Annual Report 2011 Aktieselskabet Schouw & Co.

Transcription

1 Annual Report 2011 Aktieselskabet Schouw & Co.

2 Consolidated report Portfolio companies Statements 1 Intro 2 Key figures 3 Highlights 4 Our businesses 6 Management s report 8 Income statement and cash flows 10 Balance sheet 11 Outlook 12 Board of Directors 13 Executive management 14 Investor information 16 Management Bodies 18 Corporate Governance 19 The financial reporting process 20 BioMar 22 Fibertex Personal Care 24 Fibertex Nonwovens 26 Grene 28 Hydra-Grene 30 Martin 32 Xergi 33 Andre investeringer Financial statements CONSOLIDATED FINANCIAL STATEMENTS 34 Statement of income and comprehensive income 35 Balance sheet 36 Cash flow statement 37 Statement of changes in equity 38 Notes 78 Statement by the board of directors and the managment 79 Independent auditor s report PARENT COMPANY FINANCIAL STATEMENTS 59 Income- and comprehensive statement 60 Balance sheet 61 Cash flow statement 62 Statement of changes in equity 63 Notes 72 Accounting policies This publication is a translation of the statutory Danish Annual Report The original Danish text shall be controlling for all purposes, and in cases of discrepancy, the Danish wording shall be applicable.

3 President Jens Bjerg Sørensen Major operational improvements Schouw & Co. had a good year and delivered solid improvements in I am very pleased to report that our portfolio companies reported strong operational performances and, for the first time in the history of our company, we generated EBITDA of more than DKK 1 billion. Over the past few years, our companies have all made a dedicated commitment to growing their businesses and strengthening their market positions. It is very encouraging to see the results of the large investments made and the hard work that our managements and our many employees have put into making this happen. At Schouw & Co., we are focused on three key issues: profitable growth, efficient use of capital and being primed for the future. If you are not focused on all three of these components, you will not create a profitable business in the long term. One of our core values is to make sure that we never forget how important every single penny is when determining selling prices, in procurement and in every single business process. In 2011, that approach helped us lift our profitability by a substantial margin. Our businesses have strengthened their strategic foundations and adapted their cost base, and they now stand well prepared to continue to prosper. However, the state of the global economy has made us extra cautious, and we are ready to act swiftly and firmly if things do not develop as we expect. Schouw & Co. expects to generate a substantial cash flow over the next few years. That gives us a comfortable position from which to capitalise on any opportunities that may arise in our markets. We expect 2012 to be yet another year of prosperous developments and growing earnings for Schouw & Co. President Jens Bjerg Sørensen As a financially and environmentally responsible business, Schouw & Co. will not print and distribute a conventional annual report in This year, we have prepared a shareholder magazine to accompany our full-length annual report. Readers may benefit from reading the annual report in conjunction with the shareholder magazine. The annual report contains a full presentation of financial statements and a full management s report. The articles provided in the shareholder magazine provide more in-depth information and describe the opportunities available to our businesses and the challenges they face. The shareholder magazine is available in a print version and electronically at 1

4 Key figures GROUP SUMMARY (DKK MILLION) Revenue 11, , , , ,150.3 Operating profit before depriciation (EBITDA) 1, EBIT before goodwill impairment Operating profit (EBIT) Profit/(loss) after tax in associates (26.0) (0.6) (11.4) 4.0 (3.0) Profit/loss from divestment of equity investments Value adjustment of financial investment 1) (556.2) (518.1) 40.6 (871.5) 1,466.8 Net financials before value adjustm. of financial investm. (107.2) (92.2) (117.7) (143.5) (136.5) Profit/(loss) before tax (41.2) (241.2) (865.2) 1,766.1 Tax on the profit/loss for the year (30.8) (28.5) (38.3) (102.4) Profit for the year from continuing operations (72.0) (126.6) 73.0 (903.5) 1,663.7 Profit for the year from discontinued operations Profit/(loss) for the year (72.0) (903.4) 1,683.2 Share of equity attributable to shareh. of Schouw & Co. 4, , , , ,972.4 Minority interests Total equity 4, , , , ,641.5 Total assets 9, , , , ,316.4 Net interest bearing debt (NIBD) 2, , , , ,641.3 Working capital 2, , , , ,842.4 Other financial data Average number of employees during the year 3,287 3,166 3,334 3,743 3,541 Cash flow from operating activity , Investments in property, plant and equipment Depreciation of property, plant and equipment Return on equity (%) (1.7) (0.5) 2.5 (19.1) 39.2 ROIC (%) Equity ratio (%) EBITDA margin (%) EBIT margin (%) NIBD/EBITDA Per share data 2) Earnings per share (of DKK 10) (3.07) (0.97) 4.43 (35.34) Dividend per share (of DKK 10) Net asset value per share (of DKK 10) Share price at year end (of DKK 10) Price/net asset value Market capitalisation 3) 2, , , , ,094.3 The financial ratios have been calculated in accordance with Recommendations & Ratios 2010, issued by the Danish Society of Financial Analysts. 1) Value adjustment consists of value adjustments and dividends from the holdings of shares in Vestas and Lerøy. 2) Key ratios per share have been adjusted to reflect the issue of bonus shares. 3) Market capitalisation is calculated excluding the holding of treasury shares. 2

5 Growth in revenue and operational earnings 2011 was a good year 2011 n 2011 was a year of big improvements in revenue and even bigger improvements in operational earnings. n In May, Fibertex Nonwovens acquired the French company Tharreau Industries, increasing revenue substantially. n The greater business activity and the acquisition of Tharreau Industries increased the working capital tie-up by 33%. n The financial investments in Vestas and Lerøy had a negative aggregate impact of DKK 556 million. n Net interest-bearing debt rose by DKK 578 million, but its ratio relative to EBITDA fell to 2.6x n Both revenue and earnings are expected to continue growing in 2012, despite the general global economic uncertainty. n For 2012, Schouw & Co. expects to generate consolidated revenue in the range of DKK billion (2011: DKK 11.9 billion) and EBIT in the DKK million range (2011: DKK 646 million). BioMar n Volumes sold up by 26%, revenue improved by 34% and EBIT was up 81%. The advances were mainly due to the operations in Norway and in Chile. Fibertex Personal Care n Revenue increased due to higher raw materials prices, but earnings fell, inpart due to weaker sales in Europe in the first half of the year. Fibertex Nonwovens n Acquisition of Tharreau Industries lifted revenue, but rising raw materials prices and weak activities in the car industry caused an EBIT loss. Grene n Revenue was up by 6% and EBIT by 80% as a result of progress and efficiency improvements in Denmark, Poland and Norway. Hydra-Grene n 19% revenue growth based on higher OEM and aftermarket sales. EBIT margin lifted to 15%. Martin n Strong growth in the USA and Europe produced a 20% revenue improvement. Strong EBIT growth, but still substantial room for improvement. Revenue growth EBIT growth Net interestbearing debt/ EBITDA Dividend up by 1 DKK per share 26% 75% 2.6x 4 DKK 3

6 Our businesses BioMar Fibertex Personal Care Fibertex Nonwovens Grene FAKTA BioMar is the world s third-largest manufacturer of quality feed for the fish farming industry. The core business areas are feed for salmon, trout, sea bass and sea bream. GEOGRAPHY BioMar is headquartered in Aarhus, Denmark and operates production facilities in Norway, Scotland, Denmark, France, Spain, Greece and Chile. MARKETS Core markets: Europe and South America. OWNERSHIP In 2005, Schouw & Co. took a 68.8% majority interest in BioMar, then a listed company. BioMar became a wholly owned subsidiary following a merger in FACTS Fibertex Personal Care is among the world s five largest manufacturers of spunbond/ spunmelt nonwovens for the personal care industry, manufacturing mainly nappies, sanitary towels and incontinence products. GEOGRAPHY Head office in Aalborg, Denmark. Production facilities in Denmark and Malaysia and printing facilities in Germany. MARKETS Core markets: Europe and South East Asia. OWNERSHIP Fibertex was founded in 1968 and was acquired by Schouw & Co. in March The Personal Care activities have been a part of Fibertex since 1998 and were hived off as an independent portfolio company of Schouw & Co. at the beginning of FACTS Fibertex is among Europe s leading manufacturers of nonwovens, i.e. nonwoven textiles used for a number of different industrial purposes. GEOGRAPHY Head office in Aalborg, Denmark. Production facilities in Denmark, France, the Czech Republic and South Africa. MARKETS Core markets in Europe, secondary markets in Africa and North America. OWNERSHIP Fibertex was founded in 1968 and was acquired by Schouw & Co. in March FACTS Grene is a logistics and trading business operating in the sale of spare parts and accessories for the agricultural sector as well as sales, service and projects for industry. GEOGRAPHY Head office in Skjern, Denmark. Central warehouse facilities in Denmark, Poland and Russia. MARKETS Core markets in Denmark and the rest of the Nordic region as well as Poland, Russia and the Baltic States. OWNERSHIP Grene was founded in 1915 and was acquired by Schouw & Co. in March Revenue in DKK million

7 Other investments Hydra-Grene FACTS Hydra-Grene is a specialised trading and engineering company whose core business is trading and producing hydraulic components and systems development for industry as well as related consulting services. GEOGRAPHY Head office in Skjern, Denmark. Production facilities in Denmark and China. MARKETS Core markets in Denmark and the rest of Europe as well as Asia. OWNERSHIP Hydra- Grene was an independent member of the Grene group from 1974 to 2009, when the company was hived off from Grene and became an independent portfolio company of Schouw & Co. Martin FACTS Martin is the world s leading manufacturer of computercontrolled effect lighting, which is sold to the entertainment and experience industries in most parts of the world. Martin is also a significant manufacturer of smoke machines. GEOGRAPHY Head office in Aarhus, Denmark and production facilities in Denmark, the UK and China. MARKETS Core markets: Europe, North America and Asia. OWNERSHIP Schouw & Co. became the main shareholder of Martin in 1999 and the sole owner in Xergi FACTS Xergi is a leading supplier of turnkey biogas plants. Its core business consists of technology innovation, system design and installation as well as turnkey system operation and maintenance. GEOGRAPHY Head office in Støvring, near Aalborg, Denmark MARKETS Core markets: Europe and the USA. OWNERSHIP Xergi has been owned on a fifty/ fifty basis by Schouw & Co. and Dalgasgroup since Financial investments Schouw & Co. has two ownership stakes that are not considered to be of a long-term strategic nature: of 4 million shares in Vestas Wind Systems and of 1 million shares in the Norwegian company Lerøy Seafood Group. At December 31, 2011, these financial investments were recognised in the financial statements under investments at a carrying amount of DKK 329 million. Incuba Schouw & Co. holds a 49% stake in INCUBA A/S, a development and venture operation supporting entrepreneurial environments and investing actively in new companies. INCUBA is accounted for as an associated company. The carrying amount at December 31, 2011 was DKK 31 million. Property In addition to operational properties of the portfolio companies, Schouw & Co. owns two other properties, which are recognised under property, plant and equipment at a carrying amount of DKK 85 million at December 31, The link to consolidated revenue is shown in note 1. 5

8 Management and financial report Highlights Overall, 2011 was a good year for the companies of the Schouw & Co. Group. There were a number of challenges during the year, but they were generally dealt with in a satisfactory manner, enabling the Group to improve consolidated revenue by 26% while EBIT surged by a full 75%. The large revenue improvement shows that most of the Group s operations are not directly exposed to the general economic slump. The Schouw & Co. businesses have managed to align costs, capacity and focal areas with market demand, thereby creating a platform from which to restore growth. BioMar was the largest single contributor to the year s revenue and earnings improvements. The company lifted its revenue by a substantial margin, mainly due to the increased volumes in Norway and Chile, and supported by tight cost management, among other factors, BioMar s earnings improved by an even greater margin. As a result, the full-year EBIT was well above the most recent guidance provided in the Q interim report. Fibertex Personal Care reported revenue improvements for 2011 driven by higher selling prices triggered by higher prices of raw materials. Volumes sold declined during the year. The full-year EBIT declined from 2010, mainly due to the lower volumes sold in Europa in the first half of 2011, but despite the downturn EBIT remained high and was at the upper end of the most recent guidance range. Fibertex Nonwovens reported a substantial revenue increase in 2011, mainly as a result of the acquisition of French nonwovens manufacturer Tharreau Industries. However, the full-year EBIT was impacted by the sharp price increases for raw materials during the first half of the year and by a drop in demand in the second half from those customer segments that are the most sensitive to the current economic slump in Europe. The full-year EBIT was within the most recent guidance range, but did not meet the original forecast. This is not believed to be a reflection of the earnings potential in Fibertex Nonwovens. Grene reported a revenue improvement for 2011 that was broadly founded and with a positive performance in all countries, in which the company operates. In addition to the direct effect of increasing revenue, earnings were further boosted by tight cost management and completed efficiency enhancements. Accordingly, the full-year EBIT was well ahead of the guidance provided at the beginning of the year as well as above the most recent guidance. Hydra-Grene generated a substantial revenue improvement in 2011 based on an increase in OEM and aftermarket sales, whereas sales to the wind turbine industry were largely in line with last year. The earnings for the year matched the positive revenue performance, and EBIT ended slightly higher than the most recent guidance. Martin is the company of the Group that has been most severely hit by the global economic downturn, but its performance in 2011 was characterised by quarterly continuous improvements and the company achieved an operating profit in each of the last two quarters of the year. Geographically, Martin s revenue improvement was widely founded with increased business volumes in both the USA and Europe. The positive revenue performance was supported by Martin s improved contribution margin and fixed costs remaining at the 2010 level. This brought full-year EBIT to a modest profit slightly above the upper end of the most recent guidance range and a substantial improvement relative to Xergi, the 50%-owned subsidiary, did not meet the expectations expressed at the beginning of the year, mainly due to delayed and postponed projects, and the associate Incuba incurred a loss due to losses on its venture activities. Lastly, the substantial unrealised value adjustments on the Group s financial investments had a severe negative impact on net financials. Group developments In 2010, Fibertex began preparations for a demerger of its two main business areas, and effective from January 1, 2011, Fibertex Personal Care and Fibertex Nonwovens became separate businesses in a move intended for both of them to continue to pursue their potential. In March 2011, Fibertex Nonwovens agreed to acquire 85.27% of the shares in Tharreau Industries from that company s principal shareholder. The acquisition was finalised in May The ownership interest has since been increased to 89.64% and at the beginning of 2012, the company changed its name to Fibertex Nonwovens. In 2009, the Group identified significant growth opportunities within selected areas and therefore took steps to expand production capacity substantially at BioMar in Norway and at Fibertex Personal 6

9 Care in Malaysia. Both expansion projects were completed according to plan. The BioMar project, which also included an extended logistics system, began operations before the start of the high season in late summer 2011, and the Fibertex Personal Care project became operational by the end of After the end of 2011, Grene demerged its activites in Poland into two units, one for wholesale and the other focused on retail business. The demerger is expected to enhance the performance in both areas. In addition, all of our businesses have on a smaller scale launched initiatives in 2011 aimed at creating profitable growth, including expansion and automation of warehouse facilities at Grene, system development and geographical expansion at Hydra-Grene and structural optimisation and technology innovation at Martin. Special risks Schouw & Co. is an industrial conglomerate whose business activities are distributed on a number of business areas and a portfolio of securities. By diversifying its businesses, the Group spreads its ordinary business risk exposure related to its individual business areas. However, several of the Group s business areas rely on certain raw materials and are thus sensitive to major fluctuations in the prices of such raw materials. This applies especially to BioMar and the two Fibertex businesses. For all of the Group s companies, the economic slump continues to increase the general uncertainty with respect to debtors. All Group businesses are very attentive to following up on debtors. The Group has only to a limited extent taken out insurance against losses on receivables. The parent company and the individual companies of the Group have interest-bearing debt, some of which has short-term maturities, while some carries floating interest rates, resulting in overall ordinary risk. It is important to Schouw & Co. to have a prudent valuation of the Group s assets, and that individual companies cannot jeopardise the overall Group. The majority of the company s activities are located in Denmark and elsewhere in Europe, but it also has substantial assets outside of Europe, primarily in Malaysia and Chile. The Group believes that it has customary insurance coverage for its assets. Events after the balance sheet date Other than as set out elsewhere in this Annual Report, Schouw & Co. is not aware of events occurring after December 31, 2011, which are expected to have a material impact on the Group s financial position or outlook. 7

10 Income statements and cash flows Revenue Consolidated revenue was up by DKK 2,478 million from DKK 9,451 million in 2010 to DKK 11,929 million in Acquisitions contributed DKK 280 million to the consolidated revenue. Deducting acquired revenue leaves organic revenue growth of DKK 2,198 million, equivalent to a growth rate of 23%. The improvement was broadly founded in all business areas, but BioMar in particular contributed strongly, producing 34% revenue growth and accounting for 84% of the organic growth. Changes in exchange rates had no material effect on recognition of foreign subsidiaries in consolidated revenue. Selling prices closely related or contractually tied to raw materials prices lifted revenue due to higher raw materials prices for the BioMar and Fibertex businesses. Operating profit Operating profit (EBIT) was DKK 646 million, an increase of DKK 277 million, or 75%, from DKK 369 million in The improvement derived mainly from BioMar (earnings improvement of DKK 162 million) and from Martin and Grene (improvements of DKK 71 million and DKK 39 million respectively). Fibertex Personal Care reported a slight fall of DKK 12 million. Income from investments in associates There was a net loss from investments in associates after tax of DKK 26 million against a loss of DKK 1 million in Most of this loss (DKK 21 million) derived from Incuba due to losses on its venture activities. The other associates reported in aggregate a loss of DKK 5 million consisting of a loss of almost DKK 6 million on the ownership interest in Fibertex South Africa and a profit of almost DKK 1 million from other associates. Financial income and expense The Group s financial items amounted to a net expense of DKK 663 million, compared with a net expense of DKK 610 million in Financial items were strongly affected by the unrealised value adjustments of the financial investments in Vestas and Lerøy totalling DKK 556 million, compared with DKK 518 million in The value adjustments for 2011 were DKK 456 million for Vestas and DKK 100 million for Lerøy. Calculated net of the effect of the financial investments, net financial expenses were up by DKK 15 million to DKK 107 million, the increase mainly being the result of the Group s higher average net interest-bearing debt relative to Acquisitions and divestments At the beginning of March 2011, the Schouw & Co. Group acquired 85.27% of the shares in Tharreau Industries, a French nonwovens manufacturer, at a price of EUR 30 per share, for a total price of DKK 253 million. In connection with the acquisition, a mandatory tender offer of EUR per share was made for the remaining shares, which brought the ownership interest to 89.64%. The acquired business was consolidated in Schouw & Co. s financial statements from the beginning of May 2011 when all regulatory approvals had been obtained. In addition, the Group acquired, through Grene in the spring of 2011, a small business at a price of DKK 8 million. The acquisition involves three shops in Poland, which have been integrated into Grene s Polish activities. Accounting policies In 2011, Schouw & Co. implemented amendments to existing accounting standards and interpretations, including IAS 24 and IAS 32, but has otherwise made few reclassifications, and these have affected only a few aspects of presentation. The changes have no effect on neither profit/loss for the year nor equity. Apart from the above, the accounting policies are unchanged from last year. 8

11 Income tax Schouw & Co. incurred a loss before tax for the year of DKK 41 million. Tax on the financial results for the year was an expense of DKK 31 million, which was mainly attributable to non-deductible costs, of which the value adjustment of the shares in Lerøy accounted for approximately DKK 30 million. Profit/loss on discontinued operations There were no discontinued operations in The discontinued operations recognised in 2010 related to the divested Norwegian fish farming business Sjøtroll Havbruk. Cash flow statement Cash flows from operations for the year amounted to DKK 419 million compared with DKK 444 million in Cash flows from operations for the year before changes in working capital improved by DKK 319 million to DKK 1,074 million. Working capital was up by DKK 428 million in 2011, or by 27%, which was consistent with the increase in revenue. The overall net cash flows for the year increased from DKK 484 million in 2010 to DKK 803 million in The acquisition of Tharreau Industries contributed DKK 215 million of the DKK 319 million increase, while the rest was attributable to investments in property, plant and equipment in BioMar and Fibertex Personal Care, as both of these businesses completed projects involving capacityincreasing facilities in Investments in intangible assets, much of which involved development costs for Martin, amounted to DKK 56 million against DKK 42 million in The cash flows from operating activities, at DKK 419 million, were DKK 384 million less than the total investment for the year of DKK 803 million, which explains much of the DKK 612 million increase in interest-bearing debt. In addition, dividends of DKK 71 million were paid to shareholders and the purchase of treasury shares amounted to DKK 69 million. Cash and cash equivalents at year end, comprising bank deposits, increased by DKK 90 million to stand at DKK 541 million at December 31, Much of the cash held was of a temporary nature at the end of the year and was used to pay creditors immediately thereafter. The Group s capital resources Equity strength and capital resources have generally become the subject of increased attention due to the global economic slump. In a situation like that, it is very reassuring to know that the Schouw & Co. Group has a relatively high equity ratio and therefore only moderate financial gearing. Investments made and growth achieved in 2011 have increased both the working capital tie-up and net interest-bearing debt, but have also produced a substantial improvement in EBITDA. The higher earnings bring the Group in a better position to make investments and reduce debt concurrently with still having the ability to pay stable dividends. The consolidated net interest-bearing debt amounted to DKK 2,745 million at December 31, The total interest-bearing debt amounted to DKK 3,325 million, of which 31% was categorised as non-current and 69% as current liabilities. Some 81% of the Group s total debt is floating rate. In terms of currencies, 27% is in Danish kroner and 41% is in euros. The rest is denominated in local currencies in markets where the Group has material business activities. In addition to its strong solvency position and well-established relations with its financial business partners, Schouw & Co. has a highly liquid investment at its full disposal consisting of the holdings of 4,000,000 shares in Vestas and 1,000,000 shares in Lerøy. 9

12 Balance sheet Dividends The Board of Directors intends to recommend to the shareholders in general meeting that a dividend of DKK 4 per share of DKK 10 nominal value be paid in respect of the 2011 financial year, equal to total dividend payments of DKK 102 million. Assets The Schouw & Co. Group s total assets amounted to DKK 9,901 million at December 31, 2011 compared with DKK 8,900 million at December 31, The DKK 1,001 million increase in total assets covers a number of material and opposing factors. Intangible assets amounted to DKK 1,142 million, which was DKK 67 million higher than last year. The difference was caused mainly by the addition of goodwill and other intangibles related to the acquisition of Tharreau Industries. Property, plant and equipment increased by a net amount of DKK 366 million in 2011, a large part of which represents plant and machinery from the acquisition of Tharreau Industries. The rest consisted of production plant in BioMar and Fibertex Personal Care. The remaining businesses had net disposals of DKK 41 million, as amortisation and depreciation charges were greater than investments made. In other non-current assets, investments in associates fell by DKK 31 million from DKK 94 million to DKK 63 million mainly due to losses incurred. Securities fell by DKK 571 million, which was mainly attributable to unrealised capital losses on shares in Vestas and Lerøy. The Group s holding of Vestas shares fell by DKK 456 million to DKK 248 million at the end of the year. In addition, the holding of shares in Lerøy fell by DKK 109 million. The Lerøy shares are recognised in current assets at a value of DKK 81 million. Non-current receivables and deferred tax assets were up by DKK 130 million to DKK 377 million, of which DKK 126 million involved an investment grant relating to Fibertex Personal Care in Malaysia. Current assets increased by DKK 931 million, of which increases in inventories and receivables amounted to DKK 351 million and DKK 566 million, respectively. The higher inventories and trade receivables are of course a reflection of the 26% growth in consolidated revenue and the effects of the acquisition of Tharreau Industries. Securities recognised in current assets fell by DKK 109 million and, as mentioned, consist of Lerøy shares. Cash and cash equivalents amounted to DKK 541 million at December 31, 2011, an increase of DKK 90 million. Shareholders equity Consolidated equity including minorities fell by a net amount of DKK 165 million in The change consisted of several opposing factors. Foreign exchange adjustments in foreign units and the addition of minority interest relating to the acquisition of Tharreau Industries added DKK 14 million and DKK 30 million respectively to equity. In addition, dividends paid to shareholders and the purchase of treasury shares had a negative impact on equity in the amount of DKK 140 million. After giving effect to the loss for the year of DKK 72 million, Schouw & Co. s equity including minority interests amounted to DKK 4,230 million at December 31, 2011 (equity ratio of 42.7%), compared with DKK 4,395 million a year earlier (equity ratio of 49.4%). Treasury shares At December 31, 2010, Schouw & Co. held 1,623,275 treasury shares, corresponding to 6.37% of the share capital. During 2011, Schouw & Co. acquired an additional 536,750 treasury shares at an aggregate price of DKK 76 million, while selling 151,662 treasury shares for the Group s employee share scheme and share option programme. Accordingly, Schouw & Co. held 2,008,363 treasury shares at December 31, 2011, corresponding to 7.88% of the share capital. The portfolio of treasury shares is recognised at DKK 0. Liabilities The Group s total liabilities increased by DKK 1,166 million to DKK 5,671 million at December 31, 2011, of which the interest-bearing debt amounted to DKK 3,324 million, an increase of DKK 699 million relative to December 31, Trade receivables and other liabilities increased by DKK 365 million to DKK 2,056 million at December 31,

13 Outlook Outlook Overall, the companies of the Schouw & Co. Group performed well during 2011, reporting substantial improvements in both revenue and EBIT. Our businesses have maintained good competitive strength. Adjustments have been made in preparation for the expected market conditions, and a host of business initiatives have been taken that can provide a foundation for profitable growth. We monitor very closely the economic turbulence currently affecting a large number of markets, especially in Europe. Some of our businesses are very sensitive to the situation while others are more robust. We remain focused on optimising existing operations and phasing out nonstrategic activities not generating sufficient profitability. The economic turmoil has given us a natural incentive to pay more attention to optimising the use of our capital resources. BioMar expects market growth in the North Sea region (Norway and Scotland) and in Chile in 2012, although at a somewhat lower rate than seen in 2011 and notes that weather conditions cannot be assumed to be as favourable in 2012 as they were in A relatively stable market is expected in Continental Europe and overall, BioMar expects moderate revenue and earnings growth following the strong improvements of Fibertex Personal Care sees Europe as a market with limited growth opportunities and resulting strong price pressure. Asia is a growing market that also has price competition, but where growing demand absorbs the surging supply in the region. The challenge at hand is to utilise the greater production capacity at the factory in Malaysia during Fibertex Personal Care expects to lift revenue and maintain EBIT at the 2011 level. Fibertex Nonwowens expects 2012 to be a year of economic downturn and challenging market conditions, but the company stands to capitalise during the year on the efficiency-improving measures implemented and on an increase in sales of the new products launched in recent years. Fibertex Nonwowens expects to increase revenue in 2012 as the acquired French business will be consolidated for the full year, and a strong improvement in EBIT relative to Grene continues to see good development opportunities in the company s business areas and expects a positive revenue performance in Grene is well positioned to meet the international competition and expects to retain its healthy earnings and to keep EBIT at the 2011 level. Hydra-Grene expects to maintain the good sales performance to the OEM industry and the aftermarket, and to lift sales to the wind turbine industry. The market is expected to be very price competitive and strongly fluctuating demand during the year will make it difficult to optimise costs. As a result, Hydra-Grene projects a slight drop in 2012 EBIT relative to Martin expects the gradual market recovery materialising in 2011 to continue in the years ahead, whereas in Europe it expects the current economic turmoil to limit growth in Martin expects to increase its achieved revenue and at the same time continue to strengthen its earnings power. The profit guidance for other businesses includes Xergi, which expects to improve both revenue and earnings in Overall, Schouw & Co. expects to generate consolidated revenue in the range of DKK billion in The revenue may change quite substantially due to changes in raw materials prices, without necessarily having any notable effect on profit. Schouw & Co. applies a profit forecast range for each individual business. Aggregating the individual company profit forecasts leads to consolidated guidance for 2012 of EBIT in the range of DKK million, which implies another improvement on top of the substantial increase of As in previous years, earnings are expected to be unevenly distributed over the year and to be the lowest in the first quarter and the highest in the third quarter of the year. Consolidated financial items for 2012 are expected to be an expense in the region of DKK 120 million, excluding the effects from financial investments. EBIT EBIT Revenue Revenue forecast actual forecast actual DKKm BioMar c. 7,500 7,269 Fibertex Personal Care ,500-1,600 1,314 Fibertex Nonwovens (7) c Grene c. 1,400 1,307 Hydra-Grene c Martin c Other (incl. eliminations) (10-20) (15) c. 25 (7) Total ,500-13,000 11,929 Associates (10) (24) Financial investments - (556) Other financial items (120) (107) Profit before tax (41) 11

14 Board of Directors Chairman Jørn Ankær Thomsen Born Elected to the Board in Term expires in Educational background LL.M., University of Copenhagen. Attorney and partner of Gorrissen Federspiel Law Firm. Member of the company s audit committee. Directorships Chairman Aida A/S, Carlsen Byggecenter Løgten A/S, Th. C. Carlsen Løgten A/S, Carlsen Supermarked Løgten A/S, Danish Industrial Equipment A/S, DB 2001 A/S, Den Professionelle Forening Danske Invest Institutioinal, Fibertex Nonwovens A/S, Fibertex Personal Care A/S, F.M.J. A/S, Fåmandsforeningen Danske Invest Institutional, GAM Holding A/S, GAM Wood A/S, Givesco A/S, Investeringsforeningen Danske Invest, Investeringsforeningen Danske Invest Almen Bolig, Investeringsforeningen Danske Invest Select, Kildebjerg Ry A/S, Løgten Midt A/S, Martin Professional A/S, Placeringsforeningen Profil Invest, Schouw & Co. Finans A/S, Specialforeningen Danske Invest, Søndergaard Give A/S. Deputy Chairman Carletti A/S, P. Grene A/S, Jens Eskildsen og Hustru Mary Antonie Eskildsens Mindefond. Board member ASM Foods AB (Sverige), BioMar Group A/S, Dan Cake A/S, Danske Invest Management A/S, Develco Products A/S, Ejendomsselskabet Blomstervej 16 A/S, Givesco Bakery A/S, Hydra-Grene A/S, Vestas Wind Systems A/S, Købmand Th. C. Carlsens Mindefond. Executive management AAdvokatanpartsselskabet Jørn Ankær Thomsen, Perlusus ApS. Shares held in Schouw & Co. Holds 33,220 shares in Schouw & Co. Deputy Chairman Erling Eskildsen Born Elected to the Board in Term expires in Managing director of Givesco A/S, the main shareholder of Schouw & Co. Directorships Chairman Carletti A/S, Dan Cake A/S, Dan Cake Services ApS, Givesco Bakery A/S, Leighton Foods A/S. Board member Danish Industrial Equipment A/S, Givesco A/S, P. Grene A/S, Hydra-Grene A/S, OK Snacks A/S, Struer Brød A/S, Søndergaard Give A/S. Executive management Danish Industrial Equipment A/S, Givesco A/S, Søndergaard Give A/S. Shares held in Schouw & Co. Holds 1,004,462 shares in Schouw & Co. Independence as a board member Erling Eskildsen is not considered to be independent due to his affiliation with the main shareholder Givesco A/S and the fact that he has served more than 12 years on the Board. Board member Niels Kristian Agner Born Elected to the Board in Term expires in B.Sc. (Bus.Adm.) from the Copenhagen Business School and professional board member. Chairman of the company s audit committee. Directorships Chairman G.E.C. Gad A/S, SP Group A/S, SP Moulding A/S. Board member Dantherm A/S, D.F. Holding, Skive A/S, G.E.C. Gads Forlag A/S. Executive management Pigro Management ApS Shares held in Schouw & Co. Holds 26,000 shares in Schouw & Co. Independence as a board member Niels Kristian Agner is no longer considered to be independent, having served more than 12 years on the Board. Board member Erling Lindahl Born Elected to the Board in Term expires in Mechanical engineer from Sønderborg Technical College, Denmark. Managing Director of Momenta ApS. Member of the company s audit committee. Directorships Chairman Incuba Science Park A/S, Kontorhuset Svendborg A/S, Lindl Group A/S, Venti A/S. Board member Incuba A/S, Incuba Venture I K/S, Lindahl & Co. ApS, Lübker Square K/S, Momenta Invest A/S, Moprre A/S Skandinavisk Båndkompagni A/S. Executive management BLM Foods ApS, Lindahl & Co. ApS, Lübker Square K/S, Momenta ApS, Momenta Invest A/S, Moprre A/S. Shares held in Schouw & Co. Holds 85,800 shares in Schouw & Co. Independence as a board member Erling Lindahl is considered to be independent. 12 Independence as a board member Jørn Ankær Thomsen is not considered to be independent due to his affiliation with the main shareholder Givesco A/S, and a law firm which acts as an adviser to the company and the fact that he has served more than 12 years on the Board. Directorships in other companies and other key management positions. Shareholdings include each board member s or executive s shares in Schouw & Co. and those held by their connected persons.

15 Executive management Board member Kjeld Johannesen Born Elected to the Board in Term expires in Business diploma (HD), Marketing economics, Copenhagen School of Business. CEO of Danish Crown a.m.b.a. Directorships Chairman DAT-Schaub A/S, DC France SA, pork division, DC UK Ltd., DC USA Inc., DI s udvalg for erhvervspolitik, KLS Ugglarps AB, Tulip Food Company A/S. Deputy Chairman Saturn Nordic Holding AB, Slagteriernes Arbejdsgiverforening, Sokolow SA. Board member DC Trading Japan Ltd., Plumrose USA Inc., Tulip Ltd. Executive management Danish Crown a.m.b.a., Danish Crown A/S. Shares held in Schouw & Co. Holds 20,000 shares in Schouw & Co. Independence as a board member Kjeld Johannesen is considered to be independent. Board member Jørgen Wisborg Born Elected to the Board in Term expires in MSc from the Aarhus School of Business and CEO of OK a.m.b.a. Directorships Chairman Danoil Exploration A/S, DK-Benzin A/S, Energidata ApS, Kamstrup A/S, OK Plus A/S og Samfinans A/S. Deputy Chairman Energi- og olieforum. Board member Miljøforeningen af Executive management OK a.m.b.a., Rotensia ApS. Shares held in Schouw & Co. Holds 15,000 shares in Schouw & Co. Independence as a board member Jørgen Wisborg is considered to be independent. President Jens Bjerg Sørensen Born in Appointed in Business graduate, Niels Brock Business College, Business diploma (HD), Marketing economics, Copenhagen Business School, IEP Insead Executive Programme, Insead, France. Directorships Chairman BioMar Group A/S, Dovista A/S, P. Grene A/S, Hydra-Grene A/S. Deputy Chairman Fibertex Nonwovens A/S, Fibertex Personal Care A/S, Martin Professional A/S, Xergi A/S. Board member Aida A/S, DB 2001 A/S, F.M.J. A/S, Incuba A/S, Incuba Komplementar ApS, Købmand Herman Sallings Fond, Schouw & Co. Finans A/S, Tryg A/S, Tryg Forsikring A/S, Tryghedsgruppen SMBA. Direktion Jens Bjerg Sørensen Datterholding 1 ApS, Jens Bjerg Sørensen Holding ApS, Schouw & Co. Finans A/S. Shares held in Schouw & Co. Holds 49,804 shares in Schouw & Co. Vice President Peter Kjær Born in Appointed in BSc, Electronic Engineering, Engineering College of Aarhus, Business diploma (HD), Marketing economics, Aarhus School of Business, MBA from IMD, Lausanne, Switzerland. Directorships Chairman Erhverv Aarhus, Helsingforsgade 25 Aarhus A/S, Østjysk Innovation A/S. Deputy Chairman Den Gamle By. Board member DB 2001 A/S, P. Grene A/S, Grene Danmark A/S, Grene Dustrybucja Sp. z o.o. Grene Industri-service A/S, Grene Sp. z o.o., Hydra-Grene A/S, Xergi A/S. Executive management DB 2001 A/S, Incuba A/S, Incuba Komplementar ApS, Udlejningsselskabet Nordhavnsgade 2-3 st. th. ApS. Shares held in Schouw & Co. Holds 24,260 shares in Schouw & Co. 13

16 Investor Information Capital and share structures The shares of Aktieselskabet Schouw & Co. are listed on NASDAQ OMX Copenhagen under securities identification/isin code DK The company has 25,500,000 issued shares of DKK 10 nominal value, equal to a total share capital of DKK 255,000,000 nominal value. Each share carries one vote, for a total of 25,500,000 voting rights. The company s Board of Directors reviews the company s capital and share structures at appropriate intervals. The company s Board of Directors gives priority to retaining a high equity ratio in order to ensure the necessary financial versatility. Register of shareholders The company s registrar is: Computershare A/S Kongevejen 418 DK-2840 Holte Composition of shareholders Schouw & Co. has some 7,600 registered shareholders of whom the following are listed in the company s register in accordance with section 56 of the Danish Companies Act: Givesco A/S 28.09% Direktør Svend Hornsylds Legat 14.82% Aktieselskabet Schouw & Co. 7.88% Pursuant to the provisions of Section 31 of the Danish Securities Trading Act, the three shareholders Givesco A/S, Direktør Svend Hornsylds Legat and Erling Eskildsen, who holds 3.94%, are considered as a single shareholder of Schouw & Co. The three shareholders hold in aggregate 46.85% of the shares in the company. Members of the Board of Directors and the Executive Management of Schouw & Co. and their connected persons held a total of 1,184,482 and 74,064 shares, respectively, in the company at December 31, Treasury shares At the end of 2011, the company held 2,008,363 treasury shares, equal to 7.88% of the share capital. The market value of the holding of treasury shares was DKK 186 million at December 31, The portfolio of treasury shares is recognised at DKK 0. Share price performance The Schouw & Co. share closed the year at a price of DKK (official year-end price), compared with DKK per share at December 31, 2010, corresponding to a 30.7% decline. Accordingly, the total market capitalisation of the company s listed share capital amounted to DKK 2,359 million at the close of the financial year, against DKK 3,404 million at the close of Adjusted for the holding of treasury shares, the company s market capitalisation was DKK 2,173 million at December 31, Incentive plans Since 2003, Schouw & Co. has operated a sharebased incentive programme comprising the Executive Management and senior managers, including the executive managements of subsidiaries. Under the share-based incentive programme, Schouw & Co. awarded, in March 2011, a total of 55,000 share options to members of the Executive Management (two persons) and a total of 184,000 share options to other senior managers, including the executive managements of subsidiaries (thirteen persons). The share options are exercisable during a 24-month period following the publication of Schouw & Co. s full-year profit announcement for the 2012 financial year at a strike price of DKK plus a 4% premium per annum from the date of grant until the date of exercise. The overall guidelines for incentive programmes approved by the company s shareholders in general meeting are available from the company s website, Investor relations policy Schouw & Co. aims to create value and achieve results to match the best of our industry peers. The company s investor relations policy is to provide reliable information and to maintain professional relations with shareholders and the market so as to ensure that investors always have the necessary information to make an assessment of the Group s true values. Schouw & Co. complies with the duty of disclosure rules of NASDAQ OMX Copenhagen. The company s annual and interim reports and its 14

17 stock exchange announcements of the last three years are available from its web site, dk, where users can also subscribe to the company s news service. Schouw & Co. holds presentations when releasing the company s annual and half-yearly reports. Such presentations are web cast in order to ensure that all investors have equal access. Presentations are available for subsequent viewing on the company s website. Schouw & Co. also occasionally holds meetings with investors and other parties. Presentations from such meetings are also available from the company s web site. Schouw & Co. observes a three-week silent period ahead of releasing financial reports. During such periods, our financial communications are subject to special restrictions. Any queries to the company s management should be ed to: schouw@schouw.dk. Website Schouw & Co. s web site contains announcements to the Copen hagen Stock Exchange and press releases, as well as more detailed information on the Group. On the web site, interested parties can also subscribe to the company s news service. Schouw & Co. s announcements to the Danish FSA and NASDAQ OMX Copenhagen since January 1, The announcements are available at the company s web site, 03/03/2011. No. 1. Fibertex Nonwovens negotiates acquisition of a 85% stake in Tharreau Industries 08/03/2011. No. 2. Fibertex Nonwovens acquiring 85% stake in Tharreau Industries 10/03/2011. No. 3. Annual Report /03/2011. No. 4. Continuation of incentive programme 07/04/2011. No. 5. Major shareholder announcement and information on treasury shares 14/04/2011. No. 6. Annual general meeting of Schouw & Co. 05/05/2011. No. 7. Interim report First quarter of /05/2011. No. 8. Transaction to acquire 85.27% of the shares in Tharreau Industries now closed 08/07/2011. No. 9. Tharreau Industries Takeover bid completed 18/08/2011. No. 10. Interim report First half year of /11/2011. No. 11. Interim report Third quarter of /12/2011. No. 12. Schouw & Co. s financial calendar for No. 1. Schouw & Co. upgrades full-year EBIT guidance to approx. DKK 640 million. DKK 150 DKK 145 DKK 140 DKK 135 DKK 130 DKK 125 DKK 120 DKK 115 Price performance on NASDAQ OMX Copenhagen n Schouw & Co. shares n OMXC20 index relative to Schouw & Co. shares n MidCap index relative to Schouw & Co. shares jan 11 feb 11 mar 11 apr 11 may 11 jun 11 jul 11 aug 11 sep 11 oct 11 nov 11 dec 11 jan 12 feb 12 DKK 110 DKK 105 DKK 100 DKK 95 DKK 90 15

18 Management Bodies The Board of Directors of Schouw & Co. The Board of Directors of Schouw & Co. consists of six shareholder-elected members who elect a chairman and a deputy chairman from among their number. Board members are elected for terms of four years and for purposes of continuity the individual members are up for election in different years. When a new Board candidate is nominated, emphasis is on the potential new member possessing the professional knowledge and experience to contribute to maintaining the necessary scope of competence on the Board and on the potential new member being able to act independently of special interests. The Board of Directors carries out an annual selfassessment, applying a structured model. The chairman is responsible for carrying out the assessment, and the results are discussed by the entire Board. The Board of Directors is responsible for the overall management of the company, which includes appointing the members of the Executive Management, laying down guidelines for and exercising control of the work performed by the Executive Management, organising the company s business in a responsible manner, defining the company s business concept and strategy and evaluating the adequacy of the company s capital contingency programme. The duties of the Board are set out in the company s rules of procedure, and Board meetings are conducted in accordance with a fixed master agenda, which over the full year ensures compliance with the Board s rules of procedure. The Board of Directors held six Board meetings, a conference call and a two-day Board seminar in 2011, corresponding to the ordinary level of Board activity in the company. Ordinary Board meetings are scheduled at least six months in advance. Board meetings are normally attended by all members of the Board and the Executive Management. For reasons of principle, the Chairman of the Board, Jørn Ankær Thomsen, does not participate in business regarding the holding of shares in Vestas Wind Systems A/S. The Audit Committee of Schouw & Co. The Board of Directors of Schouw & Co. has appointed an audit committee consisting of Niels Kristian Agner (chairman), Jørn Ankær Thomsen and Erling Lindahl. Erling Lindahl is considered to be independent, Niels Kristian Agner is not considered to be independent, having served on the board for more than 12 years, and Jørn Ankær Thomsen is not considered to be independent due to his affiliation with the main shareholder Givesco A/S, his affiliation to a law firm which acts as an adviser to the company and because he has served on the board for more than 12 years. All three members are considered to meet the requirements under the Auditors Act on accounting qualifications. The Audit Committee s task is mainly to monitor the work and processes relating to the financial reporting process. The Committee assists the Board in assessments and controls relating to auditing, accounting policies, systems of internal controls, financial reporting, etc. The Audit Committee held four meetings in The Executive Management of Schouw & Co. The members of the Executive Management of Schouw & Co. are Jens Bjerg Sørensen, President, and Peter Kjær, Vice President. The members of the Executive Management are registered with the Danish Business Authority. The Executive Management is in charge of the day-to-day management of the company both at Financial calendar April 11, 2012 May 3, 2012 August 16, 2012 November 8, 2012 Annual General Meeting Release of Q interim report Release of H interim report Release of Q interim report 16

19 parent company and consolidated level and complies with the guidelines and directions issued by the Board of Directors. The day-to-day management does not include any transactions that, considering the company s circumstances, are of an unusual nature or of material importance. Such transactions can only be made by the Executive Management upon specific authority from the Board of Directors unless awaiting a decision by the Board of Directors would cause significant disadvantage to the activities of the company. Management of the portfolio companies The Schouw & Co. Group has a decentralised corporate structure, under which the individual portfolio companies enjoy a large degree of independence and have their own individual organisation and management in charge of the company s operations. Each portfolio company is structured as focused sub-groups with their own subsidiaries. The boards of directors of the ultimate company of the individual portfolio companies are generally composed of a representative from each of the Board of Directors and the Executive Management of Schouw & Co. along with external board members who have a special interest in and knowledge of the particular portfolio company s business area. The boards of directors of a portfolio company s underlying subsidiaries are generally composed of managers and employees from the portfolio company, possibly with a representative of the Executive Management of Schouw & Co. or external board members. To support the individual managements of the portfolio companies, Schouw & Co. has issued a set of general guidelines for its subsidiaries. Remuneration policy Schouw & Co. s remuneration policy is intended to firmly align the interests of the members of the Board of Directors and the Executive Management with those of the shareholders and the company. The remuneration policy is a means of ensuring that the remuneration provided will always reasonably reflect the company s performance and current situation. In addition, it is intended to promote the long-term goals for safeguarding the company s interests. The remuneration policy and the overall guidelines for incentive programmes can be found on the company s website, 17

20 Corporate Governance Code of corporate governance Schouw & Co. complies with the rules applying to companies listed on NASDAQ OMX Copenhagen, which include a code on corporate governance as set out in Corporate Governance Recommendations. The Board of Directors and the Executive Management of Schouw & Co. see corporate governance as a natural part of running a responsible business. Corporate governance considerations and the interaction with the company s stakeholders is a constant priority, and considering the company s corporate governance policy is a recurring item in the annual business of the Board meetings. Schouw & Co. believes it complies in all material respects with the intentions of Corporate Governance Recommendations as issued by NASDAQ OMX Copenhagen. However, there are a few areas in which Schouw & Co. does not apply the corporate governance recommendations. A detailed account of the company s position on each individual item of the Recommendations on Corporate Governance from NASDAQ OMX Copenhagen is provided on Schouw & Co. s website: www. schouw.dk/cg2011. Corporate social responsibility Schouw & Co. s general policy is for all of the Group s companies, as a minimum, to comply with relevant legislation and regulations applying in the countries and local communities in which they operate. In addition, Schouw & Co. generally respects the ten principles on human rights, labour standards, the environment and anti-corruption as expressed in the UN Global Compact. The full wording of the ten principles is provided on Schouw & Co. s website, It is important to Schouw & Co. that the Group s businesses endeavour to comply with the principles of human rights, labour standards and anti-corruption and that they seek assurance on reasonable standards when appointing business partners and suppliers. Principles regarding the environment may require that a balance is struck between cost and effect, but Schouw & Co. believes it is important for the Group to maintain high standards when it comes to ensuring reasonable environmental issues and limiting environmental risks. In addition, the Group addresses environmental issues from a business criteria aspect with due consideration for the longterm perspectives and the Group s good reputation. Schouw & Co. has implemented its CSR policy in the Group s guidelines for its subsidiaries in order to ensure that the managements of the Group s businesses are aware of the Group s general policy on the matter. However, Schouw & Co. has not taken any structural initiatives to translate the Group s policy into specific action. Accordingly, the Group is unable to report on results achieved in the 2011 financial year. 18

21 The financial reporting process Statutory report As part of its statutory report on corporate governance, the company is required to report on the main features of the Group s internal control and risk management systems in relation to the financial reporting process. Group structure The Schouw & Co. Group consists of a number of legal corporate entities in an operational structure consisting of the parent company Schouw & Co. and a number of subsidiary portfolio companies each structured as focused sub-groups with their own subsidiaries. Each individual portfolio company has a high degree of autonomy as well as its own organisation and management in charge of its operations. Subsidiaries of the portfolio companies operate activities that are identical to or closely related to the general activities of the portfolio company, facilitating the establishment of uniform systems and procedures in the portfolio company. The management of the portfolio company s ultimate entity is in charge of preparing and implementing reasonable and appropriate procedures and policies for the company and for ensuring a systematic and responsible controlling of the portfolio company s subsidiaries. To support the individual managements of the portfolio companies, Schouw & Co. has issued a set of general guidelines for its subsidiaries. In addition, the parent company Schouw & Co conducts follow-ups on its directly-owned companies with a view to ensuring that the financial reporting presents a true and fair view without material misstatement. The Board of Directors of Schouw & Co. has appointed an Audit Committee, whose tasks include monitoring the work and processes relating to the financial reporting. Preparation of consolidated financial statements The preparation of consolidated financial statements is based on the Group s financial reporting manual, which is intended to ensure a uniform application of accounting policies throughout the Group that is in accordance with the international financial reporting standards, IFRS/IAS, under which Schouw & Co. prepares its financial statements. The financial reporting manual is updated on an ongoing basis by the parent company Schouw & Co. as and when required by amendments to accounting standards and legislation. The financial reporting manual is available in electronic form to Group users. Reporting of financial data from the Group s subsidiaries takes place in accordance with the instructions provided by the parent company in standard reporting packages transferred electronically into the parent company s financial consolidation system, thus reducing the risk of manual errors. Audit Each year, the shareholders in annual general meeting appoint external auditors following a recommendation by the Board of Directors. Ahead of each recommendation, the Board of Directors makes a critical assessment of the auditor s independence and competencies, etc., in accordance with the Recommendations of Corporate Governance issued by NASDAQ OMX Copenhagen. Auditors appointed by the shareholders in general meeting serve as auditors of all of the Group s major subsidiaries and associates. In a few foreign units, however, local auditors may be appointed for practical reasons, but audits in all group entities are conducted in accordance with instructions issued by the shareholder-appointed auditor with a focus on high-risk and material areas. Shareholder-appointed auditors report in writing in the form of long-form audit reports to the entire Board of Directors at least once a year, and immediately on becoming aware of any matters to be brought to the attention of the Board of Directors. The independent auditor attends the meeting at which the Board considers the draft annual report, holding a private session with the Board and without the Executive Management attending, as proposed in the Recommendations on Corporate Governance. The independent auditor also attends meetings of the audit committee, which are normally concluded with a private session of the audit committe without the attendance of the day-to-day management. Internal audit On the recommendation of the audit committee, the Board of Directors of Schouw & Co. has resolved not to establish an internal audit function, as it is not considered necessary given the size and structure of the Group. 19

22 Solid improvement and strong growth in revenue and EBIT BioMar Financial performance BioMar grew its revenue by 34% from DKK 5,419 million in 2010 to DKK 7,269 million in The strong improvement was mainly attributable to a 26% volume increase but also to slightly higher selling prices triggered by higher prices of raw materials. All markets contributed to the strong volume growth, with Norway and Chile as the main contributors. The improvement in Norway was based in part on the recovery in market share from the unusually low level in 2010 and in part to a more than 10% increase of the Norwegian market overall. The low water temperatures in Norway in early 2011 had an adverse impact on feed consumption, but weather conditions were extremely good during the rest of the year. The large improvement in Chile was driven by general market growth, which proved to be substantially stronger than anticipated. Elsewhere, sales in Scotland improved slightly, and the markets of Continental Europe grew in volume terms driven by BioMar s slightly higher market share and by extremely good temperatures during large parts of the year. Revenue (DKKm) 3,677 5,321 4,854 5,419 7, The surge in volumes also drove up EBIT, from DKK 200 million in 2010 to DKK 362 million in This was well ahead of the most recent guidance range as provided in the Q interim report. In addition to the larger volumes, continued tight cost management and the successful retention of the gross margin per kilo also contributed to the performance. The full-year profit was affected by a DKK 22 Torben Svejgård, CEO, BioMar million reversal of bad debt provisions in the fourth quarter of 2011 that ultimately were not needed. Net interest-bearing debt rose from DKK 239 million at December 31, 2010, to DKK 552 million at December 31, Surging sales, the resulting working capital tie-up and the large investment to expand capacity at the factory in northern Norway account for a large part of the increase. In addition, BioMar paid dividends of DKK 250 million to the parent company Schouw & Co. in Business Development Undoubtedly, the most remarkable development of 2011 was the market growth in Chile, where the magnitude came as a surprise to all market players. For BioMar, this had the direct positive effect of sales surging, but it also led to a plunge in salmon prices. For salmon producers, this meant going from exceptionally good earnings in the spring of 2011 to seeing salmon prices drop to a level of or just below production costs at the end of the year. The low salmon prices do not have any immediate impact on BioMar s earnings, but they do increase the risk of bad debts. Another potential risk is whether the Chilean market is evolving too fast to withstand possible risks of new major outbreaks of disease. So far, there are no indications to that effect, and there is no doubt that the new, more restrictive legislation will help make salmon farming operations in Chile much stronger than was previously the case. There were no material changes to market conditions in Continental Europe. BioMar has so far seen only limited effects of the debt crisis in southern Europe, but obviously, the company is monitoring the situation closely. 20

23 All amounts in DKK million Volume (thousands of tonnes) Revenue 7,269 5,419 - of which North Sea 3,734 2,672 - of which Americas 1,880 1,325 - of which Continental Europe 1,655 1,422 Direct production costs (5,774) (4,235) Gross profit 1,495 1,184 The major expansion of BioMar s factory in northern Norway was completed in the summer of 2011 as planned, and it has been instrumental in helping BioMar meet the greater demand in Norway. The factory encountered a few difficulties running in the new state-of-the-art logistics system, but the facilities are now operating as expected and contributing to providing even better service to the company s customers. The joint venture to build a new factory in Costa Rica for the production of feed for the tilapia fish species is progressing to plan, and production is still expected to start up in the second quarter of While it will only have a very small effect on BioMar s overall business, this project is of a certain strategic importance for the plans to expand the company s activities beyond its previous geographic coverage. Outlook The markets of the North Sea region (Norway and Scotland) and in Chile are expected to retain the strong growth in 2012, albeit at a somewhat lower rate than seen in Looking at climate factors, the year has started with fair water temperatures, but clearly there can be no assurance that weather conditions will be as favourable in 2012 as they were in The low salmon prices are expected to have only a limited effect on feed demand in A relatively stable market is expected in Continental Europe. BioMar expects to generate revenue of around DKK 7.5 billion in 2012, but as always revenue depends strongly on how prices of raw materials develop. The full-year profit forecast includes assumptions that weather conditions will not be as favourable in 2012 as they were in Against this background, BioMar expects EBIT in the DKK million range for All amounts in DKK million INCOME STATEMENT Revenue 7, ,419.1 Gross profit EBITDA Depreciation Operating profit (EBIT) Value adjustment of shares in Lerøy (99.8) 35.9 Financial items, net (36.8) (34.3) Profit before tax Tax for the period (83.4) (40.3) Profit from continued operations Profit from discontinuing operations Profit for the period CASH FLOWS Cash flows from operating activities Cash flows from investing activities (200.0) (235.6) Cash flows from financing activities (296.7) BALANCE SHEET Intangible assets* Property, plant and equipment 1, Other non-current assets Cash and cash equivalents Other current assets 2, ,705.7 Total assets 4, ,479.0 Equity 1, ,635.7 Interest-bearing debt Other creditors 1, ,210.6 Total liabilties and equity 4, ,479.0 Average number of employees FINANCIAL KEY FIGURES EBITDA margin 6.7% 5.9% EBIT margin 5.0% 3.7% ROIC 22.1% 15.7% Working capital Net interest-bearing debt * Excluding goodwill on consolidation in Schouw & Co. of DKK million 21

24 Investing for new capacity primed for growth Fibertex Personal Care Financial performance Fibertex Personal Care generated revenue of DKK 1,314 million in 2011, compared with DKK 1,237 million in The revenue improvement was driven by higher selling prices triggered by higher raw materials prices. Volumes sold declined during the year. The drop in volumes sold was attributable particularly to a change in the buying patterns of certain major customers, and certain Middle East markets were affected by political unrest in the region causing a drop in sales. EBIT for the year was DKK 148 million against DKK 160 million in The decline was mainly caused by the lower volumes sold in H1 in Europe, but EBIT remained high despite the downturn and was at the upper end of the most recent guidance range. Net interest-bearing debt increased from DKK 471 million at December 31, 2010, to DKK 589 million at December 31, The increase was due mainly to the investment in the substantial capacity increase in Malaysia and a higher working capital tie-up. Revenue (DKKm) 1,008 1, ,237 1, Business development Fibertex Personal Care has production facilities in Denmark and Malaysia and is well-renowned for its quality, service and innovation in both Europe and South East Asia. For the third time, Fibertex Personal Care received a Supplier Excellency -award from Procter & Gamble in 2011, which is bestowed on only the very best of their suppliers. Fibertex Personal Care makes it a priority to retain its position as technology leader. The company gives key priority to innovation and product development in close collaboration with customers and to being strongly focused on customers productdevelopment and efficiency-improvement requirements. As the previously announced R&D centre in Malaysia has now been set up and has the planned staff resources, Fibertex Personal Care can now provide service and innovation in Asia at the same high level as the innovation centre in Denmark. There was a clear tendency in 2011 for ever stricter requirements for efficient logistics and planning. Due to the requirements the company s customers face from major retailers for shorter and shorter lead times, Fibertex Personal Care has devoted a lot of time and effort to change in-house processes and enable the company to meet these requirements. The market generally gives high priority to cost savings, but also to new products with special characterics. As a result, sales of specialty products improved in 2011, including supersoft products, products with high performance leakage barriers and, not least, print products, which Fibertex Personal Care can deliver through its partly-owned business Innowo Print in Germany. During 2011, Fibertex Personal Care worked to align its operations to the current market situation of lower demand relative to 2010 and on preparing to exploit new opportunities in the European and the Middle East markets. The Fibertex Personal Care Division in Malaysia performed very well in Capacity utilisation was high and production efficiency was satisfactory all through the year, and products were of a high quality. At the end of 2011, Fibertex Personal Care increased its capacity when a new high-capacity line was commissioned in Malaysia. As an environmentally conscious company, but also as a substantial consumer of energy, Fibertex Personal Care has made a significant effort over a 22

25 All amounts in DKK million Revenue 1,314 1,237 - of which Denmark of which Malaysia number of years to reduce its energy consumption and to change sub-processes in order to convert its source of heating from electricity to natural gas. The company s huge focus on energy consumption and cost savings has reduced carbon emissions per kilo of finished goods by about 20% over the past ten years. The company is planning additional energy saving projects for 2012 at the factories in both Denmark and Malaysia. Reusing of material is an area that was also given a lot of attention. As much as 95% of waste from production is reused, and the rest is incinerated for energy recovery purposes. The company will continue to map its environmental footprint, including by applying life cycle analysis and other tools, to further reduce its impact. Outlook Fibertex Personal Care sees Europe as a market with limited growth opportunities and resulting strong price pressure. Asia is a growing market that also has price competition, but where growing demand absorbs the surging supply in the region. Fibertex Personal Care continues to see good opportunities for organic expansion in the region in the years ahead. The challenge for 2012 is to utilise the greater production capacity at the factory in Malaysia Mikael Staal Axelsen, CEO, Fibertex Personal Care while consistently manufacturing products of a high and uniform quality. Fibertex Personal Care expects to generate revenue of approximately DKK billion in 2012, but as always the revenue may be affected by changes in prices of raw materials. The financial results for 2012 will be impacted by the costs and higher impairment charges of the new production line in Malaysia. The line will have low capacity utilisation at the beginning of the year. Considering the general competitive situation, Fibertex Personal Care expects to report EBIT for 2012 in the range of DKK million. All amounts in DKK million INCOME STATEMENT Revenue 1, ,236.8 Gross profit EBITDA Depreciation Operating profit (EBIT) Financial items, net (8.5) (13.2) Profit before tax Tax for the period (36.3) (31.6) Profit for the period CASH FLOWS Cash flows from operating activities Cash flows from investing activities (266.5) (161.7) Cash flows from financing activities (4.4) BALANCE SHEET Intangible assets* Property, plant and equipment Other non-current assets Cash and cash equivalents Other current assets Total assets 1, ,295.7 Equity Interest-bearing debt Other creditors Total liabilties and equity 1, ,295.7 Average number of employees FINANCIAL KEY FIGURES EBITDA margin 18.5% 21.2% EBIT margin 11.3% 13.0% ROIC 13.7% 18.2% Working capital Net interest-bearing debt * Excluding goodwill on consolidation in Schouw & Co. of DKK 48.1 million 23

26 2011 acquisition brings a new platform and improvements Fibertex Nonwovens Financial performance Fibertex Nonwovens generated revenue of DKK 726 million in 2011, compared with DKK 413 million in The improvement was mainly due to the acquisition of French nonwovens manufacturer Tharreau Industries, which contributed DKK 260 million to consolidated revenue from the date of takeover in May. EBIT for the year was a loss of DKK 7 million against a DKK 16 million loss in 2010, which was in line with the most recent guidance range. EBIT did not meet the original forecast, however, but this is not believed to be a reflection of the earnings potential in Jørgen Bech Madsen, CEO, Fibertex Nonwovens Fibertex Nonwovens. EBIT was adversely impacted by a surge in raw materials prices during the first half of the year, with the increase only being partly offset by higher selling prices as the year wore on. In the second half of the year, revenue and earnings were also impacted by a drop in demand from those customer segments that are most sensitive to the current economic slump in Europe. Revenue (DKKm) Included in the full-year EBIT is a positive contribution of DKK 11 million from Tharreau Industries and a DKK 4 million charge in non-recurring costs related to the acquisition of Tharreau Industries. The working capital tie-up and the net interestbearing debt rose relative to December 31, 2010, mainly due to the acquisition of Tharreau Industries. Equity was strengthened in 2011 through a DKK 100 million capital contribution from the parent company Schouw & Co. made in connection with the acquisition of Tharreau Industries. Business development Effective in May 2011, Fibertex Nonwovens acquired a majority interest in Tharreau Industries S.A., a leading manufacturer of specialist nonwoven products for the automotive industry and for industrial applications. The current ownerhip interest is 89.64%, and effective January 1, 2012, the company changed its name to Fibertex Nonwovens S.A. The acquisition of Tharreau Industries has given Fibertex Nonwovens a better potential to create Europe s leading manufacturer of nonwovens, supplying needlepunched and spunlaced products for industrial and technical applications with production facilities in Denmark, the Czech Republic and France. The company is now engaged in R&D, production and sales of nonwovens for these global business areas: Automotive (insulation of engine compartments, car ceilings, door panels, trim panels and acoustic solutions) Construction (geotextiles, building and composite materials as well as DIY products) Industrial (furniture, bedding, carpets and flooring) and the med-tech industry Filtration (air, liquid and odour filters) and acoustics Wipes (wet wipes for the consumer market and specialist products for the industrial market) Fibertex Nonwovens has focused its efforts on adapting to the current competitive market situation. The company has supported these efforts by increasingly working the markets, winning market share in its core business areas while also improving the sale of products for the composite industry and of specialist high-value products. Fibertex Nonwo- 24

27 All amounts in DKK million Revenue of which Denmark of which Czech Republic of which France vens has consistently enhanced its market position in growth areas and in geographical growth markets, preparing to capitalise on the growth potential as demand begins to recover. In addition, a number of new business opportunities have been identified, which are expected to be commercialised during In terms of R&D and innovation, the company has built a strong product portfolio supporting the long-term strategy of increasing the proportion of high-value products. In early 2010, Fibertex Industrial Nonwovens established a factory in South Africa in cooperation with local business partners and IFU, the Industrialisation Fund for Developing Countries, for the purpose of manufacturing and selling needlepunched products, mainly geotextiles as well as other products to South Africa s growing automotive industry. During its first two years in operation, the priority of the business has been to establish production and build a position in the market. Demand is expected to pick up in 2012 driven by a large number of infrastructure projects in South Africa and its neighbouring countries. Fibertex South Africa is recognised in the financial statements as an associate. Outlook for 2012 Fibertex Nonwowens expects 2012 to be a year of economic downturn and challenging market conditions, but the company stands to capitalise during the year on the efficiency-improving measures it has implemented and on an increase in sales of the new products it has launched in recent years. In terms of markets, the focus will be on increasing sales and passing on rising raw materials prices by constantly adjusting selling prices. In addition, the company will continue its relentless efforts to enhance earnings by optimising production line operations, maintaining the high operational efficiency and by ensuring high capacity utilisation. Against this background, Fibertex Nonwovens expects to generate revenue of around DKK 900 million and EBIT in the range of DKK million in All amounts in DKK million INCOME STATEMENT Revenue Gross profit EBITDA Depreciation Operating profit (EBIT) (7.1) (16.3) Financial items, net (5.9) (0.3) Share of profit from ass. companies (13.2) (13.2) Profit before tax (26.2) (29.8) Tax for the period Profit for the period (18.9) (17.4) CASH FLOWS Cash flows from operating activities 12.4 (21.0) Cash flows from investing activities (240.1) (23.7) Cash flows from financing activities BALANCE SHEET Intangible assets* Property, plant and equipment Other non-current assets Cash and cash equivalents Other current assets Total assets 1, Equity Interest-bearing debt Other creditors Total liabilties and equity 1, Average number of employees FINANCIAL KEY FIGURES EBITDA margin 6.3% 6.2% EBIT margin -1.0% -3.9% ROIC neg. neg. Working capital Net interest-bearing debt * Excluding goodwill on consolidation in Schouw & Co. of DKK 32.0 million 25

28 Sustained progress and efficiency making good results Grene Financial performance Grene generated revenue of DKK 1,307 million in 2011 compared with DKK 1,237 million in The revenue improvement was broadly founded and with a positive performance in all countries, in which Grene operates. At the same time, the improvement set off the effects of the sale of a minor industrial activity in the autumn of Much of the revenue growth was attributable to new product areas, strong delivery power and a well-functioning logistics system that has proved to be extremely valuable under the current market conditions. EBIT in 2011 was DKK 87 million compared with DKK 48 million in 2010, which is slightly better than the most recent forecast and significantly better than the forecast announced at the beginning of the year. The profit for the year was particularly impacted by the very positive performance in Denmark, Poland and Norway, while Grene saw a minor decline in Sweden. In addition to the direct effect of increasing revenue, earnings were further boosted by tight cost management and completed efficiency enhancements. Revenue (DKKm) 1,185 1,307 1,140 1,237 1, Net interest-bearing debt fell from DKK 442 million at the end of 2010 to DKK 438 million at the end of 2011, despite an increase in the working capital tie-up during the period as a result of the introduction of new products and increased activity. Carsten Thygesen, CEO, Grene Business development The agro business is operated by the Grene companies in Denmark, Sweden, Norway, Finland, Poland, Lithuania and Russia. Grene s wide product range, good customer service and efficient logistics make the company an attractive business partner for leading manufacturers. In 2011, Grene took over as spare parts distributor for Kverneland, a leading agricultural brand. Also, the company signed distribution agreements for Sweden, Norway, Finland and Poland with a number of Danish agro manufacturers which have been Grene s longstanding business partners in Denmark. The garden, park and forestry area, which was introduced in Denmark in 2009 and which has developed very satisfactorily, was rolled out in the rest of Scandinavia in 2011 and the outlook is promising. In recent years, Grene has carried out significant efficiency enhancements of logistics and has extended warehouse facilities, introducing a high degree of automation. In 2011, Grene initiated an investment of around DKK 25 million for a 3,400 m 2 extension of the warehouse facilities in Sweden which will be operational in the spring of 2012, while in Denmark, an outdoor storage area of some 2,000 m 2 was covered and became operational in the fourth quarter of The expansion continues in 2012 with the planned extension of warehouse facilities in Denmark and Poland. The Polish activities have developed very positively in recent years. Grene is a wholesaler in Poland, as in other markets, but also a retailer through 90 own stores all over the country. After the end of 2011, the Polish business was demerged into two units in charge of wholesale and retail activities, respectively. The demerger is expected to strengthen both business areas. In Russia, where the activities are run in cooperation with Dutch business partner Kramp Groep, the 26

29 All amounts in DKK million Revenue 1,307 1,237 - of which Industry of which Agro 1, in Denmark in Poland in Sweden in Norway in Finland other Agro positive revenue trend continued, although the activities have not yet contributed positively to results. Activities in the industrial area, which are mainly conducted in Denmark, reported profit improvements in 2011 in an otherwise difficult market. The restructuring of Grene Industri-service, which was initiated in 2010, had a positive impact on 2011 results. The adaptation, which continues in 2012, focuses on electroservices and in the future, Grene Industri-service will stand out as Denmark s largest and most dedicated operator in this field. The remaining industrial activities, which are conducted through Grene Danmark, also recorded positive developments. These activities focus on specialisation in selected product areas and services. Outlook Grene continues to see good development opportunities in the company s business areas. During recent years economic downturn, Grene has managed to maintain a high level of investment in order to continue developing the business while at the same time adapting to current market conditions. Hence, Grene is well-positioned to meet international competition in existing markets and to pursue new business opportunities in eastern and central Europe. Agricultural earnings appear to be improving in several European countries, and various sources have expressed positive expectations for earnings in general over the coming years. The general burden of debt in agriculture, particularly in Denmark, remains a severe problem, however, which increases the debtor risk, although historically, the company s bad debts have been moderate. Grene expects to generate revenue towards DKK 1.4 billion and EBIT in the range of DKK million in All amounts in DKK million INCOME STATEMENT Revenue 1, ,237.0 Gross profit EBITDA Depreciation Impairment Operating profit (EBIT) Profit from divestments Financial items, net (23.8) (11.0) Profit before tax Tax for the period (17.4) (10.5) Profit for the period CASH FLOWS Cash flows from operating activities Cash flows from investing activities (44.3) (27.4) Cash flows from financing activities (8.5) (14.7) BALANCE SHEET Intangible assets Property, plant and equipment Other non-current assets Cash and cash equivalents Other current assets Total assets Equity Interest-bearing debt Other creditors Total liabilities and equity Average number of employees FINANCIAL KEY FIGURES EBITDA margin 9.1% 6.4% EBIT margin 6.6% 3.9% ROIC 12.5% 7.3% Working capital Net interest-bearing debt

30 High earnings sustained improvement in industrials Hydra-Grene Financial performance Hydra-Grene increased revenue by 19% from DKK 391 million in 2010 to DKK 465 million in The improvement was based on an increase in OEM and aftermarket sales relative to 2010, whereas sales to the wind turbine industry were largely in line with last year. The company s concept of strong delivery power is expected to have contributed significantly to the positive developments. Customers in the OEM and aftermarket saw a high level of Erik Lodberg, CEO, Hydra-Grene Revenue (DKKm) activity in Many of Hydra- Grene s industrial customer returned to the level of activity prevailing before the economic downturn and it is encouraging to see manufacturers of hydraulic machinery being able to maintain a fair level of activity in Denmark. Demand from customers in the wind turbine industry was slow at the beginning of 2011 and demand fluctuated strongly over the year. However, by the end of the year, sales to this segment had reached a reasonable level. EBIT was DKK 69 million in 2011 compared with DKK 56 million in 2010, which was better than the most recent guidance. The total capital tie-up increased from DKK 175 million at the end of 2010 to DKK 206 million at the end of 2011, among other things as a result of a deliberate build-up of inventories with a view to securing satisfactory delivery power, especially to customers in the wind turbine industry in the latter part of the year and in early After a dividend payment of DKK 100 million to the parent company Schouw & Co. in 2011, the net interest-bearing debt increased from DKK 38 million at the end of 2010 to DKK 120 million at the end of Business development Hydra-Grene is a specialised trading and engineering company and its principal business is to sell components and accessories for hydraulics, industrial hoses and related areas, including the supply of assembled goods such as hydraulic pump units, lubricating systems and system solutions, as well as the production of aluminium valve blocks. Recent years trends towards selling increasingly complex products and system solutions mainly to the wind turbine industry are very demanding on a supplier s organisation and quality management. For this reason, Hydra-Grene has adjusted to such demands on a current basis and has initiated the implementation of the Six Sigma quality management system. Furthermore, Hydra-Grene expects to implement a new ERP system in the second quarter of 2012 and in this connection to align and optimise its business procedures and processes. Historically, Hydra-Grene has had its principal business in Denmark, but sales to international customers has grown in recent years, especially to customers in the wind turbine industry and other industries in which the company has special expertise. In China, where small-scale production has now been established, sales reached a reasonable level, despite generally difficult conditions for selling wind turbines in the Chinese market. Hydra-Grene has established a good organisation in China and is wellpositioned for future expansion. In India, Hydra-Grene relocated to new leased premises which, for the time being, function as a warehouse for the company s Indian customers. Hydra-Grene expects to establish small-scale pro- 28

31 duction during 2012 using the same business model as in China. Hydra-Grene s only activity in the USA is a sales office and the company is awaiting general market developments before taking further steps in this market. According to Hydra-Grene s overall strategy, the production of its core products, such as valve blocks and systems, should continue to be based in Denmark. For this reason, the company focuses strongly on operating an automated and efficient production in order to maintain competitiveness, despite high wage costs and the generally high cost levels in Denmark. Outlook The good sales figures to the OEM industry and the aftermarket are expected to stabilise in 2012 in line with 2011 figures. Hydra-Grene expects to increase revenue from the wind turbine industry in 2012, with an ever increasing portion being delivered in the international market. However, significant fluctuations must be expected over the year, which results in a number of challenges in terms of product planning and inventories. Sales to the wind turbine industry as well as to other customers are marked by fierce price competition which, combined with the strongly fluctuating demand, makes it difficult to optimise costs. Hydra- Grene continues to invest in order to prepare the company for the future by strengthening its technical staffing for research and by developing systems and expanding production capacity. As a result, Hydra-Grene expects to generate revenue close to DKK 500 million and EBIT in the range of DKK million in All amounts in DKK million INCOME STATEMENT Revenue Gross profit EBITDA Depreciation Operating profit (EBIT) Share of profit from associates Financial items, net (3.1) (1.1) Profit before tax Tax for the period (16.7) (14.0) Profit for the period CASH FLOWS Cash flows from operating activities Cash flows from investing activities (12.0) (5.8) Cash flows from financing activities (23.8) (19.0) BALANCE SHEET Intangible assets Property, plant and equipment Other non-current assets Cash and cash equivalents Other current assets Total assets Equity Interest-bearing debt Other creditors Total liabilties and equity Average number of employees FINANCIAL KEY FIGURES EBITDA margin 17.3% 17.1% EBIT margin 14.9% 14.4% ROIC 24.1% 21.5% Working capital Net interest-bearing debt

32 Earnings improvement and growth especially in the USA Martin Financial performance For Martin, the 2011 performance was characterised by quarterly continuous improvements. The last two quarters of the year showed positive operating profits and marked a turning point after 12 previous quarters of continuous losses. The combination of a slowly recovering market, crisis management and the strategic measures of change required as a result of the 2009 financial crisis, now collectively show the expected performance improvement. Martin grew the revenue by 20% from DKK 715 million in 2010 to DKK 855 million in Geographically, the company s progress was widely founded with increased business volumes in the USA and Europe. In 2011, the Russian market also showed strong progress; Martin set up a representative office in Moscow two years ago. The important American market also contributed to strong growth with sales constituting 31% of the total revenue in 2011, the highest level ever. Despite an otherwise favourable financial development, the Asian market failed to match revenue growth in Western markets; however, revenue increased relative to The positive revenue performance was supported by Martin s improved contribution margin and fixed costs remaining at the 2010 level. Revenue (DKKm) 1,173 1, EBIT for the year was a profit of DKK 2 million against a loss of DKK 69 million in 2010, and thus the target of bringing EBIT towards break even in 2011 was achieved. Even though the last quarter of the year was impacted by non-recurring items, EBIT was slightly above the upper end of the most recent guidance range. The net interest-bearing debt increased from DKK 445 million at December 31, 2010, to DKK 489 million at December 31, This increase is primarily attributable to the working capital tie-up, which has grown as a result of the higher level of activity. Business development Throughout recent very turbulent years, Martin has retained a strong focus on product development. Typically, more than 40% of its revenue is generated from products launched on the market within the preceding 24 months, and therefore product innovation is absolutely vital to the company. The most recent Christian Engsted, CEO, Martin addition to the product family is the new MAC Aura, a Moving Head based on LED technology, for which Martin has taken out patents to protect important elements. The market has welcomed the product in a rather unique manner, and it became Martin s second-most sold product for the year despite its late launch in mid-september. MAC Aura has received wide international recognition and was granted the industry s Innovation Award at the PLASA fair in London in the autumn. Martin believes that the company has gained market share in the otherwise difficult and competitive market which is currently experiencing an elimination race and necessary market consolidation. In product terms, particularly intensified efforts in respect of Moving Heads and Visual Solutions have produced results. For some time now, Martin has prepared for an extensive technology transformation in the industry, and it has therefore allocated massive resources for the development of LED products which accounted for about 40% of its revenue in In the autumn, Martin prepared a new focused strategy to replace its transformation strategy having secured the company s transformation measure- 30