Rockwool — Annual Report 2020

Feb 10, 2021

ROCKWOOL Group Annual Report 2020

ROCKWOOL Group at a glance

Message from the Chairman and CEO

The ROCKWOOL purpose and strategy

Our business model

Outlook 2021

Business updates

#ROCKTheBoat

ESG performance

Risk management

The year in pictures

Shareholder information

Financial performance

Financial statements

Consolidated financial statements

Financial statements for ROCKWOOL International A/S

Overview

ROCKWOOL Group Annual Report 2020

At a glance

Employees by region

Region	Number
North America	1,300
Russia	1,000
Asia	1,200
Europe	8,000

Net sales (EURm)

Year	Net Sales (EURm)
2016	2,202
2017	2,374
2018	2,671
2019	2,757
2020	2,602

Highly-skilled individuals

White-collar positions held by women

Nationalities worldwide

Five brands

• Fire-safe stone wool insulation
• Stone wool growing media and technology
• Automotive, urban acoustics and urban climate adaptation
• Fire-safe façade cladding, roof detailing, softs and fascia
• Fire-safe acoustic ceiling tiles and systems

Sales decreased

3.7% in local currencies, incl. 0.6% from acquisitions

EBIT

338 EURm

Country	Manufacturing facilities	Sales offices
Austria	●	●
Belarus	●	●
Belgium	●	●
Bulgaria		●
Canada	●	●
China	●	●
Croatia		●
Czech Republic		●
Denmark	●	●
Germany	●	●
Estonia		●
Finland		●
France	●	●
Hungary		●
India	●	●
Italy	●	●
Korea		●
Latvia		●
Lithuania		●
Malaysia		●
Mexico	●	●
Norway	●	●
Philippines		●
Poland	●	●
Romania		●
Russian Federation	●	●
Singapore		●
Slovakia		●
Spain	●	●
Sweden	●	●
Switzerland		●
Thailand		●
The Netherlands	●	●
Turkey	●	●
Ukraine		●
United Arab Emirates		●
United Kingdom	●	●
United States	●	●
Vietnam		●

We create sustainable solutions to protect life, assets, and the environment today and tomorrow.

World leader with local presence

• 47 Manufacturing facilities
• 39 Countries where we are present
• 120+ Countries in which we have sales

ROCKWOOL Group Annual Report 2020

Five-year overview

	2020 (DKKm)	2020 EURm	2019 EURm	2018 EURm	2017 EURm	2016 EURm
Income statement
Net sales	19,397	2,602	2,757	2,671	2,374	2,202
EBITDA	3,889	522	548	507	417	389
Amortisation, depreciation and write-downs	1,370	184	176	166	159	160
EBIT	2,519	338	372	341	258	229
Financial items	-97	-13	-5	-7	-11	-7
Profit before tax	2,422	325	367	335	275	225
Profit for the year	1,871	251	285	265	214	166
Balance sheet
Non-current assets	14,337	1,927	1,825	1,468	1,383	1,409
Current assets	6,073	817	869	963	781	591
Total assets	20,410	2,744	2,694	2,431	2,164	1,999
Equity	15,566	2,092	2,118	1,877	1,684	1,536
Non-current liabilities	1,179	158	160	121	122	128
Current liabilities	3,665	494	416	433	358	336
Net interest-bearing cash / (debt)	709	95	212	375	241	116
Net working capital	1,588	213	247	198	190	175
Invested capital	14,591	1,961	1,889	1,542	1,452	1,433
Gross investment in plant, property and equipment	2,491	335	393	220	123	92
Cash flow
Cash flow from operating activities	3,261	438	402	408	332	326
Cash flow from investing activities	2,690	362	400	212	165	89
Free cash flow	571	76	2	196	167	237
Others
R&D costs	306	41	41	38	32	32
Number of patents granted	148	148	235	268	201	280
Number of full-time employees (year-end)	11,448	11,448	11,691	11,511	11,046	10,414
Ratios
EBITDA margin	20.1%	20.1%	19.9%	19.0%	17.6%	17.7%
EBIT margin	13.0%	13.0%	13.5%	12.8%	10.8%	10.4%
Payout ratio	37.7%	37.7%	33.3%	33.3%	33.3%	33.3%
ROIC	17.6%	17.6%	21.7%	22.8%	17.9%	15.8%
Return on equity	11.9%	11.9%	14.3%	14.9%	13.3%	11.5%
Equity ratio	76.1%	76.1%	78.5%	77.1%	77.5%	76.8%
Leverage ratio	-0.18	-0.18	-0.39	-0.74	-0.58	-0.29
Financial gearing	-0.05	-0.05	-0.10	-0.20	-0.14	-0.08

For definitions of key figures, ratios and exchange rates see p. 107.

ROCKWOOL Group Annual Report 2020

Net sales & sales growth (EURm)

Year	Net Sales (EURm)	Growth (%)
2016	2,202
2017	2,374	7.8%
2018	2,671	12.5%
2019	2,757	3.2%
2020	2,602	-5.6%

EBIT & EBIT margin (EURm)

Year	EBIT (EURm)	EBIT margin (%)
2016	229	10.4%
2017	258	10.8%
2018	341	12.8%
2019	372	13.5%
2020	338	13.0%

ROIC & Invested capital (EURm)

Year	ROIC (%)	Invested Capital (EURm)
2016	15.8%	1,433
2017	17.9%	1,452
2018	22.8%	1,542
2019	21.7%	1,889
2020	17.6%	1,961

Investments (EURm)

Year	Maintenance	Capacity	Acquisitions	Total
2016	92			92
2017	123			123
2018	220			220
2019	393			393
2020	335			335

Highlights 2020

EBIT
338 EURm
Down 9% compared to last year

Net sales
Sales decreased
3.7% in local currencies, incl. 0.6% from acquisitions

ROIC
17.6%
Down from 21.7% last year

ROCKWOOL Group Annual Report 2020

Organisational agility enables strong performance

Chairman Thomas Kähler and CEO Jens Birgersson

Dear stakeholders,

The year 2020 will undoubtedly be remembered most for the global pandemic, the first in more than 100 years. Its impact on our world has been profound, changing the way we interact, how we work and live, and forcing us to adapt to new and often inconvenient alternatives. Looking back on the turbulent year, we are proud of how well our colleagues handled the many challenges that arose. Our local teams and leadership ensured employees were safe while quickly adjusting operations, sales and service activities to match the changing needs of the market and our customers. At the same time, we kept an eye on the recovery and the opportunities for us to help society and our communities come back stronger: we continued investing in new production facilities and more efficient and sustainable technologies; accelerated our usage of digital platforms to meet customer needs; and made new and ambitious long-term commitments regarding sustainability goals that you will learn more about in this report.

Robust results

Considering the global nature of the COVID-19 shock, our performance during the year was strong. Our sales declined overall but were supported in regions where the construction sector stayed active, as many governments recognised that building sites could operate safely and contribute to the economic recovery at the same time. Importantly, we maintained a robust level of profitability by adjusting our production to demand and keeping costs down. More specifically, net sales for the year were down 3.7 percent in local currencies including 0.6 percent from acquisitions, while EBIT margin was 13 percent, down 0.5 percentage points. Profit for the year was EUR 251 million, a 12 percent decrease from last year. We have unused committed credit facilities of EUR 630 million and have a net positive cash position of EUR 95 million. Our largest individual investments in 2020 relate to ongoing factory projects in the United States (West Virginia), in Norway and in Germany. We made two acquisitions during the year: the Sweden-based Parafon Acoustic Ceiling business, now part of Rockfon; and Bestofire & Thermal Pte Ltd, a Singapore-based specialist supplying fire protection and thermal insulation. Both acquisitions strengthen our position in the respective markets. Importantly, our customer satisfaction score increased 6.5 percent this year compared to 2019, the sixth year in a row customers have rated us higher than the year before. Considering the unique challenges everyone faced during the year, we are especially proud of this result and our employees' ability to continue meeting customers' needs.

Recovery, renovation and urban regeneration

COVID-19 has created simultaneous health and economic crises, on top of a climate crisis that will not release its grip. That is why greening the economic recovery is so important. And while climate initiatives may have given way temporarily to the immediate requirements of the pandemic, governments are increasingly focusing on addressing the climate challenge also as a means of spurring economic growth and creating healthier and safer communities. The European Commission is leading the way on this front – and they recognise that buildings are the linchpin for both climate action and economic recovery. Combined with the Commission’s aim to raise the EU’s 2030 greenhouse gas emissions reduction target to at least 55 percent, its “Renovation Wave” strategy calls for doubling the EU’s current building renovation rate to two percent. They are working on important new policy initiatives to achieve that goal. Doing so will require renovating the buildings in which we live and work on a large scale. Buildings are the EU’s biggest carbon emitter, responsible for 36 percent of greenhouse gas emissions. They are also the EU’s most valuable financial asset, worth tens of trillions of euros. And crucially in times of economic stress, buildings are a job-creation machine: per billion euros invested, building renovations are estimated to create 18,000 jobs.

Our own decarbonisation goals

In December 2020, we announced ambitious plans to accelerate the decarbonisation of our business, with specific long-term targets. Verified and approved by the Science Based Targets initiative (SBTi), these targets include:

• Reducing total factory greenhouse gas emissions in absolute terms by 38 percent by 2034 (relative to baseline year 2019); and,
• Reducing non-factory, total lifecycle greenhouse gas emissions by 20 percent by 2034 (relative to baseline year 2019)

These absolute emission reduction targets supplement our existing sustainability goals to continue reducing the carbon intensity (carbon emitted per tonne produced) of our production. The SBTi-approved targets equate to a one-third reduction of ROCKWOOL's lifecycle greenhouse gas emissions by 2034. We are proud of this commitment, and to be among the few energy-intensive manufacturing companies whose science-based emission reduction targets SBTi has verified and approved.

Health and safety

Every year, we strive to achieve the same safety goal: zero fatalities and a minimum 10 percent annual improvement in the Lost Time Incident (LTI) rate. Most importantly, we had no fatalities in 2020. For the LTI rate, our goal was a 10 percent improve- ment, from 2.9 in 2019 to 2.6 in 2020. Although we had fewer lost time incidents in 2020 compared to 2019, the LTI rate, based on the number of hours worked, was higher in 2020, at 3.0.

ROCKWOOL Group Annual Report 2020Looking ahead With the pandemic surely leaving its mark throughout the year ahead, we anticipate that governments will continue prioritizing keeping construction sites open, owing to the multiple economic, climate, and health benefits of especially building renovations. Together with the strong market focus on non-combustible, recyclable building materials, the existing policy emphasis on greening the economic recovery should positively influence market developments, especially in the medium- to longer-terms. Financially, we forecast sales growth of 3-5 percent in local currencies for 2021. Input costs are likely to be higher in 2021, as especially energy costs are trending upward, which we aim to offset with operational productivity gains and cost savings. Overall, we thus expect a double-digit EBIT margin of around 11 percent, which is slightly down compared to 2020 when adjusting for the additional depreciation and costs related to new factory start-up. The 2021 investment level will be around EUR 370 million, with the West Virginia factory and the relocation of one of the China factories being the main drivers. We will also invest in additional Rockfon and Grodan capacity as well as make additional investments supporting our sustainability and decarbonisation goals. We want to thank all our colleagues for the hard work, perseverance and creativity that contribute so much to the Group’s success; and our customers whose trust and continued business we never take for granted. Thomas Kähler Jens Birgersson Chairman CEO

ROCKWOOL Group Annual Report 2020 9

The ROCKWOOL purpose and strategy

At the pinnacle of ROCKWOOL’s strategy is our corporate purpose: to release the natural power of stone to enrich modern living. This reflects our purpose’s unifying nature, conveying that stone is our core raw material and the bedrock on which our business is based. And while the stone we use may be millions of years old, what we do with it is cutting-edge. Every day, ROCKWOOL’s creative and entrepreneurial employees are developing and applying new technologies and innovations to release the potential of stone to enrich modern living. As we look to the future, stone wool and the products we make with it will play an increasingly significant role in addressing two of the megatrends influencing virtually every aspect of modern society – urbanisation and climate change. Every week, about 1.5 million people move to urban environments. By 2030, there will be an estimated 43 megacities around the globe with more than 10 million inhabitants. And by 2050, the earth’s population is expected to be close to 10 billion, nearly 70 percent of whom will live in cities.

The ROCKWOOL business strategy is driven by a passion for creating solutions that connect global trends with profitable business opportunities by creating superior solutions to protect life, assets, and the environment, and to create comfortable, healthy, and attractive spaces. In other words, by enriching modern living. The combination of more people living in more densely populated urban areas and the worsening consequences of climate change will increase the demand for modern housing and energy. Greater urban population density also heightens the importance of constructing and renovating the buildings in which we live, work and learn with non-combustible building materials. At the same time, the world must feed its growing population using fewer resources, while also managing the effects of more frequent extreme weather events, particularly in urban environments. The ROCKWOOL business strategy is driven by a passion for creating solutions that connect these global trends with profitable business opportunities by creating superior solutions to protect life, assets, and the environment, and to create comfortable, healthy, and attractive spaces. In other words, by enriching modern living.

Our aspiration is to grow faster than the market overall by offering top-quality products and services, strengthening our brand, building long-term customer relations, and driving an operationally effective business across all segments and geographies where we are active. As our business is inherently capital intensive, we focus on exploiting our natural strengths to balance risks, which includes a differentiated approach across selected geographies. In North America, for example, we are expanding our production capacity to capture significant growth opportunities within all major business areas. In Europe, we will grow faster than the market by launching new products and services, while improving our customer-facing activities and the productivity of our production platform. We will expand capacity where needed to meet steadily growing demand in and near core markets and enhance our geographic coverage and customer service level. In Asia, the approach is different, in that we will develop and grow our business selectively where there is a clear demand for our premium quality offerings. At ROCKWOOL, everything we do is based on releasing the natural power of stone to enrich modern living. Profitably offering solutions to address the challenges created by enduring global megatrends will help ensure our successful future growth.

ROCKWOOL Group Annual Report 2020 10

Megatrends Harnessing the 7 strengths of stone to address the world’s big challenges

Cities will continue to grow, increasing the need for buildings made with non-combustible, durable, and sustainable materials that are energy efficient and comfortable to be in. Energy renovation of buildings could provide up to 55 percent of the GHG emission reductions needed to meet UN climate targets for 2030 and align cities with a 1.5°C trajectory. Our homes have become even more important after COVID-19. Improving the comfort of our indoor spaces by optimising temperature, air quality and acoustics has well-known benefits to our overall happiness, health and wellbeing. Shifting to a circular economic model and using natural, recyclable materials in buildings would significantly reduce construction-related consumption and waste.

• Urbanisation: 2/3 of the global population is expected to live in urban areas by 2050, up from more than half today.
• Climate change: Introduction of the world's final energy demand and CO2 emissions come from buildings. ~30%
• Health and wellbeing: The amount of time people spend indoors, on average. 1/3
• Circularity: 90% of global waste is produced by the construction sector. It also consumes 40 percent of global resources annually.

At ROCKWOOL, we’ve been applying the 7 strengths of stone to the world’s biggest challenges for decades. We keep a close eye on global megatrends to ensure that our product portfolio stays relevant to the most pressing issues facing our world. By seeing these megatrends as opportunities to improve the lives of people around the world, our products have become central to conversations on issues like climate change, health and wellbeing, urbanisation, and circularity.

ROCKWOOL Group Annual Report 2020 11

The 7 strengths of stone

1. Fire-resilience: Withstand temperatures above 1000°C.
2. Thermal properties: Save energy by maintaining optimum indoor temperature and climate.
3. Acoustic capabilities: Block, absorb or enhance sounds.
4. Durability: Increased performance and greater stability with lower costs.
5. Aesthetics: Match performance with aesthetics.
6. Water properties: Manage our most precious resource.
7. Circularity: Reusable and recyclable material.

ROCKWOOL Group Annual Report 2020 12

Our business model

What does ROCKWOOL Group do? We transform volcanic rock into stone wool, a versatile material with many natural strengths that make it ideal for use in a range of applications in buildings, transportation, horticulture and water management. Our business is defined by:

• Low-risk transactional sales
• Local business
• Capital intensive production
• Conservative financial strategy

Our impact on society: We see enormous opportunity to leverage the natural power of stone to create products that accelerate progress towards a safer, healthier, low-carbon future. Volcanic rock is mixed with limestone and can contain up to 75 percent recycled material – in certain geographies and product lines – before being heated to more than 1500°C. A final heat treatment cures the binder, giving the stone wool dimensional stability, before final processing and production into a wide range of products. The molten rock is spun into wool. A binder and either a special oil or wetting agent are added depending on the application of the end product.

• 47 manufacturing facilities
• 39 countries where we have a presence
• ~400 km Average transport distance for insulation in Europe (including import/export)
• In certain geographies and product lines, our products can contain up to 75% recycled material
• 120+ countries with sales activity
• 90% of sales does not cross customs borders

All Rockpanel boards are durable like stone, easy to cut, and resistant to the effects of moisture, temperature, fire and the weather. In schools with no sound absorption, children cannot hear up to 70% of consonants their teachers speak. Lapinus Rockflow can absorb up to 95% of its volume in water, without losing its rigidity and strength. Urban horticulture can reduce land use for vegetable growing by 75% or more. Proper insulation alone can reduce heating needs by 70%. Stone wool is fully recyclable.

ROCKWOOL Group Annual Report 2020 13

Outlook 2021

COVID-19 will continue to leave its mark in 2021, though focus on greening the recovery will contribute to expected modest sales growth. As the new year begins, the ongoing pandemic continues to influence market activities to varying degrees, which will likely be the case for the full year.We do expect, however, that governments in many countries will continue prioritising keeping construction sites open, owing to the multiple economic, climate, and health benefits of especially building renovations. Though still too early to estimate its impact, successful vaccination efforts would likely positively affect overall economic activity. The underlying medium- to long-term structural growth drivers for stone wool products are even stronger today than last year. On top of fundamental trends like urbanisation and increasingly tighter building regulations, we expect several other trends will continue driving growth in our business. For example, the growing focus on energy efficiency, fire safety, and circularity continues to influence the decisions of consumers, the building industry and policymakers, with the pandemic accelerating these trends in multiple ways. COVID-19 created simultaneous health and economic crises, on top of an enduring climate crisis. That is why greening the economic recovery will remain a key focus for national governments, with buildings playing a crucial role on all fronts. The EU Commission, for its part, is making energy efficiency in buildings a key feature of its economic and climate recovery plans. This makes sense, as energy efficiency building renovations are among the highest-impact economic recovery measures to create jobs while helping deliver climate goals and ensuring more resilient and healthier communities. For these reasons among others, including renewed focus on post-Grenfell fire safety and the need for regulatory clarity requiring non-combustible cladding and insulation materials on high-rise and high-risk buildings, we view the medium- to long-term renovation outlook as quite positive. Regionally, in Europe, the EU commitment to greening the recovery and other positive considerations lead us to a cautiously optimistic outlook for construction sector recovery. We have also seen some early signs of positive impact from market-specific incentive schemes increasing interest in building renovation. The market in Russia is developing positively, and we expect this to continue in 2021. In the United Kingdom, we do not expect that finalising Brexit will materially affect our business there. As is typically the case for ROCKWOOL, our UK operations are locally anchored with most sales and procurements and all of our production taking place in the local market. We do expect the post-Grenfell conversion to non-combustible, fire-safe building materials will continue in 2021, thus further bolstering demand for ROCKWOOL insulation and cladding. The U.S. market was already back to a relatively high activity level by the end of 2020, powered by significant financial recovery funds working their way into the economy. We do not expect that the political shift following the November elections will change the fundamentals behind the recovery. In Asia, we still see a slow recovery in the sectors where we are most active. Competition will increase in certain markets and applications. Our latest capacity addition in Europe, in Neuburg, Germany, gives us a strong platform to capture business opportunities with a highly efficient factory in a central location. Taking market uncertainties into account along with the expectation that EU green recovery plans will have limited short-term impact, we forecast sales growth of 3-5 percent in local currencies for 2021. While we foresee the positive impact from increased building renovation in Europe gaining traction during the year, we would expect a noticeable impact on insulation sales only after individual member states have scaled up local energy efficiency incentive schemes. Input costs are likely to be higher in 2021, as especially energy costs are trending upward. We aim to offset higher input costs with operational productivity gains and cost savings. We expect some additional costs in connection with the factory start-ups in Germany and the United States as well as an increased depreciation level from the investments we have made during the past two years as the factories come online. Relative to 2020, the additional depreciation is expected to impact margins by around one percentage point. Overall, we thus expect a double-digit EBIT margin of around 11 percent, which is slightly down compared to 2020 when adjusting for the additional depreciation and the start-up costs for the new factories. The 2021 investment level will be around EUR 370 million excluding acquisitions, with the West Virginia factory and the relocation of one of the Chinese factories as the main additions within insulation. We will also invest in additional Rockfon and Grodan capacity as well as make additional investments supporting our sustainability and decarbonisation goals.

Outlook 2021

EURm	Investments excl. acquisitions	EBIT margin	Sales growth in local currencies
around 370	11%	3-5%

ROCKWOOL Group Annual Report 2020

San Francisco’s twisted beauty

ROCKWOOL Group Annual Report 2020

Contractors chose ROCKWOOL insulation because it met these performance needs and made an otherwise complicated job much easier, enabling installers to work efficiently and overcome the many angles, gaps and seams on the geometric façade. “ROCKWOOL’s products were favoured due to the insulation’s density and ease of install. It also had no issues with exposure to the elements, thanks to its high drying potential. It held its integrity, made installation easier and saved on time and costs”, says Tony Hughes of JJ Acoustics in San Jose, California. The Mira’s high-performance design isn’t just reserved for Silicon Valley’s wealthiest residents either – nearly 40 percent of the units are reserved for people making less than the city’s median income. After two years of watching the iconic tower rise on the San Francisco skyline, proud new owners began moving into the building in July 2020.

Case study

The glistening white, twisting façade of the Mira condominium tower is a fitting addition to a city known for its innovation. Its spiralling design gives residents in its 392 apartments more than just access to ample fresh air, natural light and sweeping views of the San Francisco Bay. For architect Jeanne Gang, high performance was just as important as good looks, with energy efficiency and sustainability being top considerations. Green roofs, a grey-water recycling system and recyclable stone wool insulation materials from ROCKWOOL helped the building meet California’s strict Title 24 building code and earn Mira a LEED Gold certification as well as several design awards. The Mira’s high performance starts on the outside where a continuous layer of ROCKWOOL exterior insulation completely wraps the 40-story building. This creates an energy-efficient envelope that also improves the acoustics of each apartment’s walls and, compared to using a combustible insulation, makes the façade much safer against fire, a top priority in such a tall building.

ROCKWOOL Group Annual Report 2020

Following the sharp pull-back in the second quarter, construction activity recovered across most markets in the second half of the year as countries emerged from lock-down and governments shifted focus to the recovery by launching financial support and economic stimulus packages. In many European countries, deep energy renovation of existing buildings was recognised as an effective recovery vehicle – creating jobs and stimulating spending, while also contributing to long-term decarbonisation goals. As a result, renovation of existing buildings was much less impacted than the commercial sector for new buildings. This was clear in Southern Europe, where the market dropped significantly in the second quarter but quickly bounced back in the second half of the year, amid encouraging signs in some markets that government support for building renovation programmes were gaining interest.

Business update

Insulation segment

Sales of ROCKWOOL insulation declined compared to 2019. Some markets performed better than others, depending largely on the extent of government restrictions and financial constraints resulting from COVID-19. In Western and Eastern Europe, sales in most countries were down compared to last year, except for the Nordic markets and the Netherlands, which showed good growth. The Nordic region increased sales each quarter during 2020, driven by the higher activity levels in home renovation; while in the UK, steady pressure from regulators and consumers bolstered demand for non-combustible building materials. Sales in Asia were particularly affected by the impact of the virus, while in North America insulation sales overall were flat. Our Technical Insulation business continues to be challenged by the slowdown in the oil industry, particularly in the United States and Asia.

Insulation solutions

ROCKWOOL offers fire-safe, thermally-efficient, highly durable, and recyclable stone wool insulation.

ROCKWOOL Group Annual Report 2020

Forget the weather, in here it’s about the fashion

“As an artist and designer, I bring creativity and passion into my designs and I want to share them with my customers through the right kind of ambience and atmosphere that allows them to be comfortable and inspired. I knew I could improve the indoor environment of my boutique with roof insulation, but I didn’t know by how much”, he says. The first to comment after the insulation was installed was his staff, who noticed it was much cooler in the hot and humid afternoons of the summer months and strangely quiet when the rains hammered down. People could talk without raising their voices. Then came the first energy bills and another benefit of the new insulation. “Since we are open seven days a week and for long hours, the electricity costs from cooling the store can be quite substantial”, says Songwattana.“After installing the insulation, we’ve reduced the running time of the air conditioning while still keeping customers comfortable. I’ve managed to lower my electricity bill by at least 25 percent. All around it’s been a good investment for my business”.

Case study

The same weather that makes Thailand one of the world’s favourite tourist destinations can be a challenge for business owners like Somchai Songwattana. The owner of the Red Warehouse Fashion Boutique, located in Bangkok’s popular ChangChui theme park, says it can get loud inside his store when it rains on the metal roof, making it hard for customers to talk and relax. And when temperatures rise outside – to above 40°C in the hotter months and near 30°C in the cooler ones – it also gets difficult and expensive for him to cool the store. To keep customers comfortable and lower his energy bills at the same time, Songwattana chose to install ROCKWOOL insulation on his metal deck roof.

ROCKWOOL Group Annual Report 2020

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Ceiling solutions

Rockfon ceiling solutions improve acoustic performance and indoor climates, while resisting humidity and inhibiting mould growth.

Business update

Systems segment

We provide customers with indoor acoustic solutions for ceilings and walls. Our ceiling systems combine stone wool acoustic tiles with suspension and decorative metal systems that are a fast and simple way to create beautiful, comfortable spaces. Our stone wool-based products are easy to install, durable and significantly improve indoor acoustic comfort.

Sales for Rockfon in 2020 declined slightly in Europe and Asia, and more significantly in North America. The acquisition of the Sweden-based Parafon ceiling tile business contributed positively to the results in Europe. The Rockfon business in North America has a higher exposure to the commercial sector than in Europe and Asia, and thus was affected more there by pandemic-related market restrictions. However, we also grew market share in the European and North American markets where we focused heavily on sales and customer service through the pandemic, leveraging digital channels and our supply chain platform to continue serving customers without interruption.

With the design community increasingly focusing on health, wellbeing and indoor air quality, the natural benefits of stone wool ceilings are becoming better appreciated and recognised within various ratings systems such as Well, LEED and Declare, for example. Overall, we are encouraged by the growing interest in our acoustic ceiling tiles and sound absorbing solutions.

ROCKWOOL Group Annual Report 2020

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Quiet comfort for patients and staff

For example, white Rockfon acoustic tiles in halls and above workstations reflect 85 percent of the light coming in through the building’s floor-to-ceiling windows and skylights, brightening rooms and spirits. In patient waiting areas, the maple wood linear ceiling creates a warm, inviting area – only the ceiling isn’t wood at all, but part of Rockfon’s metal ceiling offering, which is more durable and easier to maintain than real wood. Finally, Rockfon’s specially treated medical and hygienic ceiling tiles in the procedure and consultation rooms help maintain a high-level of cleanliness, safety and patient privacy. These stone wool tiles are easy to clean and don’t absorb moisture, so they won’t mildew, mould or deteriorate.

“We chose three Rockfon products, each one serving a specific purpose”, says Lauren Dickey, Director of Interiors for WER. “Together they really helped us get the design and aesthetics that we needed for the client”.

Case study

For its new location in Little Rock, Arkansas, Premier Gastroenterology Associates (PGA) wanted to create an environment where patients and staff felt at home – safe, comfortable and welcome. One potential issue in the 9,300 m² space was noise. “We’re a high-volume clinic that sees thousands of patients a month, so sound control is critical”, says William E. Greene III, CEO of PGA. Communication among doctors, nurses and patients is vital and good acoustics help protect privacy of those conversations, increase comprehension and limit disturbances to others nearby. Local architect, WER, chose three different Rockfon ceiling products throughout the space to get the desired effect – and to enhance certain other key elements of the architectural design.

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ROCKWOOL Group Annual Report 2020

Based on Precision Growing principles, these solutions are used to cultivate a variety of crops. Compared to soil-based methods, our solutions produce higher yields per square metre, require far less water and fertiliser and create the possibility to use biocontrol and reduce or even eliminate chemical plant protection products. We also offer customer-specific advice and tailor-made analytic tools, facilitating the sustainable production of healthy, safe, and fresh food produce.

The Grodan business grew in 2020, with sales increasing across all markets. It is clear that demand was not impacted by COVID-19. Other factors contributing to the growth are a growing awareness and interest in fresh produce that is sustainably grown and a shift in eating habits – indicated by the proliferation of plant-based foods into supermarkets, fast-food chains and diets in general. Fundamentally, we expect continued population growth and urbanisation – and a focus on urban regeneration post-COVID.

Precision Growing

Less soil, less water, less fertiliser, lower CO₂ emissions, with a significantly higher yield. That’s Precision Growing.

Business update

Systems segment

– to add to the interest in greenhouses, urban, vertical and rooftop farms in cities and other locations. We’re proud that our products help our customers grow more fresh produce using fewer resources and provide an important alternative to traditional soil-based agriculture.

To look further into the impact of our products and the shifts we are seeing to more sustainable growing methods, we have initiated a project with Wageningen University to measure how high-tech growing can help reach the UN Sustainability Goals. We are the global leader in supplying innovative, sustainable stone wool growing media solutions for the professional horticulture industry.

ROCKWOOL Group Annual Report 2020

22

Bringing the farm inside

This first Plant Factory currently produces a variety of leafy greens, which are well-suited for vertical farms since they are small and grow fast. Soon, Farminova expects it will begin growing strawberries and mushrooms as well as tomatoes, peppers and eggplants.

“Grodan’s stone wool products and technology are essential for us to grow and track the development of our crops and help us achieve the high yields and resource efficiency of our Plant Factories. And with Grodan’s ‘green advisors’ always reachable by phone or email, we know we have their support when we need it”, he says.

So while Bozkurt doesn’t expect vertical farming will replace conventional farming, he sees it as an important alternative that will help humanity meet its food needs with a lower impact on the planet. “Whether it’s in the United States or Europe where more consumers are increasingly looking for food with certain traits – locally produced, fresh, organic – or it’s in Africa where there is a significant food access problem, vertical farming will be part of the solution and we’re excited to be a part of that”.

Case study

Looking up at the rows of lettuce in his company’s first vertical farm, Kerem Bozkurt is optimistic about his company’s role in shaping the future of food production. Farminova Plant Factories is a new venture from Turkey’s CANTEK Group. This one, in Antalya, Turkey, is the first of many the company plans to build to meet a growing global demand for sustainable food production.

“Field farming agriculture alone cannot meet the world’s food demands in the coming decades", says Bozkurt, Business Development Director of Farminova Plant Factories. “We need alternatives that use fewer resources to produce healthy food, year-round, and that can be placed anywhere”.

Using LED lights, hydroponics, and Grodan’s growing media and sensor technology, the factory produces 4,000 heads of lettuce per day in its 1,000 m² space. It’s a yield that would require 45,000 m² on a conventional farm according to Farminova, and it does this with no soil, no pesticides, and 95 percent less water.

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ROCKWOOL Group Annual Report 2020

Design freedom

Whether shape, colour, engraving or even bending the boards, design freedom is at the heart of Rockpanel facades.

Business update

Systems segment

Our cladding and other boards are robust and flexible, and fit perfectly with modern architectural trends such as organic shapes, natural materials and sustainability, while also providing cost efficiency and ease of installation. Especially in its core Benelux markets, Rockpanel delivered good growth in both the roof-detailing and façade project segments.

At the start of 2020 Rockpanel launched its exclusive product line, Rockpanel Premium, to compete in the high-end board segment. The Premium product offers customers the design and technical possibilities of the entire Rockpanel product portfolio in one board. A focus on greater and more frequent communication with customers via digital channels allowed Rockpanel to improve its brand awareness and generate sales leads during the year, despite challenging COVID-19 market conditions. Importantly, delivery service performance also remained at a high level.

Among our products, the Woods product line continues to shine. Wood lookalikes are a major trend in interior and exterior applications and our attention to this segment has proven valuable: the two newest Woods designs launched in September have been well received by customers.We manufacture board material mostly used in ventilated constructions for façade cladding, roof detailing, soffits and fascia.

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24

A custom façade, fit for a designer

“It’s a 200-metre long façade at the headquarter building. It’s what you see first, so it needed to be beautiful and durable over time”, says Martijn de Waal. “Eromesmarko wanted the look of wood, but without the high maintenance and other challenges that come with it, like the need for weather treating and the risks of discoloration and rot over time”.

When the architect approached Rockpanel with a real wood sample of the colour the customer wanted, Rockpanel had nothing like it among the more than 200 colours in its portfolio – so they custom made a new one. Two weeks later, Caramel Oak was available. “We have a lot of colours to choose from but if the desired colour isn’t in our portfolio, we will do our best to customise a colour for them”, says Raf Millis, Director of Marketing for Rockpanel. “Eromesmarko wanted the durability of stone with the natural look of wood. We’re very happy to have met their expectations”.

Case study

The eye-catching façade of the Eromesmarko headquarters building in Wijchen, the Netherlands, looks so much like wood, visitors can’t believe it isn’t the real thing. “They want to know how we made such a beautiful wooden façade”, says architect Martijn de Waal from DUAL architects. “When I tell them it’s Rockpanel stone wool, they are very surprised. They have to touch it”. It is called Caramel Oak and it’s the newest colour in the Rockpanel Woods line of façade products, custom-made for the Eromesmarko renovation project. The Dutch furniture company has a reputation for innovative products specially designed to improve school environments, and a strong commitment to sustainability. They wanted the renovated building to reflect their work and their values by holding its good looks and functionality for decades, meeting the Netherlands’ highest standard for fire protection, and making employees proud and happy to come to work.

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ROCKWOOL Group Annual Report 2020

Precision engineering

Lapinus precision-engineered stone wool solutions contribute to reducing vibration, noise, dust and to better water management.

Business update

Systems segment

All our products improve people’s lives by addressing increasingly common challenges – especially in dense urban areas – like noise and vibrations from traffic, non-exhaust vehicle emissions and the effects of climate change. Global trends of urbanisation and climate change are central to our global strategy to help create resilient cities. The Rockflow water management products help urban areas mitigate the effects of extreme rains, making them safer and more attractive places to live, work and play. This year was another strong one for this part of the business, with several new projects and increased interest from markets. In 2021, we plan to enter new markets to continue growing.

In the automotive product line, sales of our fibres, used in passenger car brake pads, were negatively impacted by COVID-19 and a global decline in automotive sales. Our fibres improve safety and comfort and reduce emissions related to braking. We expect this market to recover in the coming years.

In the urban acoustics product line, acoustic fences and noise-absorbing mats for train tracks help growing urban communities maintain comfort and quiet, by reducing vibration and noise disturbance from transportation, infrastructure and other surroundings. For tracks, 2020 was a good year with large projects in Scandinavia and Canada. An improved product portfolio for acoustic fences in 2021 is expected to boost this market segment, which is currently stable.

We develop and supply innovative, stone wool-based products used in a wide range of applications in three core areas: automotive, urban acoustics and urban climate adaptation.

ROCKWOOL Group Annual Report 2020

26

Climate solutions that blend right in

Meanwhile above ground, traditional pavement in some areas has been replaced by ceramic surface tiles that absorb rain into the soil below. In other areas, the pavement has been replaced by plants and grasses that support biodiversity, and help retain rainwater and lower summer temperatures.

When climate maps made clear the challenges facing the residents of Horst aan de Maas, they chose to act – and adapt. The chosen combination of nature and technology makes Horst aan de Maas a more comfortable and safer place to live that is also more resilient to climate change. “I expect we’ll see more projects like this that bring nature and technology experts together with towns to create the best solution for them”, says Linda de Vries, business developer at Lapinus. “Horst is a good example of how we can make communities safer, more resilient and more attractive places to live”.

Case study

As the world takes steps to mitigate climate change, many urban areas are already adapting to its effects. In the Netherlands, Horst aan de Maas is an example that others can learn from. The Dutch municipality used a combination of above- and below-ground solutions, mixing nature and technology to address its key challenges – abnormal summer heat and flood risks, caused by too much pavement and an old sewer system.

Under the roads, parking lots, and walkways around the popular Gasthoes area is one of the technologies at work: Rockflow, the stormwater management system by Lapinus. When the hard and heavy rains come, a network of gullies and pipes direct water away from sewers and into an underground stone wool buffer that retains and slowly releases the water into the surrounding soil – retaining valuable groundwater and unburdening the sewer system.

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ROCKWOOL Group Annual Report 2020

ROCKTheBoat

Inspiring the next generation

For two long weekends in the summer, aspiring young sailors got a chance to learn from the best at the #ROCKTheBoat Academy.

ROCKWOOL Group Annual Report 2020

28

Clara Nielsen is electric as her feet land on the boat dock in Copenhagen harbour. “Wow! We were so high above the water”, she says, catching her breath. “I’ve never been on a foiling boat like that before – there’s so much power!”

Clara and her sailing partner, Malene Petersen, just had the thrill of a lifetime, whipping through the waters outside Copenhagen on one of the fastest sailing vessels in the world, Team ROCKWOOL Racing’s foiling GC32 boat. It is 1 August 2020 and the two 21-year old Danes aren’t just lucky bystanders, they’re participants at the #ROCKTheBoat Academy. It’s a special sailing school of sorts that for two weekends during the summer brought together Denmark’s top young sailors to learn from some of the best in the world, the six members of the Denmark SailGP Team.

Ranging in age from 13 to 21, more than 40 up-and-coming sailors attended the two weekend Academy sessions in August, first in Copenhagen and then across the country in Aarhus. Each day, with the SailGP athletes as their coaches, Clara and the others received individual and group on-the-water coaching in race tactics, specific skills and techniques, strength and conditioning and everything else it takes to make it to the top of their sport. They also got to push their limits, testing out what they learned at high-speed on the team’s foiling GC32 boat.

For Clara and Malene, it was an unforgettable experience. Both have their sights set on representing Denmark at the 2028 Olympic Games, so to meet and learn directly from athletes who have already competed at a world-class level was priceless. “Just talking to them about their experiences was motivating, but then we get to train with them, too, and sail these amazingly fast boats”, says Clara. “It was great to hear their stories and advice on how we can get better and go further in our sport. It’s so important to get new inspiration and different points of view all the time – and to get it from some of the best in the world was really special”.

One man who knows a lot about what it is like to represent Denmark on the world’s biggest stage is Martin Kirketerp. He is a “grinder” on the Denmark SailGP Team, the guy responsible for generating power in all the boat’s manoeuvres. He’s also an Olympic champion, having won gold for Denmark in the 49er class at the 2008 Olympic Games in Beijing, China. “I remember being a young sailor and going to events to hear from big Danish sailing stars, and to this day I still remember their advice”, says Martin. “Those moments are important in an athlete’s development, and passing on that legacy and knowledge to the next generation is something that we as professional athletes feel very strongly about”.

“The #ROCKTheBoat Academy is all about showing the next generation that with hard work, energy and passion, there is a path to create a bright future in professional sailing. It’s inspiring for us to see so many hungry young athletes coming into the sport. And these opportunities are only made possible with the support of ROCKWOOL. I hope we see some of them in the future sitting where we are today, as Olympians or on the Denmark SailGP Team”.

Building the future – on and off the water

At ROCKWOOL Group, we’re optimistic about the future. We believe that if we use the knowledge and solutions out there, we can achieve success, together. The #ROCKTheBoat Academy isn’t just about sailing – it’s about showing ROCKWOOL’s commitment to a brighter, more sustainable future.

Jens Birgersson, CEO, ROCKWOOL Group

With so much experience in the Denmark SailGP Team – from Olympic medallists, to round-the-world racers and much more – there’s no one better to coach and inspire the next generation than this group of SailGP athletes. Clara and Malene were part of an almost 50 percent female turnout at the Academy, a statistic that encourages Denmark SailGP Team helmsman Nicolai Sehested.# ROCKWOOL Group Annual Report 2020

"It’s awesome to see female participation growing in the sport, and it creates a more balanced atmosphere and culture at the sessions. We want to showcase sailing as an inclusive and truly sustainable sport," says Nicolai. ROCKWOOL’s involvement with Denmark SailGP team provides an opportunity to build awareness around the importance of sustainability and the connection among urban living, outdoor recreation and the important role of stone wool in enriching modern living. With SailGP’s Season 2 set to take place in some of the world’s most iconic locations – beginning in 2021 – there is no better platform for ROCKWOOL to show that #ThisFutureRocks.

ESG performance

We are committed to delivering excellent long-term investment performance, driven by responsible environmental and social stewardship, strong relationships with stakeholders and open and transparent accounting of our business and sustainability activities.

We also recognise that operating with integrity and as a responsible business is equally important and underpins everything we do. For ROCKWOOL, embedding sustainability efforts into our business leads to product and process innovation in our operations, which ultimately results in a positive impact on the Group's economic performance. Our strategic focus on sustainability makes it natural for us to prioritise ESG disclosure. In 2019, we went a step further to be the rst company in the Nordic region to host dedicated quarterly ESG calls with investment analysts to communicate our performance within specic areas and to discuss topics of interest. The calls, which continued through 2020, have been well received.

The United Nations Sustainable Development Goals (SDGs) help steer ROCKWOOL’s ambitions. The Group is committed to 10 of the 17 SDGs, pursuing those goals where we can have the greatest impact and where they are most aligned with our business competencies. We have developed impact metrics to track our contributions to the SDGs, which include setting non-nancial goals reecting key material issues within the Group's operations that help drive improvements in our environmental and safety performance. In 2016, we set six ambitious sustainability goals, aligned with six of the SDGs, to drive substantial improvements in our sustainability performance by 2030. We made good progress on all the goals in 2020 with a view to fullling the intermediate goals latest 2022.

Across the full range of our products and operations, ROCKWOOL is dedicated to sustainability. We aim to increase our positive impact in society and on people’s lives by maximising the use and benets of our products while minimising our operational footprint.

• 95% revenue from insulation business that is EU taxonomy eligible¹

In 2020 we signed up to the Science-Based Targets initiative (SBTi), committing to reducing our factories' total greenhouse gas emissions² (Scope 1 and 2) by 38 percent in absolute terms and the non-factory lifecycle emissions³ (Scope 3) by 20 percent by 2034, both targets relative to the baseline year 2019 (see p. 33). This is equal to an ambitious one-third reduction of ROCKWOOL’s lifecycle greenhouse gas emissions. We will continue to report on quantitative progress toward achieving our goals in the 2020 Sustainability Report.

¹ To learn more about EU taxonomy, go to www.ec.europa.eu/info/business-economy-finance/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
² According to the Greenhouse Gas Protocol, Scope 1 emissions are all direct emissions from the activities of an organisation or under their control e.g. fuel combustion. Scope 2 emissions are indirect emissions from electricity purchased and used by the organisation. Emissions are created during the production of the energy that is eventually used by the organisation.
³ According to the Greenhouse Gas Protocol, Scope 3 emissions are all other indirect emissions from activities of the organisation, occurring from sources it does not own, or control e.g. procured fuels and materials, transportation, waste disposal.

Environment

Climate and energy efciency

ROCKWOOL is a net carbon negative company, in that over their lifetime, the building insulation pro ducts we sold in 2020 will save 100 times the carbon emitted and energy consumed in their production (see next page). And while the products we make save substantial amounts of energy and combat climate change on a large scale, we recognise that we need to do more.

To help society reach climate change targets, ROCKWOOL has partnered with the Science Based Targets initiative (SBTi) to accelerate green house gas emission reductions in our factories and the non-factory product lifecycle. This is an enormous albeit necessary step for ROCKWOOL. With this commitment, we join a small number of other energy-intensive manufacturing companies that have science-based emission reduction targets that are veried and approved by SBTi. Reducing emissions signicantly in manufacturing and throughout the lifecycle is necessary for society to meet the global ambition to reduce lifecycle greenhouse gas emissions to net zero by 2050.

We increase our positive impact on the planet by continuously maximising the benets of our products while minimising the footprint of our operations.

	* including upstream emissions from extraction and transportation of raw materials
100 times the carbon emitted and energy consumed in its production*	During the lifetime of its use, the building insulation we sold in 2020 will save

---

ROCKWOOL's science-based decarbonisation targets

	Science Based Targets initiative (SBTi)¹ is a non-profit organisation, supporting companies to set climate-related targets, aligned with the latest climate science to meet Paris Agreement commitments. Read more about SBTi at www.sciencebasedtargets.org
Factory emissions (compared to 2019)	-38%
Scope 1 and 2
Non-factory lifecycle emissions (compared to 2019)	-20%
Scope 3	-1 000 000 tonnes
	Resulting in a one million tonne annual absolute emission reduction** by 2034, equal to a one-third reduction compared to 2019.

¹ According to World Resources Institute, absolute emissions targets specify reductions measured in metric tonnes, relative to a historical baseline. By contrast, greenhouse gas intensity targets specify emissions reductions relative to productivity or economic output, for instance, tonnes CO 2 per produced unit or per unit of revenue generated. www.wri.org/publication/target-intensity

In parallel with our SBTi-approved emission reduction targets, we will continue tracking our progress towards achieving 20 percent reduction in carbon intensity at our factories by 2030 compared to 2015. In 2020 we have seen an additional improve- ment compared to the four percent improve- ment we achieved in 2019. We have also set a goal to increase energy efciency within our own (non-renovated) ofces by 75 percent by 2030 compared to 2015, with an intermediate goal of 35 percent in 2022. In 2019, we achieved a six percent improvement. We had a similar performance in 2020 because of COVID-related delays in nalizing a number of renovations.

Circular economy

Of ROCKWOOL’s three sustainability goals relating to circularity, two pertain to exploiting the inherent recyclability of stone wool. ROCKWOOL has a goal to offer recycling services for our products in 30 countries by 2030 with an intermediate goal of 15 countries by 2022. In 2019, we offered comprehensive recycling services in 11 countries and in 2020 we introduced the service in additional countries. We have also set a goal to reduce waste from operations going to landll by 85 percent by 2030 compared to 2015, with an intermediate goal of 40 percent in 2022. In 2020, we further reduced the amount of waste going to landll from the 19 percent in 2019.

Reaching the 2034 targets will come primarily from ongoing efforts in three areas: improved energy efciency of our own operations, technology innovation, and exploiting the inherent circularity of stone wool. One example is our fuel-exible melting tech- nology. Where this technology is used, it allows ROCKWOOL to switch to less-carbon intensive fuels – for example, switching from coal or coke to natural gas or biogas. The two factories in Denmark, one in Poland and another in the United States will use this technology to shift to lower carbon fuels in 2021. In Denmark, the tran- sition to biogas will reduce our absolute carbon emissions in 2021 by 70 percent compared to 1990.

• Reclaimed waste
  • Our goal: Increase the number of countries where we offer recycling services for our products to 30 by 2030.
• Landll waste
  • Our goal: Reduce landll waste from our manufacturing facilities by 85% by 2030.
• CO 2 emissions
  • Our goal: Reduce CO 2 intensity from our manufacturing facilities by 20% by 2030.
• Energy efciency
  • Our goal: Increase energy efciency within own (non-renovated) ofces by 75% by 2030.

Large-scale electric melting technology is anoth- er example. Operating at our Moss, Norway fac- tory since December 2020, this pioneering new melter will reduce the factory’s carbon emissions by 80 percent and production-related waste wool going to landll by 99 percent. This new technol- ogy is environmentally well-suited in countries like Norway where the electricity grid is already low carbon. The learnings ROCKWOOL gains from these multiple innovations will be applied elsewhere throughout our global operations. Regarding the circularity of our products, the ability to innitely recycle stone wool without any loss of performance sets it apart from non- recyclable construction materials that might otherwise be incinerated, resulting in end-of-life emissions. Recycling stone wool at our factories contributes to reducing production-related carbon emissions.# ROCKWOOL Group Annual Report 2020 34

We have also set a goal to improve water efficiency by 20 percent in 2030 compared to 2015. In 2019, we improved water efficiency by seven percent and in 2020 moved even closer to the intermediate goal of 10 percent in 2022. In March 2021, ROCKWOOL Group will publish its annual Group Sustainability Report with detailed information on the Group’s sustainability performance and progress towards our goals.

Environmental management

We continuously aim to minimise the impacts of our processes on people and the environment. For some environmental areas, we have internal mandatory minimum requirements. In cases where our own requirements exceed legal requirements, our standards prevail. In line with the Group’s policy for Safety, Health and Environment (SHE), it is the responsibility of the Managing Director of each business unit to provide leadership for the SHE management systems at the individual factories and be accountable for the effectiveness, continual improvements and alignment to the overall strategic direction. The SHE management systems are based on the principles of ISO 14001:2015 and ISO 45001:2018.

By the end of 2020, 75 percent of our production facilities had at least one external certification within safety, health, environment or energy management and several were certified across all areas. We conduct regular internal SHE audits, and as part of our ISO certifications we are externally audited to improve the SHE performance and awareness across the Group. In 2020, due to the COVID-19 pandemic, we postponed our scheduled internal SHE audits. This has not resulted in any compromises on our SHE performance. Please go to www.rockwool.com/group/about-us/sustainability/ for more information.

Water consumption

Our goal: Reduce water consumption intensity within our manufacturing facilities by 20% by 2030.

ROCKWOOL Group Annual Report 2020 35

Renovation and urban regeneration

In several areas around Pamplona, Spain, a large-scale renovation programme is slashing the energy costs and emissions of hundreds of old buildings and breathing new life into communities.

Spain

ROCKWOOL Group Annual Report 2020 36

From the outside, the impact of a large-scale renovation effort in this neighbourhood in Pamplona, Spain, is unmistakable. Once rundown, the 23 public housing buildings – all of them between 40 and 70 years old – glisten like new. The improvement for the residents in these nearly 600 dwellings goes much deeper than a beautiful new façade, though. A new thermal envelope that includes 10 cm of ROCKWOOL external façade insulation has sharply lowered energy consumption and costs and improved acoustic comfort inside.

Some of Spain's best performers

The project that has turned these buildings – once some of Spain’s least energy efficient – into some of Spain’s best energy performers is called Effidistrict. Started in 2015, the Effidistrict project is now in its third phase with renovation planned or underway on more than 1,000 additional homes in social housing buildings in other neighbourhoods around Pamplona-Iruna. The success of Effidistrict has been recognised inside and outside of Spain as a reference case for other municipalities seeking to combine large-scale renovation with urban regeneration. The results are tangible, and the approach – including close cooperation with the community to ensure open communication during the renovation – has led to minimal disruption to the lives of residents. Since starting the project, the Government of Navarra has invested EUR 44 million in the renovation and regeneration of residential buildings in the Txantrea neighbourhood with impressive results so far.

To read more about the Effidistrict project, visit the website: www.effidistrict.eu/

	Before	After
Building address: Calle Urroz 25, Pamplona, Navarra
Building type: Multi-family
Year built: 1970
homes renovated in phase 1	588
MWh/year total energy savings		3 186
EUR/year total economic savings		254 880
tonnes/year total avoided C02 emissions		804

Energy efficiency rating

Energy consumption kwh/m²

	After	Before
	69,96	305,4

Emissions kgCo2/m²/ year

	After	Before
	15,38	77, 5

Txantrea Before and after renovation

most energy efficient A B C D E F least energy efficient G

ROCKWOOL Group Annual Report 2020 37

GSE Social

How we act towards employees, partners, customers and the communities we are in shapes our reputation as a company among these constituencies and determines the opportunities we will have to grow with them in the future. During the pandemic, our priority has been the health and safety of our people and those with whom we interact. It has been a test of our policies and procedures but more so our leadership and company culture – two areas critical to ROCKWOOL's success that we looked deeper into during the year.

What it means to be a ROCKWOOL employee

Within the last couple of years, Group Human Resources conducted an extensive internal survey to better understand, from the employee's perspective, what it means to work at ROCKWOOL. We treat our employees fairly, ensuring a safe and healthy working environment, and aim to maintain strong relationships with our customers, suppliers and the communities where we operate.

ROCKWOOL Group Annual Report 2020 38

This survey, combined with market research, formed the basis for what is now the ROCKWOOL Group Employer Value Proposition (EVP). The EVP explains our identity as an employer and how that identity contributes to attracting and retaining employees – all of which is represented in one motto: “Greater Together”.

“Greater Together” is both a promise and an expectation. It combines what is valuable to employees with what ROCKWOOL Group offers and expects as an employer: a culture of skilled and passionate people and a collaborative working environment; a solid and reliable company with a strong history and legacy; and an opportunity to develop innovative products that have a positive impact on society and the world.

The EVP exemplifies how we work, our culture and values. It serves as inspiration for how we should aim to work, the culture that we should seek to maintain and what kind of employees we want to attract – ultimately supporting the Group's goals of growth and profitability as one big team.

Integrating new colleagues

Our current method of integrating new employees differs greatly across the Group. Therefore, a global project was initiated in 2020 with the purpose of ensuring that our new employees feel prepared in their positions and ready to contribute, no matter where they work.

loyalty, immediate manager, senior management, co-operation, working conditions, job content, remuneration, learning and development and safety.

Engagement in 2020 achieved some all-time highs, including: the response rate (82 percent) and also the scores for satisfaction and motivation. Analysis of the response data and follow-up meetings are conducted throughout the organisation among teams and together with HR to learn from the results and discuss with employees how to improve. Immediate manager scores varied again this year across the Group; and while most employees report they are satisfied with their immediate manager, our new ROCKWOOL Leadership Programme will give all our managers the opportunity to learn and improve.

For ROCKWOOL, an aligned and consistent method of bringing new employees into the Group ensures new hires have the same experience from recruitment until they begin their job. For the employee, it ensures a consistent and improved understanding of the business, culture and history, and how they will contribute to the organisation’s goals. The new global onboarding programme focuses on the following knowledge areas through a timely and relevant introduction:

1. Organisation knowledge
2. Role knowledge
3. Team knowledge
4. Workplace knowledge

This programme was launched in the beginning of 2020 as a pilot in North America, Sweden, Denmark and Norway and in Group functions at ROCKWOOL headquarters in Hedehusene, Denmark. After an evaluation period, we expect to roll out the programme globally in the first quarter of 2021.

Engaging employees

We are continuously striving to improve the engagement level of our employees. We have a yearly engagement survey on a broad range of topics, including: satisfaction and motivation,

Developing our people

In 2020, we launched our new three-tier ROCKWOOL Leadership Programme. In tier one, “Managing ROCKWOOL People”, we began training the first groups of leaders in classroom settings, before switching to virtual sessions for the remainder of the year because of COVID-19. We are training a growing number of leaders and plan to roll out the programme to the upper ranks of management in 2021. The two other tiers are still under development and will address middle and senior management.

Our Operational Excellence programme continues, with the first participants graduating in 2020 and a third group of participants expected to graduate in 2021. The programme provides participants with focused learning about operational excellence.

ROCKWOOL Group Annual Report 2020 39

Diversity

As always, we are committed to provide equal opportunities to all employees, promote diversity, and work against all forms of discrimination among ROCKWOOL employees. Policies and procedures that raise awareness about these topics are part of most of our global processes. The Group believes that diversity among employees and management, including an even distribution of age, nationality and educational background, contributes positively to the working environment and strengthens the Group's competitiveness and performance.# Governance

We have long been a diverse workplace where employees have vastly different backgrounds, nationalities and competencies – not only in relation to gender, age and ethnicity but just as much in relation to education, experience and personality. For some illustration, there are 68 different nationalities represented across the Group, including 31 at our headquarters in Hedehusene, Denmark. In addition, there are three nationalities represented in the Board of Directors; and five in Group Management. Our employees also have a wide variety of skills and educational backgrounds and range in age from 19 to 77, with the majority of them between 31 and 40. It is our goal to continue ensuring this diversity in the candidate field through recruitment and promotion.

In 2020, the overall ratio of females to males in the Group remained stable with an 18/82 split. Among middle management, the ratio of women is higher and similarly stable over time. In 2018, Group Management set a target of 25-35 percent female leaders in executive and middle management positions. In 2020, 27 percent of all leaders in middle management positions were female, including 44 percent of new hires. In 2020, as in 2019, two members of Group Management were female.

Another target for 2020 was to have at least one shareholder-elected female member of the Board of Directors by the end of year. In April 2020, Rebekka Herlofsen joined the Board. We have now set a new target to achieve 33 percent female representation among our shareholder-elected members by 2024. The target in ROCKWOOL A/S, in Denmark, is still to have at least one shareholder-elected female member of the Board of Directors.

This section on diversity covers the requirements in the Danish Financial Statement Act §99b and §107d.

Health and safety of our employees

We have an annual goal of zero fatalities and a minimum 10 percent annual improvement in the Lost Time Incident (LTI) rate. For 2020, we set a goal of LTI 2.6, which represents a 10 percent improvement compared to the 2019 performance of 2.9. We had no fatalities in 2020, and although we had fewer lost time incidents in 2020 compared to 2019, the LTI rate, based on the number of hours worked, was higher in 2020, at 3.0.

Human rights commitment

During 2020, we disclosed the Group’s commitment to respect human rights. We support the United Nations Universal Declaration of Human Rights and the universal principles defined in the UN Global Compact relating to human rights, labour, environment and anti-corruption. We oppose any kind of discrimination due to age, gender, race, colour, religion, political opinion, social origin, or any other aspects of human rights. Another right we take seriously is the right to exercise freedom of association and collective bargaining. We do not use child labour, forced or compulsory labour or knowingly engage with business partners that do so. As is the case with Group policies, the Managing Directors of the business units and Group Function heads are responsible for ensuring that this commitment is fully understood and implemented in the respective business units.

Safety, health and wellbeing

Our goal: Reduce Lost Time Incident (LTI) frequency rate by 10% and ensure zero fatalities annually.

Community engagement

ROCKWOOL’s factories are essential to the Group’s success, as is maintaining constructive, positive relations in the communities around our existing facilities and those we are building. The factories create local employment and investment in their communities, and we always work to create and maintain positive relations with community members, their representatives, and other stakeholders. In many of the locations where we operate, we have active programmes supporting community initiatives and activities. When questions or issues arise, we seek to respond as expeditiously as possible.

ROCKWOOL Group Annual Report 2020 | 40

GSE Governance

Corporate governance at ROCKWOOL Group regulates the interaction among shareholders, the Board of Directors, and Group Management, with the aim to ensure optimal operational performance while at the same time securing an appropriate level of accountability and transparency of our business practices.

Organisation

The supervision and management of ROCKWOOL Group is divided among the Annual General Meeting (AGM) of shareholders, the Board of Directors (with well-defined committees), and Group Management.

We act with integrity and in accordance with our values, rules and regulations.

The Annual General Meeting

The AGM is the supreme body of the corporate governance structure and elects the Board of Directors as well as independent auditors. The AGM approves any changes to the articles of association and to the capital structure, including any issuance of new shares. The company is not aware of shareholder agreements containing pre-emption rights or restrictions on voting rights.

ROCKWOOL Group Annual Report 2020 | 41

There is an agreement among members of the founding Kähler family to meet regularly to discuss their interests in the company, including items at the AGM, but there is no requirement for them to vote jointly.

The Board of Directors

The Board of Directors outlines the overall purpose and strategy of the company and ensures that the business is developing on track toward agreed short- and long- term goals. The members of the Board of Directors are non-executive members in accordance with the Danish Companies Act. The Board of Directors today consists of nine members. Six are elected by shareholders at the AGM for a period of one year and may be re-elected. Of these, four members are deemed independent per the Danish Recommendations on Corporate Governance. Three members are elected by employees, for a period of four years, pursuant to the Danish Companies Act. The next election is in 2022.

In 2020 the Board of Directors conducted an annual evaluation facilitated by an external consultancy firm. Based on this evaluation, the Board concluded that its present composition is appropriate and sufficient for it to perform its tasks. As for the special competences of each Board member, please refer to the CVs listed on the website, www.rockwool.com/group/about-us/rockwool-group/people/

Group Management

The CEO, together with his Group Management team, is responsible for the day-to-day management, strategy execution and timely reporting to the Board of Directors. At the end of 2020, the team consisted of eight executives, of which the CEO and CFO are the registered directors with the Danish Business Authority.

Board Chairmanship and Committees

The Board of Directors has established three substructures.

The Chairmanship

The Board of Directors has established a Chairmanship consisting of the Chairman and the Deputy Chairman. They prepare the Board meetings and undertake several functions of a nomination committee.

Audit Committee

The Board of Directors has appointed an Audit Committee consisting of four members. The majority of its members are independent. The Audit Committee monitors and report on the statutory audit, accounting and audit policies and the financial and sustainability reporting processes including auditor independence. The committee also conditions which policies or processes, if determined by the Board of Directors or the Audit Committee, should be subject to thorough evaluation. The Audit Committee monitors compliance with applicable legislation, standards and regulations and the internal controls and risk management systems. The Audit Committee also monitors potential cases from the whistle-blower system.

Remuneration Committee

The Board of Directors has appointed a Remuneration Committee consisting of the Chairman of the Board of Directors and up to two other members of the Board. The Remuneration Committee ensures that the company maintains a remuneration policy for the members of the Board of Directors and the Registered Directors and the compliance hereof, and that the guidelines for Group level variable pay schemes support the strategy. At the 2020 Annual General Meeting, a revised Remuneration Policy was approved. The Remuneration Committee makes proposals for the remuneration of the Board of Directors and reviews and approves remuneration for the Registered Directors and other members of Group Management. The Remuneration Committee also ensures the preparation of the annual Remuneration Report. The Remuneration Report will be subject to a non-binding advisory vote from the shareholders. The Remuneration Report can be found on the website.

Internal control

Control environment

ROCKWOOL Group considers strong internal control to be an essential management tool. The control environment in ROCKWOOL Group is based on clear guidelines and accountability and a continuous effort to maintain that environment with due consideration of materiality and risk. The entire structure of the Group is designed based on the Group’s commercial activities with a clear segregation of management responsibilities. All Group policies are approved by Group Management and assigned to one Group Management member overseeing implementation throughout the line organisation. Policies and manuals have been adopted within all essential areas of operation, legal compliance and financial reporting.

Control activities

Minimum internal control requirements are stipulated in ROCKWOOL Group Standards, based on the risks identified. The control activities include procedures for authorisation, approval, reconciliation and separation of functions. The control system includes both manual and automated controls.

ROCKWOOL Group Annual Report 2020 | 42

The local management teams are responsible for ensuring that the control environment in each local entity is sufficient to meet local and Group requirements.# Information and communication

ROCKWOOL Group has established standardized information and reporting systems to identify, collect and communicate relevant information and reports on an ongoing basis and on all levels to facilitate an effective, reliable workflow. In addition, an in-depth business review is performed each quarter with participation of relevant members of Group Management. The Group’s position on risk management and changes in the reporting requirements is regularly communicated at financial meetings for the local finance directors, through the Group intranet and dialogue.

Monitoring

The internal control systems in relation to the presentation of financial statements are monitored at various levels, e.g. monthly reports to Group Management on segments and markets and by regular control visits to the local entities. In addition, the Group’s Integrity Committee consisting of the CEO, CFO, a member of Group Management, the Group General Counsel and Group Integrity Officer, monitor integrity compliance and launch appropriate new initiatives to constantly improve compliance. The Integrity Committee furthermore reports on integrity issues to the Audit Committee.

Recommendations

As a Danish listed company, we are guided by the recommendations issued by the Danish Committee on Corporate Governance. The company is generally in compliance with such recommendations but has, in five cases, chosen to differ as described below. The variations are generally due to company-specific views on the recommendations to optimize value for its shareholders. The company complies with recommendation 3.1.5. The company’s Board of Directors will, however, not exclude that a situation can arise, where the Board of Directors may wish to constitute itself with a former member of the company’s management as Chairman or Deputy Chairman. ROCKWOOL Group publishes its statutory report on Corporate Governance for the financial year 2020 cf. the Danish Financial Statements Act §107b on the company’s website, including a detailed description of the Board of Directors’ consideration regarding all the recommendations. The statutory report on Corporate Governance can be found at www.rockwool.com/group/about-us/corporate- governance/.

Exceptions

To a broad extent, the company is following the Committee on Corporate Governance’s recommendations, except for the following five sub-recommendations, where the company has assessed that its present set-up is more appropriate:

3.1.3 Recommendation

The Committee recommends that the selection and nomination of candidates for the Board of Directors be carried out through a thoroughly transparent process approved by the overall Board of Directors.

Explanation: The Board of Directors has authorized the Chairmanship to nominate qualified candidates to the Board of Directors. The Board of Directors will then evaluate the candidates before it recommends them for election at the Annual General Meeting.

3.3.2 Recommendation

The Committee recommends that the management report includes information about the number of shares, options, warrants and similar in the company, and other Group companies, owned by each member of the Board of Directors, as well as changes in the portfolio of the member of the securities mentioned that have occurred during the financial year.

Explanation: The company considers the portfolio of shares, options warrants and similar in the company of each member of the Board of Directors to be a private matter, and it is the company’s judgement that disclosure of such information will not add additional value for shareholders and other stakeholders. Board member remuneration does not include share-based elements.

3.4.2 Recommendation

The Committee recommends that a majority of the members of a board committee be independent.

Explanation: The Board of Directors finds that the Chairman, as a non-independent, and the Deputy Chairman, as an independent, can perform the functions of the Remuneration Committee in a prudent manner.

3.4.6 Recommendation

The Committee recommends that the Board of Directors establish a nomination committee.

Explanation: The Board of Directors has not established a nomination committee. Instead, the Chairmanship performs duties recommended concerning the candidates for the Board of Directors. ROCKWOOL Group Annual Report 2020 43 The Board of Directors selects candidates to the positions as CEO and other Registered Directors based on their qualifications.

4.2.3 Recommendation

The Committee recommends that the company prepares a remuneration report that includes information on the total remuneration received by each member of the Board of Directors and the executive board from the company and other companies in the Group and associated companies for the last three years, including information on the most important content of retention and resignation arrangements and that the correlation between the remuneration and company strategy and relevant related goals be explained.

Explanation: The 2020 remuneration of the Registered Directors is disclosed in the remuneration report, which from now on will show each year’s remuneration in the table of the report. The remuneration of the members of the Board of Directors and committees can be found in the Remuneration Report and on the website.

Responsible tax

We acknowledge that tax is an important part of society and an equally important part of responsible corporate citizenship. Tax matters and risks as well as our tax policy are governed ROCKWOOL Group Annual Report 2020 44 by the Board of Directors and discussed on a regular basis with the Audit Committee. Tax matters are operationally managed and monitored by the CFO and the Group Tax department in close relationship with the financial management of ROCKWOOL Group subsidiaries. The aim of our tax policy is to reflect and support our business by ensuring a sustainable tax rate, mitigating tax risks and complying with rules and regulations in the jurisdictions in which we operate. In all tax matters, we apply the same values and integrity as in our Code of Conduct by making sure that our primary focus is the ordinary operation of the Group. We only adopt tax positions that are defendable under full disclosure. We are committed to being a responsible tax payer and avoid aggressive tax planning. We have a clear and transparent corporate structure with no contrived entities or structures. ROCKWOOL does not have any activities in any of the countries listed on the EU Black List of non-cooperative jurisdictions. There are many transactions among ROCKWOOL Group companies, and the transfer pricing policy for these transactions is driven by the activities undertaken and the value created in each part of our businesses. The key component in our profit allocation is our transfer pricing setup and methods in which we are committed to the principle of paying tax where value is created. We acknowledge that international tax matters are increasingly complex and we are committed to assigning the necessary resources to ensure compliance with relevant tax laws and regulations. ROCKWOOL Group is at the same time committed to being as transparent about its tax matters as can reasonably be expected, and we pursue an open dialogue and relationship with tax authorities in a proactive approach to handle uncertainties. For example, we already have a bilateral advance pricing agreement between Denmark and Poland. We have applied for two more agreements in other key countries, and have a fourth application in progress. Once these are established, our ambition is to add more agreements in other important markets. An advance pricing agreement is an up-front agreement between the tax authorities in two or more countries, covering the pricing methodologies for five tax years, thereby determining the level of taxable income for the countries in question. In addition to an open dialogue with tax authorities, we also participate and engage in an open dialogue on tax matters through industry associations and other external bodies. From time to time, ROCKWOOL Group is allocated different types of tax incentives. Tax incentives are government measures that are intended to influence business decision-making or to encourage businesses to invest by reducing the amount of tax they must pay. Several of the territories in which we operate offer incentives of various kinds. We seek to use these incentives where they are aligned with our business and operational objectives.

Business integrity

Our Code of Conduct serves as our most important instrument to communicate and provide guidance on ROCKWOOL Group’s way of doing business with integrity. The Code of Conduct includes Group policies related to anti-corruption, gifts and hospitality, conflict of interest, competition law, data privacy, human rights and labour rights, health and safety, and environment. Beginning in 2021 around 6,000 targeted employees will be obligated to complete our Code of Conduct e-learning. This will repeat the e-learning conducted in 2019. As part of the enrolment package, new employees are obligated to complete the Code of Conduct e-learning to focus attention from the outset on the importance of the Code of Conduct.

Tackling corruption

ROCKWOOL Group has zero tolerance towards any kind of fraud, corruption, bribery and facilitation payments. The anti-corruption policy also applies to suppliers, agents and other third-parties. In 2020 the risk assessment of fraud, corruption and bribery was updated. The risk assessment is partly based on interviews covering the sales, finance, procurement, legal and the management area across the Group. Based on the risk assessment, new initiatives have been adopted and are being implemented to reduce the risk of corruption and bribery. These include screening of sales and procurement employees as part of the recruitment process and monitoring of sales activities to reduce the risk of corruption.# Whistleblower system

All employees are encouraged and required to report knowledge or suspicion of non-conformance with the ROCKWOOL Code of Conduct to management, the Group Integrity Officer or through the whistleblower procedure. We do not accept any form of negative employment consequences for employees reporting in good faith actual or suspected non-conformance.

In 2020, ROCKWOOL updated its whistleblower reporting tool. Reporting is now possible via a dedicated website and on the RockEthics whistleblower app. Reports can be made in multiple languages and anonymously. All communication with the whistleblower is encrypted and reporting is made in compliance with national data protection regulation and GDPR. The updated whistleblower reporting tool has been communicated across the Group.

In 2020, 16 potential cases were reported through the whistleblower system. Nine of them qualified under the whistleblower policy and were handled in accordance with the procedure in the whistleblower manual, and decided by the Integrity Committee. The nine whistleblower cases compare to 13 in 2019 and included two cases each of alleged fraud, conflict of interest, safety issues and harassment; and one involving bribery. Investigations into most of the cases have been completed, while several are pending completion. So far, two employees have been dismissed and one employee is subject to disciplinary actions. Other cases have resulted in corrective actions.

The other seven cases that did not qualify as whistleblower cases related to HR issues (three), customer complaints (three), and one concerning an ordinary management issue. All were handled outside the whistleblower policy by the relevant department. The new system has simplified reporting of whistleblower cases for both employees and third parties and allows reporting of cases in local language via the web or mobile app. Management and the Group Integrity Officer continue to promote and increase awareness and knowledge of business ethics and the whistleblower arrangement in ROCKWOOL Group, using tools like the new e-learning course. The Audit Committee is informed about all integrity and whistleblower cases. To create awareness of unethical behaviour and underline the Group’s zero-tolerance policy, a summary of integrity cases is communicated to all employees on Group intranet to make sure that we learn from past mistakes and take proper actions. In 2020, nine whistleblower cases were reported, compared to 13 in 2019. All reported integrity and whistleblower cases are investigated.

As part of the enrolment package, new employees are asked to complete the Code of Conduct e-learning to focus attention from the outset on the importance of the Code of Conduct.

ROCKWOOL Group Annual Report 2020 45

Respecting human rights and supply chain due diligence

Our commitment to respect human rights is an integral part of how we work with our suppliers. The ROCKWOOL Supplier Code of Conduct is an important part of that work, outlining our expectation that suppliers respect the United Nations Universal Declaration of Human Rights and UN Global Compact. We acknowledge there is a risk connected with the categories and countries where we do business, including: compliance with international, national and local laws and guidelines relating to employment; environmental and manufacturing practices; as well as ethics and bribery, particularly in relation to sourcing.

ROCKWOOL’s Supplier Code of Conduct is designed to mitigate these risks by explaining our expectations to suppliers and their supply chain. Before being approved to do business with ROCKWOOL Group, suppliers must register in our online supplier portal and answer questions related to our Supplier Code of Conduct. This helps us understand the extent to which the supplier is in compliance with international, national and local laws and standards.

In 2019, we evaluated the sustainability risks related to three overall areas: human rights and labour rights; environment; and anti-corruption and bribery across the countries in which we currently operate and have suppliers and the type of materials and services we procure. This work resulted in a risk matrix that we use as a guideline to proactively manage and limit potential sustainability-related risks from high risk category suppliers. Due to the pandemic, we were unable to deploy the knowledge from the matrix in our supplier due diligence processes in 2020. This work is now planned to begin in 2021.

Privacy and data protection

Privacy compliance is essential to gaining and maintaining the trust of our employees, customers and suppliers. A global data privacy organisation with a regional presence ensures support and governance. The privacy compliance programme includes a privacy policy, a privacy manual and a handbook with guidelines for selected business areas as well as specialised templates and privacy notices. Additional e-learning has been targeted at employees in functions with highest potential risk. These are designed to enable employees to perform their daily work in accordance with all privacy requirements.

ROCKWOOL Group Annual Report 2020 46

ROCKWOOL Group Annual Report 2020 47

Systems and processes

The Board of Directors is responsible for ensuring that the Group’s risk exposure is consistent with its targeted risk profile. The Board also evaluates that appropriate awareness and management processes are in place. Managing the risk process is part of the Chief Financial Officer’s area of responsibility and includes providing regular updates to the Audit Committee and Board of Directors.

All managing directors of our subsidiaries and Group functional heads must ensure that a risk review within their areas of responsibility is conducted at least once a year; and that risks are discussed, described, scored for severity and likelihood, and quantified in terms such as predicted financial impact. Appropriate mitigating actions for identified risks are proposed by the subsidiary or Group function and studiously evaluated to ensure effective risk management at Group level.

The Group has a Risk Committee, consisting of members from business areas and Group functions. The committee is responsible for reviewing and updating the internal risk management framework and for implementing related processes. The committee meets quarterly to decide on the top risks to be included in the quarterly updates to the Board. Deep dives into the Group’s top risks are selected by the Audit Committee and presented by the “risk owner” for the Risk Committee, Group Management and finally to the Audit Committee and the Board of Directors. With these systems and processes, the Group identifies and mitigates the risk. The objective is to ensure that any residual risks are at an acceptable level.

Key risks 2020

Among the risks deemed to have had the highest potential to impact ROCKWOOL Group in 2020 were: climate risks, competition law compliance and cyber threats. The risk matrix combines an assessment of the probability and impact of each risk to reach a measure of the total risk.

	Potential impact (mEUR)	Probability (%)
Cyber threats
Competition law
Climate risk

Climate risks

Description

ROCKWOOL has publicly supported the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) since 2019, and we annually disclose our climate-related risks and opportunities through the CDP (formerly the Carbon Disclosure Project). As part of an energy-intensive industry, ROCKWOOL faces specific climate-related risks on both the regulatory and technological fronts. Key developments in our melting technology have enabled us to commit to a roadmap for deep decarbonisation that is reflected in our new science-based targets, verified and approved by the Science Based Targets initiative (SBTi). Read more about our SBTi commitment on pp. 32-34.

These developments reduce our technological risks and our regulatory risks. For example, all the Group’s European factories are included in the EU Emission Trading Scheme (ETS) Phase IV from 2020-2030. Whilst the inclusion of the mineral wool sector on the EU carbon leakage list for the ETS will significantly reduce the risk of having to purchase additional allowances, our decarbonisation path will reduce this risk even more.

Mitigation

We are developing and implementing innovative technologies with lower carbon intensity to reduce the footprint of our production processes. While many of our factories currently rely on coke and coal for the core melting processes, we are increasingly using less carbon-intensive energy sources such as natural gas, biogas and renewable electricity. In Norway, a newly developed electrical melter will reduce CO2 emissions by 80 percent compared to the conventional coke-burning furnace it replaces, while in Denmark, our two factories converted to using biogas in January 2021. Combined, these technological developments will help us achieve at least a 70 percent absolute reduction in CO2 emissions in the Nordic region compared to 1990. The Board of Directors monitors progress against our sustainability goals as well as reviewing and guiding the strategy and risk mitigation for the climate-related issues.

Competition law compliance

Description

Non-compliance with national and international competition and antitrust laws could lead to fines and claims as well as damage to the ROCKWOOL brand and reputation.

Mitigation

The Group has zero tolerance for any compliance violations. Guided by our values and Code of Conduct, ROCKWOOL Group competes in a fair manner on prices, quality, customer service, innovative products and more. We maintain a strong Group-wide control framework.

Risk management

Managing risk is a natural part of doing business in the Group.

ROCKWOOL Group Annual Report 2020 48# A variety of measures are provided to relevant employees to equip them with sufficient knowledge to make day-to-day business decisions in accordance with applicable competition and antitrust laws as well as internal policies. Our compliance programme includes a competition law compliance manual, interactive training seminars and internal audits. In 2020, we arranged for all relevant employees to brush up on competition law compliance through an e-learning programme. New employees must complete the e-learning programme as part of their introduction to the Group, including training and guidance on compliance.

Cyber threats

Description

Like all other companies, IT systems, networks and related processes are essential to day-to-day business, and it makes the Group vulnerable to systems outages, cyberattacks and failed IT implementation. With increased digitalisation of business processes, cyber-attack or non-availability of IT systems could have severe financial and reputational consequences for our business and the ROCKWOOL brand.

Mitigation

Key objectives for IT include preventing digital theft of intellectual property; limiting and quickly rectifying operational disruptions; and protecting the rights of external and internal data subjects. Also high on the IT security agenda is the protection of consumers against misinformation or misuse of ROCKWOOL brands. The Group’s IT strategy therefore comprises a continued effort to increase the protection against cyberthreats. It involves investments in cyber protection practices and tools regarding core IT infrastructure, factory IT & operations technology, and user devices that access ROCKWOOL’s internal systems. Furthermore, the IT strategy focuses on reducing the human element risk of IT, by continually improving the Group’s authentication practices and usage of credentials, and continuous education of users. The Group's centralised IT department systematically mitigates risks based on internal assessments as well as the findings of external IT auditors and the evaluations of external experts. The activities carried out by the Group and its partners are expected to maintain the operational stability and integrity of all digital services rendered for internal or external use.

ROCKWOOL Group Annual Report 2020 49

Celebrating safety 23 years without an LTI at Rockfon’s California distribution centre.
ROCKWOOL France wins CSR award for “ROCKCYCLE”
The building site recycling programme collected 47,000 pallets, 550 tonnes of stone wool and 2.7 tonnes of plastic in 2019.
Climate change mitigation measures in the Netherlands
Rockflow is presented to the Dutch Minister of Infrastructure and Water Management, Cora van Nieuwenhuizen.
Staying fit for next year
After the 2020 SailGP season was postponed due to COVID-19, Team ROCKWOOL Racing was born.

The year in pictures

ROCKWOOL Group Annual Report 2020 50

Making the switch
Fuel-flexibe technology enables our two factories in Denmark to operate on biogas.
EFIC lab celebrates 20 years of excellence
Our European Fire & Conductivity lab is central to product development and the defining quality of our products.
Getting ready to roll
An inside look at our newest factory in Ranson, West Virginia.
Parafon joins the Rockfon family
New colleagues in Sweden discuss quality control.
Welcoming a new member of the Board
Rebekka Glasser Herlofsen elected to the Board of Directors.
Welcoming a new leader to the Group
Jessica Jonasson joins Group Management.

ROCKWOOL Group Annual Report 2020 51

Board of Directors

Board of Directors

(From left to right): Rebekka Glasser Herlofsen, René Binder Rasmussen, Carsten Bjerg, Thomas Kähler, Andreas Ronken, Jørgen Tang-Jensen, Christian Westerberg, Søren Kähler and Connie Enghus Theisen.

ROCKWOOL Group Annual Report 2020 52

Thomas Kähler

Chairman

Elected to the Board: 2008

Other positions related to the company
Member of the Chairmanship, Chairman of the Remuneration Committee, Member of the Kähler Family Meeting.

Thomas Kähler participated in all Board and Remuneration Committee meetings during 2020.

Carsten Bjerg

Deputy Chairman

Elected to the Board: 2011

Other positions related to the company
Member of the Chairmanship, Member of the Audit Committee, Member of the Remuneration Committee.

Positions in other Danish companies
Chairman of the Boards of Hydrema Holding ApS; Arminox Investment A/S (and one fully-owned subsidiary); Bjerringbro-Silkeborg Håndbold A/S; Bogballe Investment A/S (and one fully- owned subsidiary); Ellegaard Investment I ApS (and one fully-owned subsidiary); CapHold Guldager ApS (and one fully owned subsidiary); Robco Engineering Investment A/S (and one fully-owned subsidiary); and PCH Investment A/S (and one fully-owned subsidiary).
Member of the Boards of Vestas Wind Systems A/S; Agrometer Investment A/S (and three fully owned subsidiaries); and TCM Group A/S (and one fully owned subsidiary).

Carsten Bjerg participated in all Board, Audit and Remuneration Committee meetings during 2020.

Rebekka Glasser Herlofsen

Elected to the Board: 2020

Other positions related to the company
Chairman of the Audit Committee.

Other positions
Chairman of the Board of Norwegian Hull Club, Norway; Member of the Boards of Equinor ASA, Wilh. Wilhelmsen Holding ASA and Klaveness Combination Carriers ASA, Norway; Member of the Boards and Chairman of Audit Committees of SATS ASA and BW Offshore ASA, Norway; Member of the Nomination Committee of Orkla ASA, Norway; Senior Advisor to Altor Equity Partners AB, Sweden; Member of the Board of Handelsbanken Norge.

Following her election, Rebekka Glasser Herlofsen participated in all Board and Audit Committee meetings during 2020.

Søren Kähler

Elected to the Board: 2013

Other positions related to the company
Member of the Audit Committee, Member of the Board of the ROCKWOOL Foundation, Member of the Kähler Family Meeting.

Positions in other Danish companies
Chairman of the Board of A/S Saltbækvig.

Other positions
Member of the Board of the Foundation Sagnlandet Lejre.

Søren Kähler participated in all Board and Audit Committee meetings during 2020.

René Binder Rasmussen

Elected to the Board: 2018

District Manager, ROCKWOOL Nordics.

René Binder Rasmussen participated in all Board meetings during 2020.

Andreas Ronken

Elected to the Board: 2016

CEO of Alfred Ritter GmbH &Co. KG.

Other positions
Member of Advisory Board of Melitta Group GmbH & KG, Minden, Germany.

Andreas Ronken participated in all Board meetings during 2020.

Jørgen Tang-Jensen

Elected to the Board: 2017

Other positions related to the company
Member of the Audit Committee.

Positions in other Danish companies
Chairman of the Board of Strøjer Tegl A/S; Member of the Boards of VKR Holding A/S; VILLUM FONDEN and Maj Invest Holding A/S (and two fully owned subsidiaries).

Other positions
Chairman of the Board of Tænketanken Europa (Think Tank Europe).

Jørgen Tang-Jensen participated in all Board and Audit Committee meetings during 2020.

Connie Enghus Theisen

Elected to the Board: 2006

Director Stakeholder Engagement, ROCKWOOL International A/S.

Connie Enghus Theisen participated in all Board meetings during 2020.

Christian Westerberg

Elected to the Board of Directors: 2018

Design Manager, ROCKWOOL International A/S.

Other positions related to the company
Member of the Board of the ROCKWOOL Foundation.

Christian Westerberg participated in all Board meetings during 2020.

*listed companies

For further information about independence and competencies of the board members, please refer to www.rockwool.com/group/about-us/ rockwool-group/people/

ROCKWOOL Group Annual Report 2020 53

Group Management

Group Management

(from left to right): Jens Birgersson, Bjørn Rici Andersen, Kim Junge Andersen, Mirella Vitale, Gilles Maria, Volker Christmann, Jessica Jonasson and Henrik Frank Nielsen.

ROCKWOOL Group Annual Report 2020 54

Jens Birgersson

President and Chief Executive Officer (CEO)

Registered Director (in Danish: Medlem af Direktionen).
Member of Group Management: 2015

Other positions
Chairman of the Board of Randers Reb International A/S, Denmark and member of the Board of dormakaba Group, Switzerland.

Kim Junge Andersen

Senior Vice President, Chief Financial Officer (CFO)

Registered Director (in Danish: Medlem af Direktionen).
Member of Group Management: 2016

Other positions
Member of the Board of FORCE Technology, Denmark.

Bjørn Rici Andersen

Senior Vice President, Group Operations & Technology

Member of Group Management: 2018

Volker Christmann

Senior Vice President, Head of Insulation Central Europe

Member of Group Management: 2015

Other positions related to the company
Member of the Board of the ROCKWOOL Foundation.

Other positions
Vice President, FMI Fachverband Mineralwolleindustrie e.V., Germany (association of mineral wool industry); Member of the Board of FIW Forschungsinstitut für Wärmeschutz, Germany (research institute for thermal protection); President of BuVEG Bundesverband energieeffiziente Gebäudehülle e.V., Germany (federal association of energy-efficient building envelope); Member of the Board of H+H International A/S, Denmark.

Jessica Jonasson

Senior Vice President, Group Human Resources

Member of Group Management: 2020

Gilles Maria

Senior Vice President, Head of Insulation South West Europe and Insulation Asia

Member of Group Management: 2007

Henrik Frank Nielsen

Senior Vice President, Head of Insulation North East Europe & Russia

Member of Group Management: 2007

Other positions
Chairman of the Board of Betterhome ApS, Denmark.

Mirella Vitale

Senior Vice President, Group Marketing, Communications and Public Affairs

Member of Group Management: 2016

ROCKWOOL Group Annual Report 2020 55

ROCKWOOL shares

ROCKWOOL International A/S is listed on Nasdaq Copenhagen in two share classes; ROCKWOOL A and ROCKWOOL B. Each A share carries 10 votes, while each B share carries one vote.# Stock market information

Both the A and B shares are included in the Nasdaq Copenhagen Large Cap and the B share is part of Nasdaq OMX C25, MSCI Global Standard, and STOXX® Europe 600 Construction & Materials. In addition to Nasdaq Copenhagen, the company’s shares are traded on several other equity exchanges, e.g. Bats, Turquoise and CHI-X.

In 2020, the ROCKWOOL B share price increased by 45 percent. The ROCKWOOL A share increased by 44 percent.

Trading of shares

By the end of 2020, both shares had increased in price by an average of 45 percent, compared to the end of 2019. That compares with a four percent decrease in the benchmark index STOXX® Europe 600 Construction & Materials and a 34 percent increase in the Nasdaq OMX C25 index during 2020. The official share price at 31 December 2020 was DKK 2,296 (B share) and 2,075 (A share). The combined market capitalisation at the end of the year was DKK 47,062 million.

Shareholder information

Share price development 2020 (DKK)

Votes per shareholder category

Ownership per shareholder category

• The ROCKWOOL Foundation
• Own shares
• Private investors with less than 5%
• Institutional investors with less than 5%
• Other shareholders with more than 5%

Share data at a glance

Share class	A	B	Index	Sector	ISIN code	Short code	Nominal size	Number of shares	Voting rights per share	Share price year-end	Proposed dividend per share	Payout ratio
	OMX Large Cap	OMX C25/Large Cap	Building materials	Building materials
	DK0010219070	DK0010219153
	ROCK A	ROCK B
	DKK 10	DKK 10
	11,231,627	10,743,296
	10	1
	DKK 2,075	DKK 2,296
	DKK 32.00	DKK 32.00
	37.7%	37.7%

Capital structure and dividend

Management regularly assesses whether the ROCKWOOL International A/S capital structure is in the interests of the company and its stakeholders. The overall objective is to ensure a continued development and strengthening of the company’s capital structure that supports long-term profitable growth. It is the intention of ROCKWOOL International A/S that the ratio of net debt to EBITDA should be no larger than one, with due regard to the company’s long-term financing requirements.

The dividend policy is to pay out a stable dividend that is at least one-third of the profit after tax. At the Annual General Meeting on 7 April 2021, the Board of Directors will propose a dividend of DKK 32.00 per share for the financial year 2020 (2019: DKK 32.00) amounting to EUR 94 million (2019: EUR 94 million). Dividend to be paid out in 2021 for 2020, net of dividend on own shares held at 31 December, will amount to EUR 93 million (2019: EUR 94 million). The dividend payment occurs three banking days after the Annual General Meeting.

After assessing the outlook for the economic cycle, investment plans, and structural business opportunities, and considering the dividend policy, the Company can further decide to initiate share buy-backs to adjust the capital structure. ROCKWOOL International A/S initiated its first share buy-back programme up to an amount of EUR 80 million on 6 February 2020, to be completed within the following 12 months. In 2020, a total of 345,584 shares have been bought back, corresponding to a transaction value of around EUR 77 million. ROCKWOOL Foundation has participated proportionally to their ownership. At the Annual General Meeting, the Board of Directors will propose that the shares purchased under this programme be cancelled.

Ownership

The company had 27,950 registered shareholders on 31 December 2020. By the end of 2020, 22 percent of the shares were owned by shareholder deposits located outside Denmark. In terms of voting capital, seven percent was located outside Denmark. See p. 56 for an overview of ownership.

Investor Relations activities

As a listed company, ROCKWOOL International A/S has a defined policy for its activities related to ROCKWOOL shares. The aim is to:

• Ensure that the capital market has an accurate picture of the earnings potential of ROCKWOOL shares by communicating relevant, correct, balanced, and timely information;
• Ensure that the company complies with all relevant rules and regulations as laid out in the Nasdaq Copenhagen Rules for issuers of shares, as well as applicable Danish legislation for publicly listed companies;
• Ensure fair and transparent rules for the trading of ROCKWOOL shares by the company itself and by persons considered to be ‘insiders’;
• Communicate ROCKWOOL Group values so the capital market perception is of an honest, accessible, reliable, and responsible company;
• Maintain broad coverage by both domestic and foreign equity analysts;
• Be knowledgeable, responsive and proactive in our investor communication to maintain a fair balance between expectations and performance.

Shareholders can communicate with and receive information from ROCKWOOL International A/S through various channels:

• The shareholder portal where one can view shareholdings; register or change whether one wishes to receive the invitation to the Annual General Meeting electronically or by letter; order admission cards to the Annual General Meeting;
• The Annual General Meeting;
• Financial communication, such as investor audio casts, presentations and stock exchange releases;
• Regular ESG conference calls.

Our website provides general information on ROCKWOOL Group, the performance of ROCKWOOL International A/S shares, news from the company, financial calendar and much more. A free service allows subscribers to receive instant e-mail alerts when the company publishes new information. Announcements to Nasdaq Copenhagen in 2020 can be found on: www.rockwool.com/group/about-us/investors/

The Investor Relations team can be contacted at: investor@rockwool.com

For a list of shareholders holding more than five percent of the share capital or the votes, please refer to p. 121.

Investment banks following the ROCKWOOL shares:

• ABG Sundal Collier
• Barclays
• Carnegie
• Danske Equities
• Exane BNP Paribas
• Handelsbanken
• HSBC
• Jyske Markets
• Morgan Stanley
• Nordea
• On Field Investment Research
• SEB
• Société Générale
• Sydbank

Analyst' contact details, recommendations and consensus can be found on the investor website: www.rockwool.com/group/about-us/investors/

Annual General Meeting

The upcoming Annual General Meeting will take place on 7 April 2021. Owing to pandemic- related restrictions, the Company urges its shareholders to follow the Annual General Meeting live on our website or view the recording after the meeting has finished. The agenda will be distributed 3-5 weeks prior to the meeting to shareholders who have registered their choice of either electronic or printed communication at our shareholder portal. The agenda will be published on our website.

The agenda will include:

1. The Board of Directors’ report on the company’s activities during the past financial year;
2. Presentation of the Annual Report 2020 with the auditors’ report;
3. Adoption of the Annual Report and discharge of liability for Group Management and the Board of Directors;
4. Approval of Board of Directors’ remuneration;
5. Allocation of profits or cover of losses according to the adopted accounts;
6. Election of members to the Board of Directors;
7. Appointment of auditors;
8. Proposals, if any, by the Board of Directors or shareholders.

Shares must be registered by name in order to vote. Shareholders can submit proposals to the Board of Directors for the agenda six weeks prior to the Annual General Meeting.

Financial Calendar 2021

Date	Event
10 February	Annual Report for 2020
7 April	Annual General Meeting
19 May	Report on the first quarter of 2021
18 August	Report on the first half-year of 2021
24 November	Report on the first nine months of 2021

Financial performance

Net sales recovered well – with a local currency growth of two percent in the last quarter and strong profitability achieving an EBIT margin of 13.0 percent for the year.

Global sales development

After the significant second quarter sales impact from the COVID-19 lock down, construction activities and our sales in the second half of the year recovered in most markets, reflecting the view that keeping construction sites open during the pandemic and providing financial incentives to promote building renovations were economic recovery priorities. All factories were in operation during the second half of the year and local outbreaks of COVID-19 were handled effectively and with focus on employee safety and continued uninterrupted customer deliveries. During the year, we maintained a low positive pricing impact in the aggregate.

Net sales reached EUR 2,602 million, a decrease of 3.7 percent in local currencies including a positive impact of 0.6 percent from the Parafon and Bestofire acquisitions, which is in line with the latest announced expectation. Foreign exchange rates had a negative impact of 1.9 percent on net sales, primarily due to the U.S.

Stock market information 2020

	2020 (EUR)	2020 DKK	2019 DKK	2018 DKK	2017 DKK	2016 DKK
Earnings per share	11.5	86	97	91	73	57
Dividend per share	4.3	32.0	32.0	29.9	24.1	18.8
Cashflow per share	20	150	136	140	114	112
Book value per share	95	707	719	638	569	518
Share capital (million)	29	220	220	220	220	220
Price per A share	279	2,075	1,439	1,430	1,594	1,192
Price per B share	309	2,296	1,585	1,697	1,752	1,247
Market cap (million)	6,325	47,062	33,072	34,168	36,367	26,449
Number of own shares	403,912	403,912	72,894	75,865	206,840	275,855
Number of A shares of DKK 10 (10 votes)	11,231,627	11,231,627	11,231,627	11,231,627	11,231,627	11,231,627
Number of B shares of DKK 10 (1 vote)	10,743,296	10,743,296	10,743,296	10,743,296	10,743,296	10,743,296

Group profitability

Operational cost savings combined with lower raw material prices led to an EBIT increase of 9 percent in local currencies in the second half of the year and a reported EBIT margin of 13.0 percent for the full year, which is in the upper range of the latest guidance, due to solid sales performance in December. Operational efficiency improved as we continued prioritising cost savings activities during the year. This entailed a focus on driving efficiency, while still investing in new competencies, digitalisation and growth initiatives, which helped deliver improved profitability for the Group. Since the second wave of the COVID-19 pandemic became more visible, we took measures to reduce costs, including organisational initiatives to preserve productivity. The main part of the severance costs was recognised during 2020.

Net sales development

Growth	EURm
Net sales 2019	2,757
Organic development	-4.3%
Acquisitions	0.6%
Currency translation adjustment	-1.9%
Net sales 2020	-5.6%

EBIT development

Growth	EURm	Margin
EBIT 2019	372	13.5%
Decreased earnings from operation	-5.9%	-22
Earnings from acquisitions	0.0%	0
Currency translation adjustment	-3.3%	-12
EBIT 2020	-9.2%	338

ROCKWOOL Group Annual Report 2020 60

EBITDA decreased five percent to EUR 522 million with an EBITDA margin of 20.1 percent, an improvement compared to 2019 of 0.2 percentage points. Adjusting for the positive EUR 10 million EBITDA impact from the 2019 legal settlement involving Rockfon North America, 2020 EBITDA margin increased 0.6 percentage points.

In 2020, depreciation amounted to EUR 184 million, an increase of EUR 8 million compared 2019 due to investments in new capacity especially in Romania, Poland and the United Kingdom as well as in digital solutions. Depreciation of the new facility in Germany commenced January 2021.

EBIT for the year reached EUR 338 million, resulting in an EBIT margin of 13.0 percent, a decrease of 0.5 percentage points compared to 2019. Adjusting for the 2019 legal settlement related to Rockfon North America, the comparable EBIT margin for 2020 was only 0.2 percentage points below that of the record year 2019, mainly due to the negative currency impact of 0.2 percentage points.

There is no direct comparison to the initial outlook announced in February 2020 on EBIT margin as the COVID-19 pandemic completely altered the underlying assumptions. The result is at the upper end of the outlook announced later in 2020 mainly due to an improved performance in the last quarter with higher net sales and positive impact from lower input costs and operational efficiencies.

Net financial costs amounted to EUR 14 million, an increase of EUR 9 million compared to 2019. The increase is mainly related to unrealised currency fluctuations and fees related to the share buy-back programme.

Tax on profit for the year amounted to EUR 74 million compared to EUR 82 million in 2019. The effective tax rate increased slightly to 22.8 percent (2019: 22.4 percent) mainly due to higher withholding taxes on dividends and lower recognition of deferred tax assets.

Group profit after tax totalled EUR 251 million, a EUR 34 million decrease, which we consider to be a satisfactory result taking the global COVID-19 pandemic into account. Profit after tax in the parent company totalled EUR 241 million, a decrease of EUR 33 million mainly due to lower income from investment in subsidiaries as the earnings were impacted by the COVID-19 pandemic.

Balance sheet and equity

Net working capital ended at EUR 213 million, a decrease of EUR 34 million in reported figures compared to 2019, primarily due to lower inventory and trade receivables as well as a negative currency impact and only partly offset by a small increase in trade payables. As a percentage of sales, net working capital was 8.2 percent compared to 9.0 percent in 2019. The ability to quickly adapt to dynamic market conditions and keep costs under control was key in maintaining robust profitability

ROCKWOOL Group Annual Report 2020 61

Total assets at the end of 2020 amounted to EUR 2,744 million, an increase of EUR 50 million compared to 2019 mainly from ongoing investments partly offset by lower inventories, trade receivables as well as cash.

Equity of the Group totalled EUR 2,092 million as of 31 December 2020 compared to EUR 2,118 million in 2019, corresponding to an equity ratio of 76 percent. Equity was mainly affected by the profit for the year, the share buy-back programme, dividend pay-out, and exchange rate adjustments. The proposed dividend for 2020 is DKK 32.00 per share, unchanged from 2019.

Invested capital

Return on invested capital decreased in 2020, mainly due to higher investments and lower profit, reaching 17.6 percent compared to 21.7 percent in 2019. Invested capital amounted to EUR 1,961 million compared to EUR 1,889 million in 2019.

Cash flow and investments

COVID-19 increased uncertainties in the early part of the spring and ensuring the Group had adequate funding facilities was important. ROCKWOOL decided to draw a loan of EUR 150 million, allowing the Group to maintain its investment programme, pay dividend to shareholders and keep the share buy-back programme running. Furthermore, additional EUR 200 million was secured in committed facilities for additional safety through an extra revolving credit facility. At the end of 2020, the Group had a net cash positive position, amounting to EUR 95 million, down EUR 117 million. In addition, the Group had unused committed credit facilities of EUR 630 million by year-end.

Cash flow from operating activities increased, from EUR 402 million in 2019 to EUR 438 million in 2020. The decrease in operating profit, mainly from the lower sales, was more than compensated by the positive impact from less cash tied up in net working capital, which decreased EUR 27 million in the cash flow compared to 2019. The EUR 9 million decline in tax payments also contributed positively.

Capital expenditure excluding acquisitions and received investment grants reached EUR 362 million. This decrease of EUR 38 million compared to 2019 is in line with our latest expectation although negatively impacted by the currency development. Compared to our expectation announced in February 2020, some investment expenditures relating to the ongoing factory projects in the United States and Norway and the relocation project in China were postponed from 2020 to 2021. The largest individual investments in 2020 relate to the factory projects in the United States (West Virginia), in Norway and in Germany.

	2019	2020
Q1	16	18
Q2	24	20
Q3	22	14
Q4	800	78
YTD Q1	600	21.5
YTD Q2	700	176
YTD Q3	500	343
YTD Q4	400	400

ROCKWOOL Group Annual Report 2020 62

In December 2020, additional EUR 1 million grant was received as planned from the Chinese authorities in connection with the ongoing relocation of one of our factories in China; the sum of the grants received now amounts to EUR 19 million.In February 2020, ROCKWOOL acquired the Parafon Acoustic Ceiling business, comprising the Swedish ceiling tile factory, and its Nordic sales organisation, which are now part of Rockfon in our Systems segment. In September 2020, ROCKWOOL acquired the assets of Bestore & Thermal Pte. Ltd., a Singapore business that specialises in supplying re protection and thermal insulation in both the marine and building sectors in Singapore and which is now part of our Insulation segment. The consideration for both businesses totalled EUR 19 million. Free cash ow amounted to EUR 76 million, an increase of EUR 74 million compared to 2019, primarily due to lower investments and lower working capital. Cash ow from nancing activities ended at negative EUR 92 million as the share buy-back programme of EUR 77 million and increased dividend payments were offset by proceeds from borrowings of net EUR 96 million in the year as part of the new loan of EUR 150 million was repaid in November 2020.

Key Figures

Insulation segment

EURm
| | Q4 2020 | Q4 2019 | FY 2020 | FY 2019 |
| :---------- | :------ | :------ | :------ | :------ |
| External net sales | 491 | 517 | 1,914 | 2,077 |
| EBIT | 64 | 70 | 236 | 269 |
| EBIT margin | 11.0% | 11.5% | 10.7% | 11.3% |

Systems segment

EURm
| | Q4 2020 | Q4 2019 | FY 2020 | FY 2019 |
| :---------- | :------ | :------ | :------ | :------ |
| External net sales | 209 | 198 | 688 | 680 |
| EBIT | 36 | 24 | 102 | 103 |
| EBIT margin | 16.9% | 12.0% | 14.8% | 15.1% |

Business segments

Sales in the Insulation segment reached EUR 1,914 million, a decrease of 5.8 percent in local currencies and 7.8 percent in reported curren- cies. The sales decrease came primarily from insulation sales in Central Europe and the tech- nical insulation business. The building insulation business in North America ended 2020 with good growth despite the global pandemic. The Insulation segment’s EBIT reached EUR 236 million with an EBIT margin of 10.7 percent, a decrease compared to 2019 of 0.6 percentage points. The operational efciency in the factories could not fully compensate the start- up costs in the German factory and the electric melter project costs in Norway, combined with the overall lower capacity utilisation from the sales decrease.

The Systems segment’s sales amounted to EUR 688 million, which is an increase of 2.7 percent in local currencies including 2.4 percent from Parafon and 1.3 percent in reported gures. The growth was driven primarily by Grodan and a good second half of the year for Rockfon and Rockpanel in Europe. The Systems segment generated an EBIT of EUR 102 million with an EBIT margin of 14.8 percent, down 0.3 percentage points compared to 2019. Adjusting for the positive impact from the 2019 legal settlement involving Rockfon North America, the EBIT margin increased 1.2 percentage points, with most businesses contributing positively.

ROCKWOOL Group Annual Report 2020 63

Global sales development

In Q4 2020, ROCKWOOL Group generated sales of EUR 700 million, an increase of 1.8 percent in local currencies compared to Q4 2019 including a positive impact of 0.6 percent from the Parafon and Bestore acquisitions. Foreign exchange rates had a negative impact of 3.9 percent, mainly from the U.S. and Canadian dollars and the Russian rouble, resulting in a decrease of 2.1 percent in reported gures. A low positive sales price impact continued in the quarter in most markets and businesses.

Regional sales development

Sales in Western Europe remained stable in local currencies in Q4 2020 compared to Q4 2019 including a positive impact of 1.0 percent from the Parafon acquisition, as net sales in the quarter ended at EUR 420 million. In reported gures sales decreased 0.5 percent. The German and French markets continue to be affected by the general slowdown in the economy. Most other countries recovered well.

In Q4 2020, net sales in Eastern Europe amounted to EUR 119 million, an increase of 2.9 percent in local currencies, and a decrease of 9.0 percent in reported gures compared to Q4 2019. The Russian rouble exchange rate had a signicant negative impact though we achieved solid fourth quarter growth in Russia measured in local currencies.

Sales in the rest of the world reached EUR 161 million in Q4 2020, an increase of 5.9 percent in local currencies compared to Q4 2019. In reported gures, sales in Q4 2020 decreased 0.5 percent. Overall sales in North America improved and showed solid growth, both in the insulation and systems business. Asia except India continued to struggle.

EURm	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
	2020	2020	2020	2020	2019	2019	2019	2019
Income statement
Net sales	649	583	670	700	641	695	706	715
Operating income	651	583	672	702	644	705	707	717
Raw material and production material costs	206	187	215	237	203	238	240	248
Delivery costs and indirect costs	92	81	93	97	92	100	95	94
Other external costs	55	39	47	43	61	52	55	50
Personnel costs	173	172	172	177	168	171	175	183
Operating costs	526	479	527	554	524	561	565	575
EBITDA	125	104	145	148	120	144	142	142
Depreciation, amortisation and write-downs	45	46	45	48	43	42	43	48
EBIT	80	58	100	100	77	102	99	94
Income from investments in associated companies	0	0	0	1	0	0	0	0
Financial items	0	-5	-2	-7	-4	-2	-2	3
Protbeforetax	80	53	98	94	73	100	97	97
Taxonprotfortheperiod	19	13	21	21	16	21	20	25
Prot for the period	61	40	77	73	57	79	77	72
EBITDA margin	19.2%	17.8%	21.7%	21.1%	18.8%	20.7%	20.1%	19.9%
EBIT margin	12.3%	10.0%	14.9%	14.3%	12.0%	14.7%	14.1%	13.2%
Statement of comprehensive income
Protfortheperiod	61	40	77	73	57	79	77	72
Exchange rate adjustments of foreign subsidiaries	-68	12	-48	-4	35	-1	20	-1
Change in pension obligation	-	-	-	-3	-	-	-	-10
Hedging instruments, value adjustments	2	0	0	0	0	0	0	-3
Tax on comprehensive income	0	0	0	2	0	0	0	4
Total comprehensive income	-5	52	29	68	92	78	97	62

ROCKWOOL Group Annual Report 2020 64

Quarterly follow-up

Group profitability

EBITDA in Q4 2020 reached EUR 148 million, an increase of four percent with an EBITDA margin of 21.1 percent compared to 19.9 percent in Q4 2019. This results primarily from continued good contribution margin and a reduced cost base. EBIT in Q4 2020 reached EUR 100 million, a growth of six percent compared to Q4 2019. EBIT margin ended at 14.3 percent, 1.1 percentage points above Q4 2019. We maintained close attention to market conditions, adjusted capacity as needed and kept costs under control to sus- tain good productivity.

Business segments

External sales in Q4 2020 in Insulation segment amounted to EUR 491 million, a decrease of 0.9 percent in local currencies and 5.1 percent in reported gures compared to Q4 2019. Most businesses recovered and showed good growth except the insulation business in Central Europe and Asia and the technical insulation business. EBIT in the Insulation segment reached EUR 64 million yielding an EBIT margin of 11.0 percent, down 0.5 percentage points compared to Q4 2019, driven by start-up costs in the factory in Germany and the electric melter project costs in Norway.

Systems segment presented a strong Q4 2020. Quarterly net sales reached EUR 209 million, an increase in local currency of 8.9 percent including a positive impact of 2.2 percent from Parafon and 5.8 percent in reported gures compared to Q4 2019 as all businesses showed good growth. Grodan and Rockpanel continued the especially good performance. EBIT in the Systems segment reached EUR 36 million in Q4 2020, an increase of 49 percent and an EBIT margin of 16.9 percent compared to 12.0 percent in Q4 2019. All businesses contributed positively.

EURm	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
	2020	2020	2020	2020	2019	2019	2019	2019
Cash ow statement
EBIT	80	58	100	100	77	102	99	94
Adjustments for depreciation, amortisation and write-downs	45	46	45	48	43	42	42	49
Other adjustments	1	-1	6	1	0	1	3	2
Change in net working capital	-79	40	27	39	-88	-18	72	-5
Cashowfromoperationsbeforenancialitemsandtax	47	143	178	188	32	127	216	140
Cashowfromoperatingactivities	13	126	161	138	-6	110	193	105
Cashowfrominvestingactivities	-110	-80	-72	-100	-78	-94	-120	-108
Freecashow	-97	46	89	38	-84	16	73	-3
Cashowfromnancingactivities	68	-67	-30	-63	-6	-94	3	-23
Change in cash available	-29	-21	59	-25	-90	-78	76	-26

Segment reporting	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
	2020	2020	2020	2020	2019	2019	2019	2019
Insulation segment:
External net sales	483	438	502	491	486	533	541	517
Internal net sales	73	61	74	94	65	68	79	92
EBIT	56	40	76	64	55	67	77	70
EBIT margin	10.0%	8.0%	13.2%	11.0%	10.0%	11.2%	12.4%	11.5%
Systems segment:
External net sales	166	145	168	209	155	162	165	198
EBIT	24	18	24	36	22	34	23	24
EBIT margin	14.6%	12.4%	14.3%	16.9%	14.0%	21.2%	14.0%	12.0%
Geographical split of external net sales:
Western Europe	395	349	411	420	396	423	418	422
Eastern Europe including Russia	105	105	120	119	103	124	136	131
North America, Asia and others	149	129	139	161	142	148	152	162
Total external net sales	649	583	670	700	641	695	706	715

ROCKWOOL Group Annual Report 2020 65

68 Income statement
68 Statement of comprehensive income
69 Balance sheet
70 Cashowstatement
71 Statement of changes in equity
73 Notes
108 Management's statement
109 Independent Auditor's Reports

Consolidated financial statements

Consolidated financial statements

Income statement

1 January – 31 December
EURm
| | Note | 2020 | 2019 |
| :--------------------------------------- | :---- | :---- | :---- |
| Net sales | 1.1 | 2,602 | 2,757 |
| Other operating income | 6 | 16 | 16 |
| Operating income | | 2,608 | 2,773 |
| Raw material costs and production material costs | | 845 | 929 |
| Delivery costs and indirect costs | | 363 | 381 |
| Other external costs | | 184 | 218 |
| Personnel costs | 1.2 | 694 | 697 |
| Operating costs | | 2,086 | 2,225 |
| EBITDA | | 522 | 548 |
| Amortisation, depreciation and write-downs | 2.4, 2.5 | 184 | 176 |
| EBIT | | 338 | 372 |
| Income from investments in associated companies | | 1 | 0 |
| Financial income | 4.1 | 8 | 5 |
| Financial expenses | 4.1 | 22 | 10 |
| Prot before tax | | 325 | 367 |
| Tax on prot for the year | 5.1 | 74 | 82 |
| Prot for the year | | 251 | 285 |
| Prot for the year attributable to: | | | |
| Non-controlling interests | | 0 | 0 |
| Shareholders of ROCKWOOL International A/S | | 251 | 285 |
| Earnings per share: | 4.7 | | |
| Earnings per share of DKK 10 (EUR 1.3) | | 11.54 | 13.01 |
| Diluted earnings per share of DKK 10 (EUR 1.3) | | 11.51 | 12.98 |

Statement of comprehensive income

1 January – 31 December
EURm
| | Note | 2020 | 2019 |
| :--------------------------- | :--- | :--- | :--- |
| Prot for the year | | 251 | 285 |
| Items that will not | | | |# Consolidated financial statements

Statement of changes in equity

EURm	Share capital	Currency translation adjustments	Proposed dividend	Retained earnings	Hedging	Total Equity	Non-controlling interests	Total Equity
Equity 1/1 2020	29	-104	94	2,096	-1	2,114	4	2,118
Profit for the year	-	-	-	157	-	251	0	251
Other comprehensive income	-	-108	-	-	0	-107	-	-107
Comprehensive income for the year	-	-108	-	158	0	144	0	144
Share buy-back programme	-	-	-	-77	-	-77	-	-77
Purchase of own shares	-	-	-	-3	-	-3	-	-3
Sale of own shares	-	-	-	2	-	2	-	2
Expensed value of Restricted Share Units (RSUs) issued	-	-	-	2	-	2	-	2
Dividend paid	-	-	-94	-	-	-94	-	-94
Equity 31/12 2020	29	-212	94	2,178	-1	2,088	4	2,092
Equity 1/1 2019	29	-157	88	1,912	1	1,873	4	1,877
Profit for the year	-	-	-	191	-	285	0	285
Other comprehensive income	-	53	-	-	-2	44	0	44
Comprehensive income for the year	-	53	-	184	-2	329	0	329
Purchase of own shares	-	-	-	-2	-	-2	-	-2
Expensed value of Restricted Share Units (RSUs) issued	-	-	-	1	-	1	-	1
Dividend paid	-	-	-88	-	-	-87	0	-87
Equity 31/12 2019	29	-104	94	2,096	-1	2,114	4	2,118

Consolidated financial statements 71

Accounting policies

Note 1 Operating profit

1.1 Net sales and segmented accounts

Sales per business segment (EURm)	Insulation Systems
EBIT margin	13.0%
Average number of FTEs	11,626
Reported sales decrease	5.6%

Consolidated financial statements 74

500      1,000    1,500    2,000    2,500    3,000
0
                                              2020
                                              2019
Net sales

The Group produces and sells a range of non-combustible stone wool insulation products, including solutions for ceiling systems, ventilated facades, friction and water management and stone wool substrate solutions for the professional horticultural. Sales are recognised when control of the products has transferred to the customer, being when the products are delivered to the customer and the risk has been transferred. The products are often sold with retrospective volume discounts based on aggregate sales over a 12-month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method. The sales include no element of financing as the sales are made with credit terms of normally 30-60 days consistent with market practice. A receivable is recognised when the products are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Segmented accounts

Group Management has determined the business segments for the purpose of assessing business performance and allocating resources. Primarily segments are based on products and thermal performance, as Systems segment Notes 1.1 Net sales and segmented account is primarily defined as non-thermal insulation products. Nearly all external sales consist of sales of products. Segmental data is stated for business areas and geographical areas. The split by business areas is in accordance with the Group’s internal reporting. The segmental data is presented according to the same principle as the consolidated financial statements. The segmental EBIT includes net sales and expenditure including non-recurring expenditure operationally related to the segment.

Consolidated financial statements 73

Notes

Consolidated financial statements 68

Balance sheet

Assets - as at 31 December

EURm	Note	2020	2019
Goodwill		96	97
Software		13	13
Customer relationships		39	43
Other intangible assets		21	21
Software in progress		12	18
Total intangible assets	2.1	181	192
Buildings and sites		637	643
Plant and machinery		439	444
Other operating equipment		22	20
Tangible assets in progress		534	399
Total tangible assets	2.2	1,632	1,506
Right-of-use assets	2.3	44	52
Shares in associated companies		6	6
Long-term deposits and receivables		10	15
Deferred tax assets	5.1	54	54
Total financial assets		70	75
Non-current assets		1,927	1,825
Inventories	3.1	216	236
Trade receivables	3.2, 4.2	247	275
Other receivables	4.2	60	54
Prepayments		15	15
Income tax receivable	5.1	38	14
Cash	4.2, 4.3	241	275
Current assets		817	869
Total assets		2,744	2,694

Equity and liabilities - as at 31 December

EURm	Note	2020	2019
Share capital	4.6	29	29
Currency translation adjustments		-212	-104
Proposed dividend		94	94
Retained earnings		2,178	2,096
Hedging		-1	-1
Equity attributable to shareholders of ROCKWOOL International A/S		2,088	2,114
Non-controlling interests		4	4
Total equity		2,092	2,118
Deferred tax liabilities	5.1	47	43
Pension obligations	2.6	66	62
Lease liabilities	2.3	27	34
Provisions	2.7	18	17
Bank loans and other loans	4.2, 4.4	-	4
Non-current liabilities		158	160
Short-term portion of bank loans and other loans	4.2, 4.4	100	1
Bank debt	4.2, 4.3	1	6
Trade payables	4.2	184	196
Lease liabilities	2.3	18	18
Provisions	2.7	8	9
Income tax payable	5.1	25	29
Other payables	4.2	158	157
Current liabilities		494	416
Total liabilities		652	576
Total equity and liabilities		2,744	2,694

Consolidated financial statements 69

Cash flow statement

The consolidated cash flow statement is compiled using the indirect method on the basis of EBIT. The cash flow statement shows flows from operating, investing and financing activities for the year, as well as cash and cash equivalents at the beginning and at the end of the year. Cash flows from operating activities comprises operating profit before financial items adjusted for non-cash items and changes in working capital. Cash flows from investing activities comprise payments relating to acquisition and sale of companies, intangible and tangible assets and other asset investments. Cash flows from financing activities comprise proceeds from borrowings, repayment of lease liabilities and debt, payment of dividends, sale and purchase of own shares, transactions with non-controlling interests and increases of the share capital. Cash available includes cash less short-term bank debt. Individual items in the cash flow statement cannot be directly deduced from the consolidated balance sheet. As the two business acquisitions are considered immaterial, no separate note is disclosed. For further information on the business acquisitions please see p. 63.

EURm	Note	2020	2019
EBIT		338	372
Adjustments for amortisation, depreciation and write-downs	2.4	184	176
Adjustments of non-cash operating items	3.3	7	6
Changes in net working capital	3.3	27	-39
Cash flow from operations before financial items and tax		556	515
Finance income etc. received		8	5
Finance costs etc. paid		-22	-5
Taxes paid		-104	-113
Cash flow from operating activities		438	402

EURm	Note	2020	2019
Cash flow from operating activities (continued)		438	402
Purchase of tangible assets		-358	-379
Received investment grants		19	0
Purchase of intangible assets		-4	-21
Business acquisitions, net of cash		-19	-
Cash flow from investing activities		-362	-400
Free cash flow		76	2
Dividend paid		-94	-87
Share buy-back programme		-77	-
Purchase of own shares		-3	-2
Sale of own shares		2	0
Repayment of lease liabilities	2.3	-20	-17
Repayment of non-current receivables		-4	-14
Proceeds from borrowings		152	4
Repayment of current debt		-56	-4
Cash flow from financing activities		-92	-120
Net cash flow		-16	-118
Cash available 1/1		269	380
Exchange rate adjustments on cash available		-13	7
Cash available 31/12	4.3	240	269
Unutilised, committed credit facilities		630	428

Consolidated financial statements 70

Comments

Accounting policies

Statement of changes in equity

Dividend is included as a liability at the time of adoption by the Annual General Meeting. Dividend that is expected to be paid for the year is shown separately in the equity. Sale and purchase of, as well as dividends on own shares are recognised under retained earnings in the equity. The reserve for currency translation adjustments consists of exchange rate differences that occur when translating the subsidiaries’ financial statements from their functional currency into EUR. Hedging adjustments comprise changes in the fair value of hedging transactions that qualify for recognition as cash flow hedges and where the hedged transaction has not yet been realised.

Non-controlling interests

Non-controlling interests are recognised at the minority’s share of the net assets. The difference between the costs and the non-controlling interests’ share of the total carrying amount including goodwill is transferred from the minority interests’ share of the equity to the equity belonging to the shareholders of ROCKWOOL International A/S.

Shareholders of ROCKWOOL International A/S

Non-controlling interests

Total equity

EURm

Share capital

Currency translation adjustments

Proposed dividend

Retained earnings

Hedging

Total Equity

Equity 1/1 2020

Profit for the year

Other comprehensive income

Comprehensive income for the year

Share buy-back programme

Purchase of own shares

Sale of own shares

Expensed value of Restricted Share Units (RSUs) issued

Dividend paid

Equity 31/12 2020

Equity 1/1 2019

Profit for the year

Other comprehensive income

Comprehensive income for the year

Purchase of own shares

Expensed value of Restricted Share Units (RSUs) issued

Dividend paid

Equity 31/12 2019

Consolidated financial statements 71

Accounting policies

Note 1 Operating profit

1.1 Net sales and segmented accounts 75

1.2 Personnel costs 76

1.3 Long-term incentive programmes 77

Note 2 Invested capital

2.1 Intangible assets 80

2.2 Tangible assets 81

2.3 Leases 83

2.4 Amortisation, depreciation and write-downs 84

2.5 Impairment tests 84

2.6 Pension obligations 86

2.7 Provisions 89

Note 3 Working capital

3.1 Inventories 91

3.2 Trade receivables 91

3.3 Other cash flow notes 92

Note 4 Capital structure and financing

4.1 Financial income and Financial expenses 94

4.2 Financial risks and instruments 94

4.3 Cash available 97

4.4 Loans 97

4.5 Own shares 97

4.6 Share capital 98

4.7 Earnings per share 98

Note 5 Other

5.1 Tax 100

5.2 Commitments and contingent liabilities 102

5.3 Related parties 102

5.4 Auditor’s fee 103

5.5 New and amended standards and general accounting policies 103

5.6 Group companies 105

Notes Consolidated financial statements 73

1.1 Net sales and segmented accounts 75

1.2 Personnel costs 76

1.3 Long-term incentive programmes 77

Note 1 Operating profit

1.1 Net sales and segmented accounts

Sales per business segment (EURm)	Insulation Systems
EBIT margin	13.0%
Average number of FTEs	11,626
Reported sales decrease	5.6%

Consolidated financial statements 74

500      1,000    1,500    2,000    2,500    3,000
0
                                              2020
                                              2019
Net sales

The Group produces and sells a range of non-combustible stone wool insulation products, including solutions for ceiling systems, ventilated facades, friction and water management and stone wool substrate solutions for the professional horticultural. Sales are recognised when control of the products has transferred to the customer, being when the products are delivered to the customer and the risk has been transferred. The products are often sold with retrospective volume discounts based on aggregate sales over a 12-month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method. The sales include no element of financing as the sales are made with credit terms of normally 30-60 days consistent with market practice. A receivable is recognised when the products are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Segmented accounts

Group Management has determined the business segments for the purpose of assessing business performance and allocating resources. Primarily segments are based on products and thermal performance, as Systems segment Notes 1.1 Net sales and segmented account is primarily defined as non-thermal insulation products. Nearly all external sales consist of sales of products. Segmental data is stated for business areas and geographical areas. The split by business areas is in accordance with the Group’s internal reporting. The segmental data is presented according to the same principle as the consolidated financial statements. The segmental EBIT includes net sales and expenditure including non-recurring expenditure operationally related to the segment.# Consolidated nancial statements 75

Comments

Notes

1.1 Net sales and segmented accounts (continued)

	ROCKWOOL Group	EURm
	Insulation segment		Systems segment		Eliminations		2020
External net sales	1,914	2,077	688	680	-	-	2,602
Internal net sales	302	304	-	-	-302	-304	-
EBIT	236	269	102	103	-	-	338
EBIT margin	10.7%	11. 3%	14.8%	15 .1%	-	-	13.0%
Financial items and income from associated companies	-	-	-	-	-	-	-13
Tax on prot for the year	-	-	-	-	-	-	-74
Prot for the year	-	-	-	-	-	-	251
Goods transferred at a point in time	1,914	2,077	688	680	-	-	2,602
Non-current asset additions	326	425	44	26	-	-	370

Geographical segments

	Net sales		Intangible and tangible assets
EURm	2020	2019	2020	2019
Western Europe	1,575	1,659	914	770
Eastern Europe and Russia	449	494	379	416
North America, Asia and others	578	604	520	512
Total	2,602	2,757	1,813	1,698

ROCKWOOL Group operates in two business segments based on products: Insulation segment and Systems segment. The information is based on the management structure and internal management reporting to Group Management and constitutes the reportable segments. Headquarters costs are allocated to the business segments based on allocation keys used in the internal management reporting. These allocation keys are reassessed annually based on planned activity in the segments. Intangible and tangible assets and related amortisation/depreciation are not fully allocated to business segments as all stone wool production is done in the Insulation segment. Financial income and expens- es, and income taxes are managed at Group level and are not allocated to business segments.

1.2 Personnel costs

	EURm
	2020	2019
Wages and salaries	580	590
Expensed value of RSUs issued	2	1
Pension costs	30	27
Other social security costs	82	79
Personnel costs	694	697
Average number of employees	11,626	11,646

The above items include to Board of Directors and Group Management:

	EURm
	2020	2019
Salaries and other benets to Group Management	6	6
Value of expensed RSU cost or fair value adjustments to Group Management	1	1
Pension costs to Group Management	1	1
Board of Directors’ remuneration	1	1
Total to Board of Directors and Group Management	9	9
Hereof remuneration to Registered Directors	3	3
Hereof value of expensed RSU cost or fair value adjustments to Registered Directors	1	0
Hereof pension costs to Registered Directors	0	0
Total to Registered Directors	4	3

Remuneration of Group Management (key management personnel) complies with the principles of the Group's Remuneration Policy. The variable part of the total remuneration, measured as short-term incentive maximum and annual long-term incentive grant, can be maximum 50 percent of the total remuneration. The short-tem incentive (bonus) is dependent on achievement of individual targets and tar- gets for the Group's nancial performance, as approved by the Remuneration Committee. In addition, pension and other benets are offered in line with market prac- tice with a total value not exceeding 20 percent of base salary. The individual remuneration elements of each Regis- tered Director are disclosed in the annual Remunera- tion Report. No termination costs is included in the remuneration in neither 2020 nor 2019.

Internal net sales from the Insulation segment to the Systems segment are at arms’ length prices. The Insulation segment includes among others interior building insulation, façade insulation, roof insulation and industrial and technical insulation. The Systems segment includes acoustic ceilings, cladding boards, engineered bres, noise and vibration control, and horticultural substrates. In 2020 and 2019 write-down of software was recognised affecting both segments. For additional information please refer to note 2.4. The geographical net sales information is based on the location of the customers, while the information regard- ing the geographical assets distribution is based on the physical placement of the assets. The domestic sales in Denmark are in the range of 2-3% (2019: 2-3%) of the Group’s net sales. The domestic intangible and tangible assets in Denmark amount to EUR 159 million (2019: EUR 168 million). No customers exceed 10% of the Group’s net sales neither this year nor last year. In Germany, France and the United States net sales amounts to between 10-20% of the Group’s total net sales in both 2020 and 2019. In no other country do the net sales exceed 10% of the Group’s total net sales. Intangible and tangible assets in the United States, Germany and Poland exceed 10% of the Group's total intangible and tangible assets in both 2020 and 2019.

Consolidated nancial statements 76

Comments

Notes

1.3 Long-term incentive programmes

Stock options

No stock options have been granted since 2015. The outstanding options are all exercisable and fully vested at the end of the reporting period. The average share price at exercise in 2020 was EUR 267 (2019: EUR 214). In 2020, the stock options granted in 2012 expired and all the stock options were exer- cised. No stock options expired in 2019.

Stock option programme

Stock options outstanding at year-end have the following exercise periods and exercise prices:

Time of grant	Exercise period	Exercise price (EUR)	Number of stock options 2020	Number of stock options 2019
2012	01.09.2015 - 31.08.2020	69	-	7,625
2013	23.09.2016 - 22.09.2021	121	6,550	8,800
2015	20.03.2018 - 19.03.2023	103	8,500	18,500
Total			15,050	34,925

In 2020, all remaining stock options belonged to senior executives. In 2019, 2,350 belonged to Registered Directors and 32,575 to other senior executives.

Development in outstanding stock options

	2020		2019
	Number of stock options	Average exercise price (EUR)	Number of stock options	Average exercise price (EUR)
Outstanding stock options 1/1	34,925	100	37,225	100
Exercised	19,875	117	2,300	127
Outstanding stock options 31/12	15,050	110	34,925	100

Two different share-based incentive programmes have been established: A stock option programme and a re- stricted share programme (RSUs). Both programmes are classied as equity based, as they are settled in shares. Due to local rules, a minor part of both programmes are given as phantom shares and is classied as cash-based, as they are settled in cash. The programmes are offered to Group Management and other senior executives. The incentive programmes are part of the variable part of the remuneration and follows the Group’s Remunera- tion policy. Participation in the programmes are at the Remuneration Committees discretion and no individual has a contractual right to participate or receive any guaranteed benet.

Stock options

On issuance of stock options, the fair value of the options is assessed using the Black & Scholes formula at the time of grant and is recognised in personnel costs in the in- come statement and in equity over the three-year vesting period. A part of the stock options are given as phantom shares (cash-based programme) and are adjusted to fair value through nancial expenses in the income statement against a related provision.

Restricted Share Units (RSUs)

When RSUs are issued, the value of the RSUs at grant date is recognised in personnel cost in the income statement and in equity over the three-year vesting period. On initial recognition of the RSUs, the number of RSUs expected to vest is estimated. Subsequently, the estimate is revised so the total cost recognised is based on the actual number of RSUs vested. The fair value of RSUs is determined based on the quoted share price at grant adjusted for expect- ed dividend payout (based on historic dividend payout ratio). The participants are compensated for any dividend payment by receiving additional RSUs. A minor part of the RSUs are given as phantom shares (cash-based programme) and are adjusted to fair value through nancial expenses in the income statement against a related provision.

Consolidated nancial statements 77

Comments

Accounting policies

Restricted Share Units

Restricted Share Units (RSUs) will be subject to a vesting period of three years. After the vesting period the shares are transferred to the participants without payment, subject to continued employment with ROCKWOOL Group in the vesting period. In line with the Remuneration Policy, a one-time award of conditional RSUs was granted to the CEO in 2020. The award is subject to a ve-year vesting period and only upon achievement of three parameters: a) Reduc- tion of CO 2 per tonne line wool, b) growth in sales; and c) earnings. The RSUs represent the employee's right to shares but do not carry voting rights nor have any tangible value before the RSUs are exercised and become actual B shares of ROCKWOOL International A/S. The terms of the share incentive may provide that shares may be set- tled in cash in which case, the related provision equals the share price at the time of vesting. The estimated fair value of RSUs granted in 2020 was EUR 3 million (2019: EUR 2 million) at grant date. EUR 3 million was expensed in 2020 relating to the RSUs (2019: EUR 2 million), of which EUR 2 million was recognised in personnel costs and EUR 1 million in nance expenses (fair value of phantom shares).

Notes 1.3 Long-term incentive programmes (continued)

Restricted share units (RSUs)

RSUs outstanding at year-end have the following vesting dates:

Time of grant	Vesting date	Number of RSUs 2020	Number of RSUs 2019
2017	07.04.2020	-	12,103
2018	12.04.2021	8,494	8,633
2019	24.05.2022	10,311	10,221
2020	23.05.2023	14,226	-
2020, one-time award	26.05.2025	9,272	-
Total		42,303	30,957

Weighted average remaining contractual life of the outstanding RSUs at year-end (Year) 2.2 1.2

Of the number of RSUs 16,592 belong to Registered Directors and 25,711 to other senior executives. In 2019, 6,659 belonged to Registered Directors and 24,298 to other senior executives.# Consolidated Financial Statements

Comments

Note 2 Invested capital

2.1 Intangible assets

The costs of research activities are carried as expenditure in the year in which they are incurred. The costs of development projects which are clearly defined and identifiable, and of which the potential technical and commercial exploitation is demonstrated, are capitalised to the extent that they are expected to generate future revenue. Other development costs are recognised on an ongoing basis in the income statement under operating costs.

Intangible assets, apart from goodwill, are stated at cost less accumulated amortisation and write-downs. Amortisation of the following intangible assets is made on a straight-line basis over the expected future lifetime of the assets, which is:

• Development projects: 2-10 years
• Patents: up to 20 years
• Software: 2-4 years
• Trademarks: up to 20 years
• Customer relationships: 10-15 years

Goodwill arisen from acquisition of enterprises and activities is stated at cost. The carrying amount of goodwill is allocated to the Group’s cash-generating units at the acquisition date. Identification of independent cash-generating units is based on business structure and level of internal control of cash flow.

Acquired CO2 rights are capitalised under intangible assets. Granted CO2 rights are not capitalised.

Goodwill is tested annually for impairment and the book value of other assets is reviewed on indications of intangible assets impairment. When testing for impairment, the value is written down to the estimated net sales price or the value in use, if greater. Software in progress is also tested for impairment annually.

Intangible assets

	2020		2019
EURm	Goodwill	Software	Customer relationships
Cost 1/1	128	85	80
Exchange rate adjustments	-5	0	-3
Additions for the year	-	0	-
Transfer of assets in progress	-	10	-
Disposals for the year	-	-3	-
Business acquisitions	4	0	5
Cost 31/12	127	92	82
Amortisation and write-downs 1/1	31	72	37
Exchange rate adjustments	0	-1	-2
Amortisation for the year	-	8	8
Write-down for the year	-	3	-
Transfers	-	-	-
Disposals for the year	-	-3	-
Amortisation and write-downs 31/12	31	79	43
Carrying amount 31/12	96	13	39

During the year R&D costs amounting to EUR 41 million (2019: EUR 41 million) have been expensed.

Goodwill is allocated to cash generating units (CGUs) in Insulation segment at an amount of EUR 51 million (2019: EUR 50 million) and to CGUs in Systems segment at an amount of EUR 45 million (2019: EUR 47 million). Goodwill has been impairment tested for the identified CGUs, which for both years have not resulted in any value adjustments. The impairment test of goodwill is based on current and future results for the CGUs to where the results are allocated. Most of the goodwill in the Group is related to the acquisition of Flumroc in 2017, Chicago Metallic in 2013 and CSR in 2010 and they are performing according to plan. Please refer to note 2.5 for further details.

In 2020 a write-down of EUR 3 million of software was recognised affecting both segments due to low utilisation. In 2019 a write-down of EUR 2 million of software in progress was recognised affecting both segments due to lower benefits and utilisation compared to the original expectation.

The carrying amount of other intangible assets includes brands amounting to EUR 12 million (2019: EUR 11 million), patents amounting EUR 8 million (2019: EUR 9 million) and development projects of EUR 1 million (2019: EUR 1 million).

2.2 Tangible assets

Tangible assets are stated at cost less accumulated depreciation and impairment losses. The cost of technical plant and machinery manufactured by the Group comprises the acquisition cost, expenditure directly related to the acquisition, engineering hours, including indirect production costs and borrowing costs.

Depreciation is carried out on a straight-line basis, based on current assessment of their useful lives and scrap value. The expected lifetimes are:

• Buildings: 20-40 years
• Plant and machinery: 5-15 years
• Other operating equipment: 3-10 years

On sale or scrapping of assets, any losses or gains are included under other operating income for the year.

Investment grants are deducted in the cost of the equivalent tangible assets. The investment grants are recognised as income on a straight-line basis over the expected lives of the related assets as reduced depreciation expense. The expected lifetime for tangible assets is determined based on past experience and expectations for future use of the assets. Especially the estimated lifetime of plant and machinery is linked to uncertainty due to varying utilisation and the significant amount of maintenance costs. The expected future lifetime for the assets is evaluated annually.

When there is an indication of a reduction in the profitability of an asset, an impairment test is performed for the assets in question and write-downs are made, if necessary. The recoverable amounts of the assets and cash-generating units are determined based on value-in-use calculations and fair value less cost to sell. These calculations require the use of estimates as they are based on budgets, business plans and projections for five years and take into account previous experience and represent Management’s best estimate of future developments.

Of the carrying amount of buildings and sites, EUR 114 million (2019: EUR 114 million) represent sites not subject to depreciation. Accumulated capitalised interests amounting to EUR 3 million (2019: EUR 4 million) are included in the cost of tangible assets. There is no additional capitalised interest neither this year nor last year.

For the recognised investment grants the conditions are fulfilled or are reasonable assured to be fulfilled. Some of the received investment grants are subject to repayment obligations provided that the attached conditions are not fulfilled within a number of years. The Group’s investment grants are for the main part received in Poland, Spain, the United States and China. The investment grants are in most cases linked to expansion of the Group including the amount of investment in tangible assets and the creation of jobs - and is given as cash or loans. Only limited contingent liabilities exist.

Contractual obligations for the purchase of tangible assets at 31 December 2020 amount to EUR 90 million (2019: EUR 134 million).

Tangible assets

	2020		2019
EURm	Buildings and sites	Plant and machinery	Other operating equipment
Cost 1/1	1,094	2,084	114
Exchange rate adjustments	-46	-82	-4
Additions for the year	0	5	0
Transfer of assets in progress	55	107	15
Disposals for the year	-1	-17	-3
Business acquisitions	3	2	1
Cost 31/12	1,105	2,099	123
Depreciation and write-downs 1/1	451	1,640	94
Exchange rate adjustments	-13	-59	-4
Depreciation for the year	31	95	14
Disposals for the year	-1	-16	-3
Depreciation and write-downs 31/12	468	1,660	101
Carrying amount 31/12	637	439	22
Hereof investment grants	-10	-2	-

2.3 Leases

Whether a contract contains a lease is assessed at contract inception. For identified leases, a right-of-use (RoU) asset and corresponding liability are recognised on the lease commencement date. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the payments, which are fixed or variable payments dependent on an index or a rate. When adjustments to lease payments based on an index or a rate take effect, the lease liability is re-assessed and adjusted against the lease asset.Service components are excluded from the lease liability except from those relating to cars. To measure the lease liability at an amount equal to the net present value of the lease payments, a discount rate is used. For this purpose, the Group generally uses its incremental borrowing rate (IBR). The IBR is calculated per main country/region per asset type considering different length of the lease terms. The lease payments have been split into an interest cost and a repayment of the lease liability. RoU assets are measured at cost corresponding to the lease liability recognised, adjusted for any lease prepayments or directly related costs, including restoration costs. RoU assets are depreciated on a straight-line basis over the shorter of the expected lease term and the asset’s useful life. RoU assets are tested for impairment whenever there is an indication that the assets may be impaired. Extension and termination options are included in a number of property and equipment leases across the Group. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. If the lease contract contains an extension or purchase option that the Group considers reasonably certain to be exercised, these are included in the measurement of the liability. Short-term leases and leases of low value are recognised on a straight-line basis as cost in the income statement. The Group’s portfolio of leases covers leases of office buildings, warehouses and other equipment such as cars and forklifts. Leases for offices and other buildings have lease terms between 2-22 years, warehouses between 3-10 years while car and forklift leases generally have lease terms between 3-5 years. The Group also has a few long-term site leases with lease terms up to 99 years.

Leases in the balance sheet

EURm	2020	2019
Right-of-use assets:
Ofces, other buildings and sites	9	10
Warehouses	19	25
Forklifts, cars and other assets	16	17
Carrying amount of right-of-use assets 31/12	44	52

Contractual maturity of lease liabilities:

< 1 year | 21 | 20
1-5 years | 31 | 30

5 years | 10 | 10
Contractual maturity of lease liabilities 31/12 | 62 | 60

Current/non-current classication (discounted):

Non-current | 27 | 34
Current | 18 | 18

In 2020, additions to right-of-use assets were EUR 13 million (2019: EUR 36 million).

Leases in the income statement

EURm	2020	2019
Depreciation of right-of-use assets:
Ofces, other buildings and sites	3	2
Warehouses	8	6
Forklifts, cars and other assets	10	9
Total depreciation of right-of-use assets	21	17
Interest expense (included in nancial expenses)	2	2
Expense relating to short-term leases (included in operating costs)	8	8
Expense relating to low-value leases (included in operating costs)	0	0
Variable lease payments not included in the lease liabilities (included in operating costs)	2	5

The total cash outow for leases in 2020 was EUR 32 million (2019: EUR 32 million), of which EUR 20 million (2019: EUR 17 million) is classied as cash ow from nancing activities and EUR 12 million (2019: EUR 15 million) is classied as cash ow from operating activities.

Consolidated nancial statements 83 Accounting policies Notes

2.4 Amortisation, depreciation and write-downs

EURm	2020	2019
Amortisation of intangible assets	20	19
Write-down of intangible assets	3	2
Depreciation of tangible assets	140	138
Depreciation of right-of-use assets	21	17
Amortisation, depreciation and write-downs	184	176

In 2020 a write-down of EUR 3 million of intangible assets was recognised affecting both segments due to lower benets and utilisation compared to the original business plan. When there is an indication of a reduction in the protability of an asset, an impairment test is performed for the assets in question and write-downs are made, if necessary. For goodwill, annual impairment tests are made. The recoverable amounts of the assets and cash-generating units (CGUs) have been determined based on value-in-use calculations. When testing for impairment, the value is written down to the estimated recoverable amount, if lower than the carrying amount. Other assets are tested for impairment when there are indications of change in the structural protability. In 2019 a write-down of EUR 2 million of intangible assets under construction was recognised affecting both segments due to lower benets and utilisation compared to the original business plan.

Consolidated nancial statements 84 Accounting policies Comments

2.5 Impairment tests

Impairment test of goodwill

EURm	2020	CGUs	Carrying amount, Goodwill	Discount rate	Growth rate (budget period)	Headroom
		Chicago Metallic Corporation (Rockfon)	52	8.9%	4%*	Large
		HECK Wall Systems	6	8.0%	4%*	Minor
		CSR	8	10.8%	9%*	Large
		Flumroc	15	8.0%	2%	Large
		Other	15	8-12%	0-12%	Large
Total			96
* Average growth rate due to large spread in the period.

When testing for impairment, the value is written down to the estimated recoverable amount, if lower than the carrying amount. Other assets are tested for impairment when there are indications of change in the structural protability. In 2019 a write-down of EUR 2 million of intangible assets under construction was recognised affecting both segments due to lower benets and utilisation compared to the original business plan.

Consolidated nancial statements 84 Accounting policies Comments Notes

2.5 Impairment tests (continued)

When preparing impairment tests, estimates are used to calculate the future value. Signicant estimates are made when assessing long-term growth rates and protability. In addition, an assessment is made of the reasonable discount rate. Changes in the growth rate in the budget period or discount rate may result in signicantly different values. The assessments are made based on budgets, business plans and projections for ve years and take into account previous experience and represent Management’s best estimate of future developments. Key parameters are growth in sales, margin, discount rate and future growth expectations. Management has performed the yearly impairment test of the carrying amount of goodwill. In addition, impairment test of other assets has also been made, where indication of reduction of value was found. In the impairment test, the carrying amount of the assets is compared to the discounted value of the future cash ows. The assessment of future cash ows is typically based on ve-year management reviewed budgets and business plans, where the last year is used as a normalised terminal year. Net sales, raw material prices, discount rate and future growth assumptions constitute the most material parameters in the calculation. The average growth rate in the terminal period is set to 0.5 percent similar to last year. The average growth rate in the budget period is estimated to be between 0-10 percent depending on the businesses. The high growth rates are used in countries where we historically have seen steep increases after a slow period. Gross margins are based on average values the last three years and adjusted over the budget period for efciency improvements and expected raw material ination based on past actual price movements and future market conditions. Future investment is derived from the historic investment level to secure a smooth operation of the fac- tories and the capacity utilisation is based on the current situation including investment plans. The discount rate calculation is based on the specic circumstances of the Group and the operating segments and is derived from the weighted average cost of capital (WACC).

2020

The impairment test for 2020 has not shown a need for write-downs or reversals of write-downs recognised previous years. During 2020 HECK Wall Systems has been monitored closely. HECK Wall Systems follows the expec- tations and market outlook outlined in the impairment test last year. The net present value of HECK Wall Systems amounts to EUR 28 million in 2020 which gives a head- room of EUR 4 million to the carrying amount. The main driver is conversion to stone wool products and in 2021 it is expected to fully convert to stone wool products.

2019

The impairment test for 2019 has not shown a need for write-downs or reversals of write-downs recognised previous years. During 2019 HECK Wall Systems has been monitored closely. HECK Wall Systems follows the expectations and market outlook outlined in the impair- ment test last year. The net present value of HECK Wall Systems amounts to EUR 28 million in 2019, which gives a headroom of EUR 1 million to the carrying amount. The main driver is conversion to stone wool products and this has shown good progress.

Sensitivity analysis

As part of the preparation of impairment tests, sensitivity analyses are prepared on the basis of relevant risk factors and scenarios that management can determine within reasonable reliability. Sensitivity analyses are prepared by altering the estimates with a range of probable outcomes.

2020

The sensitivities have been assessed as follows, all other things being equal; an increase in the discount rate of 1%, a decrease in the growth rate of 1% p.a. and an increase of input costs of 1% p.a. The write-down in HECK Wall Systems would have been EUR 1-5 million if the discount rate was to increase 1% or the growth was 1% lower. We consider the chosen scenarios as the most realistic why none of the impairment tests have given rise to adjustment of the value.

2019

The sensitivities have been assessed as follows, all other things being equal; an increase in the discount rate of 1%, a decrease in the growth rate of 1% p.a. and an increase of input costs of 1% p.a. The write-down in HECK Wall Systems would have been EUR 3-6 million if the discount rate was to increase 1% or the growth was 1% lower. We consider the chosen scenarios as the most realistic why none of the impairment tests have given rise to adjustment of the value.

Impairment test of goodwill

EURm	2019	CGUs	Carrying amount, Goodwill	Discount rate	Growth rate (budget period)	Headroom
		Chicago Metallic Corporation (Rockfon)	57	8.9%	2-5%	Large
		HECK Wall Systems	6	7.6%	0%*	Minor
		CSR	8	10.7%	6%*	Large
		Flumroc	15	7.3%	2%	Large
		Other	11	7-11%	0-8%	Large
Total			97
* Average growth rate due to large spread in the period.# Consolidated financial statements 85

Comments

Critical estimates and judgements

Notes 2.6 Pension obligations

Pension payments concerning defined contribution plans are recognised on an ongoing basis in the income statement. Defined benefit plans are stated at the net present value at the balance sheet date and included in the consolidated financial statements. Adjustments of the plans are carried out on a regular basis in accordance with underlying actuarial assessments. Actuarial gains or losses for defined benefit plans are recognised in full in the period in which they occur in other comprehensive income. The actuarial assessment is carried out every year. Funded benefit plans have assets placed in trustee-administered pension funds, which are governed by local regulations and practice in each country. The payments to the pension funds are based on the usual actuarial assessments and are recognised in the income statement after maturity. Provided that the actuarial assessments of pension obligations show noticeable excess solvency or insolvency in relation to the pension fund’s assets, the difference is entered to the balance sheet and the future payments are adjusted accordingly. With regard to these schemes, the actuarial assessment is also carried out every year. The present value of defined benefit pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes to these assumptions will impact the carrying amount of pension obligations. The discount rate and other key assumptions are based in part on the current market conditions.

Pension costs
| EURm | 2020 | 2019 |
| :-------------------------- | :--- | :--- |
| Defined contribution plans: | | |
| Total pension costs recognised | 23 | 22 |
| Defined benefit plans: | | |
| Pension costs | 7 | 4 |
| Interest costs | 2 | 3 |
| Interest income | -2 | -2 |
| Curtailments/settlements | 0 | 0 |
| Total pension costs recognised | 7 | 5 |

Defined benefit pension plans
| EURm | 2020 | 2019 | 2018 | 2017 | 2016 |
| :---------------------------------- | :--- | :--- | :--- | :--- | :--- |
| Present value of pension liabilities | 250 | 247 | 217 | 227 | 160 |
| Fair value of plan assets | -184 | -185 | -164 | -174 | -92 |
| Pension obligation, net 31/12 | 66 | 62 | 53 | 53 | 68 |

Consolidated financial statements 86

Accounting policies

Critical estimates and judgements

Notes 2.6 Pension obligations (continued)

A number of the Group’s employees and former employees participate in pension schemes. The pension schemes are primarily defined contribution plans. However, defined benefit plans are also used, mainly in Switzerland, the United Kingdom and Germany. The benefit plans in the United Kingdom and Germany are closed for new entries. Under a defined benefit plan the Group carries the risk associated with the future development in e.g. interest rates, inflation, salaries, mortality and disability. Defined benefit plans typically guarantee the employees a retirement benefit based on the final salary at retirement. The pension benefit plans in the United Kingdom and Switzerland have assets placed in independent pension funds. The remaining plans are unfunded, where the main part relates to Germany. For these plans the retirement benefit obligations amount to approximately 22% (2019: 22%) of the total gross liability.

Key assumptions
| | 2020 | 2019 |
| :----------------------- | :---- | :---- |
| Increase in salaries and wages | 1.4% | 1.4% |
| Discount rate | 0.7% | 1.0% |
| Remaining life expectancy at the time of retirement (years) | 25.1 | 25.8 |

Defined benefit pension obligation
| EURm | 2020 | 2019 |
| :---------------------------------------- | :--- | :--- |
| Obligations 1/1 | 247 | 217 |
| Exchange rate adjustments | -4 | 7 |
| Pension costs | 7 | 5 |
| Interest costs | 2 | 3 |
| Settlements | 0 | 0 |
| Actuarial gains/losses from changes in demographic assumptions | 0 | 0 |
| Actuarial gains/losses from changes in financial assumptions | 12 | 28 |
| Actuarial gains/losses from changes in experience | -3 | -3 |
| Benefits paid | -11 | -10 |
| Other adjustments | - | - |
| Obligations 31/12 | 250 | 247 |

Except for the Swiss and UK plans, the mentioned defined benefit plans are not subject to regulatory requirements regarding minimum funding. The granted pension payments of the mentioned defined benefit plans are based upon the salary of the participating employees during the period of employment. The Group’s contributions are derived from the split of the pension premium between the employee and employer. The actuarial assessment of the pension obligation is based on assumptions specific to each country. The latest actuarial calculation is prepared by authorised experts. The valuation of the assets is based on the composition and the expectations to the economic development. The assumptions used are weighted averages:

Consolidated financial statements 87

Comments

The following payments are expected contributions to the defined benefit plan obligation:

Expected contributions
| EURm | 2020 | 2019 |
| :--- | :--- | :--- |
| < 1 year | 6 | 6 |
| 1-5 years | 25 | 27 |
| > 5 years | 41 | 43 |
| Expected contributions | 72 | 76 |

The expected duration of the defined benefit plan obligation is 25 years (2019: 26 years) at year end.

Sensitivity analysis
| Assumptions | -0.5% | +0.5% | -1.0% | +1.0% | -1 year | +1 year |
| :---------------------------------------- | :---- | :---- | :---- | :---- | :------ | :------ |
| EURm | | | | | | |
| 2020 - Impact on obligation | 21 | -19 | -2 | 3 | -8 | 9 |
| 2019 - Impact on obligation | 21 | -19 | -3 | 3 | -6 | 7 |

The sensitivity analysis above has been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions.

Notes 2.6 Pension obligations (continued)

Pension plan assets
| EURm | 2020 | 2019 |
| :------------------------- | :--- | :--- |
| Pension plan assets 1/1 | 185 | 164 |
| Exchange rate adjustments | -4 | 7 |
| Interest income | 2 | 2 |
| Return on plan assets | 6 | 15 |
| Employer’s contribution | 4 | 4 |
| Plan participants | 1 | 1 |
| Benefits paid | -10 | -8 |
| Other adjustments | - | - |
| Pension plan assets 31/12 | 184 | 185 |

Composition of pension plan assets
| EURm | 2020 | 2019 |
| :-------------------------------- | :---- | :---- |
| Assets quoted in active markets: | | |
| Equities in European markets | 34% | 35% |
| Bonds in European markets | 36% | 37% |
| Assets unquoted: | | |
| Cash | 12% | 10% |
| Other | 18% | 18% |

Consolidated financial statements 88

Notes

2.7 Provisions

Provisions are recognised where a legal or constructive obligation has been incurred as a result of past events and if it is probable it will lead to an outflow of financial resources and if the size of the liability can be measured on a reliable basis. The provision is calculated as the amount expected to be paid to settle the obligation. Provisions relate primarily to jubilee obligations and retirement benefits, fair value provision for phantom shares, restructuring, warranties and ongoing disputes, lawsuits. As at 31 December 2020 other provisions include a provision of EUR 5 million (2019: EUR 4 million) for restructuring measures. This provision is expected to be utilised within one year.

Provisions
| EURm | 2020 | 2019 |
| :------------------------ | :--------------------------- | :--------------------------- |
| | Employees | Claims and legal actions | Other | Total | Employees | Claims and legal actions | Other | Total |
| Provisions 1/1 | 12 | 4 | 10 | 26 | 11 | 4 | 7 | 22 |
| Exchange rate adjustments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Additions for the year | 3 | 4 | 6 | 13 | 4 | 3 | 5 | 12 |
| Used during the year | -3 | -1 | -3 | -7 | -2 | -1 | -1 | -4 |
| Reversed during the year | 0 | -3 | -3 | -6 | -1 | -2 | -1 | -4 |
| Provisions 31/12 | 12 | 4 | 10 | 26 | 12 | 4 | 10 | 26 |
| Current/non-current classification: | | | | | | | | |
| Non-current liabilities | 10 | 2 | 6 | 18 | 10 | 2 | 5 | 17 |
| Current liabilities | 2 | 2 | 4 | 8 | 2 | 2 | 5 | 9 |
| Provisions 31/12 | 12 | 4 | 10 | 26 | 12 | 4 | 10 | 26 |

Consolidated financial statements 89

Accounting policies

Comments

EURm
Net working capital in % of net sales	Decreased compared to 9.0% in 2019	8.2%
Total net working capital		213

Note 3 Working capital

3.1 Inventories 91

3.2 Trade receivables 91

3.3 Other cash flow notes 92

Consolidated financial statements 90

Notes

3.1 Inventories

Inventories are valued at the lowest value of historical cost calculated as a weighted average or the net realisation value. The cost of finished goods and work in progress include the direct costs of production materials and wages, as well as indirect production costs such as personnel costs, maintenance costs and depreciation of plant and machinery. Raw materials and consumables include the net amount of the spare part inventory of EUR 22 million (2019: EUR 25 million). The net amount consists of a cost price of EUR 84 million (2019: EUR 82 million) and a write-down of spare part inventory of EUR 62 million (2019: EUR 57 million).

Inventories
| EURm | 2020 | 2019 |
| :--------------------------- | :--- | :--- |
| Raw materials and consumables | 96 | 108 |
| Work in progress | 10 | 10 |
| Finished goods | 110 | 118 |
| Inventories 31/12 | 216 | 236 |
| Inventory before write-downs | 231 | 250 |
| Write-downs 1/1 | -14 | -12 |
| Change in the year | -1 | -2 |
| Write-downs 31/12 | -15 | -14 |
| Inventories 31/12 | 216 | 236 |

3.2 Trade receivables

Trade receivable are measured at amortised cost less allowance for bad debt based on the expected credit loss model. The Group applies the simplified approach to measure expected credit losses, which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

Trade receivables
| EURm | 2020 | 2019 |
| :----------------------------------------- | :--- | :--- |
| Trade receivables before allowance for bad debts (maximum credit risk) | 257 | 288 |
| Allowance for bad debts 1/1 | -13 | -15 |
| Exchange rate adjustments | 1 | 0 |
| Movements during the year | -1 | 0 |
| Realised losses during the year | 3 | 2 |
| Allowance for bad debts 31/12 | -10 | -13 |
| Trade receivables 31/12 | 247 | 275 |

The expected loss rates are based on the payment profiles of sales over a period of 60 months before 1 January 2020 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The costs of allowance for bad debts and realised losses during the year are included in other external costs.# Consolidated nancial statements 91

Accounting policies

Comments

Accounting policies Allowance for bad debts based on the expected credit loss model

	2020 EURm		2019 EURm
	Expected loss rate	Gross carrying amount	Allowance for bad debt	Total
Current	0.1%	241	0	241
More than 30 days past due	2%	5	0	5
More than 60 days past due	40%	1	0	1
More than 90 days past due	100%	10	-10	0
Total 31/12		257	-10	247

3.3 Other cash ow notes

Adjustments of non-cash operating items	2020 EURm	2019 EURm
Provisions	5	5
Expensed value of RSUs issued	2	1
Gain/loss on sale of intangible and tangible assets	0	0
Adjustments of non-cash operating items	7	6

Changes in net working capital	2020 EURm	2019 EURm
Change in inventories	10	7
Change in trade receivables	23	4
Change in other receivables	-9	-7
Change in trade payables	-2	-27
Change in other payables	5	-16
Change in net working capital	27	-39

Notes 3.2 Trade receivables (continued)

Consolidated nancial statements 92

Note 4 Capital structure and nancing

4.1 Financial income and  Financialexpenses 94

4.2 Financialrisksandinstruments 94

4.3 Cash available 97

4.4 Loans 97

4.5 Ownshares 97

4.6 Share capital 98

4.7 Earnings per share 98

	2020	2019
Equity ratio	76.1%	78.5%
Cash available	240	269
Earnings per share	11.5	93

Compared to 78.5% last year
Down from EUR 269 million last year
Down 1.5 EUR from last year

Consolidated nancial statements Financial income and Financial expenses

Financial income and Financial expenses comprise interest income and interest costs, interest costs compiled from lease liabilities, realised and unrealised foreign exchange gains and losses, as well as fair value adjustments of cash-settled share-based incentive pro- grammes which are offset against other liabilities.

Financial income	2020 EURm	2019 EURm
Interest income	2	2
Foreign exchange gains	6	3
Financial income	8	5

Hereof nancial income on nancial assets at amortised cost | 2 | 2 |

Financial expenses	2020 EURm	2019 EURm
Interest expenses etc.	10	7
Interest expenses lease liabilities	2	2
Fair value adjustment phantom shares	1	1
Foreign exchange losses	9	0
Financial expenses	22	10

Hereof nancial expenses on nancial liabilities at amortised cost | 8 | 5 |

Notes 4.1 Financial income and Financial expenses

Derivative nancial instruments are initially recognised in the balance sheet at cost price and are subsequently measured at fair value. Derivative nancial instruments are recognised in other receivables and other payables. Changes to the fair value of derivative nancial instru- ments, which meet the conditions for hedging the fair value of a recognised asset or liability, are recognised in the income statement together with any changes in the fair value of the hedged asset or liability. Changes to the fair value of derivative nancial instruments, which meet the conditions for hedging future cash ow, are recognised in other comprehensive income provided the hedge has been effective. Hedge effectiveness is determined at the inception of the

4.2 Financial risks and instruments hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The accumulated value adjustment related to these hedge transactions is transferred from other comprehensive income when the position is realised, and is included in the value of the hedged position e.g. the adjustment follows the cash ow. For derivative nancial instruments, which do not qualify as hedging instruments, changes to the fair value are recognised on an ongoing basis in the income statement as nancial income or nancial expenses. Financial income and Financial expenses also include adjustments to fair value hedges, and income and costs relating to cash ow hedges transferred from other comprehensive income on realisation of the hedged items.

Consolidated nancial statements 94

Accounting policies

Categories of nancial assets and liabilities

EURm	2020	2019
Financial assets:
Financial instruments for hedging of future cash ow	1	1
Financial assets at fair value through other comprehensive income	1	1
Trade receivables	247	275
Other receivables and receivables from associated companies	59	53
Cash	241	275
Financial assets at amortised costs	547	603
Financial liabilities:
Fair value hedges	0	0
Financial liabilities at fair value through income statement	0	0
Financial instruments for hedging of future cash ow	1	3
Financial liabilities at fair value through other comprehensive income	1	3
Bank loans incl. short-term	100	5
Bank debt	1	6
Trade payables	184	196
Other payables	157	154
Financial liabilities at amortised costs	442	361

The carrying value of the Group’s nancial assets and liabilities measured at amortised cost are assessed to be a reasonable approximation of fair value.

Other receivables and receivables from associated companies

Other receivables and receivables from associated companies fall due as follows:

EURm	2020	2019
< 1 year	60	54
1-5 years	-	-
> 5 years	-	-
Other receivables and receivables from associated companies	60	54

Notes 4.2 Financial risks and instruments (continued)

As a consequence of ROCKWOOL Group’s extensive international activities, the Group’s income statement and equity are subject to a number of nancial risks. The Group manages these risks in the following categories:

• Exchange rate risk,
• Interest rate risk
• Liquidity risk
• Credit risk

The Group’s policy is to identify and hedge signicant nancial risks on an ongoing basis. This is the respon- sibility of the individual companies in which nancial risks might arise and overall supported by the Group’s treasury department. The parent company continuous- ly monitors the Group’s nancial risks in accordance with a framework determined by Group Management and/or the Board of Directors.

Exchange rate risk

As a consequence of the Group’s structure, net sales and expenditure in foreign currency are to a signicant degree set off against each other, so that the Group is not exposed to major exchange rate risks. Commercial exchange rate risks in the companies, which cannot be set off are hedged on a continuous basis, to the extent that they may signicantly affect the results of the individual company in a negative di- rection, using currency loans, currency deposits and/or nancial derivatives. Exchange rate risks are hedged in the individual companies. The Group’s hedging reserve is disclosed under “Statement of changes in equity” with an insignicant amount. The Group’s net sales and expenditures will be subject to exchange rate uctuations on translation into EUR. A sensitivity analysis is made for the Group’s result and equity based on the underlying currency transactions. The nancial instruments included in the sensitivity analysis are cash, receivables, payables, current liabil- ities and nancial investments without taking hedging into consideration. The result of the sensitivity analysis

Consolidated nancial statements 95

Comments

Sensitivity analysis	Effect in EURm		2020	2019
		EBITDA
	5% change in exchange rate	USD (+/-)	7	10
		RUB (+/-)	4	4
		CAD (+/-)	-1	1
		PLN (+/-)	1	2
		GBP (+/-)	5	4
		Equity
		USD (+/-)	12	13
		RUB (+/-)	10	12
		CAD (+/-)	9	8
		PLN (+/-)	12	12
		GBP (+/-)	7	6

cannot be directly transferred to the uctuations on translating the nancial result and equity of sub sidiaries into EUR. The impact on the net sales of the difference between average rate and year-end rate amounts to EUR 42 million (2019: EUR 15 million) for the 5 largest currencies (USD, RUB, CAD, PLN and GBP), which is a change of -1.5% (2019: 0.5%). The Group’s policy is not to hedge exchange rate risks in long-term investments in subsidiaries. When relevant, external investment loans and Group loans are, as a general rule, established in the local currency of the company involved, while cash at bank and in hand are placed in local currency. In the few countries with ineffective nancial markets loans can be raised and surplus liquidity placed in DKK or EUR, subject to the approval of the Group’s nance function. Most Group loans, that are not established in DKK or EUR, are hedged via forward agreements, currency loans and cash pools or via the SWAP market.

Interest rate risk

Currently the Group does not have any signicant non-current interest-bearing debt or assets. The Group’s policy is that necessary nancing of invest- ments should primarily be affected by raising ve to seven year loans at xed or variable interest rates. Drawings on credit facilities at variable interest rates generally match the funds, and all Group loans are symmetrical in terms of interest rates. Consequently, changes in interest rates will not have a signicant effect on the result of the Group.

Liquidity risk

The current surplus and decit liquidity in the Group’s companies is set off, to the extent that this is protable, via the parent company acting as intra-Group bank and via cash pool systems. When considered appropriate, underlying cash pool systems are established in foreign companies. To the extent that the nancial reserves are of an appro- priate size, the parent company also acts as lender to the companies in the Group. To ensure adequate nancial reserves as dened by the Board of Directors, investment loans can be raised on a continuous basis to partly cover new investments and to

Notes 4.2 Financial risks and instruments (continued)

renance existing loans. The parent company has made guarantees for some credit facilities and loans. The parent company has issued ownership clauses and/or deed of postponements in connection with intercom- pany loans. The parent company ensures on an ongoing basis that exible, unutilised committed credit facilities of an adequate size are established with Investment Grade credit-rated banks.## Consolidated Financial Statements 96

Notes

4.3 Cash available

The Group’s nancial reserves also consist of cash at bank and in hand, and unused over- draft facilities. Credit risk Due to the considerable customer spread in terms of geographical location and numbers, the credit risk is fundamentally limited. To a minor degree, when consid- ered necessary, insurance or bank guarantees are used to hedge outstanding receivables. As a consequence of the international diversication of the Group’s activities there are business relations with a number of different banks in Europe, North America and Asia. To minimise the credit risk on placement of funds and on entering into agreements on derived nancial instruments, only major, nancially sound institutions are used. Customer credit risks are assessed considering the nancial position, past experience and other factors. Individual risk limits are set based on internal and exter- nal ratings. For impairment of trade receivable please refer to note 3.2. No customer exceeds 10 percent of the Group’s net sales neither this year nor last year. Categories of nancial instruments Financial assets and liabilities at fair value are related to foreign exchange rate forward contracts, foreign exchange rate swaps or interest rate swaps all of which have been valued using a valuation technique with market observable inputs (level 2). The Group is using no other valuation technique. The Group enters into derivative nancial instruments with nancial institutions. Derivatives valued using valuation techniques with market observable inputs are mainly foreign exchange forward contracts. The most frequently applied valua- tion techniques include forward pricing models using present value calculations. The models incorporate vari- ous inputs including the credit quality of counterparties and foreign exchange spot rates.

Cash available EURm		2020	2019
Cash		241	275
Bank debts		1	6
Cash available 31/12		240	269

Bank loans are measured at amortised cost. The carry- ing amount for these approximates fair value. Bank loans amounted to EUR 100 million at 31 Decem- ber 2020, mainly related to a new bank loan of EUR 150 million denominated in EUR. Part of the loan was repaid in November 2020 amounting to EUR 55 million. The full loan is due within one year and is a xed interest loan. The remaining loans amount to EUR 5 million and are also due within one year. In 2019, bank loans amounted to EUR 5 million, of which EUR 1 million was due within one year, and none were due more than ve years after the balance sheet date. All bank loans in 2019 had xed interest and were denominated in EUR.

4.4 Loans

4.5 Own shares

ROCKWOOL International A/S has a reserve of own shares recognised in retained earnings. The shares are bought back to meet obligations under the Group's equity-based stock option and restricted share unit programmes and as part of the Group's share buy-back programme. Own shares are used to hedge the Group’s stock option and restricted share unit programmes and as part of the Group's share buy-back programme. Own shares are purchased based on authorisation from the General Assembly.

Own shares EUR
		2020			2019
		Number of shares	Average purchase/ sales price	% of share capital	Number of shares	Average purchase/ sales price	% of share capital
Own shares 1/1	A-shares	-	-	-	-	-	-
Purchase		76,069	257	0.4	-	-	-
Sale		-	-	-	-	-	-
Own shares 31/12		76,069		0.4	-	-	-
Own shares 1/1	B-shares	72,894	0.3		75,865	0.4
Purchase		284,515	213	1.3	9,700	217	0.0
Sale		29,566	117	0.2	12,671	127	0.1
Own shares 31/12		327,843		1.4	72,894		0.3

Consolidated Financial Statements 97

Comments

4.6 Share capital

Each A share of a nominal value of DKK 10 (EUR 1.3) carries 10 votes, and each B share of a nominal value of DKK 10 (EUR 1.3) carries 1 vote. The total share capital has been unchanged for the last 20 years. The share capital has been fully paid up. No shareholder is under an obligation to allow his shares to be redeemed whether in whole or in part. The shares are negotiable instruments, and all shares shall be freely transferable.

Share capital EURm		2020	2019
A shares	- 11,231,627 shares of DKK 10 each (EUR 1.3)	15	15
B shares	- 10,743,296 shares of DKK 10 each (EUR 1.3)	14	14
Share capital		29	29

4.7 Earnings per share

Earnings per share EURm		2020	2019
Profit for the year attributable to shareholders of ROCKWOOL International A/S		251	285
Average number of shares ('000)		21,975	21,975
Average number of own shares ('000)		238	74
Average number of outstanding shares ('000)		21,737	21,901
Dilution effect of stock options ('000)		53	52
Average number of diluted shares ('000)		21,790	21,953
Earnings per share		11.54	13.01
Earnings per share, diluted		11.51	12.98

Consolidated Financial Statements 98

Comments

Note 5 Other

• 5.1 Tax 100
• 5.2 Commitments and contingent liabilities 102
• 5.3 Related parties 102
• 5.4 Auditor’s fee 103
• 5.5 New and amended standards and general accounting policies 103
• 5.6 Group companies 105

Effective tax rate in 2020 22.8%
Number of subsidiaries in the Group 59
Number of associated companies in the Group 2

Consolidated Financial Statements 99

The parent company is taxed jointly with all Danish subsidiaries. Income subject to joint taxation is fully distributed. Tax on prot for the year, which includes current tax on prot for the year and changes to deferred tax, is recognised in the income statement. Tax on changes in other comprehensive income is recognised directly under other comprehensive income. Provisions for deferred tax are calculated on all temporary differences between accounting and taxable values, calculated using the balance-sheet liability method. Deferred tax provisions are also made to cover the re-taxation of losses in jointly taxed foreign companies previously included in the Danish joint taxation.

Tax on profit for the year EURm		2020	2019
Current tax for the year		74	90
Change in deferred tax		1	-3
Adjustment to valuation of tax assets		-5	-6
Withholding taxes		3	3
Adjustment in current and deferred tax in previous years		1	-2
Tax on profit for the year		74	82

Reconciliation of effective tax rate %		2020	2019
Danish tax rate		22.0	22.0
Deviation in non-Danish subsidiaries' tax compared to Danish tax percentage		1.7	2.1
Withholding tax adjustment		0.8	0.8
Permanent differences		0.1	0.0
Effect on change in income tax rates		-	0.1
Adjustment to valuation of tax assets		-0.2	-2.0
Initial recognition of tax credit		-1.5	-0.5
Other deviations		0.0	-
Effective tax rate (%)		22.8	22.4

Notes 5.1 Tax (continued)

Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to qualifying expenditure. The Group accounts for such allowances as tax credits. Con- sequently, the allowance reduces income tax payables and current tax expense. A deferred tax asset is recog- nised for unclaimed tax credits that are carried forward. Deferred tax assets are recognised when it is probable, that the assets will reduce tax payments in coming years and they are assessed at the expected net realisable value. Deferred tax is stated according to current tax reg- ulations. Changes in deferred tax as a consequence of changes in tax rates are recognised in the income statement.

Income tax receivable and payable EURm		2020	2019
Income tax receivable and payable 1/1		15	29
Exchange rate adjustments		3	0
Current tax for the year including withholding taxes		77	93
Payments during the year		-100	-109
Adjustment in respect of prior years		-7	2
Current tax for the year recognised in other comprehensive income		-1	0
Income tax receivable and payable 31/12		-13	15

Income tax is recognised as follows:

		2020	2019
Income tax receivable		38	14
Income tax payable		25	29
Income tax receivable and payable 31/12		-13	15

Consolidated Financial Statements 100

Accounting policies

While conducting business globally, transfer pricing disputes, etc. with tax authorities may occur, and Man- agement judgement is applied to assess the possible outcome of such disputes. The most probable outcome is used as the measurement method, and Management believes, that the provision made for uncertain tax positions not yet settled with local tax authorities is ad- equate. However, the actual obligation may deviate and is dependent on the result of litigations and settlements with the relevant tax authorities. The Group is subject to income taxes in numerous jurisdictions. Signicant judgement is required in determining provision for uncertain tax positions or the recognition of a deferred tax asset. A tax asset is recognised if it is assessed, that the asset can be utilised in a foreseeable future based on strong indications, that sufcient future prots are available to absorb the temporary differences including the Group's future tax planning. The valuation of tax assets related to losses carried for- ward is done on a yearly basis and is based on expected positive taxable income within the next 3-5 years.

Deferred tax EURm		2020	2019
Deferred tax, net 1/1		-11	5
Exchange rate adjustments		0	1
Acquisition of subsidiary		0	0
Change in deferred tax recognised in prot and loss		9	-7
Adjustment to valuation of tax assets		-5	-6
Deferred tax for the year recognised in other comprehensive income for the year		0	-4
Deferred tax, net 31/12		-7	-11

Deferred tax is recognised in the balance sheet as follows:

		2020	2019
Deferred tax assets		54	54
Deferred tax liabilities		47	43
Deferred tax, net 31/12		-7	-11

Deferred tax relates to:

		2020	2019
Non-current assets		20	10
Current assets		-7	-5
Non-current liabilities		-14	-14
Current liabilities		-5	-5
Tax loss carried forward		-5	-1
Re-taxable amounts		4	4
Deferred tax, net 31/12		-7	-11

Notes 5.1 Tax (continued)

Unrecognised tax assets expire as follows EURm		2020	2019
< 1 year		1	2
1-5 years		5	5
> 5 years		21	30
Do not expire		4	5
Unrecognised tax assets		31	42

Tax assets not recognised amount to EUR 31 million (2019: EUR 42 million).# Consolidated nancial statements 101

Comments

Critical estimates and judgements

Notes

5.2 Commitments and contingent liabilities

For the Group, commitments comprise EUR 28 million (2019: EUR 4 million). The increase in commitments is supplier related. Contingent liabilities amount to EUR 6 million (2019: EUR 8 million). Contractual obligations for purchase of tangible assets are mentioned in note 2.2. The Group is engaged in a few legal proceedings. It is expected that the outcome of these legal proceedings will not impact the Group’s nancial position in excess of what has been provided for in the balance sheet as at 31 December 2020 (as well as at 31 December 2019). Provisions for legal proceedings are recognised, if they are certain or probable at the balance sheet date, and if the size of the liability can be measured on a reliable basis. Legal proceedings for which no reliable estimate can be made are disclosed as contingent liabilities.

5.3 Related parties

Transactions with related parties
| EURm | | 2020 | 2019 |
| :--------------------- | :--- | :---- | :---- |
| Transactions with associated companies: | | | |
| Net sales to associated companies | | 15 | 16 |
| Dividend from associated companies | | 1 | 1 |
| Transactions with other related parties: | | | |
| Shares purchased | | 16 | - |

At 31 December 2020, own shares accounted for 1.8% (2019: 0.3%) of the share capital, see note 4.5. The Group’s related parties comprise the company’s shareholder; the ROCKWOOL Foundation, the compa- ny’s Board of Directors and Management and associat- ed companies. As part of the share buy-back carried out in 2020, own shares were purchased from major shareholders. From ROCKWOOL Foundation 57,557 shares for a total of EUR 16 million was purchased on 28 August 2020. The shares were purchased at the volume-weighted average purchase price of the shares in the last ve trading days prior to completion. Apart from dividends and purchase of own shares, no transactions were carried out with the shareholders during the year. For transactions with the Board of Directors and Group Management please refer to note 1.2 and note 1.3.

Consolidated nancial statements 102

Accounting policies

Comments

Notes

5.4 Auditor’s fee

Fees to auditors elected at the Annual General Meeting
| EURm | | 2020 | 2019 |
| :-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :--- | :---- | :---- |
| Statutory audit | | 1 | 1 |
| Other opinions | | 0 | 0 |
| Tax consultancy | | 1 | 1 |
| Other services | | 0 | 0 |
| Fees to auditors | | 2 | 2 |

Fees for services in addition to the statutory audit of the nancial statements which were provided by the statutory auditor Price waterhouseCoopers Statsautoris- eret Revisionspartnerselskab to the Group amounted to less than EUR 1 million in both 2020 and 2019. Services in addition to the statutory audit of the nancial statements comprise tax services relating to transfer pricing, as well as other general accounting consultancy services.

5.5 New and amended standards and general accounting policies

The Annual Report for ROCKWOOL International A/S has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and further requirements in the Danish Financial Statements Act. The nancial year for the Group is 1 January – 31 December 2020.

5.5.1 New and amended standards and interpretations

Implementation of new standards, amendments and regulations
The Group has implemented the following amendments or new standards (IFRS) for nancial year 2020. The amendments came into effect for nancial years on or after 1 January 2020:
– Amendments to IFRS 3 Business Combinations: Amendment to the denition of a business.
– Amendments to IFRS 9 Financial Instruments: IBOR reform phase 1.
– Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Amended deni- tion of materiality.
– Amendments to IFRS 16 Leases: Modications as a consequence of COVID-19.

It is assessed that the amendments to IFRS 3 might have an impact on the future recognition and measurement of business combinations for the Group nancial state- ments. The remaining new standards and amendments are assessed not to be relevant to the Group or to have no signicant effect on the Group nancial statements.

New and amended standards and interpretation not yet entered into force
The following new standards, amendments and inter- pretations is issued, but not yet adopted by EU, could be relevant for the Group:
– IFRS 3 Business Combinations: Amendments to the reference of the conceptual framework (effective date 1 January 2022).
– IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: IBOR reform phase 2 (effective date 1 January 2021).
– IAS 1 Presentation of Financial Statements: Clar- ication of classication of liabilities as current or non-current (effective date 1 January 2023).
– IAS 16 Property, plant and equipment: Amendment related to proceeds before intended use (effective date 1 January 2022).
– IAS 37 Provisions, Contingent Liabilities and Con- tingent Assets: Clarication related to onerous con- tracts - costs of fullling a contract (effective date 1 January 2022).
– Annual improvements to IFRSs 2018-2020 cycle (effective date 1 January 2022).

None of the new amendments are expected to have a signicant effect on the Group nancial statements. ROCKWOOL's policy is to follow the 70 percent fee cap restriction on non-audit services provided by Price- waterhouseCoopers Statsautoriseret Revisionspartner- selskab, Denmark, the auditor of the parent company. PricewaterhouseCoopers Statsautoriseret Revisions- partnerselskab complies with the 70 percent fee cap restriction in 2020.

Consolidated nancial statements 103

Comments

Notes

5.5 New and amended standards and general accounting policies (continued)

make judgments, estimates and assumptions concern- ing future events. The judgements, estimates and assumptions are based on historical experience and other factors, and are con- sidered by Management as reasonable in the circum- stances, but are inherently uncertain and unpredictable and therefore the actual outcome may differ from these estimates. Management considers critical estimates and judge- ments under the following items as signicant to the consolidated nancial statements:
– Impairment testing (note 2.5)
– Expected lifetime for tangible assets (note 2.2)
– Deferred tax assets and uncertain tax positions (note 5.1)
– Pension obligations (note 2.6)

Reporting under the ESEF Regulation

The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Reg- ulation) has introduced a single electronic reporting format for the annual nancial reports of issuers with securities listed on the EU regulated markets. The ESEF Regulation sets out the annual nancial reports shall be disclosed using the XHTML format and that the primary consolidated nancial statements shall be tagged using inline eXtensible Business Reporting Language (iXBRL). IXBRL tags shall comply with the ESEF taxonomy, which is included in the ESEF Regulation and developed based on the IFRS taxonomy published in the IFRS Foundation. As part of the tagging process nancial statement line items are marked up to elements in the ESEF taxono- my. If a nancial statement line item is not dened in the ESEF taxonomy, an extension to the taxonomy is created. Extensions have to be anchored in the ESEF taxonomy, except for extensions which are subtotals. The annual report submitted to the Danish Finan- cial Supervisory Authority (The Ofcially Appointed Mechanisms) consists of the XHTML document together with some technical les all included in a ZIP le named ROCK-2020-12-31.ZIP.

5.5.2 General accounting policies

Group Accounts
The consolidated nancial statements comprise ROCKWOOL International A/S and the entities in which the company and its subsidiaries hold the majority of the voting rights. The consolidated nancial statements have been prepared as a consolidation of the parent company’s and the individual subsidiaries’ nancial statements, de- termined according to the Group’s accounting policies, and with elimination of dividends, internal revenue and expenditure items, internal prots as well as intercom- pany balances and intercompany shareholdings. Besides shares, capital investments in subsidiaries include long-term loans to subsidiaries if such loans constitute an addition to the shareholding.

Translation of foreign currency
The Annual Report has been presented in Euro (EUR) which is the Group’s presentation currency. Each compa- ny in the Group determines its own functional currency. Transactions in foreign currency are translated using the exchange rate at the transaction date or a hedged rate. Monetary items in foreign currency are translated using the exchange rates at the balance sheet date. Ac- counts of foreign subsidiaries are translated using the exchange rates at the balance sheet date for balance sheet items, and the periodic average exchange rates for items of the income statement.# Consolidated Financial Statements

Notes

5.6 Group companies

Country	% Shares owned	Parent company
Subsidiaries		ROCKWOOL International A/S
Austria	100	ROCKWOOL Handelsgesellschaft m.b.H.
Belgium	100	ROCKWOOL Belgium B.V.
Belgium	100	Etablissements Charles Wille et cie SA
Bulgaria	100	ROCKWOOL Bulgaria Ltd.
Canada	100	ROXUL Inc.
China	94.84	ROCKWOOL Firesafe Insulation (Guangzhou) Co. Ltd.
China	100	ROCKWOOL Firesafe Insulation (Jiangsu) Co., Ltd.
Croatia	100	ROCKWOOL Adriatic d.o.o.
Czech Republic	100	ROCKWOOL a.s.
Denmark	100	ROCKWOOL A/S
Estonia	100	ROCKWOOL EE OÜ
Finland	100	ROCKWOOL Finland OY
France	100	ROCKWOOL France S.A.S
Germany	100	Deutsche ROCKWOOL GmbH & Co. KG
Germany	100	HECK Wall Systems GmbH
Germany	100	ROCKWOOL Mineralwolle GmbH Flechtingen
Germany	100	ROCKWOOL Operations GmbH & Co. KG
Great Britain	100	ROCKWOOL Limited
Hong Kong	100	ROCKWOOL Building Materials Ltd.
Hungary	100	ROCKWOOL Hungary Kft.
India	100	ROXUL ROCKWOOL Insulation India Ltd.
India	100	ROXUL ROCKWOOL Technical Insulation India Pvt. Ltd.
Italy	100	ROCKWOOL Italia S.p.A.
Korea	100	ROCKWOOL Korea Co. Ltd.
Latvia	100	SIA ROCKWOOL Latvia
Lithuania	100	UAB ROCKWOOL Lithuania
Malaysia	94.84	ROCKWOOL Malaysia Sdn. Bhd.
the Netherlands	100	Breda Confectie B.V.
the Netherlands	100	ROCKWOOL B.V.
Norway	100	AS ROCKWOOL Norway
Poland	100	ROCKWOOL Polska Sp. z o.o.
Poland	100	FAST Sp. z o.o.
Romania	100	ROCKWOOL Romania s.r.l.
Russia	100	LLC ROCKWOOL Russia
Russia	100	LLC ROCKWOOL-NORTH
Russia	100	LLC ROCKWOOL-Ural
Russia	100	LLC ROCKWOOL-VOLGA
Singapore	100	ROCKWOOL Building Materials (Singapore) Pte Ltd.
Slovakia	100	ROCKWOOL Slovensko s.r.o.
Spain	100	ROCKWOOL Peninsular S.A.U.
Sweden	100	ROCKWOOL AB
Switzerland	100	Flumroc AG
Switzerland	100	PAMAG Engineering AG
Switzerland	100	ROCKWOOL GmbH
Thailand	94.84	ROCKWOOL Limited
Turkey	100	ROCKWOOL Insaat ve Yalitim Sistemleri San. Ve Tic. Ltd. Sti.
UAE	100	ROCKWOOL Middle East FZE
Ukraine	100	LLC ROCKWOOL Ukraine
United States	100	ROXUL USA Inc.
Subsidiaries (Continued)
China	100	Chicago Metallic (Shenzhen) Co. Ltd.
Germany	100	ROCKWOOL Rockfon GmbH
Hong Kong	100	Chicago Metallic (Asia Pacific) Ltd.
Malaysia	100	Chicago Metallic (Malaysia) Sdn. Bhd.
Other subsidiaries
Germany	100	ROCKWOOL Beteiligungs GmbH
Germany	100	ROCKWOOL Verwaltungs GmbH
Mexico	100	CMC Productos Perlitas S de R.L. de C.V.
Mexico	100	Servicios Pearl de Mexico S de R.L. de C.V.
Poland	100	ROCKWOOL Global Business Service Center Sp. Z.o.o.
Switzerland	100	Meilco Holding AG
Associated companies
Denmark	33	Betterhome ApS
France	20	RESO SA

The German subsidiaries DEUTSCHE ROCKWOOL GmbH & Co. KG and ROCKWOOL Operations GmbH & Co. KG, which have legal form of partnership, make use of the exemptions provided by section 264b of the German Commercial Code (HGB).

Definition of key figures and ratios

• EBITDA: Earnings before depreciation, write-downs, amortisations, financial items and tax
• EBIT: Earnings before financial items and tax
• Net working capital (NWC): Trade receivables, other receivables and other current operating assets less trade payables, other payables and other current operational liabilities adjusted for investment payables
• Invested capital: NWC + intangible assets, tangible assets and right-of-use assets less non-interest bearing liabilities and investment payables
• Net interest bearing debt: Cash less bank loans and other loans less bank debt less lease liabilities
• EBITDA margin (%): EBITDA / Net sales x 100%
• EBIT margin (%): EBIT / Net sales x 100%
• Earnings per share of DKK 10 (EUR 1.3): Profit for the year excl. non-controlling interests / Average number of outstanding shares
• Diluted earnings per share of DKK 10 (EUR 1.3): Profit for the year excl. non-controlling interests / Diluted average number of outstanding shares
• Cash flow per share of DKK 10 (EUR 1.3): Cash flows from operating activities / Average number of outstanding shares
• Dividend per share of DKK 10 (EUR 1.3): Proposed dividend for the year / Number of shares at the end of the year
• Book value per share of DKK 10 (EUR 1.3): Equity end of the year excl. non-controlling interests / Number of shares at the end of the year
• ROIC: EBIT / Average invested capital including goodwill x 100%
• Return on equity (%): Profit for the year excl. non-controlling interests / Average equity excl. non-controlling interests
• Equity ratio (%): Equity end of the year excl. non-controlling interests / Total equity and liabilities at the end of the year x 100%
• Payout ratio (%): Proposed dividend for the year / Profit for the year excl. non-controlling interests x 100%
• Leverage ratio: Net interest-bearing debt / EBITDA
• Financial gearing: Net interest-bearing debt / Equity end of the year
• Market cap: Number of outstanding shares x share price
• Growth in local currency: Growth rates excluding currency impact, as both periods are using the same exchange rates.

The ratios have been calculated in accordance with www.keyratios.org/ issued by CFA Society Denmark. The ratios mentioned in the five-year summary are calculated as described in the definitions above.

EXCHANGE RATE

	2020	2019	2018	2017	2016
Average DKK/EUR	7.45	7.46	7.45	7.44	7.45

Accounts of foreign subsidiaries are translated using the exchange rates at the balance sheet date for balance sheet items, and the periodic average exchange rates for items of the income statement.

Management’s statement

The Board of Directors and the Registered Directors have today considered and adopted the Annual Report of ROCKWOOL International A/S for the financial year 1 January - 31 December 2020. The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and the parent company financial statements have been prepared in accordance with the Danish Financial Statement Act. Management's review has been prepared in accordance with the Danish Financial Statement Act.

In our opinion the Management’s review includes a true and fair account of the development in the operations and financial circumstances of the Group and the parent company, of the results for the year and of the financial position of the Group and the parent company, as well as a description of the more significant risks and elements of uncertainty facing the Group and the parent company.

Board of Directors
Thomas Kähler
Chairman
Søren Kähler
René Binder Rasmussen
Carsten Bjerg
Deputy Chairman
Andreas Ronken
Connie Enghus Theisen
Rebekka Glasser Herlofsen
Jørgen Tang-Jensen
Christian Westerberg

In our opinion the consolidated financial statements and the parent company financial statements give a true and fair view of the Group’s and the parent company’s financial position at 31 December 2020 and of the results of the Group’s and the parent company’s operations and cash flows for the financial year 1 January - 31 December 2020.

Hedehusene, 10 February 2021

Registered Directors
Jens Birgersson
CEO
Kim Junge Andersen
CFO

In our opinion, the Annual Report of ROCKWOOL International A/S for the financial year 1 January - 31 December 2020 identified as ROCK-2020-12-31.ZIP is prepared, in all material respects, in compliance with the ESEF Regulation. We recommend that the Annual Report be adopted at the Annual General Meeting.

Independent Auditor’s Reports

To the shareholders of ROCKWOOL International A/S

Key audit matter

Impairment of intangible and tangible assets

Intangible and tangible assets might be impaired due to for example increased competition in local markets, changes in the global economy and changes in the strategy of the Group. We focused on this area as the determination of whether or not an impairment charge for intangible and tangible assets was necessary involves significant estimates and judgements made by Management, including especially:

• estimation of future cash flows, including sales margin, and the significant assumptions underlying Management’s expectations;
• discount rates applied in discounting future cash flows; and
• long-term growth rates

Reference is made to notes 2.1, 2.2, 2.4 and 2.5 to the Consolidated Financial Statements.# Independent Auditor's Report

How our audit addressed the key audit matter

We tested the impairment tests prepared by Management and evaluated the reasonableness of estimates and judgements made by Management in preparing these. Our audit procedures included assessing the Group’s impairment model. Special focus was given to the key drivers of the future cash ows, including growth in net revenues, cost ination and efciency improvements, as well as the signicant assumptions concerning dis- count rates and long-term growth rates applied. We examined sensitivity analyses performed over changes in discount rates, revenue growth and efciency improvements. Moreover, we tested the historical reliability of Man- agement’s estimates by comparing budgeted gures to actual gures for the past years. We evaluated the disclosures of impairment testing in the notes.

Report on the audit of the Financial Statements

Our opinion

In our opinion, the Consolidated Financial Statements give a true and fair view of the Group’s nancial position at 31 December 2020 and of the results of the Group’s opera- tions and cash ows for the nancial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Moreover, in our opinion, the Parent Company Financial Statements give a true and fair view of the Parent Company’s nancial position at 31 December 2020 and of the results of the Parent Company’s operations for the nancial year 1 January to 31 December 2020 in accordance with the Danish Financial Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors.

What we have audited

The Consolidated Financial Statements of ROCKWOOL International A/S for the nancial year 1 January to 31 December 2020 (pp. 67-106) comprise the consolidated income statement and statement of comprehensive income, the consolidated balance sheet, the consolidated cash ow statement, the consolidated statement of changes in equity and the notes, including summary of signicant accounting policies.

The Parent Company Financial Statements of ROCKWOOL International A/S for the nancial year 1 January to 31 December 2020 (pp. 112-121) comprise the income statement, the balance sheet, the statement of changes in equity and the notes, including summary of signicant accounting policies.

Collectively referred to as the “Financial Statements”

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fullled our other ethical responsibilities in accordance with the IESBA Code. To the best of our knowledge and belief, prohibited non- audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.

Appointment

We were rst appointed auditors of ROCKWOOL International A/S on 9 April 2014 for the nancial year 2014. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 7 years including the nancial year 2020.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most signicance in our audit of the Financial Statements for 2020. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Consolidated nancial statements 109

Statement on Management’s Review

Management is responsible for Management’s Review (pp. 3-66 and p. 107). Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act.

Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review.

Management’s responsibilities for the Financial Statements

Management is responsible for the preparation of con- solidated nancial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act and for the prepa- ration of parent company nancial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Manage- ment determines is necessary to enable the preparation of nancial statements that are free from material mis- statement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inuence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufcient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepre- sentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s and the Parent Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
• Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signicant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufcient appropriate audit evidence regarding the nancial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signicant audit ndings, including any signicant deciencies in internal control that we identify during our audit.

Independent Auditor’s Reports (continued)# Independent Auditor’s Report

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Consolidated Financial Statements

110

Independent Auditor’s Reports (continued)

Hellerup, 10 February 2021
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231

Torben Jensen
State Authorised Public Accountant
mne18651

Rune Kjeldsen
State Authorised Public Accountant
mne34160

Report on compliance with the ESEF Regulation

As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of ROCKWOOL International A/S for the financial year 1 January to 31 December 2020 with the file name ROCK-2020-12-31.ZIP is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements.

Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes:
– The preparing of the annual report in XHTML format;
– The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary;
– Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and
– For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include:
– Testing whether the annual report is prepared in XHTML format;
– Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process;
– Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements;
– Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified;
– Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and
– Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements.

In our opinion, the annual report of ROCKWOOL International A/S for the financial year 1 January to 31 December 2020 with the file name ROCK-2020-12-31.ZIP is prepared, in all material respects, in compliance with the ESEF Regulation.

Consolidated Financial Statements

111

Financial Statements for ROCKWOOL International A/S

113

Income Statement

114

Balance Sheet

115

Statement of Shareholders’ Equity

116

Parent Company Financial Statements

112

Parent Company Financial Statements

Income statement – ROCKWOOL International A/S

1 January – 31 December

EURm	Note	2020	2019
Net sales	2.1	358	402
Costs of raw material and consumables		117	134
Other external costs		98	110
Gross profit		143	158
Personnel costs	2.2	60	58
Depreciation, amortisation and write-downs	3.1, 3.2	19	24
Operating profit / EBIT		64	76
Income from investments in subsidiaries	2.3	195	226
Financial income	4.1	11	10
Financial expenses	4.1	15	11
Profit before tax		255	301
Tax on profit for the year	5.1	14	27
Profit for the year		241	274

Parent Company Financial Statements

113

Balance sheet – ROCKWOOL International A/S

Assets – as at 31 December

EURm	Note	2020	2019
Completed development projects		12	13
Acquired patents, licenses and trademarks		19	21
Development projects in progress		4	9
Intangible assets	3.1	35	43
Land and buildings		20	21
Other fixtures and fittings, tools and equipment		7	7
Prepayments and property, plant and equipment in progress		4	1
Property, plant and equipment	3.2	31	29
Investment in subsidiaries		1,884	1,821
Receivables from subsidiaries		213	204
Fixed assets investments	3.3	2,097	2,025
Fixed assets		2,163	2,097
Contract work in progress	3.4	13	17
Receivables from subsidiaries		333	270
Tax receivables		12	7
Other receivables		21	27
Prepayments		6	5
Receivables		385	326
Cash		74	126
Current assets		459	452
Assets		2,622	2,549

Equity and liabilities – as at 31 December

EURm	Note	2020	2019
Share capital		29	29
Revaluation reserve according to the equity method		71	43
Reserve for development costs		12	17
Retained earnings		1,857	1,914
Proposed dividend		94	94
Shareholders’ equity		2,063	2,097
Deferred tax	5.2	7	5
Other provisions		1	3
Provisions		8	8
Bank debt		105	-
Trade payables		19	24
Payables to subsidiaries		411	402
Other payables		16	18
Current liabilities		551	444
Liabilities		559	452
Liabilities and shareholders’ equity		2,622	2,549

Parent Company Financial Statements

114

Statement of Shareholders’ Equity - ROCKWOOL International A/S

EURm	Share capital	Revaluation reserve according to the equity method	Reserve for development costs	Retained earnings	Proposed dividend	Total equity
Shareholders’ equity 1/1 2020	29	43	17	1,914	94	2,097
Exchange rate adjustments	-	-	-	8	-	8
Profit for the year	-	140	-	7	94	241
Development costs for the year	-	-	-5	5	-	0
Currency revaluation of investments in subsidiaries	-	-111	-	-	-	-111
Other adjustments	-	-1	-	-	-	-1
Expensed value of RSUs issued	-	-	-	1	-	1
Share buy-back programme	-	-	-	-77	-	-77
Purchase of own shares	-	-	-	-3	-	-3
Sale of own shares	-	-	-	2	-	2
Dividend paid to the shareholders	-	-	-	0	-94	-94
Shareholders’ equity 31/12 2020	29	71	12	1,857	94	2,063
Shareholders’ equity 1/1 2019	29	1	25	1,724	88	1,867
Exchange rate adjustments	-	-	-	-1	-	-1
Profit for the year	-	-4	-	184	94	274
Development costs for the year	-	-	-8	8	-	0
Currency revaluation of investments in subsidiaries	-	53	-	-	-	53
Other adjustments	-	-7	-	-	-	-7
Expensed value of RSUs issued	-	-	-	0	-	0
Purchase of own shares	-	-	-	0	-	0
Sale of own shares	-	-	-	-2	-	-2
Dividend paid to the shareholders	-	-	-	1	-88	-87
Shareholders’ equity 31/12 2019	29	43	17	1,914	94	2,097

Parent Company Financial Statements

115

Notes for ROCKWOOL International A/S

116

Note 1

1.1 Accounting Policies

The financial statements of ROCKWOOL International A/S have been prepared in accordance with the Danish Financial Statements Act (accounting class D). The Financial statements for 2020 are presented in EUR.

Changes in accounting policies

The accounting policies applied remain unchanged from previous year. The accounting policies are the same as for the consolidated financial statements with the adjustments described below. For a description of the Group’s accounting policies, please refer to the consolidated financial statements.

Recognition and measurement in general

Income is recognised in the income statement as earned. All costs incurred in generating the year’s revenue are also recognised in the income statement, including depreciation, amortisation and impairment losses. Value adjustments of financial assets and liabilities measured at fair value or amortised cost are also recognised in the income statement. Assets are recognised in the balance sheet when it is considered probable that future economic benefits will flow to the company and the value of the asset can be measured on a reliable basis. Liabilities are recognised in the balance sheet when they are considered probable and can be measured on a reliable basis. At initial recognition, assets and liabilities are measured at cost. Assets and liabilities are subsequently measured as described below for each item.

Net sales

The company produces and sells machinery and consultancy service. The projects typically include one deliverable. Revenue from the projects is recognised over time based on the progress and is based on the price of the projects. As the work is done at the customer's site, control is transferred along with the progress of the project. Recognition is based on the actual costs spent relative to the total estimated costs for the project, as this method is estimated to reflect the transfer of control. The credit terms are normally end of month plus 20 days. Royalty is received for the use of the ROCKWOOL brand and technology.## Parent company financial statements

2.1 Net sales

EURm	2020	2019
Revenue from projects	142	160
Royalties and other fees	216	242
Net sales	358	402

2.2 Personnel costs

EURm	2020	2019
Wages and salaries	54	52
Expensed value of RSUs issued	1	1
Pension costs	5	5
Other social security costs	0	0
Personnel costs	60	58
Average number of employees in ROCKWOOL International A/S	448	428

Reference is made to note 1.2 and 1.3 to the consolidated financial statements concerning remuneration of the Board of Directors and the Registered Directors.

2.3 Income from investments in subsidiaries

EURm	2020	2019
Share of net profit/(loss)	205	236
Amortisation of goodwill	-10	-10
Income from investments in subsidiaries	195	226

Note 3

3.1 Intangible assets

Completed development projects and development projects in progress mainly comprise software development.

Comments	EURm	Completed devel- opment projects	Acquired patents, licenses and trademarks	Develop- ment projects in progress	2020 Total	2019 Total
Cost	1/1	79	53	9	141	126
Exchange rate adjustments		-	1	1	2	0
Additions for the year		-	3	4	7	21
Transfer of development projects in progress		10	-	-10	-	-
Disposals for the year		-3	-13	-	-16	-6
Cost	31/12	86	44	4	134	141
Amortisation and write-downs	1/1	66	32	-	98	81
Exchange rate adjustments		1	1	-	2	0
Amortisation for the year		7	5	-	12	20
Write-down for the year		3	-	-	3	-
Disposals for the year		-3	-13	-	-16	-3
Amortisation and write-downs	31/12	74	25	-	99	98
Carrying amount	31/12	12	19	4	35	43

3.2 Property, plant and equipment

EURm	Land and buildings	Other xtures and ttings, tools and equipment	Prepay- ments and property, plant and equipment in progress	2020 Total	2019 Total
Cost	1/1	37	18	1	56
Exchange rate adjustments		0	0	0	0
Additions for the year		0	0	6	6
Transfer of property, plant and equipment in progress		0	3	-3	-
Disposals for the year		0	-1	0	-1
Cost	31/12	37	20	4	61
Depreciation and write-downs	1/1	16	11	-	27
Exchange rate adjustments		0	0	-	0
Depreciation for the year		1	3	-	4
Disposals for the year		0	-1	-	-1
Depreciation and write-downs	31/12	17	13	-	30
Carrying amount	31/12	20	7	4	31

Of the total net book value of land and buildings, EUR 1 million (2019: EUR 1 million) represent land not subject to depreciation.

3.3 Fixed assets investments

EURm	Investments in subsidiaries	Receivables from subsidiaries	2020 Total	2019 Total
Cost	1/1	1,778	204	1,982
Exchange rate adjustments		7	1	8
Additions for the year		30	89	119
Reductions/disposals for the year		-2	-81	-83
Cost	31/12	1,813	213	2,026
Value adjustments	1/1	43	-	43
Exchange rate adjustments		-111	-	-111
Share of net profit		205	-	205
Amortisation of goodwill		-10	-	-10
Dividends received		-55	-	-55
Other adjustments		-1	-	-1
Value adjustments	31/12	71	-	71
Carrying amount	31/12	1,884	213	2,097

3.4 Contract work in progress

EURm	2020	2019
Sales values of work performed	293	209
Invoiced on account	-280	-192
Contract work in progress, net	13	17
Recognised as follows:
Contract work in progress (assets)	13	17
Prepayments received, contract work in progress	-	-

Note 4

4.1 Financial income and Financial expenses

EURm	2020	2019
Financial income
Interest income	0	0
Interest income from subsidiaries	4	1
Foreign exchange gains	7	9
Financial income	11	10

EURm	2020	2019
Financial expenses
Interest expenses etc.	6	3
Interest expenses to subsidiaries	1	6
Fair value adjustment phantom shares	0	1
Foreign exchange losses	8	1
Financial expenses	15	11

4.2 Proposed distribution of profit

EURm	2020	2019
Proposed distribution of profit:
Proposed dividend to shareholders	94	94
Revaluation reserve according to equity method	140	-4
Retained earnings	7	184
Total profit	241	274

Reference is made to note 4.2 to the consolidated financial statements concerning derivatives. The policy is not to hedge exchange rate risks in long-term investments in subsidiaries. When relevant, external investment loans and Group receivables are, as a general rule, established in the local currency of the company involved, while cash at bank and in hand are placed in the local currency. In the few countries with ineffective financial markets loans can be raised and surplus liquidity placed in DKK or EUR, subject to the approval of the parent company’s finance function.

4.3 Derivatives

Most Group receivables that are not established in DKK or EUR are hedged via forward agreements, currency loans and cash pools or via the SWAP market. To ensure adequate financial reserves as defined by the Board of Directors, investment loans can be raised on a continuous basis to partly cover new investments and to refinance existing loans. Ownership clauses have been issued and/or deed of postponements in connection with intercompany receivables. Please refer to note 5.3.

Note 5

5.1 Tax on profit for the year

EURm	2020	2019
Current tax for the year	11	15
Change in deferred tax	1	1
Withholding taxes	3	8
Adjustment in current and deferred tax in previous years	-1	3
Tax on profit for the year	14	27

5.2 Deferred tax

EURm	2020	2019
Deferred tax 1/1	5	6
Change in deferred tax recognised in profit and loss	1	-1
Deferred tax for the year recognised in equity	1	0
Deferred tax 31/12	7	5

5.3 Commitments and contingent liabilities

There are no contingent liabilities neither this year nor last year. Operational lease commitments expire within the following periods as from the balance sheet date:

EURm	2020	2019
< 1 year	0	1
1-5 years	0	0
> 5 years	0	-
Operational lease commitments	0	1

For certain receivables amounting to EUR 173 million (2019: EUR 80 million) deeds of postponement have been given.

5.4 Related parties

ROCKWOOL International A/S has registered the following shareholders holding more than 5 percent of the share capital or the votes:

	2020		2019
	Share capital	Votes	Share capital
ROCKWOOL Foundation, DK-1360 Copenhagen K	23%	28%
15. Juni Fonden, DK-2970 Hoersholm	6%	10%
Dorrit Eegholm Kähler, DK-2830 Virum	4%	6%

The ROCKWOOL® trademark

The ROCKWOOL trademark was initially registered in Denmark as a logo mark back in 1936. In 1937, it was accompanied with a word mark registration; a registration which is now extended to more than 60 countries around the world.

The ROCKWOOL trademark is one of the largest assets in ROCKWOOL Group, and thus well protected and defended by us throughout the world.

ROCKWOOL Group’s primary trademarks:
* ROCKWOOL ®
* Rockfon ®
* Rockpanel ®
* Grodan ®
* Lapinus ®

Additionally, ROCKWOOL Group owns a large number of other trademarks.

Disclaimer

The statements on the future in this report, including expected sales and earnings, are associated with risks and uncertainties and may be affected by factors influencing the activities of the Group, e.g. the global economic environment, including interest and exchange rate developments, the raw material situation, production and distribution-related issues, breach of contract or unexpected termination of contract, price reductions due to market-driven price reductions, market acceptance of new products, launches of competitive products and other unforeseen factors.In no event shall ROCKWOOL International A/S be liable for any direct, indirect or consequential damages or any other damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other action, arising out of or in connection with the use of information in this report.

© ROCKWOOL International A/S 2021 All rights reserved

Required reporting referring to the Danish Financial Statement Act §99a, §99b and §107d can be found on p. 13 and pp. 30-49.

Photography credits:
Cover (Ben O’bro)
P. 8 (Jesper Schwartz)
P. 16, 17 (Jason O’Rear)
P. 19 (Red Warehouse)
P. 23 (Farminova)
P. 25 (Thea van den Heuvel)
P. 28 (Brian Carlin)
P. 35 (Shutterstock / Damsea)
P. 44 (Jesper Schwartz)
P. 52 (Brian Carlin)
P. 54 (Brian Carlin)
P. 115 (Ben O’bro)

Design and production: Kontrapunkt A/S
Released: 10 February 2021

ISSN 1904-8653 (print)
ISSN 1904-8661 (online)

ROCKWOOL Group
ROCKWOOL International A/S
Hovedgaden 584
2640 Hedehusene
Denmark
Phone: +45 4656 0300
CVR No. 54879415
www.rockwool.com/group/

	2020-01-01	2020-12-31	2019-01-01	2019-12-31