Annual Report • Mar 24, 2015
Annual Report
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Nolato is a Swedish publicly listed group with 8,000 employees in Europe, Asia and North America. Nolato develops and manufactures products in polymer materials such as plastic, silicone and TPE for leading customers within medical technology, pharmaceuticals, telecom, automotive and other selected industrial sectors.
Nolato's business model is based on close, long-term and innovative collaboration with our customers.The company aims to create added value for both customers and shareholders through leading polymer technology, wide-ranging capabilities and highly-efficient production.
| 2014 in brief | 3 |
|---|---|
| The Nolato Group in brief | 4 |
| The CEO's comments | 6 |
| Business model | 8 |
| Risks and risk management | 14 |
| Financial targets and target achievement | 15 |
| Three business areas in balance | 16 |
| Nolato Medical | 18 |
| Nolato Telecom | 22 |
| Nolato Industrial | 26 |
| Corporate responsibility | 30 |
| Nolato shares and shareholders | 36 |
| Corporate governance | 38 |
| Nolato's Board | 40 |
| Group management | 42 |
| Directors' report and financial reports *) | 43 |
*) The figures in pages 43 – 79 have been audited.
| Three month interim report 2015: | 29 April 2015 |
|---|---|
| Annual General Meeting: | 29 April 2015 |
| Six month interim report 2015: | 21 July 2015 |
| Nine month interim report 2015: | 28 October 2015 |
All financial information is made available at www.nolato.com as soon as it is published.
The printed version of the Annual Report is posted to all shareholders who have informed the company that they wish to receive it. It can also be ordered online at www.nolato.com, where it is also available in digital form. New shareholders are invited to receive the Annual Report while they continue to hold shares in the company.
The Annual Report is also available in Swedish.
Per-Ola Holmström Executive Vice President and CFO
Telephone: +46 705 763340 E-mail: [email protected]
In 2014, Nolato's sales amounted to SEK 4,234 million (4,522). Operating profit (EBITA) was the best for the third year running in the company's almost 80-year history, amounting to SEK 470 million (427), which gave an EBITA margin of 11.1% (9.4). All business areas achieved a double-figure EBITA margin, contributing to the good result. Earnings per share were SEK 13.84 (11.94) and the equity/assets ratio was further strengthened to 54% (52).
Group sales decreased by 25% adjusted for currency and disposals. Nolato Telecom's sales decreased by 50% after adjustment for currency as a result of the strong demand in the consumer market for a number of mobile phone models during 2013 not being repeated in the first quarter. The Group's operating margin (EBITA) increased to 10.1% (9.7) through market positions being moved forward and continued improvements in the areas of efciency and productivity.
The Group's sales decreased by 16% adjusted for currency and disposals, while the operating margin (EBITA) was strengthened at 10.4% (9.5). The strong margin can be explained by a continued focus on improvements in efciency, a favourable product mix and a flexible cost structure, particularly in Asia. All business areas contributed with stronger operating margins.
Sales for the third quarter decreased by 4% adjusted for currency and disposals, while operating profit (EBITA) increased by 9%. Nolato Telecom improved its operating margin to 9.6% (6.8) by improved capacity utilization, a renewed product portfolio and a very strong development in electromagnetic shielding (EMC).
The Group increased its sales in the fourth quarter - adjusted for currency and disposals, they increased by 19%. Nolato Telecom's sales increased by 45% adjusted for currency. Volumes were exceptionally high due to strong demand in both mobile phones and EMC. The Group's operating profit increased strongly and the EBITA margin reached 13.2% for the quarter.
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14
| SEKm (unless otherwise specified) | 2014 | 2013 | 2012 |
|---|---|---|---|
| Net sales | 4,234 | 4,522 | 3,874 |
| Operating profit (EBITDA) 1) | 619 | 568 | 444 |
| Operating profit (EBITA) 2) | 470 | 427 | 303 |
| EBITA margin, % | 11.1 | 9.4 | 7.8 |
| Profit after financial income and expense | 462 | 403 | 272 |
| Profit after tax | 364 | 314 | 202 |
| Earnings per share 3) SEK | 13.84 | 11.94 | 7.68 |
| Adjusted earnings per share 3) 4) SEK | 14.29 | 12.39 | 8.13 |
| Cash flow after investments, excluding acquisitions and disposals | 127 | 362 | 317 |
| Return on capital employed, % | 28.4 | 26.7 | 19.4 |
| Return on shareholders' equity, % | 25.0 | 24.9 | 17.7 |
| Equity/assets ratio, % | 54 | 52 | 44 |
| Net financial assets (+) / net financial liabilities (–) | 59 | 122 | – 113 |
| Dividend per share (2014 proposal), SEK | 8.50 | 8.00 | 6.00 |
| Average number of employees | 8,020 | 9,357 | 8,421 |
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: Earnings after tax, excluding amortisation of intangible assets arising from acquisitions, divided by the average number of shares.
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:
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 end-product.
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 consideration of the environment. 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 2014 was 8,020. Of these, 90% were outside Sweden.
Nolato was listed on the stock exchange in 1984. Its B shares are listed on the NASDAQ Stockholm Exchange in the 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: | 2014 | 2013 |
|---|---|---|
| Sales SEKm | 1,333 | 1,274 |
| Operating profit EBITA SEKm | 176 | 165 |
| EBITA margin % | 13.2 | 13.0 |
| Average number of employees | 1,031 | 988 |
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, UK, Hungary, USA and China. Sales offices in Denmark, Germany, France and the Czech Republic.
Medical understanding, broad technological offering, development expertise of robust product solutions, global production and robust quality.
Becton Dickinson, Boston Scientific, Coloplast, Novo Nordisk, Pfizer, Roche, Sanofi, Takeda.
Volatility:
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: | 2014 | 2013 |
|---|---|---|
| Sales SEKm | 1,799 | 2,079 |
| Operating profit EBITA SEKm | 199 | 166 |
| EBITA margin % | 11.1 | 8.0 |
| Average number of employees | 6,297 | 7,611 |
Design, development and manufacturing of advanced components and subsystems for mobile phones, and products and systems for shielding electronics (EMC).
Development, production and sales in Sweden, China and Malaysia. Sales and technology offices in the United States and India.
Creative development work, cutting-edge technology, advanced project management, fast production start-ups and high productivity.
Ericsson, Huawei, Microsoft (Nokia), Motorola Solutions, Sony Mobile, Xioami, ZTE.
Volatility:
High. Project-based operations.
Short.
Share of the Group's net sales
Share of the Group's operating profit (EBITA)
| Financial highlights: | 2014 | 2013 |
|---|---|---|
| Sales SEKm | 1,106 | 1,170 |
| Operating profit EBITA SEKm | 118 | 119 |
| EBITA margin % | 10.7 | 10.2 |
| Average number of employees | 687 | 753 |
Development and manufacturing of components and product systems for customers in the automotive industry, hygiene, packaging, gardening/forestry, furniture and other selected industrial segments.
Development, production and sales in Sweden, Hungary, Romania and China.
Technology, project management and productivity.
Atlas Copco, Brose, Husqvarna, Jaguar/Land Rover, MCT Brattberg, Sanitec, SKF, Volvo, Volvo Cars.
Medium. Follows the Northern European industrial business cycle.
Product life cycle: Medium/Long.
net sales
Share of the Group's operating profit (EBITA)
2014 was the best year yet in Nolato's almost 80 year history with an operating profit of SEK 470 million. Good development across all three business areas is due to a successfully executed long term strategy, says Hans Porat, President and CEO, who gives his view of the past year and thoughts of Nolato's future.
"Our skilled employees constantly optimise customer oferings and operations and as a result we were able to improve profits despite lower sales"
How would you sum up 2014 – what were the highlights during the year?
Being able to say for the third year in a row it was the best year yet is, of course, very satisfying. Among the highlights were the strong development of our operations in shielding of electronics (EMC), the expansion of our manufacturing facilities in Hungary and China, which has given us increased capacity, and the establishment of our factory in Malaysia. It is however not so much a question of single highlights, but a number of operations and continuous improvements at all levels in the Group that have achieved success. This applies in particular to our systematic work with lean manufacturing, which has produced positive results in the form of higher margins.
We have had good financial development for several years, and even though sales decreased compared with the exceptionally strong figures in 2013, it is clearly higher than previous years. Our skilled employees constantly optimise customer oferings and operations and as a result we were able to improve profits despite lower sales. Cash flow was lower as a result of higher investment and the need for working capital but, despite this, we have a very strong balance sheet which gives us flexibility in the future.
Operations are working well and we have achieved very good results across all business areas, but of course there is always room for improvement. This applies across the board, from marketing to better describing our total ofering to customers. I would also have liked one more acquisition in the medical field. But we should not feel stressed in this matter – the most important thing is that we select the right company that will strengthen our position in the market.
The market for Nolato Medical is stable, growing and has long product life cycles. Demand for our pharmaceutical packaging has decreased slightly in eastern Europe, particularly in Russia, Belarus and Ukraine. The Nolato Telecom market is undergoing
rapid change, both structurally and technically as our customers continuously sell new models of mobile phones on the consumer market. Some models achieve great success, while others are given lower priority. The Chinese telecom companies are moving their positions forward, both in terms of mobile phones and the supply of base stations for the networks. Subsequently the demand for network capacity is constantly increasing, which is particularly favourable for our EMC area. In Nolato Industrial, which focus primarily on northern European industrial customers, demand has remained stable at a relatively high level, particularly regarding the supply of components and subsystems to the automotive industry.
We put a lot of energy and work into lean manufacturing. The whole of our business concept is to ensure cost-efective production for our customers. During the year we have continued to pursue this work with great success. We are working with a variety of issues, such as achieving good flows in factories, reducing the level of manning, shortening lead times and reducing the levels of scrapping. We constantly receive feedback from customers for our eforts on productivity. In 2014, for example, we were given the Supplier Excellence Award from Husqvarna, in tough competition with their other suppliers around the world. Work with lean manufacturing never ends – it is always possible to be better.
No, the work with lean manufacturing permeates all our operations and all the manufacturing units are doing a very good job. Of course, there are some units that have taken the concept of lean to a higher level. The business area Nolato Medical, for example, coined the term Medical Excellence, which means that operations are more than just lean. This is about how Nolato relates to the medical industry. It applies to everything, from putting patient safety in focus to meeting regulatory requirements. Our other two business areas work in a similar way, but each is adapted to its own customer segment, of course.
Nolato has advanced technical skills with extensive experience and consequently we are often involved at an early stage of the customer's product development. With our broad capabilities in development, engineering and design, we help our customers to develop products that can then be produced in a cost-efective way. Part of this work is designing our own production cells, including the use of robots and other automation. Another competitive edge is advanced project management, including close, long-term customer relationships where we understand the challenges that our customers are facing in each of their markets.
What work has been carried out with corporate responsibility (CR) during the year? Combining an efcient and profitable business with ethics, responsibility and environmental consideration is key for us, and again it is something that permeates all of our operations. In this area, too, we are working with continuous improvements to achieve the overall strategic group objectives that we have adopted and which are presented below in the annual report. In 2014 we implemented a series of practical sustainability measures, both large and small. For example, we installed a state-of-the-art facility in our factory in Beijing to recover and burn solvents used in the paint shop for mobile telephone parts – which was taken up on Chinese television and other media. Another example is that we now have a total of six factories located in Sweden, Hungary, Romania and China that are certified in accordance with the occupational health and safety management system, OHSAS 18001. A third example is a social project, Building Hope Together, which we run with a primary school in Daxiwan, China.
Our growth strategy remains the same, even though we did not manage to increase our sales during 2014. It means that we aim to achieve growth that exceeds general development within each of our market segments. At Nolato Medical, we will grow both organically and through acquisitions. Nolato Telecom is focused on technological development, as well as increasing the share of EMC. By increasing EMC operations we can partially compensate for fluctuations on the mobile phone market. At Nolato Industrial, we will grow through conquering market shares and thus strengthening our leading position in the Northern European market. The focus on acquisition is mainly within Nolato Medical, but selective acquisitions are also possible in the EMC part of Nolato Telecom and at Nolato Industrial.
I think that we are going to experience a slightly subdued economy, both in Europe and in Asia. There are more positive indications coming from USA, and they will probably once again have to act as a locomotive for the global economy. Despite the overall uncertainty of the global economy, there are good opportunities for continued growth and further advance Nolato's market positions.
Growth and good profitability! We will achieve this by continuing the recent years' determined work in close cooperation with customers, lean manufacturing and excellent technical skills. The strategic direction at Nolato Medical is toward a greater share of system projects, including the development of integrated products with significant complexity and production in high volumes. At Nolato Telecom we will continue to develop technologies that are attractive for our customers in the mobile phone segment, at the same time as striving to broaden operations into related customer areas. EMC operations will also be given the opportunity of making continued strong growth. Marketing work with selected key customers is being intensified at Nolato Industrial with the aim of gaining more market shares.
In addition, we intend to continue developing the strong corporate culture which, over the years, has made Nolato into a company with both heart and brains, and of course we will all continue to work hard to give our shareholders a good return on their investments.
Torekov, March 2015
Hans Porat President and CEO
"Nolato has advanced technical skills with extensive experience and consequently we are often involved at an early stage of the customer's product development"
"Despite the overall uncertainty of the global economy, there are good opportunities for continued growth and further advance Nolato's market positions"
Nolato works with quality at all stages – this is an absolute must to be the customer's first choice of partner.
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 customers assemble in their own products 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.
One type of business for Nolato is development work together with our customers. This gives us the opportunity to take advantage of our know-how and our skills to contribute to our customers receiving the best possible competitive product. Revenues from the development phase are partly from the time that our engineers spend on development work, and partly from the design of tools for future production, for example. A development assignment does not necessarily mean that Nolato is given the job of manufacturing the product. But it does position us well to get the production job, and if we do, to perform it very efciently. The combination of advanced development work and highly efcient production is an important part of the value that we bring to our customers.
Besides development assignments, most of our business is the production of a product which is manufactured by order from the customer. We deliver the product according to the customer's specifications and requirements. After delivery, Nolato invoices the customer. We do not produce for stock and operations are based on short production and throughput times. This means that Nolato has no significant risks for stock or obsolescence.
Nolato shall be the customer's first choice of partner.
By first choice we mean that the customer should consider Nolato as the natural choice for a partner and supplier. Being the customer's first choice means that the customer appreciates what we deliver – quality at all stages. We deliver what we claim, the products reach the market in time and the customer
can rely on us. We work in the long-term and have an honest relationship with our customers. We always make an extra efort and we constantly ask ourselves how we can become better.
The most important means of achieving our vision are:
We have strong core values based on the view that efcient and profitable business operations must be ethical and sustainable. Issues relating to ethics, social responsibility, environmental matters and work environment are therefore natural and integral features of our business.
Long-term customer relationships We endeavour to develop long-term and close relationships with our customers. The better we understand their processes and needs, the greater the value we can create for them.
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. We therefore have a broad customer ofering within the development and production of polymer-based products. Our customer ofering comprises everything from concept development, product design and
process optimisation to high-volume production, post-processing, assembly and logistics.
Our customers constantly challenge us with new requests and tougher requirements. We therefore enhance our ofering by continually raising the skill levels of our employees and investing in cutting-edge technologies. We also work internally across our companies and business areas to create a broad customer ofering.
We concentrate on activities that create value for our customers and their long-term priorities. High productivity and a continual focus on costs are consequently vital aspects of our day-to-day operations. Continuous 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.
Proximity to our customers is always key, for both us and them – not only in terms of logistics, but also to create efcient management lines and enable quick decisions.
A strong financial position provides us with a stable basis and means our customers can feel secure in their choice of Nolato as supplier, even in challenging economic conditions.
Our business mission is the basis of our operations, and describes how we can solve our customers' needs.
"Nolato is a high-tech developer and manufacturer of polymer products and 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."
Being a high-tech developer is key for Nolato. The customer comes to us with an idea, and maybe a first sketch. It often concerns advanced products that the customer is going to launch on their markets. We are involved at this early development stage and contribute to a functional and costeffective product that is ready to be produced.
Polymeric products and systems are the basis of our business. In-depth knowledge of materials such as plastics, silicone and TPE has been around since the company was founded in 1938. Sound knowledge of materials and processes makes us unique in the market.
all of these factors brings together the three business areas within Nolato and give the customer delivery security. Our success is based on deep and long-term customer relationships. We challenge the customer and strive to constantly make our work a little better. Nolato also runs its operations professionally and responsibly, which we see as self-evident in a world with environmental problems and increasingly scarce resources.
Nolato constantly strives to improve operations through close and long-term relationship with our customers – from the development of our customers' products and quality at every stage to sustainability and cost-effective production, all with the least possible environmental impact.
The Basic Principles are Nolato's shared values. They have evolved over a long time and describe what we stand for. They are an important guide for our employees in their daily work.
We support customers from the concept stage and are involved in discussions about suitable production.
the product unique haptic and cosmetic properties, make it waterproof, reduce its weight and/or minimise its environmental impact, to give a few examples.
We optimise design and construction in order to create the most efficient production solution in terms of function, quality and economy.
Injection moulding 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 for manufacturing containers and bottles in plastic.
We use it to produce pharmaceutical packaging.
Dip moulding Technology for manufacturing flexible, airtight products in latex rubber.
We use it to manufacture items such as catheter balloons and breathing bags.
Prototypes (3D) We visualise the future product by producing prototypes and materials
samples.
We specify and manufacture, or buy in, moulds and related production equipment.
We ensure continuously high quality through automatic vision systems, professional operators and efficient systems for continuous improvement.
Extrusion This is a method of manufacturing tubing and other continuous casting products.
We use it to produce tubing for products such as heart catheters and EMC shielding gaskets.
Die-cutting Technology for manufacturing flat products in one or more materials.
We use die-cutting for packaging, gaskets and cosmetic details such as loudspeaker protection, logotypes etc.
Finishing and assembly
We give components the desired finish through painting, printing or metallising, and assemble them to create a complete product or a subsystem.
This may take place on a fully automated, semi-automated or fully manual basis.
Nordiska Latexfabriken is founded in Torekov.
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 OTC list.
Sales rise to more than SEK 650 million through organic growth and acquisitions of companies across Sweden: 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.
The first company is ISO 14001 certified.
Production in Hungary starts through an acquisition.
The transfer of the mobile phone-related business to China begins.
Nolato Medical starts production in Hungary.
2006
Medical Rubber is acquired.
2007 The Cerbo Group is acquired.
Nolato Medical starts production in China.
Nolato Medical starts production in USA through an acquisition.
Nolato Industrial starts production in Romania.
Nolato Medical starts production in UK through an acquisition.
Nolato Sunne is sold.
Nolato expands in China and Hungary. Nolato Telecom establishes its own production of EMC in Malaysia.
A more detailed history is shown at www.nolato.com
Nolato's operations consist of our three business areas that benefit from each other and provide a natural balance for the Group regarding opportunities, risks and business cycle fluctuations. The Group's goal is to grow and maintain good profitability.
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 us new technologies or new customer segments.
Nolato Medical has a global growth strategy with the ambition of growing in America, Europe and Asia. The business area sees growth opportunities in a market with increasing needs for medical care, in which customers outsource more and more production to their suppliers.
Nolato Telecom has its focus on the Asian market, where many of the major telecomcompanies are established. The business area endeavours to push technological development forward in order to create added value for customers. In Mobile Phones, the company sees growth opportunities primarily within its existing production capacity, which reduces the financial risks. Within EMC – electromagnetic compatibility – Nolato has grown from being a small player to one of the market leaders in the telecom sector. Potential acquisitions are mainly in the EMC field, with a view to supporting clients in other industries such as medical technology and automotive.
Nolato Industrial is primarily a Nordic business but it has a presence in selected markets in Central Europe. Growth will be mainly in existing markets, with the possibility of additional acquisitions.
Nolato strives to achieve growth that exceeds the general level in each market segment.
Nolato Medical's sales in 2014 were unchanged compared to 2013 (adjusted for currency). According to estimates, long-term
growth within Nolato Medical's market segment is about 5%.
Nolato Telecom's sales decreased by 18% (adjusted for currency). According to IDC, the number of smartphones produced in the world increased by 28% in 2014.
Nolato Industrial's sales rose by 3% (adjusted for currency and disposals), which surpasses overall industrial production in Sweden by a wide margin; according to Statistics Sweden it decreased by 2%.
Acquisitions have played a key role in Nolato's development. Until 1996 most acquisitions were made within the business area that is now 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 ten 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 about half of Nolato Medical's growth. 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 us an opportunity to expand either geographically or in terms of capabilities. It is important that acquisitions are not turnaround companies, but financially and operationally healthy businesses.
Acquiring good companies is not an overnight process. There are many familyowned 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 should decide to sell.
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.
Nolato Medical's unit in Hörby has its background in the acquisition of Medical Rubber in 2006.
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, USA 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 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, what impact it 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.
| High | |||||
|---|---|---|---|---|---|
| J H |
C M |
||||
| Impact | G I |
||||
| L | B A N |
E F |
|||
| Low | K P |
O D |
|||
| Low | Probability | High | |||
| Operational risks A Business cycle risk B Subcontractor risk C Customer dependence D Supplier dependence E Raw material price risk F Energy cost risk |
G Production risks I Legal risks J Product liability risk K Environmental risk L CR risks |
H Property damage/disruption | Financial risks M Customer credit risk N Foreign exchange risk O Interest rate risk P Financing and liquidity risk |
A detailed review of the risks in Nolato's operations is provided on pages 48–49. |
In April 2014, Nolato's Board adopted new financial targets for the Group and revised its dividend policy. The new targets ensure that the Group is controlled with respect to good earnings, the ability to generate cash flow and a healthy financial risk level. The change should be seen in the light of the current balanced group structure with three business areas and advanced market positions. The new financial targets better reflect this strategic direction, while providing a financial margin for new acquisitions and/or good potential for dividends to shareholders.
The Board intends to propose a dividend each year that exceeds 50% of net profit, taking into consideration Nolato's long-term prospects, financial position and investment needs. (An increase compared to the previous policy of at least 35%).
Target >10% Outcome 11.1%
Target >75% Outcome 28%
The goal is for the EBITA margin to exceed 10% over one business cycle.
The outcome for 2014 was 11.1% (9.4). Nolato Telecom business area had an extraordinary margin development with its high volumes in the fourth quarter, along with steady, positive development in the EMC field. Nolato Medical and Nolato Industrial contributed to the improvement of the EBITA margin through continuous improvements in efficiency and productivity, among other factors.
Over the past five years, the EBITA margin has averaged 8.7%.
The objective is to achieve cash conversion over 75% of EBIT earnings during one business cycle, measured as the ratio of cash flow after investments and the EBIT earnings. Cash flow after investments is charged financial costs, tax, and investments, but not acquisitions or disposals. Cash conversion is a new target which states the opportunities of self-financing acquisitions and/or dividends to shareholders using internally generated funds.
The outcome for 2014 was 28% (82). Cash conversion was negatively impacted by working capital requirements during the year and temporarily higher investments. Increased activity, which is positive, resulted in a need for working capital. Investments in the expansion of the factories in Hungary, China and Malaysia and machine capacity for new customer projects provide opportunities for future growth.
Over the past five years, cash conversion has averaged 71%.
The goal is for the equity/assets ratio to exceed 35% over one business cycle. This target was left unchanged in the revision of the financial targets in April 2014.
The outcome at the end of 2014 was 54% (52). The continued strong financial development during the year with high profit increased equity. At the same time, growth of total assets has been relatively limited.
Over the past five years, the equity/assets ratio has averaged 50%.
Nolato Medical Nolato Telecom Nolato Industrial
Nolato's three business areas base their operations on shared values and common technologies, while they have their own conditions and characteristics.
Nolato's business is created in three customeroriented business areas: Nolato Medical, Nolato Telecom and Nolato Industrial. Although all three business areas are built on common values and technologies, they create their own, optimal conditions for success in each of their markets.
The division into business areas also creates good conditions for a profound decentralisation of our operations. This is a good foundation for engagement and motivation among our employees, and it becomes possible to make operational decisions close to customers.
Our three business areas often collaborates among one another to create additional customer value. So, for example, both Nolato Medical and Nolato Industrial ofer their customers integration of electronics and advanced solutions, based on the expertise acquired by Nolato Telecom through its long-standing relation with mobile phone customers.
And when Nolato Industrial sees a need for production in China, this can be implemented at low risk by establishing a manufacturing unit within the framework of our existing operations in Beijing. Nolato Medical started production in China a few years ago in a similar way without major investments.
We attach great importance to those factors that hold the Group together and creates the whole which is greater than the parts: Corporate responsibility, broad technical expertise, knowledge of materials and similar production techniques.
Since the business areas are afected diferently by business cycle fluctuations, external events and market patterns, good balance and stability is created in the Group.
While Nolato Medical operates in a market with long product life-cycles and low dependence on business cycles, Nolato Telecom is the opposite, with short product life-cycles and high project volatility. Nolato Industrial lies in between these two.
The diagrams below clearly show the essential features in the development of each business area's sales.
Nolato Industrial 1998 – 2014 Innovative technology and productivity
Growth related Project related Business cycle related
| Nolato Medical | Nolato Telecom | Nolato Industrial | |
|---|---|---|---|
| Product | Components Systems Consumables |
Components Systems 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 Broad technology offering Global production Robust quality Development expertise |
Creative development Cutting edge technologies Advanced proj. management Fast production start-ups 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 Project |
Industrial production Cost-effectiveness Innovation |
| Nolato Medical | Organic growth |
|---|---|
| – Growth market | Partnerships |
| – Structural changes | – Increased share of system projects |
| – Further internationalisation | Global expansion and acquisitions |
| Nolato Telecom | Organic growth |
| – Rapidly changing growth market | Broadened customer offering |
| – Project-related/volatile | Technology and project management |
| – Strong price pressure | Investment in EMC |
| Nolato Industrial | Market share |
| – Tracks the industrial business cycle | Productivity |
| – Fragmented market | Cash flow |
| – Polymer materials gaining ground | Selective geographic expansion |
Business Area President: Christer Wahlquist Employed since 1996 President since 2005
| Financial highlights: | 2014 | 2013 |
|---|---|---|
| Sales SEKm | 1,333 | 1,274 |
| Operating profit EBITA SEKm | 176 | 165 |
| EBITA margin % | 13.2 | 13.0 |
| Average number of employees | 1,031 | 988 |
Large, global companies in medical technology and pharmaceuticals. Long-term development work, high regulatory requirements, high demands on quality, safety and traceability.
Reduced lead times and increased outsourcing of development and production. Reduction of the number of suppliers. Increased globalisation of the projects.
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, UK, Hungary, USA and China. Sales offices in Denmark, Germany, France and the Czech Republic.
Medical understanding, broad technological offering, development expertise of robust product solutions, global production and robust quality.
Becton Dickinson, Boston Scientific, Coloplast, Novo Nordisk, Pfizer, Roche, Sanofi, Takeda.
Gerresheimer, Bespak/Consort, Carclo, Philips-Medisize, West Pharmaceuticals, Nemera.
Low. Steady market growth. Long-term growth potential.
Product life cycle: Long.
Nolato Medical is one of the world's leading companies in injection moulding of liquid silicone.
Nolato Medical is a rapidly growing supplier of system solutions to customers in medical technology and pharmaceuticals. In 2014, Nolato Medical strengthened its position on the market by an advanced ofering and deepened customer relationships.
Nolato Medical's operations are divided into two business units:
Sales increased by 5% to SEK 1,333 (1,274). Adjusted for currency, sales were unchanged. Volumes have been lower in packaging, which has been afected by lower demand in eastern Europe. Other segments have been positive. Operating profit (EBITA) increased to SEK 176 million (165) and the EBITA margin increased to 13.2% (13.0).
The margin was positively afected by the productivity raising measures which have been implemented in Nolato Medical's manufacturing units (Medical Excellence). A further positive efect of the Medical Excellence programme is that Nolato now has even more satisfied customers.
Nolato Medical strengthened its ofering within development support during the year, bringing us closer to the large medical technology companies and pharmaceutical companies. Nolato Medical has added the ofering of robust design and created more stable development processes with clear milestone targets.
The expansion of the production unit in Beijing was completed during the year, totalling 2,200 sq.m. The expansion was made to secure resources for growth in China and for future growth in Asia. The 3,700 square metre expansion of the production unit in Mosonmagyarovar, Hungary, was also completed.
The market for medical technology products is estimated to have a value of SEK 100 billion and a long-term global growth of about 5%. There are several driving forces behind the development of the medical technology market. The world population growth and rising life expectancy lead to an increased need for medical care. With increasing age there are more diseases that require treatment.
Another factor is the emerging market development, which brings the possibility of providing care for a larger portion of the population. There is also a trend toward increasing self-care in the home to reduce society's total healthcare costs. Hospitals will increasingly take on the role of diagnostic centres at the same time as self-care generates an increased need for medical equipment.
The increasingly limited government healthcare budgets will squeeze costs in the industry. Nolato Medical's customers will need to adapt their product portfolios, make changes in their purchasing chains and consolidate their supplier bases.
For Nolato Medical the market is characterised by three important trends of change:
These changes will put increased pressure on small suppliers, with smaller oferings and limited geographic presence. At the same time, larger and more globally oriented suppliers will have the opportunity of advancing their positions. The medical technology market is also beginning to take on the platform approach, which is dominant in the automotive industry.
Suppliers receive more and more orders for complete medical technology systems and, in turn, use additional subcontractors for parts of their production.
These market changes demonstrate that Nolato Medical chose the right strategy,
EndoGastric Solutions treat gastroesophageal reflux disease (GERD) in a new and innovative way using a disposable surgical device. During the entire development phase, Nolato Contour supported the company with technical solutions and production optimisation for the plastic components included in the device. Today Nolato Contour delivers 27 unique plastic components for the final assembly of EndoGastric Solution's product.
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) and analysis (allergy tests, pregnancy tests).
Standard or custom primary plastic packaging, which meets the requirements from the pharmaceutical and dietary supplement industries.
Medical Devices:
Nolato Beijing Medical Beijing, China MD Jörgen Karlsson
Nolato Contour Baldwin, Wisconsin, USA MD Russell Steele
Nolato Hungary Mosonmagyaróvár, Hungary MD Johan Arvidsson
Nolato MediTech Hörby and Lomma, Sweden MD Johan Iveberg
Nolato MediTor Torekov, Sweden MD Michael Holmström
Nolato Cerbo Trollhättan, Sweden MD Glenn Svedberg
Nolato Jaycare Portsmouth & Newcastle, UK MD Glenn Svedberg
to focus on growth and increased geographical presence.
Over the past seven to eight years, the business unit Medical Devices pursued a deliberate strategy to change from a local component manufacturer to a complete supplier with global resources who can support our customers from concept development to delivery of finished product.
Nolato Medical can ofer customers a broad technology base, advanced support in the development process and nine production units in Europe, Asia and North America.
In 2014 Nolato Medical consolidated its already strong market position through a broader ofering and stronger customer relationships. The business area also reinforced its key account management organisation and its technical team with new employees and ofers. Nolato Medical moved forward its positions in the systems project area by starting up new development projects with some of the world's largest medical technology companies and pharmaceutical companies.
Nolato holds a leading position in Pharma Packaging in Scandinavia and the UK, as well as having significant export outside these regions. Nolato Medical is one of the few suppliers that focus exclusively on packaging
Good understanding of complex medical technological applications, comprehensive quality and documentation requirements and risk analyses are crucial factors for success in the market.
systems for the pharmaceutical and dietary supplement market. This focus gives a better ofering to customers through a deeper understanding of the regulatory process and the quality demands in these markets, not just for a single component but for the package in its entirety.
As a result of many years of close cooperation with demanding customers in these segments in Pharma Packaging, Nolato Medical has also developed specialised expertise regarding customers' use of Nolato products. This includes everything from the selection of raw materials and robust manufacturing processes to testing and evaluation of a product's performance, and not least their use in customers' filling lines and handling by patients.
Consolidation in the industry continued in 2014. Several of Nolato Medical's competitors had new owners. Philips Medisize was purchased and Rexam sold its Pharmaceutical Devices and Prescription Retail Packaging divisions, both to private equity companies. Another example of industry consolidation was Consort Medical's acquisition of Aesica Pharmaceuticals, a contract manufacturer in the UK market.
Consolidation is driven by customer demand for larger global suppliers. Medical technology companies need to secure their global quality control, so they tend to
focus their purchases on global suppliers. For this reason they work more closely with a smaller number of strategic suppliers who can provide global support, from development to production.
Nolato Medical's strategy is to be the best partner for medical technology companies and pharmaceutical companies with regard to polymer materials. Nolato Medical must be especially competent in product development and production, and at providing global support to customers. This means that Nolato Medical must be able to ofer its customers production in the major international markets, such as Europe, America and Asia. It also means that the business area needs to further strengthen its presence in the USA and Asia in the coming years.
Just like the rest of the Group, operations at Nolato Medical have their basis in: Corporate responsibility, broad technical expertise, knowledge of materials and common production techniques. The difference is mainly Nolato Medical's deep insight into the specific conditions which govern customers' needs in the medical sector. A thorough understanding of complex medical technology applications, comprehensive quality and documentation requirements and risk analyses are critical factors for success in the market.
Production takes place mainly in cleanrooms, with very high standards regarding quality, safety and traceability.
The focus for 2015 will be to continue systematic customer work using Key Account Management in order to expand business with existing key customers and win large new customers.
Nolato Medical will prioritise growth over further improvements in margins. This increased growth will be achieved by ofering our customers additional support for product development and by acquisitions.
Nolato Medical expects the market for its products to continue growing, with a volume increase of 4–6% per year.
Operating profit (EBITA), quarter
2010 2011 2012 2013 2014
Affecting cash flow, excluding acquisitions and disposals
Business Area President: Jörgen Karlsson Employed since 1995 President since 2009
| Financial highlights: | 2014 | 2013 |
|---|---|---|
| Sales SEKm | 1,799 | 2,079 |
| Operating profit EBITA SEKm | 199 | 166 |
| EBITA margin % | 11.1 | 8.0 |
| Average number of employees | 6,297 | 7,611 |
Few large, global companies. Customers place high demands on technological levels, extremely short lead times and fast production start-ups.
Constant new demands for cost-effective solutions. Continued large emphasis on cosmetic effects and unique design innovations, as well as special features such as waterproofing. The physical size of mobile phones is increasing. Increased need for shielding of electronics (EMC).
Design, development and manufacture of advanced components and subsystems for mobile phones, as well as products and systems for shielding of electronics (EMC).
Development, production and sales in Sweden, China and Malaysia. Sales and technical offices in the United States and India.
Creative development work, cutting-edge technology, advanced project management, fast production start-ups and high productivity.
Ericsson, Huawei, Microsoft (Nokia), Motorola Solutions, Sony Mobile, Xioami, ZTE.
Chiyoda, Chomerics, Jabil Green Point, Laird, Lite-On Mobile, Worldmark.
Volatility: High. Project-based operations.
Product life cycle: Short.
Nolato Telecom's operations in shielding of electronics (EMC) have continued to develop very well.
Nolato Telecom is a supplier of technically advanced solutions and products in the telecom sector. In 2014, EMC operations showed continued positive development through an increased demand for products for shielding electronics.
Nolato Telecom operations are divided into two business units:
Sales in the business area were SEK 1,799 million (2,079). Adjusted for currency, sales decreased by 18%. Sales increased sequentially during the year and volumes in the fourth quarter were extraordinarily high. The positive development in the second half of the year is explained by the fact that many
of the customers' phone models were successful in the consumer market. Operations in the EMC area continued to develop very positively in 2014. Development of new components and the expansion of 3G/4G networks in China contributed to the increase in sales for EMC. Operating profit (EBITA) increased to SEK 199 million (166). The EBITA margin was 11.1% (8.0). High efciency and long production runs through very high volumes, together with a positive development for EMC operations, resulted in an exceptionally high margin during the fourth quarter.
Nolato Telecom launched a production unit for EMC in Malaysia. The factory produces components for shielding of electronics in walkie-talkies and mobile base stations, among other applications.
A new product area, Compatherm, was launched, which is a thermally conductive material used in the base-station area. This is an important complement to the company's current oferings within the EMC area.
An increase in production capacity for ceramics was started in Beijing. More and more items are being made in ceramic materials, which are both durable and decorative. They are used around camera lenses on mobile phones, on headphones and on other electronic products.
A major investment was made in China for new purification equipment to further increase the efciency of separating solvents. Technically speaking, it is an incineration plant that concentrates the exhaust air from the painting lines, then burns the solvents with a purification rate of over 95%.
The mobile phone industry is experiencing a turbulent period. There are changes taking place among the major players; Microsoft (Nokia) has radically reduced its sales, Samsung is also feeling the squeeze from an increasingly competitive market, while Motorola, now owned by Lenovo, appears to be returning to the market. Several Chinese manufacturers are rapidly gaining ground, mainly on the domestic market – which represents 25% of the world market.
Over the last few years there has been a strong consolidation of suppliers to the mobile phone industry, and the major suppliers have become even larger by acquiring smaller competitors. The ten largest EMS companies (Electronics Manufacturing Services), i.e. companies that manage the whole production of a mobile phone, now handle a significant part of the total volumes in the mobile phone sector.
Within Mobile Phones, Nolato Telecom operates in the upper segment. The traditional, established mobile phone companies are holding their positions in this segment, but they are being challenged by the expansion of local Chinese companies.
The Nolato Telecom market is afected by how mobile phones are designed. The more equivalent mobile phones become in terms of function and performance, the more important it is to find unique features. Other drivers are the use of diferent types of materials such as ceramics – exclusive and durable – which are now being introduced. New properties for these products, such as waterproofing and increased temperatures, are important driving forces for Nolato Telecom's market.
EMC is having an efect on a steadily growing market with the development of the 4G network, not least in China. Within the EMC area, Nolato provides the telecom
At the CES consumer electronics fair in Las Vegas in January 2015, the ceramic pendant called Miragii caused quite a stir among visitors. Miragii is a high-tech "wearable" , filled with advanced electronics and features for those who want to leave their mobile phone in their bag. The pendant vibrates when the phone rings, and if you want to know who it is quickly, you can have the information projected on your hand.
The smart jewellery was presented by HTSmartech in close cooperation with Nolato. It is manufactured in zirconium dioxide, a ceramic which is extremely durable, withstands most chemicals and has a natural beauty with an exceptionally smooth surface. The material is also bio-compatible, which means that the wearer does not risk an allergic reaction.
The use of zirconium dioxide has previously been limited due to a very complex process. Together with researchers, Nolato has developed a method that enables mass production of items with high demands on appearance and surface quality.
Injection moulded, painted and decorated components for mobile phones, in some cases integrated in the form of mechanical modules and in some cases waterproof. Creative material design and finish with high cosmetic and haptic content.
Small, designed, adhesive components with mechanical and/or cosmetic functions such as logotypes, speakergrilles and three- dimensional design elements.
Process and material solutions for shielding electronics to achieve electromagnetic compatibility (EMC).
Mobile phones:
Beijing, China MD Jörgen Karlsson
Beijing, China Shenzhen, China MD Dan Wong
Nolato Silikonteknik Hallsberg, Sweden Beijing, China Penang, Malaysia Chennai, India
MD Anders Ericsson
market with process and material solutions for shielding electronics to comply with electromagnetic compatibility.
Within EMC the overall driving force is consumers' changing use of mobile phones, especially for sending data, and the use of streaming/social media, which require significantly more capacity from the networks than normal speech. As the power used by networks increases, so does electromagnetic interference - which increases the need for EMC's process and material solutions for shielding. Another driver is the problem of heat generation by electronic devices. The use of higher power in ever smaller base stations generates more heat. This leads to Nolato Telecom's newly established area Thermal Management becoming increasingly important. New applications for shielding in the automotive and medical technology areas also drive the market.
Within Mobile Phones, Nolato Telecom is a niche player compared with the large EMS companies (Electronics Manufacturing Services), with high internal skills in design, development and production. The total mobile phone market is estimated at nearly 2 billion units for 2014. Nolato Telecom's market is in the upper segment and is projectrelated, meaning that Nolato Telecom's volumes and earnings are not so dependent on the total market development, but more on how well individual mobile phone suppliers succeed with their diferent models on the market. Nolato Telecom's market share is estimated to a few per cent.
Customers mainly consist of selected OEM companies (Original Equipment Manufacturer), which develop and produce their own endproducts, unlike mobile phone Extremely fast tool manufacturing and unique technical solutions are important competitive levers for Nolato Telecom.
companies that use large contract manufacturers to produce the whole mobile phone.
Nolato Telecom supplies mechanical components in plastic and metal to OEM companies or their subcontractors. The diferent components consist of external, visible parts with very high cosmetic and haptic requirements, and parts used inside the mobile phone. During the past year, Nolato Telecom extended its ofering to include ceramic and thermal components.
Within EMC, Nolato Telecom has a strong position as a supplier of shielding solutions for base stations in mobile phone networks. Nolato Telecom judges that the market has good growth and increases other applications in the automotive industry and health care. For example, electric cars need shielding when they are being charged. In the health care system, there is an increasing number of devices that require shielding. Nolato Telecom has started to expand its activities into these related sectors.
Our largest competitors in the international market in mobile phones include Chiyoda, Jabil Green Point, Lite-On Mobile and Worldmark. Within EMC, our largest competitors include Chomerics and Laird.
Nolato Telecom's strategy is to be a supplier of technically advanced products and a partner, mainly to the upper segment in the telecom industry.
Within EMC, Nolato Telecom's strategy is to be a supplier to customers mainly in the segments for base stations, automotive and health care equipment. Sales of EMC material also take place via Nolato licensed partners. Apart from the development of various electrically conductive material
solutions and components for shielding of electronics, development work is focused on TIM products (Thermal Interface Materials). The task of TIM products is to dissipate heat from components on a circuit board.
Operations in Nolato Telecom, like the rest of the Group, are based on: Corporate responsibility, broad technical expertise, knowledge of materials and similar production techniques. The diference is particularly in the technological content. Nolato Telecom has built up its own portfolio of unique technical solutions that enable an ofering of exceptional detail and finish. The business area also has special competence to manage very fast startups of new products and production with large fluctuations in volume.
Unlike the rest of the Nolato group, the major part of Nolato Telecom's revenues come from other technologies than injection moulding, such as tool manufacturing, diferent types of painting and decoration, and assembly.
Within Mobile Phones, the targets for 2015 are to use existing production capacity for new technologically advanced projects, as well as continued rationalisation of the production units through a focus on lean manufacturing.
Within EMC, the targets for 2015 are to continue development of Thermal Interface Material products. Nolato Telecom will also invest in the continued marketing of their own trademarks Compashield, Trishield and Compatherm.
Nolato Telecom considers that the market for mobile phones is an interesting growth market, but it has constant, rapid changes. The high volumes on the consumer market in the last quarter of 2014 are expected to be temporary, and a return to more normal levels is expected during the first quarter of 2015. The EMC market is expected to continue to grow within the mobile segment, as well as through increased demands on shielding in other industries such as automotive and medical technology.
2010 2011 2012 2013 2014
Affecting cash flow, excluding acquisitions and disposals
Business Area President: Johan Arvidsson Employed since 1994 President since 2012
| Financial highlights: | 2014 | 2013 | |
|---|---|---|---|
| Sales SEKm | 1,106 | 1,170 | |
| Operating profit EBITA SEKm | 118 | 119 | |
| EBITA margin % | 10.7 | 10.2 | |
| Average number of employees | 687 | 753 | |
Fragmented and diversified, with a large number of customers and a large number of suppliers.
Plastic is replacing heavier metal components. Customers want earlier and more extensive support in the development phase. Smaller suppliers with limited customer offerings lose their position.
Development and manufacturing of components and product systems for customers in the automotive industry, hygiene, packaging, gardening/ forestry, furniture and other selected industrial segments.
Development, production and sales in Sweden, Hungary, Romania and China.
Technology, project management and productivity.
Atlas Copco, Brose, Husqvarna, Jaguar/Land Rover, MCT Brattberg, Sanitec, SKF, Volvo, Volvo Cars.
AQ Group, Euroform, KB Components, Mann+Hummel, Promens, Rosti.
Medium. Follows the Northern European industrial business cycle.
Product life cycle: Medium/Long.
Continuous improvement and lean manufacturing are important elements of Nolato Industrial's competitive edge.
Nolato Industrial consists of eight strong specialist companies which develop and manufacture products and product systems, mainly in polymer materials, for various customer segments. The companies create opportunities individually and in cooperation with each other. Demand from automotive customers in particular was good, which led to healthy growth and increased market shares for the business area. The business area also carried out successful productivity work.
Nolato Industrial operations are mainly aimed at two customer sectors:
Customers in these two sectors often make continuous, large purchases with high volumes and long series.
Sales amounted to SEK 1,106 million (1,170). Adjusted for currency and the sale of rubber operations (Nolato Sunne AB) sales increased by 3%. Demand was good, particularly in the automotive segments and garden/forest, and Nolato Industrial gained market shares in both of these areas. Operating profit (EBITA) amounted to SEK 118 million (119) and the EBITA margin increased to 10.7% (10.2). The improvement in operating margin was due to productivity-raising measures, lean manufacturing.
Nolato Industrial continued its collaboration with Volvo Cars, for example in the new Volvo SPA platform, on which the Volvo XC90 is the first car to be launched. Examples of products supplied by Nolato Industrial are engine fans, door modules and components in the engine compartment.
During the year, Nolato was selected as "Supplier of the Year" by Husqvarna, in tough competition with other global suppliers. The award, called the Supplier Excellence Award, was presented at the Husqvarna suppliers' day in USA. In the justification of the award, Husqvarna praised the longterm, close cooperation with Nolato in the development of processes and products.
The expansion of the production unit in Mosonmagyaróvár, Hungary, which is shared with Nolato Medical, was completed in 2014 to meet customer requests for increased production resources.
Nolato Industrial's operations in Hungary and Romania were certified under the health and safety standard OHSAS 18001. Operations in China were certified under the automotive standard ISO/TS 16949.
The European market for the manufacture of polymer products is fragmented and consists of almost 50,000 companies, which have total sales of more than SEK 500 billion. A typical company is family-run, has sales of SEK 20–35 million per year and operates on the local market. Sales are often local because the products are generally bulky and thus expensive to transport.
The market is equally fragmented in the Nordic countries as the rest of Europe. In Sweden there are over 700 manufacturers of polymer products, of which two-thirds have fewer than five employees. Only around thirty companies have sales over SEK 50 million.
There are a number of driving forces behind the development of Nolato Industrial's market:
The main incentive for customers is to ofer better and more cost-efective products on their markets. This means that successful suppliers, like Nolato Industrial, need to be at the cutting edge technologically and work closely with customers, both in development and production.
A clear trend is that customers want more comprehensive support earlier in the development phase, which means that companies with only production-oriented oferings lose their position.
Another driver is polymer materials replacing metal, which is particularly clear in the automotive industry. In the development of new models, weight is becoming increasingly important in the efort to reduce fuel consumption and thus emissions.
The German automotive component manufacturer Brose was commissioned by Volvo Cars to supply a complete cooling fan package for the brand-new Volvo XC90 model. Brose in turn engaged Nolato to supply the fan and fan shroud, which are manufactured in injection moulded plastic.
The design puts high demands on the components' dimensional accuracy, and tolerance requirements for roundness and throw in the fan are very challenging. All of this is to avoid vibration or noise at high speeds.
To comply with Volvo's technical requirements with a margin, Nolato invested in new equipment. In principle, everything associated with production for Brose is new: injection moulding machines, overhead cranes, conveyors, control fixtures, etc.
Requirements on accuracy mean that every detail is checked using special equipment, including a laser measuring machine. The measuring equipment is checked at regular intervals and everything is documented.
Serial production of the new fan and fan cover started in January 2015.
Automotive Engine components, gaskets for engines and exhaust systems, interior fittings, battery boxes, etc.
Ball cages and bearing seals for ball bearings, armrests etc. for office chairs, conveyor belts, fire-proof cable glands. Components for microwave ovens, components for clearing saws and chainsaws (starters, fuel caps, air filter holders, etc.), flushing mechanisms for toilets, transport boxes for store chains.
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
Nolato Automotive Components (Beijing) Co, Ltd Beijing, China MD Jörgen Karlsson
Nolato Industrial's market position
Nolato Industrial is the market leader in the Nordic region, with about one-fifth of the business done by suppliers with sales of more than SEK 50 million. The companies in Nolato Industrial are all one of the largest on the market. Overall, Nolato Industrial is the largest operator. The business area has extensive development resources with high technological expertise in polymer materials and processes. Nolato Industrial's operations are also characterised by strong project management and highly efcient production.
In Central Europe, Nolato Industrial has a strong position as a quality supplier of products, in particular to the hygiene sector.
The extensive fragmentation in the industry is expected to lead to further consolidation in the Nordic countries and the rest of Europe. The main competitors to Nolato Industrial are the AQ Group, Euroform, KB Components, Mann+Hummel, Promens and Rosti (Nordstjernan).
Nolato Industrial's strategy is to be a leading supplier of development and production of products and product systems in
Lean manufacturing work is ongoing in all Nolato Industrial's factories and involves integrated processes, a high degree of automation, efficient flows, little or no inventory and a "zero faults" vision.
polymer materials for customers within the automotive and general industry segments (including hygiene, packaging, garden/forest and furniture). Nolato Industrial, with the Nordic market as a base, will grow by developing existing customers and taking market shares in these segments.
Nolato Industrial is able to selectively ofer existing customers production on new markets. Examples of this strategy are the establishment of the factory in Romania in 2011 where Nolato Industrial produces packaging for a large global customer and Nolato Lövepac, which started production in China in 2013 for delivery to another large global customer.
The major part of Nolato Industrial's growth will be organic, but the business area also evaluates selective acquisitions.
Operations within Nolato Industrial have their basis, just like the rest of the Group, within: Corporate responsibility, broad technical expertise and advanced production technology. The diference is mainly the great importance of high productivity. Continuous improvement and lean manufacturing are key elements for the entire
Nolato Group, but have an even greater significance for Nolato Industrial's competitiveness.
Lean manufacturing work is in progress in all Nolato Industrial factories and is characterised by integrated processes, a high degree of automation, efcient flows, little or no inventory and a "zero faults" vision.
Nolato Industrial also has the ability to quickly assimilate new technology, both in materials and processes, and can ofer its customers solutions that provide substantial cost savings. One such example is the development of the inlet manifold for Volvo Cars' new range of petrol and diesel engines, Drive-E, and another is the new packaging solutions and items for an international hygiene company.
The goal for 2015 will be to continue taking marketshares, through the development of existing customers and through increased presence in selected geographic markets. Another goal is to ensure competitiveness by being the leading company in the industry with respect to productivity improvements, resulting in even more efcient process flows between Nolato and customers.
Nolato Industrial judges that the market on which it operates generally follows the northern European industrial cycle.
EBITA margin, full year
Operating profit (EBITA), full year
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Affecting cash flow, excluding acquisitions and disposals
Operating profit (EBITA), quarter
For some years now, Nolato has participated in a long-term project that provides financial and practical support for a school called Building Hope Together in a poor, cold, rural area outside Beijing.
Sustainable development is part of Nolato's business model and we create value for our stakeholders by working strategically with issues related to people and the environment. An efcient, responsible and profitable business based on good business ethics and progressive environmental work – something that is clearly expressed in Nolato's Basic Principles.
With its focus on responsibility, order and organisation, Nolato's sustainability work actually started in 1938 when the company was founded. Since then, we have taken many large and small steps with everincreasing ambitions. Nowadays the Group goals are an important incentive, but equally important is meeting the expectations of society and our stakeholders. A very positive aspect is that much of the work on sustainability has its origin in committed managers and employees.
It is clear that requirements on environmental and social responsibility are growing among Nolato's customers and we are expected to pass on these requirements to our suppliers.
Nolato's sustainable development strategy includes:
We want to be an attractive company for both new and current employees.
The overall focus of sustainability work is stated in Nolato's Basic Principles, Code of Conduct and policies. Operational responsibility for activities is delegated to the CEO of each company. The Group Management regularly monitors sustainability work and the issues are integrated into strategic planning. A representative of Nolato's Board has a special responsibility to monitor issues related to sustainable development.
The activities are monitored through dialogues with management and through internal and external audits. In connection with the annual sustainability report there is an in-depth analysis of compliance with the law, the fulfilment of Group goals, and how performance indicators developed during the year.
Management by objectives in the environmental field is a requirement of the environmental management standard ISO 14001, so the Group units have been working with local environmental objectives for many years. To coordinate the activities introduced in 2010, shared long-term goals in the Group were introduced for sustainable development. The goals have gradually been made more stringent and individual units are also free to draw up their own local goals.
In 2014 Nolato's units worked with many diferent environmental issues. The first priority was obviously to ensure compliance with laws, regulations and customer requirements, but the overall goal is to continuously reduce environmental impact. In the strategy for sustainable development, shared Group goals for the environment are supplemented by local goals for the various units.
ISO 14001 is an important tool in environmental management and the system is in place at all units. Regular environmental audits, evaluations and sustainability reports will help us to do the right things in the right way. Resource issues such as energy, material use and waste are important for the Group's units. Emissions to air and water are small, but climate impact through carbon dioxide emissions is an issue that is considered at all levels in Nolato. A large number of activities in recent years regarding the efcient use of energy have reduced energy consumption and climate impact.
During the year, a large investment was made in purification equipment to reduce solvent emissions from the painting of mobile phones. This measure will have its full efect in 2015 and will contribute to better air quality in Beijing. Another environmental aspect that afects most of our units is the demand from customers that products must not contain any hazardous chemical substances. A number of chemicals were replaced during the year and more are on the list to be replaced during 2015.
In 2014 there were no incidents that breached any applicable laws. The authorities carried out environmental and health and safety inspections at around ten units and no serious deviations were found.
Customer's demands on the Group's companies regarding environmental, social and ethical issues are gradually becoming
The Nolato Spirit is the fundamental values and policy document that conveys the principles and attitudes that constitute Nolato's values. An update of The Nolato Spirit was started in 2014 and courses for employees will be arranged in 2015.
Nolato is affiliated to the UN Global Compact, which encompasses ten principles on the environment, human rights, working conditions and anti-corruption. Annual reports are prepared in accordance with UN guidelines (Communication on Progress, COP).
We report Nolato's sustainability work under the guidelines of the Global Reporting Initiative (GRI G4). The report includes indicators for environmental responsibility, social responsibility, ethics and financial responsibility.
We work according to international standards relating to the environment (ISO 14001) and health and safety (OHSAS 18001). The standard for social responsibility (ISO 26000) gives us guidance in overall sustainability work.
The Nolato Spirit is available for download on the Group's website, www.nolato.com/sustainability
Employees by business area
stricter. In many cases, Nolato is expected to pass on these requirements along our supply chains, which we do through information on Nolato's Code of Conduct and our specifications, as well as various types of monitoring. During the year, 12 of the Group's units were inspected by customers and the outcome was generally very good. We conducted more than 150 audits of suppliers with a focus on sustainable development. Here too, the outcome was good but two of the suppliers were not approved by Nolato.
Nolato has a long tradition of corporate responsibility. It lies deep in our soul that the company should act as a good neighbour and a caring global citizen, take responsibility for what we do and always apply good business ethics. We are convinced that this approach will help us to attract, recruit, develop and keep committed and skilled employees.
We work with leadership development, training of employees, diversity, and issues related to health and safety. In 2014 our employees participated in courses totalling approximately 230,000 hours. Training activities were particularly extensive in China, Hungary and Sweden.
In 2014, the average number of employees was 8,020 (9,357). Almost 80% of our employees are at Nolato's units in China. Other countries where we have a significant number of employees are Sweden and Hungary. Just over half (51%) of our employees are women.
All companies are wholly owned by Nolato and the guidelines in Nolato's Code of Conduct apply in the same way worldwide. The daily work with personnel and health and safety issues is decentralised. Each individual company is responsible for dealing with these issues in a manner consistent with the Group's guidelines and with each country's legislation and culture.
All employees in Nolato have the right to be represented by unions, as well as the right to collective bargaining. In Sweden and China most of the employees are covered by collective bargaining agreements. There are no unions or collective bargaining agreements at units in the other countries, reflecting the normal situation in those countries.
We make special eforts in China to attract, keep and develop both permanent and temporary staf. The activities are grouped under the term Employee Care Program and the program includes activities related to health, safety, lifestyle,
Nolato has a long tradition of corporate responsibility.
| 2012 | 2013 | 2014 | How we performed | ||||
|---|---|---|---|---|---|---|---|
| See chart below | u Energy efficiency measures were implemented. Despite the increase in production and size of premises at several units, total energy consumption decreased. |
||||||
| See chart below | u Reduced consumption of fossil fuels, and energy efficiency improve ments resulted in reduced emissions of carbon dioxide. |
||||||
| See chart below | u Continued focus on issues related to scrap and waste resulted in reduced waste volume. |
||||||
| 861 | 100 | 100 | p All units are certified. | ||||
| 642 0.0073 |
34 0.004 |
43 0.005 |
u Systems to report incidents are now in place at all plants, and nearly 500 incidents were recorded and measures taken. The acci dent rate remains largely unchanged. |
||||
| 04 | 0 | 0 | p Nolato's Basic Principles are included in courses for new employees and different types of refresher courses. |
||||
| 04 | 0 | 0 | p The whistleblowing system has been implemented throughout the Group. The Nolato Spirit and Code of Conduct are updated and new training programmes will be implemented. |
||||
| 905 | >90 | >95 | u The number of suppliers audited for environmental, health and safety and social responsibility increased by 50% compared to 2013. |
||||
p Target achieved. u Positive trend, but efforts needed to reach the target. q Negative trend.
1 % of the total number of certified facilities; 2 Number of cases with >1 day absence; 3 Number of cases per employee; 4 Number of reported cases; 5 % of the number of plants that give out information about Nolato's values, place demands and carry out assessments of suppliers' environmental/social responsibility
Emissions of carbon dioxide CO2
All Group targets are stated in our detailed sustainability report (see www.nolato.com/sustainability)
A large number of Nolato's employees in Beijing are on temporary agency work, due to short product cycles and widely varying production volumes. These employees are covered by the same principles as permanent employees.
opportunities to participate in language learning and employee surveys supplemented by a forum where employees can discuss issues with the company President. In 2014, the program was supplemented by:
In addition to this, there are various bonus schemes and competitions that are aimed at groups of employees or individual employees, such as work with improvement and quality.
Preventive health and safety work is targeted and systematic. We identify risks, take appropriate measures and implement technical improvements and training courses. An important part of this systematic work is the introduction of a management system for health and safety (OHSAS 18001).
Five units are currently certified and four others are preparing for certification in the near future.
In 2014, there were 43 (34) occupational accidents, resulting in a total absence of 929 (381) days. The most common causes were injuries by machinery or equipment and accidents through falling, which in most cases only resulted in one or two days' absence. Some cases of cuts and muscle injuries resulted in long-term absence. The registration of incidents has been further improved and a total of 475 were reported during the year which were investigated and corrective and preventive actions were taken.
Training courses in the environment and health and safety are one part of the preventive work, and on average 4.5 hours per employee are spent on this per year. 700 employees in China participated in first aid training.
We work together with the surrounding communities in the locations where we operate. For Nolato it is important to
maintain contact with universities and schools. This involves study visits, dissertations, placements and development projects. Our local units often contribute to sports, culture and health activities.
In Hungary, the employment of people with diferent types of disability has been extended, and this has received continued appreciation from governments and society in the form of awards. Through employment, blind or deaf people have a better quality of life and they carry out excellent work in the company's production units. In China, too, a number of people with disabilities have been employed.
The project Building Hope Together in China has continued to involve senior management and employees. For some years now, Nolato has participated in a long-term project to provide financial and practical support to a school in a poor, cold, rural area outside Beijing. This year's contribution included warm jackets and backpacks for the pupils.
From time to time, Nolato comes across viewpoints on business ethics and business practices that are unacceptable. When this happens, we find support in our Code of Conduct that is our ethical compass. By spreading and discussing our values, we
govern and monitor the ways of doing business in the Group companies. We pay particular attention to ethical issues in relationships with our business partners. Normal business practice in each country must be observed, but if business practices are not consistent with Nolato's Code of Conduct we must refrain from operations or take other relevant measures. We have zero tolerance on bribery, corruption and the building of cartels. We make annual assessments in this area using check-lists from the UN Global Compact. So far, no cases involving violations of the Code of Conduct have been identified and the companies continue with their active eforts to combat corruption.
During the year, the system of whistleblowing has been more deeply anchored in the Group. The system means that an employee can sound the alarm about any questionable practices via a third party, without fear of reprisals or pressure.
Among other things, in 2015 we will be working with:
Further measures that help energy efciency, reduce climate impact and cause less waste.
Activities related to health and safety, including the introduction of the OHSAS 18001 standard at more of our production units.
Total shareholder return and share price performance 2010 – 2014
Dividend yield 2010 – 2014
5 year 305.1% (annual average 32.3%) 3 year 318.3% (annual average 61.2%) 2 year 151.4% (annual average 58.7%)
Nolato AB was listed on the Stockholm Stock Exchange in 1984 and the B share is listed on NASDAQ Stockholm, where Nolato is a Mid Cap company in the Industrials sector.
Trading in shares also took place in Burgundy and Chi-X BXTR in 2014.
The share's symbol is STO:NOLA B and the ISIN code is SE0000109811.
Nolato's B shares rose during the year by 22% (87), which is 11 percentage points better than the average performance on the Stockholm Stock Exchange (OMXS). At the end of 2014 the shares were listed at SEK 178.00 (146.50).
The highest closing price on NASDAQ Stockholm in 2014 was SEK 181.00 (25/11/2014) and the lowest closing price was SEK 139.50 (16/10/2014). The highest price paid during the year was SEK 183.00 (19/12/2014) and the lowest paid was SEK 135.00 (16/10/2014).
The share market value at 31 December 2014 was SEK 4,683 million (3.854).
In 2014, 11.0 million Nolato shares (14.5) were traded, of which 11.0 million (13.9) on NASDAQ Stockholm, 0.0 million (0.1) on Burgundy and 0.0 million (0.5) on Chi -X BXTR. The turnover rate, or degree of liquidity, was 47% (62).
The number of shareholders increased by 12% and on 31 December it was 9,409 (8,373).
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 shares 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 has no ongoing programme of financial instruments which involves dilution of the shares.
The Board revised its dividend policy in 2014.
Under the policy, the Board intends to propose a dividend annually that exceeds 50% of the net profit with regard to Nolato's long-term prospects, financial position and investment needs (an increase compared with the previous policy of no less than 35%).
For 2014, the Board proposes an increased dividend of SEK 8.50 per share (ordinary dividend of SEK 4.00, extraordinary dividend of SEK 4.00, total of SEK 8.00), corresponding to SEK 224 million (210).
The payout ratio, or dividend in relation to earnings after tax, amounted to 61% (67).
The dividend yield relative to the stock exchange price on 31 December 2014 was 4.8%. Over the past five years, Nolato's shares have had an average yield of 7.0%.
There is no limitation regarding the transferability of the shares by law or in the Articles of Association.
The Nolato share has been monitored and analysed during the year by the following analysts:
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.
On our website www.nolato.com you will find information about B-shares' current and historical price performance and monthly updates of the largest shareholders of Nolato.
You will also find all interim reports, annual reports and press releases since 1998 on the same website.
| Shareholders | Share of capital (%) | Share of votes (%) | ||
|---|---|---|---|---|
| 31/12/2014 | Change* | 31/12/2014 | $Change^*$ | |
| Jorlén family | 9.9 | $0.0\Rightarrow$ | 24.5 | $0.0\Rightarrow$ |
| Boström family | 9.4 | $0.0\Rightarrow$ | 19.6 | $0.0\Rightarrow$ |
| Skandia funds | 3.3 | $-0.9$ 0 | 1.7 | $-0.5$ 0 |
| Paulsson family | 3.1 | $0.0\Rightarrow$ | 16.0 | $0.0\Rightarrow$ |
| Svolder | 3.1 | $-1,6$ 0 | 1.6 | $-0.8$ 0 |
| Odin funds | 3.1 | $-1.3$ $\bullet$ | 1.6 | $-0.7$ $\bullet$ |
| JPM Chase | 2.8 | $-0.7$ $\bullet$ | 1.4 | $-0.4$ 0 |
| DnB - Carlson funds | 2.7 | $0.1\Omega$ | 1.4 | $0.0\Rightarrow$ |
| MPCS EQ SEC Client Seq | 2.7 | $0.2 \Omega$ | 1.4 | $0.1\Omega$ |
| State Street Bank & Trust | 2.4 | $0.2 \Omega$ | 1.2 | $0.1\Omega$ |
| Swedbank Robur funds | 2.1 | $0.6\Omega$ | 1.1 | $0.3 \Omega$ |
| Citibank NA New York | 1.8 | $1.8\Omega$ | 0.9 | $0.9\Omega$ |
| Försäkringsaktiebolaget, Avanza pension | 1.6 | $-0.2$ $\bullet$ | 0.8 | $-0.1$ 0 |
| Sijoitusrahasto Evli Eurooppa | 1.3 | $1.3\Omega$ | 0.6 | $0.6\Omega$ |
| SEB Investment Management | 1.2 | $0.2 \Omega$ | 0.6 | $0.1\Omega$ |
| Total 15 largest shareholders | 50.5 | 74.4 | ||
| Other shareholders | 49.5 | 25.6 |
*Change (percentage points) in shareholding compared with 31/12/2013
| 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|
| Net earnings per share, SEK 1) | 13.84 | 11.94 | 7.68 | 5.02 | 7.11 |
| Shareholders' equity per share, SEK 2) | 60 | 51 | 44 | 44 | 45 |
| Cash flow per share, SEK, excl. acquisitions and disposals | 4.83 | 13.76 | 12.05 | 4.26 | 8.74 |
| Share price at 31 December, SEK | 178.00 | 146.50 | 78.50 | 50.75 | 83.00 |
| Price/earnings ratio, times 3) | 13 | 12 | 10 | 10 | 12 |
| Turnover rate, % | 47 | 62 | 19 | 34 | 47 |
| Dividend (2014 proposal), SEK | 8.50 | 8.00 | 6.00 | 5.00 | 6.00 |
| Yield (2014 proposal), $\%$ 4) | 4.8 | 5.5 | 7.6 | 9.9 | 7.2 |
| Dividend as % of earnings per share (2014 proposal) | 61 | 67 | 78 | 100 | 84 |
| Average number of shares, thousand | 26.307 | 26.307 | 26.307 | 26.307 | 26,307 |
| Price/equity ratio per share, times | 3.0 | 2.9 | 1.7 | 1.2 | 1.8 |
| Market capitalisation 31 December, SEK million | 4.683 | 3.854 | 2.065 | 1.335 | 2,183 |
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:
Nolato's Basic Principles 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 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 systems and routines for receiving and processing employees' reports of 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 NAS-DAQ Stockholm, 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 two of the points in 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 holding around 60% 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 2014 AGM, authorised public accountant Alf Svensson, KPMG, was reelected as auditor of Nolato and authorised public accountant Camilla Alm Andersson, KPMG, was re-elected as deputy auditor, both for the period until the next AGM.
Alf Svensson, born 1949. Authorised public accountant, KPMG. Auditor of Nolato since 2008. Elected auditor of companies including Bioinvent International, Diaverum, Lindéngruppen and Nibe.
Camilla Alm Andersson, born 1965. Authorised public accountant, KPMG. Deputy auditor of Nolato since 2008. Other major clients: Wilh. Becker, Höganäs, Pergo and Kjell o Company.
Reporting and control takes place 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 submitted to the Board on an ongoing basis. The Board reads and approves financial reports such as monthly reports, forecasts, interim reports and the Annual Report.
| Name | Fredrik Arp | Dag Andersson | Sven Boström-Svensson | Åsa Hedin | Henrik Jorlén |
|---|---|---|---|---|---|
| Year elected | 2009 (also member between 1998 - 1999) |
2014 | 2013 | 2014 | 1974 |
| Position | Chairman of the Board and Chairman of the Remuneration Committee. |
Board member | Board member | Board member | Board member and member of the Remu neration and Audit Com mittees. |
| Born | 1953 | 1961 | 1983 | 1962 | 1948 |
| Education | Bachelor of Science (econ.) and Ec. Doctor h.c. |
Bachelor of Science (econ.) Stockholm School of Economics. MBA Insead. |
Bachelor of Science in Chemistry |
Master of Science in Biophysics, Bachelor of Arts in Physics |
Commercial school |
| Other assignments |
Chairman of the Board of Mediplast and Parques Reunidas. Board member of Tech nogym and Vattenfall |
Board member of Dia verum AB and other boards within Diaverum incl. JV companies. |
— | Swedish Space Corperation AB |
— |
| Background | CEO of Volvo Cars, Trelleborg, PLM. |
CEO and President Dia verum AB. Vice President Mölnlycke Health Care, various positions SKF. |
— | Vice President Elekta AB. Leading positions at Siemens Healthcare and Gambro AB. |
Management positions within the Nolato Group. |
| Attendance | 6 of 6 meetings | 4 of 6 meetings (elected at the AGM) |
6 of 6 meetings | 4 of 6 meetings (elected at the AGM) |
6 of 6 meetings |
| Remunera tion 1) (SEK) |
455,000 | 175,000 | 175,000 | 175,000 | 210,000 |
| Share holding 2) |
3,000 B (3,000 B) |
1,000 B | 255,870 B (255,870 B) |
0 | 294,000 A + 47,950 B (294,000 A + 47,950 B) |
| Dependence | Independent of the com pany and major share holders. |
Independent of the com pany and major share holders. |
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 2014 (31 December 2013) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
| Name | Hans Porat | Lars-Åke Rydh | Ingegerd Andersson | Håkan Svensson |
|---|---|---|---|---|
| Year elected | 2008 | 2005 | 2013 Deputy 2004 – 2013 |
2014 Deputy 2009–2014 |
| Position | Board member President and CEO of Nolato AB. |
Board member and Chairman of the Audit Committee. |
Employee representative LO. |
Employee representative PTK. |
| Born | 1955 | 1953 | 1951 | 1960 |
| Education | Master of Science (metallurgy) |
Master of Science (eng.) | Upper secondary school | Upper secondary school. Certified Member of the Board PTK. |
| Other assignments |
Board member of Lindab International and Nefab. |
Chairman of OEM Interna tional, Nefab, Plastprint and Schuchardt Maskin. Board member of HL Display, Olja ek.för. and Investment AB Vitrinen. |
— | — |
| 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 Cerbo. |
| Attendance | 6 of 6 meetings | 6 of 6 meetings | 6 of 6 meetings | 6 of 6 meetings |
| Remunera tion 1) (SEK) |
0 | 230,000 | 0 | 0 |
| Share holding 2) |
20,000 B (20,000 B) |
2,000 B (2,000 B) |
0 (0) |
0 (0) |
| Dependence | Not independent of the company but independent of major shareholders. |
Independent of the com pany and major share holders. |
— | — |
Deputies for employee representatives: Björn Jacobsson (LO), Arif Mislimi (LO) and Jonny Petersson (PTK).
1) For more information about remuneration, see note 10 on page 64.
2) Shareholding in Nolato at 31 December 2014 (31 December 2013) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
| 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 (eng.) MBA |
Polymer engineering | Master of Science (eng.) |
| 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 |
| Shareholding1) | 20,000 B (20,000 B) |
14,084 B (20,154 B) |
15,712 B (15,712 B) |
0 (0) |
5,000 B (5,000 B) |
1) Shareholding in Nolato at 31 December 2014 (31 December 2013) incl. family and companies, according to Euroclear Sweden. For current information see www.nolato.com.
| Operations in 2014 and comments on the financial statement 44 | |
|---|---|
| Corporate responsibility 45 | |
| Operational risks47 | |
| Management systems47 | |
| Nolato's shares 47 | |
| Corporate governance47 | |
| Remuneration guidelines 47 | |
| Parent Company 47 | |
| Proposed appropriation of profits 47 | |
| Events after the end of the financial year 47 | |
| Future performance 47 | |
| Consolidated income statement and comprehensive income50 |
|---|
| Comments on the consolidated income statement 51 |
| Consolidated balance sheet 52 |
| Comments on the consolidated balance sheet 53 |
| Consolidated cash flow statement 54 |
| Comments on the consolidated cash flow statement55 |
| Note 1 General information 56 | |
|---|---|
| Note 2 Accounting and valuation policies 56 | |
| Note 3 Critical accounting estimates and judgements 59 | |
| 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 auditors 62 | |
| Note 9 Other operating expenses 62 | |
| Note 10 Personnel 63 | |
| Note 11 Financial income and expenses 65 | |
| Note 12 Tax 65 | |
| 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 equipment 68 | |
| Note 17 Financial assets69 | |
| Note 18 Inventories69 | |
| Note 19 Other current assets 69 | |
| Note 20 Share capital 69 | |
| Note 21 Other reserves70 | |
| Note 22 Financial liabilities 70 | |
| Note 23 Provisions for pensions and similar obligations 71 | |
| Note 24 Other provisions 71 |
Note 25 Other current liabilities.....................................................................71 Note 26 Pledged assets ................................................................................72 Note 27 Related parties ................................................................................72 Note 28 Cash flow ........................................................................................72
| Parent Company income statement and comprehensive income 73 | |
|---|---|
| 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 auditors 75 | |
| Note 5 Other operating expenses 75 | |
| Note 6 Personnel 76 | |
| Note 7 Profit from participations in Group companies76 | |
| Note 8 Financial income76 | |
| Note 9 Financial expenses 76 | |
| Note 10 Appropriations 76 | |
| Note 11 Tax 77 | |
| Note 12 Expenses allocated by type of cost 77 | |
| Note 13 Participations in Group companies77 | |
| Note 14 Share capital 78 | |
| Note 15 Borrowings 78 | |
| Note 16 Receivables and liabilities, Group companies 78 | |
| Note 17 Other provisions 78 | |
| Note 18 Accrued expenses and deferred income78 | |
| Note 19 Untaxed reserves78 | |
| Note 20 Contingent liabilities 78 | |
| Note 21 Related parties 78 | |
| Note 22 Cash flow 78 | |
| Five-year review | |
|---|---|
| Specialist terms81 | |
| Definitions and terms Definitions 81 |
|
| Attestation and signatures of the Board 79 Auditor's report80 |
|
* The content of pages 43 – 79 has been audited.
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 2014 financial year.
Nolato is a Swedish publicly listed group with 8,020 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 NASDAQ Stockholm Exchange in the Mid Cap segment, where they are included in the Industrials sector.
Nolato's operational activities are conducted in three customer-focused business areas:
Nolato Medical develops and manufactures complex product systems and components in medical technology and advanced packaging solutions for pharmaceuticals and dietary supplements.
Nolato Telecom develops and manufactures components and subsystems for mobile phones, and products to achieve electromagnetic compatibility (EMC).
Nolato Industrial develops and manufactures products and product systems for customers in the automotive industry, hygiene, packaging, gardening/forestry, furniture 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. In between these two lies Nolato Industrial.
The operations of these business areas are presented in more detail on pages 16 – 29.
The 2014 financial year resulted in the best operating profit since Nolato was founded in 1938.
| Sales | Operating profit (EBITA) | EBITA margin % | |||||||
|---|---|---|---|---|---|---|---|---|---|
| SEKm | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 |
| Nolato Medical | 1,333 | 1,274 | 1,159 | 176 | 165 | 133 | 13.2 | 13.0 | 11.5 |
| Nolato Telecom | 1,799 | 2,079 | 1,548 | 199 | 166 | 96 | 11.1 | 8.0 | 6.2 |
| Nolato Industrial | 1,106 | 1,170 | 1,170 | 118 | 119 | 105 | 10.7 | 10.2 | 9.0 |
| Intra-Group adj., Parent Co. | – 4 | – 1 | – 3 | – 23 | – 23 | – 31 | — | — | — |
| Group total | 4,234 | 4,522 | 3,874 | 470 | 427 | 303 | 11.1 | 9.4 | 7.8 |
Group sales amounted to SEK 4,234 million Cash flow after investments (4,522), a decrease of 6%. Adjusted for currency, acquisitions and disposals, the decrease was 8%. Consolidated operating profit (EBITA) amounted to SEK 470 million (427), giving an EBITA margin of 11.1% (9.4). Consolidated profit after tax rose to SEK 364 million (314). Earnings per share, basic and diluted, were SEK 13.84 (11.94).
Nolato Medical saw sales rise by 5% to SEK 1,333 million (1,274). Adjusted for currency, sales remained unchanged.
Operating profit (EBITA) rose to SEK 176 million (165) and the EBITA margin was 13.2% (13.0). The margin was positively afected by high productivity.
Increased capacity in the form of new buildings and extensions has been added in both China and Hungary during the year, with a view to future growth.
Nolato Telecom's sales fell by 13% to SEK 1,799 million (2,079). Adjusted for currency, sales decreased by 18%. Sales increased sequentially during the year and volumes in the fourth quarter were exceptionally high. The positive trend in the second half of the year was due to the success of many customers' phone models on the consumer market, as well as continued good development for Nolato's operations within electromagnetic shielding (EMC). The high volumes on the consumer market are judged to be temporary, however, and a return to more normal levels is expected during the first quarter of 2015.
Operating profit (EBITA) increased to SEK 199 million (166) and the EBITA margin rose to 11.1% (8.0). High efciency and long production runs due to the very high volumes, together with a positive development for EMC operations, resulted in an exceptionally high margin in the fourth quarter. During the year, a new production unit for EMC was established in Malaysia.
Nolato Industrial's sales amounted to SEK 1,106 million (1,170). Adjusted for currency and disposals, sales rose by 3%. Demand in the automotive segment was good and most of the other segments were stable. Increased market share gives a positive efect.
Operating profit (EBITA) amounted to SEK 118 million (119), with a strong EBITA margin of 10.7% (10.2). Successful lean work had a positive efect on the margin.
The Group did not make any acquisitions in 2014. The acquisitions focus is unchanged, though, meaning that the Group's strategic planning includes acquisitions, primarily in medical technology in western Europe and North America. Acquisitions are also planned in the EMC area.
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 sustainability perspective, but also creates opportunities and business benefits.
We manage sustainability issues in a methodical way and have integrated them into both long-term strategic planning and our day-to-day operations.
We have set Group sustainable development targets. (See page 33.)
We have clear guidelines in the form of Nolato's Basic Principles, Code of Conduct and Environmental Policy.
We have been signatories to the UN Global Compact since 2008 and we follow the ten principles concerning the environment, human rights and action against corruption.
We report sustainability work in accordance with the guidelines in the Global Reporting Initiative (GRI). The Group is currently adapting to the G4 guidelines.
All production units are certified under the environment management standard ISO 14001.
The ISO 26000 standard for social responsibility provides a guideline for our sustainability work.
Nolato Telecom 42%
Share of sales
The average number of employees at Nolato in 2014 was 8,020 (9,357). The decrease in the number of employees is mainly attributable to Nolato Telecom's operations in China and was due to lower volumes at the beginning of the year.
51% (57) of all the Group's 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 the normal situation in these countries.
In Beijing, China, where the Group has its largest concentration of employees with around 76% of 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, there is a whistleblowing system. This enables members of staf to alert the company to any irregularities without risk of reprisal or pressure. No significant cases were reported in 2014.
The total figure for the average number of employees includes approximately 5,000 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 workforce for mobile phone projects and consequently avoid creating its own large recruitment organisation. In accordance with the Group's policy, these employees are covered by 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 2014.
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 30–35 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 2015.
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 2014.
An important aspect of Nolato's strategic planning is identifying potential operational risks, assessing their probability 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.
A health and safety management system (OHSAS 18001) is in place at several of Nolato's units.
A social responsibility standard (ISO 26000) 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 NASDAQ Stockholm Exchange in the 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 2014, Nolato had 9,409 (8,373) shareholders. The six largest shareholders are the Jorlén family with 10%, the Boström family with 9%, Skandia funds with 3%, the Paulsson family with 3%, Svolder with 3% and Odin funds with 3% of the capital.
Only one individual shareholder, Backahill AB, with 16% 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-to-date 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 2015 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 29 million (23) and have increased due to higher costs charged to subsidiaries. Profit after financial income and expense was SEK 85 million (85).
The profit at the disposal of the Annual General Meeting is as follows:
| Total | SEK 673 million |
|---|---|
| Profit for the year | SEK 310 million |
| Retained profit | SEK 363 million |
The Board of Directors and the President and CEO propose that these earnings be appropriated as follows:
| Total | SEK 673 million |
|---|---|
| To be carried forward | SEK 449 million |
| Div. to shareh. of 8.50 SEK per share | SEK 224 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.
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.
| Operative 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-making hierarchy enable quick decisions to be taken to adapt re sources at an early stage ahead of an anticipated economic 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 cus tomers could have a significant nega tive impact on Nolato's performance and earnings. |
Dependence on individual customers is lowest in Nolato In dustrial, whose market is made up of a large number of cus tomers. 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 de liver to Nolato on time or at the right qual ity. |
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 in creasing in price and having a significant negative effect on various projects. In Nolato, this mainly applies to various plas tic 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 ac counts for around 10 – 15% of the selling price on average, while the corresponding figure is around 20 – 25% for Nolato Medical and 25 – 30% 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 ap plies to the purchase of electricity. |
The Group's production operations are relatively electricity intensive. In 2014 the Group spent SEK 118 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% 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 oc cur during the start-up of a project, but also during ongoing production. |
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- spe cific 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 ex ecutives are authorised to enter into. |
| J Product liability risk The risk of faults in a product manufac tured by Nolato leading to significant fi nancial 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 vi sion 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 risks The risk of significant environmental dam age, 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 a 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 car tel 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 insolvent and being unable to pay for or ders made. |
In terms of customers within Nolato Medical and Nolato Indus trial, this risk is mitigated by sales taking place in a large num ber of countries to a large number of customers, which diversi fies the risk. Nolato Telecom has fewer customers. 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 755 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 con tinually monitors the development of overdue receivables 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 320 million at year-end, 50% of which was hedged. This means that SEK 160 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 8 million on Group profit. The Group has SEK 727 million in foreign net assets, mainly in China, Hungary and the UK. A five percent appre ciation of the Swedish krona would have an impact of SEK 37 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 ex pense will significantly increase in the event of changes to market interest rates. |
Interest-bearing liabilities amounted to SEK 197 million at year-end. A 1 percentage point increase in the interest rate would re sult in a SEK 2 million increase in annual interest expense. At 31 December the Group's financial net assets were SEK 59 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 ac cessing capital. |
Nolato has total loan agreements of SEK 900 million, of which SEK 450 million matures on 31 December 2015 and SEK 450 million matures in July 2017. |
In order to maintain financial flexibility and meet the Group's capital requirements, loan facilities are continuously agreed. |
* Financial risk management is described in detail in Note 4 on pages 59 – 60.
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| Net sales | 5 | 4,234 | 4,522 |
| Cost of goods sold | 6 | – 3,520 | – 3,868 |
| Gross profit | 714 | 654 | |
| Other operating income | 7 | 5 | 19 |
| Selling expenses | – 101 | – 89 | |
| Administrative expenses | 8 | – 162 | – 165 |
| Other operating expenses | 9 | – 2 | – 8 |
| – 260 | – 243 | ||
| Operating profit | 10, 14 | 454 | 411 |
| Financial income | 11 | 18 | 3 |
| Financial expenses | 11 | – 10 | – 11 |
| 8 | – 8 | ||
| Profit after financial income and expenses | 462 | 403 | |
| Tax | 12 | – 98 | – 89 |
| Profit for the year attributable to Parent Company shareholders | 364 | 314 | |
| Depreciation/amortisation and impairment included at | 13 | 165 | 157 |
| Earnings per share, basic and diluted (SEK) | 13.84 | 11.94 | |
| Number of shares at 31 December (thousand) | 26,307 | 26,307 | |
| Average number of shares (thousand) | 26,307 | 26,307 |
| 2014 | 2013 |
|---|---|
| 364 | 314 |
| – 20 | 9 |
| – 2 | |
| 7 | |
| 15 | |
| — | |
| — | |
| 15 | |
| 65 | 22 |
| 336 | |
| 4 – 16 84 – 4 1 81 429 |
Consolidated net sales for 2014 totalled SEK 4,234 million (4,522), a drop of 6%. Adjusted for currency, acquisitions and disposals, sales fell by 8%.
Nolato Medical sales rose by 5% to SEK 1,333 million (1,274). Adjusted for currency, sales remained unchanged. Volumes were lower in Packaging, afected by lower demand in eastern Europe. Other segments were positive.
Nolato Telecom's sales fell by 13% to SEK 1,799 million (2,079). Adjusted for currency, sales decreased by 18%. Sales increased sequentially during the year and volumes in the fourth quarter were exceptionally high. The positive trend in the second half of the year was due to the success of many customers' phone models on the consumer market, as well as continued good development for Nolato's operations within electromagnetic shielding (EMC). The high volumes on the consumer market are judged to be temporary, however, and a return to more normal levels is expected during the first quarter of 2015. The expansion of 3G/4G networks contributes to increased sales in EMC.
Nolato Industrial's sales were SEK 1,106 million (1,170). Adjusted for currency and disposals, sales rose by 3%. Demand in the automotive segment was good and most of the other segments were stable. Increased market share gives a positive efect.
Gross profit was SEK 714 million (654) and increased through improved margins in all business areas, mainly at Nolato Telecom, which showed the largest increase in margin. Gross profit is sales minus the cost of goods sold. The cost of goods sold consists of production costs for materials and manufacturing salaries, as well as other production expenses.
As a percentage of sales, the gross margin was 2.4 percentage points higher than in 2013, chiefly due to higher capacity utilisation, but also as a result of continuous improvement and greater efciency. This contributed to increased profitability.
Total depreciation increased to SEK 165 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 145 million (136).
Other operating income decreased mainly owing to a one-of item in year 2013 of SEK 12 million for an allocation payment from a previous bankruptcy.
Selling and administrative expenses increased compared to 2013 and amounted to SEK 263 million (254). 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 a value in the acquisition analysis in connection with acquisitions.
These decreased due to a one-of item in year 2013 of SEK 8 million for a capital loss from the sale of a subsidiary.
Operating profit rose to SEK 454 million (411). The increase was achieved by sharply improved earnings for Nolato Telecom, improved earnings for Nolato Medical and essentially unchanged results for Nolato Industrial.
Net financial income/expense improved dramtically. Among the financial revenues is a one-of item of SEK 8 million (0) from the reversal of a previous debt relating to an acquisition in 2012 in England. Net interest income also improved due to lower average debt compared to 2013. In addition, the net exchange diferences on financial items were more advantageous. Profit after net financial income/expense was SEK 462 million (403).
Profit after tax rose to SEK 364 million (314), with earnings per share of SEK 13.84 (11.94). The efective tax rate was 21% (22). The lower tax rate was mainly due to an increased share of earnings in countries with lower tax rates.
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible non-current assets | 15 | 549 | 538 |
| Property, plant and equipment | 16 | 894 | 733 |
| Non-current financial assets | 17 | 2 | 2 |
| Other non-current receivables | 1 | 2 | |
| Deferred tax assets | 12 | 45 | 36 |
| Total non-current assets | 1,491 | 1,311 | |
| Current assets | |||
| Inventories | 18 | 264 | 259 |
| Accounts receivable | 17 | 755 | 598 |
| Current tax assets | 18 | 3 | |
| Other current assets | 19 | 130 | 81 |
| Other current financial assets | 17 | — | 3 |
| Cash and bank balances | 17 | 256 | 318 |
| Total current assets | 1,423 | 1,262 | |
| Total assets | 2,914 | 2,573 | |
| Shareholders' equity and liabilities | |||
| Shareholders' equity | |||
| Share capital | 20 | 132 | 132 |
| Other capital contributed | 228 | 228 | |
| Other reserves | 21 | 100 | 19 |
| Retained earnings | 1,107 | 969 | |
| Total shareholders' equity | 1,567 | 1,348 | |
| Non-current liabilities | |||
| Provisions for pensions and similar obligations | 23 | 128 | 111 |
| Deferred tax liabilities | 12 | 61 | 84 |
| Other provisions | 24 | 29 | 30 |
| Total non-current liabilities | 218 | 225 | |
| Current liabilities | |||
| Accounts payable | 22 | 589 | 524 |
| Current tax liabilities | 41 | 7 | |
| Other current financial liabilities | 22 | 79 | 85 |
| Other current liabilities | 25 | 420 | 384 |
| Total current liabilities | 1,129 | 1,000 | |
| Total liabilities | 1,347 | 1,225 | |
| Total liabilities and shareholders' equity | 2,914 | 2,573 | |
| Pledged assets | — | — | |
| Contingent liabilities | 26 | 3 | 3 |
Non-current assets increased, as net investments were higher than depreciation/amortisation of SEK 165 million for the year. Net investments amounted to SEK 215 million. During the year, investments were primarily for expansion in China, Hungary and Malaysia where production plants were expanded along with increased industrial capacity. Other changes in assets consist of translation efects of assets in foreign companies.
Cash and bank balances decreased to SEK 256 million (318).
Total comprehensive income for 2014 of SEK 429 million, which consists of net income and currency efects from exchange rate diferences and revaluation of defined benefit pension plans, has increased in shareholders' equity. Dividends to the amount of SEK 210 million were paid, thereby reducing shareholders' equity. The return on shareholders' equity was essentially unchanged at 25.0% (24.9).
Accounts payable increased slightly compared with 2013. The average total working capital requirement in relation to sales was a low 1.6% (1.3). The improvement in earnings meant that, despite an increase in average capital employed, the return on capital employed rose to a strong 28.4% (26.7).
Interest-bearing liabilities were unchanged at SEK 197 million (196). Interest-bearing assets decreased to SEK 256 million (318), thus decreasing the financial net asset to SEK 59 million (122).
Nolato has loan agreements of SEK 900 million, of which SEK 450 million matures at the turn of 2015/2016 and SEK 450 million matures in July 2017. Of these amounts, SEK 831 million was unutilised at the close of 2014. The loan agreements' credit frameworks mainly provide capacity for capital requirements in the event of future acquisitions.
| Financial position SEKm | 31/12/2014 | 31/12/2013 |
|---|---|---|
| Interest-bearing liabilities, credit institutions | – 69 | – 85 |
| Interest-bearing pension liabilities | – 128 | – 111 |
| Total borrowings | – 197 | – 196 |
| Cash and bank balances | 256 | 318 |
| Net financial assets (+) / net financial liabilities (–) | 59 | 122 |
| Working capital | 107 | 29 |
| As a percentage of sales (avg.) (%) | 1.6 | 1.3 |
| Capital employed | 1,764 | 1,544 |
| Return on capital employed (avg.) (%) | 28.4 | 26.7 |
| Shareholders' equity | 1,567 | 1,348 |
| Return on shareholders' equity (avg.) (%) | 25.0 | 24.9 |
| Attributable to Parent Company shareholders | ||||||
|---|---|---|---|---|---|---|
| Share- capital |
Other capital contributed |
Hedging reserves |
Translation reserves |
Retained earnings |
Total shareh. equity |
|
| Opening balance, 1 January 2013 | 132 | 228 | 1 | 3 | 806 | 1,170 |
| Profit for the year | — | — | — | — | 314 | 314 |
| Other comprehensive income for the year | — | — | — | 15 | 7 | 22 |
| Comprehensive income for the year | — | — | — | 15 | 321 | 336 |
| Dividend for 2012 | — | — | — | — | – 158 | – 158 |
| Closing balance, 31 December 2013 | 132 | 228 | 1 | 18 | 969 | 1,348 |
| Opening balance, 1 January 2014 | 132 | 228 | 1 | 18 | 969 | 1,348 |
| Profit for the year | — | — | — | — | 364 | 364 |
| Other comprehensive income for the year | — | — | – 3 | 84 | – 16 | 65 |
| Comprehensive income for the year | — | — | – 3 | 84 | 348 | 429 |
| Dividend for 2013 | — | — | — | — | – 210 | – 210 |
| Closing balance, 31 December 2014 | 132 | 228 | – 2 | 102 | 1,107 | 1,567 |
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| 28 | |||
| Operating activities | |||
| Operating profit | 454 | 411 | |
| Adjustments for items not included in cash flow: | |||
| Depreciation/amortisation and impairment | 165 | 157 | |
| Provisions | 12 | 12 | |
| Unrealised exchange rate differences | 29 | 2 | |
| Other items | — | 8 | |
| Pension payments | – 5 | – 5 | |
| Interest received | 4 | 3 | |
| Interest paid | – 8 | – 11 | |
| Realised exchange rate differences | – 25 | – 3 | |
| Income tax paid | – 88 | – 123 | |
| Cash flow from operating activities before changes in working capital | 538 | 451 | |
| Cash flow from changes in working capital | |||
| Changes in inventories | 13 | 20 | |
| Changes in accounts receivable | – 126 | 69 | |
| Changes in accounts payable | – 40 | – 1 | |
| Other changes in working capital | – 55 | – 27 | |
| – 208 | 61 | ||
| Cash flow from operating activities | 330 | 512 | |
| Investment activities | |||
| Acquisition of property, plant and equipment | – 204 | – 151 | |
| Sale of property, plant and equipment | 1 | 1 | |
| Sale of operations, net of cash and cash equivalents | — | 6 | |
| Cash flow from investment activities | – 203 | – 144 | |
| Cash flow before financing activities | 127 | 368 | |
| Financing activities | |||
| Borrowings | 19 | — | |
| Repayment of loans | – 36 | – 169 | |
| Dividend paid | – 210 | – 158 | |
| Cash flow from financing activities | – 227 | – 327 | |
| Cash flow for the year | – 100 | 41 | |
| Cash and cash equivalents, opening balance | 318 | 272 | |
| Exchange rate difference in cash and cash equivalents | 38 | 5 | |
| Cash and cash equivalents, closing balance | 256 | 318 | |
Cash flow before investments and disposals fell to SEK 330 million (512). Increased activity and a positive sales trend in the fourth quarter resulted in increased customer and project receivables during 2014. The change in working capital was negative at SEK 208 million (+61).
Net investments afecting cash flow totalled SEK 203 million (SEK 144 million in the previous year, of which the sale of the company Nolato Sunne accounted for SEK 6 million).
In 2014, net investments in property, plant and equipment were SEK 203 million (150, excluding companies sold). The investments in property, plant and equipment chiefly comprised machinery and equipment, as well as construction in progress, but also investments in buildings and land in connection with construction and extensions of factories in China, Hungary and Malaysia.
Investments afecting cash flow excluding acquisitions and disposals are distributed across the Group's business areas as follows: SEK 78 million (49) for Nolato Medical, SEK 30 million (53) for Nolato Telecom and SEK 95 million (48) for Nolato Industrial.
For Nolato Medical, investments chiefly consisted of further machinery capacity in Sweden, UK, Hungary and USA, primarily for new customer projects. The extensions
to the factories in China are wholly for Nolato Medical and partially in Hungary (jointly with Nolato Industrial). Nolato Telecom's investments consisted mainly of technology initiatives, expansion of EMC production in Malaysia and investments in the replacement of machinery in China. Nolato Industrial has made investments in further machinery capacity for new projects, and partly in the factory extension in Hungary.
| Investments (net) | 2014 | 2013 |
|---|---|---|
| Buildings and land | 39 | – 2 |
| Machinery and equipment | 132 | 88 |
| Construction in progress | 32 | 64 |
| Total investments | 203 | 150 |
Affecting cash flow, excluding acquisitions and disposals
Cash flow after investments was SEK 127 million (362, excluding the disposal of a subsidiary).
Financing activities describe the Group's financing and dividends to shareholders, and totalled a net amount of SEK -227 million (-327). This consists of net amortised borrowings of SEK -17 million (-169) and paid dividends of SEK -210 million (-158).
2010 2011 2012 2013 2014 The year 2010 is 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.
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 Stockholm, where Nolato is a Mid Cap company within the Industrials sector.
The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as adopted by the EU, and interpretations from the IFRS Interpretations Committee. 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 2014 have not materially affected the consolidated accounts.
IASB and IFRS Interpretations Committee have issued new standards and statements which come into force for financial years beginning on 1 January 2015 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 in 2015.
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.
Judgements 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".
Subsidiaries are companies in which Nolato AB has a direct or indirect controlling influence. Controlling influence exists if Nolato AB has influence over the investee, is exposed to or has the right to variable returns from its involvement and can use its influence over the investment in order to affect returns. In assessing whether controlling influence exists, potential voting shares are considered and whether de facto control exists.
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 reported 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, 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 be 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 reported in profit for the year.
The profit and financial position of all Group companies are translated into the Group's reporting currency as follows:
– assets and liabilities are translated at the rate on the balance sheet date
– income and expenses are translated at the average rate of exchange for the financial year
– exchange rate differences that arise are recognised as translation differences for the year in the translation of foreign operations under other comprehensive income.
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 a need for 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 reported amount may not be recoverable. An impairment is taken in the amount at which the reported 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 impairment-tested 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.
and hedging measures
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.
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 2014 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 had a share-based remuneration scheme in which payment would ultimately be made in cash. The scope and conditions of the programme are detailed in Note 10 under "Stock options programme". Remuneration was measured at fair value and recognised as an expense with a corresponding increase in liabilities.
Fair value was calculated initially at the time of issue and allocated over the vesting period. The fair value of cash-settled options was calculated according to the Black & Scholes model. At the date of measurement, the terms and conditions of the issued instruments were taken into account. The liability was revalued on each balance sheet date and at the time of
cash settlement. All changes in the fair value of the liability were recognised in the income statement as a personnel cost.
The basis for provisioning and expensing social security contributions in relation to share-based remuneration has been 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.
59
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 128 million (111).
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 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 2014, Nolato's sales to countries outside Sweden accounted for 79% (80). 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% 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 -2 (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 6 (0) million in net financial income/expense.
At the end of 2014, the Group had the following currency hedges in relation to anticipated payment flows in CNY, EUR, GBP and USD for 2015. 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 2014 was SEK -10 million (3). The market value of contracts identified as cash flow hedges that meet the conditions for hedge accounting was SEK -6 million (1).
| USD (net sales) Total |
– 246 7.42 – 316 |
– 6 – 10 |
– 5 – 8 |
– 1 – 3 |
|
|---|---|---|---|---|---|
| GBP (net sales) | – 107 11.87 | – 1 | – 2 | — | |
| EUR (net purch.) | 44 9.16 | – 2 | – 1 | – 1 | |
| CNY (net sales) | – 7 1.13 | – 1 | — | – 1 | |
| Nominal value in contract |
Average rate (SEK) |
Market value |
Reported in income statement |
Reported in other compre hensive income |
Gains and losses in other comprehensive income in relation to currency forward contracts at 31 December 2014 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.
| Total | 320 | 160 | 50% | |
|---|---|---|---|---|
| USD | 186 | 96 | 52% | 7.16 |
| EUR | 120 | 57 | 48% | 9.01 |
| CNY | 14 | 7 | 50% | 1.13 |
| SEKm | 12 month estimated net flows |
Total hedging |
Percent age |
Average rate |
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 2014 the effect of the currency derivatives on operating profit was SEK -3 million (0).
| Total | 160 | 8 | |
|---|---|---|---|
| USD | 90 | +/- 5% | 5 |
| EUR | 63 | +/- 5% | 3 |
| CNY | 7 | +/- 5% | — |
| SEKm | 12 month unhedged estimated net flows |
Change in currency |
Effect on earnings |
At the end of the year, the Group had SEK 160 million in unhedged assessed currency flows, including effects from currency hedges. A change in the value of the Swedish krona of +/–5% would have an impact of SEK 8 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, known as translation exposure. Nolato's policy is that net investments in shareholders' equity in foreign currency shall not be currencyhedged. Translation differences reported in other comprehensive income are detailed in Note 21, "Other reserves".
| SEKm | Net assets | Swedish krona 5% stronger |
|---|---|---|
| Nolato Romania, RON | – 4 | — |
| Nolato USA, USD | 17 | – 1 |
| Nolato Jaycare, GBP | 113 | – 6 |
| Nolato Beijing Automotive, CNY | – 1 | — |
| Nolato Beijing Medical, CNY | 2 | — |
| Nolato Beijing Mobile, CNY | 313 | – 16 |
| Nolato Lovepac Converting, CNY | 56 | – 3 |
| Nolato Lovepac Converting India, INR | – 21 | 1 |
| Nolato EMC Prod. Center, MYR | 2 | — |
| Nolato Hungary, EUR | 248 | – 12 |
| Cerbo Norge, NOK | 2 | — |
| Cerbo France, EUR | — | — |
| Total | 727 | – 37 |
The Group has SEK 727 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 –37 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 197 million (196). 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 900 million, of which SEK 450 million matures on 31 December 2015 and SEK 450 million matures on 21 July 2017.
– 3.0 – 4.0 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.
Total financial net asset 59
| Outstanding amount (SEKm) |
Future interest expense during the term outst. |
Term out- standing (mon) |
Remaining fixed interest period (mon) |
Average interest (%) |
|
|---|---|---|---|---|---|
| Interest-bearing liabilities | |||||
| Bank loan, SEK | – 69 | — | 1 | 1 | 1.2 |
| Pension liability, SEK | – 128 | — | — | — | 3.5 |
| Total | – 197 | — | 2.3 | ||
| Interest-bearing assets | |||||
| Cash and cash equivalents | 256 | — | — | 1.9 |
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 | 20 MUSD | 7.5891 | 30/12/2015 |
| Nolato Holdings UK Ltd, Storbritannien | 9 MGBP | 11.8683 | 30/12/2015 |
| Nolato Hungary Kft, Hungary | 2 MEUR | 9.5020 | 30/12/2015 |
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 8 million/EUR 2 million at a rate of 4.5548 maturing on 30 December 2015.
On 31 December the Group's financial liabilities stood at SEK 796 million (720). 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 | 306 | 270 | 9 | 4 | 589 |
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 755 million (601), consisting essentially of SEK 755 million (598) of accounts receivable.
Accounts receivable are continually analysed at the 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 product systems and components for medical technology and advanced packaging solutions for pharmaceuticals and diet supplements. 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 designs, 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 startups. Nolato Telecom enjoys a strong position with selected customers. In 2014, 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 components and product systems in plastic and TPE for customers in the automotive industry, hygiene, packaging, gardening/forestry, white goods and other selected industry segments. The market is fragmented and diversified, with a large number of customers and many 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, Romania and China. 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 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| External sales | ||||||||||
| External sales | 1,333 | 1,274 | 1,796 | 2,070 | 1,105 | 1,170 | — | 8 | 4,234 | 4,522 |
| Internal sales | — | — | 3 | 9 | 1 | — | – 4 | – 9 | — | — |
| Net sales | 1,333 | 1,274 | 1,799 | 2,079 | 1,106 | 1,170 | – 4 | – 1 | 4,234 | 4,522 |
| Profit | ||||||||||
| Operating profit (EBITA) | 176 | 165 | 199 | 166 | 118 | 119 | – 23 | – 23 | 470 | 427 |
| Amort. of intang. assets arising from company acq. | – 13 | – 13 | — | — | – 3 | – 3 | — | — | – 16 | – 16 |
| Operating profit | 163 | 152 | 199 | 166 | 115 | 116 | – 23 | – 23 | 454 | 411 |
| Financial income | 18 | 3 | ||||||||
| Financial expenses | – 10 | – 11 | ||||||||
| Tax expenses for the year | – 98 | – 89 | ||||||||
| Profit for the year | 364 | 314 | ||||||||
| Receivables and liabilities | ||||||||||
| The segments' assets | 1,259 | 1,104 | 763 | 611 | 819 | 667 | – 232 | – 170 | 2,609 | 2,212 |
| Unallocated assets | 305 | 361 | ||||||||
| Total assets | 1,259 | 1,104 | 763 | 611 | 819 | 667 | – 232 | – 170 | 2,914 | 2,573 |
| The segments' liabilities | 382 | 298 | 616 | 560 | 261 | 239 | – 199 | – 182 | 1,060 | 915 |
| Unallocated liabilities | 287 | 310 | ||||||||
| Total liabilities | 382 | 298 | 616 | 560 | 261 | 239 | – 199 | – 182 | 1,347 | 1,225 |
| Other information | ||||||||||
| Investments (activated) | 105 | 52 | 34 | 53 | 123 | 46 | – 2 | — | 260 | 151 |
| Depreciation and amortisation | 76 | 75 | 42 | 39 | 44 | 43 | — | — | 162 | 157 |
| Impairment | — | — | 3 | — | — | — | — | — | 3 | — |
| Significant items, other than depr./amort. with no offsetting payments, impairment and provisions |
– 26 | – 2 | – 3 | 2 | – 27 | — | — | — | – 56 | — |
| Cash flow from operations, allocated by segment | 2014 | 2013 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | |
| Cash flow from operations before changes in working capital | 239 | 244 | 159 | 642 | 226 | 205 | 158 | 589 |
| Changes in working capital | – 14 | – 62 | – 72 | – 148 | 12 | 41 | 4 | 57 |
| Cash flow from operations | 225 | 182 | 87 | 494 | 238 | 246 | 162 | 646 |
| Unallocated items 1) | – 164 | – 134 | ||||||
| Total cash flow from operations | 330 | 512 |
| Cash flow from investing activities, allocated by segment | 2014 | 2013 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | Nolato Medical |
Nolato Telecom |
Nolato Industrial |
Total | |
| Acquisition of non-current assets 2) | – 79 | – 30 | – 95 | – 204 | – 49 | – 54 | – 48 | – 151 |
| Sale of non-current assets | 1 | — | — | 1 | — | 1 | — | 1 |
| Sale of operation | — | 6 | ||||||
| Cash flow from investment activities | – 78 | – 30 | – 95 | – 203 | – 49 | – 53 | – 48 | – 144 |
1) For 2014, the Group's change in working capital was SEK -208 million and, allocated by business area, according to the above is SEK -148 million. The difference of SEK -60 million is included in the amount of SEK –164 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 –88 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 56 million (1).
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.
| Sweden | Other Nordic country | Other Europe | North America etc. | Asia | Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| External sales | 872 | 882 | 177 | 166 | 1,222 | 1,145 | 330 | 333 | 1,633 | 1,996 | 4,234 | 4,522 |
| Assets | 1,198 | 1,102 | — | — | 635 | 543 | 200 | 163 | 881 | 765 | 2,914 | 2,573 |
| Average number of employees | 765 | 814 | — | — | 804 | 807 | 169 | 167 | 6,282 | 7,569 | 8,020 | 9,357 |
| Investments (activated) | 129 | 73 | — | — | 83 | 21 | 13 | 6 | 35 | 51 | 260 | 151 |
| Total | 227 | 211 |
|---|---|---|
| Development expenditure for customer-specific products | 227 | 211 |
| 2014 | 2013 |
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 | 5 | 19 |
|---|---|---|
| Others | 5 | 7 |
| Bankruptcy payment | — | 12 |
| 2014 | 2013 |
| SEK thousand | 2014 | 2013 |
|---|---|---|
| KPMG: | ||
| Auditing | 2,720 | 2,534 |
| Taxation duties | 384 | 542 |
| Other duties | 1,957 | 255 |
| Total | 5,061 | 3,331 |
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 | – 2 | – 8 |
|---|---|---|
| Capital loss on sale of subsidiary | — | – 8 |
| Effect of exchange rate on receivables/liabilities, net | – 2 | — |
| 2014 | 2013 |
| 2014 | 2013 | |||
|---|---|---|---|---|
| Number | Of which men | Number | Of which men | |
| Parent Company | ||||
| Nolato AB, Torekov, Sweden | 10 | 80% | 11 | 82% |
| Group Company | ||||
| Cerbo France Sarl, France | 1 | 0% | 1 | 0% |
| Lövepac Converting Ltd, China | 605 | 40% | 675 | 35% |
| Lövepac Converting Private Ltd, India | — | — | 3 | 100% |
| Nolato Beijing Ltd, China | 5,593 | 46% | 6,842 | 39% |
| Nolato Cerbo AB, Trollhättan, Sweden | 109 | 59% | 110 | 57% |
| Nolato Contour, Inc., USA | 169 | 55% | 167 | 57% |
| Nolato EMC Production Center SDN BHD, Malaysia | 47 | 51% | 49 | 24% |
| Nolato Gota AB, Götene, Sweden | 128 | 71% | 107 | 68% |
| Nolato Hertila AB, Åstorp, Sweden | 24 | 63% | 23 | 65% |
| Nolato Hungary Kft, Hungary | 516 | 43% | 506 | 47% |
| Nolato Jaycare Ltd, UK | 259 | 79% | 271 | 77% |
| Nolato Lövepac AB, Skånes Fagerhult, Sweden | 41 | 59% | 40 | 70% |
| Nolato Medical Device Co. Ltd, China | 37 | 49% | — | — |
| Nolato MediTech AB, Hörby, Sweden | 184 | 58% | 175 | 54% |
| Nolato MediTor AB, Torekov, Sweden | 53 | 53% | 56 | 54% |
| Nolato Plastteknik AB, Göteborg, Sweden | 105 | 70% | 102 | 70% |
| Nolato Polymer AB, Torekov, Sweden | 63 | 78% | 72 | 76% |
| Nolato Romania Srl, Romania | 28 | 39% | 29 | 45% |
| Nolato Silikonteknik AB, Hallsberg, Sweden | 48 | 73% | 36 | 69% |
| Nolato Sunne AB, Sunne, Sweden | — | — | 82 | 76% |
| Total | 8,020 | 49% | 9,357 | 43% |
| Total | 1,112 | 1,095 |
|---|---|---|
| Social security contributions | 161 | 164 |
| Pension expenses, Note 23 | 78 | 81 |
| Salaries and remuneration, etc. | 873 | 850 |
| 2014 | 2013 | |
There are 121 (134) senior executives within the Group. Expensed remuneration and benefits for the senior executives during the year totalled SEK 111 million (116), of which SEK 15 million (19) relates to bonus.
| Total | 101 | 20 | 112 | 22 |
|---|---|---|---|---|
| Other senior executives | 43 | 18 | 46 | 19 |
| Managing directors | 15 | — | 16 | — |
| Board members | 43 | 2 | 50 | 3 |
| Men | Women | Men | Women | |
| 2014 | 2013 |
| 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 | 455 | — | — | — | — | — | 455 |
| Board member, Dag Andersson | 175 | — | — | — | — | — | 175 |
| Board member, Sven Boström Svensson | 175 | — | — | — | — | — | 175 |
| Board member, Åsa Hedin | 175 | — | — | — | — | — | 175 |
| Board member, Henrik Jorlén | 210 | — | — | — | — | — | 210 |
| Board member, Lars-Åke Rydh | 230 | — | — | — | — | — | 230 |
| President and CEO, Hans Porat | 4,836 | 2,418 | 1,082 | 147 | 3,460 | 67 | 12,010 |
| Other senior executives (4 people) | 9,553 | 3,019 | — | 396 | 2,105 | 180 | 15,253 |
| Total | 15,809 | 5,437 | 1,082 | 543 | 5,565 | 247 | 28,683 |
| 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 |
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.
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 2014, 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 2014, the outcome for the President and CEO was 50% of base salary (50) and for senior executives it was 24-40% of base salary (24–40).
Previously there was a cash-based synthetic stock options programme for the President and CEO. The programme covered the period 1 April 2011 to 31 March 2014. The agreement entitled the President and CEO to a stock yield-based bonus, the value of which amounted 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 was 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 could only be awarded to the President and CEO after the programme matured. The cost of the programme for the year was charged to profit in the amount of SEK 1,082 thousand (6,007). At the end of 2013, the total value of the bonus programme was deemed to be SEK 8,796 thousand including social security contributions. The programme ended on 31 March 2014.
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. There is an additional pension premium paid at a fixed amount of SEK 500 thousand per quarter to the President and CEO, according to a new agreement that runs from 1 April 2014 - 31 March 2017. The agreement requires the CEO remains in service during the period. Variable remuneration does not qualify as pensionable income. For 2014, the pension premium was 72% of the pensionable salary (40).
Other senior executives have defined contribution pension schemes. For 2014, 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. In the event of termination by the company, a notice period of 24 months applies. Other senior executives shall have 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 paid after the notice period.
| 2014 | 2013 | |
|---|---|---|
| Interest income | 4 | 3 |
| Interest expenses | – 6 | – 8 |
| Net gains/losses | ||
| Foreign exchange gains and losses, net | 6 | — |
| Other financial income | 8 | — |
| Other financial expenses | – 4 | – 3 |
| Net financial income/expense | 8 | – 8 |
| Recognised as: | ||
| Financial income | 18 | 3 |
| Financial expenses | – 10 | – 11 |
| Net financial income/expense | 8 | – 8 |
| 2014 | 2013 | ||||||
|---|---|---|---|---|---|---|---|
| Interest income |
Interest expenses |
Net gains/ losses |
Other | Interest income |
Interest expenses |
Net gains/ losses |
|
| Total net financial income/expense per category of financial instruments | |||||||
| Financial assets/liabilities valued at fair value in income statement | |||||||
| Derivatives used to hedge intra-Group loans | — | — | – 6 | — | — | — | 2 |
| Bank deposits | 4 | — | — | — | 3 | — | — |
| PRI pension liability | — | – 4 | — | — | — | – 4 | — |
| Borrowings | — | – 2 | — | — | — | – 4 | — |
| Liquidation of subsidiary | — | — | — | – 2 | — | — | — |
| Reversal of previously provision for additional consideration for acquisitions in the UK | — | — | — | 8 | — | — | — |
| Other financial liabilities | — | – 2 | 12 | — | — | – 3 | – 2 |
| Total | 4 | – 8 | 6 | 6 | 3 | – 11 | — |
All interest income is attributable to financial assets, which are valued at accumulated acquisition value.
| 21 | 19 | ||
|---|---|---|---|
| Deferred tax as a result of tax rate changes | 1 | — | |
| Deferred tax attributable to previous years | 7 | 3 | |
| Deferred tax in relation to temporary differences | 13 | 16 | |
| Deferred tax income/expense | |||
| – 119 | – 108 | ||
| Adjustment for tax attributable to previous years | – 1 | 3 | |
| Tax expenses for the period | – 118 | – 111 | |
| Current tax expenses | |||
| 2014 | 2013 |
| 2014 | 2013 | |
|---|---|---|
| Profit before tax | 462 | 403 |
| Tax according to applicable Parent Company tax rate | – 102 | – 89 |
| Effect of other tax rates for foreign Group companies | – 3 | – 2 |
| Non-deductible expenses | – 9 | – 2 |
| Non-taxable revenues | 10 | — |
| Tax attributable to previous years | 7 | 6 |
| Effect of change in tax rates | 1 | — |
| Effect of non-capitalised deficits arising during the year | – 1 | – 2 |
| Standard interest on tax allocation reserve | – 1 | — |
| Recognised effective tax | – 98 | – 89 |
Swedish corporation tax amounted to 22.0% (22.0) and the effective tax rate was 21.2% (22.1).
| Deferred tax assets |
Deferred tax liabilities |
Net | ||||
|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| Intangible non-current assets | — | — | 15 | 23 | – 15 | – 23 |
| Property, plant and equipment | 27 | 20 | 48 | 42 | – 21 | – 22 |
| Inventories | 9 | 6 | — | — | 9 | 6 |
| Accounts receivable | 4 | 1 | — | — | 4 | 1 |
| Provisions for pensions | 13 | 14 | 1 | — | 12 | 14 |
| Tax allocation reserves | — | — | 36 | 41 | – 36 | – 41 |
| Others | 35 | 22 | 4 | 5 | 31 | 17 |
| Loss carry-forwards | — | — | — | — | — | — |
| Tax assets/liabilities | 88 | 63 | 104 | 111 | – 16 | – 48 |
| Offsetting | – 43 | – 27 | – 43 | – 27 | — | — |
| Tax assets/liabilities, net | 45 | 36 | 61 | 84 | – 16 | – 48 |
Deferred tax assets have not been recognised in the Group in relation to loss carry-forwards totalling SEK 26 million (49). These loss carry-forwards relate to the operations in India, and it is unlikely that they will be able to be used against future taxable gains. Loss carry-forwards in India can be utilised rolling for a maximum of 8 years from the year each deficits occurred.
| Balance as at 1 Jan 2013 |
Recognised in profit for the year |
Recognised in 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 |
| Balance as at 1 Jan 2014 |
Recognised in other compreh. income |
Acquisitions of business |
Disposal of business |
Balance as at 31 Dec 2014 |
||
|---|---|---|---|---|---|---|
| Intangible non-current assets | – 23 | 8 | — | — | — | – 15 |
| Property, plant and equipment | – 22 | 1 | — | — | — | – 21 |
| Inventories | 6 | 3 | — | — | — | 9 |
| Accounts receivable | 1 | 3 | — | — | — | 4 |
| Provisions for pensions | 14 | – 6 | 4 | — | — | 12 |
| Tax allocation reserves | – 41 | 5 | — | — | — | – 36 |
| Others | 17 | 13 | 1 | — | — | 31 |
| Loss carry-forwards | — | — | — | — | — | — |
| Total | – 48 | 27 | 5 | — | — | – 16 |
| Total | 5 | – 2 |
|---|---|---|
| Deferred tax on currency futures | 1 | 1 |
| Deferred tax attributable to pension provisions (PRI) | 4 | – 3 |
| 2014 | 2013 |
Depreciation/amortisation and impairment is included in operating expenses as follows:
| 2014 Customer relations 16 Buildings and land 16 Machinery and other technical facilities 116 Equipment, tools, fixtures and fittings 15 Others 2 |
Total | 165 | 157 |
|---|---|---|---|
| 3 | |||
| 16 | |||
| 106 | |||
| 16 | |||
| 16 | |||
| 2013 |
Depreciation/amortisation and impairment has been allocated as follows:
| 2014 | 2013 | |
|---|---|---|
| Cost of goods sold | 145 | 136 |
| Selling expenses | 18 | 18 |
| Administrative expenses | 2 | 3 |
| Total | 165 | 157 |
| 2014 | 2013 | |
|---|---|---|
| Raw materials and supplies | – 1,674 | – 2,015 |
| Costs for remuneration to employees | – 1,112 | – 1,095 |
| Energy costs | – 120 | – 115 |
| Other costs | – 714 | – 748 |
| Depreciation/amortisation and impairment | – 165 | – 157 |
| Total | – 3,785 | – 4,130 |
| Software | Tenancy rights | Customer rel.1) | Cap. dev. exp. | Goodwill1) | Total | |
|---|---|---|---|---|---|---|
| ACQUISITION COST | ||||||
| On 1 January 2013 | 12 | 5 | 128 | 3 | 483 | 631 |
| Translation differences | — | — | 1 | — | 2 | 3 |
| On 1 January 2014 | 12 | 5 | 129 | 3 | 485 | 634 |
| Translation differences | — | — | 8 | — | 25 | 33 |
| On 31 December 2014 | 12 | 5 | 137 | 3 | 510 | 667 |
| ACCUMULATED DEPRECIATION/AMORTISATION | ||||||
| On 1 January 2013 | – 7 | – 4 | – 64 | – 3 | — | – 78 |
| Depreciation/amortisation for the year | – 2 | — | – 16 | — | — | – 18 |
| On 1 January 2014 | – 9 | – 4 | – 80 | – 3 | — | – 96 |
| Depreciation/amortisation for the year | – 2 | — | – 16 | — | — | – 18 |
| Translation differences | — | — | – 4 | — | — | – 4 |
| On 31 December 2014 | – 11 | – 4 | – 100 | – 3 | — | – 118 |
| Book value 31 December 2013 | 3 | 1 | 49 | — | 485 | 538 |
| Book value 31 December 2014 | 1 | 1 | 37 | — | 510 | 549 |
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. All 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. The forecasts correspond to historical experience and/or external sources of information.
Goodwill is allocated to Group segments as follows:
| 2014 | 2013 | |
|---|---|---|
| Nolato Medical | 407 | 382 |
| Nolato Industrial | ||
| Nolato Gota AB | 41 | 41 |
| Nolato Hertila AB | 62 | 62 |
| Total | 510 | 485 |
| Nolato Medical | Nolato Industrial | |||||||
|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | |||||
| Nolato Gota AB | Nolato Hertila AB | Nolato Gota AB | Nolato Hertila AB | |||||
| Risk-free rate, % | 1.3 | 2.5 | 1.1 | 1.1 | 2.4 | 2.4 | ||
| Tax rate, % | 24.8 | 23.2 | 22.0 | 22.0 | 22.0 | 22.0 | ||
| 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, % | 8.4 | 9.2 | 9.1 | 9.1 | 10.0 | 10.0 |
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 need for 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 facilities |
Equipment, tools, fixtures and fittings |
Construction in progress and advance payments |
Total | |
|---|---|---|---|---|---|
| ACQUISITION COST | |||||
| On 1 January 2013 | 505 | 1,772 | 223 | 47 | 2,547 |
| Investments | 3 | 87 | 8 | 64 | 162 |
| Grants received1) | – 5 | – 6 | — | — | – 11 |
| Subsidiaries sold | – 41 | – 108 | – 29 | — | – 178 |
| Sales/disposals | – 39 | – 51 | – 3 | — | – 93 |
| Reclassifications | — | 49 | 5 | – 54 | — |
| Translation differences | 4 | 21 | 1 | — | 26 |
| On 1 January 2014 | 427 | 1,764 | 205 | 57 | 2,453 |
| Investments | 39 | 124 | 9 | 88 | 260 |
| Sales/disposals | — | – 38 | – 7 | — | – 45 |
| Reclassifications | 12 | 36 | 3 | – 51 | — |
| Translation differences | 16 | 137 | 7 | 1 | 161 |
| On 31 December 2014 | 494 | 2,023 | 217 | 95 | 2,829 |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT | |||||
| On 1 January 2013 | – 268 | – 1,376 | – 168 | — | – 1,812 |
| Depreciation for the year | – 16 | – 107 | – 16 | — | – 139 |
| Subsidiaries sold | 28 | 99 | 26 | — | 153 |
| Sales/disposals | 39 | 50 | 3 | — | 92 |
| Translation differences | – 1 | – 12 | – 1 | — | – 14 |
| On 1 January 2014 | – 218 | – 1,346 | – 156 | — | – 1,720 |
| Depreciation and impairment for the year | – 16 | – 115 | – 16 | — | – 147 |
| Sales/disposals | — | 38 | 7 | — | 45 |
| Translation differences | – 3 | – 106 | – 4 | — | – 113 |
| On 31 December 2014 | – 237 | – 1,529 | – 169 | — | – 1,935 |
| Book value 31 December 2013 | 209 | 418 | 49 | 57 | 733 |
| Book value 31 December 2014 | 257 | 494 | 48 | 95 | 894 |
1) Nolato Hungary received a contribution from the European Regional Development Fund relating to historical investments in 2011 and 2012.
| Carrying amount | 755 | 598 |
|---|---|---|
| Deduction: Provision for decline in value of accounts receivable | – 22 | – 7 |
| Accounts receivable | 777 | 605 |
| 2014 | 2013 | |
| Note 17 Financial assets |
The average period of credit in 2014 was 58 days (52). Accounts receivable as a percentage of sales amounted to 17.8% (13.2%). During the year, the Group reversed SEK 6 million (6) of provisions for the decline in value of accounts receivable at 1 January. Provisions for the year totalled SEK 22 million (7). 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 |
|
|---|---|---|---|---|---|
| 2014 | 777 | 703 | 62 | 11 | 1 |
| 2013 | 605 | 543 | 49 | 9 | 4 |
| Total | Not due | Due ≤15 days |
Due 16 – 60 days |
Due > 60 days |
|
|---|---|---|---|---|---|
| 2014 | 755 | 685 | 59 | 10 | 1 |
| 2013 | 598 | 540 | 49 | 8 | 1 |
| Loans receivable and accounts receivable 1) |
Assets available for sale 1) |
Derivatives used for hedging accounting |
2014 Total |
|
|---|---|---|---|---|
| Other securities | — | 2 | — | 2 |
| Accounts receivable | 755 | — | — | 755 |
| Cash and bank balances | 256 | — | — | 256 |
| Derivatives (see Note 4) | — | — | — | — |
| Carrying amount | 1,011 | 2 | — | 1,013 |
| Fair value | 1,011 | 2 | — | 1,013 |
| 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 |
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.
| Total | 264 | 259 | |
|---|---|---|---|
| Finished goods and goods for resale | 107 | 100 | |
| Products in manufacturing | 42 | 39 | |
| Raw materials and supplies | 115 | 120 | |
| 2014 | 2013 |
During the year, the Group impaired inventories by SEK 48 million (29). Impairment losses for the year are included in Cost of goods sold in the income statement.
During the year, reversed impairment losses reported in Cost of goods sold amounted to SEK 32 million (33). 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 | 130 | 81 |
|---|---|---|
| Accrued expenses and deferred income | 27 | 19 |
| Other receivables | 103 | 62 |
| 2014 | 2013 |
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.:
| Total capital | 1,567 | 1,348 |
|---|---|---|
| Retained earnings, incl. net income | 1,107 | 969 |
| Hedging reserve | – 2 | 1 |
| Translation reserve | 102 | 18 |
| Other capital contributed | 228 | 228 |
| Share capital | 132 | 132 |
| 2014 | 2013 |
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 2014 is shown below.
| 2014 | 2013 | |||
|---|---|---|---|---|
| Financial targets | Outcome | Financial targets | Outcome | |
| EBITA margin | >10% | 11.1% | >8% | 9.4% |
| Return on capital employed | N/A | N/A | >15% | 26.7% |
| Cash conversion | >75% | 28.0% | N/A | 82.0% |
| Equity/assets ratio | >35% | 54.0% | >35% | 52.0% |
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 50% of profit after tax. For 2014, the Board proposes a dividend of SEK 8.50 per share (ordinary dividend of 4.00 plus an extra dividend of SEK 4.00 per share, totalling SEK 8.00) or SEK 224 million (210). This corresponds to a payout ratio of 61% (67).
| Hedging reserve |
Transl. reserve |
Total | |
|---|---|---|---|
| Balance on 1 January 2013 | 1 | 3 | 4 |
| Cash flow hedges: | |||
| Gain from fair value measurement during the year | — | — | — |
| Translation differences | — | 15 | 15 |
| Balance on 31 December 2013 | 1 | 18 | 19 |
| Opening balance on 1 January 2014 | 1 | 18 | 19 |
| Cash flow hedges: | |||
| Gain from fair value measurement during the year | – 3 | — | – 3 |
| Tax from fair value valuation | 1 | — | 1 |
| Transfers to the income statement | – 2 | — | – 2 |
| Tax on transfers to the income statement | 1 | — | 1 |
| Translation differences | — | 83 | 83 |
| Reversed translation difference from liquidation | — | 1 | 1 |
| Closing balance, 31 December 2014 | – 2 | 102 | 100 |
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.
| Year of maturity | Carrying | 2014 Fair |
Carrying | 2013 Fair |
|
|---|---|---|---|---|---|
| Current financial liabilities | value | value | value | value | |
| Accounts payable | 2014-2015 | 589 | 589 | 524 | 524 |
| Short-term bank loan in SEK (variable rate) | < 3 months | 69 | 69 | — | — |
| Short-term bank loan in USD (variable rate) | < 3 months | — | — | 85 | 85 |
| Derivatives for hedge accounting (see Note 4) | 10 | 10 | — | — | |
| Subtotal of current financial liabilities | 668 | 668 | 609 | 609 | |
| Total | 668 | 668 | 609 | 609 |
At year-end, the Group's interest-bearing liabilities excluding pension liability amounted to SEK 69 million (85). The average interest rate was 1.2% (0.9). The average fixed-interest term was 1 month (1).
Total credit lines granted in the Group amount to SEK 900 million (800). Of this amount, SEK 450 million is available through 31 December 2015 and SEK 450 million through 21 July 2017. 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 52 million (48). 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.
| Operating leases | |
|---|---|
| Non-cancellable lease agreements total: | |
| Within 1 year | 53 |
| Between 1 and 5 years | 62 |
| Total | 115 |
| Other pension schemes Total |
1 128 |
1 111 |
|---|---|---|
| Net present value of defined benefit pension plans | 127 | 110 |
| 2014 | 2013 |
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.
| 2014 | 2013 |
|---|---|
| 110 | 130 |
| 2 | 1 |
| 4 | 4 |
| — | — |
| – 5 | – 5 |
| 16 | – 7 |
| — | – 13 |
| 127 | 110 |
| Total pension expense | 78 | 81 |
|---|---|---|
| Expense for special employer's contribution | 7 | 6 |
| Expense for defined contribution schemes | 64 | 69 |
| Total expense for defined benefit pension schemes | 7 | 6 |
| Expense for special employer's contribution and tax on returns | 1 | 1 |
| Interest expense | 4 | 4 |
| Expenses related to service during the financial year | 2 | 1 |
| 2014 | 2013 |
| Total | 7 | 7 |
|---|---|---|
| Interest expenses | 4 | 4 |
| Amounts charged to financial expenses: | ||
| Administrative expenses | 1 | 1 |
| Cost of goods sold | 2 | 2 |
| Amounts charged to operating profit: | ||
| 2014 | 2013 | |
| 2014 | 2013 | |
|---|---|---|
| Actuarial gains (+) / losses (–) | – 16 | 7 |
| Special employer's contribution and tax on returns | – 4 | 2 |
| Deferred income tax | 4 | – 2 |
| Total | – 16 | 7 |
| Accumulated at 31 December | – 48 | – 32 |
|---|---|---|
| Recognised in the period | – 16 | 7 |
| Divestment of subsidiaries | — | – 4 |
| Accumulated at 1 January | – 32 | – 35 |
| 2014 | 2013 |
| % | 2014 | 2013 |
|---|---|---|
| Discount rate | 2.85 | 3.80 |
| 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 multiple-employer defined benefit pension scheme. For the 2014 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 (4). Alecta's surplus can be allocated to policyholders and/or insured parties. On 31 December 2014, Alecta's surplus, in the form of the collective funding ratio, amounted to 143% (148). 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.
| Amount on 31 December | 29 | 29 |
|---|---|---|
| Amounts claimed | – 8 | – 8 |
| Provisions for the year | 7 | 7 |
| Amount on 1 January | 30 | 30 |
| Miscellaneous Total |
The amount utilised relates to the reversal of a previously allocated debt for consideration in acquisitions in England.
The amount at year-end refers to a provision for the restoration of leased property, SEK 11 million, a provision for special payroll tax in accordance with IAS 19 for PRI pension liability, SEK 10 million, and a provision for special employer's contribution in respect of an endowment insurance, SEK 8 million.
| 2013 | |
|---|---|
| 17 | 25 |
| 36 | 41 |
| 95 | 95 |
| 37 | 37 |
| 104 | 87 |
| 14 | 13 |
| 12 | 9 |
| 13 | 9 |
| 36 | 11 |
| 56 | 57 |
| 367 | 318 |
| 420 | 384 |
| 2014 |
| Total | 3 | 3 |
|---|---|---|
| Guarantee commitments, FPG/PRI | 3 | 3 |
| 2014 | 2013 |
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 flow statement | 256 | 318 |
|---|---|---|
| Credit balance on Group account in Parent Company | 17 | 40 |
| Cash and bank balances | 239 | 278 |
| The following subcomp. are included in cash and cash equivalents: | ||
| 2014 | 2013 | |
| Note 28 Cash flow |
At the balance sheet date, unutilised credit within the Group stood at SEK 831 million (715).
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| Net sales | 2 | 29 | 23 |
| Other operating income | 3 | — | 2 |
| Selling expenses | – 11 | – 8 | |
| Administrative expenses | 4 | – 50 | – 48 |
| Other operating expenses | 5 | – 4 | — |
| – 65 | – 54 | ||
| Operating profit | 2,6,12 | – 36 | – 31 |
| Profit from participations in Group companies | 7 | 91 | 113 |
| Financial income | 8 | 34 | 22 |
| Financial expenses | 9 | – 4 | – 19 |
| 121 | 116 | ||
| Profit after financial income and expenses | 85 | 85 | |
| Appropriations | 10 | 291 | 157 |
| Tax | 11 | – 66 | – 48 |
| Profit for the year | 310 | 194 | |
| 308 | 194 | |
|---|---|---|
| Other comprehensive income Items transf. or that could be transf. to profit for the period Exchange rate diff. on monetary items in rel. to overseas net inv. |
– 2 | — |
| Profit for the year | 310 | 194 |
| SEKm | 2014 | 2013 |
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| Assets | |||
| Non-current assets Intangible non-current assets |
— | 1 | |
| Property, plant and equipment | 1 | — | |
| Participations in Group companies | 13 | 733 | 609 |
| Receivables from Group companies | 16 | 392 | 419 |
| Other non-current receivables | 2 | 2 | |
| Deferred tax assets | 11 | 6 | 4 |
| Total non-current assets | 1,134 | 1,035 | |
| Current assets | |||
| Receivables from Group companies | 424 | 346 | |
| Prepaid expenses and accrued income | 4 | 3 | |
| 428 | 349 | ||
| Cash and bank balances | 17 | 40 | |
| Total assets | 1,579 | 1,424 | |
| Shareholders' equity and liabilities | |||
| Shareholders' equity | |||
| Restricted equity | |||
| Share capital (26,307,408 shares) | 14 | 132 | 132 |
| Statutory reserve | 228 | 228 | |
| 360 | 360 | ||
| Unrestricted equity | |||
| Translation reserve | – 3 | – 1 | |
| Retained earnings | 366 | 382 | |
| Profit for the year | 310 | 194 | |
| 673 | 575 | ||
| Total shareholders' equity | 1,033 | 935 | |
| Untaxed reserves | 19 | 161 | 181 |
| Other provisions | 17 | 9 | 6 |
| Current liabilities | |||
| Liabilities to credit institutions | 15 | 50 | 85 |
| Accounts payable | 3 | 1 | |
| Liabilities to Group companies | 283 | 175 | |
| Current tax liabilities | 26 | 4 | |
| Other liabilities | 1 | 9 | |
| Accrued expenses and deferred income | 18 | 13 | 28 |
| Total current liabilities | 376 | 302 | |
| Total shareholders' equity and liabilities | 1,579 | 1,424 | |
| Pledged assets | — | — | |
| Contingent liabilities | 20 | 133 | 98 |
| Restricted equity | Unrestricted equity | ||||
|---|---|---|---|---|---|
| SEKm | Share- Statutory Translation | Retained | Total | ||
| capital reserve | reserve | earnings sh. equity | |||
| Opening balance on 1 Jan 2013 | 132 | 228 | – 1 | 540 | 899 |
| Profit for the year | — | — | — | 194 | 194 |
| Other comprehensive income for the year | — | — | — | — | — |
| Comprehensive income for the year | — | — | — | 194 | 194 |
| Dividend for 2012 | — | — | — | – 158 | – 158 |
| Closing balance at 31 Dec 2013 | 132 | 228 | – 1 | 576 | 935 |
| Opening balance on 1 Jan 2014 | 132 | 228 | – 1 | 576 | 935 |
| Profit for the year | — | — | — | 310 | 310 |
| Other comprehensive income for the year | — | — | – 2 | — | – 2 |
| Comprehensive income for the year | — | — | – 2 | 310 | 308 |
| Dividend for 2013 | — | — | — | – 210 | – 210 |
| Closing balance at 31 Dec 2014 | 132 | 228 | – 3 | 676 | 1,033 |
| SEKm | Note | 2014 | 2013 |
|---|---|---|---|
| 22 | |||
| Operating activities | |||
| Operating profit | – 36 | – 31 | |
| Adjustments for items not included in cash flow | 1 | 1 | |
| Dividends from subsidiaries | 18 | 27 | |
| Liquidation profit from subsidiaries | — | 5 | |
| Interest received | 19 | 22 | |
| Interest paid | – 4 | – 6 | |
| Other financial income | 4 | — | |
| Realised exchange rate differences | – 34 | – 3 | |
| Income tax paid | – 42 | – 55 | |
| Cash flow from operating activities before changes in working capital |
– 74 | – 40 | |
| Changes in working capital | |||
| Changes in operating receivables and operating liabilities | 195 | 260 | |
| Cash flow from operating activities | 121 | 220 | |
| Investment activities | |||
| Acquisition of financial assets | – 6 | — | |
| Shareholders' contribution | – 118 | – 91 | |
| Sale of financial assets | — | 21 | |
| Cash flow from investment activities | – 124 | – 70 | |
| Cash flow before financing activities | – 3 | 150 | |
| Financing activities | |||
| Repayment of loans | – 35 | – 169 | |
| Change in long-term intra-Group transactions | 66 | 7 | |
| Dividend paid | – 210 | – 158 | |
| Group contributions received | 165 | 174 | |
| Group contributions paid | – 6 | – 6 | |
| Cash flow from financing activities | – 20 | – 152 | |
| Cash flow for the year | – 23 | – 2 | |
| Cash and cash equivalents, opening balance | 40 | 42 | |
| Cash and cash equivalents, closing balance | 17 | 40 |
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 2014 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 284 thousand (417). 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.
| 2014 | 2013 | |
|---|---|---|
| Sales of services to subsidiaries | 29 | 23 |
| Purchase of services from subsidiaries | – 4 | – 4 |
| Total | — | 2 |
|---|---|---|
| Exchange gains | — | 2 |
| 2014 | 2013 | |
| Total | 2,663 | 1,140 |
|---|---|---|
| Other duties | 1,948 | 237 |
| Taxation duties | 107 | 330 |
| Auditing | 608 | 573 |
| KPMG: | ||
| SEK thousand | 2014 | 2013 |
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 | – 4 | — |
|---|---|---|
| Effect of exchange rate on receivables/liabilities, net | – 4 | — |
| 2014 | 2013 |
| 2014 | 2013 | |||
|---|---|---|---|---|
| Number Of which men Number Of which men | ||||
| Nolato AB, Torekov | 10 | 80% | 11 | 82% |
| Total | 43 | 50 |
|---|---|---|
| Social security contributions | 8 | 10 |
| Pension expenses, defined contribution plans | 7 | 8 |
| Salaries and remuneration | 28 | 32 |
| 2014 | 2013 |
There are 5 (5) senior executives at the Parent Company. Expensed remuneration and benefits for senior executives at the Parent Company during the year totalled SEK 21 million (25), of which SEK 7 million (11) relates to bonuses. Of the Parent Company's pension expenses, SEK 3.5 million (1.9) 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).
| 2014 | 2013 | |||
|---|---|---|---|---|
| Men | Women | Men | Women | |
| Board members | 7 | 2 | 7 | 3 |
| CEO | 1 | — | 1 | — |
| Other senior executives | 4 | — | 4 | — |
| 2014 | 2013 | |
|---|---|---|
| Dividend received from Group companies | 18 | 27 |
| Anticipated dividend from Group companies | 70 | 92 |
| Liquidation profit from Group companies | 3 | 5 |
| Capital loss on sale of subsidiary | — | – 11 |
| Total | 91 | 113 |
| 2014 | 2013 | |
|---|---|---|
| Interest income, Group companies | 19 | 22 |
| Repayment of impaired non-current loan receivable, Group companies | 4 | — |
| Insurance recourse 1) | 3 | — |
| Exchange rate differences | 8 | — |
| Total | 34 | 22 |
All interest income is attributable to financial assets, which are measured at amortised cost. 1) Relates to a bankruptcy payment of a previously credit-insured customer.
| Exchange rate differences | — | – 2 |
|---|---|---|
| Insurance recourse 1) | — | – 11 |
| Other financial expenses | – 2 | – 3 |
| Interest expense, credit institutions | – 2 | – 3 |
| 2014 | 2013 |
1) 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 | 291 | 157 |
|---|---|---|
| Allocation to tax allocation reserve | — | – 47 |
| Reversal of tax allocation reserve | 21 | 45 |
| Group contributions paid | – 6 | – 6 |
| Group contributions received | 276 | 165 |
| 2014 | 2013 |
| Total reported Parent Company tax expense | – 66 | – 48 |
|---|---|---|
| Deferred tax in relation to temporary differences | 2 | — |
| Deferred tax income/expense | ||
| – 68 | – 48 | |
| Adjustment for tax attributable to previous years | — | – 15 |
| Tax expense for the period | – 68 | – 33 |
| Current tax expense (–) / income (+) | ||
| 2014 | 2013 |
The tax rate applicable is 22%.
| 2013 | |
|---|---|
| 376 | 242 |
| – 83 | – 53 |
| – 7 | – 7 |
| 23 | 27 |
| — | – 15 |
| 1 | — |
| – 66 | – 48 |
| 2013 | |
| 1 | |
| 4 | 3 |
| 6 | 4 |
| 2014 2014 2 |
| Balance as at 01/01/2013 |
Recognised in profit for the year |
Recognised in equity |
Balance as at 31/12/2013 |
|
|---|---|---|---|---|
| Other provisions | 1 | — | — | 1 |
| Others | 3 | — | — | 3 |
| Total | 4 | — | — | 4 |
| Balance as at 01/01/2014 |
Recognised in profit for the year |
Recognised in equity |
Balance as at 31/12/2014 |
|
| Other provisions | 1 | 1 | — | 2 |
| Others | 3 | 1 | — | 4 |
| Total | 4 | 2 | — | 6 |
| Total | – 65 | – 56 |
|---|---|---|
| Other costs | – 7 | — |
| Effect of exchange rate on receivables/liabilities, net | – 4 | — |
| Consultancy expenses | – 6 | – 3 |
| Insurance policies | – 5 | – 3 |
| Costs for remuneration to employees | – 43 | – 50 |
| 2014 | 2013 | |
| 2014 | 2013 | |
|---|---|---|
| Acquisition cost on 1 January | 964 | 905 |
| Acquisitions | 6 | — |
| Shareholders' contribution | 118 | 91 |
| Disposals | — | – 32 |
| Accumulated acquisition cost on 31 December | 1,088 | 964 |
| Accumulated impairment losses on 1 January | – 355 | – 355 |
| Impairment losses for the year | — | — |
| Accumulated impairment losses on 31 December | – 355 | – 355 |
| Carrying amount | 733 | 609 |
| Particip. interest | Carr. amount | |||
|---|---|---|---|---|
| 2014 2013 | 2014 | 2013 | ||
| 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% | |||
| Kartongprodukter 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, USA | 100% 100% | — | — | |
| Nolato Contour Inc, USA | 100% 100% | |||
| Nolato Gota AB, Götene, Sweden | 100% 100% | 129 | 79 | |
| Nolato Hertila AB, Åstorp, Sweden | 100% 100% | 41 | 31 | |
| 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% | — | — | |
| Nolato Lövepac AB, Skånes Fagerhult, Sweden | 100% 100% | 10 | 10 | |
| Nolato Medical Device (Beijing) Co.,Ltd, China | 100% | — | 6 | — |
| Nolato MediTech AB, Hörby, Sweden | 100% 100% | 115 | 80 | |
| Nolato MediTor AB, Torekov, Sweden | 100% 100% | 9 | 1 | |
| Nolato Mobile Comm.Polymers (Beijing) Ltd, China | 100% 100% | 91 | 91 | |
| Nolato Automotive Components (Beijing) Co.,Ltd, China | 100% 100% | 1 | 1 | |
| Nolato Plastteknik AB, Göteborg, Sweden | 100% 100% | 42 | 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% | 18 | 8 | |
| Nolato Torekov AB, Torekov, Sweden | 100% 100% | 12 | 12 | |
| Carrying amount | 733 | 609 |
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 2013 | 26,307,408 | 5 SEK | SEK 131,537 k |
| Share capital, 31 Dec 2014 | 26,307,408 | 5 SEK | SEK 131,537 k |
| Note 15 Borrowings | ||
|---|---|---|
| Total | 50 | 85 | |
|---|---|---|---|
| Short-term bank loan in USD (variable rate) | < 3 months | — | 85 |
| Short-term bank loan in SEK (variable rate) | < 3 months | 50 | — |
| Due | 2014 | 2013 | |
| On 1 January 2013 | 442 |
|---|---|
| Change | – 23 |
| On 1 January 2014 | 419 |
| Change | – 27 |
| On 31 December 2014 | 392 |
| On 1 January 2013 | 17 |
|---|---|
| Change | – 17 |
| On 1 January 2014 | — |
| Change | — |
| On 31 December 2014 | — |
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.
| Others | Total | |
|---|---|---|
| Amount on 1 January | 6 | 6 |
| Provisions for the year | 3 | 3 |
| Amounts claimed | — | — |
| Amount on 31 December | 9 | 9 |
The amount relates to future employer's contributions for endowment insurance.
| 2014 | 2013 | |
|---|---|---|
| Salary liabilities | 9 | 15 |
| Social security contributions | 4 | 6 |
| Complaints | — | 2 |
| Other items | — | 5 |
| Total | 13 | 28 |
| 2014 | 2013 | |
|---|---|---|
| Tax allocation reserves 2010 | — | 20 |
| Tax allocation reserves 2011 | 32 | 32 |
| Tax allocation reserves 2012 | 35 | 35 |
| Tax allocation reserves 2013 | 47 | 47 |
| Tax allocation reserves 2014 | 47 | 47 |
| Total | 161 | 181 |
| Total | 133 | 98 | ||
|---|---|---|---|---|
| Guarantees on behalf of subsidiaries | 133 | 98 | ||
| 2014 | 2013 | |||
The Parent Company has controlling influence over the subsidiaries, in accordance with the structure described in Note 13.
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 29 million (23), 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 19 million (22) and interest expenses of SEK 0 million (0) have arisen in the Parent Company to the extent reported in Notes 8 and 9. Interest on loans receivable and liabilities is calculated on an ongoing basis in line with the market rate. There are no contractual regulated durations. Intra-Group receivables at the Parent Company amount to SEK 392 million (418) and liabilities to Group companies amount to SEK 0 million (0).
During the year, the Parent Company received dividends from subsidiaries in the amount of SEK 88 million (119), of which SEK 70 million (92) refers to anticipated dividends.
| Total c.a.c.e. reported in the cash flow statement | 40 | |
|---|---|---|
| Credit balance on Group account in Parent Company | 17 | 40 |
| The following subcomp. are included in cash and cash equivalents: | ||
| 2014 | 2013 |
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 2015. 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 29 April 2015.
Torekov, 6 March 2015
Fredrik Arp
Chairman of the Board
Ingegerd Andersson Håkan Svensson
Sven Boström-Svensson Henrik Jorlén Dag Andersson
Board member Board member Board member
Åsa Hedin Lars-Åke Rydh Hans Porat
Board member Board member President and CEO
Employee representative Employee representative
My auditor's report was submitted on 13 March 2015
Alf Svensson Authorised public accountant
I have audited the annual accounts and consolidated accounts of Nolato AB for the year 2014. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 43 – 79.
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 judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.
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 2014 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 2014 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 2014.
Responsibilities of the Board of Directors and the Managing Director 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 a 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 assess whether the proposal is in accordance with the Companies Act.
As a 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, 13 March 2015
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-interest-bearing liabilities and provisions.
Operating profit as a percentage of average operating capital. Operating capital consists of total capital less non-interestbearing 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 per share Cash flow before financing activities in relation to the average number of shares.
Cash flow after investments, excluding acquisitions and disposals divided by operating profit (EBIT). Cash flow and operating profit have been adjusted for non-recurring items.
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. The mould is called the moulding tool.
Production technique whereby a container is first injection-moulded and then inflated so that a receptacle is formed. Used by Nolato in the production of pharmaceutical packaging.
This is a method for continuously manufacturing products in strands, such as medical tubing.
Method 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 compatibility (EMC). This is achieved using silicone gaskets containing silver or nickel particles.
| 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|
| Sales and profit | |||||
| Net sales (SEK million) | 4,234 | 4,522 | 3,874 | 2,977 | 3,375 |
| Sales growth (%) | – 6 | 17 | 30 | – 12 | 30 |
| Percentage of sales outside Sweden (%) | 79 | 80 | 75 | 70 | 76 |
| Operating profit (EBITA) (SEK million) | 470 | 427 | 303 | 199 | 262 |
| Operating profit (EBIT) (SEK million) | 454 | 411 | 287 | 190 | 253 |
| Financial income and expense (SEK million) | 8 | – 8 | – 15 | – 7 | – 10 |
| Profit after financial income and expense (SEK million) | 462 | 403 | 272 | 183 | 243 |
| Profit for the year (SEK million) | 364 | 314 | 202 | 132 | 187 |
| Financial position | |||||
| Total assets (SEK million) | 2,914 | 2,573 | 2,634 | 2,144 | 2,350 |
| Shareholders' equity (SEK million) 1) | 1,567 | 1,348 | 1,170 | 1,117 | 1,179 |
| Interest-bearing assets (SEK million) | 256 | 318 | 272 | 124 | 239 |
| Interest-bearing liabilities and provisions (SEK million) 1) | – 197 | – 196 | – 385 | – 243 | – 273 |
| Net financial assets (+) / net financial liabilities (–) (SEK million) 1) | 59 | 122 | – 113 | – 119 | – 34 |
| Equity/assets ratio (%) 1) | 54 | 52 | 44 | 52 | 50 |
| Liquidity (%) | 126 | 126 | 109 | 123 | 120 |
| Debt/equity ratio (times) 1) | 0.1 | 0.1 | 0.3 | 0.2 | 0.2 |
| Cash flow | |||||
| Cash flow from operations (SEK million) | 330 | 512 | 476 | 246 | 370 |
| Investment activities (SEK million) | – 203 | – 144 | – 335 | – 134 | – 286 |
| Cash flow before financing activities (SEK million) | 127 | 368 | 141 | 112 | 84 |
| Cash conversion (%) | 28 | 82 | 111 | 45 | 91 |
| Profitability | |||||
| Return on total capital before tax (%) | 17.1 | 15.9 | 11.9 | 8.7 | 11.3 |
| Return on capital employed before tax (%) 1) | 28.4 | 26.7 | 19.4 | 13.9 | 18.4 |
| Return on operating capital before tax (%) 1) | 33.0 | 32.6 | 22.6 | 15.5 | 21.6 |
| Return on net shareholders' equity, after tax (%) 1) | 25.0 | 24.9 | 17.7 | 11.6 | 16.5 |
| EBITA margin (%) | 11.1 | 9.4 | 7.8 | 6.7 | 7.8 |
| Profit margin (%) | 10.9 | 8.9 | 7.0 | 6.1 | 7.2 |
| Interest coverage ratio (times) | 58 | 37 | 23 | 16 | 25 |
| Share data (see also pages 36-37) | |||||
| Net earnings per share (SEK) | 13.84 | 11.94 | 7.68 | 5.02 | 7.11 |
| Shareholders' equity per share (SEK) 1) | 60 | 51 | 44 | 42 | 45 |
| Cash flow from operating activities per share (SEK) | 12.54 | 19.46 | 18.09 | 9.35 | 14.06 |
| Cash flow before financing activities excl. acq. and disp. per share (SEK) | 4.83 | 13.76 | 12.05 | 4.26 | 8.74 |
| Yield (2014 proposal) (%) | 4.8 | 5.5 | 7.6 | 9.9 | 7.2 |
| Dividend per share (2014 proposal) (SEK) | 8.50 | 8.00 | 6.00 | 5.00 | 6.00 |
| Personnel | |||||
| Number of employees | 8,020 | 9,357 | 8,421 | 5,496 | 7,563 |
| Sales per employee (SEK thousand) | 528 | 483 | 460 | 542 | 446 |
| Profit after financial income and expense per employee (SEK thousand) | 58 | 43 | 32 | 33 | 32 |
1) The year 2010 is 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.
The Nolato Annual Report was produced by Bysted AB.
Photo: Lasse Davidsson, Karl Forsberg, Gillis Sabrie, Jüri Soomägi, Lasse Strandberg, Michel Thomas, Magnus Torle 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-certified pulp and in a process with minimal emissions and low energy and water consumption.
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
Åhus, Sweden Snidaregatan 1 SE-296 31 Åhus, Sweden Phone: +46 708 744170
San Diego, USA 16208 Palomino Mesa Ct San Diego, CA 92127, USA Phone: +1 858 859 5270
Box 905, SE-461 29 Trollhättan, Sweden Street address: Verkmästarev. 1-3 Phone: +46 520 409900
Paris, France 15, Rue Vignon FR-75008 Paris, France Phone: +33 1 47 975284
660 VandeBerg Street Baldwin, WI 54002, USA Phone: +1 715 684 4614
Box 29, SE-533 21 Götene, Sweden Street address: Alsborgsgatan 2 Phone: +46 511 342100
Persbogatan 1 SE-265 38 Åstorp, Sweden Phone: +46 42 66880
Jánossomorjai utca 3 HU-9200 Mosonmagyaróvár, Hungary Phone: +36 96 578770 Negoiesti, Romania DIBO Industrial Park, H13 Negoiesti, Prahova,
Walton Road, Farlington, Portsmouth PO6 1TS Great Britain Phone: +44 2392 370102 Newcastle, Great Britain New York Way, New York Ind. Park, Newcastle upon Tyne NE27 0QF Great Britain Phone: +44 191 296 0303
BDA, Beijing, 100176 P.R. China Phone: +86 10 6780 5580
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
Saligrammam, Chennai–600093, India Phone: +91 99403 54400
Ringvägen 5 SE-280 40 Skånes Fagerhult, Sweden Phone: +46 433 32300
Box 93, SE-242 21 Hörby, Sweden Visiting address: Medicingatan Tel: +46 415 19700
Lomma, Sweden Box 28, SE-234 21 Lomma, Sweden Street address: Koppargatan 13 Phone: +46 415 19700
SE-269 04 Torekov, Sweden Street address: Nolatovägen Phone: +46 431 442260
Box 4123, SE-422 04 Hisings Backa, Sweden Street address: Exportgatan 59 Phone: +46 31 588400
SE-269 04 Torekov, Sweden Street address: Nolatovägen Phone: +46 431 442200
Ängelholm, Sweden Framtidsgatan 6 SE-262 73 Ängelholm, Sweden Phone: +46 431 442200
Bergsmansvägen 4, SE-694 91 Hallsberg, Sweden Phone: +46 582 88900
Beijing, China 402 Longsheng Industrial Park 7, Rong Chang Road East Beijing Development Area Beijing 100176, P.R. China Phone: +86 10 6787 2200
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
www.nolato.com
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