Annual Report • Mar 31, 2014
Annual Report
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Nolato is a Swedish publicly listed group with 9,350 employees in Europe, Asia and North America. We develop and manufacture products in polymer materials such as plastic, silicone and TPE for leading customers within medical technology, pharmaceuticals, telecom, automotive and other selected industrial sectors.
Our business model is based on close, long-term and innovative collaboration with our customers. We endeavour to create added value for both customers and shareholders through leading polymer technology, wide-ranging capabilities and highly efficient production.
| The Nolato Group in brief 4 | |
|---|---|
| The CEO's comments 6 | |
| Nolato's business model 8 | |
| Risks and risk management 14 | |
| Financial targets and target achievement 15 | |
| Three business areas that balance our operations 16 | |
| Nolato Medical 18 | |
| Nolato Telecom22 | |
| Nolato Industrial 26 | |
| Corporate responsibility30 | |
| Shareholder information36 | |
| Corporate governance 38 | |
| Nolato's Board40 | |
| Group management42 | |
| Directors' report and financial reports *) 43 |
|
*) The content of pages 44-78 has been audited.
All financial information is posted on www.nolato.com as soon as it is published.
The printed Annual Report is sent by post to those shareholders who have notified the company that they wish to receive a copy. It can also be ordered at www.nolato.com, where a digital version is also available.
The Annual Report is also available in Swedish.
Per-Ola Holmström Executive Vice President and CFO Phone +46 705 763340 E-mail [email protected]
Pharmaceutical packaging undergoes automated in-line quality control at a Nolato Medical Pharma Packaging plant.
2013 was the best year yet in Nolato's history. Compared with the previous year, sales rose by 17% to SEK 4,522 million, with operating profit (EBITA) up by 41% to SEK 427 million and earnings per share up by 55% to SEK 11.94. The strong earnings performance resulted in robust cash flow and sharply reduced indebtedness.
All business areas showed very strong performance and Group sales rose by 50%. There was also a sharp increase in operating profit. The Nolato Telecom business area saw sales increase by a full 118% thanks to excellent consumer demand for a number of new mobile phone models.
The positive performance continued in the second quarter, with strong earnings and a high return on capital. All three of our business areas showed increased earnings and high margins. Work began on expanding Nolato Medical's Chinese production facility by 2,200 m2.
The strong performance continued in the third quarter. Sales rose by 12% and operating profit was up by 23%. A decision was taken to expand the Hungarian production unit, which is shared by Nolato Medical and Nolato Industrial, by 3,700 m2.
Sales for the fourth quarter were virtually unchanged. However, profit and margin both improved and cash flow was strong. At year-end the Group's financial position remained very healthy. Rubber component company Nolato Sunne was divested as part of the Group's focus on plastic, silicone and TPE products.
2012 – 2013 SEK
| SEKm (unless otherwise specified) | 2013 | 2012 | 2011 |
|---|---|---|---|
| Net sales | 4,522 | 3,874 | 2,977 |
| Operating profit (EBITDA) 1 | 568 | 444 | 360 |
| Operating profit (EBITA) 2 | 427 | 303 | 199 |
| EBITA margin, % | 9.4 | 7.8 | 6.7 |
| Profit after financial income and expense | 403 | 272 | 183 |
| Profit after tax | 314 | 202 | 132 |
| Earnings per share, 3 SEK | 11.94 | 7.68 | 5.02 |
| Adjusted earnings per share, 3, 4 SEK | 12.39 | 8.13 | 5.28 |
| Cash flow after investments, excluding acquisitions and disposals | 362 | 317 | 112 |
| Return on capital employed, % | 26.7 | 19.4 | 13.9 |
| Return on shareholders' equity, % | 24.9 | 17.7 | 11.6 |
| Equity/assets ratio, % | 52 | 44 | 52 |
| Net financial assets (+) / net financial liabilities (–) | 122 | – 113 | – 119 |
| Dividend per share (2013 proposal), SEK | 8.00 | 6.00 | 5.00 |
| Average number of employees | 9,357 | 8,421 | 5,496 |
1 Operating profit (EBITDA): Earnings before interest, taxes, depreciation and amortisation.
2 Operating profit (EBITA): Earnings before interest, taxes and amortisation of intangible assets arising from acquisitions.
3 Nolato does not have any financial instrument programmes which involve any dilution in the number of shares.
4 Adjusted earnings per share: Profit after tax, excluding amortisation of intangible assets arising from acquisitions, divided by the average number of shares.
4
Nolato is a Swedish publicly listed group with operations in Europe, Asia and North America. We develop and manufacture products in plastic, silicone and TPE for leading, often global, companies within three areas.
– medical devices (such as inhalers, insulin pens and catheter balloons)
– telecom components (subsystems for mobile phones, often with significant cosmetic content, as well as methods and materials for shielding electronics)
– products for industrial companies (such as packaging, hygiene products and vehicle components).
Nolato's customer ofering comprises most technologies in the field of polymers and covers the entire value chain through to product delivery.
We endeavour to develop close, long-term and constructive collaboration with customers and we are often chosen for the production of complex products with stringent technical demands.
Our wide-ranging capabilities support our customers' product development. Our involvement in customers' development work at an early stage allows us to optimise product design to help achieve a better endproduct.
Nolato has a long tradition of responsible business, and one of our Basic Principles is that efcient business operations must be combined with ethics, responsibility and environment awareness. These areas are therefore natural and integral aspects of our business activities.
We are signatories to the UN Global Compact and report sustainability work in accordance with GRI.
The average number of employees in 2013 was 9,357. Of these, 91% were outside Sweden.
Nolato was listed on the stock exchange in 1984, and its B shares are listed on the NASDAQ OMX Nordic Exchange in the Stockholm Mid Cap segment, where they are included in the Industrials sector.
Nolato was founded in 1938 as Nordiska Latexfabriken i Torekov AB, with the trademark Nolato, which has been the company name since 1982. Today's global Group is the result of organic growth and acquisitions. The head ofce is still in Torekov, Sweden, but the majority of operations are now based abroad.
| Financial highlights: | 2013 | 2012 |
|---|---|---|
| Sales SEKm | 1,274 | 1,159 |
| Operating profit EBITA SEKm | 165 | 133 |
| EBITA margin % | 13.0 | 11.5 |
| Average number of employees | 988 | 932 |
Development and manufacturing of complex product systems and components within medical technology and advanced packaging solutions for pharmaceuticals and dietary supplements.
Development, production and sales in Sweden, the UK, Hungary, the US and China. Sales offices in Germany, France and the Czech Republic.
Medical understanding, broad technological offering, development expertise, global production and robust quality.
AstraZeneca, Becton Dickinson, Boston Scientific, Coloplast, Gambro, Novo Nordisk, Pfizer, Sanofi, Takeda.
Low. Steady market growth. Long-term growth potential.
Long.
Share of the Group's net sales
Share of the Group's
operating profit (EBITA)
| Financial highlights: | 2013 | 2012 |
|---|---|---|
| Sales SEKm | 2,079 | 1,548 |
| Operating profit EBITA SEKm | 166 | 96 |
| EBITA margin % | 8.0 | 6.2 |
| Average number of employees | 7,611 | 6,741 |
Design, development and manufacturing of advanced components and subsystems for mobile phones. Product and systems for shielding of electronics (EMC).
Development, production and sales in China, Sweden and Malaysia. Sales and technology offices in the US and India.
Creative development work, cutting-edge technology, advanced project management, fast production start-ups and high productivity.
Ericsson, Huawei, Motorola Solutions, Nokia, Nokia Solutions, Sony Mobile, Xioami, ZTE.
High. Project-based operations.
net sales
Short.
Share of the Group's operating profit (EBITA)
| Financial highlights: | 2013 | 2012 |
|---|---|---|
| Sales SEKm | 1,170 | 1,170 |
| Operating profit EBITA SEKm | 119 | 105 |
| EBITA margin % | 10.2 | 9.0 |
| Average number of employees | 753 | 743 |
Development and manufacturing of components and product systems in plastic and TPE for customers in the automotive industry, hygiene, packaging, gardening/forestry, domestic appliances and other selected industrial segments.
Development, production and sales in Sweden, Hungary, Romania and China.
Technology, project management and productivity.
Atlas Copco, Brose, Haldex, Husqvarna, Landrover, MCT Brattberg, Sanitec, Scania, SKF, Volvo, Volvo Cars.
Medium. Follows the Northern European industrial business cycle.
Product life cycle: Medium/Long.
Share of the Group's net sales
Share of the Group's operating profit (EBITA)
2013 was a strong year for Nolato, the best since the company was founded in 1938.
All three business areas substantially exceeded the results for the previous year. Nolato Medical's sales rose by 24%, Nolato Telecom's by 73% and Nolato Industrial's by 13%.
Group sales rose by 17% overall to SEK 4,522 million, with operating income (EBITA) up by 41% to SEK 427 million. And this was despite 2012 also being "the best since the company was founded".
The reason for the excellent results of the past two years is simple: all three of our business areas performed well at the same time. I have often mentioned the business areas' balancing efect on the Group's performance in previous annual reports, whereby a temporary dip in one business area can be ofset by better performance in another area. But the strong performance in 2012 and 2013 by all three areas is clearly an added bonus for us.
The only disappointment in 2013 was that we didn't fully achieve our acquisition goals. We are always looking at a number of possibilities, but none of them came to fruition during the year.
We are prepared to give these opportunities the time they require. We are selective and are looking not only for companies that provide us with expansion opportunities in terms of geography and capabilities, but that also have a corporate culture that is a good fit with our own. Acquisition candidates also need to have a strong market position and quickly contribute to continued strong financial performance by the Group.
We are also pleased with the extremely positive development of recent years' acquisitions and their contribution to our success.
2013 provided numerous confirmations that our focus on expertise and resources to support customers' product development is bearing fruit. We are becoming increasingly involved at the concept phase of customers' development projects, which provides us with good opportunities to develop a close long-term relationship with customers that is mutually rewarding.
This is important for us as the traditional role of suppliers – being good at producing components that meet customer specifications – is no longer enough. Our large customers want to work with highly skilled suppliers with strong resources that can ofer an end-to-end service, from concept discussions to delivery of a final product. Suppliers also need to be able to ofer global production with a local presence.
Those companies that fail to keep up will be pushed out of the market or bought up, while large companies with a more global focus, like Nolato, have the opportunity to advance their positions.
A good example of this is the collaboration between Volvo Cars and Nolato on the development of components for their new Drive-E family of engines. The process began four years ago with open discussions about what can and cannot be produced. The emphasis was then placed on design, structure and production in order to create the most efective solutions possible, both financially and in terms of quality. Deliveries to Volvo Cars in Skövde, Sweden began in 2013. Preparations are underway to also produce certain components in China for supply to Volvo Cars' new engine plant there.
Our focused, goal-oriented work based on Lean Manufacturing is contributing strongly to our healthy earnings. Nolato is at the cutting edge of efcient production, which is demonstrated not only through companies outsourcing production to us but also in our earnings performance.
Adopting a lean approach involves more than just eliminating unnecessary work. Ensuring that all employees in all parts of the company are working in a well organised way and feel involved is just as important. To do this we adopt an overall approach and ensure these activities become a natural part of day-to-day operations. We do not rest on our laurels but are constantly endeavouring to become even better. Today we also need to be extremely leanfocused in China, as the country's strong growth has led to rising costs and growing competition for capable employees. Our strong focus on efcient production ofsets this to some extent, but it remains important to attract, develop and retain committed and skilled staf.
Our Chinese companies, which are by far the Group's largest employers, have consequently introduced an extensive Employee Care Programme. This programme is an important tool in our eforts to be the most attractive employer in our sector. It focuses on the specific circumstances in China and aims to create good conditions for all employees, both at work and outside work. The latter is particularly important as many of our employees in Beijing come from other parts of China and spend much of their free time close to their workplace.
It is not just in China that we are endeavouring to create an attractive environment for staf. From an early stage Nolato's organisation was based on the fundamental idea that it is capable individuals, with knowledge and good ideas, working together that create a successful company.
This approach remains important. There are almost no simple jobs left in our industry and the number of employees per unit of production has declined as increasingly efcient processes are introduced. We require our staf to have a thorough basic education, a desire to constantly develop professionally and a willingness to take on responsibility.
I believe that today's increasingly complex duties will result in our employees developing further and enjoying their work. But this isn't enough. To be competitive we also need to give back in the form of a healthy environment, good employment terms and an organisation that employees
are proud of and where they can develop professionally. In short, to be a company with both head and heart.
Taking responsibility is something that permeates Nolato's entire organisation. In particular, responsibility for ensuring that all aspects of our operations are run professionally and sustainably.
I am therefore pleased that we are viewed as a company that cares. For many years now Nolato has been included in the Sustainable Portfolio of Swedish business weekly Veckans Afärer, where we have been awarded the top rating. We have achieved good results in a review by Swedbank Robur according to its ethical investment criteria. And in insurance company Folksam's Corporate Responsibility Index we came 25th out of 250 companies rated on the environment and 40th on human rights.
Our work in this area continues. For the 2014– 2016 period we have further tightened up our targets on energy consumption and carbon dioxide emissions. We have also included sustainability issues as a full, integral aspect of the Group's strategic longterm planning. These important future issues are reflected in the strategic work being undertaken throughout our organisation.
In this year's Annual Report we consequently use the term CR, which stands for Corporate Responsibility, to emphasise that, rather than just taking social responsibility, we have an overall responsibility for how our entire organisation impacts the world around us, now and in the future.
the right path in a changing world So how do we view the future? As in the past, we do not provide detailed earnings forecasts in this year's report. This is because our business is highly dependent on customers' internal decisions and commercial performance. Factors among customers that we cannot influence in the short-term, such as postponed or cancelled projects, higher or lower sales volumes and longer or shorter product life span, are of great significance to our sales and profit.
This is particularly evident in Nolato Telecom, where consumer interest in each individual mobile phone model that we
work on has a direct impact on the profitability of the business area and, ultimately, all of Nolato.
However, our strategic planning for the next few years outlines our way forward:
– Nolato Medical will continue its significant focus on further growth, both organically and through acquisitions. We are now positioned for major customer projects involving the development of highly complex integrated system products and highvolume production.
– Nolato Telecom will continue to strengthen its niche position as a supplier of technically advanced solutions and products in the mobile phone sector. We will also expand our operations in the high-growth market for electromagnetic compatibility (EMC) shielding. We believe that, in the longer term, this could also lead to more even performance in this business area.
– Nolato Industrial will continue to strengthen its competitiveness as a strategic supplier to selected major industrial customers in Scandinavia and Central Europe. We are also open to the possibility of collaborating with customers in their globalisation activities.
Our strength is finding the right path to take when our operating environment changes. Being proactive and taking action when conditions become challenging or when obstacles arise. Being open to new business opportunities at all times. And constantly ensuring that our production culture is so flexible that we can adapt to changes in our operating environment without this resulting in excessive costs.
Nolato is now a much bigger market player than before. We have good resources, a high level of technical capabilities and a strong financial position. We play a completely diferent role for our customers than we did five years ago, providing solutions that are technically, financially and sustainably optimal.
Because the best way for us to create value is through close long-term relationships with our customers. Today, tomorrow and in the future.
Torekov, March 2014
Hans Porat President and CEO
We will achieve our vision and our financial targets in order to create job security for our employees and lasting value for our customers and shareholders
Broad customer offering Long-term customer relationships Local yet global presence Highly skilled High productivity Ethical & sustainable
Excellent customer relationships Advanced, leading technology Cutting-edge development and design expertise Effective adaptation to changes in operating environment Advanced project management Active sustainability work Strong financial position
We are professional We are well organised We are responsible
Nolato develops and manufactures products in polymer materials such as plastic, silicone and TPE for customers within medical technology, pharmaceuticals, telecom, automotive and other selected industrial sectors.
We manufacture everything from individual components, which the customer assembles in its own product, to complete products that are ready for delivery to a customer's client.
We also develop and manufacture our own products, such as pharmaceutical packaging.
Our business model is based on our objective to achieve our vision and financial targets in order to create job security for our employees and lasting value for our owners.
Based on extensive experience and wideranging capabilities we have close, long-term and innovative relationships with our customers. We create added value for our customers and our owners through progressive, leading technology, advanced project management, extensive expertise in development and design and highly efcient production.
Our operations are based on our three Basic Principles of being professional, well organised and responsible.
The key factors in achieving our vision are:
As a supplier we need to concentrate on activities that create value for our customers and what they consider important in the long term. High productivity and a continual focus on costs are consequently vital aspects of our day-to-day operations. Continual improvements and lean manufacturing lead to better business for both us and our customers through efcient processes, reduced scrap, shorter lead times and new solutions.
We always endeavour to develop long-term and close relationships with our customers. Because the better we understand their processes and needs, the greater the value we can create for them. We also work internally across our companies and business areas to create a broad customer ofering.
The general trend is for customers to reduce their number of suppliers and prioritise those providers with the resources and capabilities to support them from concept to delivery. Our customer ofering therefore encompasses most technologies in the field of polymers and includes everything from concept development, product design and material optimisation to mass production, post-processing, assembly and logistics.
Proximity to the customer is always key, both for us and for customers. We are therefore open to establishing production where the customer is located. We can reduce investment risk and lead times by using existing production units.
Our customers constantly challenge us with new requests and tougher requirements. We therefore proactively enhance our ofering by continually raising the skill levels of our employees and investing in cutting-edge technologies.
We have strong core values which are based on the view that efcient and profitable business operations must be ethical and sustainable. Issues relating to ethics, social responsibility, environmental issues and working environment are therefore natural and integral features of our business activities.
Nolato is a high-tech developer and manufacturer of polymer product systems for leading customers in specific market areas.
With its many years of experience, in-depth expertise in materials and processes, early involvement in customer projects, advanced project management and detailed knowledge of each customer's specific requirements, Nolato is an effective and innovative partner.
Nolato shall be the customer's partner of first choice.
Technology for manufacturing components in plastic, silicone and TPE to highly precise dimensions and stringent quality requirements. Our most common production technology.
Injection blow moulding
Technology combining injection moulding with inflation techniques. We mainly use this method for the manufacture of pharmaceutical packaging.
A technology for creating a product by dipping formers in liquid latex. This is used to manufacture items such as catheter balloons and breathing bags.
Die-cutting can produce products from hard or soft material. We use die-cutting for packaging, gaskets and cosmetic details such as loud speaker protection.
5: Production tools We specify and manufacture, or buy in, moulds and related production equipment.
Extrusion is a method for the production of tubing. This technique is used to manufacture tubing for products such as heart catheters and EMC shielding gaskets.
Not a technology as such, but an important part of our customer offering. Can take place on a fully automated, semi-automated or fully manual basis.
9: Effcient production solutions We develop fully or partially automated cells by using robots to link numerous processes to create highly efficient production.
2: Customer-oriented solutions
We create technical solutions that reduce the weight of products, minimise their environmental impact, make them water-resistant or produce a unique surface.
We optimise design in order to create the most efficient and effective production solutions, both financially and in terms of quality.
4: Prototypes We visualise the future product by producing prototypes and materials samples.
6: Injection moulding
We manufacture components using one of our production technologies, such as injection moulding.
7: Polishing
We polish the surface before painting, for example in the production of mobile phone casings, to produce perfect haptics.
8: Post-processing We give the products their final finish through painting, printing or metallisation.
10: Assembly We assemble the components we have manufactured ourselves together with purchased components to create a complete product or subsystem.
11: Quality
We constantly ensure the correct quality through automated vision systems, professional operators and effective systems for continuous improvements.
12: Logistics We deliver on a bespoke basis to customers' assembly plants, warehouses or directly to their customers around the world.
Nolato's growth strategy is based on generating organic growth within all business areas and further strengthening Nolato Medical's global presence by taking on customers' outsourced production operations, and through acquisitions. Selective acquisitions within Nolato Telecom and Nolato Industrial may also be of interest if they bring new technology or new customer segments.
Acquisitions have played a key role in Nolato's development. Until 1996 most acquisitions were made within the business area now called Nolato Industrial.
1997 was a milestone for Nolato, with its acquisition of Ericsson's plastic manufacturing unit for mobile phones in Kristianstad, Sweden. This resulted in a doubling of sales and Nolato's entry into the mobile phone sector. Over the past 10 years the acquisition strategy has mainly focused on broadening our operations in the Nolato Medical business area.
Acquisitions carried out in recent years account for around 55% of Nolato Medical's sales of almost SEK 1.3 billion. These acquisitions have performed extremely well and we remain interested in acquisitions. Those companies that we may be interested in should essentially have the same corporate culture and approach as Nolato and ofer an opportunity to expand either geographically or in terms of capabilities. It is important that the companies are not turnaround companies, but financially healthy businesses.
But acquiring good companies takes time and there are many family-owned companies on our list of acquisition candidates. By building up good relationships with their owners, we endeavour to stand out as the best buyer, if and when they decide to sell.
Nolato aims to achieve growth that is at least in line with growth within each market segment. All business areas met this target in 2013.
Nolato Medical's sales rose by 7% (adjusted for currency and acquisitions). According to estimates, growth in Nolato Medical's market segments is around 5%.
Nolato Telecom's sales increased by 37% (adjusted for currency). According to research company Gartner, the global mobile phone market grew by 3.5% in 2013.
Nolato Industrial's sales rose by 2% (excluding currency efects and disposals), which is considerably better than the performance of Swedish industrial production, which fell by 3.4% according to Statistics Sweden.
Nolato Medical Rubber in Hörby is acquired. The acquisition adds new capabilities within injection moulding of liquid silicone, an area in which Nolato Medical is now a world leader. The operations in Hörby are now part of Nolato MediTech.
Cerbo Group in Trollhättan, Sweden is acquired. The acquisition adds two new areas of expertise in the form of pharmaceutical packaging within Nolato Medical and own products within Nolato Industrial. These operations now come under Nolato Cerbo and Nolato Hertila.
Contour-Plastics in Baldwin, Wisconsin in the US is acquired, providing Nolato Medical with a platform for operations in North America. The company is now called Nolato Contour.
Cope Allman Jaycare, a UK-based pharmaceutical packaging company, is acquired. The company, renamed Nolato Jaycare, provides the Group with new markets, new products and new production technology within pharmaceutical packaging.
An important aspect of Nolato's strategic planning is identifying potential risks in the organisation, assessing their likelihood and any consequences and minimising the negative impact that such risks could have on the Group.
Financial risks are managed in accordance with a financial policy established annually by the Board of Directors.
The chart below shows our assessment of the probability of a risk occurring and – if it did – the impact this would have on Nolato's operations and earnings.
The letters marked on the chart refer to the review of risks, risk exposure and risk management set out in the Directors' Report on pages 48 – 49.
Nolato's Board has established long-term financial targets for margin, return and equity/assets ratio. These targets are to be seen as an average over a business cycle, and were most recently revised 2011, when the margin target was adjusted upwards by one percentage point from 7% to 8%. The change was made due to the growing proportion of medical technology, in which the margin is normally slightly higher than for the Group's other operations.
The target for the EBITA margin is for it to exceed 8% over a business cycle.
The outcome for 2013 was a strong 9.4%. Margins have improved in all business areas. A significant focus on profitability through continuous improvement in efciency and productivity together with high capacity utilisation have resulted in an improvement in the margin.
Over the last five years, the EBITA margin
has averaged 7.7%.
2009 2010 2011 2012 2013
The target for return on capital employed is for it to exceed 15% over a business cycle.
The outcome for 2013 was a high 26.7%. Efcient management of capital resulted in virtually no change in average capital employed in 2013 compared with 2012. Combined with the significant earnings improvement in 2013, return on capital employed also improved.
Over the last five years, return on capital employed has averaged 18.1%.
The target for the equity/assets ratio is for it to exceed 35% over a business cycle.
The outcome at year-end 2013 was 52%. The improvement in profitability has also had an impact on after-tax profit. This has contributed to a significant increase in equity, despite the higher dividend that was paid out in 2013, which led to a reduction in equity. The equity/assets ratio has increased as a result of total assets remaining at a roughly unchanged level through efcient capital management.
Over the last five years, the equity/assets ratio has averaged 50%.
Nordiska Latexfabriken is started in Torekov. 1957
First medical component is produced.
The Group changes its name to Nolato, an abbreviation of the previous name. It had been used for years as a trademark and popular name.
The company's shares are listed on the Stockholm Stock Exchange's OTC list.
Sales rise to more than SEK 650 million through organic growth and acquisitions of companies across Sweden including in Lomma, Sunne, Hallsberg, Göteborg and Ängelholm.
Nolato's mobile phone-related operations begin through the acquisition of Ericsson's plastics plant in Kristianstad, Sweden. The acquisition doubles the Group's sales.
1998
The first company is ISO 14001 certified.
2000
Production starts in Hungary through an acquisition. 2001
The transfer of the mobile phone-related business to China begins.
2005
Nolato Medical starts production in Hungary.
2006
Acquisition of Medical Rubber.
Acquisition of Cerbo Group.
Nolato Medical starts production in China.
Nolato Medical starts production in the US through an acquisition.
Nolato Industrial starts production in Romania.
2012
Nolato Medical starts production in the UK through an acquisition.
Nolato Sunne is sold.
Å A more detailed corporate history is available at www.nolato.com
Nolato's operations comprise three customer-focused business areas: Nolato Medical, Nolato Telecom and Nolato Industrial. While all three business areas are based on common values and technologies, they all
enjoy good opportunities to create their own optimal conditions to succeed.
The division of operations into business areas also allows for far-reaching decentralisation of our operations. This provides a
sound basis for committed and motivated employees while enabling us to make operational decisions in close contact with our customers.
Our three business areas also often collaborate with each other to create additional customer value. This allows both Nolato Medical and Nolato Industrial to ofer their customers integration of electronics and advanced decoration solutions, based on the capabilities of Nolato Telecom, through its long-standing work with mobile phone producers.
When Nolato Industrial identifies a need among its customers for production in China, this can be achieved at low risk by establishing operations as part of our existing activities in Beijing. This was how Nolato Medical started its production in China a few years ago without requiring major investments.
We also place a strong emphasis on those factors that bind the Group together, resulting in an organisation that is greater than the sum of its parts: corporate responsibility, wide-ranging technical capabilities and similar production technology.
The fact that all three business areas are afected diferently by business cycle fluctuations, events and market patterns means the Group benefits from a healthy balance in its operations.
Nolato Medical operates on a market with long product life cycles and low business cycle dependency, while Nolato Telecom is the opposite, with short product life spans and high project volatility. And, between these two we find Nolato Industrial.
The charts below show the general sales trend for each business area over a period of 17 years, between 1997 and 2013.
Q Nolato Industrial 1997 – 2013 Innovative technology and productivity
| Nolato Medical | Nolato Telecom | Nolato Industrial | |
|---|---|---|---|
| Product Components Components Systems Systems Consumables Techniques |
Niche technologies | Components Systems Standard products |
|
| Product life cycle | Long | Short/project | Medium/long |
| Number of customers | Medium | Few | Many |
| Success factors | Medical understanding Creative development Broad technology offering Cutting edge technology Global production Adv. proj. management Robust quality Fast production start-ups Development expertise High productivity |
Technology Project management Productivity |
|
| Market | Continental/Global | Global | National/Continental |
| Market growth | |||
| Driving forces | Quality of life Welfare diseases Increased self-care |
Technology development Increased communication |
Industrial production Cost-effectiveness Innovation |
Q The business areas' share of net sales
Business Area President: Christer Wahlquist Born 1971 Employed 1996 President since 2005
| 1,274 | 1,159 |
|---|---|
| 165 | 133 |
| 13.0 | 11.5 |
| 988 | 932 |
Development and manufacturing of complex product systems and components within medical technology and advanced packaging solutions for pharmaceuticals and dietary supplements.
Development, production and sales in Sweden, the UK, Hungary, the US and China. Sales offices in Germany, France and the Czech Republic.
Medical understanding, broad technological offering, global production, robust quality and development expertise.
AstraZeneca, Becton Dickinson, Boston Scientific, Coloplast, Gambro, Novo Nordisk, Pfizer, Sanofi, Takeda.
Gerresheimer, Bespak/Consort, Carclo, Phillips-Medisize, West Pharmaceuticals, Rexam.
Low. Steady market growth. Long-term growth potential.
Product life cycle:
Long.
Large, global medical technology and pharmaceutical companies. Long-term development work, strict authority requirements, strict requirements in terms of quality, safety and traceability.
Increased outsourcing of production. Customers are reducing the number of suppliers. Shorter lead times in the development phase. Increased globalisation of projects.
Nolato Medical is a fast-growing supplier of system solutions for medical technology and pharmaceutical customers.
Nolato Medical's operations are divided into two business units:
Medical Devices: Develops and manufactures complex product systems and components based on advanced polymer technology and automation.
Pharma Packaging: Develops and manufactures advanced packaging solutions for pharmaceuticals and dietary supplements.
The business area's sales rose by 10% to SEK 1,274 million (1,159). Adjusted for currency and acquisitions, sales rose by 7%. Operating profit (EBITA) increased to SEK 165 million (133) and the EBITA margin was 13.0% (11.5). The margin was positively afected by high productivity and a favourable product mix.
Integration of UK-based company Nolato Jaycare, acquired in 2012, proceeded according to plan.
Expansion of the production unit in Beijing, China, began. This expansion covers an additional 2,200 m2, 800 m2 of which consists of a class 8 clean room. The purpose of this is to secure resources for future growth in Asia.
Expansion is also underway at the production unit at Mosonmagyaróvár in Hungary, which is shared with Nolato Industrial. This expansion project, which covers 3,700 m2, aims to meet customer production resource requirements.
Multi-component injection moulding, here using three diferent materials, means the manufacturing process can be used to create diferent functions in a single component, reducing the need for assembly.
Adapting the design of products for Design For Manufacturing (DFM) and Design For Assembly (DFA) are two of Nolato Medical's core capabilities.
We work together with customers to reduce production costs, cut quality risks
The medical devices market is growing at a rate of around 5% a year. This growth stems from the increasing global population, which is living longer as a result of wider access to medication and advanced healthcare. Combined with hard-pressed government budgets, this is leading to cost pressure in the sector. This pressure is resulting in customers overhauling their product portfolios, changes being made in the supply chain and consolidation of the supplier base.
The market is displaying three particular new trends that are important for us:
Pharmaceutical and medical technology companies are focusing more on their core capabilities, which is leading to increased outsourcing of both development and production.
A focus on suppliers that can ofer endto-end service from product development to global supply, which is leading to a reduction in the number of suppliers.
Shorter lead times in the development phase are necessary to cope with the transition to new, cost-efective products. These changes are leading to smaller supand simplify assembly of the final product. A good example of this is the development of a new product for Norway-based Photocure ASA. We were able to reduce the complexity of production and assembly by more than 50%. Nolato first produces the
pliers with a limited ofering and a narrow geographic presence being forced out of the market or bought up. Meanwhile, larger companies with a more global focus, like Nolato, have the opportunity to advance their positions.
In addition, the medical device market is starting to move towards a platform-based approach similar to the one that dominates in sectors such as the automotive industry. Suppliers are tasked with developing and manufacturing an entire system, in turn using additional subcontractors for parts of the production process. This trend makes it even more difcult for smaller suppliers to collaborate directly with the end-customer.
Overall, developments in the medical market indicate that our strategy of focussing on growth and geographical expansion has been the right path for Nolato Medical to take.
Medical device projects usually have relatively long lead times. Although all parties endeavour to cut the time it takes to get a product to market, it usually takes several years before the product is ready for mass production.
casing in silicone using injection moulding and then assembles the complete product, including the electronics.
This new product is currently undergoing clinical trials.
Examples of therapy areas and products: Asthma (inhalers, check valves), diabetes (insulin pens, infusion sets), hearing aids (seals, earpieces), heart rhythm treatment (seals for pacemakers, cardiac
anchors), dialysis (seals, connectors), urology (urinary catheters, urodomes), surgery (catheter balloons, complete blood purification equipment), analysis (allergy tests, pregnancy tests).
Standard or customer-specific primary plastic packaging that meets pharmaceutical and dietary supplement industry requirements.
– 2013
Medical Devices:
Nolato Beijing Medical Beijing, China MD Jörgen Karlsson
Nolato Contour Baldwin, Wisconsin, US MD Russell Steele
Nolato Hungary Mosonmagyaróvár, Hungary MD Johan Arvidsson
Nolato MediTech Hörby & Lomma, Sweden MD Johan Iveberg
Torekov, Sweden MD Anders Ekberg (until 3 March 2014) Christer Wahlquist (from 3 March 2014)
Nolato Cerbo Trollhättan, Sweden MD Glenn Svedberg
MD Glenn Svedberg
Nolato Medical's production mainly takes place in clean rooms, with stringent requirements on quality, safety and traceability. The photo shows a class 8 clean room at our Hungarian unit.
The long time to market is mainly due to circumstances that are specific to the medical field:
The medical sector is heavily regulated, with extensive regulatory requirements for approval and registration.
Stringent requirements on product function and safety.
Requirements on extensive documentation and validation of every stage of development and production processes.
Once a product has received regulatory approval it usually has a long product life.
Within Medical Devices, Nolato has adopted a focused strategy over the past six to seven years of making a transition from being a good but rather local manufacturer of components, to being an end-to-end supplier with global resources to support customers from the concept stage to supply of the final product. Expressed in sporting terms, this mightbe compared to Nolato Medical going from playing non-league football to the Champions League.
This advancement has required both technological and geographic expansion. When we embarked on this process our ofering involved supplying products based on customers' technical drawings. Nolato Medical now ofers customers advanced support throughout the development process, an extremely broad technological base and a network of nine wholly owned production units in Europe, Asia and North America.
Nolato has a leading position in Pharma Packaging on the Scandinavian and UK markets. Nolato Medical is one of only a few suppliers that are wholly focussed on packaging for pharmaceuticals and dietary supplements, which creates a better understanding of customer needs.
Nolato Medical's operations are based on the same core elements as the rest of the Group: corporate responsibility, wide-ranging technical capabilities and advanced production technology. What distinguishes Nolato Medical is its in-depth knowledge of the specific conditions governing customer
needs in the medical sector. Expert understanding of complicated medical applications, extensive documentation requirements and risk analysis are crucial to success in this market.
Production is mainly carried out in clean rooms, with extremely strict requirements in terms of quality, safety and traceability.
Our sights are now set on bolstering our market position through a continued focus on large customer projects involving the development of complex, integrated system products for high-volume production.
The aim is to continue to expand our geographic presence, primarily via acquisitions in Western Europe and North America and through expansion in countries where customers wish Nolato Medical to have a presence.
2009 2010 2011 2012 2013
Net sales quarter
Q4/12 Q1/13 Q2/13 Q3/13 Q4/13
Q
Q Average number of employees
Business Area President: Jörgen Karlsson Born 1965 Employed 1995 President since 2009
| Financial highlights: | 2013 | 2012 |
|---|---|---|
| Sales, SEKm | 2,079 | 1,548 |
| Operating profit (EBITA), SEKm | 166 | 96 |
| EBITA margin, % | 8.0 | 6.2 |
| Average number of employees | 7,611 | 6,741 |
Design, development and manufacturing of advanced components and subsystems for mobile phones. Product and systems for shielding of electronics (EMC).
Development, production and sales in China, Sweden and Malaysia. Sales and technology offices in the US and India.
Creative development work, cutting-edge technology, advanced project management, fast production start-ups and high productivity.
Ericsson, Huawei, Motorola Solutions, Nokia, Nokia Solutions, Sony Mobile, Xioami, ZTE.
Chiyoda, Chomerics, Jabil Green Point, Laird, Lite-On Mobile, Toyoda Gossei, Worldmark.
High. Project-based operations.
Product life cycle: Short.
A few large, global companies. These customers have high technological demands, extremely short development times and quick production start-ups.
Constant new demands for new, cost-effective solutions. Continued high importance of cosmetic effects and unique design solutions, as well as speciality functions such as water resistance. The physical size of mobile phones is growing. Greater need for shielding of electronics (EMC) .
Nolato Telecom is a supplier of technically advanced solutions and products in the telecom sector.
Nolato Telecom's operations are divided into two business units:
Mobile Phones: Develops and manufactures mechanical subsystems and components for mobile phones and tablet devices. These products have high cosmetic and haptic content, often with requirements regarding special functions such as water resistance and heat dissipation.
EMC: Develops techniques and materials for shielding of electronics to achieve electromagnetic compatibility.
Sales for the business area rose by 34% to SEK 2,079 million (1,548). Adjusted for currencies, sales increased by 37%. Volumes
have been very high, particularly in the first half of the year, driven by very strong demand for a number of mobile phone models on the consumer market.
Operating profit (EBITA) increased to SEK 166 million (96), and the EBITA margin rose to 8.0% (6.2). The margin was positively afected by high capacity utilisation.
A Thermal Management Centre has been developed at Lövepac Converting in Beijing to create solutions for efcient dissipation of heat from electronic components.
Resources have been expanded at Nolato Beijing to manage larger products such as tablet devices.
Nolato Beijing has introduced an extensive Employee Care Programme to ensure good conditions for employees both at work and in their free time.
An increasing problem for all electronic equipment producers is heat. As electronics become increasingly powerful, components are also being squeezed into the
Mobile phone manufacturing is probably one of the most extreme market sectors in the world in terms of speed of development, high volumes, short product life cycles and continual requirements for new technologies for producing cosmetic efects. This requires close collaboration between mobile phone producers and their suppliers, which often leads to long-standing relationships.
This rapid technological development leads to constant new demands on suppliers to come up with efective solutions that meet mobile phone producers' functionality and quality needs.
Recent years have seen substantial consolidation of the supplier chain, with large suppliers becoming even bigger by buying up smaller competitors. The 10 largest Electronics Manufacturing Services (EMS) companies, which manage the entire production of a mobile phone, now control around 65 percent of all mobile phone sector volumes.
Within Mobile Phones, Nolato Telecom operates in the upper segment of the mobile phone market. Traditional mobile phone companies still retain their positions in this segment, but they are being threatened by local Chinese companies, which are taking market share in their domestic market.
smallest possible space, which impedes heat dissipation. In Beijing, Lövepac Converting has established an R&D centre where the company simulates and analy-
Within the EMC sector, the Internet of Things (also known as M2M or Machine to Machine) is leading to a strong market trend. This new technology also means that electromagnetic compatibility requirements are increasing beyond the telecom sector, for instance in the medical technology and automotive industries.
Nolato Telecom is a niche player in Mobile Phones, ofering strong in-house expertise in design, development and production. The market is project-related, which means that Nolato Telecom's volumes and results are not especially dependent on overall market development as such, but more on the consumer sales performance of individual mobile phone projects in which we are involved.
Customers mainly consist of a number of selected Original Equipment Manufacturers (OEMs) that develop and produce their own end-product, in contrast to those mobile phone companies, which use large contract manufacturers to produce the entire mobile phone.
Nolato Telecom supplies mechanical plastic or metal components to these OEM companies or their subcontractors. These
ses diferent types of heat dissipation solutions before they are actually produced. The aim is to be a leading player in Thermal Management.
Components and subsystems for mobile phones Injection-moulded, painted and decorated components for mobile phones, in certain cases integrated into "mechanical modules", sometimes waterresistant. Creative material and surface design with significant cosmetic and haptic content.
Small, designed adhesive components with mechanical and/or cosmetic functions, such as logos, speaker grilles and threedimensional design elements.
Process and material solutions for shielding electronics (EMC).
Mobile Phones:
Beijing, China MD Jörgen Karlsson
Beijing, China Shenzhen, China Chennai, India MD Dan Wong
Penang, Malaysia MD Anders Ericsson components consist of both external visible parts, with high cosmetic and haptic demands, and internal components for mobile phones. These business operations comprise development, production and cosmetic processing of these diferent components and extensive assembly of these components together with purchased parts.
In comparison with the major EMS companies, Nolato Telecom is a niche supplier with a market share of just a few percent. We have a strong position with our large customers and are viewed as a highly skilled partner with strong technical capabilities. This results in us often sharing projects with advanced technical challenges and stringent requirements regarding cosmetic and haptic content.
Within EMC, Nolato Telecom has a strong position as a supplier of solutions for equipment such as mobile network base stations. Expansion has begun into related sectors, such as automotive and medical device electronics, in which there is strong
growth in shielding requirements as a result of increasingly complex electronic solutions and online connection.
Nolato Telecom's operations are based on the same core elements as the rest of the Group: corporate responsibility, wide-ranging technical capabilities and advanced production technology.
The main distinguishing factor is the technological content. Nolato Telecom has developed its own portfolio of unique technical solutions in order to ofer exceptional detailed finishing. This business areas also ofers particular expertise in handling rapid start-ups of new products and production with major fluctuations in volume.
In addition, unlike the rest of the Nolato Group, the bulk of Nolato Telecom's revenues come from technologies other than injection moulding such as tool production, assembly and various methods of painting and decoration.
continue to develop strong competitiveness by enhancing technology and processes, automation and rationalisation of production. For example, we aim to cut our already fast lead times even further by reducing the time taken to produce an injection mould by around 30%.
We are also working on further developing functional solutions such as water resistance, heat dissipation and creative integration of antennas.
Within EMC we are continuing to enhance our product ofering within existing market and technical areas. Activities have also been initiated in order to reach customers on what are new markets for us, such as the automotive and medical technology industries, and through heat-dissipating material for electronics.
We also intend to further expand our EMC operations through acquisitions.
Affecting cash flow, excluding acquisitions and disposals.
Q SEKm Change in sales
| 2100 | Volume | Currency | ||
|---|---|---|---|---|
| 1800 | Price | –3% | ||
| 1500 | Mix | |||
| 1200 | +37% | |||
| 900 | ||||
| 600 | ||||
| 300 | ||||
| 0 | ||||
| 2012 | 2013 |
Business Area President: Johan Arvidsson Born 1969 Employed 1994 President since 2012
| Financial highlights: | 2013 | 2012 |
|---|---|---|
| Sales, SEKm | 1,170 | 1,170 |
| Operating profit (EBITA), SEKm | 119 | 105 |
| EBITA margin, % | 10.2 | 9.0 |
| Average number of employees | 753 | 743 |
Development and manufacturing of components and product systems in plastic and TPE for customers in automotive, hygiene, packaging, gardening/forestry, domestic appliances and other selected industrial segments.
Development, production and sales in Sweden, Hungary, Romania and China.
Technology, project management and productivity.
Atlas Copco, Brose, Ericsson, Husqvarna, Landrover, MCT Brattberg, Sanitec, Scania, SKF, Volvo and Volvo Cars.
AQ Group, Euroform, KB Components, Mann+Hummel, Promens, Rosti.
Medium. Follows the Northern European industrial business cycle.
Product life cycle: Medium/long.
Fragmented and diversified, with a large number of customers and a large number of suppliers.
Plastic is replacing heavier metal components. Customers want more extensive support earlier on in the development phase. Suppliers with limited customer offering are being forced out of the market.
Nolato Industrial consists of seven strong specialist companies that create business opportunities both individually and in cooperation with one another.
Nolato Industrial's operations mainly focus on three customer sectors:
For the automotive sector, Nolato Industrial supplies components for vehicle interiors and advanced technical details for engines and engine bays.
Within hygiene, packaging, garden-
ing/forestry and appliances, Nolato Industrial supplies customers with continual and extensive purchasing operations, high volumes and long product runs.
Other industry mainly includes customers in the companies' related sectors.
Sales for this business area were unchanged and amounted to SEK 1,170 million (1,170). Adjusted for currencies and the disposal of the rubber component operation, sales rose by 2%. Volumes in the automotive segment
Nolato has been involved in the work to develop Volvo Cars' new four-cylinder Drive-E series of engines and is now producing components for these engines.
The largest and most complex part that we are involved in is the new inlet manifold. Nolato technicians have been sup-
were lower, especially in the first half of the year, while certain other segments such as hygiene made a positive contribution.
Operating profit (EBITA) increased to SEK 119 million (105) and the EBITA margin was 10.2% (9.0). A strong focus on continuous improvement and profitability, and a favourable product mix had a positive efect on the margin.
The decision was taken to extend the production unit at Mosonmagyaróvár in Hungary, which is shared with Nolato Medical, by 3,700 m2. This expansion project aims to meet future customer production resource requirements.
Nolato Lövepac established production in China to supply Volvo Cars' new engine plant.
Nolato Sunne AB, which was the only unit in the Group focussed solely on producing rubber products, was divested on 1 November 2013.
The European market for the manufacture of polymer products is fragmented, consisting of almost 50,000 companies with combined sales of over SEK 500 billion.
The typical company is family-owned,
porting Volvo's engine technicians in this development work since 2009.
The work initially involved discussing purely conceptual solutions and production possibilities.
Later stages of the project have mainly concerned design optimisation in order to
turns over SEK 20 – 35 million annually and operates in its local market. Business is done locally due to the fact that the products in this market are usually fairly bulky, making them expensive to transport.
Fragmentation in the Nordic region is just as strong as elsewhere in Europe. There are over 700 manufacturers of polymer products in Sweden, of which just under twothirds have fewer than five employees. Only around 30 have sales exceeding SEK 50 million.
This market is characterised by two important trends for Nolato Industrial:
Plastic is replacing heavier metal components. This is particularly evident in the automotive industry, where lower vehicle weight and hence reduced fuel consumption is a key competitive advantage.
Customers want more extensive support earlier on in the development phase, which is resulting in those companies with only a production-oriented customer ofering being forced out of the market or being ofered limited business.
Nolato Industrial is a market leader in Scandinavia, with around one-fifth of the busicreate the most efective and efcient production solution.
Serial production of the inlet manifold began in 2013 and this is now being supplied as a final, assembled product to Volvo Cars' engine plant in Skövde, Sweden.
Automotive industry Gaskets for engines and exhaust systems, interior fittings, motor components, battery boxes, etc.
Hygiene, packaging, gardening/forestry and domestic appliances
Components for microwave ovens, components for chainsaws (recoil housing, filler caps, air filter holders, gasket, etc.), flush buttons and complete flushing mechanisms for toilets, transportation crates for the clothing industry.
Ball retainers and storage seals for ball bearings, office chair components, conveyor belts, insert blocks to seal cables and pipe transits.
Nolato Gota Götene, Sweden MD Peter Holterberg
Nolato Hertila Åstorp, Sweden MD Håkan Hillqvist
Nolato Hungary Mosonmagyaróvár, Hungary MD Johan Arvidsson
Nolato Lövepac Skånes Fagerhult, Sweden Beijing, China MD Henrik Enoksson
Nolato Plastteknik Göteborg, Sweden MD Magnus Hettne
Nolato Polymer Torekov & Ängelholm, Sweden MD Anders Willman
Nolato Romania Negoiesti, Romania MD Johan Arvidsson ness done by suppliers with sales of over SEK 40 million. The companies in Nolato Industrial are all among the largest operators in the market and Nolato Industrial is the largest overall player in its sector.
In Central Europe, Nolato Industrial has a strong position as a quality supplier of products, particularly in the hygiene sector.
Nolato Industrial's operations are based on the same core elements as the rest of the Group: corporate responsibility, wideranging technical capabilities and advanced production technology.
The main distinguishing factors are the importance of high productivity and a constant focus on costs. Continuous improvement and lean manufacturing are important features throughout the Group's operations, but for Nolato Industrial they are essential.
Nolato Industrial will continue to concentrate on the Nordic and Central European markets, but it will also be able to ofer cus-
tomers a certain amount of production in Nolato Industrial: five-year review China in 2014.
There will be a focus on continuing to develop professionalism, project management, productivity and customer-oriented technology.
The business area's growth will mainly take place organically, but the acquisition of companies with unique technological expertise or with a strong position in a particular customer segment may also be of interest.
Q Operating profit (EBITA) quarter
Q SEKm Change in sales
Q Nolato Jaycare's units in Portsmouth and Newcastle, which were acquired in 2012, achieved ISO 14001 certification.
Q Lövepac Converting's units in China achieved OHSAS 18001 certification. Nolato Beijing is already certified to this standard for its work environment.
Q During the year Nolato Beijing received The Best Practice Activity Safety Award 2013 from Beijing Development Area's work environment department.
Q For the fourth year running, Nolato was awarded the highest rating in Swedish business weekly Veckans Affärer's Sustainable Portfolio.
Q In insurance company Folksam's Corporate Responsibility Index Nolato came 25th out of 250 listed companies rated on the environment and 40th on human rights.
Q Nolato's whistleblowing system was introduced in all Group companies.
Q Our work on ensuring good conditions for the Group's employees in China continued through an active Employee Care Programme.
Î Our full sustainability report is available at www.nolato.com/sustainability
Nolato has a long tradition of responsible business, and one of our Basic Principles is that efcient and profitable business operations must be combined with ethics, responsibility and environmental awareness. It goes without saying that the company should be a good neighbour and a good global citizen, and that we should take responsibility for what we do and always apply sound business ethics.
Over time, the original innate approaches within Nolato – of basing our operations on professionalism, good organisation and responsibility – have been developed into a carefully thought-out strategy for sustainability. This strategy is based on conviction that a future-oriented, responsible approach is not only necessary from a responsibility perspective, but also creates opportunities and business benefits.
Q We manage sustainability issues in a methodical way and have integrated them into both long-term strategic planning and our day-to-day operations.
Q We have set Group sustainable development targets.
Q We have clear guidelines in the form of Nolato's Basic Principles, Code of Conduct and Environmental Policy.
Q All production units are certified to ISO 14001 standard.
Q We have been signatories to the UN Global Compact since 2008 and we report sustainability work in accordance with the Global Reporting Initiative (GRI). The Group is currently adapting to GRI's new G4 guidelines.
Q ISO 26000 standard for social responsibility provides a guideline for our sustainability work.
Requirements have changed and, although our sustainability work began many years ago, we constantly face new challenges.
We want to make further progress on energy consumption, climate impact, resource efciency, processes and products. We also plan to integrate sustainability issues even further into our strategic work and enhance management systems within social responsibility, the environment and working environment.
Recent years have seen both large and small steps in this field, in particular by structuring and formalising our sustainability work. Our overall targets for sustainable development have been a key driver in this
work. The views and expectations of society, employees and external stakeholders have also encouraged development.
Furthermore, we are seeing increased interest from customers, particularly in regard to switching to materials with reduced environmental impact.
The overall focus of our sustainability work is set out in Nolato's Basic Principles, Code of Conduct and policies. Operational responsibility for business activities is delegated to the Managing Director of each company. Group Management regularly follows up on the development of sustainability work. One representative on Nolato's Board has special responsibility for monitoring issues relating to sustainable development.
These activities are followed through dialogue with the companies' management and through internal and external audits. Along with the annual sustainability report we also carry out an in-depth analysis of compliance with legislation, achievement of targets and the development of performance and key performance indicators during the year.
The most significant environment-related aspects in the Group are issues concerning resources such as energy and material consumption, and waste.
Direct emissions from our production to air and water are limited. However, indirect emissions of carbon dioxide are a significant aspect of our environmental work. One of our environmental targets is therefore to reduce energy consumption by 10% over the next three years compared with the average for 2011–2012.
Individual production plants may have particular circumstances that result in a specific environmental issue being significant. One example of this is the plant in Beijing, where the city's poor air quality has received negative publicity. The trafc and coal-fired power stations contribute to these problems, but the authorities are also tightening up on requirements for reduced emissions from industrial plants. We are currently working on further reducing emissions of solvents from our paint line. We already use waterbased paints to some extent, but the most important measure will be in 2014 when we will replace old cleaning equipment with new, more efcient equipment.
Nolato is a global company and we often encounter views on business ethics and business methods that difer from what is stated in Nolato's Code of Conduct. Regardless of cultural diferences and expectations, we take a zero-tolerance approach to bribery, corruption and cartel formation.
We manage and follow up on the way Group units operate by informing them of our values and discussing these. We pay particular attention to ethical issues in our relationships with our partners. Standard business practice must be observed in each individual country, but if business methods do not comply with Nolato's Code of Conduct, we should refrain from doing business or take alternative relevant actions.
We carry out annual evaluations within this area using UN Global Compact checklists. No code of conduct breaches were identified in 2013.
To further strengthen our ability to quickly obtain information about breaches of the Group's Code of Conduct and other serious irregularities, we introduced a whistleblowing system in all units in 2013. The system enables members of staf to report any irregularities without risk of reprisal or pressure. No information about significant irregularities was received in 2013.
When working with suppliers and other external parties we require them to comply with Nolato's Code of Conduct and Environmental Policy. Around one hundred of Nolato's most important suppliers were reviewed during the year in terms of environmental awareness, working environment and social responsibility.
In collaboration with our customers, we take our responsibility for sustainability measures by proposing materials and processes to customers that have a lower environmental impact.
Customers also require us to comply with their own sustainability rules. In 2013 around two-thirds of Nolato's production units were reviewed by our customers and achieved good results. During the year our units in China were reviewed under the Sony Green Partner environmental requirements and achieved the approved standard.
The booklet The Nolato Spirit sets out the fundamental value and policy documents that convey the values, principles and attitudes that make up Nolato's core values.
Nolato is a signatory to the UN Global Compact which comprises 10 principles on the environment, human rights, labour conditions and the combatting of corruption.
We report Nolato's sustainability work in accordance with Global Reporting Initiative (GRI) guidelines. This reporting includes indicators on environmental responsibility, social responsibility, ethics and financial responsibility.
All Group units are to be certified in accordance with ISO 14001. This is an international standard for environmental management, which includes regular environmental audits and a commitment to continuous improvement.
OHSAS 18001 is an international standard for working environment and safety management systems. It applies the same basic principles as ISO 14001 but focuses on risks in the work environment. Nolato's Chinese units are certified to this standard.
The international standard on social responsibility, ISO 26000, provides a guideline for our sustainability work.
Î The Nolato Spirit booklet can be downloaded at www.nolato.com/sustainability
0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 2009 2010 2011 2012 2013 Q Average number of employees Average Q Employees by business area China 7,517 Hungary 506 US etc. 249 UK 271 Sweden 814 Average Q Employees by country Nolato Telecom 7,611 Nolato Medical 988 Nolato Industrial 753
Openness and dialogue with stakeholders are an important element in our sustainable development strategy. The Group's sustainability report therefore details our strategy, dialogue with stakeholders and a number of key performance indicators in accordance with GRI. The sustainability report is available on our website at www.nolato.com/sustainability.
Attracting committed and skilled employees is an important factor in Nolato's ability to develop and remain a successful company. We work on management issues, employee training, diversity and on issues relating to health and safety.
The average number of employees at Nolato in 2013 was 9,357 (8,421). The increase in the number of employees is mainly as a result of Nolato Telecom's operations in China and is due to higher volumes.
All units are wholly owned by Nolato and comply fully with the guidelines in Nolato's Basic Principles, Code of Conduct and Environmental Policy. The practical work relating to personnel issues in the Group is decentralised. This means each individual Group company is responsible for managing personnel issues in a way that complies with both Group guidelines and legislation and the culture of the country in question.
Pursuant to Nolato's Code of Conduct, all employees have the right to be represented by trade unions, and to collective agreements. In Sweden and China, the majority of employees are covered by collective agreements. At the units in other countries, there are no unions or collective agreements, and this reflects a normal situation in these countries.
A large proportion of Nolato's employees in Beijing are temporarily employed through stafng agencies, because of short product cycles and significant fluctuations in production volumes. These employees are managed in accordance with the same principles that apply to permanent employees.
Special measures to attract, retain and develop both permanent and temporary employees in Beijing have been in place for about a year. These activities come under the term Employee Care Programme and include:
Q A focus on health and safety through training, information and competitions.
Q An exercise break twice every shift. Q Opportunity to undertake training in English and Japanese.
Q Newsletters and improved internal information.
Q Employee questionnaires and a forum in which employees can discuss issues with the company's managing director. The views expressed through these channels have resulted in specific measures such as a new canteen, a wide range of meal options and two free meals a day.
Q Activities for more stimulating leisure time.
Our operations involve extensive contact with various stakeholders in the countries in which we operate. We believe it is important to have a close link with local communities and we have frequent contact with universities and schools. It is also common for our local units to support activities within areas such as sport and culture.
In Hungary the employment of staf with diferent types of disability was received very positively by both the local community and authorities. Employment has provided people with visual or hearing impairments with a better quality of life, and they are making an excellent contribution to the company's work.
In China, management and staf have been involved in a long-term project to provide financial and practical support to a school in a deprived rural area outside Beijing.
Nolato has had Group-wide long-term sustainability development targets in place since 2010. The following page provides details on some of these targets and the results achieved. Further information about these targets is available in our separate sustainability report.
We understand that the journey towards completely sustainable development will be a long and time-consuming one, and that there are also a number of circumstances over which we have no control. However, within those areas that we can influence, our sustainability work will continue unabated in accordance with the Group's overall strategy. In 2014, we will work with measures including the following:
Q Energy efciency and reduced climate impact.
Q Improved resource efciency, including through reduced waste.
Q Making products more environmentally friendly through the use of new materials and production processes.
Q Activities in relation to sustainable
development in the Group's supplier chains.
Q Continuing to train our employees on issues relating to people, the environment and ethics.
| Environmental responsibility | 2010 | 2011 | 2012 | 2013 | How we performed |
|---|---|---|---|---|---|
| Reduced energy consumption in relation to sales. For the period 2014 – 2016 the target is a 10% reduction compared with the average for 2011– 2012, measured as GWh/net sales. |
See chart below. | X Production units have implemented numerous energy-saving measures and energy consumption decreased in 2013 both over all and measured in GWh/net sales. |
|||
| Reduced greenhouse gas emissions in relation to Group sales. For the period 2014 – 2016 the target is a 10% reduction compared with the average for 2011– 2012. |
See chart below. | X Energy efficiency measures are cutting emissions at many plants. Increased production, and consequently higher purchas es of electricity generated from fossil fuels in China and Hungary, has resulted in higher indirect emissions overall, although these have fallen measured in tons/net sales. |
|||
| Reduced weight of waste in relation to net sales. | See chart below. | X Implemented measures have reduced the weight of waste and increased recycling. Overall, the weight of waste has risen over a five-year period owing to increased production. |
|||
| All plants are to be certified according to ISO 14001. (% of total number of certified plants) |
89 | 85 | 86 | 100 | S Nolato Jaycare, which was acquired in 2012, was certified in 2013, which means that all units are now certified. |
| Social responsibility | |||||
| No infringements of human rights, discrimination or forced labour. (Number of reported cases) |
0 | 0 | 0 | 0 | S Information and training in connection with the Nolato Spirit have been provided at most units. New employees are the main target group. |
| Minimise occupational accidents and work-related illnesses. Introduce systems for the reporting of incidents. (Number of cases of >1 day absence and cases per employee) |
44 0.006 |
28 0.005 |
64 0.007 |
34 0.004 |
X The number of cases per employee has fallen, but efforts to reduce the total number of accidents is continuing. Systems for the reporting of incidents are now in place at all units. |
| Business partners and other stakeholders | |||||
| There shall be no cases of bribery, corruption or cartel formation. Active information shall continue to be provided to employees. (Number of reported cases) |
0 | 0 | 0 | 0 | S A whistleblowing system was introduced in all units in 2013. Employees are informed of Nolato's regulations when first em ployed and when provided with various forms of personnel infor mation. |
| Improved evaluation of suppliers' sustainability work. (% of number of plants providing information about Nolato's values, setting require ments and carrying out evaluations of suppliers' environmental/social responsibility) |
84 | 90 | 90 | >90 | X In China and the UK, around 30 employees have been trained in auditing methods. Over 100 suppliers were evaluated with regard to the environment, work environment and social respon sibility. |
S Goal achieved. X Positive trend, but work is still required to achieve target. T Negative trend.
Î All Group targets are reported on in our detailed sustainability report (see www.nolato.com/sustainability).
Assembly of inlet manifold for Volvo Cars' new Drive-E series of engines at Nolato Gota in Götene, Sweden.
34
Q Total shareholder return and share price performance 2009 – 2013
2009 2010 2011 2012 2013*
Total shareholder return: 5 years 524.7% (yearly average 44.3%) 3 years 116.3% (yearly average 29.3%) 2 years 227.3% (yearly average 80.9%)
Nolato AB was listed on the Stockholm Stock Exchange in 1984, and its B shares are now listed on NASDAQ OMX Stockholm. Nolato is a Mid Cap company in the Industrials sector.
Shares were also traded on the Burgundy and Chi-X BXTR exchanges in 2013.
The share symbol is STO:NOLA B and the ISIN code is se0000109811.
Nolato's B shares rose over the course of the year by 87% (55), outperforming the Stockholm Stock Exchange (OMXS) average by 63 percentage points. The shares were listed at the end of 2013 at sek 146.50 (78.50).
The highest closing price on the NASDAQ OMX Stockholm during 2013 was sek 146.50 (30 December) and the lowest closing price was sek 78.50 (2 January). The highest price paid during the year was sek 148.00 (30 December), and the lowest was sek 78.50 (2 January).
The market value of the shares at 31 December 2013 was sek 3,854 million (2,065).
In 2013 14.5 million (4.5) Nolato shares were traded, of which 13.9 million on the NASDAQ OMX Stockholm Exchange, 0.1 million (0.1) on Burgundy and 0.5 (0.0) on Chi-X BXTR. The turnover rate, i.e. the degree of liquidity, was 62% (19).
The number of shareholders increased by 12% during the year, totalling 8,373 (7,445) at 31 December.
The share capital of Nolato AB totals sek 132 million, divided into 26,307,408 shares.
Of these, 2,759,400 are A shares and 23,548,008 are B shares. Each A share entitles the holder to ten votes, while a B share entitles the holder to one vote. All shares have equal rights to the assets and earnings of the company.
Nolato does not have any current financial instrument programmes which involve any dilution in the number of shares.
The Board's dividend proposal shall take into consideration Nolato's long-term development potential, financial position and investment needs. The intention is to propose a dividend each year which corresponds on average to at least 35 percent of profit after tax.
The Board of Directors proposes an ordinary dividend for 2013 of sek 4.00 (3.50) per share, together with an extra dividend of sek 4.00 (2.50), totalling sek 8.00 per share (6.00), corresponding to sek 210 million (158). The pay-out ratio for the ordinary dividend, i.e. the dividend in relation to net income, is 34% (46) and 67% (78) in total.
The dividend yield is 5.5% in relation to the share price on 31 December 2013. Over the last five years, the average yield from Nolato's shares has been 7.1%.
There are no restrictions on the transferability of the shares as a result of legal provisions or the company's Articles of Association.
Over the course of the year, Nolato's shares were monitored and analysed by analysts including the following:
Nolato's management works continuously to develop and improve financial information, in order to provide the market with good conditions for determining the value of the company as fairly as possible. This includes participating actively when dealing with analysts, shareholders and the media.
Current information about Nolato's shares and largest shareholders can be found on our website, www.nolato.com.
On the website you will also find all interim reports, annual reports and press releases since 1998.
| Shareholder | % of capital | Change* | % of votes | Change* |
|---|---|---|---|---|
| Jorlén family | 9.73 | $-0.3$ $\bullet$ | 24.45 | $-0.2$ $\bullet$ |
| Boström family | 9.45 | $0.0\Rightarrow$ | 19.56 | $0.0\Rightarrow$ |
| Svolder | 4.68 | $-1.0$ $0$ | 2.41 | $-0.5$ $\bullet$ |
| Odin fonder | 4.40 | $1.8\Omega$ | 2.26 | $0.9\Omega$ |
| Skandia fonder | 4.21 | $-0.1$ $\Rightarrow$ | 2.16 | $-0.1$ $\Rightarrow$ |
| JPM Chase | 3.50 | $\Omega$ | 1.83 | — 0 |
| Paulsson family | 3.15 | $-9.0$ $\bullet$ | 16.04 | $-4.6$ $0$ |
| DnB - Carlson fonder | 2.64 | $-0.1$ $\Rightarrow$ | 1.36 | $-0.0$ $\Rightarrow$ |
| MPCS EQ SEC Client Seq | 2.50 | $2.5\Omega$ | 1.29 | $1.3\Omega$ |
| Handelsbanken fonder | 2.28 | $-0.2$ 0 | 1.17 | $-0.1$ $\Rightarrow$ |
| State Street Bank & Trust | 2.27 | $2.3 \Omega$ | 1.17 | $1.2 \Omega$ |
| Avanza pension | 1.76 | $0.3 \Omega$ | 0.91 | $0.2 \Omega$ |
| Swedbank Robur fonder | 1.54 | $1.2\Omega$ | 0.79 | $0.6\Omega$ |
| SEB Investment Management | 1.05 | 1.1 $\Omega$ | 0.54 | $0.5\Omega$ |
| Lannebo fonder | 0.99 | $-9.7$ $\bullet$ | 0.51 | $-5.0$ $\bullet$ |
| Total for 15 largest shareholders | 54.15 | 76.45 | ||
| Other shareholders | 45.85 | 23.55 |
* Change (percentage points) in shareholdings compared with 31 December 2012
| 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|
| Net earnings per share, SEK 1 | 11.94 | 7.68 | 5.02 | 7.11 | 4.68 |
| Shareholders' equity per share, SEK 2 | 51 | 44 | 44 | 45 | 41 |
| Cash flow per share, SEK, excl. acquisitions and disposals | 13.76 | 12.05 | 4.26 | 8.74 | 5.28 |
| Share price at 31 December, SEK | 146.50 | 78.50 | 50.75 | 83.00 | 59.00 |
| Price/earnings ratio, times 3 | 12 | 10 | 10 | 12 | 13 |
| Turnover rate, % | 62 | 19 | 34 | 47 | 34 |
| Dividend (2013 proposal), SEK | 8.00 | 6.00 | 5.00 | 6.00 | 3.00 |
| Yield (2013 proposal), $% ^{4}$ | 5.5 | 7.6 | 9.9 | 7.2 | 5.1 |
| Dividend as percentage of earnings per share (2013 prop.) | 67 | 78 | 100 | 84 | 64 |
| Average number of shares, thousand | 26.307 | 26.307 | 26.307 | 26.307 | 26.307 |
| Price/equity ratio per share, times | 2.9 | 1.7 | 1.2 | 1.8 | 1.4 |
| Market capitalisation 31 December, SEK million | 3.854 | 2.065 | 1.335 | 2.183 | 1.552 |
Defnitions 1 Profit after tax divided by the average number of shares.
2 Shareholders' equity divided by the number of shares.
3 Quoted share price on 31 December divided by net earnings per share.
4 Dividend for the year divided by the market price quoted on 31 December.
The following overall policy documents for the Group have been established by the Board of Directors:
These define the platform of common values for all Group operations.
This sets out the ethical and compassionate principles that Nolato employees are obliged to follow.
This outlines the underlying focus of the Group's quality work.
This governs the Group's environmental activities.
This governs how financial risks should be dealt with within the Group.
This governs the Group's IT security structure.
This governs the dissemination of information by the Group, including in relation to listing requirements.
Supplements insider trading legislation rules with directives on notification obligations and trading in Nolato's shares.
This governs the Group's procedures whereby employees can report serious misconduct.
Nolato is a Swedish limited company. Its corporate governance is based on Swedish legislation, primarily the Swedish Companies Act, the regulations set out by NASDAQ OMX Nordic, the Swedish Code of Corporate Governance and the rules and recommendations issued by relevant organisations.
Nolato's formal corporate governance report is available to read on our website at www.nolato.com/corpgov.
Shareholders exercise their power of ownership at General Meetings. Nolato's A shares entitle holders to 10 votes, and the B shares to 1 vote. Resolutions at General Meetings are normally passed by simple majority. On certain issues, the Swedish Companies Act stipulates a specific minimum percentage of the shareholders present and/or a larger majority.
The meeting of the company at which the Board presents the annual accounts and the audit report is called the Annual General Meeting (AGM) and is normally held by Nolato at the end of April. At the AGM, matters are dealt with relating to subjects such as dividends, discharging the members of the Board and the President and CEO from liability, and electing the Board members, the Chairman of the Board and auditors. The AGM also determines the fees payable to the Board and the auditors, guidelines for the remuneration of senior executives and the principles for appointing the Nomination Committee for the next AGM.
Shareholders have the opportunity to ask questions about the company and its performance at the AGM. Shareholders also have opportunities to request that a particular issue be dealt with by submitting such a request in writing to the Board.
The Swedish Code of Corporate Governance is based on the principle of comply or explain. This means that companies which apply the Code may deviate from specific
rules, but must then provide explanations and reasons for each individual deviation.
Nolato deviates from points 2.4 and 7.3 of the Code.
Point 2.4 states that the majority of the Nomination Committee should consist of non-Board members, that no more than one of these Board members may be dependent in relation to the company's major shareholders, and that the Chairman of the Nomination Committee should not be the Chairman of the Board or another Board member. Nolato's largest shareholders are of the opinion that the company's ownership structure, with three families which hold around 60 percent of the votes, is best represented within the Nomination Committee by these shareholders together with other major shareholders. Since the representatives of these families have such a large shareholding, they have deemed it to be both natural and necessary that they should also be involved and exercise their shareholders' interests through representation on both the company's Nomination Committee and the Board.
Point 7.3 states that the Audit Committee should consist of at least three Board members. The Board has decided that, in view of the composition and size of Nolato's Board, the Audit Committee would be best represented by two members.
At the 2013 AGM, authorised public accountant Alf Svensson, KPMG, was elected as auditor of Nolato and authorised public accountant Camilla Alm Andersson, KPMG, was elected as deputy auditor, both for the period until the next AGM.
Auditor: Alf Svensson, born 1949. Authorised public accountant, KPMG. Auditor of Nolato since 2008. Elected auditor of companies including Bioinvent International, Diaverum, Lindéngruppen, Midsona, Nibe and Peab.
Camilla Alm Andersson, born 1965. Authorised public accountant, KPMG. Deputy auditor of Nolato since 2008. Other major clients: Wilh. Becker, Höganäs, Pergo and Strålfors.
Reporting and control occurs by means of the Board and the Audit Committee analysing and assessing risks and control environments, and overseeing the quality of financial reporting and Nolato's internal control systems. This takes place through, for example, issuing instructions to the President and CEO and agreeing on requirements for the content of the reports on financial conditions given to the Board on an ongoing basis. The Board reads monthly reports and forecasts and approves interim reports and the Annual Report.
| Name | Fredrik Arp | Sven Boström-Svensson | Henrik Jorlén | Anna Malm Bernsten | Erik Paulsson |
|---|---|---|---|---|---|
| Year elected | 2009 (member also 1998 – 1999) |
2013 | 1974 | 2010 | 2003 |
| Position | Chairman of the Board and Chairman of the Remuneration Com mittee. |
Board member | Board member and member of the Remuneration and Audit Committees. |
Board member | Board member |
| Born | 1953 | 1983 | 1948 | 1961 | 1942 |
| Education | Bachelor of Science (econ) and Ec. Doctor h.c. |
Bachelor in Chemistry. | Commercial school | Master of Engineering | Elementary school |
| Other assignments |
Chairman of the Board of Hilding Anders, Mediplast and Parques Reunidas. Board member of Technogym. |
— | — | Board member of Bird step, Cellavision, Fagerhult, Matrisen, Medivir, Neurovive and Oatly. |
Chairman of the Board of Backahill, Brinova Fastigheter, Fabege, SkiStar and Wihlborgs Fastigheter. Board mem ber of Catena. |
| Background | CEO of Volvo Cars, Trelleborg, PLM. |
— | Management positions within the Nolato Group. |
Management positions within sales and market ing at international com panies, including Assa Abloy, GE Healthcare Life Science and Pharmacia & Upjohn. |
Manager and entrepreneur within the construction and property industry since 1959. One of the founders of Peab and SkiStar, and active owner of a number of listed property compa nies. |
| Attendance | 5 of 5 meetings | 3 of 3 meetings (elected at the AGM) |
5 of 5 meetings | 5 of 5 meetings | 2 of 5 meetings |
| Remunera tion 1 (SEK) |
405,000 | 155,000 | 190,000 | 155,000 | 155,000 |
| Share holding 2 |
3,000 B (3,000 B) |
255,870 B (255,870 B) |
294,000 A + 47,950 B (294,000 A + 47,950 B) |
1,000 B (1,000 B) |
609,200 A + 10,050 B (609,200 A + 2,372,575 B) |
| Dependence | Independent of the com pany and major share holders. |
Independent of the com pany, but not of major shareholders. |
Independent of the com pany, but not of major shareholders. |
Independent of the com pany and major share holders. |
Independent of the com pany, but not of major shareholders. |
1 For more information about remuneration, see note 10 on page 64.
2 Shareholding in Nolato at 31 December 2013 (31 December 2012) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
| Name | Hans Porat | Lars-Åke Rydh | Ingegerd Andersson | Björn Jacobsson | Eva Norrman |
|---|---|---|---|---|---|
| Year elected | 2008 | 2005 | 2013 Deputy 2004 – 2013 |
2000 | 2006 Deputy 1997–2006 |
| Position | Board member President and CEO of Nolato AB. |
Board member and Chairman of the Audit Committee. |
Employee representative, LO. |
Employee representative, LO. |
Employee representative, PTK. |
| Born | 1955 | 1953 | 1951 | 1971 | 1951 |
| Education | Master of Science (metallurgy) |
Master of Engineering | Upper secondary school | Upper secondary school | Nurse |
| Other assignments |
— | Chairman of OEM International, Nefab, Plastprint, SanSac and Schuchardt Maskin. Board member of HL Display and Olja ek.för. |
— | — | — |
| Background | Management positions at ABB, Vice President of Trelleborg, President of Gadelius Japan. |
President and CEO of Nefab. |
Employed at Nolato Plastteknik. |
Employed at Nolato Gota. |
Employed at Nolato Plastteknik. |
| Attendance | 5 of 5 meetings | 5 of 5 meetings | 4 of 5 meetings 3) | 5 of 5 meetings | 2 of 5 meetings 3) |
| Remunera tion 1 (SEK) |
0 | 210,000 | 0 | 0 | 0 |
| Share holding 2 |
20,000 B (33,898 B) |
2,000 B (2,000 B) |
0 (0) |
0 (0) |
0 (0) |
| Dependence | Not independent of the company but independent of major shareholders. |
Independent of the com pany and major share holders. |
— | — | — |
Deputy employee representatives are Arif Mislimi (LO) and Håkan Svensson (PTK).
1 For more information about remuneration, see note 10 on page 64.
2 Shareholding in Nolato at 31 December 2013 (31 December 2012) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
3 In the absence of the ordinary employee member the deputy member participated.
| Name | Hans Porat | Per-Ola Holmström | Christer Wahlquist | Jörgen Karlsson | Johan Arvidsson |
|---|---|---|---|---|---|
| Employed | 2008 | 1995 | 1996 | 1995 | 1994 |
| Position | President and CEO since 2008 |
Executive Vice President and CFO since 1995 |
President of Nolato Medical since 2005 |
President of Nolato Telecom since 2009 and MD of Nolato Beijing since 2007 |
President of Nolato Industrial since 2012 and MD of Nolato Hungary since 2008 |
| Born | 1955 | 1964 | 1971 | 1965 | 1969 |
| Education | Master of Science (metallurgy) |
Bachelor of Science (econ) |
Master of Science MBA |
Polymer engineering | Master of Science |
| Background | Management positions at ABB, Vice President of Trelleborg, President of Gadelius Japan. |
Authorised public accountant |
Marketing manager MD in Group companies |
Marketing manager MD in Group companies |
MD in Group companies |
| Share holding 1 |
20,000 B (33,898 B) |
20,154 B (20,154 B) |
15,712 B (20,712 B) |
0 (0) |
5,000 B (5,000 B) |
1 Shareholding in Nolato at 31 December 2013 (31 December 2012) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
| Operations in 2013 and comments on the financial statements 44 | |
|---|---|
| Corporate responsibility 45 | |
| Operational risks47 | |
| Management systems47 | |
| Nolato's shares 47 | |
| Corporate governance47 | |
| Remuneration guidelines47 | |
| Parent Company 47 | |
| Proposed appropriation of profits47 | |
| Events after the end of the financial year47 | |
| Future performance 47 | |
| Consolidated income statement and comprehensive income50 | |
|---|---|
| Comments on the consolidated income statement 51 | |
| Consolidated balance sheet52 | |
| Comments on the consolidated balance sheet53 | |
| Consolidated cash flow statement 54 | |
| Comments on the consolidated cash flow statement 55 |
| Note 1 General information56 | |
|---|---|
| Note 2 Accounting and valuation policies 56 | |
| Note 3 Critical accounting estimates and judgements59 | |
| Note 4 Financial risk management59 | |
| Note 5 Operating segments 61 | |
| Note 6 Research and development62 | |
| Note 7 Other operating income 62 | |
| Note 8 Information on remuneration to auditors62 | |
| Note 9 Other operating expenses 62 | |
| Note 10 Personnel63 | |
| Note 11 Financial income and expenses65 | |
| Note 12 Tax65 | |
| Note 13 Depreciation, amortisation and impairment67 | |
| Note 14 Expenses allocated by type of cost 67 | |
| Note 15 Intangible non-current assets 67 | |
| Note 16 Property, plant and equipment68 | |
| Note 17 Financial assets69 | |
| Note 18 Inventories 69 | |
| Note 19 Other current assets 69 | |
| Note 20 Share capital69 | |
| Note 21 Other reserves70 | |
| Note 22 Financial liabilities 70 | |
| Note 23 Provisions for pensions and similar obligations71 | |
| Note 24 Other provisions 71 |
| Note 25 Other current liabilities71 | |
|---|---|
| Note 26 Pledged assets 72 | |
| Note 27 Contingent liabilities 72 | |
| Note 28 Related parties 72 | |
| Note 29 Cash flow72 | |
| Note 30 Sale of subsidiary 72 | |
| Note 31 Change in pension provisions72 | |
| Parent Company income statement and comprehensive income73 |
|---|
| Parent Company balance sheet73 |
| Parent Company cash flow statement74 |
| Note 1 Accounting and valuation policies 75 | |
|---|---|
| Note 2 Purchasing and sales between Parent Company and subsidiaries 75 | |
| Note 3 Other operating income 75 | |
| Note 4 Information on remuneration to auditors75 | |
| Note 5 Other operating expenses 75 | |
| Note 6 Personnel76 | |
| Note 7 Depreciation, amortisation and impairment76 | |
| Note 8 Profit from participations in Group companies 76 | |
| Note 9 Financial income 76 | |
| Note 10 Financial expenses 76 | |
| Note 11 Appropriations76 | |
| Note 12 Tax77 | |
| Note 13 Expenses allocated by type of cost 77 | |
| Note 14 Participations in Group companies 77 | |
| Note 15 Share capital78 | |
| Note 16 Borrowings 78 | |
| Note 17 Receivables and liabilities, Group companies78 | |
| Note 18 Other provisions 78 | |
| Note 19 Accrued expenses and deferred income 78 | |
| Note 20 Untaxed reserves78 | |
| Note 21 Contingent liabilities 78 | |
| Note 22 Related parties 78 | |
| Note 23 Cash flow78 | |
| Signatures and auditor's report | |
| Attestation and signatures of the Board79 | |
| Auditor's report 80 | |
| Defnitions and terms | |
| Definitions 81 | |
| Specialist terms 81 | |
| Five-year review | |
| Five-year review 82 |
* The content of pages 44 – 78 has been audited.
This document is a translation from Swedish. In the event of any differences between this version and the Swedish original, the Swedish original shall govern.
Q Adjusted earnings per share
The Board of Directors and the President and CEO hereby publish the Annual Report and consolidated accounts for Nolato AB (publ), company number 556080-4592, for the 2013 financial year.
Nolato is a Swedish publicly listed group with about 9,350 employees in wholly owned subsidiaries in Europe, Asia and North America. The companies in the Group develop and manufacture products in polymer materials such as plastic, silicone and TPE for leading customers within medical technology, pharmaceuticals, telecom, automotive and other selected industrial sectors.
The business model is based on close, long-term and innovative collaboration with customers. Nolato endeavours to create added value for both customers and shareholders through leading technology, wideranging capabilities and highly efcient production.
Nolato's shares are listed on the NAS-DAQ OMX Nordic Exchange in the Stockholm Mid Cap segment, where they are included in the Industrials sector.
Nolato's operational activities are conducted in three customer-focused business areas:
Q Nolato Medical develops and manufactures polymer products for customers working in medical technology and pharmaceuticals, as well as plastic pharmaceuticals packaging.
Q Nolato Telecom develops and manufactures components and subsystems for mobile phones, and products to achieve electromagnetic compatibility (EMC).
Q Nolato Industrial develops and manufactures polymer products for customers in the automotive industry, hygiene, packaging, gardening/forestry, domestic appliances and other selected industrial segments.
The activities of these three business areas are based on the same core elements of corporate responsibility, wide-ranging technical capabilities and advanced production technology. These business areas all enjoy good opportunities to create their own optimal conditions to succeed as a result of their specialisation in and adaptation to their respective customer sectors.
As all three business areas are afected diferently by business cycle fluctuations, events and market patterns, the Group benefits from a healthy balance in its operations. Nolato Medical operates on a market with long product life cycles and low business cycle dependency, while Nolato Telecom is the opposite, with short product life spans and high project volatility. And between these two we find Nolato Industrial.
The operations of these business areas are presented in more detail on pages 16 –29.
The 2013 financial year resulted in the highest sales and best operating profit since Nolato was founded in 1938.
Q Group sales amounted to SEK 4,522 million (3,874), an increase of 17%. Adjusted for currency, acquisitions and disposals, sales rose by 17%.
Consolidated operating profit (EBITA) amounted to SEK 427 million (303), giving an EBITA margin of 9.4% (7.8).
| Sales | Operating profit (EBITA) | EBITA margin (%) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | ||
| Nolato Medical | 1,274 | 1,159 | 917 | 165 | 133 | 110 | 13.0 | 11.5 | 12.0 | |
| Nolato Telecom | 2,079 | 1,548 | 935 | 166 | 96 | 11 | 8.0 | 6.2 | 1.2 | |
| Nolato Industrial | 1,170 | 1,170 | 1,129 | 119 | 105 | 102 | 10.2 | 9.0 | 9.0 | |
| Intra-Group adj., Parent Co. | – 1 | – 3 | – 4 | – 23 | – 31 | – 24 | — | — | — | |
| Group total | 4,522 | 3,874 | 2,977 | 427 | 303 | 199 | 9.4 | 7.8 | 6.7 |
314 million (202). Earnings per share, basic and diluted, were SEK 11.94 (7.68).
Q Nolato Medical saw sales rise by 10% to SEK 1,274 million (1,159). Adjusted for currency and acquisitions, sales rose by 7%.
Operating profit (EBITA) rose to SEK 165 million (133) and the EBITA margin was 13.0% (11.5). The margin was positively afected by high productivity and a favourable product mix. The extension of the Chinese and Hungarian factories is proceeding according to plan.
Q Nolato Telecom's sales rose by 34% to SEK 2,079 million (1,548). Adjusted for currency, sales increased by 37%. Volumes were very high, particularly in the first half of the year, driven by very strong demand for a number of mobile phone models on the consumer market.
Operating profit (EBITA) increased to SEK 166 million (96), and the EBITA margin rose to 8.0% (6.2). The margin was positively afected by high capacity utilisation.
Q Nolato Industrial's sales were unchanged at SEK 1,170 million (1,170). Adjusted for currency and disposals, sales rose by 2%. Volumes in the automotive segment were lower, especially in the first half of the year, while certain other segments such as hygiene made a positive contribution.
Operating profit (EBITA) rose to SEK 119 million (105) and the EBITA margin improved to 10.2% (9.0). A strong focus on continuous improvement and profitability, and a favourable product mix, had a positive efect on the margin.
In July the decision was taken to expand Nolato Medical's production plant in Beijing, China, by an additional 2,200 m2, of which 800 m2 will consist of the highest standard of clean room, meeting ISO 14644- 1:1999 class 8 requirements. The expansion is being undertaken to enable Nolato Medical to secure resources for future growth in China.
It was decided in October to extend Nolato's Hungarian production unit by a further 3,700 m2. This work is being carried out to create room for expansion and provide even better conditions for efcient production. The unit undertakes production for both
Consolidated profit after tax rose to SEK Cash flow after investments Nolato Medical and Nolato Industrial customers. The extended area is expected to be brought into use in the latter part of 2014.
No acquisitions were made by the Group in 2013. The acquisition focus remains unchanged, however, and the Group's strategic planning includes acquisitions primarily within medical technology in Western Europe and North America. Acquisitions are also planned within the field of EMC.
Group company Nolato Sunne was divested on 1 November 2013. The operations of this company are wholly focused on rubber products and was the only company in the Group with this particular focus. The disposal was part of Nolato's focus on developing and manufacturing products in plastic, silicone and TPE.
Nolato Sunne had 95 employees in Sunne, Sweden with sales of around SEK 130 million. The sale price was SEK 22.5 million and the transaction resulted in a minor capital loss in the fourth quarter. Further information can be found in Note 30 on page 72.
Nolato has a long tradition of responsible business, and one of our Basic Principles is that efcient and profitable business operations must be combined with ethics, responsibility and environmental awareness. It goes without saying that the company should be a good neighbour and a good global citizen, and that we should take responsibility for what we do and always apply sound business ethics.
Over time, the original innate approaches within Nolato – of basing our operations on professionalism, good organisation and responsibility – have been developed into a carefully thought-out strategy for sustainability. This strategy is based on the conviction that a future-oriented, responsible approach is not only necessary from a responsibility perspective, but also creates opportunities and business benefits.
Q We manage sustainability issues in a methodical way and have integrated them into both long-term strategic planning and our day-to-day operations.
Q We have set Group sustainable development targets. (See page 33.)
Q We have clear guidelines in the form of
Q
QAverage no. employees
Nolato's Basic Principles, Code of Conduct and Environmental Policy.
Q All production units are certified to ISO 14001 standard.
Q We have been signatories to the UN Global Compact since 2008 and we report sustainability work in accordance with the Global Reporting Initiative (GRI). The Group is currently adapting to GRI's new G4 guidelines.
Q ISO 26000 standard for social responsibility provides a guideline for our sustainability work.
The average number of employees at Nolato in 2013 was 9,357 (8,421). The increase in the number of employees is mainly attributable to Nolato Telecom's operations in China and is due to higher volumes.
57 percent (62) of the Group's total employees were women.
All units are wholly owned by Nolato and comply fully with the guidelines in Nolato's Basic Principles and Code of Conduct. The practical work relating to personnel issues in the Group is decentralised. This means each individual Group company is responsible for managing personnel issues in a way that complies with both Group guidelines and legislation and the culture of the country in question.
All Nolato employees have the right to be represented by trade unions, and to collective agreements. In Sweden and China, the majority of employees are covered by collective agreements. At the units in other countries, there are no unions or collective agreements, and this reflects a normal situation in these countries.
In Beijing, China, where the Group has its largest concentration of employees with around 7,500 staf, an Employee Care Programme has been introduced. The aim of this is to ensure good conditions for employees both at work and in their free time.
To further strengthen our ability to quickly obtain information about breaches of the Group's Code of Conduct and other serious irregularities, we introduced a whistleblowing system in all units in 2013. This enables members of staf to alert the company to any irregularities without risk of reprisal or pressure. No significant cases were reported in 2013.
The total figure for the average number of employees includes approximately 6,000 staf in China who are employed through stafng agencies. This form of employment has mainly been chosen to make it easier for the business to recruit a work force for mobile phone projects and consequently avoid creating its own large recruitment organisation. In accordance with the Group's policy, these employees are managed according to the same principles as Nolato's other employees in China with regard to the setting of wages, benefits, working hours, work environment, social responsibility etc.
Nolato has zero tolerance of bribery, corruption and cartel formation. We therefore work continuously on managing and monitoring the methods used by the units within the Group to conduct business based on Nolato's Basic Principles and Code of Conduct.
We pay particular attention to ethical issues in our relationships with our partners. Standard business practice must be observed in each individual country, but if business practice does not comply with our ethical rules we must refrain from doing business or take alternative actions.
We carry out annual evaluations within this area using UN Global Compact checklists. No code of conduct breaches were identified in 2013.
The guidelines in Nolato's Code of Conduct also apply to suppliers and other Nolato business partners. Fulfilment of these guidelines is checked by means of periodic assessments.
The Group's operations involve the use of energy, raw materials and chemicals, emissions to air and water, and waste. All units are certified in accordance with the environmental management system ISO 14001.
Systematic environmental work is carried out in the Group to reduce environmental impact and improve resource efciency. This work is described on pages 30 –33 and is reported in the separate sustainability report at www.nolato.com/sustainability.
All production units in Sweden are obliged to provide notifications pursuant to the Swedish Environmental Code. The Group's units outside Sweden require permits or are covered by similar requirements in accordance with environmental legislation in the country in question. Sales from operations with permit requirements and notification obligations make up all of the Group sales.
No renewal of environmental permits or update of notification cases are planned for 2014.
In most cases, regular reports are submitted to the environmental authorities, and the supervisory authorities carry out inspections. No breaches of environmental legislation were registered in 2013.
An important aspect of Nolato's strategic planning is identifying potential operational risks, assessing their likelihood and any consequences and minimising the negative impact that such risks could have on the Group.
Financial risks are managed in accordance with a financial policy established annually by the Board of Directors.
An analysis of potential risks in Nolato's operations and how we manage these risks can be found on pages 48–49. Further information on Nolato's assessment of risks is provided on page 14.
Nolato's production units are all certified in accordance with the ISO 9001 quality management system and the ISO 14001 environmental management system.
A number of units are also certified in accordance with ISO standards for the automotive industry (ISO 16949), medical technology (ISO 13585) or pharmaceutical packaging (ISO 15378).
A number of units have integrated the various management systems in order to cover a broader operational area.
An occupational environmental management system (OHSAS 18001) is in place at Nolato's Chinese units.
Social responsibility standard (ISO26000) provides a guideline for Nolato's corporate responsibility.
Nolato was registered on the Stockholm Stock Exchange OTC list in 1984. The company's B shares are now listed on the NAS-DAQ OMX Nordic Exchange in the Stockholm Mid Cap segment, where they are included in the Industrials sector. The Company's A shares are not listed.
The share capital totals SEK 132 million, divided into 26,307,408 shares. Of these, 2,759,400 are A shares and 23,548,008 are B shares. The A shares entitle holders to ten votes and the B shares to one vote. All shares have equal rights to the assets and earnings of the company.
At the end of 2013, Nolato had 8,373 (7,445) shareholders. The five largest shareholders are the Jorlén family with 9.7%, the Boström family with 9.4%, Svolder with 4.7%, Odin funds with 4.4% and Skandia funds with 4.2% of the capital.
Only one individual shareholder, Backahill AB, with 11.9% of the votes, represents at least one-tenth of the number of votes for all shares in the company.
Nolato does not own any of its own shares. There are no restrictions as a result of legal provisions or the company's Articles of Association that afect the transferability of the shares.
Further information about Nolato's shares can be found on pages 36 – 37. Up-todate information about the share price and shareholders is always available at www. nolato.com.
Basic information about the company's governance, Board of Directors and management can be found on pages 38 – 42. Nolato's formal corporate governance report is available at www.nolato.com/corpgov.
The guidelines for the remuneration of senior executives agreed on at the latest Annual General Meeting are detailed in Note 10 on page 64. This note also explains what happens if these executives resign or are dismissed by the company. These guidelines are also essentially the same as the Board's proposals for guidelines for the remuneration of senior executives proposed to the 2014 Annual General Meeting.
The Parent Company, Nolato AB, is a holding company which carries out joint Group management functions and financial and accounting functions.
Sales totalled SEK 23 million (19). Profit after financial income and expense was SEK 85 million (7). The rise in profit is mainly due to higher dividends from subsidiaries.
QProposed appropriation of profits The profit at the disposal of the Annual General Meeting is as follows:
| Total | SEK 575 million |
|---|---|
| Profit for the year | SEK 194 million |
| Retained profit | SEK 381 million |
The Board of Directors and the President and CEO propose that these earnings be appropriated as follows:
| Total | SEK 575 million |
|---|---|
| To be carried forward | SEK 365 million |
| Div. to shareh. of SEK 8.00 per share | SEK 210 million |
The proposed dividend is, in the view of the Board of Directors, justifiable with respect to the demands that the type and size of operations and the risks associated with them place on shareholders' equity and the company's capital requirements, liquidity and financial position.
the end of the financial year
No significant events have occurred since the balance sheet date.
Nolato's financial position remains very strong, creating freedom and opportunities to act, while enabling our customers to feel secure in their choice of Nolato as supplier.
Nolato has an excellent platform for its future operations through a high level of technological expertise and professionalism, modern production units, a clear focus on sustainability and a customer-specific geographic presence in Europe, Asia and North America, as well as a strong financial position.
However, Nolato does not provide any earnings forecast because as a supplier, the company conducts operations that are highly dependent on its customers' internal decisions and commercial performance. Factors among customers that we cannot influence in the short term, such as postponed or cancelled projects, higher or lower sales volumes and longer or shorter product life span, are therefore of great significance in terms of Nolato's sales and profit.
The letter by each risk refers to the further information on Nolato's assessment of risks that is provided on page 14.
| Operational risks | Risk exposure | Risk management |
|---|---|---|
| A Business cycle risk The risk that an economic downturn could have a significant impact on Nolato's per formance and earnings. |
Nolato Medical and Nolato Telecom's operations have fairly low sensitivity to economic and business cycle fluctua tions, while Nolato Industrial's business generally follows the Northern European business cycle. |
Active monitoring of markets and efficient decision-mak ing hierarchy enable quick decisions to be taken to adapt resources at an early stage ahead of an anticipated eco nomic downturn. |
| B Subcontractor risk The risk that changes at customers could have a significant impact on Nolato's per formance and earnings. |
As a subcontractor, Nolato is highly dependent on custom ers' internal decisions and commercial performance. Factors among customers that we cannot influence include post poned or cancelled projects, higher or lower sales volumes and longer or shorter product life spans. |
By means of active and close contact with customers we en deavour to identify changes at an early stage and adapt our resources. Within mobile phone operations, which are characterised by rapid changes in project life cycles and volumes, all pro duction takes place in Asia. This provides significant flex ibility and good opportunities to manage this risk in a cost effective way. |
| C Customer dependence The risk that changes at individual customers could have a significant nega tive impact on Nolato's performance and earnings. |
Dependence on individual customers is lowest in Nolato Industrial, whose market is made up of a large number of customers. Nolato Medical has good risk diversification across a large number of customers, while Nolato Telecom has fewer customers. |
We endeavour to broaden our customer base and offering within Nolato Telecom. |
| D Supplier dependence The risk of a supplier being unable to deliver to Nolato on time or at the right quality. |
If a significant, strategic supplier does not fulfil its undertak ings we could face problems supplying on time and at the right quality to our customers. |
For input goods and machinery, this risk is limited by the fact that there are a number of alternative suppliers. In terms of components for system products, the choice of supplier is usually made in consultation with Nolato's customer. |
| E Raw material price risk The risk of an important raw material increasing in price and having a signifi cant negative effect on various projects. In Nolato, this mainly applies to various plastic raw materials. |
Quantities of plastic raw material in our production vary from business area to business area. For Nolato Telecom, with its many thin-walled products, the plastic raw material only accounts for around 10 – 15 percent of the selling price on average, while the corresponding figure is around 20 –25 percent for Nolato Medical and 25 –30 percent for Nolato Industrial. |
We endeavour to include price adjustment clauses in supply agreements that cover an extended period of time. Product life span within Nolato Telecom is short, usually less than one year, which limits the risk in this business area. |
| F Energy cost risk The risk of the cost of energy rising and having a significant negative impact on profitability. Within Nolato this mainly applies to the purchase of electricity. |
The Group's production operations are relatively electricity intensive. In 2013 the Group spent SEK 115 million on elec tricity. |
The risk of negative effects from rising electricity prices is addressed by the Group entering into fixed price agreements for 20–80 percent of electricity requirements for the next four to twelve quarters. |
| G Production risks The risk of significant supply delays and/or quality issues. |
As a supplier, the products and components that we manu facture are supplied in accordance with customer specifica tions and quality requirements. Disruptions can mainly occur during the start-up of a project, but also during ongoing pro duction. |
In order to counteract disruptions, the Group follows an ad vanced concept involving competent staff, quality assur ance systems, vision monitoring systems and checklists. All production units are certified in accordance with ISO 9001. Most are also certified in accordance with industry-specific standards such as ISO/TS 16949 (automotive) and ISO 13485 (medical technology). |
| H Property damage and disruptions The risk of a negative impact on earnings and customer confidence as a result of a fire, explosion, natural disaster, damage to machinery, etc. |
Major property damage to a building or production equip ment can lead to production losses that could impact the Group's profit. Our base technologies are in place at most of the Group's production units, making it possible to relocate production from one affected unit to another unit in the event of disruptions and consequently mitigate the effects of the damage. |
All units must follow Nolato's risk management manual to achieve the specified level of risk and thereby reduce the risk of significant damage and create strong security of sup ply. The risk manual also provides guidelines for the Group's property insurance. External risk engineers inspect the pro duction units based on a rolling schedule to verify that risks are being managed in line with the manual. |
| I Legal risks The risk of significant disputes with differ ent external stakeholders. |
Legal risks can mainly arise in connection with the supply of products. This may concern issues relating to quality or liabil ity and intellectual property rights. |
To prevent disputes Nolato works with external lawyers and consultants on legal issues, for example on agreements with customers and suppliers. The Group also has internal poli cies and regulations relating to which agreements senior executives are authorised to enter into. |
| J Product liability risk The risk of faults in a product manufac tured by Nolato leading to significant financial claims on the Group. |
Design liability for products and components usually lies with customers. Nolato's risk is therefore normally limited solely to manufacturing faults. |
The Group follows an advanced concept involving compe tent staff, quality assurance systems and checklists. In many cases, in-line monitoring takes place using automated vision systems. All production units are certified in accordance with ISO 9001. Most are also certified in accordance with industry-specific standards such as ISO/TS 16949 (automo tive) and ISO 13485 (medical technology). |
|---|---|---|
| K Environmental risk The risk of significant environmental damage, which could lead to costs or have a negative impact on Nolato's reputation. |
Nolato's operations do not involve any significant environ mental impact as result of a risk of emissions to air or water or a risk of ground pollution. |
The production units have the necessary regulatory permits and fulfil the requirements of the REACH chemical legisla tion. All units are certified in accordance with environmental management system ISO 14001. Regular risk assessments are carried out to identify new environmentally related risks and/or costs. |
| LCR risks The risk of the Group's costs increasing significantly or of negative publicity owing to events relating to employees, business ethics or other areas related to social re sponsibility. |
Nolato has large units active in Sweden, Hungary, the UK, the US and China. The majority of our employees are outside Sweden. This concentration in Asia increases CR risk with re gard to working conditions such as minimum age, salaries, overtime and remuneration for overtime. |
All major units are wholly owned by Nolato, which makes the Group's management of CR easier. Nolato has a significant focus on all units creating good working conditions for employees. Nolato has a special group in Beijing that works with CR issues relating specifi cally to China. The Beijing operations are certified according to OHSAS 18001. Nolato has zero tolerance of bribery, corruption and cartel formation. Nolato's core values and Code of Conduct are continually communicated to staff. Regular audits of suppli ers are carried out. |
| Financial risks* | Risk exposure | Risk management |
| M Customer credit risk The risk of a major customer becoming in solvent and being unable to pay for orders made. |
In terms of customers within Nolato Medical and Nolato Industrial, this risk is mitigated by sales taking place in a large number of countries to a large number of customers, which diversifies the risk. Nolato Telecom has fewer cus tomers. If any of the Group's major customers were to suffer financial difficulties, the Group could sustain significant bad debt losses. The Group's maximum exposure of accounts receivable amounted to SEK 598 million at year-end (all receivables from all customers). |
The Group's revenues are mostly derived from medium sized and large global customer groups, which reduces the risk of credit losses but does not eliminate them. Nolato continually monitors the development of overdue receiva bles and the financial position of large customers. |
| NForeign exchange risk The risk of the difference between differ ent currencies having a significant nega tive impact on Nolato's performance and earnings. This risk consists of transaction exposure, which derives from buying and selling in different currencies, and trans lation exposure, which derives from the translation of foreign subsidiaries' assets, liabilities and earnings to Swedish kronor. |
Estimated net flows in foreign currency amounted to SEK 191 million at year-end, 46 percent of which was hedged. This means that SEK 103 million of estimated net flows were unhedged and a change in the value of the Swedish krona of +/–5 percent would have an impact of SEK 5 million on Group profit. The Group has SEK 546 million in foreign net assets, mainly in China, Hungary and the UK. A five percent appreci ation of the Swedish krona would have an impact of SEK 26 million on the net assets in the Group. |
Nolato carries out short-term currency hedging for part of the Group's estimated net exposure in foreign currencies in order to even out fluctuations in earnings. See the table in Note 4 on page 59. |
| OInterest rate risk The risk that the Group's net interest expense will significantly increase in the event of changes to market interest rates. |
Interest-bearing liabilities amounted to SEK 196 million at year-end. A 1 percentage point increase in the interest rate would result in a SEK 2 million increase in annual interest expense. At 31 December the Group's financial net assets were SEK 122 million. |
In order to limit interest rate risk, the portion of those inter est-bearing liabilities exceeding SEK 400 million must have a fixed interest term maturity structure as follows: Loans with a maturity of up to one year shall account for 35 – 65%. Loans with a maturity of more than one year shall account for 35 – 65%. The average fixed interest term shall never exceed 3 years. |
| PFinancing and liquidity risk The risk of the Group having problems accessing capital. |
Nolato has total loan agreements of SEK 800 million, of which SEK 350 million matures on 1 August 2014 and SEK 450 million matures on 31 December 2015. |
In order to maintain financial flexibility and meet the Group's capital requirements, loan facilities are continually agreed. |
* Financial risk management is described in detail in Note 4 on pages 59 – 60.
| SEKm | Note | 2012 | |
|---|---|---|---|
| 2013 | |||
| Net sales | 5 | 4,522 | 3,874 |
| Cost of goods sold Gross proft |
6 | – 3,868 654 |
– 3,353 521 |
| Other operating income | 7 | 19 | 11 |
| Selling expenses | – 89 | – 82 | |
| Administrative expenses | 8 | – 165 | – 156 |
| Other operating expenses | 9 | – 8 | – 7 |
| – 243 | – 234 | ||
| Operating proft | 10, 14 | 411 | 287 |
| Financial income | 11 | 3 | — |
| Financial expenses | 11 | – 11 | – 15 |
| – 8 | – 15 | ||
| Proft after fnancial income and expenses | 403 | 272 | |
| Tax | 12 | – 89 | – 70 |
| Proft for the year attributable to Parent Company shareholders | 314 | 202 | |
| Depreciation/amortisation and impairment included at | 13 | 157 | 157 |
| Earnings per share, basic and diluted (SEK) | 11.94 | 7.68 | |
| Number of shares at 31 December (thousand) | 26,307 | 26,307 | |
| Average number of shares (thousand) | 26,307 | 26,307 |
| 202 |
|---|
| 1 |
| – 2 |
| – 1 |
| – 17 |
| 1 |
| – 16 |
| – 17 |
| 185 |
Consolidated net sales for 2013 totalled SEK 4,522 million (3,874), a rise of 17% compared with 2012. Adjusted for currency, acquisitions and disposals, sales also rose by 17%.
Nolato Medical continued to show healthy growth, with sales rising by 10%. Adjusted for currency and acquisitions, sales rose by 7%. The majority of the business area's customer segments experienced strong performance in terms of volumes and growth has been well in line with the market.
Nolato Telecom's sales rose by 34% to SEK 2,079 million (1,548). Adjusted for currency, sales increased by 37%. Volumes have been very high, particularly in the first half of the year, driven by very strong demand for a number of models on the consumer market.
Nolato Industrial's sales were unchanged at SEK 1,170 million (1,170). Adjusted for currency and disposals, sales rose by 2%. Volumes in the automotive segment were lower, especially in the first half of the year, while certain other segments such as hygiene made a positive contribution.
Gross profit was SEK 654 million (521) and rose mainly as a result of higher sales. Gross profit is sales minus the cost of goods sold. The cost of goods sold consists of production costs for materials and manufacturing wages and salaries, as well as other production expenses.
As a percentage of sales, the gross margin was approximately one percentage point higher than in 2012, chiefly because of higher capacity utilisation, but also as a result of continuous improvement and greater efciency. This has contributed to increased profitability.
Total depreciation was unchanged at SEK 157 million (157). This consisted mainly of depreciation of non-current assets used in production, which is included in the cost of goods sold in the income statement at SEK 136 million (137).
Other operating income increased mainly owing to a one-of item of SEK 12 million for an allocation payment from a previous bankruptcy.
Selling and administrative expenses increased compared to 2012 and amounted to SEK 254 million (238). These expenses consist of personnel costs and other costs associated with the sales organisation, and administrative functions. The selling expenses also include costs for amortisation of intangible assets arising from acquisitions, which amounted to SEK 16 million (16). They comprise amortisation of so-called customer relationships that are assigned value in the acquisition analysis in connection with acquisitions.
These amounted to SEK 8 million (7) and consisted in 2013 of a one-of item of a capital loss from the sale of a subsidiary.
Operating profit rose sharply to SEK 411 million (287). This increase has been brought about by improved earnings for all business areas.
Net financial income/expense improved primarily as a result of lower interest expense owing to lower average indebtedness, compared with 2012. There was also an improvement in net exchange rate diferences for financial items.
Profit after net financial income/expense was SEK 403 million (272).
Profit after tax rose sharply to SEK 314 million (202), with earnings per share of SEK 11.94 (7.68). The efective tax rate was 22% (26). The lower tax rate was mainly due to an increased share of earnings in countries with lower tax rates, including the reduced tax rate in Sweden, together with a positive tax efect from the nonrecurring items.
| SEKm | Note | 2013 | 2012 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible non-current assets | 15 | 538 | 553 |
| Property, plant and equipment | 16 | 733 | 735 |
| Non-current financial assets | 17 | 2 | 2 |
| Other non-current receivables | 2 | 2 | |
| Deferred tax assets | 12 | 36 | 35 |
| Total non-current assets | 1,311 | 1,327 | |
| Current assets | |||
| Inventories | 18 | 259 | 288 |
| Accounts receivable | 17 | 598 | 682 |
| Current tax assets | 3 | 1 | |
| Other current assets | 19 | 81 | 61 |
| Other current financial assets | 17 | 3 | 3 |
| Cash and bank balances | 17 | 318 | 272 |
| Total current assets | 1,262 | 1,307 | |
| Total assets | 2,573 | 2,634 | |
| Shareholders' equity and liabilities | |||
| Shareholders' equity | |||
| Share capital | 20 | 132 | 132 |
| Other capital contributed | 228 | 228 | |
| Other reserves | 21 | 19 | 4 |
| Retained earnings | 31 | 969 | 806 |
| Total shareholders' equity | 1,348 | 1,170 | |
| Non-current liabilities | |||
| Non-current financial liabilities | 22 | — | 1 |
| Provisions for pensions and similar obligations | 23, 31 | 111 | 131 |
| Deferred tax liabilities | 12, 31 | 84 | 104 |
| Other provisions | 24, 31 | 30 | 32 |
| Total non-current liabilities | 225 | 268 | |
| Current liabilities | |||
| Accounts payable | 22 | 524 | 529 |
| Current tax liabilities | 7 | 19 | |
| Other current financial liabilities | 22 | 85 | 255 |
| Other current liabilities | 25 | 384 | 393 |
| Total current liabilities | 1,000 | 1,196 | |
| Total liabilities | 1,225 | 1,464 | |
| Total liabilities and shareholders' equity | 2,573 | 2,634 | |
| Pledged assets | 26 | — | 1 |
| Contingent liabilities | 27 | 3 | 2 |
Non-current assets were relatively unchanged, as net investments were roughly in line with depreciation/amortisation of SEK 157 million for the year. Other changes in non-current assets consist of translation efects from assets in foreign companies and the efect from the sale of a subsidiary and its non-current assets.
Cash and bank balances increased to SEK 318 million (272). The strong cash flow, mainly in the fourth quarter, increased cash and cash equivalents.
Shareholders' equity increased as a result of comprehensive income for 2013 of SEK 336 million, which consists of profit after tax and currency efects from translation diferences and the revaluation of defined benefit pension plans. Dividends in the amount of SEK 158 million were paid, thereby reducing shareholders' equity. The return on shareholders' equity rose to 24.9% (17.7), mainly as a result of the sharp increase in profit after tax.
Accounts payable remained relatively unchanged compared with 2012. The average total working capital requirement in relation to sales was a low 1.3% (3.4). The improvement in earnings meant that, with generally unchanged average capital employed, the return on capital employed rose to a strong 26.7% (19.4).
Interest-bearing liabilities fell to SEK 196 million (385), since indebtedness was paid down during the year using the positive cash flow. Interest-bearing assets increased at the same time to SEK 318 million (272), meaning net debt became a financial net asset of SEK 122 million (–113).
Nolato has loan agreements of SEK 800 million, of which SEK 350 million matures in mid-2014 and SEK 450 million at the turn of 2015/2016. Of these amounts, SEK 715 million was unutilised at the close of 2013. The loan agreements' credit frameworks mainly provide capacity for capital requirements in the event of future acquisitions.
| Q Financial position SEKm | 31 Dec. 2013 | 31 Dec. 2012 |
|---|---|---|
| Interest-bearing liabilities, credit institutions | – 85 | – 254 |
| Interest-bearing pension liabilities | – 111 | – 131 |
| Total borrowings | – 196 | – 385 |
| Cash and bank balances | 318 | 272 |
| Net fnancial assets (+) / net fnancial liabilities (–) | 122 | – 113 |
| Working capital | 29 | 93 |
| As a percentage of sales (avg.) (%) | 1.3 | 3.4 |
| Capital employed | 1,544 | 1,555 |
| Return on capital employed (avg.) (%) | 26.7 | 19.4 |
| Shareholders' equity | 1,348 | 1,170 |
| Return on shareholders' equity (avg.) (%) | 24.9 | 17.7 |
| Share- | Other capital | Hedging | Translation | Retained | Total |
|---|---|---|---|---|---|
| shareh. equity | |||||
| 1,151 | |||||
| — | — | — | — | 202 | 202 |
| — | — | 1 | – 17 | – 1 | – 17 |
| — | — | 1 | – 17 | 201 | 185 |
| — | — | — | — | – 132 | – 132 |
| — | — | — | — | – 34 | – 34 |
| 132 | 228 | 1 | 3 | 806 | 1,170 |
| 132 | 228 | 1 | 3 | 806 | 1,170 |
| — | — | — | — | 314 | 314 |
| — | — | — | 15 | 7 | 22 |
| — | — | — | 15 | 321 | 336 |
| — | — | — | — | – 158 | – 158 |
| 132 | 228 | 1 | 18 | 969 | 1,348 |
| capital 132 |
contributed 228 |
reserves — |
Attributable to Parent Company shareholders reserves 20 |
earnings 771 |
* Refers to adjusted opening balance at 1 January 2012 regarding amendment of IAS 19 defined benefit pension plans.
The previous application of the corridor method as a mechanism to even out actuarial gains/losses has been removed. See Note 31.
| Note SEKm |
2013 | 2012 |
|---|---|---|
| 29 | ||
| Operating activities | ||
| Operating profit | 411 | 287 |
| Adjustments for items not included in cash fow: | ||
| Depreciation/amortisation and impairment | 157 | 157 |
| Provisions | 12 | 8 |
| Unrealised exchange rate differences | 2 | 13 |
| Other items | 8 | 3 |
| Pension payments | – 5 | – 5 |
| Interest received | 3 | — |
| Interest paid | – 11 | – 14 |
| Realised exchange rate differences | – 3 | – 2 |
| Income tax paid | – 123 | – 60 |
| Cash fow from operating activities before changes in working capital | 451 | 387 |
| Cash fow from changes in working capital | ||
| Changes in inventories | 20 | – 34 |
| Changes in accounts receivable | 69 | – 137 |
| Changes in accounts payable | – 1 | 110 |
| Other changes in working capital | – 27 | 150 |
| 61 | 89 | |
| Cash fow from operating activities | 512 | 476 |
| Investment activities | ||
| Acquisition of intangible non-current assets | — | – 2 |
| Acquisition of property, plant and equipment | – 151 | – 157 |
| Acquisition of operations, net of cash and cash equivalents | — | – 176 |
| Sale of property, plant and equipment | 1 | — |
| Sale of operations, net of cash and cash equivalents | 6 | — |
| Cash fow from investment activities | – 144 | – 335 |
| Cash fow before fnancing activities | 368 | 141 |
| Financing activities | ||
| Borrowings | — | 254 |
| Repayment of loans | – 169 | – 110 |
| Dividend paid | – 158 | – 132 |
| Cash fow from fnancing activities | – 327 | 12 |
| Cash fow for the year | 41 | 153 |
| Cash and cash equivalents, opening balance | 272 | 124 |
| Exchange rate difference in cash and cash equivalents | ||
| Cash and cash equivalents, closing balance | 5 318 |
– 5 272 |
Cash flow before investments and disposals rose to SEK 512 million (476), afected mainly by the upbeat earnings trend. The change in working capital was a positive SEK 61 million (89). Reduced activity due to the Christmas holiday had a positive efect on the working capital requirement.
Net investments afecting cash flow totalled SEK 144 million (SEK 335 million in the previous year, of which the acquisition of Cope Allman Jaycare accounted for SEK 176 million).
In 2013, gross investments in property, plant and equipment were SEK 150 million (157), and SEK 0 million (2) in intangible non-current assets. The investments in property, plant and equipment chiefly comprised machinery and equipment, as well as construction in progress. Investments in buildings and land were limited during the year and a contribution of SEK 5 million was received, which has reduced the amount of investment.
Investments afecting cash flow excluding acquisitions and disposals are distributed across the Group's business areas as follows: SEK 49 million (78) for Nolato Medical, SEK 53 million (39) for Nolato Telecom and SEK 48 million (42) for Nolato Industrial.
For Nolato Medical, investments have chiefly consisted of further machinery
capacity in Sweden, the UK, Hungary and the US. Nolato Telecom's investments consisted mainly of technology initiatives, expansion of EMC production in China and investments in the replacement of machinery in China. Nolato Industrial has made investments in further machinery capacity and in new projects. The investments were mainly made in Sweden.
| Construction in progress Total investments |
64 150 |
59 159 |
|---|---|---|
| Machinery and equipment | 88 | 77 |
| Buildings and land | – 2 | 21 |
| Tenancy rights | — | 2 |
| Investments (net) | 2013 | 2012 |
Affecting cash flow, excluding acquisitions and disposals
Excluding the subsidiary disposal, cash flow after investments was SEK 362 million (317 excluding acquisitions) and SEK 368 million including the disposal (141 including acquisitions).
Financing activities describe the Group's financing and dividends to shareholders, and totalled a net amount of SEK –327 million (12). This consists of net amortised borrowings of SEK –169 million (+144 borrowings raised) and dividends paid totalling SEK –158 million (–132).
Q Cash flow after investments
Q
Q SEKm Net financial assets (+) net financial liabilities (–)
change to pension provisions in IAS 19, which means that the corridor method as a mechanism to even out actuarial gains/losses is no longer applied (see Note 31).
Nolato is a high-tech developer and manufacturer of polymer product systems for leading customers in medical technology, telecommunications, hygiene, automotive products and other selected industrial sectors.
The Parent Company Nolato AB, corporate identity number 556080-4592, is a limited company with its registered office in Torekov, Sweden. Its head office address is 269 04 Torekov, Sweden.
Nolato's B shares are listed on the NASDAQ OMX Stockholm,where Nolato is a Mid Cap company within the Industrials sector.
The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations from the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU. Recommendation RFR 1 of the Swedish Financial Accounting Standards Council, Supplementary Rules for Consolidated Financial Statements, has also been applied.
The Parent Company applies the same accounting policies as the Group, except in those cases specified in the section "the Parent Company's accounting policies".
Apart from those exceptions described in further detail, the following accounting policies have been applied consistently to all periods presented in the Group's financial statements. The accounting policies have been applied consistently by the Group's companies. In addition, comparison figures have been reclassified in those cases where the policies have been changed in order to correspond with the figures presented in this year's financial statements, as described below.
Changes to standards and interpretations that came into force in 2013 have not materially affected the consolidated accounts, with the exception of the following:
IAS 1 Presentation of Financial Statements: The change results in other comprehensive income being presented by dividing it into two groups. The division is based on whether or not items could be reclassified to profit or loss (reclassification adjustments). Comparative figures have been relabelled based on the new format.
IAS 19 Employee Benefits: This change means that the Group no longer applies the "corridor rule" and instead recognises all actuarial gains and losses in other comprehensive income when they arise. Past service costs are recognised immediately. Interest expense and expected return on plan assets have been replaced by net interest, which is calculated using the discount rate based on the net surplus or net deficit in the defined benefit pension plan. For information about the effects on the consolidated income statement and balance sheet, see Note 31.
Amended IFRS 7 Financial Instruments: Disclosures. This amendment relates to disclosure requirements relating to the offsetting of financial assets and liabilities. The change applies to financial years beginning 1 January 2013 or later and is applied retroactively.
IFRS 13 Fair Value Measurement: A new uniform standard for measuring fair value and improved disclosure requirements. These new disclosure requirements are set out in Notes 17 and 22.
IASB and IFRIC have issued new standards and statements which come into force for financial years beginning on 1 January 2014 or later. There are no plans for the early application of new or amended standards for future application. Nolato will continue to evaluate the effects and application of the new standards and statements during 2014.
The functional currency of the Parent Company is the Swedish krona (SEK), which is also the reporting currency for the Parent Company and the Group. This means that the financial statements are presented in Swedish kronor. All amounts are presented in millions of kronor unless otherwise indicated.
Assets and liabilities are recognised at their historical acquisition costs, except for certain financial assets and liabilities, which are measured at fair value. In Nolato, these consist of currency derivatives measured at fair value. Non-current assets and long-term liabilities consist in all significant respects only of amounts which are expected to be recovered or paid after more than 12 months after the balance sheet date. Current assets and current liabilities consist in all significant respects only of amounts which are expected to be recovered or paid within 12 months of the balance sheet date. Offsetting of receivables and liabilities and of income and expenses is done only if this is required or expressly permitted.
Preparing the financial statements in accordance with IFRS requires that Group management makes judgements, estimates and assumptions which affect the application of accounting policies and the recognised amounts for assets, liabilities, income and expenses. Estimates and assumptions are based on historical experience and a number of other factors which seem reasonable given current conditions. The actual outcome may deviate from these estimates and assumptions. The estimates and assumptions are reviewed regularly. Changes to estimates are reported during the period when the change is made if the change only affects that period, or during the period when the change is made and future periods if the change affects both the current period and future periods.
Assumptions made by Group management in the application of IFRS standards which have a significant impact on the financial statements, and estimates made which may entail significant adjustments to the financial statements for the following year are described under Note 3, "Critical accounting estimates and judgements".
The consolidated financial statements comprise the Parent Company, Nolato AB, and the subsidiaries in which Nolato AB has a direct or indirect controlling influence. Controlling influence is defined as the right to draw up a company's financial and operations strategies with a view to realising financial benefits. This is usually achieved if the holding corresponds to over 50 percent of the number of votes. Companies acquired or disposed of are included in profit for the year for the Group from the time of the acquisition up until the date when controlling influence ceases.
The consolidated financial statements have been prepared in accordance with IFRS 3 Business Combinations and by applying the acquisition method. This method means that shareholders' equity in the Group includes shareholders' equity in the Parent Company and the portion of shareholders' equity in subsidiaries which has accumulated since the acquisition. The difference between the acquisition cost of shares in a subsidiary and that company's shareholders' equity at the time of acquisition, adjusted in accordance with consolidated accounting principles, has been allocated among the assets and liabilities measured at market value that were taken over on acquisition. Transaction costs on acquisitions are recognised under profit for the year in accordance with IFRS 3 for the Group. Amounts which cannot be allocated are reported as goodwill. Intra-Group transactions and balance sheet items and unrealised gains/losses on transactions between Group companies are eliminated. The accounting policies for subsidiaries have, where applicable, been changed to ensure the consistent application of consolidated accounting policies.
Items included in the financial statements for the various units in the Group are measured in the currency used in the economic environment in which each company primarily operates. The Swedish krona (SEK), which is the Parent Company's functional currency and reporting currency, is used in the consolidated accounts. For subsidiaries, the local currency of their respective countries is used as the reporting currency, and this is considered to constitute the functional currency.
Transactions in foreign currencies are translated into the functional currency at the rate in effect on the transaction date. Exchange rate gains and losses arising from the payment of such transactions and from the revaluation of monetary assets and liabilities denominated in foreign currencies at the rate on the balance date are recognised in profit for the year.
The profit and financial position of all Group companies are translated into the Group's reporting currency as follows:
An operating segment is a part of the Group that engages in business activities from which income can be generated and expenses incurred, and for which separate financial information is available. An operating segment's performance is also monitored by the company's highest executive decision-maker to evaluate the performance and make decisions about resources to be allocated to the operating segment. The Group's three operating segments are Nolato Medical, Nolato Telecom and Nolato Industrial. See Note 5 for a more detailed description of the breakdown and presentation of the operating segments.
Revenue is recognised when virtually all risks and rights associated with ownership are transferred to the buyer, which normally occurs in connection with delivery having taken place, and when the price has been established. The revenues are recognised at the fair value of what has been received or will be received, minus discounts awarded. Gains and losses on forward contracts entered into for hedging purposes are deducted from earnings together with the transaction to which the hedging relates.
At each reporting date, the Company evaluates if there is objective proof of impairment for a financial asset or group of assets. Objective proof consists partly of observable circumstances that have arisen and that have a negative impact on the possibility of recovering the acquisition cost, and partly of a significant or prolonged reduction in the fair value of a financial investment classified as an available-for-sale financial asset.
The impairment for accounts receivable is established based on historical experiences of bad debt losses on similar receivables. The Company classifies accounts receivable as doubtful when they have fallen due for payment and when they are also deemed to be non-recoverable based on other information.
Assets with an indeterminable useful life, goodwill, are not amortised but impairment-tested at least once a year or when there is an indication of impairment. Goodwill impairment is not reversed.
Amortised assets are assessed based on a decline in value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is taken in the amount at which the carrying amount of the asset exceeds its recoverable value. The recoverable value is the higher of an asset's fair value less selling expenses and its value in use. In assessing the impairment, assets are grouped at the lowest levels at which there are separately identifiable cash flows (cash-generating units). For cash-generating units, goodwill is impaired first.
In calculating the value in use, future cash flows are discounted using a discount rate which takes into consideration the risk-free interest rate and the risk associated with the specific asset.
Impairment of loans receivable and accounts receivable which are recognised at amortised cost, are reversed if a subsequent increase in the recoverable value can be objectively attributed to an event which occurred after the impairment was carried out.
Impairment of other assets are reversed over profit for the year if there is an indication that there is no longer impairment and there has been a change in the assumptions which formed the basis for calculating the recoverable value.
An impairment is only reversed to the extent that the carrying amount of the asset after reversal does not exceed the carrying amount which the asset would have had if no impairment had been carried out, taking into account the depreciation/amortisation which would have applied at that time.
Financial income consists of interest income on funds invested.
Profit from the disposal of a financial instrument is recognised once the risks and benefits associated with ownership of the instrument have been transferred to the buyer and the Group no longer has control of the instrument.
Financial expenses mainly consist of interest expenses on loans and borrowing costs recognised in profit for the year.
Income taxes consist of current tax and deferred tax. Income taxes are recognised in profit for the year, except where the underlying transaction is recognised in other comprehensive income, in which case the related tax effect is recognised in other comprehensive income.
Current tax is tax that is payable or receivable in relation to the current year, with the application of the tax rates that have been decided, or decided in practice, as at the balance sheet date. Current tax also includes adjustments for current tax attributable to previous periods.
Deferred tax is calculated using the balance sheet method, taking temporary differences between recognised and tax-related values of assets and liabilities as the starting point. Temporary differences are not taken into account in consolidated goodwill, or for any difference that arises on initial recognition of assets and liabilities that are not business combinations which, at the time of the transaction, affect neither recognised nor taxable earnings. Temporary differences attributable to participations in subsidiaries that are not expected to be reversed within the foreseeable future are not taken into account either. The measurement of deferred tax is based on how underlying assets or liabilities are expected to be realised or regulated. Deferred tax is calculated using the application of the tax rates and tax rules that have been decided, or decided in practice, as at the balance sheet date.
Deferred tax assets in relation to deductible temporary differences and loss carry-forwards are only recognised to the extent that it is likely that these will be utilised. The value of deferred tax assets is reduced once it is no longer deemed likely that they can be utilised.
Any future income tax arising on dividends is recognised at the same time as when the dividend is recognised as a liability.
Earnings per share are calculated based on the consolidated profit for the year attributable to the Parent Company's shareholders and on the weighted average number of shares outstanding during the year.
Intangible assets acquired in a business acquisition which are recognised separately from goodwill consist of customer relations.
Goodwill consists of the amount by which the consideration transferred exceeds the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the time of the acquisition. Goodwill from the acquisition of subsidiaries is recognised as an intangible asset. Goodwill is not amortised but impairmenttested annually, and is recognised at acquisition cost less accumulated impairment losses. Any gain or loss from the disposal of a unit includes the remaining carrying amount of the goodwill associated with the unit disposed of. Goodwill is allocated to cash-generating units in impairment tests.
Acquired intangible assets are recognised separately from goodwill if they fit the definition of an asset, are separable or arise from contractual or other legal rights and their market value can be reliably measured.
The Group's capitalised customer relationships relate to assets acquired through the acquisition of the Cerbo Group, Medical Rubber AB, Nolato Contour Inc. in the US and Nolato Jaycare Ltd in the UK. Straight-line depreciation is applied over the expected useful life, i.e. six to ten years.
Product development expenditure is normally charged as operating expenses as it occurs, and is included in the cost of goods sold in the income statement. Capitalised development expenditure is amortised on a straight-line basis over the expected useful life from the point when use of the asset can commence. The amortisation period does not exceed 10 years.
Development expenditure in which knowledge and other research results are applied in order to achieve new or improved products is recognised as an asset in the balance sheet if the product is technically and commercially feasible and the Company has sufficient resources to complete the development and subsequently use or sell the product. The carrying amount includes expenditure on materials, directly attributable salary expenditure and indirect expenditure which can be attributed to the asset in a reasonable and consistent manner. Other development expenditure is recognised as an expense in the income statement when it arises.
Property, plant and equipment are recognised within the Group at acquisition cost after accumulated depreciation according to plan and any impairment. Expenditure which is directly attributable to the purchase of the asset is included in the acquisition cost. Additional expenditure is added to the acquisition cost only if it is likely that the future financial benefits associated with the asset will accrue to the company and the acquisition cost can be calculated reliably. All other additional expenditure is reported as an expense in the period when it arises. An additional expense is added to the acquisition cost if the expense relates to replacing identified components or parts thereof. The expense is also added to the acquisition cost in the event that a new component is created. Any undepreciated carrying amounts of replaced components or parts of components are eliminated and expensed in connection with replacing the component. Repairs are expensed on an ongoing basis.
There is no depreciation of land. Other assets are depreciated on a straight-line basis over their expected useful life, taking into account the estimated residual value, as follows:
| Buildings | 25 years |
|---|---|
| Land improvements | 20 – 27 years |
| Injection moulding machines | 8 – 10 years |
| Automated assembly equipment | 3 years |
| Other machinery | 5 – 10 years |
| IT | 3 years |
| Other equipm., tools, fixtures and fittings 5 – 10 years |
The residual value, useful life and depreciation method for assets are tested each balance sheet date and adjusted if necessary. The carrying amount of an asset is impaired immediately to its recoverable value if the asset's carrying amount exceeds its expected recoverable value.
The carrying amount of an item of property, plant and equipment is removed from the balance sheet on scrapping or disposal, or when no future financial benefits are expected from using or scrapping/disposing of the asset. Any gain or loss arising from scrapping or disposing of an asset consists of the difference between the selling price and the carrying amount of the asset, with direct selling expenses deducted. Gains and losses are reported as other operating income/expense.
In the consolidated financial statements, leasing is classified as either financial or operating leasing. Financial leasing exists where the financial risks and benefits associated with ownership are transferred in all significant respects to the lessee. If this is not the case, it is a matter of operating leasing. Operating leasing fees are expensed over the term of the lease. Variable fees are expensed in the periods when they arise.
Inventories are measured at the lower of the acquisition cost and the net market value. The acquisition cost of inventories is calculated by applying the first in, first out principle (FIFO), and includes expenditure arising on the acquisition of the inventory assets and on transporting them to their present location and condition. For finished goods and work in progress, the acquisition cost includes a reasonable proportion of indirect costs based on normal capacity.
The net market value is the estimated selling price in the operating activities, after deductions for estimated costs for completion and for realising a sale.
Recognition in and removal from the balance sheet A financial asset or a financial liability is included in the balance sheet when the company becomes a party in accordance with the contractual agreements of the instrument. A receivable is included when the company has delivered and there is a contractual obligation for the counterparty to pay, even if an invoice has not yet been sent. Accounts receivable are included in the balance sheet once the invoice has been sent. Liabilities are included once the counterparty has delivered and there is a contractual obligation to pay, even if an invoice has not yet been received. Accounts payable are included once an invoice has been received.
A financial asset is removed from the balance sheet once the rights in the agreement have been realised, or fallen due, or the company loses control of them. The same applies for part of a financial asset. A financial liability is removed from the balance sheet when the obligation in the agreement is met or is otherwise satisfied. The same applies for part of a financial liability.
A financial asset and a financial liability are offset and recognised at a net amount in the balance sheet only when there is a legal entitlement to offset the items and there is an intention to settle the items at a net amount or to realise the asset and settle the liability simultaneously.
Acquisitions and disposals of financial liabilities are recognised on the business day that constitutes the date when the company commits to acquire or dispose of the asset.
The Group classifies its financial instruments under one of the following categories: Derivatives used for hedge accounting, loans receivable and accounts receivable. The classification depends on the purpose for which the instrument was purchased. The classification of instruments is determined at the first reporting date.
Currency derivatives are measured at fair value and transaction charges are charged as expenses. Financial instruments that are not derivatives are initially recognised at acquisition cost, corresponding to the instrument's fair value plus transaction charges.
Most of the Group's financial assets and liabilities are attributable to deliveries of goods and services, where receivables have a short maturity. The Nolato Group reports these receivables at amortised cost.
Currency futures are used to hedge a highly probable forecast transaction (cash flow hedge), and in this case hedge accounting is applied.
Hedge accounting does not apply to currency hedging in large investments in property, plant and equipment and for large internal long-term loans receivable issued by the Parent Company in a currency other than SEK, which are hedged for future repayment.
Cash fow hedging of forecast sales in foreign currency The effective portion of changes in the fair value of derivative instruments which have been identified as cash flow hedges and which meet the conditions for hedge accounting is recognised in other comprehensive income. Accumulated amounts in the hedging reserve are reversed to the profit for the year in those periods when the hedged item affects earnings (for instance, when a forecast sale took place).
When a hedge instrument matures or is sold, or when the hedge no longer meets the conditions for hedge accounting and there are accumulated gains or losses from hedging in other comprehensive income, those gains/losses remain in other comprehensive income and are entered as income at the same time as the forecast transaction is ultimately recognised under profit for the year.
When a forecast transaction is no longer expected to take place, the accumulated profit or loss recognised in other comprehensive income is immediately transferred to profit for the year.
Cash and cash equivalents consist of cash assets and immediately available balances at banks and equivalent institutions, as well as short-term liquid investments maturing less than three months from the time of acquisition and which are exposed only to an insignificant risk of fluctuations in value.
There are a number of both defined contribution and defined benefit pension schemes within the Group.
In defined contribution schemes, the company pays defined contributions to a separate legal entity and has no obligation to make further contributions. Expenses are charged to the consolidated profit as the benefits are earned.
In defined benefit schemes, remuneration to employees and former employees is payable based on their salary at the time they retired and the number of years earned. The Group bears the risk of ensuring that payments undertaken are made. Nolato's defined benefit schemes are unfunded. These PRI obligations are recognised in the balance sheet as provisions.
Pension expenses and pension obligations stemming from defined benefit schemes in Sweden are calculated using the projected unit credit method. This method allocates pension expenses as employees perform services for the Company, which increases their entitlement to future payment. Independent actuaries perform the calculation annually. The Company's undertakings are measured at the present value of expected future payments using a discount rate equal to the interest rate of top-rated corporate bonds or housing bonds/government bonds with a maturity equal to that of such undertakings. The most important actuarial assumptions are provided in Note 23.
Actuarial gains and losses may arise in determining the present value of obligations. This arises either when the actual outcome deviates from the previous
assumption, or when assumptions change. Interest on pension liabilities is recognised in net financial income/ expense. Other components are recognised in operating profit.
The liability for retirement pensions and family pensions for executives in Sweden is secured through a policy with Alecta. According to a statement issued by the Swedish Financial Reporting Board, UFR 3, this is a multiple-employer defined benefit scheme. For the 2013 financial year, the Company had no access to any information that would enable it to recognise this scheme as a defined benefit scheme. The ITP pension scheme (supplementary pensions for salaried employees), which is insured by Alecta, is thus recognised as a defined contribution scheme.
The Group has a share-based remuneration scheme in which payment will ultimately be made in cash. The scope and conditions of the programme are detailed in Note 10 under "Stock options programme". Remuneration is measured at fair value and recognised as an expense with a corresponding increase in liabilities.
Fair value is calculated initially at the time of issue and allocated over the vesting period. The fair value of cash-settled options is calculated according to the Black & Scholes model. At the date of measurement, the terms and conditions of the issued instruments are taken into account. The liability is revalued on each balance sheet date and at the time of cash settlement. All changes in the fair value of the liability are recognised in the income statement as a personnel cost.
The basis for provisioning and expensing social security contributions in relation to share-based remuneration is the fair value of the options at the date of measurement.
The provision for variable remuneration is based on the bonus policy established by the Board. The liability is included in the balance sheet when a reliable measurement can be carried out and when services have been rendered by the employee.
Severance pay is awarded when an employee's position is terminated prior to the normal retirement date. The Group reports the severance pay as a liability when it is demonstrably obliged to terminate employment according to a detailed formal plan without the possibility of rehire, and the employee does not carry out any services which bring financial benefits for the Company. Benefits which fall due after more than 12 months from the balance sheet date are discounted to present value.
A provision differs from other liabilities in that there is uncertainty in relation to the payment date or the size of the amount in terms of settling the provision. A provision is recognised in the balance sheet when there is an existing legal or informal obligation as a result of an event that has occurred, and it is likely that an outward flow of financial resources will be required to settle the obligation and a reliable estimation of the amount can be made.
A provision for restructuring is recognised when there is an established detailed and formal restructuring plan, and the restructuring process has either begun or been publicly announced. No provision is made for future operating expenses.
A contingent liability is recognised when there is a possible obligation deriving from events that have occurred and the occurrence of which is confirmed only by one or more uncertain future events, or when there is an obligation that is not recognised as a liability or provision on the grounds that it is not likely that an outward flow of resources will be required.
The cash flow statement was prepared using the indirect method. The recognised cash flow includes only transactions which involve payments made or payments received. Changes for the year in operating receivables and operating liabilities have been adjusted for effects of unrealised currency exchange rate fluctuations. Acquisitions and disposals are recognised in investment activities. The assets and liabilities attributable to the companies acquired or disposed of at the time of the change are not included in the statement of changes in working capital or in the change in balance sheet items recognised under financing activities.
The Group management and the Board of Directors make estimates and assumptions about the future. These estimates and assumptions affect recognised assets, liabilities, income and expenses, as well as other information submitted, for instance contingent liabilities. These estimates are based on historical experience and the various assumptions that are deemed to be reasonable in the prevailing circumstances. Conclusions drawn in this way form the basis for decisions relating to the carrying amounts of assets and liabilities in those cases where these cannot be established by means of other information. Actual outcomes may differ from these judgements if other assumptions are made or other circumstances arise.
The areas which include such estimates and judgements that may have a significant impact on the Group's profit and financial position include:
Calculations regarding remuneration to employees The value of pension obligations for defined benefit pension schemes is based on actuarial calculations on the basis of assumptions about discount rates, future salary increases, inflation and demographic circumstances. At the end of the year, pension liabilities amounted to SEK 111 million (131).
Impairment testing of goodwill and other assets Goodwill impairment testing is carried out annually in connection with the year-end report or as soon as changes indicate that impairment will arise, for example a change in the business climate or a decision on the disposal or closure of operations. An Impairment is carried out if the calculated value in use exceeds the carrying amount. An account of impairment testing for the year can be found in Note 15.
Other property, plant and equipment and intangible non-current assets are recognised at acquisition cost less accumulated depreciation and any impairment. Depreciation is carried out over the calculated useful life to an assessed residual value. The carrying amount of the Group's non-current assets is tested as soon as changed circumstances show that there is an impairment requirement. The value in use is measured as the anticipated future discounted cash flow primarily from the cash-generating unit to which the asset belongs,
but also in specific cases in relation to individual assets. A test of the carrying amount of an asset is also carried out in connection with a decision being made on disposal. The asset is included at the lower of the carrying amount and the fair value after deductions for selling expenses.
Operations are conducted on the basis of a financial policy established by the Board, which specifies rules and guidelines for how the various financial risks shall be dealt with. The following significant risks are identified in the financial policy: Foreign exchange risk, interest rate risk, financing risk, and credit and liquidity risk. Currency and interest rate derivatives are used as hedging instruments in accordance with the Board's guidelines.
As a borrower and through its extensive operations outside Sweden, the Nolato Group is exposed to various financial risks. Nolato's financial policy specifies guidelines for how these risks should be managed within the Group. This policy outlines the aim, organisation and allocation of responsibilities of the Group's financial operations, and is designed to manage the described risks. The CFO initiates and, if necessary, proposes updates to the financial policy, and issues internal instructions in order to ensure compliance with the policy within operating activities. The Board then evaluates and adopts the proposed changes to the financial policy on an annual basis or as necessary.
The Group's financial management is centralised within the Group's financial department, and acts as a staff service body. The Group staff is responsible for the Group companies' external banking relationships, liquidity management, net financial income/expense and interest-bearing liabilities and assets, as well as for the Group-wide payment system, in the form of the internal bank. This centralisation involves significant economies of scale, a lower financing cost and better internal control and management of the Group's financial risks. Within the framework of the financial policy, there is the opportunity to utilise foreign exchange and interest rate instruments. During the year, trading was only carried out in currency derivatives.
Market risk relates to the risk arising through commercial flows in foreign currencies emerging in the operations (transaction exposure), financing of working capital (interest rate risk) and foreign investments (translation risk).
Transaction exposure
Transaction exposure derives from the Group's sales and purchases in various currencies. This foreign exchange risk consists of both the risk of fluctuations in the value of financial instruments, i.e. accounts receivable and accounts payable, and the foreign exchange risk in anticipated and contracted payment flows.
In 2013, Nolato's sales to countries outside Sweden accounted for 80 percent (75). The largest flow currencies for the Swedish units were EUR and USD, with EUR being net outward flows and USD being a net inward flow. The Chinese operations had a net exposure largely in CNY/USD.
Nolato carries out short-term currency hedging for part of the Group's net exposure in foreign currencies. The aim of hedging the currency exposure is to even
out fluctuations in earnings. According to this policy, Nolato shall hedge the net flow of the forecast inward and outward flow of currencies over a rolling 12 month period. In the event that the net flow in an individual currency is less than SEK 10 million, there is no hedging requirement. The hedging levels for the flows in each currency shall be within the following ranges:
| Range | Hedged flow |
|---|---|
| 1–3 months in the future | 60 –80% |
| 4–6 months in the future | 40 –60% |
| 7–9 months in the future | 20 –40% |
| 10–12 months in the future | 0 –20% |
Individual investments in machinery are hedged at 100 percent in the event that the currency flow has a countervalue exceeding SEK 1.5 million. The consolidated income statement includes exchange rate differences of SEK 0 million in operating profit.
Foreign exchange risks in financial flows relating to loans and investments in foreign currencies can be avoided by the Group's companies borrowing in local currencies or hedging these flows. According to this policy, any such hedging or risk-taking is decided on a case-by-case basis. Any hedging costs and any differences in interest rate levels between countries are taken into consideration in decisions on any possible risktaking in relation to financial flows. During the year, there were exchange rate differences of SEK 0 million in net financial income/expense.
At the end of 2013, the Group had the following currency hedges in relation to anticipated payment flows in CNY, EUR, GBP and USD for 2014. The derivatives used are futures and currency swaps. The volume and scope of the contracts are stated below in nominal terms.
Currency forward contracts entered into but unutilised are detailed in the table below. The market value at 31 December 2013 was SEK 3 million (2). The market value of contracts identified as cash flow hedges that meet the conditions for hedge accounting was SEK 1 million (1).
| Nom. value in contract |
Average rate (SEK) |
Market value |
Reported against inc.statement |
|
|---|---|---|---|---|
| CNY (net sales) | – 8 | 1.07 | — | — |
| EUR (net purch.) | 6 | 8.93 | 1 | 1 |
| GBP (net sales) | – 100 | 10.73 | 1 | 1 |
| USD (net sales) | – 97 | 6.65 | 1 | — |
| Total | – 199 | 3 | 2 |
Gains and losses in other comprehensive income in relation to currency forward contracts at 31 December 2013 will be transferred to the income statement at various dates within one year of the balance sheet date.
The Group enters into derivative contracts under International Swaps and Derivatives Association (ISDA) master netting agreements. These agreements mean that when a counterparty is unable to settle its commitments under all transactions, the contract is discontinued and all outstanding balances must be settled at a net amount. The ISDA agreements do not fulfil the offsetting criteria in the statement of financial position. This is because offsetting under ISDA agreements is only permitted if the counterparty or the Group is unable to settle its commitments. Moreover, it is not the intention of either the counterparty or the Group to settle transactions on a net basis or at the same time.
Notes 17 and 22 list the financial instruments covered by a legally binding framework agreement on netting or a similar agreement.
| SEKm | 12 month estimated net flows |
Total hedging |
Percent age |
Average rate |
||||
|---|---|---|---|---|---|---|---|---|
| CNY | 16 | 8 | 50% | 1.07 | ||||
| EUR | 63 | 29 | 46% | 8.62 | ||||
| USD | 112 | 51 | 46% | 6.71 | ||||
| Total | 191 | 88 | 46% |
The contracts are included at fair value in the balance sheet, and the change in value is recognised in other comprehensive income. When the contracts are realised, the accumulated change in value is booked to the income statement. In 2013, the effect of the currency derivatives on operating profit was SEK 0 million (1).
| Total | 103 | 5 | |
|---|---|---|---|
| USD | 61 | +/– 5% | 3 |
| EUR | 34 | +/ – 5% | 2 |
| CNY | 8 | +/– 5% | — |
| SEKm | 12 month unhedged estimated net flows |
Change in currency |
Effect on earnings |
At the end of the year, the Group had SEK 103 million in unhedged assessed currency flows, including effects from currency hedges. A change in the value of the Swedish krona of +/–5 percent would have an impact of SEK 5 million on profit.
Foreign exchange risks also exist in the translation of foreign subsidiaries' assets, liabilities and profit into the Parent Company's functional currency. This is known as translation exposure. Nolato's policy is that net investments in shareholders' equity in foreign currency shall not be currency-hedged. Translation differences reported in other comprehensive income are detailed in Note 21, "Other reserves".
| SEKm | Net assets |
Swedish krona 5% stronger |
|---|---|---|
| Nolato Romania, RON | – 3 | — |
| Nolato USA, USD | 6 | — |
| Nolato Jaycare, GBP | 85 | – 4 |
| Nolato Beijing, CNY | 288 | – 14 |
| Nolato Lovepac Converting, CNY | 42 | – 2 |
| Nolato Lovepac Converting India, INR | – 17 | 1 |
| Nolato EMC Prod. Center, MYR | 2 | — |
| Nolato Kuala Lumpur, MYR | – 36 | 2 |
| Nolato Hungary, EUR | 177 | – 9 |
| Cerbo Norge, NOK | 2 | — |
| Cerbo France, EUR | — | — |
| Total | 546 | – 26 |
The Group has SEK 546 million in foreign net assets, mainly in China, Hungary and the UK. A five percentage point appreciation of the Swedish krona would have an impact of SEK –26 million on the net assets in the Group.
Interest rate risk is the risk that the Group's net interest income/expense will be weakened in the event of changes to market interest rates. At 31 December, interest-bearing liabilities amounted to SEK 196 million (386). In order to limit the Nolato Group's interest rate risk, the portion of those interest-bearing liabilities exceeding SEK 400 million must have a fixed interest maturity structure as follows:
– Up to one year: 35–65% – More than one year: 35–65%
The average fixed interest term, including the effects of financial instruments, shall never exceed 3 years.
The target for investing excess liquidity is to achieve the best possible return with regard to credit risk and the liquidity of the investments. The policy stipulates that investments may only be carried out in interestbearing securities or bank deposits. The term of the investments may not exceed three months.
Liquidity risk, also known as financing risk, relates to the risk of the Group having problems accessing capital. In order to maintain financial flexibility and meet the Group's capital requirements, contractual credit facilities are in place with various contract lengths. This both enables the financing of fluctuations and organic growth, and provides the Group with capacity for large investments and acquisitions.
Nolato has total loan agreements of SEK 800 million, of which SEK 350 million matures on 1 August 2014 and SEK 450 million matures on 31 December 2015.
An increase in the interest rate by one percentage point based on the interest-bearing liabilities at the end of the year would result in additional interest expenses within the Group of SEK 2 million.
| Outstanding | Future interest expense | Term out- | Remaining fixed | Average | |
|---|---|---|---|---|---|
| amount (SEKm) | during the term outst. standing (mon) interest period (mon) interest (%) | ||||
| Interest-bearing liabilities | |||||
| Bank loan, USD | – 85 | — | 1 | 1 | 0.9 |
| Pension liability, SEK | – 111 | — | — | — | 3.5 |
| Total | – 196 | — | 2.3 | ||
| Interest-bearing assets | |||||
| Cash and cash equivalents | 318 | — | — | 1.2 | |
Total fnancial net asset 122
As part of the financing of the Group's subsidiaries, the Parent Company has issued internal loans in EUR in Hungary, in GBP in the UK and in USD in the US. The repayment of these loans has been hedged according to the table below.
| Subsidiary company | Currency forward | Selling price | Maturity date |
|---|---|---|---|
| Nolato Holding USA, Inc., USA | 7 MUSD | 6.5849 | 30 Dec. 2014 |
| Nolato Holdings UK Ltd, UK | 9 MGBP | 10.7332 | 30 Dec. 2014 |
| Nolato Hungary Kft, Hungary | 5 MEUR | 9.0444 | 30 Dec. 2014 |
As part of the financing of the Group's Romanian subsidiary, the Parent Company has hedged an internal loan between its Hungarian and Romanian subsidiaries using a currency swap of RON 9 million/EUR 2 million at the rate of 4.577 maturing 30 Dec. 2014.
On 31 December the Group's financial liabilities stood at SEK 720 million (916). The maturity structure for borrowings in relation to interest-bearing liabilities is shown in the table above. Non-interest-bearing liabilities are attributable primarily to accounts payable, with the term outstanding shown in the table below.
| Maturity | < 1 month | Within 1–3 months | Within 4–12 months | > 1 year | Total |
|---|---|---|---|---|---|
| Accounts payable | 311 | 189 | 11 | 13 | 524 |
Credit risk refers to an exposure to loss in the event that a counterparty to a financial instrument is unable to fulfil its commitments. Nolato is exposed to credit risk through its operational activities and some of its financial activities.
The Group's maximum credit risk exposure is SEK 601 million (685), consisting essentially of SEK 598 million (682) of accounts receivable.
Accounts receivable are continually analysed at operating level within the Group. Accounts receivable are subject to credit checks and approval procedures exist in all Group companies.
In accordance with the Group's financial policy on credit risk for financial activities, the Group only deals with well-established financial institutions. Transactions are undertaken within set limits and credit exposure per counterparty is continually analysed.
The Group's operations are monitored by the highest decision-makers (the Group management) on the basis of the three operational business areas: Nolato Medical, Nolato Telecom and Nolato Industrial.
Nolato Medical develops and manufactures complex polymer products and product systems for medical technology and pharmaceutical customers. The market consists of large, global customers, featuring demanding development work, long product life spans and stringent requirements in terms of quality, traceability and safety. Nolato Medical has a strong position in the Nordic region and a growing position in the rest of Europe and the US. Development and production are carried out in Sweden, Hungary, the US, the UK and China. A more detailed presentation of the business area can be found on pages 18 – 21.
Nolato Telecom develops and manufactures advanced components and subsystems for mobile phones and products and systems for shielding of electronics (EMC). The market consists of a few large, global companies with high technological demands, extremely short development times and quick production start-ups. Nolato Telecom enjoys a strong position with selected customers. In 2013, development and production were conducted in China, Malaysia and Sweden. A more detailed presentation of the business area can be found on pages 22 – 25.
Nolato Industrial develops and manufactures products and product systems in plastic and TPE for customers in the automotive industry, hygiene, domestic appliances, gardening/forestry, furniture and other selected customer areas. The market is fragmented and diversified, with a large number of customers and a large number of suppliers. Nolato Industrial has a strong position in the Nordic region and parts of Central Europe. Development and production are carried out in Sweden, Hungary and Romania. A more detailed presentation of the business area can be found on pages 26 – 29.
Directly attributable items and items which could be distributed among the segments in a reasonable and reliable manner have been included in the segments' profit, assets and liabilities. The recognised items in the operating segments are measured in accordance with the earnings, assets and liabilities monitored by the Group management.
Internal pricing between the Group's various segments is set according to the arm's length principle, i.e. between parties which are independent of each other, well-informed and have an interest in the transactions being carried out.
The assets in each business area consist of all operating assets used by the operating segment, primarily intangible non-current assets arising through business combinations, property, plant and equipment, inventories and accounts receivable. Liabilities assigned to operating segments include all operating liabilities, mainly accounts payable and accrued expenses.
Unallocated items in the balance sheet consist primarily of financial assets, interest-bearing receivables and liabilities, provisions and deferred tax assets/liabilities. Unallocated items in the income statement are attributable to the Parent Compa-
ny's expenses, financial income, financial expenses and tax expenses.
The segments' investments in non-current assets include all investments other than investments in expendable equipment and low value equipment. All segments are established in accordance with Group accounting policies.
| Nolato Medical | Nolato Telecom | Nolato Industrial | Elimination | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| External sales | ||||||||||
| External sales | 1,274 | 1,159 | 2,070 | 1,541 | 1,170 | 1,169 | 8 | 5 | 4,522 | 3,874 |
| Internal sales | — | — | 9 | 7 | — | 1 | – 9 | – 8 | — | — |
| Net sales | 1,274 | 1,159 | 2,079 | 1,548 | 1,170 | 1,170 | – 1 | – 3 | 4,522 | 3,874 |
| Proft | ||||||||||
| Operating profit (EBITA) | 165 | 133 | 166 | 96 | 119 | 105 | – 23 | – 31 | 427 | 303 |
| Amort. of intang. assets arising from company acq. | – 13 | – 13 | — | — | – 3 | – 3 | — | — | – 16 | – 16 |
| Operating proft | 152 | 120 | 166 | 96 | 116 | 102 | – 23 | – 31 | 411 | 287 |
| Financial income | 3 | — | ||||||||
| Financial expenses | – 11 | – 15 | ||||||||
| Tax expenses for the year | – 89 | – 70 | ||||||||
| Proft for the year | 314 | 202 | ||||||||
| Receivables and liabilities | ||||||||||
| The segments' assets | 1,104 | 1,079 | 611 | 686 | 667 | 709 | – 170 | – 157 | 2,212 | 2,317 |
| Unallocated assets | 361 | 317 | ||||||||
| Total assets | 1,104 | 1,079 | 611 | 686 | 667 | 709 | – 170 | – 157 | 2,573 | 2,634 |
| The segments' liabilities | 298 | 254 | 560 | 631 | 239 | 258 | – 182 | – 201 | 915 | 942 |
| Unallocated liabilities 1 | 310 | 522 | ||||||||
| Total liabilities | 298 | 254 | 560 | 631 | 239 | 258 | – 182 | – 201 | 1,225 | 1,464 |
| Other information | ||||||||||
| Investments | 52 | 248 | 53 | 36 | 46 | 47 | — | — | 151 | 331 |
| Depreciation and amortisation | 75 | 72 | 39 | 41 | 43 | 44 | — | — | 157 | 157 |
| Impairment | — | — | — | — | — | — | — | — | — | — |
| Significant items, other than depr./amort. with no offsetting payments, impairment and provisions |
– 2 | 6 | 2 | 3 | — | – 5 | — | — | — | 4 |
1 The year 2012 has been restated in respect of the change to pension provisions in IAS 19, which means that the corridor method as a mechanism to even out actuarial gains/losses is no longer applied (see Note 31).
| Cash fow from operations, allocated by segment | 2013 | 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | |
| Cash flow from operations before changes in working capital | 226 | 205 | 158 | 589 | 191 | 137 | 146 | 474 |
| Changes in working capital | 12 | 41 | 4 | 57 | 15 | 69 | – 21 | 63 |
| Cash fow from operations | 238 | 246 | 162 | 646 | 206 | 206 | 125 | 537 |
| Unallocated items 1 | – 134 | – 61 | ||||||
| Total cash fow from operations | 512 | 476 | ||||||
| Cash fow from investing activities, allocated by segment | 2013 | 2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | |
| Acquisition of non-current assets 2 | – 49 | – 54 | – 48 | – 151 | – 254 | – 39 | – 42 | – 335 |
| Sale of non-current assets | — | 1 | — | 1 | — | — | — | — |
| Sale of operation | 6 | — | ||||||
| Cash fow from investment activities | – 49 | – 53 | – 48 | – 144 | – 254 | – 39 | – 42 | – 335 |
1 For 2013, the Group's change in working capital was SEK 61 million and, allocated by business area, according to the above SEK 57 million. The difference of SEK 4 million is included in the amount of SEK –134 million. Other unallocated items consist chiefly of an operating loss of SEK –23 million (with the Parent Company accounting for the majority) income tax paid at SEK –123 million and other items such as pension payments, other provisions paid, interest received/paid, including certain parts of the items not affecting cash flow.
2 Paid investments for the year in non-current assets, i.e. after adjustment for outstanding supplier invoices at the balance sheet date of SEK 1 million (–4).
In the Nordic region the Group manufactures and sells products from all three business areas. Elsewhere in Europe, the Group has manufacturing and sales for the Nolato Medical and Nolato Industrial business areas. In Asia, the Group has manufacturing and sales in all business areas, and in North America in the Nolato Medical business area.
| Asia | Group | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| 882 | 952 | 166 | 179 | 1,145 | 965 | 330 | 1,996 | 1,448 | 4,522 | 3,874 | |
| 1,102 | 1,196 | — | 1 | 543 | 548 | 170 | 765 | 719 | 2,573 | 2,634 | |
| 814 | 865 | — | 2 | 807 | 696 | 159 | 7,569 | 6,699 | 9,357 | 8,421 | |
| 73 | 79 | — | — | 21 | 217 | 4 | 51 | 31 | 151 | 331 | |
| Sweden | Other Nordic countr. | Other Europe | North America etc. 2013 333 163 167 6 |
| Sweden | Other Nordic countr. | Other Europe | North America etc. | Asia | Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Total | 211 | 248 |
|---|---|---|
| Development expenditure for customer-specific products | 211 | 248 |
| 2013 | 2012 |
The Group's development expenditure relates to developing customer-specific products in close collaboration with customers. Product development costs are charged to the income statement in the cost of goods sold when they arise.
| Total | 19 | 11 |
|---|---|---|
| Others | 7 | 11 |
| Bankruptcy payment | 12 | — |
| 2013 | 2012 |
| Total | 3,331 | 4,961 |
|---|---|---|
| Other duties | 255 | 1,850 |
| Taxation duties | 542 | 481 |
| Audit business other than auditing | — | 63 |
| Auditing | 2,534 | 2,567 |
| KPMG: | ||
| SEK thousand | 2013 | 2012 |
Auditing relates to reviewing the annual report and accounts, as well as the administration of the Board of Directors and the President and CEO, other duties required of the company's auditor and advisory services or other assistance resulting from observations in relation to such review or carrying out such other duties.
| 2013 | 2012 | |
|---|---|---|
| Effect of exchange rate on receivables/liabilities, net | — | – 1 |
| Acquisition expenses | — | – 6 |
| Capital loss on sale of subsidiary | – 8 | — |
| Total | – 8 | – 7 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Number | Of which men | Number | Of which men | |
| Parent Company | ||||
| Nolato AB, Torekov, Sweden | 11 | 82% | 12 | 83% |
| Group companies | ||||
| Cerbo France Sarl, France | 1 | 0% | 1 | 0% |
| Cerbo Norge A/S, Norway | — | — | 2 | 50% |
| Lövepac Converting Ltd, China | 675 | 35% | 456 | 47% |
| Lövepac Converting Private Ltd, India | 3 | 100% | 118 | 90% |
| Nolato Beijing Ltd, China | 6,842 | 39% | 6,089 | 29% |
| Nolato Cerbo AB, Trollhättan, Sweden | 110 | 57% | 108 | 58% |
| Nolato Contour, Inc., US | 167 | 57% | 159 | 66% |
| Nolato EMC Production Center SDN BHD, Malaysia | 49 | 24% | 36 | 25% |
| Nolato Gota AB, Götene, Sweden | 107 | 68% | 103 | 66% |
| Nolato Hertila AB, Åstorp, Sweden | 23 | 65% | 25 | 60% |
| Nolato Hungary Kft, Hungary | 506 | 47% | 468 | 47% |
| Nolato Jaycare Ltd, UK | 271 | 77% | 205 | 77% |
| Nolato Lövepac AB, Skånes Fagerhult, Sweden | 40 | 70% | 35 | 71% |
| Nolato MediTech AB, Hörby, Sweden | 175 | 54% | 201 | 57% |
| Nolato MediTor AB, Torekov, Sweden | 56 | 54% | 61 | 56% |
| Nolato Plastteknik AB, Gothenburg, Sweden | 102 | 70% | 96 | 71% |
| Nolato Polymer AB, Torekov, Sweden | 72 | 76% | 82 | 79% |
| Nolato Romania Srl, Romania | 29 | 45% | 23 | 35% |
| Nolato Silikonteknik AB, Hallsberg, Sweden | 36 | 69% | 35 | 74% |
| Nolato Sunne AB, Sunne, Sweden | 82 | 76% | 106 | 76% |
| Total | 9,357 | 43% | 8,421 | 38% |
| Total 1,095 |
1,012 |
|---|---|
| Social security contributions 164 |
148 |
| Pension expenses, Note 23 81 |
78 |
| Salaries and remuneration, etc. 850 |
786 |
| 2013 | 2012 |
There are 133 (149) senior executives within the Group. Expensed remuneration and benefits for the senior executives during the year totalled SEK 116 million (112), of which SEK 19 million (11) relates to bonus.
| 2013 | 2012 | |||
|---|---|---|---|---|
| Men | Women | Men | Women | |
| Board members | 50 | 2 | 60 | 5 |
| Managing directors | 16 | — | 15 | — |
| Other senior executives | 46 | 19 | 52 | 17 |
| Total | 112 | 21 | 127 | 22 |
| SEK thousand | Base salary/ Directors' fee 1 |
Bonus 2 | Stock options progr. | Other benefits 3 |
Pension premiums |
Other remuneration 4 |
Total |
|---|---|---|---|---|---|---|---|
| Chairman of the Board, Fredrik Arp | 405 | — | — | — | — | — | 405 |
| Board member, Sven Boström-Svensson | 155 | — | — | — | — | — | 155 |
| Board member, Erik Paulsson | 155 | — | — | — | — | — | 155 |
| Board member, Henrik Jorlén | 190 | — | — | — | — | — | 190 |
| Board member, Lars-Åke Rydh | 210 | — | — | — | — | — | 210 |
| Board member, Anna Malm Bernsten | 155 | — | — | — | — | — | 155 |
| President and CEO, Hans Porat | 4,608 | 2,304 | 6,007 | 144 | 1,883 | 89 | 15,035 |
| Other senior executives (4 people) | 8,992 | 3,082 | — | 673 | 1,978 | 239 | 14,964 |
| Total | 14,870 | 5,386 | 6,007 | 817 | 3,861 | 328 | 31,269 |
| SEK thousand | Base salary/ Directors' fee 1 |
Bonus 2 | Stock options progr. | Other benefits 3 |
Pension premiums |
Other remuneration 4 |
Total |
|---|---|---|---|---|---|---|---|
| Chairman of the Board, Fredrik Arp | 320 | — | — | — | — | — | 320 |
| Board member, Gun Boström | 140 | — | — | — | — | — | 140 |
| Board member, Erik Paulsson | 140 | — | — | — | — | — | 140 |
| Board member, Henrik Jorlén | 170 | — | — | — | — | — | 170 |
| Board member, Lars-Åke Rydh | 190 | — | — | — | — | — | 190 |
| Board member, Anna Malm Bernsten | 140 | — | — | — | — | — | 140 |
| President and CEO, Hans Porat | 4,392 | 1,757 | 676 | 142 | 1,791 | 87 | 8,845 |
| Other senior executives (3 people) 5 | 7,110 | 2,137 | — | 414 | 1,593 | 59 | 11,313 |
| Total | 12,602 | 3,894 | 676 | 556 | 3,384 | 146 | 21,258 |
1 Including remuneration for committee work.
2 Bonus pertains to expensed remuneration for the financial year, payable in the following year.
3 Other benefits pertains to company cars.
4 Other remuneration relates to the President and CEO and other senior executives regarding previous holiday entitlements paid, and other remuneration.
5 Four people from 15 October 2012.
A director's fee is paid to the Chairman and members of the Board as decided by the Annual General Meeting. No director's fee is paid to employees of the Group or to employee representatives. Remuneration for the President and CEO and other senior executives is made up of a base salary, variable remuneration, other benefits and a pension. Other senior executives are individuals who, together with the President and CEO, constitute the Group management. In 2013, Group management comprised four people, besides the President and CEO. They are Executive Vice President and CFO Per-Ola Holmström, President of Nolato Medical Christer Wahlquist, President of Nolato Telecom Jörgen Karlsson and President of Nolato Industrial Johan Arvidsson. For further information, see page 42.
The Board of Directors has appointed a Remuneration Committee, consisting of the Chairman of the Board and one other Board member. The committee has proposed, and the Board of Directors has approved, the current principles for variable remuneration. The committee has made decisions on all remuneration and benefits for the President and CEO, which have been presented to and approved by the Board. The committee has approved the remuneration of the Group management.
Bonuses paid to the President and CEO and other senior executives are based on the outcome of profit and return on capital employed. The maximum outcome is 50% of base salary for the President and CEO and
40% for other senior executives. At the same time, the relevant profit centre must report positive earnings. In 2013, the outcome for the President and CEO was 50% of base salary (40) and for senior executives it was 24- 40% of base salary (27–40).
In the Group, there is a cash-based synthetic stock options programme for the President and CEO. The programme covers the period 1 April 2011 to 31 March 2014. The agreement entitles the President and CEO to a stock yield-based bonus, the value of which amounts to the difference between the average closing price of the Nolato shares in Q1 2014, and 83.74 multiplied by 150,000, although no more than 50% of the accumulated monthly ordinary gross salary expensed during the period 1 April 2011 to 31 March 2014. The President and CEO did not make any cash payment and was allotted the 150,000 options directly when the agreement commenced.
The programme is expensed by means of allocation at ongoing revaluation of the liability to fair value, measured according to the Black & Scholes model and taking into account the terms and conditions of the programme until payment is made. This remuneration can only be awarded to the President and CEO after the programme matures. The cost of the programme for the year (including social security contributions) has been charged to profit in the amount of SEK 6,007 k (676) and is recognised as an interim liability in the Parent Company. At the end of 2013, the total value of the bonus programme was deemed to be SEK 8,796 k (901) including social security contributions.
The retirement age for the President and CEO and other senior executives is 65. The President and CEO's pension premium amounts to 40% of pensionable salary, and follows a defined contribution pension scheme. Variable remuneration does not qualify as pensionable income. For 2013, the pension premium was 40% of base salary (40).
Other senior executives have defined contribution pension schemes. For 2013, the average pension premium was 22% of base salary (22). Variable remuneration does not qualify as pensionable income.
The company and the President and CEO have agreed on a notice period of six months if the President and CEO resigns of his own accord. In the event of termination by the company, a notice period of 24 months applies. Other senior executives shall provide a notice period of six months. In the event of termination by the company, a notice period of 12-24 months applies. Any other income that is received during the notice period shall be deducted from the salary and other remuneration payable during the notice period. No such deduction shall be made for the President and CEO. Both the President and CEO and other senior executives collect base salary and other benefits during the notice period. There is no remuneration after the notice period.
| 2013 | 2012 | |
|---|---|---|
| Interest income | 3 | — |
| Interest expenses | – 8 | – 9 |
| Net gains/losses | ||
| Foreign exchange gains and losses, net | — | – 3 |
| Other financial expenses | – 3 | – 3 |
| Net fnancial income/expense | – 8 | – 15 |
| Recognised as: | ||
| Financial income | 3 | — |
| Financial expenses | – 11 | – 15 |
| Net fnancial income/expense | – 8 | – 15 |
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Interest income |
Interest expenses |
Net gains/ losses |
Interest income |
Interest expenses |
Net gains/ losses |
|
| Total net fnancial income/expense per category of fnancial instruments | ||||||
| Financial assets/liabilities valued at fair value in income statement | ||||||
| Derivatives used to hedge intra-Group loans | — | — | 2 | — | — | – 2 |
| Bank deposits | 3 | — | — | — | — | — |
| PRI pension liability | — | – 4 | — | — | – 5 | — |
| Borrowings | — | – 4 | — | — | – 4 | — |
| Other financial liabilities | — | – 3 | – 2 | — | – 3 | – 1 |
| Total | 3 | – 11 | — | — | – 12 | – 3 |
All interest income is attributable to financial assets, which are valued at accumulated acquisition value.
| 2013 | 2012 | |
|---|---|---|
| Current tax expenses | ||
| Tax expenses for the period | – 111 | – 75 |
| Adjustment for tax attributable to previous years | 3 | – 1 |
| – 108 | – 76 | |
| Deferred tax income/expense | ||
| Deferred tax in relation to temporary differences | 16 | – 1 |
| Deferred tax attributable to previous years | 3 | — |
| Deferred tax attributable to unutilised loss carry-forwards | — | – 8 |
| Deferred tax as a result of tax rate changes | — | 15 |
| 19 | 6 | |
| Total reported tax expense | – 89 | – 70 |
| 2013 | 2012 | |
|---|---|---|
| Proft before tax | 403 | 272 |
| Tax according to applicable Parent Company tax rate | – 89 | – 71 |
| Effect of other tax rates for foreign Group companies | – 2 | – 4 |
| Non-deductable expenses | – 2 | – 4 |
| Tax attributable to previous years | 6 | – 1 |
| Effect of change in tax rates | — | 15 |
| Effect of non-capitalised deficits arising during the year | – 2 | – 4 |
| Standard interest on tax allocation reserve | — | – 1 |
| Recognised effective tax | – 89 | – 70 |
Swedish corporation tax amounted to 22.0% (26.3) and the effective tax rate was 22.1% (25.7).
| Deferred tax assets | Deferred tax liabilities | Net | ||||
|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| Intangible non-current assets | — | — | 23 | 24 | – 23 | – 24 |
| Property, plant and equipment | 20 | 21 | 42 | 47 | – 22 | – 26 |
| Inventories | 6 | 7 | — | — | 6 | 7 |
| Accounts receivable | 1 | 1 | — | — | 1 | 1 |
| Provisions for pensions 1 | 14 | 5 | — | – 10 | 14 | 15 |
| Tax allocation reserves | — | — | 41 | 40 | – 41 | – 40 |
| Others | 22 | 3 | 5 | 5 | 17 | – 2 |
| Loss carry-forwards | — | — | — | — | — | — |
| Tax assets/liabilities | 63 | 37 | 111 | 106 | – 48 | – 69 |
| Offsetting | – 27 | – 2 | – 27 | – 2 | — | — |
| Tax assets/liabilities, net | 36 | 35 | 84 | 104 | – 48 | – 69 |
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in the Group in relation to loss carry-forwards totalling SEK 49 million (47). These loss carry-forwards relate to the operations in Malaysia and India, and it is unlikely that they will be able to be used against future taxable gains.
| Balance as at 1 Jan 2012 |
Recognised in profit for the year |
Recognised against other compreh. income |
Acquisitions of business |
Disposal of business |
Balance as at 31 Dec 2012 |
|
|---|---|---|---|---|---|---|
| Intangible non-current assets | – 15 | 1 | — | – 10 | — | – 24 |
| Property, plant and equipment | – 31 | 7 | – 1 | – 1 | — | – 26 |
| Inventories | 7 | — | — | — | — | 7 |
| Accounts receivable | 2 | – 1 | — | — | — | 1 |
| Provisions for pensions 1 | 4 | 1 | 10 | — | — | 15 |
| Tax allocation reserves | – 44 | 4 | — | — | — | – 40 |
| Others | – 7 | 3 | — | 2 | — | – 2 |
| Loss carry-forwards | 9 | – 9 | — | — | — | — |
| Total | – 75 | 6 | 9 | – 9 | — | – 69 |
| Balance as at 1 Jan 2013 |
Recognised in profit for the year |
Recognised against other compreh. income |
Acquisitions of business |
Disposal of business |
Balance as at 31 Dec 2013 |
|
|---|---|---|---|---|---|---|
| Intangible non-current assets | – 24 | 1 | — | — | — | – 23 |
| Property, plant and equipment | – 26 | — | — | — | 4 | – 22 |
| Inventories | 7 | – 1 | — | — | — | 6 |
| Accounts receivable | 1 | — | — | — | — | 1 |
| Provisions for pensions | 15 | 2 | – 3 | — | — | 14 |
| Tax allocation reserves | – 40 | – 1 | — | — | — | – 41 |
| Others | – 2 | 18 | 1 | — | — | 17 |
| Loss carry-forwards | — | — | — | — | — | — |
| Total | – 69 | 19 | – 2 | — | 4 | – 48 |
| Total | – 2 | 9 |
|---|---|---|
| Exchange rate differences in deferred tax | 1 | – 1 |
| Deferred tax attributable to provisions for pensions (PRI) 1 | – 3 | 10 |
| 2013 | 2012 |
1 The year 2012 has been restated in respect of the change to pension provisions in IAS 19, which means that the corridor method as a mechanism to even out actuarial gains/losses is no longer applied (see Note 31).
Depreciation/amortisation is included in operating expenses as follows:
| 2013 | 2012 | |
|---|---|---|
| Customer relations | 16 | 14 |
| Buildings and land | 16 | 16 |
| Machinery and other technical facilities | 106 | 110 |
| Equipment, tools, fixtures and fittings | 16 | 15 |
| Others | 3 | 2 |
| Total | 157 | 157 |
Depreciation/amortisation has been allocated as follows:
| 2013 | 2012 | |
|---|---|---|
| Cost of goods sold | 136 | 137 |
| Selling expenses | 18 | 17 |
| Administrative expenses | 3 | 3 |
| Total | 157 | 157 |
| Total | – 4,130 | – 3,598 |
|---|---|---|
| Depreciation/amortisation and impairment | – 157 | – 157 |
| Other costs | – 292 | – 391 |
| Energy costs | – 115 | – 116 |
| Costs for remuneration to employees | – 1,095 | – 1,012 |
| Changes in inventories of finished goods and work in progress | – 33 | 62 |
| Raw materials and supplies | – 2,438 | – 1,984 |
| 2013 | 2012 |
| Software | Tenancy rights | Customer rel.1 | Cap. dev. exp. | Goodwill1 | Total | |
|---|---|---|---|---|---|---|
| ACQUISITION COST | ||||||
| On 1 January 2012 | — | — | 79 | 30 | 387 | 496 |
| Investments | — | 2 | — | — | — | 2 |
| Reclassifications | 12 | 4 | 10 | – 26 | — | — |
| Acquisitions | — | — | 41 | — | 102 | 143 |
| Translation differences | — | – 1 | – 2 | – 1 | – 6 | – 10 |
| On 1 January 2013 | 12 | 5 | 128 | 3 | 483 | 631 |
| Translation differences | — | — | 1 | — | 2 | 3 |
| On 31 December 2013 | 12 | 5 | 129 | 3 | 485 | 634 |
| ACCUMULATED DEPRECIATION/AMORTISATION | ||||||
| On 1 January 2012 | — | — | – 41 | – 21 | — | – 62 |
| Depreciation/amortisation for the year | – 2 | — | – 14 | — | — | – 16 |
| Reclassifications | – 5 | – 4 | – 9 | 18 | — | — |
| On 1 January 2013 | – 7 | – 4 | – 64 | – 3 | — | – 78 |
| Depreciation/amortisation for the year | – 2 | — | – 16 | — | — | – 18 |
| On 31 December 2013 | – 9 | – 4 | – 80 | – 3 | — | – 96 |
| Book value 31 December 2012 | 5 | 1 | 64 | — | 483 | 553 |
| Book value 31 December 2013 | 3 | 1 | 49 | — | 485 | 538 |
1) Consists of acquired surplus values. Amortisation of customer relationships is included in Group selling expenses.
Goodwill is impairment-tested annually and when there is an indication of impairment. The test is performed at the lowest cash-generating unit level, or groups of cash-generating units on which these assets can be verified. In most cases, this means the acquisition level. However, following integration, they can be transferred to part of another unit. For Nolato Medical, impairment testing has been performed at the segment level, and by legal company for Nolato Industrial. An impairment is recognised if the carrying amount exceeds the recoverable value. The recoverable value is established based on calculations of useful life. A discounted cash flow model is used to estimate useful life. The estimate includes an important source of uncertainty because the estimates and assumptions used in the discounted cash flow model contain uncertainty about future events and market circumstances, so the actual outcome can differ significantly. The estimates and assumptions have, however, been reviewed by the management and correspond with internal forecasts and future outlook for the operations.
The discounted cash flow model includes forecasting future cash flow from operations including estimates regarding income volumes, production costs and requirements in terms of capital employed. Several assumptions are made, the most significant being the growth rate of income and the discount rate.
Forecasts of future operating cash flows are based on the following:
– budgets and strategic plans for a three-year period corresponding to management's estimates, as adopted by the board of each legal company, of future revenues and operating expenses, with the help of the outcome of previous years, general market conditions, industry trends and forecasts and other available information. – after this, a final value is calculated based on a growth factor that corresponds to expected inflation in the country where the asset is used.
Impairment-tested operations in the Group are mainly in Sweden, the UK and the US. Both of these countries are deemed to have largely similar expected inflation, which is in line with the goals of central banks and similar institutions. It is assumed that relevant markets will grow in line with general inflation.
Forecasts of future cash flow from operations are adjusted to present value with a suitable discount rate. As a starting point, the discount rate takes the Nolato Group's marginal borrowing rate adjusted for the risk premium in the country concerned, if applicable, and the systematic risk in the cash-generating unit at the time of measurement. Management bases the discount rate on the inherent risk in the business in question and in similar industries.
Goodwill is allocated to Group segments as follows:
| 2013 | 2012 |
|---|---|
| 382 | 380 |
| 41 | 41 |
| 62 | 62 |
| 485 | 483 |
| Nolato Industrial | Nolato Medical | ||||||
|---|---|---|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | ||||
| Nolato Gota Nolato Hertila | Nolato Gota Nolato Hertila | ||||||
| Risk-free rate, % | 2.4 | 2.4 | 1.7 | 1.7 | 2.5 | 1.9 | |
| Tax rate, % | 22.0 | 22.0 | 22.0 | 22.0 | 23.2 | 23.6 | |
| Forecast period | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | |
| Growth after forecast period, % | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | |
| Applied discount rate before tax, % | 10.0 | 10.0 | 9.2 | 9.2 | 9.2 | 8.5 | |
In the impairment test in each segment, the discount rate has essentially been constructed segment by segment. The various legal companies in each segment are relatively similar in size, have the same type of customer segments with similar behaviour, and similar types of products. Therefore, the risk level for the legal companies is also deemed to be more or less the same and the assumptions given for Nolato Industrial are essentially applicable to the companies included in the segment. Impairment-tested operations in the Group are mainly in Sweden, the UK and the US. Therefore, test assumptions have been relatively homogeneous, with adjustments for country-specific parameters.
Using these assumptions, the recoverable value exceeds the carrying amount of all cash-generating units, and there is no impairment. Sensitivity analyses have been performed to evaluate whether reasonable unfavourable changes within the most relevant parameters would lead to an impairment. The analyses focused on a deterioration in the average growth rate, declining profitability and an increase in the discount rate. These analyses did not give rise to any impairment indications.
| Buildings and land |
Machinery and other technical facilites |
Equipment, tools, fixtures and fittings |
Construction in progress and advance payments |
Total | |
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| On 1 January 2012 | 477 | 1,700 | 199 | 62 | 2,438 |
| Investments | 21 | 67 | 9 | 55 | 152 |
| In new companies on acquisition | — | 28 | 6 | — | 34 |
| Sales/disposals | — | – 23 | – 2 | — | – 25 |
| Reclassifications | 13 | 35 | 13 | – 67 | – 6 |
| Translation differences | – 6 | – 35 | – 2 | – 3 | – 46 |
| On 1 January 2013 | 505 | 1,772 | 223 | 47 | 2,547 |
| Investments | 3 | 87 | 8 | 64 | 162 |
| Contributions received 1 | – 5 | – 6 | — | — | – 11 |
| Divested subsidiary | – 41 | – 108 | – 29 | — | – 178 |
| Sales/disposals | – 39 | – 51 | – 3 | — | – 93 |
| Reclassifications | — | 49 | 5 | – 54 | — |
| Translation differences | 4 | 21 | 1 | — | 26 |
| On 31 December 2013 | 427 | 1,764 | 205 | 57 | 2,453 |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT | |||||
| On 1 January 2012 | – 249 | – 1,325 | – 158 | — | – 1,732 |
| Depreciation for the year | – 16 | – 110 | – 15 | — | – 141 |
| Sales/disposals | — | 20 | 1 | — | 21 |
| Reclassifications | – 4 | 8 | 2 | — | 6 |
| Translation differences | 1 | 31 | 2 | — | 34 |
| On 1 January 2013 | – 268 | – 1,376 | – 168 | — | – 1,812 |
| Depreciation for the year | – 16 | – 107 | – 16 | — | – 139 |
| Divested subsidiary | 28 | 99 | 26 | — | 153 |
| Sales/disposals | 39 | 50 | 3 | — | 92 |
| Translation differences | – 1 | – 12 | – 1 | — | – 14 |
| On 31 December 2013 | – 218 | – 1,346 | – 156 | — | – 1,720 |
| Book value 31 December 2012 | 237 | 396 | 55 | 47 | 735 |
| Book value 31 December 2013 | 209 | 418 | 49 | 57 | 733 |
1 Nolato Hungary received a contribution from the European Regional Development Fund relating to historical investments in 2011 and 2012.
| Not 17 Financial assets | ||
|---|---|---|
| 2013 | 2012 | |
| Accounts receivable | 605 | 688 |
| Deduction: Provision for decline in value of accounts receivable | – 7 | – 6 |
| Carrying amount | 598 | 682 |
The average period of credit in 2013 was 52 days (57). Accounts receivable as a percentage of sales amounted to 13.2% (17.6%). During the year, the Group reversed SEK 6 million (4) of provisions for the decline in value of accounts receivable at 1 January. Provisions for the year totalled SEK 7 million (3). The credit quality of accounts receivable not due and not impaired, and of other financial receivables is deemed to be good.
| Total | Not due | Due )15 days |
Due 16–60 days |
Due > 60 days |
|
|---|---|---|---|---|---|
| 2013 | 605 | 543 | 49 | 9 | 4 |
| 2012 | 688 | 560 | 99 | 26 | 3 |
| Total | Not due | Due )15 days |
Due 16 –60 days |
Due > 60 days |
|
|---|---|---|---|---|---|
| 2013 | 598 | 540 | 49 | 8 | 1 |
| 2012 | 682 | 558 | 97 | 25 | 2 |
| Loans receivable and accounts receivable 1 |
Assets available for sale 1 |
Derivatives used for hedging accounting |
2013 Total |
|
|---|---|---|---|---|
| Other securities | — | 2 | — | 2 |
| Accounts receivable | 598 | — | — | 598 |
| Cash and bank balances | 318 | — | — | 318 |
| Derivatives (see Note 4) | — | — | 3 | 3 |
| Carrying amount | 916 | 2 | 3 | 921 |
| Fair value | 916 | 2 | 3 | 921 |
| Loans receivable and accounts receivable 1 |
Assets available for sale 1 |
Derivatives used for hedging accounting |
2012 Total |
|
|---|---|---|---|---|
| Other securities | — | 2 | — | 2 |
| Accounts receivable | 682 | — | — | 682 |
| Cash and bank balances | 272 | — | — | 272 |
| Derivatives (see Note 4) | — | — | 3 | 3 |
| Carrying amount | 954 | 2 | 3 | 959 |
| Fair value | 954 | 2 | 3 | 959 |
1 Assets valued at fair value via the income statement.
The market value of the currency forward contracts (derivatives) is set according to level 2. Level 1: In accordance with prices listed on an active market for the same instrument. Level 2: Based on directly or indirectly observable market data which is not included in level 1. Level 3: Based on input data which is not observable in the market.
The carrying amount of accounts receivable is deemed to coincide with the fair value because of the short maturity of these receivables.
| 2013 | 2012 | |
|---|---|---|
| Raw materials and supplies | 120 | 135 |
| Products in manufacturing | 39 | 51 |
| Finished goods and goods for resale | 100 | 102 |
| Total | 259 | 288 |
During the year, the Group impaired inventories by SEK 29 million (40). Impairment losses for the year are included in "Cost of goods sold" in the income statement.
During the year, reversed impairment losses totalled SEK 33 million (32). The reversal of previously impaired stocks is due to the fact that these items could be sold or were no longer deemed obsolete.
| Closing balance | 81 | 61 |
|---|---|---|
| Accrued expenses and deferred income | 19 | 13 |
| Other receivables | 62 | 48 |
| 2013 | 2012 |
The Group aims to have a sound capital structure and financial stability. "Capital" is defined as the Group's total reported shareholders' equity, i.e.:
| Retained earnings, incl. net income | 969 | 806 |
|---|---|---|
| Hedging reserve | 1 | 1 |
| Translation reserve | 18 | 3 |
| Other capital contributed | 228 | 228 |
| Share capital | 132 | 132 |
| 2013 | 2012 |
The Board aims to maintain a good balance between a high return which can be achieved through higher borrowing and the advantages and security offered by a sound capital structure. The Board sets the Group's financial targets each year on the basis of this. These targets should be seen as average figures over a business cycle. The extent to which these targets were achieved for 2013 is shown below.
| 2013 | 2012 | |||
|---|---|---|---|---|
| Financial targets | Outcome | Financial targets | Outcome | |
| EBITA margin | >8% | 9.4% | >8% | 7.8% |
| Return on capital employed | >15% | 26.7% | >15% | 19.4% |
| Equity/assets ratio | >35% | 52.0% | >35% | 44.0% |
The Board's dividend proposal shall take into consideration Nolato's long-term development potential, financial position and investment requirements. The Board's dividend policy means that the Board shall intend to propose a dividend which corresponds on average to at least 35% of profit after tax. For 2013, the Board proposes SEK 4.00 per share (3.50) plus an extra dividend of SEK 4.00 per share (2.50), totalling SEK 8.00 per share (6.00) or SEK 210 million (158), corresponding to a payout ratio of 67% (78).
| Hedging reserve |
Transl. reserve |
Total | |
|---|---|---|---|
| Balance on 1 January 2012 | — | 20 | 20 |
| Cash fow hedges: | |||
| Gain from fair value measurement during the year | 1 | — | 1 |
| Translation differences | — | – 17 | – 17 |
| Balance on 31 December 2012 | 1 | 3 | 4 |
| Balance on 1 January 2013 | 1 | 3 | 4 |
| Cash fow hedges: | |||
| Gain from fair value measurement during the year | — | — | — |
| Translation differences | — | 15 | 15 |
| Balance on 31 December 2013 | 1 | 18 | 19 |
The hedging reserve includes the effective portion of the accumulated net change in fair value of a cash flow hedging instrument attributable to hedged transactions which have not yet occurred. Transfers to the income statement of cash flow hedges have been recognised against other operating expenses.
The translation reserve includes all exchange rate differences arising on converting financial statements from foreign operations which have produced their financial statements in a currency other than that in which the Group's financial statements are produced. The Parent Company and the Group present their financial statements in Swedish kronor.
| Non-current liabilities | Year of maturity | Carrying value |
2013 Fair value |
Carrying value |
2012 Fair value |
|---|---|---|---|---|---|
| Financial leases | 2013 | — | — | 1 | 1 |
| Subtotal of non-current fnancial liabilities | — | — | 1 | 1 | |
| Current fnancial liabilities | |||||
| Accounts payable | 2013-2014 | 524 | 524 | 529 | 529 |
| Short-term bank loan in GBP (variable rate) | < 3 months | — | — | 129 | 129 |
| Short-term bank loan in SEK (variable rate) | < 3 months | — | — | 40 | 40 |
| Short-term bank loan in USD (variable rate) | < 3 months | 85 | 85 | 85 | 85 |
| Derivatives for hedge accounting (see Note 4) | — | — | 1 | 1 | |
| Subtotal of current fnancial liabilities | 609 | 609 | 784 | 784 | |
| Total | 609 | 609 | 785 | 785 |
At year-end, the Group's interest-bearing liabilities excluding pension liability amounted to SEK 85 million (254). The average interest rate was 0.9% (1.3). The average fixed-interest term was 1 month (2).
Total credit lines granted in the Group amount to SEK 800 million (800). Of this amount, SEK 350 million (350) is available through 1 August 2014 and SEK 450 million (450) through 31 December 2015. Pledged assets for the credit facilities amount to SEK 0 million (0). The credit facilities are conditional upon normal covenants. These include requirements in terms of financial key ratios for the Group, including net debt in relation to operating profit before depreciation/amortisation (EBITDA) and the equity/ assets ratio. At 31 December, all loan conditions were met. All loan agreements can be terminated by the other party in the event of any significant change in ownership control of the company.
The market value of the currency forward contracts (derivatives) is set according to level 2. Level 1: In accordance with prices listed on an active market for the same instrument. Level 2: Based on direct and indirect observable market data not included in Level 1. Level 3: Based on input data which is not observable in the market.
Operating lease agreements consist mainly of rental contracts for production premises. Expensed leasing fees for the year totalled SEK 48 million (45). The variable fees included in these do not add up to any significant amount. The operating lease agreements are not restricted by index clauses or such terms that provide entitlement to extend or acquire the leased items. However, there are restrictions on the right of disposal.
| Total | — | 132 |
|---|---|---|
| Between 1 and 5 years | — | 82 |
| Within 1 year | — | 50 |
| Non-cancellable lease agreements total: | ||
| Financial leases | Operating leases |
| 2013 | 2012 | |
|---|---|---|
| Net present value of defined benefit pension plans 1 | 110 | 130 |
| Other pension schemes | 1 | 1 |
| Total | 111 | 131 |
1 The provision for 2012 has increased retroactively by SEK 36 million as the previous application of the corridor method as a mechanism to even out actuarial gains/losses has been removed from IAS 19, see Note 31.
In the Group, there are defined benefit pension schemes in which employees are entitled to remuneration after leaving their position based on their final salary and vesting period. Defined benefit pension schemes in the Group only exist in Sweden.
| 2013 | 2012 | |
|---|---|---|
| Balance on 1 January | 130 | 129 |
| Benefits vested during the period | 1 | 1 |
| Interest expenses | 4 | 4 |
| Benefits redeemed | — | — |
| Pension payments | – 5 | – 5 |
| Actuarial gain (–) / loss (+) | – 7 | 1 |
| Divested subsidiary | – 13 | — |
| Total | 110 | 130 |
| 2013 | 2012 | |
|---|---|---|
| Expenses related to service during the financial year | 1 | 1 |
| Interest expense | 4 | 5 |
| Expense for special employer's contribution and tax on returns | 1 | 1 |
| Total expense for defned beneft pension schemes | 6 | 7 |
| Expense for defined contribution schemes | 69 | 65 |
| Expense for special employer's contribution | 6 | 6 |
| Total pension expense | 81 | 78 |
| Total | 7 7 |
|
|---|---|---|
| Interest expenses | 4 5 |
|
| Amounts charged to fnancial expenses: | ||
| Administrative expenses | 1 1 |
|
| Selling expenses | — | — |
| Cost of goods sold | 2 1 |
|
| Amounts charged to operating proft: | ||
| 2013 | 2012 |
Expenses for defned beneft pension schemes are recognised on the following lines in other comprehensive income:
| Total | 7 | – 1 |
|---|---|---|
| Deferred income tax | – 2 | – 2 |
| Special employer's contribution and tax on returns | 2 | — |
| Actuarial gains (+) / losses (–) | 7 | 1 |
| 2013 | 2012 |
| Accumulated at 31 December | – 32 | – 35 |
|---|---|---|
| Recognised in the period | 7 | – 1 |
| Divestment of subsidiaries | – 4 | — |
| Accumulated at 1 January | – 35 | – 34 |
| 2013 | 2012 |
| % | 2013 | 2012 |
|---|---|---|
| Discount rate | 3.80 | 3.40 |
| Future annual salary increases | 3.20 | 3.20 |
| Future annual pension increases | 1.90 | 1.90 |
| Employee turnover | 5.00 | 5.00 |
Commitments regarding retirement pensions and family pensions for salaried employees in Sweden are secured through a policy with Alecta. According to a statement issued by the Swedish Financial Reporting Board, UFR 3, this is a multipleemployer defined benefit pension scheme. For the 2013 financial year, the company had no access to any information that would enable it to recognise this scheme as a defined benefit scheme. The ITP pension scheme (supplementary pensions for salaried employees), which is insured by Alecta, is thus recognised as a defined contribution scheme. Charges for the year for pension insurance policies held with Alecta totalled SEK 4 million (5). Alecta's surplus can be allocated to policyholders and/or insured parties. On 31 December 2013, Alecta's surplus, in the form of the collective funding ratio, amounted to 148% (129). The collective funding ratio is determined by the market value of Alecta's assets as a percentage of the pension commitments calculated according to Alecta's actuarial calculation assumptions, which do not comply with IAS 19.
| Miscellaneous | Total | |
|---|---|---|
| Amount on 1 January 1 | 32 | 32 |
| Provisions for the year | — | — |
| Amounts claimed | – 2 | – 2 |
| Amount on 31 December | 30 | 30 |
1 See Note 31 on the applicable amendment of IAS 19 and the impact of amounts at 1 January.
| 2013 | 2012 | |
|---|---|---|
| Customer advances | 25 | 25 |
| Other current liabilities | 41 | 35 |
| Accrued expenses and deferred income | ||
| Salary liabilities | 95 | 93 |
| Social security contributions | 37 | 38 |
| Deliveries of goods received, not invoiced | 87 | 94 |
| Energy costs | 13 | 12 |
| Rents | 9 | 6 |
| Claims | 9 | 28 |
| Maintenance | 11 | 19 |
| Other items | 57 | 43 |
| Subtotal of accrued expenses and deferred income | 318 | 333 |
| Total | 384 | 393 |
| Note 26 Pledged assets | ||
|---|---|---|
| 2013 | 2012 | |
| Assets with retention of title | — | 1 |
| Total | — | 1 |
| 2013 | 2012 | |
|---|---|---|
| Guarantee commitments, FPG/PRI | 3 | 2 |
| Total | 3 | 2 |
The Group's transactions with senior executives in the form of salaries and other remuneration, benefits, pensions and severance pay agreements with the Board and the President and CEO are detailed in Note 10.
There are no known transactions with related parties.
| Total c.a.c.e. reported in the cash fow statement | 318 | 272 |
|---|---|---|
| Credit balance on Group account in Parent Company | 40 | 42 |
| Cash and bank balances | 278 | 230 |
| The following subcomp. are included in cash and cash equivalents: | ||
| 2013 | 2012 |
At the balance sheet date, unutilised credit within the Group stood at SEK 715 million (546).
On 1 November 2013, Nolato divested the subsidiary Nolato Sunne AB to an associated company within Per Vannesjö Industri AB. The disposal is part of our focus on the development and manufacture of products made from plastic, silicone and TPE. Nolato Sunne had 95 employees in Sunne, Sweden with sales of around SEK 130 million.
| Net assets | Balance sheet at time of sale |
|---|---|
| Property, plant and equipment | 23 |
| Financial assets | 1 |
| Current assets | 40 |
| Cash and cash equivalents | 15 |
| Provisions | – 14 |
| Deferred tax liabilities | – 4 |
| Current liabilities | – 32 |
| Sold net assets | 29 |
| Cash fow effects | |
| Cash received, sale proceeds | 22 |
| Less selling expenses | – 1 |
| Less cash equivalents sold | – 15 |
| Net cash fow from the sale | 6 |
The amendment to IAS 19 regarding defined benefit pension plans applies to fiscal years starting on 1 January 2013 with retroactive application. The previous application of the corridor method as a mechanism to even out actuarial gains/losses has thus been removed.
| Adjusted | Adjusted | Adjusted | |
|---|---|---|---|
| opening balance on | earnings | closing balance | |
| 1 Jan. 2012 | 2012 | on 31 Dec. 2012 | |
| Effect on balance sheet | |||
| Provisions for pensions and similar obligations | 37 | – 1 | 36 |
| Deferred tax liabilities | – 12 | 2 | – 10 |
| Other provisions | 9 | — | 9 |
| Shareholders' equity | – 34 | – 1 | – 35 |
| Proft for the year | — | |
|---|---|---|
| Other comprehensive income | 1 | |
| Tax attributable to other comprehensive income | – 2 | |
| Comprehensive income for the year | – 1 |
For Nolato, this involved the recognised PRI pension liability increasing by SEK 37 million at 31 December 2011 and by SEK 36 million at 31 December 2012.
Net debt has thus increased by the above amounts and the change is recognised retroactively in this report from 31 December 2011.
Adding to the change in the pension liability itself is also a special employer's contribution liability, which is recognised under other provisions in the consolidated balance sheet. Furthermore, deferred tax is calculated on the change in pension liability, including the special employer's contribution recognised among deferred tax liabilities.
The total effect of the above is then recognised in other comprehensive income (equity) and, at 31 December 2011, resulted in a reduction in equity of SEK 34 million and, at 31 December 2012, of SEK 35 million.
The change in closing balances between the years has been distributed on a straight-line basis over the quarters.
Return on equity, the equity/assets ratio, debt/equity ratio and equity per share have been affected by the reduction in equity. Return on capital employed and operating capital have also been affected, but not materially.
All key ratios above have been retroactively restated from 31 December 2011.
| SEKm | Note | 2013 | 2012 |
|---|---|---|---|
| Net sales | 2 | 23 | 19 |
| Other operating income | 3 | 2 | — |
| Selling expenses | – 8 | – 7 | |
| Administrative expenses | 4 | – 48 | – 42 |
| Other expenses | 5 | — | – 3 |
| – 54 | – 52 | ||
| Operating proft | 2,6,7,13 | – 31 | – 33 |
| Profit from participations in Group companies | 8 | 113 | 44 |
| Financial income | 9 | 22 | 25 |
| Financial expenses | 10 | – 19 | – 29 |
| 116 | 40 | ||
| Proft after fnancial income and expense | 85 | 7 | |
| Appropriations | 11 | 157 | 149 |
| Tax | 12 | – 48 | – 39 |
| Proft for the year | 194 | 117 | |
| SEKm | 2013 | 2012 |
|---|---|---|
| Proft for the year | 194 | 117 |
| Other comprehensive income Items transf. or that could be transf.to proft for the period Exchange rate diff. on monetary items in rel. to overseas net inv. |
— | – 1 |
| Comprehensive income for the year | 194 | 116 |
| SEKm | Note | 2013 | 2012 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible non-current assets | 1 | 1 | |
| Participations in Group companies | 14 | 609 | 550 |
| Receivables from Group companies | 17 | 419 | 442 |
| Other non-current receivables | 2 | 2 | |
| Deferred tax assets | 12 | 4 | 4 |
| Total non-current assets | 1,035 | 999 | |
| Current assets | |||
| Receivables from Group companies | 346 | 470 | |
| Other receivables | — | — | |
| Prepaid expenses and accrued income | 3 | 2 | |
| 349 | 472 | ||
| Cash and bank balances | 40 | 42 | |
| Total assets | 1,424 | 1,513 | |
| Shareholders' equity and liability | |||
| Shareholders' equity | |||
| Restricted equity | |||
| Share capital (26,307,408 shares) | 15 | 132 | 132 |
| Statutory reserve | 228 | 228 | |
| 360 | 360 | ||
| Unrestricted equity | |||
| Translation reserve | – 1 | – 1 | |
| Retained earnings | 382 | 423 | |
| Profit for the year | 194 | 117 | |
| 575 | 539 | ||
| Total shareholders' equity | 935 | 899 | |
| Untaxed reserves | 20 | 181 | 179 |
| Other provisions | 18 | 6 | 5 |
| Non-current liabilities | |||
| Liabilities to Group companies | 17 | — | 17 |
| Current liabilities | |||
| Liabilities to credit institutions | 16 | 85 | 254 |
| Accounts payable | 1 | 2 | |
| Liabilities to Group companies | 175 | 125 | |
| Current tax liabilities | 4 | 12 | |
| Other liabilities | 9 | 1 | |
| Accrued expenses and deferred income | 19 | 28 | 19 |
| Total current liabilities | 302 | 413 | |
| Total shareholders' equity and liabilities | 1,424 | 1,513 | |
| Pledged assets | — | — | |
| Contingent liabilities | 21 | 98 | 110 |
| Restricted equity | Unrestricted equity | ||||
|---|---|---|---|---|---|
| SEKm | Share- | Statutory | Translation | Retained | Total |
| capital | reserve | reserve | earnings | sh. equity | |
| Opening balance, 1 Jan. 2012 | 132 | 228 | — | 555 | 915 |
| Profit for the year | — | — | — | 117 | 117 |
| Other compreh. income for the year | — | — | – 1 | — | – 1 |
| Compreh. income for the year | — | — | – 1 | 117 | 116 |
| Dividend for 2011 | — | — | — | – 132 | – 132 |
| Closing balance, 31 Dec. 2012 | 132 | 228 | – 1 | 540 | 899 |
| Opening balance, 1 Jan. 2012 | 132 | 228 | – 1 | 540 | 899 |
| Profit for the year | — | — | — | 194 | 194 |
| Other compreh. income for the year | — | — | — | — | — |
| Compreh. income for the year | — | — | — | 194 | 194 |
| Dividend for 2012 | — | — | — | – 158 | – 158 |
| Closing balance, 31 Dec. 2013 | 132 | 228 | – 1 | 576 | 935 |
| SEKm | Note | 2013 | 2012 |
|---|---|---|---|
| 23 | |||
| Operating activities | |||
| Operating profit | – 31 | – 33 | |
| Adjustments for items not included in cash flow | 1 | 1 | |
| Dividends from subsidiaries | 27 | 16 | |
| Liquidation profit from subsidiaries | 5 | — | |
| Interest received | 22 | 25 | |
| Interest paid | – 6 | – 7 | |
| Realised exchange rate differences | – 3 | — | |
| Income tax paid | – 55 | – 29 | |
| Cash fow from operating activities before changes in working capital |
– 40 | – 27 | |
| Changes in working capital | |||
| Changes in operating receivables and operating liabilities | 260 | – 28 | |
| Cash fow from operating activities | 220 | – 55 | |
| Investment activities | |||
| Acquisition of financial assets | — | – 70 | |
| Shareholders' contribution | – 91 | – 2 | |
| Sale of financial assets | 21 | — | |
| Cash fow from investment activities | – 70 | – 72 | |
| Cash fow before fnancing activities | 150 | – 127 | |
| Financing activities | |||
| Borrowings | — | 254 | |
| Repayment of loans Change in long-term intra-Group transactions |
– 169 7 |
— – 157 |
|
| Dividend paid | – 158 | – 132 | |
| Group contributions received | 174 | 170 | |
| Group contributions paid | – 6 | – 5 | |
| Cash fow from fnancing activities | – 152 | 130 | |
| Cash fow for the year | – 2 | 3 | |
| Cash and cash equivalents, opening balance | 42 | 39 | |
| Cash and cash equivalents, closing balance | 40 | 42 |
The Parent Company's annual report has been drawn up in accordance with the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial Reporting Board's recommendation RFR 2, Accounting for Legal Entities. The Swedish Financial Reporting Board's statements relating to listed companies have also been applied. RFR 2 involves the Parent Company, in the annual report for the legal entity, applying all IFRS standards and statements adopted by the EU as far as possible within the framework of the Swedish Annual Accounts Act and the Swedish Law on Safeguarding Pension Obligations, and in view of the relationship between accounting and taxation. The recommendation details which exceptions from and additions to IFRS shall apply.
The accounting principles of the Parent Company otherwise comply with the consolidated accounting policies, with the following exceptions:
Transaction charges attributable to the acquisition of shares in subsidiaries are included in the acquisition cost of participations in Group companies in the balance sheet.
The income statement and balance sheet have been produced for the Parent Company in accordance with the Swedish Annual Accounts Act's format, while the comprehensive income statement, the statement of changes in shareholders' equity and the cash flow statement are based on IAS 1 Presentation of Financial Statements and IAS 7 Cash Flow Statements. The differences compared with the consolidated reports that are in the Parent Company's income statements and balance sheets consist primarily of reporting financial income and expenses and the classification of shareholders' equity.
The Parent Company has the character of a holding company, in which expenses consist solely of invoicing for joint Group expenses, particularly personnel costs for Group staff and other joint Group overheads, such as insurance, licensing fees, etc. Invoicing is carried out when services are rendered or when other resources have been received by the counterparty.
Dividend income is recognised when the right to receive the dividend is established.
In view of the relationship between reporting and taxation, the rules on financial instruments and hedge accounting contained in IAS 39 are not applied within the Parent Company as a legal entity. The Parent Company does not therefore recognise the fair value measurement of currency futures/currency swaps in the balance sheet. Outstanding derivative instruments as at 31 December 2013 are described in the consolidated statements' Note 4.
Defined benefit pension schemes are insured through a policy held with Alecta. According to RFR 2, the defined benefit pension schemes are classified and recognised as defined contribution schemes, which means that premiums paid are charged to the income statement. Charges for the year to Alecta totalled SEK 417 k (401). Within the Parent Company, a different basis than that set out in IAS 19 is applied when calculating and valuing the defined benefit schemes. The Parent Company follows the provisions of the Swedish Law on Safeguarding Pension Obligations and the regulations of the Swedish Financial Supervisory Authority, since this is a requirement for tax deduction rights. The main differences compared with the rules of IAS 19 are the manner in which the discount rate is established, the fact that the defined benefit obligations are calculated based on current salary levels without taking assumptions regarding future salary increases into consideration, and the fact that all actuarial gains and losses are recognised in the income statement when they arise.
In the Parent Company, untaxed reserves are recognised gross as a liability in the balance sheet. Appropriations are recognised as gross amounts in the income statement.
Group contributions paid and received in the Parent Company are recognised as appropriations according to the alternative rule.
| 2013 | 2012 | |
|---|---|---|
| Sales of services to subsidiaries | 23 | 19 |
| Purchase of services from subsidiaries | – 4 | – 3 |
| 2013 | 2012 |
|---|---|
| 2 | — |
| 2 | — |
| Total | 1,140 | 1,064 |
|---|---|---|
| Other duties | 237 | 187 |
| Taxation duties | 330 | 179 |
| Audit business other than auditing | — | 63 |
| Auditing | 573 | 635 |
| KPMG: | ||
| SEK thousand | 2013 | 2012 |
Auditing relates to reviewing the annual report and accounts, as well as the administration of the Board of Directors and the President and CEO, other duties required of the company's auditor and advisory services or other assistance resulting from observations in relation to such review or carrying out such other duties.
| Total | — | – 3 |
|---|---|---|
| Impairment internal receivables Group companies | — | – 2 |
| Effect of exchange rate on receivables/liabilities, net | — | – 1 |
| 2013 | 2012 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Number Of which men | Number | Of which men | ||
| Nolato AB, Torekov | 11 | 82% | 12 | 83% |
| Total | 50 | 38 |
|---|---|---|
| Social security contributions | 10 | 8 |
| Pension expenses, defined contribution plans | 8 | 5 |
| Salaries and remuneration | 32 | 25 |
| 2013 | 2012 |
There are 5 (4) senior executives at the Parent Company. Expensed remuneration and benefits for senior executives at the Parent Company during the year totalled SEK 25 million (15), of which SEK 11 million (4) relates to bonuses. Of the Parent Company's pension expenses, SEK 1.9 million (1.8) relates to the Board and the President and CEO. The company's outstanding pension liabilities and obligations in relation to the Board and the President and CEO was SEK 0 million (0).
| Total | 12 | 2 | 10 | 3 |
|---|---|---|---|---|
| Other senior executives | 4 | — | 3 | — |
| President and CEO | 1 | — | 1 | — |
| Board members | 7 | 2 | 6 | 3 |
| Men | Women | Men | Women | |
| 2013 | 2012 | |||
Depreciation, amortisation and impairment are included in operating expenses as follows:
| 2013 | 2012 |
|---|---|
| — | – 2 |
| — | – 2 |
| 2013 | 2012 |
| — | – 2 |
| — | – 2 |
| 2013 | 2012 | |
|---|---|---|
| Dividend received from Group companies | 27 | 16 |
| Anticipated dividend from Group companies | 92 | 35 |
| Impairment of participations in Group companies | — | – 7 |
| Liquidation profit from Group companies | 5 | — |
| Capital loss on sale of subsidiary | – 11 | — |
| Total | 113 | 44 |
| Total | 22 | 25 |
|---|---|---|
| Interest income, Group companies | 22 | 25 |
| 2013 | 2012 |
All interest income is attributable to financial assets, which are measured at amortised cost.
| Total | – 19 | – 29 |
|---|---|---|
| Exchange rate differences | – 2 | – 1 |
| Insurance recourse 2 | – 11 | — |
| Other financial expenses | – 3 | – 3 |
| Impairment non-current loan receivable, Group companies 1 | — | – 21 |
| Interest expense, credit institutions | – 3 | – 3 |
| Interest expense, Group companies | — | – 1 |
| 2013 | 2012 | |
1 The Parent Company's long-term loan receivable on the subsidiary in India has been impaired to SEK 0.
2 Relates to a bankruptcy payment of a previously credit-insured customer.
All interest expenses are attributable to financial liabilities, which are measured at amortised cost.
| Total | 149 | |
|---|---|---|
| 157 | ||
| Allocation to tax allocation reserve | – 47 | – 47 |
| Reversal of tax allocation reserve | 45 | 28 |
| Group contributions paid | – 6 | – 6 |
| Group contributions received | 165 | 174 |
| 2013 | 2012 |
77
| Total reported Parent Company tax expense | – 48 | – 39 |
|---|---|---|
| Deferred tax in relation to temporary differences | — | – 2 |
| Deferred tax income/expense | ||
| – 48 | – 37 | |
| Adjustment for tax attributable to previous years | – 15 | — |
| Tax expense for the period | – 33 | – 37 |
| Current tax expense (–) / income (+) | ||
| 2013 | 2012 |
The tax rate applicable is 22%.
| Proft before tax 242 Tax according to applicable Parent Company tax rate – 53 Non-deductable expenses – 7 Non-taxable income 27 Tax attributable to previous years – 15 Effect of changed tax rates — Standard interest on tax allocation reserve — Recognised effective tax – 48 |
156 – 41 – 8 12 — – 1 |
|---|---|
| – 1 | |
| – 39 | |
| Recognised in the balance sheet | |
| 2013 | 2012 |
| Other provisions 1 |
1 |
| Others 3 |
3 |
| Total 4 |
4 |
| Balance as at 1 Jan 2012 |
Recognised in profit for the year |
Recognised against shareholders' equity |
Balance as at 31 Dec 2012 |
|
|---|---|---|---|---|
| Other provisions | 1 | — | — | 1 |
| Others | 5 | – 2 | — | 3 |
| Total | 6 | – 2 | — | 4 |
| Balance as at 1 Jan 2013 |
Recognised in profit for the year |
Recognised against shareholders' equity |
Balance as at 31 Dec 2013 |
|
| Other provisions | 1 | — | — | 1 |
| Others | 3 | — | — | 3 |
| Total | 4 | — | — | 4 |
| Total | – 56 | – 52 |
|---|---|---|
| Depreciation/amortisation and impairment losses | — | – 2 |
| Other costs | – 6 | – 12 |
| Costs for remuneration to employees | – 50 | – 38 |
| 2013 | 2012 |
| Carrying amount | 609 | 550 |
|---|---|---|
| Accumulated impairment losses on 31 December | – 355 | – 355 |
| Impairment losses for the year | — | – 7 |
| Accumulated impairment losses on 1 January | – 355 | – 348 |
| Accumulated acquisition cost on 31 December | 964 | 905 |
| Disposals | – 32 | — |
| Shareholders' contribution | 91 | 2 |
| Acquisitions | — | 70 |
| Acquisition cost on 1 January | 905 | 833 |
| 2013 | 2012 | |
| Particip. interest | Carr. amount | |||
|---|---|---|---|---|
| 2013 | 2012 | 2013 | 2012 | |
| AB Cerbo Group, Trollhättan, Sweden | 100% | 100% | 117 | 117 |
| Nolato Cerbo AB, Trollhättan, Sweden | 100% | 100% | ||
| A/S Cerbo Norge, Norway | 100% | 100% | ||
| Cerbo France Sarl, France | 100% | 100% | ||
| Kartongprod. Berglund AB, Trollhättan, Sweden | 100% | 100% | ||
| Lövepac Converting Ltd, China | 100% | 100% | 9 | 9 |
| Lövepac Converting Private Ltd, India | 100% | 100% | — | — |
| Nolato Alpha AB, Kristianstad, Sweden | 100% | 100% | 12 | 12 |
| Nolato EMC Production Center Sdn Bhd, Malaysia | 100% | 100% | — | — |
| Nolato Holding USA Inc, US | 100% | 100% | — | — |
| Nolato Contour Inc, US | 100% | 100% | ||
| Nolato Gota AB, Götene, Sweden | 100% | 100% | 79 | 79 |
| Nolato Hertila AB, Åstorp, Sweden | 100% | 100% | 31 | 1 |
| Nolato Holdings UK Ltd, UK | 100% | 100% | 70 | 70 |
| C A Portsmouth Ltd, UK | 100% | 100% | ||
| Nolato Jaycare Ltd, UK | 100% | 100% | ||
| Nolato Hungary Kft, Hungary | 100% | 100% | 46 | 46 |
| Nolato Kuala Lumpur Sdn Bhd, Malaysia | 100% | 100% | — | — |
| Nolato Lövepac AB, Skånes Fagerhult, Sweden | 100% | 100% | 10 | 10 |
| Nolato MediTech AB, Hörby, Sweden | 100% | 100% | 80 | 19 |
| Nolato MediTor AB, Torekov, Sweden | 100% | 100% | 1 | 1 |
| Nolato Mobile Comm.Polymers (Beijing) Ltd, China | 100% | 100% | 91 | 91 |
| Nolato Automotive Comp. (Beijing) Co., Ltd, China | 100% | — | 1 | — |
| Nolato Plastteknik AB, Gothenburg, Sweden | 100% | 100% | 37 | 37 |
| Nolato Polymer AB, Torekov, Sweden | 100% | 100% | 5 | 5 |
| Nolato Produktions AB, Götene, Sweden | 100% | 100% | — | — |
| Nolato Romania S.R.L., Romania | 100% | 100% | — | — |
| Nolato Silikonteknik AB, Hallsberg, Sweden | 100% | 100% | 8 | 8 |
| Nolato Sunne AB, Sunne, Sweden | — | 100% | — | 33 |
| Nolato Torekov AB, Torekov, Sweden | 100% | 100% | 12 | 12 |
| Carrying amount | 609 | 550 |
The share capital of Nolato AB totals SEK 132 million, divided into 26,307,408 shares. Of these, 2,759,400 are A shares and 23,548,008 are B shares. Each A share entitles the holder to ten votes, while a B share entitles the holder to one vote. All shares have equal rights to the assets and earnings of the company.
| Number of shares | Quotient value | Share capital | |
|---|---|---|---|
| Share capital, 31 Dec 2012 | 26,307,408 | SEK 5 | SEK 131,537 k |
| Share capital, 31 Dec 2013 | 26,307,408 | SEK 5 | SEK 131,537 k |
Note 16 Borrowings
| Total | 85 | 254 | |
|---|---|---|---|
| Short-term bank loan in USD (variable rate) | < 3 months | 85 | 85 |
| Short-term bank loan in SEK (variable rate) | < 3 months | — | 40 |
| Short-term bank loan in GBP (variable rate) | < 3 months | — | 129 |
| Due | 2013 | 2012 | |
| 307 |
|---|
| 135 |
| 442 |
| – 23 |
| 419 |
| On 1 January 2012 | 17 |
|---|---|
| Change | — |
| On 1 January 2013 | 17 |
| Change | – 17 |
| On 31 December 2013 | — |
All items relate to internal loans, for which interest is calculated on an ongoing basis in line with the market. There are no contractual regulated terms.
| Note 18 Other provisions | ||||
|---|---|---|---|---|
| -------------------------- | -- | -- | -- | -- |
| Others | Total | |
|---|---|---|
| Amount on 1 January | 5 | 5 |
| Provisions for the year | 1 | 1 |
| Amounts claimed | — | — |
| Amount on 31 December | 6 | 6 |
The amount relates to future employer's contribution for endowment insurance.
| 28 | 19 |
|---|---|
| 5 | — |
| — | 4 |
| 2 | 2 |
| 6 | 4 |
| 15 | 9 |
| 2013 | 2012 |
| Total | 181 | 179 |
|---|---|---|
| Tax allocation reserves 2014 | 47 | — |
| Tax allocation reserves 2013 | 46 | 46 |
| Tax allocation reserves 2012 | 35 | 35 |
| Tax allocation reserves 2011 | 32 | 32 |
| Tax allocation reserves 2010 | 21 | 21 |
| Tax allocation reserves 2009 | — | 45 |
| 2013 | 2012 | |
| Guarantees on behalf of subsidiaries 98 |
110 |
|---|---|
| 2013 | 2012 |
The Parent Company has controlling influence over the subsidiaries, in accordance with the structure described in Note 14.
When delivering goods and services between Group companies, business terms and conditions and market pricing are applied. The scope of internal invoicing for joint Group services amounts to SEK 23 million (19), as detailed in Note 2, and relates primarily to assigning costs for joint Group services and overheads. The Parent Company is an internal bank for the Group companies, whereby intra-Group interest income of SEK 22 million (25) and interest expenses of SEK 0 million (1) have arisen in the Parent Company to the extent reported in Notes 9 and 10. Interest on loans receivable and liabilities is calculated on an ongoing basis in line with the market rate. There are no contractually regulated durations. Intra-Group receivables at the Parent Company amount to SEK 418 million (442) and liabilities to Group companies amount to SEK 0 million (17).
During the year, the Parent Company received dividends from subsidiaries in the amount of SEK 119 million (51), of which SEK 92 million (32) refers to anticipated dividend and recovered intra-Group accounts receivable of SEK 0 million (0).
| Total cash and cash equivalents rep. in the cash fow statement | 42 | |
|---|---|---|
| Credit balance on Group account in Parent Company | 40 | 42 |
| The following subcomp. are included in cash and cash equivalents: | ||
| 2013 | 2012 |
This Annual Report has been prepared in accordance with IFRS international accounting standards as adopted by the EU. It provides a true and fair presentation of the operations, financial position and earnings of the Group and the Parent Company, and describes the significant risks and uncertainty factors faced by the Parent Company and the companies included in the Group.
As indicated below, the Annual Report was approved for issue by the Board on 6 March 2014. The consolidated income statement and balance sheet and the Parent Company's income statement and balance sheet will be proposed for adoption at the Annual General Meeting on 28 April 2014.
Torekov, 6 March 2014
Fredrik Arp
Chairman of the Board
Sven Boström-Svensson Henrik Jorlén Anna Malm Bernsten
Ingegerd Andersson Björn Jacobsson Eva Norrman
Board member Board member Board member
Erik Paulsson Lars-Åke Rydh Hans Porat
Board member Board member President and CEO
Employee representative Employee representative Employee representative
My auditor's report was submitted on 14 March 2014.
Alf Svensson Authorised public accountant
I have audited the annual accounts and consolidated accounts of Nolato AB for the year 2013. The annual accounts and con-solidated accounts of the company are included in the printed version of this document on pages 44 – 78.
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
My responsibility is to express an opinion on these annual accounts and consolidated accounts based on my audit. I conducted my audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that I 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 judgment, 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.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions.
In my 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 2013 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 2013 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
I 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 my audit of the annual accounts and consolidated accounts, I 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 Nolato AB for the year 2013.
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.
My 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 my audit. I conducted the audit in accordance with generally accepted auditing standards in Sweden.
As basis for my opinion on the Board of Directors proposed appropriations of the company's profit or loss I 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 basis for my opinion concerning discharge from liability, in addition to my audit of the annual accounts and consolidated accounts, I 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. I 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.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinions.
I 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.
Malmö, 14 March 2014
Alf Svensson
Authorised public accountant
Profit after financial income and expenses, plus financial expenses, as a percentage of average total capital according to the balance sheet.
Profit after financial income and expenses, plus financial expenses, as a percentage of average capital employed. Capital employed consists of total capital less non-interestbearing liabilities and provisions.
Operating profit as a percentage of average operating capital. Operating capital consists of total capital less non-interest-bearing liabilities and provisions, less interest-bearing assets.
Profit after tax in relation to average shareholders' equity.
Operating profit (ebita) as a percentage of net sales.
Interest-bearing assets less interest-bearing liabilities and provisions.
Profit after tax, excluding amortisation of intangible assets arising from acquisitions, divided by the average number of shares.
Cash flow before financing activities in relation to the average number of shares.
Total current assets divided by total current liabilities.
Profit after tax in relation to the average number of shares.
Profit after financial income and expenses, plus financial expenses, divided by financial expenses.
Earnings before interest, taxes, depreciation and amortisation.
Earnings before interest, taxes and amortisation of intangible assets arising from acquisitions.
Earnings before interest and taxes.
Interest-bearing liabilities and provisions divided by shareholders' equity.
Shareholders' equity as a percentage of total capital according to the balance sheet.
Profit after financial income and expenses as a percentage of net sales.
Materials such as plastic, silicone, rubber and thermoplastic elastomers (TPEs).
A method for the production of polymer components. The material is injected under high pressure into a mould in which the component is made.
Production technique whereby a container is first injection-moulded and then inflated so that a receptacle is formed. Injection blow moulding is used by Nolato in the production of pharmaceutical packaging.
This is a method for continuously manufacturing products in strands, such as medical tubing.
Dip moulding is used to manufacture breathing bags, ventilator bellows and catheter balloons from synthetic or natural rubber latex. Pre-heated formers are dipped into liquid latex rubber and products are shaped by the geometry of the formers.
Designing a surface so that a function or cosmetic efect can be felt.
A room with extremely strict requirements in terms of the absence of dust particles, etc. Used by Nolato when producing medical technology components and mobile phone components.
Technology for shielding electronics from electromagnetic interference, both internally between diferent electronic components and from external interference, to achieve electromagnetic compatability (EMC). This is achieved using silicone gaskets containing silver or nickel particles.
| 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|
| Sales and proft | |||||
| Net sales (SEK million) | 4,522 | 3,874 | 2,977 | 3,375 | 2,602 |
| Sales growth (%) | 17 | 30 | – 12 | 30 | – 8 |
| Percentage of sales outside Sweden (%) | 80 | 75 | 70 | 76 | 73 |
| Operating profit (EBITA) (SEK million) | 427 | 303 | 199 | 262 | 166 |
| Operating profit (EBIT) (SEK million) | 411 | 287 | 190 | 253 | 158 |
| Financial income and expense (SEK million) | – 8 | – 15 | – 7 | – 10 | – 10 |
| Profit after financial income and expense (SEK million) | 403 | 272 | 183 | 243 | 148 |
| Profit for the year (SEK million) | 314 | 202 | 132 | 187 | 123 |
| Financial position | |||||
| Total assets (SEK million) | 2,573 | 2,634 | 2,144 | 2,350 | 2,113 |
| Shareholders' equity (SEK million) 1 | 1,348 | 1,170 | 1,117 | 1,179 | 1,086 |
| Interest-bearing assets (SEK million) | 318 | 272 | 124 | 239 | 172 |
| Interest-bearing liabilities and provisions (SEK million) 1 | – 196 | – 385 | – 243 | – 273 | – 212 |
| Net financial assets (+) / net financial liabilities (–) (SEK million) 1 | 122 | – 113 | – 119 | – 34 | – 40 |
| Equity/assets ratio (%) 1 | 52 | 44 | 52 | 50 | 51 |
| Liquidity (%) | 126 | 109 | 123 | 120 | 122 |
| Debt/equity ratio (times) 1 | 0.1 | 0.3 | 0.2 | 0.2 | 0.2 |
| Cash fow | |||||
| Cash flow from operations (SEK million) | 512 | 476 | 246 | 370 | 257 |
| Investment activities (SEK million) | – 144 | – 335 | – 134 | – 286 | – 118 |
| Cash flow before financing activities (SEK million) | 368 | 141 | 112 | 84 | 139 |
| Proftability | |||||
| Return on total capital before tax (%) | 15.9 | 11.9 | 8.7 | 11.3 | 7.5 |
| Return on capital employed before tax (%) 1 | 26.7 | 19.4 | 13.9 | 18.4 | 12.1 |
| Return on operating capital before tax (%) 1 | 32.6 | 22.6 | 15.5 | 21.6 | 13.9 |
| Return on net shareholders' equity, after tax (%) 1 | 24.9 | 17.7 | 11.6 | 16.5 | 11.5 |
| EBITA margin (%) | 9.4 | 7.8 | 6.7 | 7.8 | 6.4 |
| Profit margin (%) | 8.9 | 7.0 | 6.1 | 7.2 | 5.7 |
| Interest coverage ratio (times) | 37 | 23 | 16 | 25 | 14 |
| Share data (see also page 36) | |||||
| Earnings per share after tax (SEK) | 11.94 | 7.68 | 5.02 | 7.11 | 4.68 |
| Shareholders' equity per share (SEK) 1 | 51 | 44 | 42 | 45 | 41 |
| Cash flow from operating activities per share (SEK) | 19.46 | 18.09 | 9.35 | 14.06 | 9.77 |
| Cash flow before financing activities excl. acq. and disp. per share (SEK) | 13.76 | 12.05 | 4.26 | 8.74 | 5.28 |
| Yield (2013 proposal) (%) | 5.5 | 7.6 | 9.9 | 7.2 | 5.1 |
| Dividend per share (2013 proposal) (SEK) | 8.00 | 6.00 | 5.00 | 6.00 | 3.00 |
| Personnel | |||||
| Number of employees (people) | 9,357 | 8,421 | 5,496 | 7,563 | 4,308 |
| Sales per employee (SEK thousand) | 483 | 460 | 542 | 446 | 604 |
| Profit after financial income and expense per employee (SEK thousand) | 43 | 32 | 33 | 32 | 34 |
1 The years 2009 –2010 are not restated in respect of the change to pension provisions in IAS 19, which means that the corridor method as a mechanism to even out actuarial gains/losses is no longer applied (see Note 31).
The Nolato Annual Report was produced by Andrarum AB. Translation by Hilltop Language Ltd. Photography by Minghao Jin, Magnus Olsson, Gillis Sabrie, Jüri Soomägi, Caroline Tengen, Michel Thomas, Magnus Torle, László Vajkó and others. Printed in Sweden by JMS, Vellinge. Production has been carried out in line with Nolato's sustainability philosophy, with social responsibility and a low environmental impact. The paper was produced using FSC-certifed pulp and in a process with minimal emissions and low energy
and water consumption. The printing process is FSC and environmentally certifed.
Q Nolato AB SE-269 04 Torekov, Sweden Street address: Nolatovägen Phone: +46 431 442290 Fax: +46 431 442291 E-mail: [email protected]
402 Longsheng Industrial Park 7, Rong Chang Road East Beijing Development Area Beijing 100176, P.R. China Phone: +86 10 6787 2200
Q Åhus, Sweden Snidaregatan 1 SE-296 31 Åhus, Sweden Phone: +46 708 744170
Q San Diego, USA 16208 Palomino Mesa Ct San Diego, CA 92127, U.S.A. Phone: +1 858 859 5270
Box 905, 461 29 Trollhättan, Sweden Street address: Verkmästarev. 1-3 Phone: +46 520 409900
Q Paris, Frankrike 15, Rue Vignon FR-75008 Paris, France Phone: +33 1 47 975284
660 VandeBerg Street Baldwin, WI 54002, U.S.A. Phone: +1 715 684 4614
Box 29, SE-533 21 Götene, Sweden Street address: Alsborgsgatan 2 Phone: +46 511 342100
Q Nolato Hertila Persbogatan 1 SE-265 38 Åstorp, Sweden
Phone: +46 42 66880
Q Nolato Hungary Jánossomorjai utca 3 HU-9200 Mosonmagyaróvár, Hungary Phone: +36 96 578770 Q Negoiesti, Romania DIBO Industrial Park, H13 Negoiesti, Prahova, Romania, 107086
Walton Road, Farlington Portsmouth PO6 1TS Great Britain Phone: +44 2392 370102 Q Newcastle, Great Britain
New York Way, New York Ind. Park Newcastle upon Tyne NE27 0QF Great Britain
Phone: +44 191 296 0303
4th Floor, No. 21 Xingsheng Road BDA, Beijing, 100176 P.R. China Phone: +86 10 6780 5580 Q Shenzhen, China
Unit 401, Factory 2 Hasee Hua Sai Industrial Park #466, Ji Hua Road, Bantian Longgang District Shenzhen, 518129, P.R. China Phone: +86 755 8610 6804
Q Chennai, India Lövepac Converting Pvt Ltd. No 136, Arcot Road Regus Chennai Office Center Shyamala Towers, Saligramam Chennai, TN - 600093, India Phone: +91 44 6686 4415
Q Nolato Lövepac Ringvägen 5 SE-280 40 Skånes Fagerhult, Sweden Phone: +46 433 32300
Q Nolato MediTech Box 93, SE-242 21 Hörby, Sweden Street address: Medicingatan Phone: +46 415 19700
Q Lomma Box 28, SE-234 21 Lomma, Sweden Street address: Koppargatan 13 Phone: +46 415 19700
Q Nolato MediTor SE-269 04 Torekov, Sweden Street address: Nolatovägen
Phone: +46 431 442260 Q Nolato Plastteknik Box 4123
SE-422 04 Hisings Backa, Sweden Street address: Exportgatan 59 Phone: +46 31 588400
Q Nolato Polymer SE-269 04 Torekov, Sweden Street address: Nolatovägen Phone: +46 431 442200
Q Ängelholm, Sweden Framtidsgatan 6 SE-262 73 Ängelholm, Sweden Phone: +46 431 442200
Q Nolato Silikonteknik Bergsmansvägen 4,
SE-694 91 Hallsberg, Sweden Phone: +46 582 88900
Q Beijing, China 402 Longsheng Industrial Park 7, Rong Chang Road East Beijing Development Area Beijing 100176, P.R. China Phone: +86 10 6787 2200
Q Penang, Malaysia Nolato EMC Production Center No 1107 & 1108 Jalan Kebun Baru Taman Perindutrian Ringan Iks Juru 14100 Bukit Mertajam Penang, Malaysia Phone: +603 8739 3603
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