||
| Residual value according to plan at 31 December 2012 |
569 | 1,951 | 92 | 188 | 2,800 |
| of which land | 68 |
| Patents and other intangible |
|||
|---|---|---|---|
| Group | Goodwill | assets | Total |
| Cost at 1 January 2011 | 580 | 216 | 796 |
| Investments | - | 7 | 7 |
| Acquired through business combinations | 143 | 3 | 146 |
| Exchange differences | 10 | 1 | 11 |
| Accumulated cost at 31 December 2011 | 733 | 227 | 960 |
| Cost at 1 January 2012 | 733 | 227 | 960 |
| Investments | - | 7 | 7 |
| Acquired through business combinations | 376 | - | 376 |
| Exchange differences | -64 | 4 | -60 |
| Accumulated cost at 31 December 2012 | 1,045 | 238 | 1,283 |
| Amortisation and impairment loss at 1 January 2011 | 0 | - | 114 |
| Impairment losses for the year | - | 19 | 19 |
| Exchange differences | 0 | 0 | 0 |
| Accumulated amortisation and impairment loss at 31 December 2011 | 0 | 133 | 133 |
| Amortisation and impairment loss at 1 January 2012 | 0 | 133 | 133 |
| Impairment losses for the year | - | 21 | 21 |
| Disposals | - | 2 | 2 |
| Exchange differences | 0 | -5 | -5 |
| Accumulated amortisation and impairment loss at 31 December 2012 | 0 | 151 | 151 |
| Residual value at 31 December 2011 | 733 | 94 | 827 |
| Residual value at 31 December 2012 | 1,045 | 87 | 1,132 |
In preparing the financial statements for 2012, the Group has reviewed impairment of goodwill.
Goodwill is allocated to cash-generating units. The recoverable amount for a cash-generating unit is determined by calculating its value in use. These calculations are based on estimated future cash flow as stated in budgets and forecasts covering a five-year period. Cash flow beyond this period has been extrapolated by no more than 3 percent (3) in any case. Working capital beyond the five-year period is estimated at the same level as year five. Discount rates are assumed to be 9 percent (9) after tax and 12.8 percent (12.8) before tax. Goodwill testing of the Swedish, Danish, and Dutch units was done at an aggregate level, where the three production units were considered a single cash flow generating unit. Other goodwill testing considered cash-generating units at country level. Approximately 60 percent of goodwill is attributable to the business area Chocolate & Confectionery Fats and the remaining approximately 40 percent to Food Ingredients.
Testing has not demonstrated any need for impairment. The sensitivity in these calculations indicates that recognised goodwill still intact even if the discount rate increases by 1 percent or if long-term growth is 1 percent less.
| 2012 | 2011 | |
|---|---|---|
| Scandinavia including The Netherlands | 481 | 486 |
| United Kingdom | 62 | 63 |
| United States | 502 | 184 |
| Total | 1,045 | 733 |
| Parent | ||
|---|---|---|
| 2012 | 2011 | |
| Start of year | 3,995 | 3,995 |
| Formation of subsidiaries | 10 | - |
| Accumulated cost | 4,005 | 3,995 |
| 2012 | 2011 | ||||||
|---|---|---|---|---|---|---|---|
| Domicile | No. of shares | Capital % |
Book value |
No. of shares | Capital % |
Book value |
|
| AarhusKarlshamn Invest AB, Sweden | Malmö | 1,000 | 100 | 0 | 1,000 | 100 | 0 |
| AarhusKarlshamn Holding Malta Ltd, Malta | Gzira | 25,274,999 | 100 | 2,527 | 25,274,999 | 100 | 2,527 |
| AarhusKarlshamn Finance AB, Sweden | Malmö | 100,000 | 100 | 10 | - | - | - |
| AarhusKarshamn Holding AB, Sweden | Malmö | 1,000 | 100 | 0 | 1,000 | 100 | 0 |
| AarhusKarlshamn Sweden AB, Sweden | Karlshamn | 21,864,928 | 100 | 21,864,928 | 100 | ||
| AarhusKarlshamn Netherlands BV, Netherlands | Zaandijk | 500 | 100 | 500 | 100 | ||
| AarhusKarlshamn Group Treasury A/S, Denmark | Aarhus | 400,000,000 | 100 | 1,468 | 400,000,000 | 100 | 1,468 |
| AarhusKarlshamn Denmark A/S, Denmark | Aarhus | 100,000,000 | 100 | 100,000,000 | 100 | ||
| AarhusKarlshamn Latin America S.A., Uruguay | Cousa | 150,000,000 | 100 | 150,000,000 | 100 | ||
| AarhusKarlshamn UK Ltd, UK | Hull | 23,600,000 | 100 | 23,600,000 | 100 | ||
| AarhusKarlshamn USA Inc., USA | New Jersey | 20,300,000 | 100 | 20,300,000 | 100 | ||
| AarhusKarlshamn Mexico, S.A. de C.V., Mexico | Morelia | 201,006,799 | 95,49 | 201,006,799 | 95,49 | ||
| Total | 4,005 | 3,995 |
The list includes certain shares and ownership interests owned by the Parent, either directly or indirectly, as of 31 December 2012. A complete listing of all holdings of shares and interests prepared in accordance with the rules of the Swedish Annual Accounts Act and which is included in the annual reports with the Swedish Companies Registration Office Investor can be requested from AarhusKarlshamn AB, Corporate Communication, Jungmansgatan 12, 211 19 Malmö, Sweden.
| Group | ||
|---|---|---|
| 2012 | 2011 | |
| Raw materials and consumables | 1,524 | 1,490 |
| Goods in transit | 289 | 543 |
| Products in progress | 384 | 414 |
| Finished products and goods for resale | 386 | 437 |
| Total according to balance sheet | 2,583 | 2,884 |
| Change in fair value | -187 | 83 |
| Inventory at fair value | 2,396 | 2,967 |
"Raw materials and consumables and changes in inventories of finished products and products in progress" for the Group includes impairment loss on inventories of SEK 17 million (15).
| Group | ||||
|---|---|---|---|---|
| 2012 | 2011 | |||
| Cash equivalents | 316 | 315 | ||
| Current investments | 14 | 16 | ||
| Total | 330 | 331 |
As of 31 December 2012 the Group's registered share capital was 40.898.189 shares (SEK 408.981.890).
Translation reserves include all exchange differences that arise when translating financial statements from foreign operations whose financial statements are stated in currencies other than the Group's presentation currency. The Parent company and the Group present their financial statements in SEK.
The hedging reserve encompasses the effective portion of the accumulated net change in the fair value of a cash flow hedging instrument attributable to hedging transactions yet to take place.
The statutory reserve refers to a reduction of the share capital carried out previously.
Retained profits and profit for the year include profits earned and retained by the Parent company, subsidiaries, investments in associates, the purchase price paid for stock options issued and profit for the year.
The Group owned a total of 0 (0) treasury shares as of 31 December 2012.
| Statutory | Hedging | Translation | ||
|---|---|---|---|---|
| reserve | reserve | reserve | Total | |
| 2011 opening balance | 5 | - | -373 | -368 |
| Translation differences | - | - | -32 | -32 |
| Cash flow hedges recognised in "Other comprehensive income" | - | -19 | - | -19 |
| Tax on cash flow hedges recognised in | - | 5 | - | 5 |
| "Other comprehensive income" | ||||
| 2011 closing balance | 5 | -14 | -405 | -414 |
| 2012 opening balance | 5 | -14 | -405 | -414 |
| Translation differences | - | - | -97 | -97 |
| Cash flow hedges recognised in "Other comprehensive income" | - | -13 | - | -13 |
| Tax on cash flow hedges recognised in | ||||
| "Other comprehensive income" | - | 3 | - | 3 |
| 2012 closing balance | 5 | -24 | -502 | -521 |
In accordance with the articles of association for AarhusKarlshamn AB (publ), share capital shall be a minimum of SEK 300 million and a maximum of SEK 1.2 billion. All shares are fully paid and entitle the holder to equal voting rights and shares in Company assets. Share capital consists of 40,898,189 shares (40,898,189) at a quota value of SEK 10 per share, and shareholder equity of SEK 408,981,890 (408,981,890).
The statutory reserve refers to a reduction of the share capital carried out previously.
Includes non-restricted equity from the previous year and after any dividend distribution. Comprises, together with profit/ loss for the year, the purchase price paid for issued stock options and any funded fair value non-restricted equity – that is, the total amount available for distribution of dividends to shareholders.
In accordance with the Swedish Companies Act, the Board of Directors proposes payment of a dividend for the consideration and approval of the Annual General Meeting of the Shareholders. The proposed dividend for payment in 2012 is SEK 215 million (SEK 5.25 per share), which has not yet been considered by the Annual General Meeting. This amount is not recognised as a liability.
| Group | Parent | |||
|---|---|---|---|---|
| Non-current | 2012 | 2011 | 2012 | 2011 |
| Liabilities to banks and credit institutions | 2,774 | 3,400 | - | - |
| Total | 2,774 | 3,400 | - | - |
| Group | Parent | |||
| Current | 2012 | 2011 | 2012 | 2011 |
| Liabilities to banks and credit institutions | 68 | 72 | - | - |
| Total | 68 | 72 | - | - |
Maturity for non-current borrowing is as follows:
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Between 1 and 5 years | 2,436 | 3,136 | - | - |
| More than 5 years | 338 | 264 | - | - |
| Total | 2,774 | 3,400 | - | - |
| Restruc | Environ mental |
|||
|---|---|---|---|---|
| Group | turing | restoration | Other | Total |
| Opening balance at 1 January 2011 | 39 | 33 | 32 | 104 |
| Provisions for the year | 24 | - | 4 | 28 |
| Provisions claimed for the year | -31 | - | -6 | -37 |
| Exchange differences | 0 | 0 | 0 | 0 |
| Closing balance at 31 December 2011 | 32 | 33 | 30 | 95 |
| Restruc | Environ mental |
|||
|---|---|---|---|---|
| Group | turing | restoration | Other | Total |
| Opening balance at 1 January 2012 | 32 | 33 | 30 | 95 |
| Provisions for the year | - | 6 | 2 | 8 |
| Provisions claimed for the year | -21 | -1 | -5 | -27 |
| Exchange differences | 0 | 0 | 0 | 0 |
| Closing balance at 31 December 2012 | 11 | 38 | 27 | 76 |
| Provisions include | 2012 | 2011 |
|---|---|---|
| Non-current | 53 | 57 |
| Current | 23 | 38 |
| Total | 76 | 95 |
A provision for restructuring is reported when the Group has adopted a comprehensive and formal restructuring plan, and the restructuring has either been started or published. No provisions are made for future operating expenses.
These provisions are primarily related to restoring contaminated land.
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Employee-related expenses | 208 | 206 | 13 | 13 |
| Other: | 318 | 279 | 16 | 10 |
| Total | 526 | 485 | 29 | 23 |
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Collateral for provisions and liabilities | ||||
| Property mortgages | 532 | 611 | - | - |
| Total | 532 | 611 | - | - |
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Other contingent liabilities | 1 | 12 | - | - |
| Total | 1 | 12 | - | - |
Contingent liabilities refer primarily to counter-guarantees issued for Group companies' commitments to financial institutions to cover local borrowings.
Over and above the contingent liabilities stated above, guarantees for the completion of various contractual undertakings are sometimes involved as part of the Group's normal business activities. There was no indication at year-end that any contractual guarantees provided will require any payment to be made.
For the Parent company, SEK 50 million (47), i.e. 100 percent (100) of sales were to Group companies. The Parent company purchasing from Group companies is related to administrative services of limited scope. All transactions were carried out at market value.
Besides those transactions stated in Note 8 Remuneration of Board Members and Senior Managers and in the description of the Board of Directors on page 58-59, the following transactions with key management personnel have taken place: During the year, the Group had transactions with Unitata Berhard in Malaysia, which through Carl Bek-Nielsen and Martin Bek-Nielsen may be considered to be a related party.
Outstanding accounts receivable amounted to SEK 38 million (9). Outstanding accounts payable amounted to SEK 142 million (112). Purchasing during the year amounted to SEK 1,092 million (1,052) and sales amounted to SEK 106 million (179).
All transactions were carried out at market value.
AAK acquired Oasis Foods Company on 25 May 2012. This strengthened Food Service's position on the North American market. The company was founded in 1975 and is located in Hillside, New Jersey. Oasis Foods Company employs 160 people and has a turnover of around SEK 925 million.
The acquisition significantly strengthens AAK's ability to deliver a more extensive product portfolio of speciality oils and fats to existing and new customers in the US. As the US is one of the world's largest markets for specialty oils, expanding there is particularly exciting. The location of the factory in New Jersey, close to our facility in Port Newark, gives the company easy access to one of the most densely-populated areas in the country.
The goodwill from the transaction is tax deductible.
AAK acquired Crown Foods A/S on 31 May 2012. The acquisition strengthened the position of AAK's Food Service division in the Scandinavian market. The company was founded in 1988 and is located in Mörköv in Denmark. It employs 20 people and has a turnover of approximately SEK 60 million.
The acquisition will enable AAK to provide a wider range of Food Service products to its customers.
The goodwill from the transaction is tax deductible.
| Carrying amount | |
|---|---|
| Amount in SEK million | in the Group |
| Intangible assets | - |
| Property, plant and equipment | 43 |
| Inventories | 38 |
| Accounts receivables | 52 |
| Other receivables | 22 |
| Accounts payable | -78 |
| Other liabilities | -14 |
| Identifiable assets | 63 |
| Goodwill | 367 |
| Total identifiable assets and goodwill | 430 |
The Group's operations are organically divided into business segments based on product. The marketing organisation also reflects this structure. The business areas therefore make up the Group's primary segments and the geographical markets are the secondary segments.
| 2012 | Food Ingredients |
Chocolate & Confectionery Fats |
Technical Products & Feed |
Group Functions |
Eliminations | Group 2012 |
|---|---|---|---|---|---|---|
| Net sales | ||||||
| External sales | 10,729 | 4,583 | 1,599 | - | - | 16,911 |
| Internal sales | 909 | 832 | 67 | - | -1,808 | - |
| Group total | 11,638 | 5,415 | 1,666 | - | -1,808 | 16,911 |
| Chocolate & | Technical | |||||
|---|---|---|---|---|---|---|
| Food | Confectionery | Products & | Group | |||
| 2012 | Ingredients | Fats | Feed | Functions | Eliminations | Group 2012 |
| Operating profit | 697 | 311 | 88 | -121 | - | 975 |
| Adjustment for Hurricane Sandy* |
6 | 5 | - | 10 | - | 21 |
| Total | 703 | 316 | 88 | -111 | - | 996 |
| Other | ||||||
| Assets | 4,835 | 3,586 | 647 | 58 | - | 9,126 |
| Unallocated assets | - | - | - | - | - | 634 |
| Group total | 4,835 | 3,586 | 647 | 58 | - | 9,760 |
| Liabilities | 1,280 | 761 | 322 | 175 | - | 2,538 |
| Unallocated liabilities | - | - | - | - | - | 3,299 |
| Group total | 1,280 | 761 | 322 | 175 | - | 5,837 |
| Investments Depreciation, amortisation and |
218 | 94 | 61 | 1 | - | 374 |
| impairment loss | 134 | 165 | 40 | 8 | - | 347 |
*Adjustment for the negative effect of Hurricane Sandy
All transactions between business areas are recognised at market value. Assets and liabilities not attributed to a segment include income tax recoverable and income tax liabilities, financial investments and financial liabilities, as well as cash and cash equivalents and interest-bearing receivables.
| Sweden | Denmark | Other Nordic countries |
Central and Eastern Europe |
Western Europe |
North America |
Other countries |
Total | ||
|---|---|---|---|---|---|---|---|---|---|
| External sales | 2,111 | 287 | 1,142 | 1,872 | 4,714 | 6,095 | 690 | 16,911 | |
| Intangible assets and prop | |||||||||
| erty, plant and equipment | 832 | 1,357 | 0 | 0 | 477 | 1,226 | 40 | 3,932 | |
| Other assets | 1,652 | 728 | 10 | 55 | 1,120 | 1,965 | 298 | 5,828 | |
| Total assets | 2,484 | 2,085 | 10 | 55 | 1,597 | 3,191 | 338 | 9,760 | |
| Investments | 104 | 56 | - | - | 66 | 145 | 3 | 374 |
The external sales are based on where our customers are located. The carrying amounts of assets and the direct investment in plant for the period are determined by the location of the assets. The Group has applied hedge accounting based on fair-value hedging.
Segment-based reporting is prepared in accordance with the accounting policies described in Note 2 "Accounting Policies."
| Food | Chocolate & Confectionery |
Technical Products & |
Group | |||
|---|---|---|---|---|---|---|
| 2011 | Ingredients | Fats | Feed | Functions | Eliminations | Group 2011 |
| Net sales | ||||||
| External sales | 10,076 | 4,954 | 1,665 | - | - | 16,695 |
| Internal sales | 526 | 957 | 53 | - | -1,536 | - |
| Group total | 10,602 | 5,911 | 1,718 | - | -1,536 | 16,695 |
| Chocolate & | Technical | |||||
|---|---|---|---|---|---|---|
| Food | Confectionery | Products & | Group | |||
| 2011 | Ingredients | Fats | Feed | Functions | Eliminations | Group 2011 |
| Operating profit | 518 | 378 | 103 | -88 | - | 911 |
| Insurance | - | 56 | - | -8 | - | 48 |
| compensation | ||||||
| Restructuring | -45 | - | - | - | - | -45 |
| Total | 473 | 434 | 103 | -96 | - | 914 |
| Other | ||||||
| Assets | 4,834 | 3,825 | 650 | 90 | - | 9,399 |
| Unallocated assets | - | - | - | - | - | 575 |
| Group total | 4,834 | 3,825 | 650 | 90 | - | 9,974 |
| Liabilities | 1,562 | 634 | 195 | 116 | - | 2,507 |
| Unallocated liabilities | - | - | - | - | - | 3,902 |
| Group total | 1,562 | 634 | 195 | 116 | - | 6,409 |
| Investments Depreciation, amortisa |
172 | 128 | 49 | 1 | - | 350 |
| tion and impairment loss | 143 | 157 | 43 | 7 | - | 350 |
All transactions between business areas are recognised at market values. Assets and liabilities not attributed to a segment include income tax recoverable and income tax liabilities, financial investments and financial liabilities, as well as cash and cash equivalents and interest-bearing receivables.
| Sweden | Denmark | Other Nordic coun tries |
Central and Eastern Europe |
Western Europe |
North America |
Other coun tries |
Total | |
|---|---|---|---|---|---|---|---|---|
| External sales | 2,148 | 306 | 1,112 | 2,015 | 5,007 | 5,368 | 739 | 16,695 |
| Intangible assets and prop | ||||||||
| erty, plant and equipment | 835 | 1,463 | 0 | 0 | 468 | 816 | 46 | 3,628 |
| Other assets | 1,692 | 450 | 41 | 65 | 1,492 | 2,441 | 165 | 6,346 |
| Total assets | 2,527 | 1,913 | 41 | 65 | 1,960 | 3,257 | 211 | 9,974 |
| Investments | 100 | 56 | - | - | 49 | 137 | 8 | 350 |
The external sales are based on where our customers are located. The carrying amounts of assets and the direct investment in plant for the period are determined by the location of the assets. The Group has applied hedge accounting based on fair-value hedging.
Segment-based reporting is prepared in accordance with the accounting policies described in Note 2 "Accounting Policies."
Future minimum leasing fees under non-cancellable operating lease agreements are distributed as follows:
| Group | |||
|---|---|---|---|
| 2012 | 2011 | ||
| Within 1 year | 49 | 37 | |
| 1 to 5 years | 102 | 71 | |
| More than 5 years | 126 | 129 | |
| Total | 277 | 237 |
Operating lease expenses of SEK 62 million (30) are recognised in profit or loss for the period.
| Group | Parent | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Adjustment for items not included in cash flow | ||||
| Provisions | 1 | 1 | -0 | -11 |
| Sales of non-current assets | 4 | 3 | - | - |
| IAS 39 effects | - | - | - | - |
| Other | - | - | - | - |
| Total | 5 | 4 | - | -11 |
The financial statements will be submitted for resolution to the Annual General Meeting on 3 May 2013 for adoption.
This Corporate Governance Report has been drawn up in accordance with the rules of the Annual Accounts Act and the Swedish Corporate Governance Code ("the Code"). The Corporate Governance Report has been reviewed by the company's auditor in accordance with the provisions of the Annual Accounts Act.
Effective and clear corporate governance contributes to the safeguarding of trust among AAK's stakeholder groups and also increases the focus on business benefit and shareholder value in the company. AAK's Board of Directors and management team endeavour, through a high level of transparency, to make it easy for individual shareholders to understand the company's decision-making process and to clarify where in the organisation responsibilities and authorities reside. AAK's corporate governance is based on applicable legislation, the Code, NASDAQ OMX Stockholm's regulatory framework for issuers, generally accepted practice in the stock market and various internal guidelines. Where AAK has chosen to diverge from the rules in the Code, the reason is provided under each heading in this Corporate Governance Report.
AAK is a Swedish public limited company, whose shares are traded on NASDAQ OMX Stockholm within the Mid Cap segment, Consumer Commodities sector. AAK has around 7,000 shareholders. Its business operations are global, with a presence in almost 100 countries. As of 31 December 2012, the number of employees was 2,211. Responsibility for management and control of AAK is divided between the shareholders at the Annual General Meeting, the Board of Directors, its elected committees and the Chief Executive Officer (CEO) in accordance with the Swedish Companies Act, other legislation and ordinances, applicable rules for companies traded on a regulated market, the Articles of Association and the Board's internal control instruments. AAK's goal is to be the obvious first choice for its customers, and to create the best possible value for the company's various stakeholder groups – in particular customers, suppliers, shareholders and employees. At the same time, AAK aims to be a good corporate citizen and take long-term responsibility. The aim of corporate governance is to define a clear allocation of responsibility and roles between the owners, the Board, the executive management team and various control bodies. In line with this, corporate governance covers the Group's management and control systems.
Information about shareholders and shareholdings can be found on pages 56-57.
AAK's current Articles of Association were adopted at the Annual General Meeting on 19 May 2009. The Articles of Association state that the company is to operate manufacturing and trading business, primarily within the food industry, to own and manage shares and securities and other associated business. The Articles of Association also state the shareholders' rights, the number of Board members and auditors, that the Annual General Meeting shall be held yearly within six months of the end of the financial year, how notification of the AGM shall be effected and that the registered office of the Board of Directors shall be in Malmö, Sweden. The company's financial year is the calendar year. The Annual General Meeting shall be held in Malmö or Karlshamn, Sweden. The Articles of Association contain no restrictions on the number of votes each shareholder may cast at a general meeting. Furthermore, the Articles of Association contain no special provisions on the appointment and removal of Members of the Board of Directors and on amendments to the Articles of Association. For the current Articles of Association, please see www.aak.com.
The Annual General Meeting of AAK is the highest decision-making body and the forum through which the shareholders exercise their influence over the company. The tasks of the Annual General Meeting are regulated by the Swedish Companies Act and the Articles of Association. The Annual General Meeting makes decisions on a number of central issues, such as adoption of the income statement and balance sheet, discharge from liability for the Board members and CEO, the dividend to shareholders and the composition of the Board. Further information about the Annual General Meeting and complete minutes from previous Annual General Meetings and Extraordinary General Meetings are published at www.aak.com.
The Annual General Meeting (AGM) held on 15 May 2012 was attended by shareholders representing around 60 percent of the share capital and votes in the company. The Chairman of the Board, Melker Schörling, was elected Chairman of the Annual General Meeting. The AGM adopted the income statement and balance sheet, as well as the consolidated income statement and consolidated balance sheet. In association with this, the Annual General Meeting approved the Board's proposal for a dividend for the 2011 financial year of SEK 4.75 per share. Melker Schörling, Carl Bek-Nielsen, Martin Bek-Nielsen, Mikael Ekdahl, Märit Beckeman, Ulrik Svensson, Harald Sauthoff and Arne Frank were re-elected as ordinary members of the Board of Directors. Member of the Board John Goodwin did not stand for re-election. Melker Schörling was elected Chairman of the Board and Carl Bek-Nielsen was elected Vice Chairman of the Board. The employee organisations had appointed Annika Westerlund (PTK-L) and Leif Håkansson (IF Metall) as employee representative members of the Board, and Rune Andersson (IF Metall) and Ted Jörgensen (PTK-L) as deputy members of the Board. The Annual General Meeting did not authorise the Board to resolve on the issue of new shares by the Company or the acquisition of the Company's own shares in a share buy-back programe.
The Annual General Meeting decides on the election of the Board, among other items. The task of the Nomination Committee is to make proposals to the Annual General Meeting regarding the election of the Chairman and other members of the Board and of the Chairman of the Meeting, and regarding remuneration issues and related issues.
The Annual General Meeting in 2012 decided that the Nomination Committee should have five members, whereby Mikael Ekdahl (BNS
Holding AB), Carl Bek-Nielsen (BNS Holding AB), Henrik Didner (Didner & Gerge Fonder) and Åsa Nisell (Swedbank Robur Fonder) were re-elected, and Lars-Åke Bokenberger (AMF Fonder) was elected as a new member, to the Nomination Committee for the Annual General Meeting in 2013. Mikael Ekdahl was also appointed Chairman of the Nomination Committee. The members of the Nomination Committee represent around 60 percent of the votes in AAK. The decision also included the opportunity to change the composition of the Nomination Committee in the event of a change in ownership. As AAK's main shareholder, Melker Schörling AB, considers that it is natural that one representative from each major shareholder is represented on the Nomination Committee. The shareholders in question also consider it natural that a representative of the largest shareholder in voting terms is the Chairman of the Nomination Committee. This is the reason why a Board member is the Chairman of the Nomination Committee. During the year, the Nomination Committee held one minuted meeting. At this meeting, the Chairman reported on the evaluation work, whereupon the Nomination Committee discussed any changes and new recruitment. The Nomination Committee has been contactable by letter with proposals from shareholders. The members of the Nomination Committee have not received any remuneration from AAK for their work. Shareholders who wish to contact the Nomination Committee can send letters addressed to AarhusKarlshamn AB (publ), Valberedningen, Jungmansgatan 12, SE-211 19 Malmö, Sweden.
The tasks of the Board are regulated in the Swedish Companies Act and the Articles of Association. In addition to this, the work of the Board is regulated by the working practices adopted by the Board each year. The procedural rules of the Board also regulate the distribution of work and responsibilities between the Board, the Chairman of the Board and the CEO and also include procedures for financial reporting by the CEO to the Board. According to the current working practices, the Board shall meet at least six times each year, including a statutory meeting following election held immediately after the Annual General Meeting. The tasks of the Board shall include setting strategies, business plans, budgets, interim reports and year-end reports for AAK. The Board shall also monitor the work of the CEO, appoint and dismiss the CEO and decide on important changes to AAK's organisation and operation. The most important tasks of the Board are to set the overriding goals for the company's operation and to decide on the company's strategy for achieving the goals; to ensure the company has an effective executive management team and appropriate remuneration terms; to ensure the transparency and accuracy of the company's external reporting; and that external reporting provides a fair presentation of the company's performance, profitability and financial position and exposure to risk; to monitor the financial reporting, including instructions to the CEO and the establishment of requirements for the content of the financial reporting to be submitted to the Board on a continuous basis; to ensure the company's insider policy and logging procedures are adhered to in accordance with legislation and the guidelines of the Swedish Financial Supervisory Authority; to ensure there are effective systems for follow-up and control of the company's operational and financial position against set goals; to follow up and evaluate the company's development and to recognise and support the work of the CEO in carrying out the required measures; to ensure there is sufficient control of the company's compliance with legislation and other rules applicable to the operation of the company, to ensure the required ethical guidelines are set for the company's behaviour; and to propose to the Annual General Meeting any dividend, repurchase of shares, redemption or other proposals falling within the competence of the Annual General Meeting.
Under the Articles of Association, AAK's Board shall consist of at least three and at most ten members. The current Board consists of eight members elected by the Annual General Meeting. Under Swedish law, employee organisations have a right to be represented on the Board, and have appointed two ordinary members and two deputies. In accordance with the proposal of the Nomination Committee, eight members were re-elected at the Annual General Meeting in 2012. Melker Schörling was appointed Chairman of the Board. At the statutory Board meeting following the Annual General Meeting, the Board chose to appoint an Audit Committee and a Remuneration Committee. Ulrik Svensson was appointed Chairman of the Audit Committee and Mikael Ekdahl, Martin Bek-Nielsen and Harald Sauthoff were appointed members. Mikael Ekdahl was appointed Chairman of the Remuneration Committee and Martin Bek-Nielsen was appointed member. Melker Schörling is also Chairman of the Board of BNS Holding AB, which holds around 40 percent of the votes in AAK, and Mikael Ekdahl is a member of the Board of BNS Holding AB. Melker Schörling and Mikael Ekdahl cannot, therefore, be considered as independent in relation to major shareholders in the company in accordance with the Code. The largest shareholder in BNS Holding AB is Melker Schörling AB, which, on the date of the 2012 Annual General Meeting held 58.5 percent of the shares and votes in BNS Holding AB. On 20 July 2012, Melker Schörling AB acquired the remaining shares and votes in BNS Holding AB. As part of the transaction, BNS Holding AB transferred shares corresponding to approximately 5 percent of the shares and votes in AAK, and now holds around 35 percent of the shares and votes in AAK. Carl Bek-Nielsen and Martin Bek-Nielsen were formerly on the Board of BNS Holding AB, and could not, therefore, be considered as independent in relation to AAK's major shareholders. In connection with BNS Holding AB becoming a wholly-owned subsidiary of Melker Schörling AB, both Carl Bek-Nielsen and Martin Bek-Nielsen stepped down from the Board of BNS Holding AB. Following this, they were both independent in relation to AAK's major shareholders for a period of time. Martin Bek-Nielsen is still independent in relation to AAK's major shareholders. At the Extraordinary General Meeting of Melker
| Member | Board of Direc tors |
Audit Com mittee |
Remu neration Com mittee |
|
|---|---|---|---|---|
| Number of meetings | 12 | 4 | 2 | |
| Märit Beckeman | 11 | |||
| Carl Bek-Nielsen | 10 | |||
| Martin Bek-Nielsen | 11 | 3 | 2 | |
| Mikael Ekdahl | 11 | 4 | 2 | |
| Arne Frank | 12 | |||
| Leif Håkansson | 12 | |||
| Harald Sauthoff | 11 | 3 | ||
| Melker Schörling | 12 | |||
| Ulrik Svensson | 12 | 4 | ||
| Annika Westerlund | 11 | |||
| Information about the members of the Board can be found on pages 58-59. |
Schörling AB held on 13 December 2012, Carl Bek-Nielsen was elected as member of the Board of Melker Schörling AB. Since that date, Carl Bek-Nielsen is, accordingly, no longer independent in relation to the major shareholders in the company. Nor can Ulrik Svensson, who is CEO of BNS Holding AB and Melker Schörling AB, be regarded as independent in relation to the major shareholders in the company. The President and CEO Arne Frank is, in his capacity as CEO and an employee of the company, not independent in relation to the company management. The other two members elected by the AGM, Märit Beckeman and Harald Sauthoff, are independent in relation to AAK, the company management and the company's major shareholders in accordance with the Code.
The Board therefore fulfils the requirement of the Code that at least two Board members who are independent of the company and the company management shall also be independent of the company's major shareholders. Peter Korsholm acts as secretary to the Board.
The Board's working practices, containing instructions for the division of work between the Board and the CEO and for financial reporting, are updated and adopted annually. Board meetings consider the financial reporting and monitoring of day-to-day business operations and profitability trends, as well as goals, strategies for the business operation, acquisitions and significant investments and matters relating to capital structure. Business area managers and other senior executives report on business plans and strategic issues on a continual basis.
Remuneration and audit issues are prepared within the respective committees. The Board holds a statutory meeting immediately after the Annual General Meeting. At this meeting, the Board's working practices are also adopted, as are the instructions to the CEO and the Committees and other internal management instruments. The current Board held its statutory meeting on 15 May 2012, at which meeting all members were in attendance.
At the Annual General Meeting held on 15 May 2012, Melker Schörling was elected Chairman of the Board. The role of the Chairman of the Board is to lead the work of the Board and ensure the Board fulfils its tasks. The Chairman shall monitor the progress of the business in dialogue with the CEO, and is responsible for ensuring the other members continuously receive the information required to carry out the work on the Board, maintaining the required quality and in accordance with the Swedish Companies Act and other applicable laws and ordinances, the Articles of Association and the working practices of the Board. The Chairman is responsible for ensuring the Board constantly develops its knowledge about the company, that an evaluation of the Board's work is carried out and that the Nomination Committee is provided with this evaluation. The Chairman shall also participate in evaluation and development issues relating to senior executives in the Group.
The Board held 12 meetings during the year. All business area managers reported on the goals and business strategies of the business areas. The Board has handled issues relating to staffing and organisation, and has also followed up on the progress of the specialisation projects within operations in Denmark, Sweden, the Netherlands and the UK. Decisions have been made relating to acquisitions and investments. Other areas handled are the Group's work on raw materials supply, risk management and the company's strategy for capital structure and borrowing.
According to the decision of the Annual General Meeting, the total fees to the Board amount to SEK 2.775.000, to be allocated between the members as follows: SEK 500,000 to the Chairman, SEK 375,000 to the Vice Chairman and SEK 250,000 to each of the other members elected at the Annual General Meeting who are not employed by the company. The Chairman of the Audit Committee received SEK 200,000 and the members SEK 100,000 each. The Chairman of the Remuneration Committee received SEK 100,000 and the member SEK 50,000. The CEO, the secretary to the Board and employee representatives to the Board do not receive any compensation other than for costs in connection with their participation in Board activities. For further information about remuneration to members of the Board, please see page 33-34.
The Board continuously evaluates the work and competence of the CEO and the company's management team. This is discussed at least once a year without representatives of the company management being present.
The Annual General Meeting 2012 approved the principles for the remuneration of senior executives. The principles for the remuneration of AAK's senior executives are designed to ensure, from an international perspective, that AAK can offer compensation that is competitive and at the prevailing market level to attract and retain qualified people. The total remuneration package paid to senior executives shall consist of fixed basic salary, annual variable salary, pension, company car and severance payment. The fixed salary shall be individually differentiated on the basis of responsibility and performance, and shall be set on market principles and revised annually. In addition to annual salary, senior executives shall also receive a variable salary, which shall have a pre-set ceiling and be based on the outcome in relation to goals set annually. The goals shall be related to the company's performance and shall also be able to be linked to individual areas of responsibility. The annual variable portion shall amount to a maximum of 60 percent of the fixed salary. In addition to the variable salary mentioned, share or share-price related incentive programmes may be added as determined from time to time. The right to a pension for senior executives shall apply from the age of 60 at the earliest. Pension plans for senior executives shall be either defined benefit or defined contribution plans, or a combination of the two. In the event of termination of employment by the company, the notice period for the President and other senior executives shall be twelve months, and they shall be entitled to receive severance pay with a pre-determined ceiling corresponding to twelve months' salary. For termination of employment by the employee, a notice period of six months shall normally apply and no severance pay shall be payable. These guidelines shall cover those persons who are in senior management positions during the period of time to which the guidelines apply. The guidelines apply to agreements entered into after the resolution of the Annual General Meeting, and in the event that changes are made to existing agreements after this point in time. The Board shall be entitled to diverge from the guidelines if there are particular reasons to do so in an individual case.
An incentive programme has been introduced for senior executives and key personnel in the Group, in accordance with the resolution of the Extraordinary General Meeting of 8 November 2010. Within the framework of this programme, 1,500,000 stock options, carrying an entitlement to subscribe for an equivalent number of shares in AAK, have been issued to the whollyowned subsidiary, AarhusKarlshamn Invest AB, and offered for sale to participants in the programme. Around 100 senior executives and key personnel within the Group have so far acquired 1,300,000 stock options. The remaining stock options, which have not been assigned, are reserved for the future recruitment of senior executives and key personnel to the Group. The incentive programme, which gives senior executives and key personnel the opportunity to participate in the growth in value of the company, is expected to stimulate interest in the growth of the company. The incentive programme is also expected to assist in the recruitment and retention of highly skilled people. The market-based valuation at the time has set the subscription price for subscribing to shares through the exercise of the stock options at SEK 188. The stock options are assigned to participants in the programme at market price. The stock options will be eligible for the purchase of shares during the period 1 December 2013 –1 December 2015.
Audit and remuneration issues within the Board are handled in committees, whose task it is to prepare issues arising and submit proposals for decisions to the Board. The tasks and working practices of the committees are determined by the Board in written instructions, which constitute part of the Board's working practices.
In accordance with the Board's working practices, issues of remuneration to the CEO and senior executives shall be prepared by the Remuneration Committee. The Remuneration Committee prepares and presents proposals to the Board relating to remuneration to the CEO and other senior executives. The final task of the Remuneration Committee is to monitor and evaluate the ongoing programmes for variable remuneration of the company management team, and programmes terminated during the year, as well the application of the guidelines for the remuneration of senior executives and the current remuneration structure and remuneration levels in the company. During 2012, the members of the Remuneration Committee were Mikael Ekdahl (Chairman) and Martin Bek-Nielsen. The recommendations of the Remuneration Committee to the Board include principles for remuneration, the relationship between fixed and variable salary, conditions for pensions and severance pay and other benefits payable to the management. Remuneration to the CEO has been decided by the Board on the basis of the recommendations of the Remuneration Committee. Remuneration to other senior executives has been decided by the Chief Executive Officer in consultation with the Remuneration Committee. For further information, see page 33-34. During 2012, the Remuneration Committee met on two occasions, at which both members attended. The Board's proposal for guidelines for remuneration to senior executives can be found in Note 8 on page 33-34, and will be put to the Annual General Meeting in 2013 for a decision.
During 2012, members of the Audit Committee were Ulrik Svensson (Chairman), Martin Bek-Nielsen, Mikael Ekdahl and Harald Sauthoff. The Committee held four ordinary meetings during the year, which the company's external auditors and representatives of the management team have attended. Areas dealt with by the Audit Committee have primarily related to planning, scope and follow-up of the audit for the year. Other issues dealt with include risk management, integration and systematics of Group procedures, coordination of insurance issues, corporate governance, internal control, accounting rules, development of the global finance function, financing operations and other issues that the Board has requested the Committee to prepare. Under the provisions of Chap. 8 § 49 a of the Companies Act (2005:551), at least one member of the Audit Committee must be independent in relation to major shareholders in the company, and have expertise in accounting or auditing, and the company fulfils this requirement of the Code.
AAK's auditors are appointed by the Annual General Meeting. At the Annual General Meeting in 2009, the audit company PricewaterhouseCoopers AB was appointed auditors up to and including the Annual General Meeting in 2013. Anders Lundin, Authorised Public Accountant, was appointed lead auditor. Anders Lundin also holds the position of auditor to a number of companies, including Electrolux AB, Husqvarna AB, Melker Schörling AB, Svenska Cellulosa AB SCA and TeliaSonera. All services requested in addition to the statutory audit are tested separately, to ensure there is no conflict arising involving independence or disqualification.
It is the task of the CEO to lead the operation in accordance with the guidelines and instructions of the Board. In conjunction with this, the CEO shall use the required control systems to ensure the company complies with applicable laws and ordinances. The CEO reports to the Board meetings and shall ensure the Board receives as much factual, detailed and relevant information as is required for the Board to reach wellinformed decisions. The CEO also maintains continual dialogue with the Chairman of the Board and keeps him informed of the development and financial position of the Company and the Group.
AAK's Group management team consists of eleven persons from seven countries: the CEO, CFO, HR/CIO, CTO and President European Supply Chain, as well as six persons in charge of business areas/ countries. The Group management team meets on a monthly basis and deals with the Group's financial development, investments, synergy and productivity projects, acquisitions, Group-wide development projects, leadership and competence supply and other strategic issues. The meetings are chaired by the CEO, who reaches decisions in consultation with the other members of the Group management team. The Group has a small number of Group employees, who are responsible for Group-wide activities, such as financial performance, tax, IT, internal audit, strategy, investor relations, information and legal issues. The CEO and Group management team are presented on pages 60-61. For remuneration principles and salaries and other fees paid to the CEO and Group management team, please see Note 8 on page 33-34.
AAK's business areas are Food Ingredients, Chocolate & Confectionery Fats and Technical Products & Feed. The heads of each business area/country are responsible for goals, strategies, product development and day-to-day business issues, as well as for profit, cash flow and balance sheets for the unit in question. The business areas in turn are organised into different sectors with responsibility for day-to-day business issues. Direction is exercised through internal boards, which meet four times a year. At these meetings, AAK's President/CEO acts as chairman of the board, and the Group CFO also participates. Other executives, such as the Group Controller, are co-opted as necessary. In all countries where AAK has subsidiaries, a Country Manager has legal charge of the operation. The Country Manager's task is to represent AAK vis-à-vis public authorities in the country, to coordinate operations on the ground, organisation and Group-wide procedures/projects and to ensure that Group-wide guidelines are complied with. For each such country, one member of the Group management team has been appointed to have overriding responsibility for the operation. This person is the superior of the Country Manager, and in most cases acts as chairman of the local legal board.
The Board is responsible for AAK's internal control, the overall purpose of which is to protect the owners' investments and the company's assets. The Board shall provide a description of how internal control and risk management relating to financial reporting is organised in a separate section of this Corporate Governance Report. Internal control relating to financial reporting is a process involving the Board, the company management team and personnel.
The process has been designed to ensure the reliability of external reporting. According to the commonly accepted framework (COSO) established for this purpose, internal control is usually described from five different aspects, which are described below. The control environment forms the basis for internal management and control. Risk assessment and risk management mean that the management is aware of and has itself assessed and analysed risks and threats to the operation.
Control activities are the measures and procedures designed by the management to prevent errors from arising and for discovering and correcting errors that do arise. In order for individual tasks to be carried out in a satisfactory manner, the personnel in an organisation need to have access to current and relevant information. The final module of the frame work relates to followup of internal management and the design and effectiveness of controls.
AAK's organisation is designed to facilitate quick decision-making. Operational decisions are therefore made at business area or subsidiary level, while decisions about strategies, acquisitions and overriding financial issues are taken by the company's Board and Group management team. The organisation is characterised by clear division of responsibilities and effective and established management and control systems, covering all units within AAK.
The basis for the internal control relating to financial reporting consists of an overall control environment in which the organisation, decision-making routes, authorities and responsibilities have been documented and communicated in management documents, such as AAK's financial policy, raw material purchasing policy, the manual on financial reporting and the authorisation rules set by the CEO. AAK's finance functions are integrated through a joint consolidation system and a joint accounting instruction. The Group's finance unit works closely and effectively with the controllers of subsidiaries in relation to year-end financial statements and reporting.
As a supplement to the internal control, under a specific plan, an annual audit of some units in the Group is carried out on a rotating basis by the Group's central Finance Department, in collaboration with an independent international accounting firm. AAK has decided not to set up a separate review function (internal audit), as the functions mentioned above fulfil this task well. All of AAK's subsidiaries report on a monthly basis. These reports form the basis for the Group's consolidated financial reporting. Each legal unit has a controller who is responsible for the financial management of each business area, and for ensuring the financial reports are correct, complete and delivered in time for consolidated reporting.
Through its international presence, the AAK Group is exposed to a number of different risks. Risk management within the Group is performed in accordance with fixed policies and procedures, which are reviewed annually by AAK's Board. Risks relating to commodities are managed using the Group's raw material purchasing policy. Risks relating to currency, interest and liquidity are mainly governed by AAK's finance policy. The Group's credit policy directs the management of credit and contract risks. Effective risk management unites operational business development with the requirements of owners and other stakeholders for improvements in control and long-term value. Risk management aims to minimise risks, but also to ensure that opportunities are utilised in the best possible way. Risk management covers the following areas of risk: strategic risks relating to the market and sector, commercial, operational and financial risks, compliance with external and internal regulatory frameworks and financial reporting. The main components of risk assessment and management are identification, evaluation, management, reporting, follow-up and control. For further information about AAK's risk management, please see Note 3 on pages 25-29.
The risks identified relating to financial reporting are handled via the company's control activities. These control activities aim to prevent, identify and correct errors and discrepancies. Control activities take the form of manual controls, such as reconciliation and stocktaking, automatic controls via the IT systems and general controls of the underlying IT environment. Detailed financial analyses of the result and follow-up against budgets and forecasts supplement the operation-specific controls and provide overall confirmation of the quality of the reporting.
To ensure the completeness and accuracy of its financial reporting, the Group has adopted guidelines for information and communication aimed at ensuring relevant and significant exchange of information within business operations, both within each unit and to and from management and the Board. Policies, handbooks and working practices relating to the financial process are communicated between the management and employees, and are available in electronic format and/or printed format. The Board receives regular feedback on internal control from the Audit Committee. To ensure that external information is correct and complete, AAK has an information policy adopted by the Board, which states what is to be communicated, by whom and in what way.
The effectiveness of the process for risk assessment and execution of control activities is followed up continuously. The follow-up covers both formal and informal procedures, which are used by those responsible at each level. The procedures include follow-up of results against budgets and plans, analyses and key figures. The Board receives monthly reports about the Group's financial position and development. The company's financial situation is discussed at each Board meeting, and the management team analyses the financial reporting at detailed level on a monthly basis.
At Audit Committee meetings, the Committee follows up the financial reporting and receives reports from the auditors about their observations.
AAK has a number of policies for the operations of the Group and its employees. These include:
Ethical guidelines for the Group have been drawn up with the aim of clarifying the Group's fundamental approach to ethical issues, both within the Group and externally with regard to customers and suppliers.
The Group's finance function works in accordance with an instruction adopted by the Board, which provides a framework for how the Group's operation shall be financed, and for how, for example, currency and interest risks are to be handled.
The Group's information policy is a document describing the Group's general principles for the publication of information.
The Group's environment policy provides guidelines for environmental work within the Group.
The consolidated income statement and balance sheet will be presented at the Annual General Meeting 3 May, 2013 for approval.
The Board of Directors and the Chief Executive Officer declare that the consolidated accounts have been prepared in accordance with IFRS International Accounting Standards, as adopted by the EU, and provide a true and fair view of the Group's financial position and results. The annual accounts have been prepared in accordance with generally accepted accounting practices and provide a true and fair view of the Parent Company's financial position and results.
The Directors' Report for the Group and Parent Company provides a true and fair view of the development of the business operations, financial position and results of the Group and Parent Company and describes the significant risks and uncertainty factors facing the Parent Company and the companies belonging to the Group.
Martin Bek-Nielsen Mikael Ekdahl Märit Beckeman Harald Sauthoff
Annika Westerlund Leif Håkansson Employee representative Employee representative
Melker Schörling Carl Bek-Nielsen Arne Frank Ulrik Svensson Chairman of the Board Vice Chairman Chief Executive Officer and President
Member Member Member Member
Member
Audited and submitted on 25 March 2013 by PricewaterhouseCoopers AB
Anders Lundin Authorised Public Accountant Lead Auditor
To the annual meeting of the shareholders of Aarhus Karlshamn AB (publ), corporate identity number 556669-2850
We have audited the annual accounts and consolidated accounts of Aarhus Karlshamn AB (publ) for the year 2012 except for the corporate governance statement on pages 47-52. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 1-53.
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts and 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 opinion.
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. Our opinions do not cover the corporate governance statement on pages 47-52. 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 income statement and balance sheet for the parent company and 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 Aarhus Karlshamn AB (publ) for the year 2012. We have also conducted a statutory examination of the corporate governance report.
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 and that the corporate governance report on pages 47-52,
Malmö, 25 March 2013. PricewaterhouseCoopers AB
Anders Lundin Authorised Public Accountant Lead Auditor
has been prepared in accordance with the Annual Accounts 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.
Furthermore, we have read the corporate governance statement and based on that reading and our knowledge of the company and the group we believe that we have a sufficient basis for our opinions. This means that our statutory examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden.
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. A corporate governance statement has been prepared, and its statutory content is consistent with the other parts of the annual accounts and consolidated accounts.
Equity, non-controlling share of equity and deferred tax liability divided by balance sheet total.
Profit/loss for the year as a percentage of average shareholders' equity.
Operating profit divided by average operating capital.
Operating income minus cost of goods.
Share price divided by equity per share.
Dividend per share as a percentage of the share price.
Equity divided by average number of shares at the balance sheet date.
Net sales divided by average operating capital.
Cash and bank balances plus short-term investments with a maturity of less than three months.
Profit/loss for the year divided by the average number of shares on the balance sheet date.
The total of interest-bearing liabilities minus interest-bearing assets.
Share price divided by earnings per share.
Operating profit/loss plus financial income divided by financial expenses.
Non-interest-bearing current assets minus non-interest-bearing liabilities excluding deferred tax.
Net borrowings divided by equity including non-controlling interests.
Equity including non-controlling interests as a percentage of balance sheet total.
Total assets minus cash and cash equivalents, interest-bearing receivables and non-interest-bearing operating liabilities, but excluding deferred tax.
Dividend per share as a percentage of earnings per share.
AAK's shares have been traded since 2 October 2006 on the NASDAQ OMX, Stockholm, the Nordic List, within the Mid Cap segment, Consumer Commodities sector. The abbreviation is AAK and the ISIN code is SE0001493776.
During 2012, 12.3 million (10.8) shares were traded at a total value of SEK 2,875 million (1,917), which corresponds to a turnover rate of 30 percent (26). The average trade per trading day was 49,516 (42,573) shares, or SEK 11,498,000 (7,577,000). At year end, the price was SEK 276.00 (199.50) and AAK's market value was SEK 11,288 million (8,159). The highest price during the year was SEK 276.00 (28 December 2012) and the lowest price was SEK 189.00 (10 January 2012).
At 31 December 2012, the share capital of AAK amounted to SEK 408,981,890 (408,981,890). The number of shares was 40,898,189 (40,898,189). The quota value per share was SEK 10. Each share entitles the holder to one vote. All shares have equal rights to participate in the profits and assets of the Company.
The number of shareholders at 31 December 2012 was 6,934 (7,313).
The Board of Directors has adopted a dividend policy. Under the policy, the Board's goal, after considering earnings trends for the Group, its financial position and future growth potential, is to propose annual dividends corresponding to at least 30 to 50 percent of annual earnings after tax for the Group.
The Board of AAK proposes a dividend for the 2012 financial year of SEK 5.25 (4.75) per share, a total of SEK 215 million (194).
AAK's aim is for the shares to be valued on the basis of relevant, accurate and upto-date information. This requires a clear strategy for financial communication, reliable information and regular contact with financial market stakeholders.
Contact with the financial markets takes place via presentations in conjunction with quarterly reports and meetings with analysts, investors and journalists at capital market days, seminars and visits to AAK's divisions.
In 2012, the company held two capital market days (in Stockholm and Copenhagen) and a large number of meetings with analysts and other professionals in Stockholm, Copenhagen, London, Frankfurt, Paris, New York and Zürich.
Those interested can obtain presentation material and listen to audio recordings from quarterly presentations at www.aak.com, which makes presentations available for all shareholders.
Berenberg Bank – James Targett CA Cheuvreux – Richard Koch Carnegie Investment Bank AB – Fredrik Villard Danske Bank – Bile Daar Handelsbanken – Casper Blom Nordea Bank A/S – Patrik Setterberg SEB Enskilda – Christopher Lyrhem Swedbank – Christian Anderson
Financial information about AAK is available at www.aak.com, where financial reports, press releases and presentations can be obtained. The Company's press releases are distributed via Cision and are also available on the Company's website.
The Company management can be contacted as follows: Telephone: +46 40 627 83 00 E-mail: [email protected]
Shareholder contacts: Arne Frank President and CEO Telephone: +46 40 627 83 00
Peter Korsholm Chief Financial Officer (CFO) Telephone: +46 40 627 83 00
Fredrik Nilsson Director Group Controlling and Head of Investor Relations Telephone: +46 40 627 83 00 E-mail: [email protected]
| No. of shares |
Proportion of share capital and votes, % |
|
|---|---|---|
| BNS Holding AB | 14,318,350 | 35.0 |
| AMF - Försäkring och Fonder | 3,317,000 | 8.1 |
| Swedbank Robur fonder | 2,781,230 | 6.8 |
| Didner & Gerge Fonder Aktiebolag | 2,270,000 | 5.6 |
| Svenska Handelsbanken Copenhagen | 1,391,185 | 3.4 |
| SEB Investment Management | 1,058,491 | 2.6 |
| Alecta Pensionsförsäkring | 800,000 | 2.0 |
| JPM Chase NA | 752,938 | 1.8 |
| Enter fonder | 646,833 | 1.6 |
| Other shareholders | 13,562,162 | 33.1 |
| Total | 40,898,189 | 100.0 |
Source:
| Distribution of shareholdings, as of 31 December 2012 | |||
|---|---|---|---|
| No. of shares | No. of shareholders |
Proportion of all shareholders, % |
Proportion of share capital and votes, % |
| 1 - 500 | 5,195 | 74.9 | 2.29 |
| 501 - 1,000 | 824 | 11.9 | 1.68 |
| 1,001 - 5,000 | 629 | 9.1 | 3.40 |
| 5,001 - 10,000 | 103 | 1.5 | 1.74 |
| 10,001 - 15,000 | 36 | 0.5 | 1.08 |
| 15,001 - 20,000 | 14 | 0.2 | 0.77 |
| 20 001 - | 133 | 1.9 | 89.04 |
| Total | 6,934 | 100.0 | 100.00 |
| Information per share | ||
|---|---|---|
| 2012 | 2011 | |
| Share price, reporting date, SEK |
276,00 | 199.50 |
| Dividend, SEK | 5.25 | 4.75 |
| Direct yield, % | 1.90 | 2.38 |
| Earnings per share, SEK |
15.66 | 14.72 |
| Equity per share, SEK |
95.32 | 86.72 |
| Share price/ Equity |
2.90 | 2.30 |
For definitions, see page 55
Melker Schörling Chairman of the Board of Directors. Elected in: 2005 (Karlshamns AB 2001). Born: 1947. Nationality: Swedish.
Main occupation: Chairman of the Board of Directors of Melker Schörling AB.
Qualifications: BSc. in Business and Economics. Professional background: CEO of a number of companies, including Securitas AB 1987-1992 and Skanska 1993-1997.
Other directorships: Hexagon AB, Securitas AB and HEXPOL AB and member of the Board of Directors of Hennes & Mauritz AB.
Number of shares: MSAB holds 14,318,350 shares (35.0 percent) in AAK.
Arne Frank Elected in: 2010. Born: 1958. Nationality: Swedish. Main occupation: President and CEO, AarhusKarlshamn AB. Qualifications: MSc. in Industrial Engineering and Management. Professional background: Chairman, CEO and President of TAC, Executive VP of Building Automation Business Unit at Schneider Electric S.A., Chairman and CEO of Carl Zeiss Vision Holding GmbH. Other directorships: Chairman of the Board of
Contex Holding A/S and member of the Board of Directors of Alfa Laval AB (publ.). Number of shares: 2,000. Share options: 264,550. Stock options: 80,000.
Carl Bek-Nielsen Vice Chairman. Elected in: 2005. Born: 1973. Nationality: Danish. Main occupation: Chief Executive Director and Vice Chairman at United Plantations Berhad. Qualifications: BSc. in Agriculture. Professional background: Executive Director, Director-in-charge. Other directorships: Chairman of the Board of Directors of United International Enterprises Ltd. Member of the Board of Directors of MSAB. Number of shares: United International Enterprises Ltd holds 1,363,406 shares (3.3 percent) in AAK.
Martin Bek-Nielsen Elected in: 2005. Born: 1975. Nationality: Danish. Main occupation: Executive Director (Finance & Marketing) United Plantations Berhad. Qualifications: Agricultural Economics. Professional background: Executive Director (Finance & Marketing).
Other directorships: Member of the Board of Directors of United Plantations Berhad, Vice Chairman of the Board of Directors of United International Enterprises Ltd.
Number of shares: United International Enterprises Ltd holds 1,363,406 shares (3.3 percent) in AAK.
Mikael Ekdahl Elected in: 2005. Born: 1951. Nationality: Swedish. Main occupation: Lawyer and partner in Mannheimer Swartling Advokatbyrå. Qualifications: Swedish equivalents of MBA and LLB. Kand.
Professional background: Lawyer and partner. Other directorships: Chairman of the Board of Directors of Bong AB, Marco AB, Absolent AB and EM Holding AB. Vice Chairman of the Board of Directors of Melker Schörling AB. Number of shares: 8,000.
Märit Beckeman Elected in: 2006. Born: 1943. Nationality: Swedish. Main occupation: Project work at the Department of Design Sciences, Division of Packaging Logistics at LTH, Lund University. Qualifications: PhD. Master of Science and Licentiate in Engineering. Professional background: Project Manager, Consultant, Business development and Product/ packaging development. Other directorships: Member of the Board of Directors of Beckeman Consulting AB.
Number of shares: 0.
Ulrik Svensson Elected in: 2007. Born: 1961. Nationality: Swedish. Main occupation: CEO Melker Schörling AB. Qualifications: BSc Economics and Business. Professional background: CFO of several listed companies, including Swiss International Airlines and Esselte.
Other directorships: Member of the Board of Directors of Assa Abloy AB, HEXPOL AB, Loomis AB, Hexagon AB and Flughafen Zürich AG. Number of shares: 0.
Harald Sauthoff Elected in: 2010. Born: 1955. Nationality: German. Main occupation: Vice President, BASF Personal Care and Nutrition GmbH. Qualifications: Industrial Business Management. Professional background: Risk Management Agricultural Commodities, General Business Management in the Chemical Industry. Number of shares: 0.
Leif Håkansson AarhusKarlshamn Sweden AB. Appointed by IF-Metall. Elected in: 2005. Born: 1957. Nationality: Swedish. Main occupation: Senior positions in trade unions and local and regional government and Board work. Qualifications: Electrical engineering. Number of shares: 0.
Annika Westerlund AarhusKarlshamn Sweden AB. Appointed by PTK-L. Elected in: 2005. Born: 1956. Nationality: Swedish. Main occupation: Laboratory Assistant. Qualifications: Technical College. Number of shares: 0.
PricewaterhouseCoopers AB
Anders Lundin Born: 1956. Authorised public accountant. Lead auditor. The company's auditor since 2005.
Arne Frank Employed: 2010. Born: 1958. Nationality: Swedish. Main occupation: President and CEO AarhusKarlshamn AB. Qualifications: MSc. Industrial Engineering and Management. Directorships: Chairman of the Board of Contex Holding A/S and member of the Board of Directors of Alfa Laval AB (publ.). Number of shares: 2,000. Share options: 264,550. Stock options: 80,000.
Peter Korsholm Employed: 2012. Born: 1971. Nationality: Danish. Main occupation: CFO (Chief Financial Officer). Vice President AarhusKarlshamn AB. Qualifications: MBA, MSc. Econometrics and Mathematical Economics, BA Economics. Directorship: Member of the Board of Maj Invest A/S. Number of shares: 0. Stock options: 130.000.
Renald Mackintosh Employed: 2002. Born: 1951. Nationality: Dutch. Main occupation: Vice President AarhusKarlshamn AB. President Business Area Food Ingredients Continental Europe. Qualifications: MSc. Food Technology. Number of shares: 300. Stock options: 40,000.
Octavio Díaz de León Employed: 2007. Born: 1967. Nationality: Mexican. Main occupation: Vice President AarhusKarlshamn AB. Managing Director AarhusKarlshamn Mexico. Qualifications: MBA, BSc. Mechanical & Electrical Engineering. Number of shares: 0. Stock options: 40,000.
Edmond Borit Employed: 2001. Born: 1969. Nationality: Peruvian and French. Main occupation: Vice President AarhusKarlshamn AB. Managing Director AarhusKarlshamn South America. Qualifications: MBA, BSc. Food Engineering. Number of shares: 0. Stock options: 50,000.
David Smith Employed: 2001. Born: 1960. Nationality: British. Main occupation: Vice President AarhusKarlshamn AB. President European Supply Chain. Qualifications: MBA, Graduate Diploma in Business Management. Number of shares: 0. Stock options: 40,000.
Torben Friis Lange Employed: 2010. Born: 1963. Nationality: Danish. Main occupation: Vice President AarhusKarlshamn AB. President Business Area Chocolate & Confectionery Fats. Qualifications: BSc. Dairy Technology, Graduate Diploma in Business Administration. Number of shares: 0. Stock options: 100,000.
Bo Svensson Employed: 1974. Born: 1951. Nationality: Swedish. Main occupation: Vice President AarhusKarlshamn AB. President Business Area Technical Products & Feed. Qualifications: Graduate Diploma in Food Engineering. Number of shares: 210. Stock options: 10,000.
Hal Grant Employed: 2012. Born: 1960. Nationality: American. Main occupation: Interim President AAK USA. Qualifications: Phd., MSc. Industrial Management and BSc. Mechanical Engineering. Number of shares: 0. Stock options: 0.
Karsten Nielsen Employed: 1988. Born: 1963. Nationality: Danish. Main occupation: CTO (Chief Technology Officer) and Vice President AarhusKarlshamn AB. Qualifications: Graduate Diploma in Food Technology. Number of shares: 264. Stock options: 15,000.
Anne Mette Olesen Employed: 2010. Born: 1964. Nationality: Danish. Main occupation: Vice President Human Resources, Communications and CSR AarhusKarlshamn AB. Qualifications: MBA, BSc. Chemical Engineering. Number of shares: 0. Stock options: 60,000.
AarhusKarlshamn AB (publ) will provide financial information for the 2013 financial year on the following occasions:
Reports and press releases are available in English and Swedish and can be ordered from
AarhusKarlshamn AB (publ) Corporate Communication Jungmansgatan 12 211 19 Malmö, Sweden Telephone: +46 40 627 83 00 Fax: +46 40 627 83 11 E-mail: [email protected]
More information about AarhusKarlshamn AB (publ) is available on the company's website: www.aak.com
AarhusKarlshamn AB (publ)'s Annual General Meeting will take place on Friday 3 May 2013 at 2 pm at Europaporten in Malmö. Doors to the Annual General Meeting open at 1 pm and registration must be completed before 2 pm, at which time the voting list will be established.
Shareholders are entitled to attend the Annual General Meeting if they are registered in the printout of the shareholders' register created on Friday 26 April 2013, and if they have given notice that they will attend the Annual General Meeting by 4 pm on Friday 26 April 2013.
The company's shares are affiliated with Euroclear Sweden AB, the Swedish central securities depository. This means that, in order to be entitled to attend the Annual General Meeting, shareholders must be entered in the share register held by Euroclear Sweden AB as per Friday 26 April 2013. Anyone who has had shares registered through a nominee must temporarily register the shares in their own name to be able to attend the Annual General Meeting. This should be done in good time before this date.
Shareholders who wish to attend the Annual General Meeting must notify the company by one of the following alternatives.
by post to: AarhusKarlshamn AB (publ) Helena Raihle Jungmansgatan 12 211 19 Malmö, Sweden by telephone on: +46 733 99 83 15 by e-mail: [email protected] or through the website: www.aak.com as soon as possible, and no later than 4 pm on Friday 26 April 2013.
In the notification, the shareholder must specify his or her name, address, phone number, personal or corporate identity number and shareholding.
Notice of the Annual General Meeting is published in Post- och Inrikes Tidningar and on the company's website, including a full agenda. An advertisement regarding the Annual General Meeting being convened will be published in Svenska Dagbladet.
Jungmansgatan 12 211 19 Malmö, Sweden Telephone: +46 40 627 83 00 Fax: +46 40 627 83 11 E-mail: [email protected] www.aak.com Corporate identity no. 556669-2850
For further information, please visit our website www.aak.com
This document is a translation of the Swedish language version. In the event of any discrepancies between the translation and the original Swedish AAK report 2012, the latter shall prevail.
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