http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/RSS.ashxiPaper PagesMon, 23 Mar 2009 10:59:45 +0100http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1Annual Report2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=22 CONTE NTS MANAG EMENT R EPORT 20 0 8 Contents Management report The new Hartmann Group profile Five-year financial highlights and ratios Strategy Group developments 2008 Outlook for 2009 Risk factors Business description Egg Packaging Business description Industrial Packaging Sustainable development Corporate governance Shareholder information Board of Directors and Executive Board Management statement and independent auditor’s report Financial statements Contents Financial review Income statement Statement of cash flows Balance sheet, assets Balance sheet, equity and liabilities Statement of recognised income and expense Segment information Notes Contact addresses Definitions of financial ratios 4 6 7 8 12 16 18 22 25 26 28 30 32 34 36 38 42 43 44 45 46 47 48 86 872009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3MANAG EMENT R EPORT 20 0 8 CONTE NTS 32009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=44 INTRODuCTION MANAG EMENT R EPORT 20 0 8 The new Hartmann The year 2008 was a good year for Hartmann. We completed an extensive turnaround of the Group, earnings improved significantly, and we completed a successful rights issue which gave us renewed financial strength to optimise and develop our activities.We are now entering a new phase that involves a focus on optimising and developing our business. Over the past two years, we have devoted our full efforts to reversing the trend in the Group’s performance – and we have succeeded. In 2007, we launched an extensive turnaround process, the ‘Forward to basics’ plan, which also set the agenda for 2008. We divested or shut down loss-making activities; we implemented an extensive restructuring; we achieved savings; we introduced more efficient work methods; and we improved the collaboration between production units and the sales organisation. The turnaround process was completed at the end of 2008, and we are now entering a new phase after two turbulent and very challenging years. From ’Forward to basics’ to ’10 in 10’ Based on our new structures and work methods, we will continue to strengthen our business and reap the benefits of the many measures we implemented in 2007 and 2008. Our goal for the next two years is to achieve a continued optimisation and development of our European core business, egg packaging, to stabilise our industrial packaging business and to increase sales and capacity utilisation in North America. Our target is to achieve an EBIT margin in the level of 10% in 2010. We call this our ‘10 in 10’ goal. A successful rights issue In June 2008, we completed a rights issue with the purpose of strengthening our capital base and changing our share structure. The capital increase was effected as a rights issue underwritten by banks and guaranteed by a group of Hartmann’s major shareholders. The rights issue was fully subscribed, and Hartmann’s capital base was strengthened by DKK 252 million. Our share classes were also merged, and one share now represents one vote. The successful rights issue enabled us to reduce our debt and improve our equity ratio, which added to our financial strength. In this way, the rights issue formed a platform for the implementation of many improvement processes and investments to ensure that we reach our goal of an EBIT margin of approximately 10%. We are grateful for the support we received from our shareholders in connection with the rights issue. Significant growth in total earnings Despite the higher prices of paper and energy during the first nine months of 2008, earnings in our largest and most important business area – Egg Packaging Europe – significantly improved in 2008. This was driven not least by our focus on earnings before growth and the positive effect of the extensive restructuring and relocation process. Our North American business offered both challenge and disappointment. Despite substantial reductions in fixed costs and several operational improvements, we did not achieve our performance growth targets. A minor decline in volumes and unfavourable exchange rate movements led to unsatisfactory earnings in an otherwise favourable and promising market.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5MANAG EMENT R EPORT 20 0 8 INTRODuCTION 5 Core earnings in our industrial packaging business grew significantly, but unfortunately, in the spring of 2008, our largest single customer informed us that it would be introducing a different packaging concept in 2009 and would therefore be moving to a new supplier. As a result, we implemented a comprehensive restructuring of Industrial Packaging to match the new market conditions. We are now working hard to attract new customers to the business area. Overall, Hartmann’s consolidated earnings improved considerably, and we reported an operating profit before special items of DKK 91 million, which is substantially higher than our profit before special items for 2007 of DKK 53 million. ’Less steak and more omelette’ In our experience, the consumption of eggs does not decrease in times of crisis. On the contrary: ‘Less steak and more omelette’ seems to be the reaction, and we expect that consumers will also follow this pattern in the current economic situation. Furthermore, a new agenda is becoming increasingly more apparent: a growing environmental awareness. All other things being equal, this trend will create more demand for products such as Hartmann’s, and we will seek to exploit this potential as effectively as possible. We are, however, highly aware of the considerable uncertainty surrounding the world economy and the financial markets at the beginning of 2009. Despite our best efforts to reduce risks, Hartmann is also affected by this uncertainty and turbulence, and we are sensitive to factors such as changes in the prices of raw materials and exchange rate movements in the different markets. The negative exchange rate movements in several of our markets are expected to have quite a significant adverse impact on revenue and operating profit primarily for Egg Packaging Europe in 2009. This led to a reassessment of our expectations for 2009 compared with the previous expectations announced in our offering circular in 2008. The momentum created in 2008 was advanced by many skilled and keen employees who tackled their work with drive. We would like to thank all staff for their outstanding work. We look forward to continuing along the same track and believe that we are wellprepared for 2009. Peter Arndrup Poulsen, CEO Tom Wrensted, CFO Tom Wrensted and Peter Arndrup Poulsen2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=66 GROu P PROFIlE MANAG EMENT R EPORT 20 0 8 In 2008, Hartmann moved its head office to new leased premises in Gentofte located close to the motorway and public transport. With its bright open-plan offices, the new building houses some 50 head office staff. Group profile Brødrene Hartmann A/S is among the three largest manufacturers of moulded-fibre egg packaging and also manufactures mouldedfibre industrial packaging. In addition, Hartmann specialises in the development of machinery and technology for the production of moulded fibre. Hartmann was founded in 1917 as a paper bag factory. In the 1930s, the company switched to manufacturing moulded-fibre packaging. Today, the products are sold primarily in most European markets and in North America. Hartmann is the market leader in egg packaging in Europe and holds a small market share in the USA and Canada. The customers of Hartmann’s egg packaging products are egg producers, egg packing companies and retail chains. The customer portfolio comprises upwards of 1,500 customers in more than 50 countries, and most of these customers are longstanding business partners of Hartmann’s. Hartmann is listed on NASDAQ OMX Copenhagen A/S, where it is classified as a Small Cap+ company Revenue distribution geography Western Europe 75% Central and Eastern Europe 14% North America 8% Other 3% Revenue distribution product Egg packaging 85% Industrial packaging 8% Other operations 7% Revenue distribution currency EUR 53% DKK 10% GBP 7% USD 7% SEK, NOK 6% HUF, PLN 6% Andre 14% GBP 1% HUF 2% USD 6% CAD 7% DKK 7% SEK, NOK 10% EUR 53% Consolidated revenue 2008: DKK 1,491 million More than 90% of production is sold outside Denmark No. of employees 2008: 1,629 CAD 1% Others 10% Production at five factories in Europe, one in Israel and one in North America Sales offices in 12 countries2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7MANAG EMENT R EPORT 20 0 8 FINANCIAl HIGHlIGHTS AND R ATIOS 7 Five-year financial highlights and ratios 2008 Income statement (DKKm) Revenue Operating profit/(loss) before depreciations, amortisation and impairment (EBITDA) Operating profit/(loss) before special items Special items Operating profit/(loss) (EBIT) Net financial income and expense Profit/(loss) before tax (EBT) Profit/(loss) for the year from continuing operations Profit/(loss) for the year from discontinued operations Profit/(loss) for the year (EAT) Total recognised income and expense for the year Cash flows (DKKm) Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash flows from continuing operations Cash flows from discontinued operations Total cash flows Balance sheet (DKKm) Assets Invested capital (IC) Net working capital (NWC) Net interest-bearing debt Equity Financial ratios in per cent Operating margin (EBITDA) Profit margin (EBIT) Return on invested capital (ROIC) Return on equity Equity interest Gearing Share-related key figures No. of shares (at year-end, excluding treasury shares) No. of shares (average, excluding treasury shares) Earnings per share in DKK (EPS) Cash flow per share DKK Dividend per share Book value per share Market price per share at year-end Listed price/book value per share Price/earnings, at year-end Pay-out ratio Market value Market value, free float Employees Average no. of employees (continuing operations) 140 1,189 727 100 319 456 12.8 4.4 8.6 (0.8) 38.4 69.9 6,915,090 5,732,568 (0.5) 18.7 0.0 79.6 70.5 0.9 (141.1) 487.5 487.5 1,629 1,491 193 91 (25) 66 (77) (11) (3) (3) (16) 101 (83) 122 140 2007 1,492 106 53 (199) (146) (52) (198) (271) (242) (513) (324) 56 (141) 74 (12) (64) (76) 1,220 810 112 592 220 7.6 (9.8) (16.3) (134.3) 18.0 268.7 3,407,545 4,483,612 (113.7) 12.5 0.0 49.1 112.5 2.3 (1.3) 504.3 442.8 1,946 2006 1,475 168 17 45 62 (20) 42 38 (115) (77) (95) 39 11 (70) (20) (2) (22) 1,438 979 144 431 544 11.0 4.2 6.2 (12.9) 37.8 79.2 3,407,545 4,483,612 (13.9) 8.8 0.0 121.4 172.5 1.4 (16.3) 773.5 688.4 1,929 2005 1,415 159 53 0 53 3 56 38 (10) 28 54 58 (72) (28) (42) 25 (17) 1,599 1,026 123 492 646 10.5 3.8 5.5 4.4 40.4 76.2 3,407,545 4,483,612 6.4 12.9 2.5 144.1 126.2 0.9 25.9 29.8 566.0 512.0 1,901 23 1,504 911 93 482 593 4.3 (9.0) (13.3) (18.8) 39.4 81.3 3,407,545 4,483,612 (27.4) 11.6 0.0 132.2 91.2 0.7 (4.4) 409.0 370.0 2,091 2004 1,387 60 (20) (106) (126) (29) (153) (129) 6 (123) (116) 52 (91) 62 23 - * Adjusted for the bonus element in connection with the rights issue in June 2008, in accordance with IAS 33, excluding the number of shares at year-end. The financial ratios are calculated in accordance with Recommendations & Ratios, 2005, issued by the Danish Society of Financial Analysts. See page 87 for definitions and concepts.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=8http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=88 STR ATEGy MANAG EMENT R EPORT 20 0 8 Strategy Hartmann’s overall goal is to be the market’s preferred supplier of sustainable moulded-fibre packaging and thus create value for its customers, shareholders and employees. Three-phase strategy In order to achieve its overall goals, Hartmann has defined a threephase strategy process. The first two phases will run over a twoyear period, and their primary aim will be to reduce risks, stabilise operations and ensure and improve earnings based on current revenue levels. The third and the last phase will focus on the years after 2010. Together, these three phases will shape the new Hartmann. Phase 2: ’10 in 10’ Performance growth Hartmann has gained momentum as a result of its turnaround plan implementation and successful rights issue in 2008, and the second phase of the strategy process began in early 2009. Hartmann’s target is to achieve an EBIT margin in the level of 10% in 2010: our ‘10 in 10’ goal. The world around us has changed considerably since we announced this goal in mid-2008. A prerequisite for achieving the goal was that exchange rates remained on a level with the rates hedged for 2008. Hartmann operates in several markets where the local currencies are now adversely affected by the turmoil that has prevailed in the financial markets since the second half of 2008. These negative exchange rate movements have a downward impact on Hartmann’s revenue and results of operations. The EBIT margin target of approximately 10% thus has not become less challenging, but is still considered to be realistic. The target will be subject to continuous review in the light of the changing and turbulent conditions in the financial markets. In the following, a number of operational measures to ensure that Hartmann meets the ‘10 in 10’ goal will be described. Optimisation in Europe To ensure a competitive cost level going forward, Hartmann has decided to change the distribution of production capacity among its European factories. This redistribution process was completed in 2008, and a substantial part of production is now based in Hartmann’s factories in low-wage countries. Phase 1: ’Forward to basics’ Turnaround successfully completed Previously, Hartmann’s activities were based on a globalisation strategy aimed at revenue growth and expansion into new markets. However, after several years with disappointing results, this strategy was revised. With the aim of reversing the trend in the Group’s performance, an extensive turnaround process was launched in early 2007, the ‘Forward to basics’ plan: ‘basics’ because Hartmann had to become even better at running the basic part of its business; ‘forward’ because the process was forward-looking and action-oriented. As part of its turnaround plan, Hartmann completed and introduced a large number of measures in 2007 to stabilise and consolidate its business. These measures continued in 2008. The effects of the turnaround plan were evident throughout 2008, and by the end of the year, the plan had been successfully implemented. Hartmann expects to see the full effects of its turnaround measures in 2009.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=9http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=9MANAG EMENT R EPORT 20 0 8 STR ATEGy 9 In 2009, the Group will focus on energy efficiency improvements in production, further reductions of wastage and salary cost cuts based on investment in automation. Implementation of a new and less complex supply strategy will also be completed to ensure improved supply services and reduce logistics costs. Efforts to raise product quality even more are also being made, for example through continued investment in a production tools upgrade that began in 2008. Along with these initiatives in 2009, Hartmann will focus on identifying further efficiency improvements through process optimisation in production. Finally, the work on optimising Hartmann’s product portfolio will continue. The Group will to some extent re-explore the possibility of generating profitable growth through innovation and product development in future. This will, however, be aligned with the Group’s focus on earnings. Revenue growth and improved capacity utilisation in North America The market for moulded-fibre packaging in both the USA and Canada shows a positive trend. Growing environmental awareness contributes to an increase in demand for sustainable packaging, and Hartmann is attempting to capitalise on these trends in order to improve its market position and obtain revenue growth. Revenue growth can be achieved only by increasing production Three-phase strategy capacity utilisation. Additional – but limited – investment in process improvements and automation is expected to increase production efficiency. Hartmann continually monitors developments in manufacturing and sales in North America to ensure the best possible strategy for the Group’s North American operations. Adjusting the activity level in Industrial Packaging As part of the turnaround plan, Industrial Packaging underwent extensive restructuring. This resulted in substantial earnings growth, but the business area also became increasingly dependent on a few large customers. As mentioned previously, the largest Industrial Packaging customer has begun to gradually phase out its purchases of Hartmann’s moulded-fibre packaging – a process scheduled for completion by the end of 2009. Hartmann will continually adapt its organisation and production to match the new activity level in Industrial Packaging with a view to maintaining an acceptable level of earnings. Hartmann has also initiated a process to identify new potential product groups. The food service area is believed to have sales potential: the catering industry, for example, will likely provide some offset to the loss of revenue. Due to current market trends, Hartmann has decided to abandon its previous business objective of developing Industrial Packaging as an independent strategic business area, but Industrial Packaging is expected to continue to contribute to Hartmann’s earnings. Period Plan Focus area Partial global pullback Adjusting the organisation Earnings before growth Optimisation in Europe Revenue growth and improved capacity utilisation in North America Adjusting the activity level in Industrial Packaging 2007-2008 (Phase 1) ’Forward to basics’ 2009-2010 (Phase 2) ’10 in 10’ 2011- (Phase 3) To be defined during Phase 22009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=10http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1010 STR ATEGy MANAG EMENT R EPORT 20 0 8 Phase 2: ’10 in 10’ activities Focus area Optimisation in Europe Challenge Unit costs too high Action Reallocate production from high-wage economies to low-wage countries Improve energy efficiency in production process Status Completed In progress Reduce wastage through upgrade of production equipment Invest in automation of selected processes In progress In progress Supply service improvement Strengthen cross-function organisation and processes New supply strategy In progress In progress Quality improvement Strengthen quality organisation In progress Upgrade production tools In progress Standardise product specifications In progress Standardise and upgrade quality control In progress Management of product portfolio Capacity utilisation too low Revenue growth and improved capacity utilisation in North America Revenue too low Optimise product portfolio In progress Additional but limited investment in process impro- In progress vements and automation Activities to increase sales volumes and to capture a In progress larger share of the market for high-value packaging Identify the potential of other product groups In progress Adjusting the activity Sales to current customers slowing level in Industrial Packaging Phase 3: Hartmann after ’10 in 10’ The third and the last phase of Hartmann’s strategy will focus on the years after 2010. The process of defining the third phase start- ed at the beginning of 2009. It will involve the entire organisation and is expected to be completed in early 2010. Further information will follow at that time.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=11http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=11MANAG EMENT R EPORT 20 0 8 STR ATEGy 112009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=12http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1212 GROu P DE vE lOPME NTS IN 20 0 8 MANAG EMENT R EPORT 20 0 8 Group developments 2008 Operating profit before special items improved significantly, primarily due to substantial growth in the Group’s largest and most important business area, Egg Packaging Europe. Operations in North America performed unsatisfactorily, while core earnings in Industrial Packaging were satisfactory. The Group’s performance in 2008 Hartmann’s consolidated revenue for 2008 was DKK 1,491 million (2007: DKK 1,492 million) from the four primary business areas: Egg Packaging Europe, Egg Packaging North America, Industrial Packaging and Other business areas, including sales of machinery and the power plant in Tønder. Operating profit was DKK 66 million (2007: a loss of 146 million). The Group reported a net loss for the year of DKK 3 million for 2008 (2007: a loss of DKK 513 million). Consolidated operating profit before special items was DKK 91 million, which was a significant improvement compared with the year-earlier level (2007: DKK 53 million). This positive development is an effect on the underlying business of the many turnaround plan activities. For more information on the Group’s performance, see the table on fulfilment of financial objectives below and the financial review on page 38. Rights issue successfully completed In June 2008, Hartmann completed a fully subscribed rights issue of 3,507,545 new shares of a nominal value of DKK 20. The rights issue received strong support from Hartmann shareholders. The new shares were subscribed at a price of DKK 78 per share, resulting in DKK 274 million in gross proceeds, or DKK 252 million after deduction of the costs of the rights issue. The rights issue was made in order to strengthen the financial position of Hartmann and provide the financial strength for a number of additional investments in the core business in order to increase Hartmann’s earnings in the long term. The rights issue significantly strengthened Hartmann’s capital base and financial position: At year-end, Hartmann’s equity interest stood at 38% (1 January 2008: 18%), and gearing stood at 70% at year-end (1 January 2008: 269%). The combination of a capital injection and strong earnings growth significantly strengthened Hartmann and created a solid platform for the implementation of the Group’s strategy plan (See Strategy, p. 8). Egg Packaging Europe Despite the higher prices of paper and energy in the first nine months of 2008, earnings in Hartmann’s largest and most important business area – Egg Packaging Europe – significantly improved in 2008. Revenue increased by 9% to DKK 1,142 million (2007: DKK 1,043 million), and operating profit increased by 83% to DKK 118 million (2007: DKK 64 million). Fulfilment of financial objectives 2008 Amount in DKKm Revenue Operating profit before special items Special items: Impairment of assets in Industrial Packaging Non-recurring costs, closing-down in Industrial Packaging Reversal of provision concerning Asia Sales of machinery, other business areas Sales of building in Asia Operating profit Net profit/(loss) Actual 1,491 91 Outlook in Q3 2008 1,480 79 Outlook in Annual Report 2007 1,460 70 (37) (5) 4 5 8 66 (3) (30) (8) 6 8 55 0-5 70 202009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=13http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=13MANAG EMENT R EPORT 20 0 8 GROu P DE vElOPME NTS IN 20 0 8 13 The improvement was driven by the Group’s extensive focus on cost efficiency, its focus on earnings before growth and the positive effect of the extensive restructuring and relocation process that took place in 2008. Relocation of capacity and trimming of portfolio Two years ago, Hartmann commenced a project to expand and modernise its factory in Hungary. The expansion project was completed by the end of 2008 as scheduled. In connection with Group expansion in Hungary, the overall distribution of production among the European factories was re-evaluated with a view to further optimising both production and logistics costs and the reliability of supply to customers. As a result of the subsequent redistribution, the Hungarian factory accounted for a larger share of the Group’s total production output, whereas the factory in Tønder accounted for a smaller share. In 2008, the costs and organisation of the factory in Tønder were adjusted to match this new situation. The process of trimming the product portfolio that began in 2007 continued in 2008 and resulted in a further reduction of production complexity. Despite slimming its product and colour range, Hartmann continues to offer the market’s broadest product portfolio. Cross-functional business processes and quality As mentioned previously (Strategy, p. 8), Hartmann is in the process of introducing a new supply strategy for its factories in Europe. In 2008, these efforts further centred on creating closer ties between the individual production units through a greater focus on improving business processes across units. Cross-functional teams were set up for a number of key functions, and heads of functions were appointed to drive development and improve business processes. Heads of functions are to a great extent posted locally at the factories. On the quality side, an extensive investment programme was launched to upgrade production tools, and quality control was also strengthened. Hartmann’s sales organisation was restructured in 2008: partly to tackle the changed market conditions and partly to reduce fixed costs. Operating profit/(loss) Amount in DKKm before special items (unaudited) Q4 2008 28 5 (3) 30 38 (7) 2 (3) 30 Q4 2007 26 6 32 23 (7) 18 (2) 32 2008 66 37 1 (8) (5) 91 118 (27) 29 (29) 91 2007 (146) 44 40 115 53 69 (28) 41 (29) 53 Operating profit/(loss) Special items: Impairment of assets in Industrial Packaging Non-recurring costs, reorganisation efforts Sale of building, closing-down in Asia Sale of machinery, other business areas Impairment of assets in Asia Impairment of assets in North America Operating result before special items Breakdown by segments: Egg Packaging Europe Egg Packaging North America* Industrial Packaging Other business areas (incl. eliminations) Operating result before special items * Full year 2008 includes a DKK 6 million gain from intra-group sales of production technology.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=14http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1414 GROu P DE vE lOPME NTS IN 20 0 8 MANAG EMENT R EPORT 20 0 8 Fourth quarter of 2008 Revenue and earnings in Hartmann’s largest and most important business area – Egg Packaging Europe – showed strong growth in Q4 2008. Revenue increased by 8% to DKK 309 million (Q4 2007: DKK 286 million), and operating profit before special items increased by 70% to DKK 38 million (Q4 2007: DKK 23 million). As mentioned above, the improvement was driven by the Group’s extensive focus on cost efficiency, its focus on earnings before growth and the positive effect of an extensive restructuring and relocation process that took place in 2008. million in 2009 compared with 2008. In early 2009, the CAD/USD spot rate has been within the region of 0.80. All other things being equal, the exchange rate movement from the average hedging level of 0.92 in 2009 to the current spot rate level of approximately 0.80 (February 2009) would also have had a further positive effect of DKK 12-15 million. Focus on utilisation of capacity As part of the turnaround plan, the factory in North America made continual improvements in production efficiency and sizeable reductions in fixed costs. An agreement was signed with another supplier of moulded-fibre packaging. Hartmann will to some extent be able to draw on this supplier’s capacity and stocks with a view to ensuring the required reliability of supply and flexibility in production. Fourth quarter of 2008 Revenue for Q4 2008 was DKK 32 million, down 17% against the year-earlier period (Q4 2007: DKK 38 million). Operating profit/ (loss) before exceptional items for Q4 2008 was a loss of DKK 7 million, on a level with the year-earlier period. This was due to unfavourable effects of currency hedging and a minor decline in volumes. Egg Packaging North America Despite substantial reductions of fixed costs and operational improvements, the business area Egg Packaging North America performed unsatisfactorily in 2008 with revenue falling by 16% to DKK 123 million compared with the previous year (2007: DKK 147 million). This was due to unfavourable effects of currency hedging and a minor decline in volumes. Volumes are expected to grow again from the beginning of 2009. Operating profit showed favourable growth and came to a loss of DKK 21 million in 2008 (2007: a loss of DKK 144 million), reflecting asset impairment and non-recurrent costs in 2007 of DKK 116 million and a DKK 6 million gain from intra-group sales in 2008. Unfavourable effects of currency hedging Salaries and purchases of raw materials and other services in relation to Hartmann’s operations in North America are primarily settled in CAD, while the majority of sales are settled in USD. A weakening of USD against CAD would therefore entail a proportional drop in earnings and have an adverse effect on the earnings potential. Continued efforts are made to place a larger proportion of purchasing orders in USD. Furthermore, the cross rate between CAD and USD is hedged. The average hedging for 2008 was effected at 1.04, whereas the rate for 2007 was 0.88 (corresponding to a positive effect of approximately DKK 19 million). In the autumn of 2008, Hartmann hedged the CAD/USD cross rate for the full year of 2009 at an average level of 0.92. All other things being equal, this will positively impact profit from the North American operations by DKK 12-15 Industrial Packaging Revenue for 2008 in the business area Industrial Packaging dropped by 43% to DKK 126 million (2007: DKK 220 million), which reflected declining sales in Europe and the closing down of the industrial packaging operations in Asia and North America. Operating profit broke even in 2008 (2007: a loss of DKK 16 million). Impairment, restructuring and closures adversely affected the results by DKK 29 million. Operating profit before special items for 2008 was DKK 29 million (2007: DKK 41 million). Loss of major customer In May 2008, the business area’s largest customer notified Hartmann that it would start a g2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=15http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=15MANAG EMENT R EPORT 20 0 8 GROu P DE vElOPME NTS IN 20 0 8 15 Adjusting the organisation Hartmann wishes to centre its industrial packaging operations in Europe, both geographically and organisationally. Consequently, the Group’s sales offices in Japan and the USA were closed down in 2007, and production in China and Malaysia was completely shut down in 2008. The closing down of operations in Asia resulted in a positive adjustment of the 2008 profit/(loss) by DKK 12 million in non-recurring income. Furthermore, accumulated foreign exchange losses relating to Malaysia of DKK 16 million were reclassified from equity to financial income and expense. The reclassification only affected the income statement and had no effect on cash flows or equity. In the European part of the organisation, the remaining production at the Danish factory in Tønder was transferred to the factory in Hungary. This transfer necessitated a write down by DKK 37 million of assets and other restructuring costs of DKK 5 million. Sales and development activities continue As part of Hartmann’s strategy plan, a number of sales and development activities were launched with the aim of developing new moulded-fibre products to attract new customers to the business area. These activities will continue in 2009. Fourth quarter of 2008 Revenue for Q4 2008 came to DKK 25 million, which was considerably lower than the year-earlier period (Q4 2007: DKK 64 million), reflecting significantly declining sales in Europe and to a lesser extent the closing down of the industrial packaging operations in Asia and North America. Revenue for Q4 2008 also fell short of expectations. December sales, in particular, were affected by the current economic crisis, which causes activities to slow down, especially in the electronics industry. The economic crisis is also expected to affect sales in 2009. Operating profit before special items for Q4 2008 was DKK 2 million; a significant reduction compared to the year-earlier period (Q4 2007: DKK 18 million). This was primarily due to the significant decline in European sales. Other business areas Other business areas comprise Hartmann Technology, the combined heat and power plant in Tønder, costs relating to corporate functions and eliminations. Revenue for the year was DKK 100 million, corresponding to an increase of DKK 19 million from the year-earlier level (2007: DKK 81 million), the main growth driver being the boost in sales of production plant in Hartmann Technology. Operating profit came to a loss of DKK 30 million in 2008 (2007: a loss of DKK 50 million). This was primarily a result of substantial non-recurrent costs and restructuring costs in corporate functions in 2007 of DKK 20 million. Operating profit/(loss) DKKm 40 35 30 25 20 15 10 5 0 06 07 08 06 07 08 before special items (unaudited) Egg Packaging Europe DKKm Egg Packaging North America 10 5 0 -5 -10 -15 DKKm Industrial Packaging 20 15 10 5 0 -5 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 06 07 08 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=16http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1616 OuTlOOK FOR 20 09 MANAG EMENT R EPORT 20 0 8 Outlook for 2009 The negative exchange rate movements in several markets and the significant drop in sales in Industrial Packaging will adversely affect Hartmann’s revenue for 2009, which is expected to come to approximately DKK 1,400 million. EBIT margin is expected to be in the region of 5-6%. Revenue Hartmann’s revenue forecast for 2009 is approximately DKK 1,400 million, down approximately 6% from the preceding year (2008: DKK 1,491 million). This is lower than the forecast provided in the offering circular of May 2008 of revenue of DKK 1,500 million in 2009 and is mainly due to expected negative effects of exchange rate movements as a result of unrest in the financial markets. Compared with the exchange rates hedged for 2008, this represents a negative effect of approximately DKK 125 million. Hartmann’s consolidated revenue forecast is based on expected revenue growth in the Group’s second-largest business area, Egg Packaging North America, and an expected decline in revenue from Egg Packaging Europe and Industrial Packaging, respectively. The market for egg packaging is not considered to be sensitive to cyclical fluctuations. The consumption of eggs is resilient to economic recession and is therefore not expected to be influenced by the current economic turmoil. However, Hartmann operates in several markets where the local currencies are adversely affected by the turbulence that has prevailed in the financial markets since the second half of 2008. As mentioned above, these negative exchange rate movements impact revenue from Hartmann’s main business area, Egg Packaging Europe. Egg Packaging Europe is also expected to see a slight decline in volumes compared with 2008. However, this will be more than offset by an improved product and price mix. In the autumn of 2008, Egg Packaging North America signed a number of agreements which are expected to generate substantial revenue growth in the business area. The growing interest in high-value packaging in the North American markets, spurred by a wish to differentiate products through packaging, is furthermore expected to have a positive impact on the 2009 volumes in this business area. The ever-growing focus on environmental awareness and the growing interest in sustainable packaging in North America also contribute to the projections for the year. A USD/CAD exchange rate that is favourable to Hartmann is also having a positive impact on Egg Packaging North America revenue. The expected decline in revenue from Industrial Packaging is, as mentioned previously, attributable to the largest customer of the business area having informed Hartmann in May 2008 of its decision to gradually phase out its purchases of Hartmann’s mouldedfibre packaging by the end of 2009. Active efforts are still made to generate compensating sales. Profit from operations The Group expects its EBIT margin for 2009 to remain in the region of 5-6%, which is an improvement on the preceding year (2008: 4.4%). This is lower than the forecast provided in the offering circular of 2008 of an EBIT margin in the region of 6.0-6.7% in 2009 and primarily reflects the negative effects of exchange rate movements, which are expected to impact the EBIT margin by approximately 2 percentage points. Operating profit for the business area Egg Packaging Europe is expected to improve in 2009, as the full effects of the initiatives launched as part of the turnaround plan materialise. However, this development is expected to be more than offset by unfavourable movements in several of the currencies to which Hartmann is exposed.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=17http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=17MANAG EMENT R EPORT 20 0 8 OuTlOOK FOR 20 09 17 The expected improvement in Egg Packaging North America is attributable to a combination of expected higher volumes and a more favourable USD/CAD exchange rate, and the operating profit for the full year of 2009 is expected to about break even. Profit before exceptional items in Industrial Packaging is expected to fall significantly due to the sharp drop in the revenue of the business area. The financial year 2008 was significantly affected by special items, including impairment relating to production in Denmark being closed down, and operating profit for Industrial Packaging is therefore expected to improve in 2009. Experience indicates that consolidated revenue and earnings will be higher in the first and fourth quarters than in the second and third quarters. Investments In 2009, Hartmann’s strategy with respect to investment in automation and production optimisation is expected to lead to a substantial one-off investment of approximately DKK 50-75 million. Capital investments are thus expected to total approximately DKK 125-150 million. Assumptions Hartmann’s revenue and profit forecast for 2009 is based on the Group’s present composition of business operations and the current assumptions. The prices of energy and raw materials in 2009 are assumed to be on a level with prices in the fourth quarter of 2008. Total energy and raw materials costs in 2009 are assumed to be lower than in 2008. Hartmann also assumes sales prices to remain stable at the opening level of 2009. Any negative deviations from these assumptions may adversely affect the profit for 2009. Industrial Packaging is particularly vulnerable to changes in market conditions, among other things due to an increase in the number of customers relocating production to Asia and due to substitution with other materials. If compensating sales cannot be generated fully or partially through an inflow of new customers or through increased sales to existing customers, it could lead to additional impairment charges if production equip- ment is decommissioned and cannot be reused or sold at the carrying amount. This is not included in the forecast. Furthermore, the above forecast is based on an assumption that the current global economic crisis will not significantly affect Hartmann’s business areas, apart from the effects described in this report. The very limited effects of the settlement with the Lactosan Sanovo Holding A/S Group (company announcement no. 2/2009) on Hartmann’s profit are included in the forecast. The Group’s operating profit is exposed to changes in the US dollar (USD), Canadian dollar (CAD), euro (EUR), pound sterling (GBP), Polish zloty (PLN), Hungarian forint (HUF), Swedish krona (SEK) and Norwegian krone (NOK) rates. During 2008 and in early 2009, Hartmann hedged the CAD/USD and EUR/HUF exchange rates for the full year of 2009. These represent the Group’s main currency transaction risks. Furthermore, the Group hedged the GBP/DKK, SEK/DKK and NOK/DKK exchange rates for the first half of 2009. Due to the volatility that characterised the currency markets in the second half of 2008, CAD/USD hedging was at a higher level (0.92) than the spot rate level in early 2009 (around 0.80). However, the hedging was considerably more favourable than the hedging for 2008 (average level of 1.04). Forward-looking statements The forward-looking statements in this Annual Report reflect Brødrene Hartmann A/S’s current expectations for future events and financial results. Statements regarding 2009 are naturally subject to risks and uncertainties which may result in deviations from expectations. Factors that may cause the actual results to deviate from expectations include but are not limited to general economic developments and developments in the financial markets, changes and amendments to legislation and regulations on Brødrene Hartmann A/S’s markets changes in demand for products competition and the prices of energy and raw 2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=18http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=1818 RI S K FACTORS MANAG EMENT R EPORT 20 0 8 Risk factors It is a fundamental objective of Hartmann’s Management to ensure constant and adequate monitoring of the Group’s risk exposure and ensure the existence of the necessary risk management capabilities in the form of policies and procedures. In connection with its operations, Hartmann is exposed to a number of operational and business risks. Hartmann continually monitors these risks, and the Board of Directors and the Executive Board perform an annual review of the Group’s risks, identifying and assessing significant risks that could affect Hartman’s operational and financial goals. The purpose of risk management is to identify the various risk factors affecting Hartmann, to determine how to manage these risks and ensure the best possible balance between risk and return. Fluctuations in the price of raw materials Hartmann is dependent on the purchase prices of the raw materials used in the Group’s production. Hartmann is particularly exposed to fluctuations in the purchase prices of recycled paper and energy (electricity and gas), which are the most important raw materials used in production. The price of these raw materials has fluctuated considerably in the past, which had a negative impact on the Group’s results of operations in 2008, among other things. Hartmann seeks to achieve a reduction of its sensitivity to developments in paper prices by signing fixed-price and framework agreements. Because of these agreements, which have been concluded with some of the largest paper suppliers, the effect on Hartmann’s purchase prices of developments in the market price of paper occurs at a certain delay, which may improve the chances of making the necessary adjustments. In addition, Hartmann has signed fixed-price agreements with energy suppliers, typically for periods of approximately 12 months, covering a substantial part of the Group’s energy consumption. However, some countries in which Hartmann operates do not permit fixed-price agreements with energy suppliers. Dependence on suppliers Hartmann contracts with a number of suppliers of raw materials used in production. If contracts with one or more of these suppliers are terminated or breached, or the suppliers fail to meet their contractual obligations for other reasons, it may mean that Hartmann cannot obtain delivery of the necessary raw materials or that it may be required to make purchases from alternative suppliers, which may not necessarily be effected at the same terms. Hartmann has contracted with several suppliers of recycled paper, energy and other raw materials, and distributing its production across several different locations in Europe also helps ensure flexibility in relation to suppliers. Dependence on customers Hartmann’s sales are distributed among a relatively limited number of major customers and a large number of small customers. The contracts with the customers are typically signed for periods of 12 months at a time. Markets are believed to be developing towards fewer and larger customers and, as a result, Hartmann will become more dependent on fewer and larger customers in the future. Should one or more major customers terminate their contracts with Hartmann, it may have a material adverse effect on the Group’s results of operations. Demand for eggs Hartmann’s core business consists of sales of egg packaging, and the Group is therefore dependent on the demand for eggs. The consumption of eggs is affected by many factors beyond Hartmann’s control, including trends, health perceptions and fear of avian flu and salmonella, etc.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=19http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=19MANAG EMENT R EPORT 20 0 8 RI SK FACTORS 19 Product development and customer preferences Hartmann relies on customers not changing their preferences from moulded-fibre egg packaging to egg packaging made of other materials. The future success of the Group is dependent on its ability to regularly develop and market new and improved, competitively priced products, which are popular with its customers. Hartmann is continually developing its product portfolio within the framework of Hartmann’s focus on earnings. The development takes place in close collaboration with Hartmann’s customers. In addition, Hartmann is highly dependent on changes in customer behaviour and preferences. All other things being equal, a stronger focus on sustainability and the environment should strengthen preferences for the type of packaging manufactured by Hartmann. Industrial Packaging is particularly exposed to changes in market conditions, due among other factors to an increase in the number of customers relocating production to Asia and to substitution for other materials. Competition Hartmann operates in markets characterised by substantial competition, and the fierce competition is expected to continue and make tougher demands on the Group’s ability to compete effectively. In particular, it is believed that it is important to be competitive with respect to product assortment, quality, service, price and ontime shipments. Hartmann is working purposefully to strengthen its position and efforts in these areas, and is continually optimising production to ensure a competitive cost level. Hartmann seeks to reduce price sensitivity by offering a wide range of packaging solutions with special focus on high-value packaging. Financial performance in Egg Packaging North America and Industrial Packaging The future actual financial results of Egg Packaging North America and Industrial Packaging may especially be affected by one-off, unexpected events that are beyond Hartmann’s control, and as a consequence, Hartmann’s future actual financial results may differ significantly from the forecasts. One of the critical assumptions for Egg Packaging North America is that the sales and volume assumptions materialise and that the CAD/USD exchange rate does not develop unfavourably for Hartmann. Should one or more of these assumptions fail to materialise, or should circumstances develop unfavourably, it could have a material adverse effect on the Group’s performance. Management closely monitors developments at the Canadian plant on an ongoing basis to be able to assess the relationship between the risks and the long-term strategic perspectives of the Group. The future performance of Industrial Packaging is highly dependent on changes in customer behaviour and preferences. Industrial Packaging is exposed to changes in market conditions partly as a result of the relocation of production to Asia by globally orientated manufacturers of consumer electronics and substitution for other materials. After having adapted the level of activity in Industrial Packaging in 2007 and in early 2008, Industrial Packaging’s sales rely to a great extent on one large customer. In May 2008, this large customer notified Hartmann that it would start a gradual phaseout of its purchases of Hartmann’s moulded-fibre packaging. Active efforts are made to generate compensating sales, but if this cannot be achieved through an inflow of new customers or through increased sales to existing customers, it could lead to additional impairment charges if production equipment is decommissioned and cannot be reused or sold at the carrying amount. Environmental risks Hartmann’s business, including production, sales, use, storage and disposal of products, is subject to a number of environmental laws and regulations. Environmental risks are monitored both locally and by Hartmann’s corporate department for sustainable development. STEP® Environment, Hartmann’s environment management model, is an effective and profe2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=20http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2020 RI S K FACTORS MANAG EMENT R EPORT 20 0 8 For example, Hartmann is subject to rules governing the limitation of noise and rules governing waste water discharge and waste disposal and to EU’s CO2 certificate scheme. Hartmann aims to operate all production facilities in an environmentally responsible manner and in compliance with the Group’s sustainability principles and environment management model. Hartmann’s European production facilities are all certified to the ISO 14001 standard. Social relations and risks Hartmann gives high priority to measures safeguarding health and safety in the workplace, the protection of human values in the local community, and the protection of the people with whom Hartmann or its products are in contact. STEP® Human, Hartmann’s social responsibility management model, ensures compliance with the Group’s standards in relation to health and safety in the workplace. The model also ensures that Hartmann handles its social responsibility effectively and efficiently and acts as a responsible player in all countries where it operates. Insurance Hartmann has a comprehensive insurance programme, which reflects the scope and extent of its operations and their geographical location. Once a year, the insurance programme is reviewed together with the Group’s global advisor to ensure that adjustments are made on an ongoing basis in support of Hartmann’s development and, thus, that any possible effect on the Group’s financial performance is minimised. The total loss of a factory due to fire constitutes the single most important risk for Hartmann, as the re-establishment of production facilities would take a long time, involving the risk of losing market shares and the risk of business interruption. Therefore, Hartmann has taken out an all-risk insurance policy for all production facilities, which includes fire events, business interruption and other incidents. Hartmann is furthermore making a systematic effort to prevent injury and damage, and together with the Group’s insurance broker, the Group has implemented a risk management programme. Most production facilities have 24-hour surveillance, and all facilities have fire fighting procedures. In addition, sprinkler systems have been installed in critical areas at almost all factories. Hartmann’s insurance programme also covers commercial and product liability, property and contents, business interruption loss, occupational injuries, personal injury and environmental liability. Financial risks Developments in Hartmann’s financial performance and equity are affected by an array of financial risks, among them foreign exchange risks, interest rate risks, liquidity risks and credit risks. Hartmann has centralised the management of its financial risks in the corporate finance function, which also functions as a service centre to all Group subsidiaries. Hartmann uses derivative financial instruments as a hedge against some of the financial risks that arise out of its commercial operations, primarily currency and interest rate swaps and forward and option contracts. The Group does not engage in transactions for the purpose of speculation. Financial risks and financial risk management are described in detail in note 30 on p. 76, and note 31 on page 78.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=21http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=21MANAG EMENT R EPORT 20 0 8 RI SK FACTORS 212009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=22http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2222 Bu S INES S DESCRIP TION EGG PACK AGING MANAG EMENT R EPORT 20 0 8 Business description Egg Packaging The market for moulded-fibre egg packaging is dominated by three major suppliers who together account for 50% of global sales. Hartmann is the only one of the three to focus primarily on moulded fibre. Hartmann’s moulded-fibre egg packaging business is divided into two geographical segments: Egg Packaging Europe and Egg Packaging North America. Egg Packaging Europe is Hartmann’s largest business area and accounted for 77% of total revenue in 2008. The products are manufactured at Hartmann’s factories in Denmark, Hungary, Croatia, Germany, Finland and Israel. Sales in Europe are co-ordinated from Frankfurt, and the business area has ten sales offices in Europe and one in Israel. Egg Packaging North America accounted for 8% of Hartmann’s revenue in 2008. Acquired in 2002, the North American operations cover the USA and Canada. Hartmann’s factory is located in Brantford, Canada, and sales are handled by sales representatives in Canada and the USA. Products and markets Hartmann has the strongest market position in Western Europe and its long-standing presence has given the Group strong relations to Western European customers and markets. The Western European market is also the market in which Hartmann sells its most diversified product portfolio. Hartmann is the market leader in the moulded-fibre retail carton segment in Europe, with Germany, the United Kingdom, France, Italy, the Netherlands and Poland representing the largest markets in Europe. In Europe, Hartmann has dedicated its resources to high-value packaging in recent years. Hartmann has contributed to building this market segment through the launch of several new products, as packaging is becoming an ever-important sales parameter for eggs in retailing and may be used to differentiate specialities such as organic eggs from the standard eggs. Hartmann’s production process Hartmann’s standardised production processes enable the Company to supply the same product to the same customer from several different factories. Hartmann’s European factories are certified to the ISO 9001 standard. The production processes in North America are largely identical to the European ones, although the North American factories have a higher degree of automation. Pulper Source: Hartmann De-inking Moulding Drying Afterpress Print/label Delivery2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=23http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=23MANAG EMENT R EPORT 20 0 8 B u S INES S DESCRIP TION EGG PACK AGING 23 Packaging is becoming an even more important sales parameter for eggs in retailing and may be used to differentiate specialities such as organic eggs from the standard eggs. The increase in sales of high-value packaging has triggered a decline in sales of standard and discount packaging, and this trend is expected to continue in the years to come. In the Southern European markets, the use of plastic packaging is more widespread than in other Western European markets. Despite expectations for a growing environmental awareness, Southern Europe is still expected to represent a relatively limited market for Hartmann. Central and Eastern Europe are smaller markets than Western Europe. Retail cartons are not used as widely, but the use of these products will most likely rise with the proliferation of international and national retail chains and the increased application of Western European standards and EU legislation. In North America, high-value products correspond to products at the top end of the standard range in Europe. Hartmann has built a strong position in the North American market and focuses more on these product types. These represent a growing segment, driven not least by increased demand for environmentally compatible products. Hartmann is expected to be in a good position to capture a sizeable share of the growth in the North American market for high-value products. Customers Hartmann’s customer portfolio in Europe mostly consists of egg producers, egg packing companies and, increasingly, retail chains. The customer base comprises more than 1,500 customers distributed on most of the European countries. Historically, Hartmann has enjoyed a stable customer base, owing to high-quality products and reliability of supply among other factors. Nine of the ten largest customers have been customers with Hartmann for more than ten years. Hartmann’s customers in North America mostly consist of egg producers, egg packing companies and, increasingly, retail chains. Most of these have been Hartmann customers since 2002, when Hartmann commenced operations in North America. Market trends Growing influence of retailers Traditionally, packaging manufacturers in North America have sold their products and maintained direct relations with the egg producers and egg packing companies. Today, retailers increasingly tend to collaborate directly with the packaging manufacturers to decide aspects such as colouring, print, labelling and marketing activities. As a result, retailers today have a real impact on the choice of packaging supplier in large parts of the market. Sustainable marketing of eggs with special features An ever-increasing number of Hartmann’s customers set higher standards for the environmental profile of the packaging they buy. Hartmann’s packaging is manufactured from recycled paper, which is both easy to reuse and biologically degradable. This gives Hartmann a competitive edge at a time when health and sustainability are receiving a great deal of attention from the public. North America in particular is seeing this trend, with retail chains such as Wal-Mart, Topco, Burnbrae and Egglands Best among Hartmann’s customers. In 2008, Egglands Best and Hartmann worked together to develop a packaging concept for so-called ‘Disney eggs’: omega 3 eggs with various well-known Disney characters printed directly on the egg.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=24http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2424 Bu S INES S DESCRIP TION EGG PACK AGING MANAG EMENT R EPORT 20 0 8 The USA is witnessing a growing awareness of sustainability. In 2008, the authorities in Seattle prohibited the use of foam plastic in food packaging, and in San Francisco, shops were prohibited from distributing free plastic bags. Other American cities are working towards similar bans on the use of plastic, promoting instead the use of recycled materials made from paper and cardboard. More information is available on www.sfenvironment.org and www.seattle.gov. The same trend is seen in Europe, albeit on a smaller scale than in North America. The market in Western Europe, in particular, is expected to witness the same trend within a few years. Replacement of other packaging materials Moulded fibre is made from recyclable raw materials, and the product is biodegradable. This product is therefore an environmentfriendly alternative to plastic and foam egg packaging. As for retail cartons, growing attention to environmental issues and sustainability among retailers and consumers is expected to Egg packaging by product group Retail cartons (high value) lead to plastic and foam packaging being replaced by moulded-fibre packaging. In the northern European markets, this trend has prevailed for a number of years, and it is expected to become more and more widespread in the rest of Europe. Hartmann is also seeing growing awareness of environmental correctness and sustainability in North America: retailers there are becoming more aware of environmental issues and actively promote sustainable manufacturing among their suppliers (see also Sustainable development on p. 26). High-value packaging is characterised by new designs and differentiation options such as different colouring, design labelling and multi-colour prints. Used primarily for packing premium eggs such as free-range eggs and organic eggs. Retail cartons (standard) foto Standard packaging is characterised by more traditional designs that are well-established in the market. Possible to differentiate by different colouring, design labelling and multi-colour prints. Most often used for packing standard eggs. Retail cartons (discount) Discount packaging is characterised by more traditional product designs – with or without topside windows – that are well-established in the market. Offered in a limited range of colours with multi-colour prints. Customised colours and design labelling are not available. Most often used for packing standard eggs. foto Transport packaging Transport packaging is manufactured in trays holding for example 20 or 30 eggs. Primarily used for distribution of eggs between egg producers and their customers. Only available in grey.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=25http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=25MANAG EMENT R EPORT 20 0 8 B u S INES S DESCRIP TION INDu STRIAl PACK AGING 25 Business description Industrial Packaging The market for industrial packaging is fragmented and is based on many different types of materials and technologies. In 2008, Industrial Packaging accounted for 8% of Hartmann’s total revenue. As part of the turnaround plan, this business area has been restructured to increase earnings by focusing operations both geographically and organisationally and by trimming the customer and product portfolios. The Group’s former sales offices in Japan and the USA were closed, the European sales organisation was downsized, and Asian operations were wound up at the beginning of 2008. The business area is now concentrated in Europe, and sales are coordinated from Denmark. As of the beginning of March 2009, the products are exclusively manufactured at Hartmann’s factories in Hungary. Production takes place at several production lines. However, the manufacturing of industrial and egg packaging products share certain processes, which means that there is some degree of joint operations. Products and markets The market is extremely competitive, and Hartmann competes not only with other moulded-fibre manufacturers but also with manufacturers of alternative materials such as foam, plastic and folding cardboard. The competition includes large packaging groups and a number of small local manufacturers of moulded fibre and other materials. As customers often launch new products, collaboration between customers and the packaging manufacturer is crucial, since ongoing changes to the production batches place heavy demands on the development of production moulds and the ability to swiftly run in new product versions in production. Hartmann manufactures moulded-fibre industrial packaging, which forms an integral part of the packaging of the end product. Hartmann offers packaging inserts, and the product range is divided into display packaging and packaging for transport protection. Display packaging is used for packing and protecting consumer electronics. Customer products are placed in Hartmann’s packaging insert, which is then inserted into the exterior packaging. Hartmann’s packaging inserts are used especially for packing mobile phones and other electronic equipment. The shape and visual appearance of the packaging is customer and product specific and may be changed by altering the shape, colour and printing. Display packaging accounts for more than 90% of revenue in the business area. Packaging for transport protection is used for storing and transporting fragile products such as fluorescent tubes, light bulbs, tubes, etc. The shape of the packaging is customer and product specific. Both product categories are characterised by project sales to industrial customers, and Hartmann therefore only has one customer for a given product and does not offer a standard range. Customers In the field of industrial packaging, Hartmann has traditionally focused on globally-orientated manufacturers of consumer electronics in Europe. The market potential for industrial packaging in Europe has declined in recent years, among other things because more and more electronics manufacturers have relocated production to the Far East and due to substitution with other types of packaging, including folding cardboard. This trend is expected to continue.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=26http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2626 Su STAINAB lE DE vE lOPME NT MANAG EMENT R EPORT 20 0 8 Sustainable development There is today an increasing focus on sustainability, which has been a natural part of Hartmann’s business for a number of years, both with respect to products and the structure of the entire Group. Hartmann was one of the first companies in Denmark to take a systematic and professional approach to environmental and social sustainability. The principles of and goals for sustainability form an integral part of Hartmann’s business model and are reflected both in the development of the Group’s products and in the Group’s business practices. Hartmann has laid down ten principles to form the overall framework for its sustainability efforts: 1. 2. 3. 4. 5. 6: 7. 8. 9. 10. Health and safety in the workplace The well-being of employees and their families Fair wages Good relations to the local community Non-discrimination and equal opportunities The right to organise and collective bargaining Rejection of forced labour Preventing child labour Refraining from bribery and corruption Proactive environmental protection In addition to its development activities, Hartmann regularly participates in international research projects, for example aimed at developing new materials with the same sustainability profile as moulded fibre or better. Hartmann also takes part in a number of activities to promote awareness and implementation of sustainability, both by businesses and consumers. For example, Hartmann currently chairs the CSR network under the Confederation of Danish Industry (DI). Leader in sustainability Hartmann continually strives to encourage its markets and customers to adopt a more sustainable approach to packaging. For a number of years now, Europe has seen a focus on sustainability, also in packaging, and Hartmann has played an important role in this development. All through 2008, the Group met with current and potential customers to tell them how a strong sustainability profile can benefit their business. As a result, a number of Hartmann’s key customers have integrated sustainability into their marketing efforts. In North America, however, the focus on sustainable packaging is a relatively new phenomenon; Hartmann’s experience from Europe has successfully positioned Hartmann as a pioneer in this field. For example, Hartmann was the only packaging manufacturer to feature sustainability as a theme at the 2008 International Poultry Expo in Atlanta, and because of this, the Group won two awards. Its role as a pioneering company has not only increased the demand These principles are consistent with the ten principles of the UN Global Compact, which Hartmann endorsed in 2003. Sustainable product development Hartmann’s development activities are aimed at increasing the use of products made of environmentally friendly moulded fibre based on recycled paper. Sustainability is taken into consideration in the development and manufacture of all Hartmann products. uN Global Compact Having endorsed the UN Global Compact in 2003, Hartmann is committed to working continually to integrate these ten principles in the areas of human rights, labour standards, environment and anti-corruption in its strategy, corporate culture and business practices. More information about the ten principles is available on www.unglobalcompact.org and www. hartmann-packaging.com. Green Frog Award In 2008, Hartmann Croatia received Deloitte’s Central European Environmental Reporting Award (the ‘Green Frog Award’) for having the third-best sustainability reporting of the region. The award has existed since 2001. In 2008, the jury focused on reduced CO2 emissions and innovative environmental measures.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=27http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=27MANAG EMENT R EPORT 20 0 8 Su STAINAB lE DE vE lOPMENT 27 Hartmann’s sales and marketing campaign Choose Fibre. Save Nature® has been an important tool in the sustainability profiles of both Hartmann and its customers since 2007. for Hartmann’s products; Hartmann has also become a popular provider of knowledge on environmentally friendly packaging and life cycle assessments. Sustainability is also the theme of Hartmann’s sales and marketing campaign Choose Fibre. Save Nature®, which was launched in 2007 and continued in 2008. The idea is to highlight the properties and advantages of moulded fibre over competing materials, and the campaign is aimed at the largest retail chains in Europe and North America. Retailers and wholesalers have transferred the environmental arguments and the material to their own advertising and presentations, and the concept has also been used at several trade fairs and exhibitions both in Europe and North America. The campaign will be continued in 2009. Hartmann reduces CO2 emissions Hartmann has sought to reduce energy consumption at its factories for many years, and in 2007 the Group signed the UN Caring for Climate charter, committing itself to reducing its CO2 emissions. Hartmann aims to reduce CO2 emissions per kilogramme of product by 20% between 2009 and 2011. This will be achieved through measures such as a focus on investments, maintenance and replacement of old equipment, through introducing best practice and through training and education. All of Hartmann’s European factories are targeting environmental and energy issues. Hartmann has appointed a person in charge of energy in Europe to be at the head of various energy initiatives across the organisation. A cross-organisational energy team has also been set up, with local representatives at each factory. The purpose of the team is to operationalise and ensure implementation of specific energy-saving measures. Furthermore, Hartmann is developing STEP® Energy (STEP: Sustainability Tools for the Entire Product Chain), which is based on the same principles as those that form the basis for the Group’s recognised STEP® Environment and STEP® Human models. STEP® Energy makes it possible to consistently measure energy consumption across the organisation and use that information to set clear goals for improving energy efficiency. More information about Hartmann’s STEP® models is available on www.hartmann-packaging.com. Environmental efforts at Hartmann’s factories, in brief: • All of Hartmann’s European factories have been environmentally certified to the ISO 14001 standard. • Most of Hartmann’s European factories have received working environment certification to the OHSAS 18001 standard. • All factories are regularly tested and compared on the basis of key environmental parameters such as consumption of energy, water and raw materials. • The sustainability performance of all factories is measured systematically. Hartmann advises Wal-Mart on sustainability In 2007, the world’s largest supermarket chain, US-based Wal-Mart, announced its intention to work towards a greener profile, also by demanding more environmentally compatible and sustainable packaging from its suppliers. Hartmann’s egg packaging was already in Wal-Mart’s shops at the time. As a result of Hartmann’s profile and experience in sustainability, its business relationship with Wal-Mart was expanded to include consultancy in this field. Among other initiatives, several of Wal-Mart’s purchasers have undergone training at Hartmann. The collaboration provides Hartmann with important insight into sustainability trends, developments and requirements in the North American market. Since 2007, Wal-Mart, the world’s largest supermarket chain, has worked towards a green profile based on a clearly defined sustainability policy, in collaboration with Hartmann. Photo: www.walmartstores.com2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=28http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=2828 CORPOR ATE GOvERNANCE MANAG EMENT R EPORT 20 0 8 Corporate governance Hartmann continued to focus on good corporate governance in 2008. The Group’s share classes were merged, and the Board of Directors performed its first self-assessment. The Board of Directors and the Executive Board continually seek to ensure that Hartmann’s management structure and control systems are adequate and work satisfactorily. A number of internal procedures have been developed and are updated regularly to ensure the active, safe and profitable management of the business. NASDAQ OMX Copenhagen A/S has drawn up recommendations for corporate governance. With reference to the ‘comply or explain’ principle, Hartmann’s Board of Directors has considered these recommendations, and the Board is of the opinion that Hartmann complies with these principles. Hartmann’s corporate governance is also based on the Danish Public Companies Act, the Danish Financial Statements Act, IFRS, the Danish Securities Trading Act, the Rules for issuers of shares on the NASDAQ OMX Copenhagen A/S, Hartmann’s Articles of Association, and best practice for businesses of the same size and with the same international scope as Hartmann. The role of the shareholders and their interaction with Management The Board of Directors believes that a good interaction between Management and the shareholders is crucial to Hartmann and that an appropriate framework encourages dialogue. The Annual General Meeting is considered to be the central forum for dialogue among shareholders and among shareholders and Management. Efforts are made to ensure that general meetings and notices of general meetings are planned to enable a democratic debate to take place which allows all shareholders to make informed decisions. The Hartmann website is the pivotal communication forum for providing regular information to shareholders. The Board of Directors regularly assesses the capital structure and share structure of Hartmann. In 2008, Hartmann successfully completed a capital increase and updated its share structure according to the ‘one share – one vote’ principle. Hartmann’s Articles of Association now contain no restrictions with respect to ownership or voting rights. More information is available in Shareholder Information on p. 30. The role of stakeholders and their importance to Hartmann Hartmann seeks to develop and maintain good relations with its stakeholders. Management runs and develops Hartmann with due consideration for stakeholders, focusing on key areas such as communication, environmental aspects and responsibility towards customers and society in general. More information on sustainability is available on p. 26. Openness and transparency Hartmann’s Executive Board and Investor Relations are responsible for communication of information to shareholders and investors according to guidelines agreed with the Board of Directors. This communication takes place with due regard paid to the rules of NASDAQ OMX Copenhagen A/S and comprises annual and interim reports, replies to enquiries from equity analysts, investors and shareholders, visits by investors and analysts to the Group and a special investor section on Hartmann’s website. The tasks and responsibilities of the Board of Directors The Board of Directors has a duty to work towards steady progress for Hartmann and its stakeholders, to create the greatest possible value for shareholders and to preserve the trust and confidence in the Group held by the world around it. The general rules for the work to be done by the Board of Directors are laid down in rules of procedure which are reviewed and adjusted annually by the Board. The rules of procedure provide guidelines, including2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=29http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=29MANAG EMENT R EPORT 20 0 8 CORPOR ATE GOvERNANCE 29 In January 2009, Hartmann received the Danish Society of Financial Analysts’ Information Award for open and transparent communication regarding the Group’s turnaround plan which was completed at the end of 2008. In this connection, Hartmann received a work of art entitled ‘Five playing children’ by Finnish artist Raimo Veranen. guidelines for the activities of the Board such as its supervision of the organisation, day-to-day management and performance. Eight Board meetings were held in 2008. One member was absent at one of the meetings. The composition of the Board of Directors Through recruiting and evaluation processes, the Board of Directors ensures that it is composed in such a way as to allow it to perform its managerial tasks in an efficient and forward-looking manner and at the same time function as a constructive and highly qualified sounding board for the Executive Board. The Board of Directors regularly assesses whether its composition and the competence of its members, individually and collectively, reflect the demands made by the current situation and circumstances. Hartmann’s Board of Directors has not set up any permanent committees. The Board believes that the size of the Board of Directors and the complexity of Hartmann do not necessitate such committees. According to the definition contained in the recommendations of NASDAQ OMX Copenhagen A/S on corporate governance, one of the Board members elected by the shareholders, Peter-Ulrik Plesner, is not independent, since he is partner of PLESNER law firm and serves on the Board of the Brødrene Hartmann Foundation. More information on Hartmann’s Board of Directors is available on page 32. Remuneration The Board of Directors finds it important to ensure that the remuneration paid to members of Management and the Board of Directors is competitive and reflects the performance demanded from them. The remuneration structure of Management encourages long-term behaviour, is transparent and is easy to under- stand. The total and individually specified remuneration amounts paid to the members of the Board of Directors and the Executive Board are found in note 4 on p. 51. The guidelines for incentive pay schemes for the Executive Board were approved at the Annual General Meeting on 22 April 2008. The guidelines have been posted on Hartmann’s website. The members of the Board of Directors of Hartmann do not participate in the company’s incentive pay schemes. Risk management On the basis of a wish to develop and maintain an understanding among the organisation’s employees of Hartmann’s strategic and operational objectives, and in order to identify the critical success factors upon which the fulfilment of these objectives relies, the Board of Directors has identified the most important business risk areas and continually monitors developments in these areas. More information about risk management is available on pp. 18 and 76. Audit An essential element of the Board of Directors’ work is ensuring that the auditors are competent and independent. The Board assesses auditors on the basis of a minimum of four regular annual meetings with these auditors in connection with preparing the Annual Report and the three interim reports. Under section 31 of the Danish Auditors’ Act, all listed companies are required to set up an audit committee to strengthen the board’s work in relation to risk management, preparation of financial statements and financial reporting. At the end of 2007, Hartmann’s Board of Directors resolved to transfer the duties of the former accounting and audit committee to the full board. The duties of the audit committee will therefore be undertaken by the full Board of Directors also in future. Corporate governance measures in 2008 Hartmann introduced the following new corporate governance measures in the financial year 2008: Merger of share classes Hartmann’s share capital was previously divided into three share clas2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=30http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3030 SHAREHOlDER INFORMATION MANAG EMENT R EPORT 20 0 8 Shareholder information Hartmann’s three previous share classes were merged in 2008. Each share now carries one vote. As a result of the merger, the voting rights of the Brødrene Hartmann Foundation were reduced from 58.1% to 12.2%, corresponding to the Foundation’s ownership interest in Hartmann. The shares of Brødrene Hartmann A/S are listed on NASDAQ OMX Copenhagen A/S and are a component of the SmallCap+ index. The shares are negotiable instruments with no restrictions on their transferability. The shares are issued to bearer, and each share of DKK 20 carries one vote. Share capital The share classes of Brødrene Hartmann A/S were merged immediately after the capital increase in June 2008, and now Hartmann only has one share class. After the merger of the share classes, Hartmann’s share capital has a nominal value of DKK 140,301,800 divided into 7,015,090 shares. In the course of 2008, the price of the Hartmann share dropped by 37%. By comparison, the OMXC20 index fell by 47% in the same period, and the SmallCap+ index fell by 62%. The average daily trading in the Hartmann share on the stock exchange came to just under DKK 0.5 million in 2008, a decline of 23% from 2007. Ownership The shares of Brødrene Hartmann A/S were distributed on 2,012 shareholders at 1 March 2009, 1,705 of whom were registered by name in the register of shareholders. Four shareholders hold more than 5% of the share capital. Hartmann encourages all shareholders to register their shares in the register of shareholders, which is managed by VP Investor Services A/S. At 31 December 2008, members of the Board of Directors and the Executive Board held approximately 0.2% of the share capital, and Hartmann’s portfolio of treasury shares amounted to 1.4% of the share capital. The treasury shares will be used e.g. for the performance of share-based incentive plans for the members of the Executive Board and key employees, see note 4 on p. 51. Dividends The Board of Directors takes the general view that the annual dividend to shareholders should represent approximately 30% of the profit for the year after tax. However, the level of dividend declared will always take into account the Group’s growth plans and liquidity requirements. Dividends of DKK 8.5 million were declared for the financial year 2005. No dividend was declared for the financial years 2006 and 2007. At the Annual General Meeting to be held on 21 April 2009, the Board of Directors will recommend that, due to the results for the year and the increased level of investment in 2009, no dividend be declared for 2008. Investor relations Hartmann aims to provide investors and equity analysts with the best possible insight into matters deemed relevant in ensuring an effective and fair pricing of the Hartmann share. The Executive Board and Investor Relations handle the contact to analysts and investors. Major shareholders Ownership (%) 2008 LD Equity 1 K/S, DK-1363 Copenhagen K, Denmark ATP, DK-3400 Hillerød, Denmark The EDJ Group, DK-6700 Esbjerg, Denmark B.H.F. Invest A/S and the Brødrene Hartmann Foundation, DK-2800 Gentofte, Denmark Forlaget Commodore ApS, DK-2900 Hellerup, Denmark 20.6 13.4 12.8 12.2 <5.0 Ownership (%) 2007 20.6 10.3 10.3 12.2 10.22009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=31http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=31MANAG EMENT R EPORT 20 0 8 SHAREHOlDER INFORMATION 31 Hartmann’s investor website, www.hartmann-packaging.com, provides historical and topical information about Hartmann and the Hartmann share, including company announcements, graphs, investor presentations and annual and interim reports. Shareholders and other interested parties can subscribe to Hartmann’s news service and receive financial reports and company announcements by e-mail at the same time as the announcement is made to NASDAQ OMX Copenhagen A/S. Hartmann’s communications with investors, analysts and the press are subject to specific restrictions for a period of four weeks prior to the publication of annual and interim reports. Investor contacts Peter Arndrup Poulsen, CEO pap@hartmann-packaging.com, tel. +45 51 51 40 69 Tom Wrensted, CFO twr@hartmann-packaging.com, tel. +45 21 76 50 30 Ann-Louise Elkjær, IR & Corporate Communications Manager aej@hartmann-packaging.com, tel. +45 20 33 86 93 Financial calendar 2009 19 March 2009 Release of Annual Report 2008 20 March 2009 Presentation of Annual Report 2008 8:15 am at the head office of Brødrene Hartmann A/S, Ørnegårdsvej 18, DK-2820 Gentofte, Denmark Annual General Meeting 2 pm at PLESNER law firm, Amerika Plads 37, DK-2100 Copenhagen Ø Denmark Interim report for Q1 2009 Interim report for H1 2009 Presentation of interim report for H1 2009 8:15 am at the head office of Brødrene Hartmann A/S, Ørnegårdsvej 18, DK-2820 Gentofte, Denmark 21 April 2009 28 May 2009 27 August 2009 28 August 2009 24 November 2009 Interim report for Q3 2009 Data Hartmann share Shareholder distribution in per cent ISIN No. of shares lowest price 2008 Highest price 2008 Share price 1 January 2008 DK0010256197 7,015,090 70 122 112 Major shareholders 61% Major shareholders 61% Minor shareholders Minor shareholders 20% 20% Unregistered shareholders 18% Unregistered shareholders 18% 1% Share price 31 December 2008 71 Exchange Reuters code Bloomberg code NASDAQ OMX Copenhagen A/S HARTb.CO HART DC Treasury shares Treasury shares 1%2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=32http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3232 BOARD OF DIRECTORS AND E xECuTIvE BOARD MANAG EMENT R EPORT 20 0 8 Board of Directors and Executive Board All Board members elected by the shareholders serve for terms of one year.The information below reflects the situation in early March 2009, and updated information on the members of Hartmann’s Board of Directors and Executive Board is found on www.hartmann-packaging.com. Board of Directors Erik Højsholt (1948) • Joined the Board in 2007 (Chairman since September 2007) No. of shares held: 4,900 • CEO of Aarhus United A/S until 2006. Now only engages in board work and similar work. • BC: R2 Group A/S, Fluxome Sciences A/S, Brødrene Kier A/S and Novopan Træindustri A/S • BM: Royal Unibrew A/S, Hans Schourup A/S, Good Food Group A/S and Aarhus University Walther Vishof Paulsen (1949) • Joined the Board in 2005 (as Vice-Chairman) No. of shares held: 0 • CEO and member of the Executive Board of Carlsberg A/S until 2000. Now only engages in board work and similar work • BC: Hotel Koldingfjord A/S and Dantherm A/S • BVC: C.W. Obel A/S • BM: Investeringsforeningen Danske Invest, VPG Holding A/S, Dan-Ejendomme A/S, Dan-Ejendomme Holding A/S, Dan-Ejendomsinvestering A/S, Det Obelske Familiefond, Sanistål A/S, Vital Invest A/S, Vital Petfood Group A/S, Arkil A/S and Arkil Holding A/S Jan Peter Antonisen** (1965) • Joined the Board in 2008 No. of shares held: 0 • Team Leader substitute with Brødrene Hartmann A/S in Tønder since 1993 Ove Brandt** (1964) • Joined the Board in 2006 No. of shares held: 144 • De-inking employee with Brødrene Hartmann A/S in Tønder since 1986 Niels Hermansen (1953) • Joined the Board in 2006 No. of shares held: 0 • Managing Director of packaging company Neoplex/Mondi Packaging Nyborg A/S until 2005, and before that Managing Director of Fritz Hansen A/S. Now only engages in board work and similar work • BC: Fredericia Furniture A/S, R. Færch Plast A/S, Kühnel Design A/S and 1508.DK Holding A/S • BVC: VIKAN A/S • BM: Vissingfonden Peter-Ulrik Plesner* (1946) • Joined the Board in 1982 No. of shares held: 570 • Attorney-at-law since 1974, and partner of PLESNER law firm from 1978 Erik Højsholt Walther Vishof Paulsen Jan Peter Antonisen Ove Brandt Niels Hermansen BC: BvC: BM: Board chairman Board vice-chairman Board member2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=33http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=33MANAG EMENT R EPORT 20 0 8 BOARD OF DIRECTORS AND E xECuTIvE BOARD 33 • BC: EVA Denmark A/S, Johan Mangor A/S, Piet Hein A/S and Triumph International Textil A/S and the Brødrene Hartmann Foundation • BM: Ida Løfbergs Fond • Chairman of the Association for the Protection of Industrial Rights and member of several law associations in Denmark and abroad Hans Vilhelmsen** (1961) • Joined the Board in 2006 No. of shares held: 200 • Process Operator with Brødrene Hartmann A/S in Tønder since 1985 Changes to the Board of Directors in 2008 Jan Peter Antonisen, Board member elected by the employees, joined the Board at 16 December 2008. Michael Schrøder Nielsen, Board member elected by the employees, resigned from the Board at 1 October 2008. * Is not considered an independent Board member, as he serves on the Board of the Brødrene Hartmann Foundation, cf. the recommendations of NASDAQ OMX Copenhagen A/S on corporate governance ** Board member elected by the employees Peter-Ulrik Plesner Hans Vilhelmsen Peter Arndrup Poulsen Tom Wrensted Executive Board Peter Arndrup Poulsen (1962) • No. of shares held: 6,825 No. of share options held: 13,196 • CEO of Brødrene Hartmann A/S since 1 October 2006. Over the past 19 years, Peter Arndrup Poulsen has held a number of executive positions, e.g. in the building materials industry, serving as CEO of building materials supplier A/S L. Hammerich & Co. and manufacturer of furniture ScanCom International A/S • BM: Noble-Nordmann A/S, Noble-Nordmann Holding A/S and a number of Hartmann’s subsidiaries Tom Wrensted (1965) • No. of shares held: 0 No. of share options held: 8,972 • CFO of Brødrene Hartmann A/S and member of the Executive Board since November 2007. Joined Hartmann in April 2007 from a position as Finance Director of Hartmann North America. Previously Finance Director of ISS Healthcare, and, before that, he has held several finance positions with Ecco Danmark A/S and Danfoss A/S, most recently as Finance Manager of Danfoss in Japan and Korea • BVC: Danfiber A/S and DanBørs A/S • BM: A number of Hartmann’s subsidiaries2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=34http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3434 MANAGE ME NT STATE MENT MANAG EMENT R EPORT 20 0 8 Management statement The Board of Directors and the Executive Board today considered and approved the Annual Report 2008 of Brødrene Hartmann A/S which includes the management statement, management report, financial review, income statement, balance sheet, statement of recognised income and expense, statement of cash flows, segment information and notes to the financial statements. The Annual Report was prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for annual reports of listed companies. We consider the accounting policies applied to be appropriate to the effect that it gives a true and fair view of the Group’s and the parent company’s assets and liabilities and financial position at 31 December 2008, and of the results of the Group’s and the parent company’s operations and cash flows in the financial year 1 January – 31 December 2008. We are furthermore of the opinion that the management report gives a true and fair view of developments in the Group’s and the parent company’s operations and financial situation, the results for the year in review and the Group’s and the parent company’s financial position in general and describes the significant risk and uncertainty factors that may affect the Group and the parent company. The Annual Report is recommended for approval by the Annual General Meeting. Gentofte, 19 March 2009 Executive Board: Peter Arndrup Poulsen CEO Tom Wrensted CFO Walther V. Paulsen Vice-Chairman Niels Hermansen Peter-Ulrik Plesner Jan Peter Antonisen Board of Directors: Erik Højsholt Chairman Ove Brandt Hans Vilhelmsen The independent auditor’s report To the shareholders of Brødrene Hartmann A/S We have audited the Annual Report of Brødrene Hartmann A/S for the financial year 1 January – 31 December 2008 which comprises the management statement, management report, financial review, income statement, balance sheet, statement of recognised income and expense, statement of cash flows, segment information and notes for both Group and parent company. The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for the annual reports of listed companies. Management’s responsibility for the Annual Report those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of an Annual Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of the accounting policies applied by Management and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the Annual Report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit did not result in any qualification. Opinion Management is responsible for the preparation and fair presentation of an annual report in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for annual reports of listed companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility and basis of opinion In our opinion, the Annual Report gives a true and fair view of the Group’s and the parent company’s assets and liabilities and financial position at 31 December 2008, and of the results of t2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=35http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=35MANAG EMENT R EPORT 20 0 8 MANAGEMENT STATE ME NT 352009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=36http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3636 CONTE NTS FINANCIAL STATEMENTS 20 0 8 Financial statements: Financial review Income statement Statement of cash flows Balance sheet, assets Balance sheet, equity and liabilities Statement of recognised income and expense Segment information Notes to the financial statements 38 42 43 44 45 46 47 482009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=37http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=37FINANCIAL STATEMENTS 20 0 8 CONTE NTS 372009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=38http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=3838 FINANCIAl RE vIE W FINANCIAL STATEMENTS 20 0 8 Financial review Hartmann generated revenue of DKK 1,491 million for 2008, in line with the 2007 figure. Operating profit was DKK 66 million, an improvement of DKK 212 million on 2007. Substantial growth in equity and reduction of interest-bearing debt after rights issue. Income statement Revenue in line with 2007 Hartmann generated revenue of DKK 1,491 million for 2008, which was in line with the 2007 figure. Revenue was on a level with the expectations announced in the interim report for Q3 2008 of 17 November 2008 (DKK 1,480 million). Revenue was lifted by 7% due to changes in the product mix and higher prices, and negatively affected by a decline in volumes by 7%. Revenue in Egg Packaging Europe increased by 9% to DKK 1,142 million compared with 2007, which was mainly attributable to an improved product mix and higher prices. Revenue in Egg Packaging North America fell by 16% compared with 2007 to DKK 123 million, primarily due to unfavourable developments in the CAD/ USD exchange rate and the CAD/DKK exchange rate, respectively. Revenue in Industrial Packaging declined by DKK 94 million, or 43%, year on year to DKK 126 million, due to declining European sales and the closing down of industrial packaging operations in Asia and North America. The Group’s other business areas generated revenue of DKK 100 million, up DKK 19 million on 2007. Reduced production costs Consolidated production costs for 2008 fell by DKK 20 million, or 2%, compared with 2007 to DKK 1,084 million. The decrease was primarily attributable to the effects of the turnaround activities commenced in 2007. Increase in gross profit Gross profit grew by DKK 19 million, or 5%, to DKK 407 million compared with 2007. The gross margin was 27% (2007: 26%). Sales and distribution costs and administrative expenses fell compared with 2007 Sales and distribution costs fell by DKK 12 million, or 4%, to DKK 251 million, while administrative expenses fell by DKK 5 million, or 7%, to DKK 70 million (2007: DKK 75 million). The fall was a result of the restructuring of the organisation implemented in 2007 and 2008. Total consolidated sales and distribution costs and administrative expenses represented 22% of revenue for 2008, a decrease of DKK 17 million, or 1 percentage point, from the year-earlier period (2007: 23%). Growth in operating profit before special items Operating profit before special items was DKK 91 million, an increase of DKK 38 million from the year-earlier level (2007: DKK 53 million). This performance primarily related to substantial profit growth in Egg Packaging Europe, which posted an operating profit before special items of DKK 118 million, or a DKK 48 million increase. Egg Packaging North America posted an operating loss before special items of DKK 27 million, on a level with 2007. The business area was adversely affected by unfavourable developments in the CAD/USD exchange rate. Operating profit before special items from Industrial Packaging was DKK 29 million, down DKK 12 million compared with 2007, mainly reflecting a lower level of Revenue DKKm 1,500 Operating margin, EBIT % 5 Operating profit/(loss) DKKm 90 60 30 ROIC % 15 10 5 0 -5 -10 -15 -20 -25 1,200 1,300 1,400 1,500 Costs Dkkm 1,600 distribution % 100 1,000 0 90 0 -30 80 500 -5 -60 -90 -120 70 0 -10 -150 60 04 05 0 6 07 08 Revenue Operating margin, EBIT 04 05 0 6 07 08 Operating pro t/(loss) ROIC 04 05 06 07 08 Total expense Production Sales and Distribution Administration2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=39http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=39FINANCIAL STATEMENTS 20 0 8 FINANCIAl RE vIE W 39 activity due to a major customer phasing out purchases. The other business areas of the Group reported a loss of DKK 29 million, which was in line with 2007. Significant reduction of special items Special income came to DKK 13 million in 2008 (2007: DKK 0 million), which was attributable to sales of property, plant and equipment in connection with the closing down of operations in Asia. Special expense came to DKK 38 million in 2008 (2007: DKK 199 million), which was attributable to impairment in Industrial Packaging. In 2007, special expense comprised non-recurring costs and impairment in relation to ongoing turnaround activities. Detailed information on special items is available in note 6 (p. 54) to the financial statements. Increase in operating profit Operating profit (EBIT) for 2008 was DKK 66 million (2007: a loss of 146 million), DKK 11 million higher than the forecast announced in the interim report for Q3 2008 of DKK 55 million. Financial items Net financial income and expense in 2008 totalled an expense of DKK 77 million (2007: an expense of DKK 52 million), reflecting the effects of foreign exchange losses of DKK 39 million (2007: DKK 14 million), which included DKK 16 million in reclassified, accumulated exchange losses relating to the closing down of operations in Asia. In Q4 2008 alone, financial income and expense was adversely affected by foreign exchange losses of DKK 10 million, primarily relating to negative movements in the GBP, SEK and NOK exchange rates. Tax on profit for the year Continuing operations generated a loss for the year before tax of DKK 11 million. Tax on profit/(loss) for the year from continuing operations came to DKK 8 million in 2008 (2007: a tax charge of DKK 74 million), and the effective tax rate for 2008 was therefore 73%. The calculation of the effective tax rate appears in note 8 (p. 55) to the financial statements. Profit/(loss) for the year The Group reported a consolidated loss of DKK 3 million for the year (2007: a loss of DKK 513 million). This was in line with the guidance provided in the interim report for Q3 2008. Balance sheet At 31 December 2008, Hartmann’s total assets amounted to DKK 1,189 million, down DKK 31 million from 31 December 2007. Assets Intangible assets were unchanged compared with 31 December 2007 and amounted to DKK 11 million at 31 December 2008. The assets primarily related to goodwill. Property, plant and equipment at 31 December 2008 amounted to DKK 632 million (31 December 2007: DKK 690 million), primarily owing to impairment of DKK 47 million. In addition, total investments in 2008 in property, plant and equipment came to DKK 108 million compared with DKK 95 million in depreciation (2007: investments totalling DKK 148 million and DKK 104 million in depreciation). Other non-current assets totalled DKK 103 million at 31 December 2008 (31 December 2007: DKK 38 million), primarily relating to deferred tax assets in the subsidiary in Canada and government grants receivable in the subsidiary in Hungary. In connection with the completion of the investment project at the factory in Hungary, Hartmann is entitled to a grant from the Hungarian government in the form of reduced future tax payments. The grant is capped at 50% of the investment. Current assets amounted to DKK 444 million at 31 December 2008 (31 December 2007: DKK 481 million), mainly relating to lower trade receivables. The above changes caused a decline in the amount of invested capital by DKK 83 million to DKK 727 million at 31 December 2008 (31 December 2007: DKK 810 million). Investment DKKm 150 120 90 60 30 0 depreciation % 40 20 0 -20 -40 -60 -80 -100 -120 -140 Return on equity Employees No. 2,500 2,000 1,500 1,000 500 0 average 04 05 0 6 07 08 Investment in property, plant and equipment Depreciation 04 05 0 6 07 08 Return on equity 04 05 0 6 07 08 Employees2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=40http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4040 FINANCIAl RE vIE W FINANCIAL STATEMENTS 20 0 8 Equity and liabilities Equity at 31 December 2008 stood at DKK 456 million, representing an increase of DKK 236 million compared with 31 December 2007. This was mainly due to fresh capital raised in connection with the rights issue in June 2008. As a result, gearing decreased from 269% at 31 December 2007 to 70% at 31 December 2008. In addition to the loss for the year (a loss of DKK 3 million), the change in equity was a result of exchange rate adjustments (DKK 3 million), revaluation of hedging instruments (negative DKK 16 million), adjustments of pension obligations etc. (negative DKK 1 million), tax (negative DKK 1 million), sale of pre-emptive rights (DKK 2 million) and the rights issue (DKK 252 million). Non-current liabilities stood at DKK 394 million at 31 December 2008, up DKK 5 million from 31 December 2007. Bank debt fell by DKK 30 million, pension obligations, mainly relating to the German subsidiary, grew by DKK 6 million, and government grants, relating to the Hungarian subsidiary, grew by DKK 46 million. Current liabilities stood at DKK 339 million at 31 December 2008, corresponding to a decrease of DKK 272 million compared with 31 December 2007. This was primarily due to repayment of bank debt of DKK 128 million in connection with the rights issue. subordinated loan convered to share capital). Total cash flows were an inflow of DKK 140 million (2007: an outflow of DKK 12 million). Net interest-bearing debt came to DKK 319 million at 31 December 2008, corresponding to a decrease of DKK 273 million compared with 31 December 2007, due to repayment of debt in connection with the rights issue. Financial resources, made up as the sum of cash and cash equivalents and current credit facilities, increased by DKK 38 million to DKK 228 million at 31 December 2008 (31 December 2007: DKK 190 million). Earnings per share and dividend Earnings per share (EPS) were negative by DKK 0.5 in 2008 (2007: minus DKK 113.7). The Board of Directors will recommend to the Annual General Meeting that no dividend be declared, as was also the case in 2007. Events after the balance sheet date As announced in company announcement no. 1/2009 of 18 February 2009, Hartmann has implemented a management change in the European production organisation. As a result, the managing director of the Group’s largest subsidiary, Hartmann Hungary Kft., is no longer with Hartmann. Management has commenced a recruitment process to find a new manager to head the factory in Hungary. The management change will not affect the European production structure or the role of the Hungarian factory within the Group. As stated in company announcement no. 2/2009 of 4 March 2009, Hartmann has reached a settlement with Lactosan Sanovo Holding A/S regarding a number of previously notified claims for up to DKK 50 million relating to Hartmann’s sale of the loss-making operations in South America to Lactosan Sanovo Holding A/S. As a consequence of the settlement, the five-year agreement on distribution of profit between buyer and seller no longer applies. The other details of the settlement are confidential, and there are very limited effects on the profit in the forecast for 2009. Other than as set out above, no significant events have occurred since 31 December 2008. Earnings DKK 20 0 -20 -40 -60 Cash flows and interest-bearing debt Cash flows from operating activities increased by DKK 45 million to DKK 101 million in 2008 (2007: DKK 56 million), primarily as a result of improved underlying operations, and lower restructuring costs in 2008. Cash flows from investing activities were an outflow of DKK 83 million in 2008 (2007: an outflow of DKK 141 million). The change was primarily attributable to major investments at the factory in Hungary in 2007. The free cash flow was an inflow of DKK 18 million in 2008 (2007: an outflow of DKK 85 million). Cash flows from financing activities were positively affected by the proceeds of DKK 2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=41http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=41FINANCIAL STATEMENTS 20 0 8 FINANCIAl RE vIE W 412009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=42http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4242 Income state me nt FINANCIAL STATEMENTS 20 0 8 Income statement 1 January - 31 December amounts in DKKm Group 2008 2007 Parent company 2008 2007 Note 2 3, 4 Revenue Production costs Gross profit 1,490.9 (1,083.9) 407.0 (250.7) (69.8) 4.7 (0.3) 90.9 13.0 (37.7) 66.2 0.2 2.5 (79.4) (10.5) 7.8 (2.7) 0.0 (2.7) 1,492.0 (1,104.1) 387.9 (262.3) (75.4) 3.2 (0.7) 52.7 0.0 (198.5) (145.8) 0.2 2.9 (54.8) (197.5) (73.6) (271.1) (242.3) (513.4) 606.8 (508.6) 98.2 (83.6) (58.2) 3.1 0.0 (40.5) 10.5 (51.8) (81.8) 45.4 (53.3) (89.7) 30.4 (59.3) 0.0 (59.3) 731.7 (608.3) 123.4 (99.8) (57.3) 3.1 (0.6) (31.2) 0.0 (25.2) (56.4) 34.0 (381.1) (403.5) 23.2 (380.3) (1.7) (382.0) 4 4 5 5 Sales and distribution costs Administrative expenses Other operating income Other operating expense operating profit/(loss) before special items 6 6 Special items, income Special items, expense operating profit/(loss) (eBIt) Operating profit/(loss) after tax in associates 7 7 Other financial income Other financial expense Profit/(loss) before tax (eBt) from continuing operations 8 Tax on the profit/(loss) for the year from continuing operations Profit/(loss) for the year from continuing operations 26 Profit/(loss) for the year from discontinued operations net profit/(loss) for the year (eat) the profit/(loss) for the year is attributable to: Shareholders of Brødrene Hartmann A/S Minority interests (2.7) 0.0 (2.7) (509.7) (3.7) (513.4) (59.3) 0.0 (59.3) (382.0) 0.0 (382.0) Proposal for the distribution of profit: It is proposed that no dividend be paid for the financial year 2008 Retained earnings 0.0 (59.3) (59.3) 9 9 9 9 Earnings per share in DKK (EPS) Earnings per share in DKK, diluted (EPS-D) Earnings per share in DKK for continuing operations Earnings per share in DKK for continuing operations, diluted (0.5) (0.5) (0.5) (0.5) (113.7) (113.7) (59.5) (59.5) 0.0 (382.0) (382.0)2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=43http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=43FINANCIAL STATEMENTS 20 0 8 statement of c ash flows 43 statement of cash flows 1 January - 31 December amounts in DKKm Group 2008 2007 Parent company 2008 2007 Note Operating profit/(loss) before special items Depreciation and amortisation 10 Changes in working capital cash flows from ordinary activities Interest etc. received Interest etc. paid Net restructuring costs paid Net corporate tax paid cash flows from operating activities Disposal of property, plant and equipment and intangible assets Acquisition of property, plant and equipment and intangible assets Dividend received from associates Dividend received from subsidiaries Government grants received Capital injections in subsidiaries cash flows from investing activities cash flows from operating and investing activities 10 Changes in non-current loans Changes in non-current receivables from subsidiaries Proceeds from sale of own pre-emptive rights Proceeds from rights issue cash flows from financing activities cash flows from continuing operations 26 cash flows from discontinued operations total cash flows Cash and cash equivalents and bank debt at 1 January Foreign exchange adjustments cash and cash equivalents and bank debt at 31 December 90.9 87.7 (3.4) 175.2 2.5 (44.6) (3.6) (28.5) 101.0 19.6 (108.2) 0.2 5.3 (83.1) 17.9 (99.1) 2.2 218.5 121.6 139.5 0.0 139.5 (131.1) 0.4 8.8 52.7 103.4 5.9 162.0 2.9 (40.7) (44.2) (23.9) 56.1 1.1 (147.5) 0.3 4.7 (141.4) (85.3) 73.8 0.0 0.0 73.8 (11.5) (64.6) (76.1) (54.5) (0.5) (131.1) (40.5) 41.7 (10.2) (9.0) 4.6 (43.6) (3.6) (0.3) (51.9) 2.1 (23.0) 0.2 40.6 0.0 (4.0) 15.9 (36.0) (96.7) 51.3 2.2 218.5 175.3 139.3 0.0 139.3 (165.9) 3.5 (23.1) (31.2) 43.8 16.2 28.8 3.9 (40.4) (17.5) (1.0) (26.2) 3.0 (37.1) 0.3 29.8 2.0 0.0 (2.0) (28.2) 75.0 (72.3) 0.0 0.0 2.7 (25.5) (127.5) (153.0) (13.1) 0.2 (165.9) Recognition of cash and cash equivalents and bank debt at 31 December: Cash and cash equivalents Bank debt (current liabilities) total cash and cash equivalents and bank debt Statement of cash flows cannot be derived solely from the published financial information. 63.9 (55.1) 8.8 52.3 (183.4) (131.1) 27.6 (50.7) (23.1) 12.9 (178.8) (165.9)2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=44http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4444 Bal ance s hee t, as s e ts FINANCIAL STATEMENTS 20 0 8 Balance sheet, assets 31 December amounts in DKKm Group 2008 2007 Parent company 2008 2007 Note non-current assets Intangible assets Development projects Goodwill 11 total intangible assets Property, plant and equipment Land and buildings Technical plant and machinery Fixtures and fittings, tools and equipment Technical plant under construction 12 total property, plant and equipment Other non-current assets 13 14 15 16 17 Investments in subsidiaries Receivables from subsidiaries Investments in associates Other receivables Deferred tax asset total other non-current assets total non-current assets Current assets 18 30 19 Inventories Trade receivables Contract work in progress Receivables from subsidiaries Corporate tax receivables Other receivables Prepayments Cash and cash equivalents total current assets total assets 108.5 225.8 0.0 4.5 30.3 10.5 63.9 443.5 1,188.8 110.8 273.8 4.4 4.5 15.2 20.0 52.3 481.0 1,220.2 43.9 33.9 0.0 53.6 0.3 19.0 10.2 27.6 188.5 839.6 51.2 55.2 9.9 44.7 1.7 11.3 13.9 12.9 200.8 945.8 3.9 47.2 51.6 102.7 745.3 3.9 0.0 34.3 38.2 739.2 347.0 67.3 0.3 0.0 9.6 424.2 651.1 346.2 89.3 0.3 0.0 0.0 435.8 745.0 158.1 435.5 14.3 23.9 631.8 169.4 475.5 19.0 26.1 690.0 37.3 161.0 6.5 11.3 216.1 42.6 230.9 9.3 15.4 298.2 0.1 10.7 10.8 0.3 10.7 11.0 0.1 10.7 10.8 0.3 10.7 11.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=45http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=45FINANCIAL STATEMENTS 20 0 8 Bal ance shee t, equ It y anD lIaB IlItIes 45 Balance sheet, equity and liabilities 31 December amounts in DKKm Group 2008 2007 Parent company 2008 2007 Note equity 20 Share capital Hedging reserve Translation reserve Retained earnings total equity Non-current liabilities 17 21 22 22 22 23 Deferred tax Pension obligations Mortgage debt Bank debt Other debt Government grants total non-current liabilities Current liabilities 22, 23 Current portion of non-current liabilities Subordinated loan Bank debt 19 Contract work in progress Prepayments from customers Trade payables Payable to subsidiaries Payable to associates Corporate tax 24 25 Provisions Other payables total current liabilities total liabilities total equity and liabilities 28.0 0.0 55.1 0.5 1.1 134.7 6.1 4.4 1.8 107.1 338.8 732.6 1,188.8 79.7 50.0 183.4 0.2 4.0 121.9 4.9 4.4 0.9 161.5 610.9 1,000.1 1,220.2 20.9 0.0 50.7 0.5 1.1 77.5 79.5 6.1 0.0 1.8 59.1 297.2 605.5 839.6 75.9 50.0 178.8 0.2 3.9 70.8 59.3 4.9 0.0 0.9 104.1 548.8 907.4 945.8 7.2 24.1 1.3 298.4 3.4 59.4 393.8 24.6 18.4 2.7 328.0 2.4 13.1 389.2 0.0 0.0 0.0 297.6 3.4 7.3 308.3 22.0 0.0 0.0 325.9 2.4 8.3 358.6 140.3 (8.9) (33.4) 358.2 456.2 70.2 2.0 (30.2) 178.1 220.1 140.3 (2.6) 0.0 96.4 234.1 70.2 (3.4) 0.0 (28.4) 38.42009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=46http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4646 Income anD e XPe n s e FINANCIAL STATEMENTS 20 0 8 statement of recognised income and expense 1 January - 31 December amounts in DKKm Parent company Group 2008 2007 2008 2007 Note Foreign exchange adjustments, foreign subsidiaries Foreign exchange translation, equity-like loans to subsidiaries Revaluation of hedging instruments transferred to the income statement, revenue Revaluation of hedging instruments transferred to the income statement, financial items Revaluation of hedging instruments 21 17 Actuarial gain/(loss) on defined benefit plans Tax on movements in equity Net profit/(loss) recognised directly in equity Net profit/(loss) for the year total recognised income and expense for the year attributable to: Shareholders of Brødrene Hartmann A/S Minority interests (9.4) 12.2 (5.5) (1.0) (9.3) 0.5 (1.1) (13.6) (2.7) (16.3) 184.4 (3.0) (0.3) 0.0 8.7 (3.0) 2.4 189.2 (513.4) (324.2) 4.4 0.0 (3.3) (0.3) 0.8 (59.3) (58.5) 1.1 0.0 10.1 (3.0) 8.2 (382.0) (373.8) (16.3) 0.0 (16.3) (320.4) (3.8) (324.2) (58.5) (58.5) (373.8) (373.8) segment information Hartmann’s business is divided into four reportable segments, reflecting the Group’s products and markets and the Group’s internal financial control. Corporate management regularly receives this information with a view to resource allocation and results evaluation. No operating segments have been accumulated to represent the reportable segments. egg Packaging europe: This segment comprises manufacturing and sales of moulded-fibre egg packaging. Products are manufactured at the Group’s European factories and are primarily sold to egg producers, egg packing companies and, increasingly, to retail chains. European sales are coordinated from the sales office in Germany. egg Packaging north america: This segment comprises manufacturing and sales of moulded-fibre egg packaging. Products are manufactured at the Group’s North American factory and are primarily sold to egg producers, egg packing companies and, increasingly, to retail chains. Industrial Packaging: This segment comprises design, manufacturing and sales of moulded-fibre industrial packaging. The product range includes display packaging for electronics and transport protection. The products are manufactured at the Group’s European factories and are sold as project sales to customers. Sales are coordinated from the head office in Denmark. other business areas: This segment comprises the combined heat and power plant in Tønder, Hartmann Technology (internal and external sales of machinery) and corporate functions. other segment information Management assesses the ‘operating profit’ from the reportable segments separately in order to make decisions on resource allocation and results evaluation. The accounting policies applying to the consolidated financial statements are also applied in relation to the calculation of the operating profit from the reportable segments. Group financing (including financial income and expense) and corporate tax are handled at Group level and are not allocated to the reportable segments. The segment assets and segment liabilities comprise inventories, trade receivables and trade payables directly relating to the individual segments. Other segment information includes investments in intangible assets, property, plant and equipment and depreciation, amortisation and impairment. No single customer accounts for more than 10% of external revenue.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=47http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=47FINANCIAL STATEMENTS 20 0 8 PRImaRy seGme nts 47 segment information 1 January - 31 December Egg Packaging 2008 External revenue external revenue, see annual report Europe 1,141.6 North America 123.0 South America (discontinued operations) 0.0 Industrial Packaging 126.0 Other business Total of reporareas table segments 100.3 1,490.9 amounts in DKKm Eliminations 0.0 Total 1,490.9 1,490.9 90.9 13.0 (37.7) 66.2 0.2 2.5 (79.4) (10.5) 108.5 225.8 745.3 109.2 1,188.8 134.7 393.8 204.1 732.6 operating profit/(loss) before special items 117.6 Special income 0.0 Special expense 0.0 operating profit/(loss) 117.6 Operating profit/(loss) after tax in associates Other financial income Other financial expense Profit/(loss) before tax from continuing operations, see annual report Inventories Trade receivables Non-current assets Current assets (in addition to inventories and trade receivables) total assets, see annual report Trade payables Non-current liabilities Current liabilities (in addition to trade payables) total liabilities, see annual report other segment information Investments in intangible assets and property, plant and equipment Depreciation and amortisation Impairment, net 67.3 186.8 - (27.2) 6.4 0.0 (20.8) - 0.0 0.0 0.0 - 29.0 8.4 (37.7) (0.3) - (23.7) 4.6 0.0 (19.1) - 95.7 19.4 (37.7) 77.4 - (4.8) (6.4) 0.0 (11.2) - 19.6 16.6 - 0.0 0.0 - 14.3 14.6 - 9.1 7.8 - 110.3 225.8 - (1.8) 0.0 - 74.8 - 10.9 - 0.0 - 0.2 - 48.8 - 134.7 - 0.0 - 107.0 76.5 0.0 6.2 10.1 0.0 0.0 0.0 0.0 27.5 11.5 36.6 6.4 9.5 0.0 147.1 107.6 36.6 (38.9) (12.1) 0.0 108.2 95.5 36.6 2007 External revenue External revenue, discontinued operations external revenue, see annual report 1,043.0 147.3 92.0 220.3 81.4 1,584.0 0.0 1,584.0 (92.0) 1,492.0 52.4 0.0 (198.5) (146.1) 0.3 0.2 2.9 (54.8) (197.5) 110.8 273.8 739.2 96.4 1,220.2 121.9 389.2 489.0 1,000.1 operating profit/(loss) before special items 69.2 Special income 0.0 Special expense (4.8) operating profit/(loss) 64.4 Discontinued operations Operating profit/(loss) after tax in associates Other financial income Other financial expense Profit/(loss) before tax from continuing operations, see annual report Inventories Trade receivables Non-current assets Current assets (in addition to inventories and trade receivables) total assets, see annual report Trade payables Non-current liabilities Current liabilities (in addition to trade payables) total liabilities, see annual report other segment information Investments in intangible assets and property, plant and equipment Depreciation and amortisation Impairment, net 72.0 192.9 - (27.7) 0.0 (116.1) (143.8) - (0.3) 0.0 (0.3) - 41.0 0.0 (57.4) (16.4) - (19.4) 0.0 (20.2) (39.6) - 62.8 0.0 (198.5) (135.7) - (10.4) 0.0 (10.4) - 15.2 17.4 - 0.0 0.0 - 11.1 55.5 - 14.1 8.0 - 112.4 273.8 - (1.6) 0.0 - 59.6 - 15.2 - 0.0 - 2.2 - 44.9 - 121.9 - 0.0 - 121.3 71.2 0.0 15.4 14.6 115.0 0.0 0.0 41.8 8.5 13.8 33.6 2.3 11.0 0.0 147.5 110.6 190.4 0.0 (5.8) 0.0 147.5 104.8 190.4 Geographical information External sales 2008 Denmark western europe central and eastern europe* north america south america (discontinued operations) asia other total 111.2 1,002.0 201.1 123.0 0.0 3.1 50.5 1,490.9 2007 99.1 965.9 197.3 157.0 92.0 30.6 42.1 1,584.0 Intang. assets, property, plant and equipment total 2008 2007 178.8 55.9 310.8 87.9 0.0 0.0 9.1 642.6 266.0 63.0 246.8 116.3 0.0 0.0 8.9 701.0 Breakdown on customer and asset location Denmark western europe central and eastern europe north america south america asia other Denmark Austria, Belgium, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and UK Baltic States, Czech Republic, Croatia, Hungary, Poland and Russia Canada, Mexico and USA Argentina, Brazil and Chile China, Japan and South East Asia Israel *Of which intangible assets, property, plant and equipment in Hungary: DKK 250 million.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=48http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=4848 conte nt FINANCIAL STATEMENTS 20 0 8 notes 1 2 3 4 5 6 7 8 9 Notes - income statement critical accounting estimates and judgments Revenue cost of sales staff costs other operating income and other operating expense special items other financial income and expense tax on profit/(loss) for the year from continuing operations earnings per share 50 50 50 51 53 54 54 55 56 56 57 58 60 61 62 62 63 65 65 66 67 70 72 73 73 Notes - statement of cash flows 10 statement of cash flows 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Notes - balance sheet Intangible assets Property, plant and equipment Investments in subsidiaries Receivables from subsidiaries Investments in associates other receivables Deferred tax Inventories contract work in process equity Pension obligations current and non-current liabilities Government grants Provisions other payables Notes - other Discontinued operations and assets held for sale fee to the auditors Provision of security and contingent liabilities operating leases financial risks Derivative financial instruments Related party transactions new accounting regulation subsequent events accounting policies 26 27 28 29 30 31 32 33 34 35 74 75 75 75 76 78 79 79 79 802009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=49http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=49FINANCIAL STATEMENTS 20 0 8 conte nt 492009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=50http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5050 notes FINANCIAL STATEMENTS 20 0 8 notes to the income statement amounts in DKKm 1. cricital accounting estimates and judgments estimation uncertainty The determination of carrying amounts and the preparation of the financial statements are based on estimates by Management of the likely effect of future events on the value of certain assets and liabilities. These estimates build upon assumptions which in the opinion of Management are valid, but which are inherently uncertain and unpredictable. special items The recognition of special items involves management estimates to ensure their delimitation relative to other items in the income statement. See the accounting policies. When recognising special items, it is crucial that the items represent significant income and expenses that are not attributable to the Group’s usual operating activities, but related to structural changes in the Group and any related gains and losses from disposals. trade receivables Write-downs for bad debts are made based on an individual assessment of trade receivables, including those with a previous bad payment record, customer credit ratings and current developments in economic trends in the countries in which the Group operates. Deferred tax In the measurement of deferred tax assets, it is assessed whether, on the basis of budget and operating plans, future earnings will allow the utilisation of the temporary differences between tax bases and carrying amounts or tax loss carry-forwards. non-current assets An assessment is made of the recoverability of the carrying amount of non-current assets. The assessment of the recoverable amount is based upon the utilisation of the assets in the individual cash-generating units and the possibility of using the asset elsewhere within the Group. Group 2008 2. Revenue Value of goods sold Sales value of production for the year from contracts Sales of services to subsidiaires total revenue 1,451.4 39.5 1,490.9 1,472.2 19.8 1,492.0 2007 Parent company 2008 2007 528.6 77.2 1.0 606.8 652.6 78.6 0.5 731.7 3. cost of sales Cost of sales for the year Inventory write-downs for the year Reversed inventory write-downs total cost of sales 685.1 0.4 0.0 685.5 732.0 0.8 (2.0) 730.8 445.4 0.4 0.0 445.8 474.4 0.8 (2.0) 473.22009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=51http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=51FINANCIAL STATEMENTS 20 0 8 notes 51 notes to the income statement Group 2008 4. staff costs Breakdown of staff costs: Wages, salaries and remuneration Payments to defined benefit pension plans Payments to defined contribution pension plans Other social security costs total staff costs 407.8 3.4 32.1 23.4 466.7 479.1 4.0 31.5 25.5 540.1 2007 amounts in DKKm Parent company 2008 2007 214.4 0.0 18.9 3.6 236.9 269.3 0.0 21.8 3.7 294.8 Recognition of staff costs in the financial statements: Production costs Sales and distribution costs Administrative expenses Discontinued operations total staff costs 345.2 49.9 71.6 0.0 466.7 398.1 61.4 70.9 9.7 540.1 185.1 6.7 45.1 0.0 236.9 228.4 12.9 53.5 0.0 294.8 number of employees Average number of full-time employees Average number of full-time employees, continuing operations See also note 21 on page 67 on pension obligations. Remuneration to members of the executive Board and the Board of Directors The remuneration of members of the Executive Board is based on a fixed salary, pension, bonus, share options and other benefits in the form of company car and phone. Bonuses are allocated on an individual basis and are performance-related. The Group’s Executive Board and a few other key employees have signed an agreement under which, in the event of a change of ownership of a controlling interest in Brødrene Hartmann A/S, their notice of termination will be extended to 24 months effective from the date when the shareholding is sold. The extended notice will apply for a period of up to 18 months after the transfer. 1,629 1,629 2,036 1,946 555.0 555.0 675.0 675.0 2008 total remuneration of the executive Board and key employees Salary Peter Arndrup Poulsen Tom Wrensted (from 23 November 2007) Michael Hedegaard Lyng (resigned on 31 March 2007) Remuneration of the executive Board Key employees total remuneration 2.4 1.6 4.0 5.8 9.8 Bonus 0.8 0.5 1.3 1.2 2.5 Pension 0.3 0.2 0.5 0.5 1.0 Share options 0.1 0.1 0.2 0.0 0.2 Other benefits 0.2 0.2 0.4 0.2 0.6 2007 Total 3.8 2.6 6.4 7.7 14.1 Total 2.7 0.2 1.4 4.3 5.7 10.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=52http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5252 notes FINANCIAL STATEMENTS 20 0 8 notes to the income statement amounts in DKKm 4. staff costs, cont’d The annual fee of Board members is approved by the AGM in connection with the approval of the Annual Report. Ordinary Board members each receive an annual fee of DKK 150,000. The vice-chairman receives the amount of the ordinary fee multiplied by two, and the chairman receives the amount of the ordinary fee multiplied by three. The Board of Directors recommends that the fee of the Board members for 2009 remains unchanged compared with 2008. 2008 total fees to the Board of Directors former Board of Directors: Chairman Present Board of Directors: Chairman Vice-Chairman Ordinary members total fees to the Board of Directors 0.5 0.3 0.8 1.7 0.1 2007 0.3 0.2 0.3 1.0 1.8 accounts and audit committee The Board of Directors decided at year-end 2007, to transfer the work of the Accounts and Audit Committee to the full Board of Directors. 2008 total remuneration to the accounts and audit committee Chairman Ordinary members total remuneration 0.2 0.2 0.4 2007 Incentive programmes Brødrene Hartmann A/S’s share option programme for the Executive Board shall ensure alignment of interests between the Management of Brødrene Hartmann A/S and its shareholders. The share options are granted in a number corresponding to the value of half of the annual fixed salary. 50% is granted without any performance requirements, and up to an additional 50% is granted on the basis of the degree of fulfilment of bonus targets. In 2008 a total of 16,664* (2007: 5,504*) share options were granted to the Executive Board. The market value at the date of grant for these options totalled DKK 0.5 million (2007: DKK 0.3 million). Each option entitles its holder to acquire an existing share of DKK 20 in Brødrene Hartmann A/S. The options can only be settled in shares (equity-based plan). The share option programme is covered by Brødrene Hartmann A/S’s portfolio of treasury shares. In case all the unexercised share options at 31 December 2008 (22,168 options) are exercised, it would correspond to 0.32% of the share capital. The share options vest on a continuous basis from the date of grant until the date of exercise. The share options may be exercised in a period from three to five years following the grant. The share options are subject to a number of conditions in respect of death, resignation, etc.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=53http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=53FINANCIAL STATEMENTS 20 0 8 notes 53 notes to the income statement 4. staff costs, cont’d Exercise period Issued Members of the Executive Board 2007 2008 total 2010 2011 2012 2013 5,504 0 5,504 0 16,64 16,664 0 0 0 0 0 0 5,504 16,664 22,168 Start year End year 1 Jan. 2008 Issued Number of options* Expired Exercised amounts in DKKm 31 Dec. 2008 Exercise price* 158,08 107,92 Assumptions for the determination of the market value at the date of grant for share options recognised in 2008: 2008 Assumptions: Market value per option, DKK* Share price* Exercise price* Volatility Risk-free interest rate Payout ratio Expected term The share price and exercise price are calculated as the average price at which the Brødrene Hartmann A/S share is listed on the NASDAQ OMX Copenhagen A/S during the first 10 trading days after the publication of the annual report. The expected term is determined on the basis of exercise taking place in the middle of the exercise period. The market value of share options builds on the Black-Scholes’ formula for the valuation of options. * Adjusted for the bonus element in connection with the rights issue in June 2008. 32.9 107.9 107.9 30% 4.3% 0% 4 years 2007 47.1 156.6 158.1 30% 4.3% 0% 4 years Group 2008 5. other operating income and other operating expense other operating income Gains on the disposal of property, plant and equipment Licence fees total other operating income other operating expense Losses on the disposal of property, plant and equipment total other operating expense 0.3 0.3 0.7 0.7 2.9 1.8 4.7 0.2 3.0 3.2 2007 Parent company 2008 2007 1.3 1.8 3.1 0.1 3.0 3.1 0.0 0.0 0.6 0.62009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=54http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5454 notes FINANCIAL STATEMENTS 20 0 8 notes to the income statement Group 2008 6. special items special income Proceeds from the sale of property, plant and equipment in connection with the closing-down of operations in Asia total special items, income 13.0 13.0 0.0 0.0 2007 amounts in DKKm Parent company 2008 2007 10.5 10.5 0.0 0.0 special items, expense Impairment of property, plant and equipment in North America Impairment and reversal of impairment of property, plant and equipment Industrial Packaging Impairment of other assets Restructuring/closing down of operations Reversal of provision, Industrial Packaging Asia Restructuring of organisation total special items, expense total special items If special items had been recognised in operating profit before special items, they would have been: Production costs Sales and distribution costs Administrative expenses total special items 24.7 0.0 0.0 24.7 171.9 5.9 20.7 198.5 41.3 0.0 0.0 41.3 10.9 0.0 14.3 25.2 0.0 36.6 1.1 3.6 (3.6) 0.0 37.7 (24.7) 115.0 33.6 6.4 9.0 0.0 34.5 198.5 (198.5) 0.0 47.1 1.1 3.6 0.0 0.0 51.8 (41.3) 0.0 0.0 0.0 0.0 0.0 25.2 25.2 (25.2) Group 2008 7. other financial income and expense other financial income Dividend from subsidiaries Dividend from associates Interest income, subsidiaries Other income. total other financial income 2.5 2.5 2.9 2.9 2007 Parent company 2008 2007 40.6 0.2 3.5 1.1 45.4 29.8 0.3 2.9 1.0 34.0 other financial expense Interest expense, subsidiaries Write-down of investments in subsidiaries Net foreign exchange loss Interest expense, liabilities Other expense total other financial expense total other financial income and expense 38.8 35.1 5.5 79.4 (76.9) 14.1 37.1 3.6 54.8 (51.9) 4.2 3.2 8.8 26.6 10.5 53.3 (7.9) 3.8 314.1 26.6 23.6 13.0 381.1 (347.1)2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=55http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=55FINANCIAL STATEMENTS 20 0 8 notes 55 notes to the income statement Group 2008 8. tax on profit/(loss) for the year from continuing operations Breakdown of tax for the year: Tax on profit/(loss) from continuing operations Tax on movements in equity total tax (7.8) 1.1 (6.7) 73.6 (2.4) 71 .2 2007 amounts in DKKm Parent company 2008 2007 (30.4) 0.3 (30.1) (23.2) 3.0 (20.2) Breakdown of tax on profit/(loss) for the year from continuing operations: Current tax Changes in deferred tax Change of corporate tax rate Adjustment of prior-year tax total tax on profit/(loss) for the year from continuing operations 31.0 (36.7) 0.9 (3.0) (7.8) 22.8 40.9 6.3 3.6 73.6 0.3 (28.3) 0.0 (2.4) (30.4) 0.0 (22.1) (0.7) (0.4) (23.2) Breakdown of tax on profit/(loss) for the year from continuing operations: Profit/(loss) before tax Dividend from subsidiaries and associates Profit/(loss) after tax in associates (10.5) 0.0 (0.2) (10.7) (197.5) 0.0 (0.2) (197.7) (89.7) (40.8) (0.2) (130.7) (403.5) (29.8) (0.3) (433.6) Tax charged at 25% Adjustment of tax calculated for foreign subsidiaries in relation to 25% (2.7) (2.7) (49.4) (4.8) (32.7) 0.0 (108.4) 0.0 tax effect of: Reduction of corporate tax rate Non-deductible write-down of investments in subsidiaries Non-deductible impairment of assets Unrecognised deferred tax assets in foreign subsidiaries Non-taxable income and non-deductible expense Tax in prior years 0.9 0.0 0.0 (4.7) 4.4 (3.0) (7.8) effective tax rate 73% 6.3 0.0 47.8 65.1 5.0 3.6 73.6 0.0 0.8 0.0 0.0 3.9 (2.4) (30.4) 23% (0.7) 78.6 0.0 0.0 7.7 (0.4) (23.2) 6%2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=56http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5656 notes FINANCIAL STATEMENTS 20 0 8 notes to the income statement 9. earnings per share Average number of shares Average number of treasury shares average number of shares in circulation Average diluting effect of non-exercised share options average number of shares, diluted amounts in DKKm Parent company 2008 2007 5,832,568 (100,000) 5,732,568 0 5,732,568 4,583,612 (100,000) 4,483,612 0 4,483,612 Profit/(loss) for the year attributable to shareholders of Brødrene hartmann a/s Earnings per share in DKK (EPS) Earnings per share in DKK, diluted (EPS-D) (2.7) (0.5) (0.5) (509.7) (113.7) (113.7) Profit/(loss) for the year from continuing operations attributable to shareholders of Brødrene hartmann a/s Earnings per share in DKK for continuing operations Earnings per share in DKK for continuing operations, diluted (2.7) (0.5) (0.5) (267.4) (59.5) (59.5) notes to the statement of cash flows Group 2008 10. statement of cash flows Change in working capital Inventories and long-term contracts Receivables Trade payables Prepayments from customers Other payables etc. Pension obligations relating to operations total 4.2 28.5 15.8 (2.9) (51.4) 2.4 (3.4) (0.1) (11.2) (18.2) 3.7 31.5 0.2 5.9 17.5 8.4 6.7 (2.8) (40.0) 0.0 (10.2) (8.0) 15.9 (14.8) 3.6 19.5 0.0 16.2 2007 Parent company 2008 2007 Changes in non-recurrent liabilities Servicing and repayment of debt Loan raised Subordinated loan Of which converted into share capital in connection with rights issue total (82.4) 0.0 (50.0) 33.3 (99.1) (26.2) 50.0 50.0 0.0 73.8 (80.0) 0.0 (50.0) 33.3 (96.7) (25.0) 50.0 50.0 0.0 75.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=57http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=57FINANCIAL STATEMENTS 20 0 8 notes 57 notes to the balance sheet Development projects 11. Intangible assets Group and parent company Cost at 1 January 2008 Disposals cost at 31 December 2008 6.6 (5.6) 1.0 amounts in DKKm Goodwill Total 10.7 0.0 10.7 17.3 (5.6) 11.7 Amortisation and impairment at 1 January 2008 Amortisation Disposals amortisation and impairment at 31 December 2008 carrying amount at 31 December 2008 6.3 0.2 (5.6) 0.9 0.1 0.0 0.0 0.0 0.0 10.7 6.3 0.2 (5.6) 0.9 10.8 Cost at 1 January 2007 cost at 31 December 2007 6.6 6.6 10.7 10.7 17.3 17.3 Amortisation and impairment at 1 January 2007 Amortisation amortisation and impairment at 31 December 2007 carrying amount at 31 December 2007 5.0 1.3 6.3 0.3 0.0 0.0 0.0 10.7 5.0 1.3 6.3 11.0 Devlopment projects Amoritisation of development projects is recognised in the income statement under production costs. In 2008 development costs totalled DKK 0.5 million (2007: DKK 14.1 million), which are recognised in the income statement under production costs. Goodwill Goodwill is allocated to Egg Packaging Europe. Based on the expected future net cash flows, Management believes that the carrying amount of goodwill will not significantly exceed the recoverable amount. The estimate is based on the results achieved and the expected level of future earnings. The recoverable amount is based on the value in use determined by means of expected net cash flows on the basis of approved budgets and forecasts for the period 2009-2013 and by using a pre-tax discount rate of 10% (2007: 8%) which takes into account the specific risks characterising the European market. The calculation is not based on significant growth expectations.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=58http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=5858 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet Land and buildings Technical plant and machinery Other operating equipment and fixtures amounts in DKKm Production plant under construction Total 12. Property, plant and equipment Group Cost at 1 January 2008 Foreign exchange adjustments Transfer Additions Disposals cost at 31 December 2008 Depreciation and impairment at 1 January 2008 Foreign exchange adjustments Reversal of impairment Impairment Depreciation Disposals Depreciation and impairment at 31 December 2008 carrying amount at 31 December 2008 Cost at 1 January 2007 Foreign exchange adjustments Transfer Additions Disposals cost at 31 December 2007 Depreciation and impairment at 1 January 2007 Foreign exchange adjustments Impairment Depreciation Disposals Depreciation and impairment at 31 December 2007 carrying amount at 31 December 2007 349.9 (11.1) 0.0 14.5 (13.2) 340.1 180.5 (2.7) 0.0 1.3 12.6 (9.7) 182.0 158.1 319.1 1.8 0.0 29.1 (0.1) 349.9 162.7 (0.6) 6.3 12.1 0.0 180.5 169.4 1,592.2 (56.6) 26.1 63.5 (69.2) 1,556.0 1,116.7 (44.9) (10.5) 45.0 74.8 (60.6) 1,120.5 435.5 1,469.1 11.0 96.8 17.2 (1.9) 1,592.2 905.7 (6.2) 136.9 82.2 (1.9) 1,116.7 475.5 146.4 (1.0) 0.0 6.2 (23.1) 128.5 127.4 (0.9) 0.0 0.8 7.9 (21.0) 114.2 14.3 144.2 (0.4) 0.0 8.2 (5.6) 146.4 119.4 (1.3) 5.4 9.2 (5.3) 127.4 19.0 26.1 (0.1) (26.1) 24.0 0.0 23.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.9 30.8 (0.9) (96.8) 93.0 0.0 26.1 0.0 0.0 0.0 0.0 0.0 0.0 26.1 2,14.6 (68.8) 0.0 108.2 (105.5) 2,048.5 1,24.6 (48.5) (10.5) 47.1 95.3 (91.3) 1,416.7 631.8 1,963.2 11.5 0.0 147.5 (7.6) 2,114.6 1,187.8 (8.1) 148.6 103.5 (7.2) 1,424.6 690.0 Group 2008 Breakdown of depreciation: Depreciation Impairment Part of government grants recognised as income total depreciation Depreciation for the year is recognised in the income statement under the following items: Production costs Sales and distribution costs Administrative expenses Special items total depreciation 95.3 36.6 (5.2) 126.7 2007 103.5 148.6 (1.9) 250.2 87.5 1.5 1.1 36.6 126.7 98.7 1.7 1.2 148.6 250.2 In connection with the final closing down of operations in Malaysia in 2008, a production line was sold. In 2007, the carrying amount of this production line was written off and, in 2008, this resulted in a partial reversal of the write-off recognised in 2007. The reversal amounted to DKK 10.5 million. The largest customer in Industrial Packaging has begun a gradual phase-out of its purchases of Hartmann’s moulded-fibre packaging which is expected to be completed by the end of 2009. In response to this, the Group has begun to close down production of industrial packaging at the factory in Tønder, and the remaining part of the production of industrial packaging is being relocated to the factory in Hungary. As a result, property, plant and equipment relating to the production of industrial packaging in Tønder was written down to the recoverable amount. The write-down of DKK 47.1 million is recognised under special expense in the income statement.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=59http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=59FINANCIAL STATEMENTS 20 0 8 notes 59 notes to the balance sheet Land and buildings Technical plant and machinery Other operating equipment and fixtures amounts in DKKm Production plant under construction Total 12. Property, plant and equipment Parent company Cost at 1 January 2008 Transfer Additions Disposals cost at 31 December 2008 Depreciation and impairment at 1 January 2008 Impairment Depreciation Disposals Depreciation at 31 December 2008 carrying amount at 31 December 2008 Cost at 1 January 2007 Transfer Additions Disposals cost at 31 December 2007 Depreciation at 1 January 2007 Depreciation Disposals Depreciation at 31 December 2007 carrying amount at 31 December 2007 165.8 0.0 1.0 0.0 166.8 118.3 1.3 5.0 0.0 129.5 37.3 164.8 0.0 1.1 (0.1) 165.8 118.3 4.9 0.0 123.2 42.6 802.4 12.4 8.3 (22.7) 800.4 544.4 44.4 35.8 (12.3) 639.4 161.0 787.9 8.0 17.5 (11.0) 802.4 544.4 34.6 (7.5) 571.5 230.9 102.7 0.0 3.1 (9.5) 96.3 92.6 1.4 3.1 (8.1) 89.8 6.5 102.2 0.0 3.1 (2.6) 102.7 92.6 3.4 (2.6) 93.4 9.3 15.4 (12.4) 10.6 (2.3) 11.3 0.0 0.0 0.0 0.0 0.0 11.3 12.1 (8.0) 15.4 (4.1) 15.4 0.0 0.0 0.0 0.0 15.4 1,086.3 0.0 23.0 (34.5) 1,074.8 755.3 47.1 43.9 (20.4) 858.7 216.1 1,067.0 0.0 37.1 (17.8) 1,086.3 755.3 42.9 (10.1) 788.1 298.2 Parent company 2008 Breakdown of depreciation: Depreciation Impairment and reversal of impairment Part of government grants recognised as income total depreciation Depreciation for the year is recognised in the income statement under the following items: Production costs Sales and distribution costs Administrative expenses Special items total depreciation 43.9 47.1 (1.1) 89.9 2007 42.9 0.0 (0.9) 42.0 41.3 0.4 1.1 47.1 89.9 41.0 0.1 0.9 0.0 42.0 The largest customer in Industrial Packaging has begun a gradual phase-out of its purchases of Hartmann’s moulded-fibre packaging which is expected to be completed by the end of 2009. In response to this, the Group has begun to close down production of industrial packaging at the factory in Tønder, and the remaining part of the production of industrial packaging is being relocated to the factory in Hungary. As a result, property, plant and equipment relating to the production of industrial packaging in Tønder was written down to the recoverable amount. The write-down of DKK 47.1 million is recognised under special expense in the income statement.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=60http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6060 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet 13. Investments in subsidiaries Cost at 1 January Additions Disposals cost at 31 December amounts in DKKm Parent company 2008 2007 1,000.7 4.0 (122.7) 882.0 1,004.9 0.0 (4.2) 1,000.7 Write-down at 1 January Write-down during the year Disposals write-down at 31 December carrying amount at 31 December 654.5 3.2 (122.7) 535.0 347.0 344.6 314.1 (4.2) 654.5 346.2 Additions for the year came to DKK 4.0 million and related to a cash capital injection in the wholly-owned subsidiary Brødrene Hartmann Invest ApS, the equity of which was negative at the time of the capital injection. Impairment for the year came to DKK 3.2 million and related to the write-down to the recoverable amount of investments in the wholly-owned subsidiary Brødrene Hartmann Invest ApS. Disposals for the year came to DKK 122.7 million and related to the subsidiary Hartmann Malaysia Sdn. Bhd., which was wound up in 2008. The cost of the company was written off in 2007, and the carrying amount at 31 December 2008 was therefore not affected by the write-off. The impairment loss of DKK 314.1 million recognised in 2007 was mainly attributable to write-downs due to the closing down of operations in Asia commenced in 2007, and write-down of the subsidiary in North America and the subsidiary Brødrene Hartmann Invest ApS. name Hartmann UK Ltd. Hartmann France S.a.r.l. Hartmann Verpackung AG Hartmann Italiana S.r.l. (in liqudation) Hartmann-Schwedt GmbH Hartmann Verpackung GmbH (subsidiary of Hartmann Schwedt GmbH) Hartmann-Hungary Kft. Hartmann Pólska Sp. z.o.o. Brødrene Hartmann Invest ApS Hartmann China Holding A/S Hartmann Packaging (Suzhou) Co. Ltd. (subsidiary of Hartmann China Holding A/S) (in liquidation) Hartmann Malaysia Sdn. Bhd. (liqudated) Hartmann Papirna Ambalaza d.o.o. Hartmann-Mai Ltd. Hartmann-Varkaus Oy H-Novi SAD Hartmann Canada Inc. Hartmann Dominion Inc. (subsidiary of Hartmann Canada Inc.) Hartmann USA Inc. (subsidiary of Hartmann Canada Inc.) Registered office England France Switzerland Italy Germany Germany Hungary Poland Denmark Denmark China Malaysia Croatia Israel Finland Serbia Canada Canada USA stake 2008 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0% 100% 100% 100% 100% 100% 100% 100% stake 2007 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% 100% 100% 100% 100% 100% 100% 100% 100% 100%2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=61http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=61FINANCIAL STATEMENTS 20 0 8 notes 61 notes to the balance sheet 14. Receivables from subsidiaries Carrying amount at 1 January Foreign exchange adjustments Additions Disposals carrying amount at 31 December Of this amount, DKK 14.2 million relates to finance leases (2007: DKK 30.3 million) amounts in DKKm Parent company 2008 2007 89.3 (1.3) 22.3 (43.0) 67.3 67.5 (1.1) 49.4 (26.5) 89.3 Breakdown of the gross amount of receivables from finance leases: Due within 1 year Due within 1 to 5 years Due after 5 years total gross amount receivable Unearned future finance income net investments in finance leases 14.5 0.0 0.0 14.5 (0.3) 14.2 17.2 14.5 0.0 31.7 (1.4) 30.3 Breakdown of net investments in finance leases: Due within 1 year Due within 1 to 5 years Due after 5 years net investments in finance leases Finance leases cover leases for production equipment manufactured by Hartmann Technology for use in a foreign subsidiary. 14.2 0.0 0.0 14.2 16.2 14.1 0.0 30.32009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=62http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6262 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet Group 2008 15. Investments in associates Cost at 1 January cost at 31 December 0.3 0.3 0.3 0.3 2007 amounts in DKKm Parent company 2008 2007 0.3 0.3 0.3 0.3 Revaluations at 1 January Dividend Share in profit/(loss) for the year Revaluations at 31 December carrying amount at 31 December 3.6 (0.2) 0.2 3.6 3.9 3.7 (0.3) 0.2 3.6 3.9 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.3 2008 name DanFiber A/S Registered office Søborg stake 33.4% Revenue 6.9 Profit for the year 0.7 assets 28.0 liabilities 16.3 equity 11.7 2007 name DanFiber A/S Registered office Søborg stake 33.4% Revenue 7.4 Profit for the year 0.5 assets 42.8 liabilities 31.3 equity 11.5 In the consolidated balance sheet, investments in associates are measured using the equity method. In the parent company balance sheet, investments in associates are measured at cost. Group 2008 16. other receivables Carrying amount at 1 January Additions Disposals carrying amount at 31 December 0.0 50.2 (3.0) 47.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2007 Parent company 2008 2007 The increase in non-current receivables for 2008 of DKK 50.2 million related to government grants in the Hungarian subsidiary. In connection with the completion of the investment project at the factory in Hungary in late 2008, Hartmann is entitled to government grants from the Hungarian government. See also note 23 (p. 72) to the financial statements. 2008 Other non-current receivables are expected to fall due: Within 1 year Within 1 to 5 years After 5 years 0.0 9.1 32.8 5.3 47.2 2007 0.0 0.0 0.0 0.0 0.0 2008 0.0 0.0 0.0 0.0 0.0 2007 0.0 0.0 0.0 0.0 0.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=63http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=63FINANCIAL STATEMENTS 20 0 8 notes 63 notes to the balance sheet Group 2008 17. Deferred tax Deferred tax at 1 January Foreign exchange adjustments Change of corporate tax rate recognised in profit/(loss) for the year from continuing operations Deferred tax for the year recognised in profit/(loss) for the year from continuing operations Deferred tax for the year recognised in profit/(loss) for the year from discontinued operations Deferred tax on foreign exchange adjustments recognised in equity Deferred tax on hedging instruments recognised in equity Deferred tax on actuarial gains and losses Adjustment of deferred tax in prior years Deferred tax at 31 December (9.7) 3.1 0.9 (36.7) 0.0 3.1 (2.2) 0.2 (3.1) (44.4) (54.7) 0.2 6.3 40.9 0.0 (0.6) (0.9) (0.9) 0.0 (9.7) 2007 amounts in DKKm Parent company 2008 2007 22.0 0.0 0.0 (28.3) 0.0 0.0 0.3 0.0 (3.6) (9.6) 41.0 0.0 (0.7) (22.1) 0.8 0.0 3.0 0.0 0.0 22.0 Breakdown of deferred tax: Intangible assets Property, plant and equipment Current assets Liabilities Other Tax loss carry-forwards Deferred tax at 31 December 1.1 4.5 0.3 (2.8) (0.1) (47.4) (44.4) 1.0 7.5 2.2 (5.8) (1.7) (12.9) (9.7) 1.1 14.9 1.1 (2.2) 0.0 (24.5) (9.6) 1.0 32.5 1.8 (3.9) (1.1) (8.3) 22.0 Deferred tax is recognised in the following balance sheet items: Other non-current assets Non-current liabilities (51.6) 7.2 (44.4) (34.3) 24.6 (9.7) (9.6) 0.0 (9.6) 0.0 22.0 22.0 Value of unrecognised deferred tax assets 93.3 106.2 0.0 0.0 No recognition is made of deferred tax relating to such part of the consolidated deferred tax assets as is not expected to be realised or which is subject to other significant risks of not being utilised. Deferred tax assets relating to tax loss carry-forwards are recognised to the extent that their realisation is expected in the form of future taxable profits within a period of maximum 7 years. The carrying amount at 31 December 2008 of tax loss carry-forwards from continuing operations relates primarily to North America and the Danish parent company Brødrene Hartmann A/S.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=64http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6464 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet Intangible assets Property, plant and equipment Current assets Liabilities Other amounts in DKKm Tax loss carried forward etc. Total 17. Deferred tax, cont'd Group Deferred tax at 1 January 2008 Foreign exchange adjustments Recognised in profit/(loss) for the year, net Recognised in equity, net Deferred tax at 31 December 2008 1.0 0.0 0.1 0.0 1.1 7.5 2.9 (5.9) 0.0 4.5 2.2 0.0 (1.9) 0.0 0.3 (5.8) 0.2 2.6 0.2 (2.8) (1.7) 0.1 3.7 (2.2) (0.1) (12.9) (0.1) (37.5) 3.1 (47.4) (9.7) 3.1 (38.9) 1.1 (44.4) Deferred tax at 1 January 2007 Foreign exchange adjustments Recognised in profit/(loss) for the year, net Recognised in equity, net Deferred tax at 31 December 2007 1.2 0.0 (0.2) 0.0 1.0 (7.3) (0.7) 15.5 0.0 7.5 1.9 0.0 0.3 0.0 2.2 (5.5) 0.0 0.6 (0.9) (5.8) 0.3 0.0 (0.1) (1.9) (1.7) (45.3) 0.9 31.1 0.4 (12.9) (54.7) 0.2 47.2 (2.4) (9.7) Parent company Deferred tax at 1 January 2008 Recognised in profit/(loss) for the year, net Recognised in equity, net Deferred tax at 31 December 2008 1.0 0.1 0.0 1.1 32.5 (17.6) 0.0 14.9 1.8 (0.7) 0.0 1.1 (3.9) 1.7 0.0 (2.2) (1.1) 1.1 0.0 0.0 (8.3) (16.5) 0.3 (24.5) 22.0 (31.9) 0.3 (9.6) Deferred tax at 1 January 2007 Recognised in profit/(loss) for the year, net Recognised in equity, net Deferred tax at 31 December 2007 1.2 (0.2) 0.0 1.0 40.1 (7.6) 0.0 32.5 2.0 (0.2) 0.0 1.8 (2.6) (1.3) 0.0 (3.9) 0.2 (3.0) 1.7 (1.1) 0.1 (9.7) 1.3 (8.3) 41.0 (22.0) 3.0 22.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=65http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=65FINANCIAL STATEMENTS 20 0 8 notes 65 notes to the balance sheet Group 2008 18. Inventories Raw materials and consumables Work in progress Finished goods and goods for resale Inventories at 31 December Inventories recognised at net realisable value The Group has not provided inventories as security for debt items for any third party. 47.0 11.0 50.5 108.5 0.0 44.5 20.2 46.1 110.8 5.3 2007 amounts in DKKm Parent company 2008 2007 23.9 0.7 19.3 43.9 0.0 24.5 6.8 19.9 51.2 5.3 Group 2008 19. contract work in progress Sales value of contracts Progress billing total contract work in progress 0.4 (0.9) (0.5) 12.9 (8.7) 4.2 2007 Parent company 2008 2007 0.4 (0.9) (0.5) 18.4 (8.7) 9.7 Recognised as follows: Contract work in progress (assets) Contract work in progress (liabilities) total contract work in progress 0.0 (0.5) (0.5) 4.4 (0.2) 4.2 0.0 (0.5) (0.5) 9.9 (0.2) 9.72009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=66http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6666 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet 20. equity amounts in DKKm Group Share capital Hedging reserve Translation reserve Retained earnings Total Minority interests Total equity equity at 1 January 2008 Total recognised income and expense for the year Implementation of IFRIC 14 Share options Sale of pre-emptive rights, treasury shares Rights issue* net change recognised directly in equity equity at 31 December 2008 70.2 70.1 70.1 140.3 2.0 (10.9) (10.9) (8.9) (30.2) (3.2) (3.2) (33.4) 178.1 (2.2) (1.8) 0.2 2.2 181.7 180.1 358.2 220.1 (16.3) (1.8) 0.2 2.2 251.8 236.1 456.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 220.1 (16.3) (1.8) 0.2 2.2 251.8 236.1 456.2 equity at 1 January 2007 Reclassification Total recognised income and expense for the year net change recognised directly in equity equity at 31 december 2007 70.2 0.0 0.0 70.2 (17.6) 10.6 9.0 19.6 2.0 (215.7) 3.2 182.3 185.5 (30.2) 703.6 (13.8) (511.7) (525.5) 178.1 540.5 0.0 (320.4) (320.4) 220.1 3.8 0.0 (3.8) (3.8) 0.0 544.3 0.0 (324.2) (324.2) 220.1 * The gross proceeds amounted to DKK 273.6 million, less DKK 21.8 million in costs relating to the rights issue Parent company Hedging reserve Retained earnings Share capital Total equity equity at 1 January 2008 Total recognised income and expense for the year Share options Sale of pre-emptive rights, treasury shares Rights issue* net change recognised directly in equity equity at 31 December 2008 70.2 70.1 70.1 140.3 (3.4) 0.8 0.8 (2.6) (28.4) (59.3) 0.2 2.2 181.7 124.8 96.4 38.4 (58.5) 0.2 2.2 251.8 195.7 234.1 equity at 1 January 2007 Reclassification Total recognised income and expense for the year net change recognised directly in equity equity at 31 december 2007 70.2 0.0 0.0 70.2 (5.9) (5.7) 8.2 2.5 (3.4) 347.9 5.7 (382.0) (376.3) (28.4) 412.2 0.0 (373.8) (373. 8) 38.4 * The gross proceeds amounted to DKK 273.6 million, less DKK 21.8 million in costs relating to the rights issue2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=67http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=67FINANCIAL STATEMENTS 20 0 8 notes 67 notes to the balance sheet 20. equity, cont’d Breakdown of the share capital: Class A Class AA Shares share capital 7,015,090 shares of DKK 20 amounts in DKKm Parent company 2008 2007 140.3 140.3 6.4 2.1 61.7 70.2 The share capital remained unchanged in the period 2003-2007. In June 2008, Hartmann carried out a rights issue. Share capital was increased by DKK 70.1 million and the three share classes were merged into one single share class. treasury shares Hartmann’s portfolio of treasury shares is unchanged at 100,000 shares at a nominal value of DKK 2 million, representing 1.4% of the total share capital. The value of the shares at 31 December 2008 was DKK 7.1 million (2007: DKK 14.8 million). The shares were acquired to cover liabilities related to future share option plans. According to an authorisation from the shareholders which is valid until 22 October 2009, Brødrene Hartmann A/S may acquire up to 10% of its own shares. 21. Pension obligations Defined contribution pension plans Hartmann provides pension plans which cover certain groups of employees in Denmark and abroad. As a general rule, the pension plans are defined contribution plans under which Hartmann recognises payments of premium (e.g. a fixed amount or a fixed percentage of the salary) on a regular basis to independent insurers, who are responsible for the pension liabilities. Under a defined contribution plan the Group carries no risk in relation to future developments in interest rates, inflation, mortality or disability. Once the contributions under a defined contribution plan have been paid, Hartmann has no further pension obligations towards existing or former employees. Defined benefit pension plans Under a defined benefit plan, Hartmann is obligated to pay a specific benefit (e.g. retirement pension in the form of a fixed proportion of the exit salary). Under these plans, Hartmann carries the risk in relation to future developments in interest rates, inflation, mortality, etc. A change in the assumptions upon which the calculation is based results in a change in the actuarial present value. In the event of changes in the assumptions used in the calculations of defined benefit pension plans relating to existing and former employees, actuarial gains and losses are recognised directly in equity. See note 35, in accounting policies, on p. 84. The total pension obligations relate to funded plans in the subsidiary in Canada and unfunded plans in the subsidiary in Germany.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=68http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=6868 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet 2008 21. Pension obligations, cont’d Recognition of the obligation relating to defined benefit plans in the balance sheet: Pension obligations and similar obligations Pension assets total pension obligations, net calculation of net obligation: Present value of plan and plan assets Market value of plan assets net obligation of plans with plan assets Present value of plan without plan assets Assets not recognised due to asset cap Recognised net obligation calculation of total obligation Present value of plan with assets Present value of plan without assets total pension obligations Developments in obligations: Pension obligations at 1 January Reclassification Pension costs during the period Employee contribution Calculated interest expense Actuarial gain/(loss) Benefits paid out Foreign exchange adjustments, etc. total pension obligations at 31 December Developments in plan assets: Market value of assets at 1 January Transfered to ’Other receivables’/reclassification Calculated expected return Actuarial gain/(loss) Contributions to the plans Benefits paid out Foreign exchange adjustments, etc. market value of assets at 31 December Breakdown of actual return on assets: Actual return on plan assets Expected return on plan assets actuarial return on plan assets amounts in DKKm Group 2007 24.1 0.0 24.1 18.4 0.0 18.4 26.0 (29.0) (3.0) 21.6 5.5 24.1 60.0 (41.6) 18.4 0.0 0.0 18.4 26.0 21.6 47.6 60.0 0.0 60.0 60.0 0.0 2.4 0.6 3.1 (9.4) (3.2) (5.9) 47.6 68.8 (12.1) 3.3 0.7 2.9 (2.9) (2.8) 2.1 60.0 41.6 (5.8) 2.1 (4.8) 4.2 (2.3) (6.0) 29.0 50.4 (12.1) 1.8 (1.4) 3.5 (2.6) 2.0 41.6 (2.7) 2.1 (4.8) 0.4 1.8 (1.4) 2008 Distribution of plan assets: Shares and investment funds Bonds and other securities Reinsured Cash and cash equivalents total DKKm 14.0 6.6 0.0 8.4 29.0 % 48.3 22.7 0.0 29.0 100.0 2007 DKKm 17.7 7.3 5.8 10.8 41.6 % 42.5 17.6 13.9 26.0 100.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=69http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=69FINANCIAL STATEMENTS 20 0 8 notes 69 notes to the balance sheet 21. Pension obligations, cont’d assumptions used: Discount rate Expected return on plan assets Future rate of increase of salary Future rate of increase of pension Recognised in the income statement Pension costs relating to the year Calculated expected return on assets Calculated interest expense, obligations Change in pension terms and settlements Total amount recognised for defined benefit plans Total amount recognised for defined contribution plans total amount recognised in the income statement costs are recognised under the following line items in the income statement: Production costs Sales and distribution costs Administrative expenses total amount recognised in the income statement Recognised in equity: Recognised at 1 January Incorporated during the year, prior year Implementation of IFRIC 14 Actuarial gain/(loss) in the period Foreign exchange adjustments etc. Recognised at 31 December Deferred tax: Recognised at 1 January Deferred tax for the period Foreign exchange adjustments etc. Deferred tax relating to changes recognised directly in equity five-year summary (from 1 January 2005) 2008 Obligations Plan assets unfunded Experience-based adjustment of obligations Experience-based adjustment of plan assets 47.6 (29.0) 18.6 (9.4) (4.8) 2007 60.0 (41.6) 18.4 (2.9) (1.4) amounts in DKKm Group 2008 2007 5.25-7.00% 6.0% 2.2-3.0% 2.25-2.50% 4.50-5.25% 5.0-6.0% 2.2-3.0% 2.25-2.50% 2.4 (2.1) 3.1 0.0 3.4 32.1 35.5 3.3 (1.8) 2.9 (0.4) 4.0 31.5 35.5 26.0 3.0 6.5 35.5 26.4 3.3 5.8 35.5 (3.6) 0.0 (4.1) 4.6 0.8 (2.3) (0.6) (4.5) 0.0 1.5 0.0 (3.6) (1.1) 0.2 0.2 (0.7) (0.1) (0.9) (0.1) (1.1) 2006 68.8 (50.4) 18.4 0.1 2.2 2005 59.0 (42.3) 16.7 0.1 0.0 The majority of pensions falls due more than 1 year after the balance sheet date.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=70http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7070 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet Due within 1 to 5 years Due after 5 years amounts in DKKm Total amount due after 1 year Due within 1 year 22. current and non-current liabilities Group 2008 Mortgage banks, fixed interest 4.5% Banks, fixed interest at between 4.6 and 6.3% Banks, floating-rate * Other debt (interest rate swap) Forward contracts Trade payables carrying amount at 31 December 2008 1.3 0.7 297.7 3.4 0.0 0.0 303.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.7 297.7 3.4 0.0 0.0 303.1 1.3 1.4 75.1 0.0 10.6 134.7 223.1 2007 Mortgage banks, fixed interest 4.5% Banks, fixed interest at between 4.6 and 6.3% Banks, floating-rate * Other debt (interest rate swap) Forward contracts Trade payables carrying amount at 31 December 2007 2.7 61.8 236.4 2.4 0.0 0.0 303.3 0.0 29.8 0.0 0.0 0.0 0.0 29.8 2.7 91.6 236.4 2.4 0.0 0.0 333.1 1.4 66.5 193.4 0.0 6.5 121.9 389.7 * Includes a floating-rate loan of DKK 75 million (2007: DKK 246.4 million) secured on a fixed-rate interest swap. The above figure does not include interest on interest-bearing debt. Due after 1 year Breakdown on currencies of current and non-current liabilities: DKK CAD EUR Other 2008 58.4 0.0 244.5 0.2 303.1 2007 197.4 41.5 93.5 0.7 333.1 Due within 1 year 2008 78.2 84.3 20.4 40.2 223.1 2007 274.9 27.3 32.1 55.4 389.72009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=71http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=71FINANCIAL STATEMENTS 20 0 8 notes 71 notes to the balance sheet Due within 1 to 5 years Due after 5 years amounts in DKKm Total amount due after 1 year Due within 1 year 22. current and non-current liabilities, cont’d Parent company 2008 Banks, floating-rate * Other debt (interest rate swap) Trade payables carrying amount at 31 December 2008 297.6 3.4 0.0 301.0 0.0 0.0 0.0 0.0 297.6 3.4 0.0 301.0 70.7 0.0 77.5 148.2 2007 Banks, fixed interest at between 4.6 and 6.3% Banks, floating-rate * Other debt (interest rate swap) Forward contracts Trade payables carrying amount at 31 December 2007 59.7 236.4 2.4 0.0 0.0 298.5 29.8 0.0 0.0 0.0 0.0 29.8 89.5 236.4 2.4 0.0 0.0 328.3 64.9 188.8 0.0 4.5 70.8 329.0 * Includes a floating-rate loan of DKK 75 million (2007: DKK 246.4 million) secured on a fixed-rate interest swap. The above figure does not include interest on interest-bearing debt. Due after 1 year Breakdown on currencies of current and non-current liabilities: DKK CAD EUR Other 2008 58.4 0.0 242.6 0.0 301.0 2007 197.4 41.5 89.4 0.0 328.3 Due within 1 year 2008 77.9 69.1 0.0 1.2 148.2 2007 274.8 10.0 17.2 27.0 329.02009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=72http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7272 notes FINANCIAL STATEMENTS 20 0 8 notes to the balance sheet Group 2008 23. Government grants Government grants at 1 January Additions Government grants at 31 December 40.2 55.0 95.2 35.5 4.7 40.2 2007 amounts in DKKm Parent company 2008 2007 21.7 0.0 21.7 19.7 2.0 21.7 Recognised in the income statement at 1 January Recognised in the income statement during the year Recognised at 31 December carrying amount at 31 December 25.3 5.2 30.5 64.7 23.4 1.9 25.3 14.9 12.4 1.1 13.5 8.2 11.5 0.9 12.4 9.3 Amount recognised as current liabilities Amount recognised as non-current liabilities 5.3 59.4 64.7 1.8 13.1 14.9 0.9 7.3 8.2 1.0 8.3 9.3 Parent company Brødrene Hartmann A/S regularly receives government grants for development-related and energy-saving projects. In 1995 the Group received a major grant towards the construction of the combined heat and power plant in Tønder. No repayment obligations are currently linked to the grants. Group In addition to the government grants to the parent company, Hartmann also received government grants for production facilities in Germany and Hungary. In the event that eligible assets in the German subsidiary are not used in accordance with the eligibility criteria, the repayment obligation will total DKK 2.3 million at 31 December 2008. The repayment obligation will be gradually reduced in the period up until 2011. The Hungarian subsidiary received government grants in the form of direct grants and in the form of reduced future tax payments. The grants are capped at 50% of the investment, corresponding to a nominal amount of DKK 72.3 million, of which direct grants represent a nominal amount of DKK 9.0 million. If the eligibility criteria are not met, future grants receivable in the form of reduced tax payments may be reduced or discontinued. Hartmann expects to meet the eligibility criteria for the grants received in Germany and Hungary, respectively.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=73http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=73FINANCIAL STATEMENTS 20 0 8 notes 73 notes to the balance sheet Group 2008 24. Provisions Warranty commitments at 1 January Additions Disposals warranty commitments at 31 December 0.9 1.8 (0.9) 1.8 1.5 0.1 (0.7) 0.9 2007 amounts in DKKm Parent company 2008 2007 0.9 1.8 (0.9) 1.8 1.5 0.1 (0.7) 0.9 Obligations relating to subsidiaries with negative equity at 1 January Additions Disposals obligations relating to subsidiaries with negative equity at 31 December Provisions at 31 December 1.8 0.9 0.0 0.0 0.0 0.0 1.8 75.0 0.0 (75.0) 0.0 0.9 warranty Provisions have been made for warranties in cover of contract-related warranty complaints for goods and services already delivered by Hartmann Technology. The obligation is shown based on historical warranty costs. Group 2008 25. other payables Salaries and holiday pay, etc. Payable withholding tax VAT and other taxes Other payables total other payables at 31 December 42.6 5.0 6.8 52.7 107.1 43.9 6.0 11.1 100.5 161.5 2007 Parent company 2008 2007 33.2 1.8 0.0 24.1 59.1 36.1 2.0 3.7 62.3 104.1 The change in other debt was primarily attributable to provisions for restructuring costs relating to operations closed down in Industrial Packaging in Asia and debt relating to the divested operations as at 31 December 2007.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=74http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7474 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes Group 2008 26. Discontinued operations and assets held for sale Revenue Operating profit/(loss) (EBIT) Financial expense Tax on profit/(loss) for the year Profit/(loss) after tax 0.0 0.0 0.0 0.0 0.0 92.0 (0.3) (8.7) 0.0 (9.0) 2007 amounts in DKKm Parent company 2008 2007 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Write-down to fair value Write-down of tax assets Realised exchange losses Value adjustments after tax 0.0 0.0 0.0 0.0 (41.8) 0.0 (191.5) (233.3) 0.0 0.0 0.0 0.0 (1.7) 0.0 0.0 (1.7) Profit/(loss) for the year from discontinued operations 0.0 (242.3) 0.0 (1.7) Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities total cash flows 0.0 0.0 0.0 0.0 (72.2) 7.6 0.0 (64.6) 0.0 0.0 0.0 0.0 (14.7) 0.0 (112.8) (127.5) Property, plant and equipment Other current assets Cash and cash equivalents total assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Banks Deferred tax liabilities Other liabilities total liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Earnings per share in DKK for discontinued operations Earnings per share in DKK for discontinued operations, diluted In 2007 the Group’s activities in South America were divested. 0.0 0.0 (54.0) (54.0) - -2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=75http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=75FINANCIAL STATEMENTS 20 0 8 notes 75 supplementary notes Group 2008 27. fee to the auditors KPMG Others total fee specification: Statutory audit Assurance engagements other than audits Tax and VAT-related services Other services total fee 3.0 0.4 2.1 2.0 7.5 2.9 1.4 1.2 0.5 6.0 5.8 1.7 7.5 5.5 0.5 6.0 2007 amounts in DKKm Parent company 2007 2007 3.8 0.4 4.2 2.8 0.0 2.8 1.1 0.3 0.8 2.0 4.2 1.1 1.4 0.3 0.0 2.8 28. Provision of security and contingent liabilities The Group is a party to a few legal actions. Management believes that the pending cases will not materially affect the financial position of the Group and the parent company. This situation is unchanged from last year. The parent company has provided guarantees for the debt of subsidiaries and guarantees in relation to third parties in an amount of DKK 13.0 million (2007: DKK 23.7 million). Lactosan Sanovo Holding A/S Group had given notice of a compensation claim against Brødrene Hartmann A/S for an amount up to DKK 50 million relating to the sale of the operations in South America to the Lactosan Sanovo Holding A/S Group. A settlement was reached on 4 March 2009. See note 34 on p. 79. Group 2008 29. operating leases Rental and leasing obligations (operating leases) Due within 1 year Due within 1 to 5 years Due after 5 years total rental and leasing obligations (operating leases) 11.6 28.0 13.1 52.7 11.7 16.3 14.1 42.1 2007 Parent company 2008 2007 7.6 21.7 13.1 42.4 4.3 12.0 14.0 30.3 Rental and leasing cost for the year (operating leases) 11.7 9.1 4.3 1.82009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=76http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7676 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes 30. financial risks General risk Changes in Hartmann’s profit/(loss) and equity are affected by a number of financial risks, among them currency, interest rate, liquidity and credit risks. management of financial risk Hartmann uses financial instruments to hedge some of the financial risks that arise out of its commercial activities. As a general rule, the Group opts for the least complicated method of hedging risks. The Group does not engage in transactions for the purpose of speculation. Hartmann has centralised the management of its financial risks in the corporate finance function which also functions as a service centre to all subsidiaries. Interest rate risk Hartmann’s interest rate risk relates mainly to the Group’s interest-bearing debt to mortgage banks and banks. A specification of the Group’s current and noncurrent liabilities is given in note 22 (p. 70) to the financial statements. Interest rate hedging has been arranged for approximately 25% (2007: 60%) of the Group’s interest-bearing debt. At 31 December 2008, loans with a long term to maturity accounted for 95% (2007: 56%) of interest-bearing debt. The debt is recognised at amoritised cost. The net present value of interest-bearing debt at 31 December 2008 was DKK 52 million (2007: DKK 89 million) lower than the carrying amount. Due to a higher level of refinancing in 2011, the interest rate risk will increase if and when significant increases in the current interest rate level occur. A change in the interest rate by 1% would affect the profit/(loss) for the year by DKK 2 million. management of interest rate risk It is Hartmann’s policy to manage interest rate risks to mitigate the negative effects of interest rate fluctuations on earnings and the balance sheet. Financing is primarily arranged in the form of non-current, committed credit facilities in one of the Group’s main currencies: DKK or EUR. Hartmann primarily uses interest rate swaps to hedge against interest rate risk. The need to hedge the non-current interest rate risk is assessed on an ongoing basis. In early 2009, Hartmann therefore arranged for additional interest rate hedging in the form of 50% of the Group’s non-current EUR loans. Accordingly, changes in the interest rate level are not assessed to have a significant effect on the Group’s profit before tax, and the Group’s interest rate risk over the next 2-3 years is considered to be limited. currency risk Hartmann’s currency risk stems partly from an imbalance between income and payments in the individual currencies (transaction risk) due to Hartmann’s international business profile with foreign subsidiaries (translation risk), and from part of its net assets being denominated in foreign currency. Hartmann is exposed to transaction risk due to cross-border transactions, leading to contractual cash flows in foreign currency. Hartmann’s sales in North America are denominated in USD, whereas costs are dominated in CAD, and this means that the currency exposure in relation to the CAD/USD exchange rate constitutes one of the Group’s single largest translation risks. All other things being equal, a decline of 5% in USD against CAD relative to the exchange rate at the balance sheet date would reduce Hartmann Canada’s operating profit/(loss) by approximately DKK 5 million if the USD/ CAD exchange rate is not hedged. Due the forward hedging, the Company does expect to see any significant effects of exchange rates movements in 2009 (subject to 100% effective forward hedging). Currency exposure in the EUR/HUF exchange rate represents another significant transaction risks. This exposure is a result of sales from Hartmann’s factory in Hungary to other subsidiaries being denominated in EUR, and costs being denominated primarily in HUF. All other things being equal, a decline of 5% in amounts in DKKm EUR against HUF relative to the exchange rate at the balance sheet date would reduce Hartmann Hungary’s o2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=77http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=77FINANCIAL STATEMENTS 20 0 8 notes 77 supplementary notes amounts in DKKm management of liquidity risk The Group’s short-term liquidity is managed primarily by the transfer of liquidity from the business units to the Group’s treasury function for the purpose of directing cash to units with cash requirements. Hartmann’s subsidiaries finance their operations mainly through the Group treasury function, but local circumstances may require financing to be arranged through one of the Group’s foreign banks. It is the opinion of Management that the Group has sufficient capital resources to cover the ongoing financing of current and planned operations. Hartmann continuously complies with the covenants for maintaining the loan. In 2008, Hartmann complied with the covenants. The drawing rights are short-term credit facilities on which the Group may draw and which may at any time be terminated by the banks. The agreements concerning the loan and the drawing rights, respectively, contain cross default clauses. At 31 December 2008, the Group’s net interest-bearing debt was DKK 319 million (2007: DKK 592 million). The reduction in net interest-bearing debt was mainly due to repayment of bank debt by fresh capital raised in connection with the rights issue in June 2008. The Group’s unused bank credit lines amounted to DKK 164 million at 31 December 2008 (31 December 2007: DKK 138 million). Cash and cash equivalents came to DKK 64 million at 31 December 2008 (31 December 2007: DKK 52 million), resulting in a total amount in cash resources available to the Group of DKK 228 million at 31 December 2008 (31 December 2007: DKK 190 million). credit risk Hartmann’s credit risk occurs in relation to the risk of losses on receivables or credit institutions. The Group is not deemed to have any major concentration of credit risk. DKKm Trade receivables (gross) Write-down for bad debt: Write-down at 1 January Bad debt recognised for the year Losses incurred during the year Write-down at 31 December Total trade receivables Net, trade receivables correspond to an average credit period of (days) Gross trade receivables Breakdown: Not due Due within: 1 and 30 days 31 and 60 days More than 60 days 2008 233.2 8.3 1.0 (1.9) 7.4 225.8 55 2007 282.1 10.1 1.4 (3.2) 8.3 273.8 67 management of credit risk Hartmann takes out credit insurance on its trade receivables to a high degree. Cover is not arranged for trade receivables from customers with very high credit ratings. Also, in certain circumstances local conditions make it impossible to take out credit insurance. In these cases, Hartmann applies a stricter internal credit assessment procedure by retrieving information on credit ratings from various information sources. The Group manages its credit risk relating to financial counterparties in connection with trading in derivative financial instruments and investments of surplus liquidity by limiting such transactions to banks with satisfactory credit ratings from one or more credit rating agencies as required under the Group’s finance policy. Write-downs of debtors are made individually and on a portfolio level. Raw materials risk Hartmann is dependent on the purchase prices of the raw materials used in the Group’s production. Hartmann is particularly exposed to fluctuations in the purchase prices of recycled paper and energy (electricity and gas), which are the most important raw materials used in production. The price of these raw materials has fluctuated considerably in the past, which had a negative impact on the Group’s results of operations in 2008, among other things. The cost of paper accounts for 5-10%, and the cost of energy for 10-15% of revenue. Accordingly, fluctuations in the prices of paper and energy have a major impact on developments in the Group’s financial performance. All other things being equal, a 5% change in the price of paper would change the Group’s operating profit/(loss) (EBIT) by DKK 4-7 million. Similarly, all other things being equal,2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=78http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=7878 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes amounts in DKKm 31. Derivative financial instruments At 31 December 2008 the Group had open forward contracts with terms of up to 24 months. Hartmann has one interest rate swap with a term to maturity of 2 years. In accordance with the Group’s accounting policies, the fair value is recognised in receivables and payables and equity at 31 December 2008 and is recognised in the income statement as and when the hedged future transactions are realised. 2008 Forward contracts GBP/DKK CAD/EUR PLN/DKK PLN/HUF SEK/DKK NOK/DKK USD/CAD EUR/HUF USD/CAD total forward contracts Interest rate swap CAD/CAD CAD/CAD DKK/DKK total interest rate swaps Put options USD/CAD total put options 2007 Gain/(loss) recognised in the income statement Group Parent company Group Average rate per unit Fair value, net Parent company In currency Currency Year due 12.2 0.0 (0.5) (0.8) 1.5 2.0 (7.4) 4.9 0.0 11.9 12.2 (2.0) (0.5) 0.0 1.5 2.0 0.0 0.0 0.0 13.2 (9.7) (0.9) 1.8 (8.8) 0.0 0.0 0.0 0.0 14.4 30.0 7.9 Nominal amount in currency CAD EUR CAD 0.92 272.04 0.79 expired expired expired expired expired expired 2009 2009 2010 (0.2) (2.1) 0.0 (2.3) (0.2) (2.1) 0.0 (2.3) (3.4) (3.4) (3.4) (3.4) 8.0 22.0 75.0 CAD CAD DKK - settled settled 2011 (2.8) (2.8) (2.8) (2.8) 0.7 0.7 0.7 0.7 14.4 USD 2009 Gain/(loss) recognised in the income statement Group Parent company Group Fair value, net Parent company In currency Currency Average rate per unit Year due Forward contracts GBP/DKK USD/CAD CAD/EUR PLN/DKK PLN/HUF EUR/HUF SEK/DKK NOK/DKK total forward contracts Interest rate swap CAD/CAD CAD/CAD DKK/DKK total interest rate swaps Put options USD/CAD total put options (0.2) (4.9) 0.0 0.3 0.0 (1.8) 0.0 0.0 (6.6) (0.2) 0.0 (10.0) 0.3 0.0 0.0 0.0 0.0 (9.9) 4.3 (1.6) (10.0) (0.2) (0.5) 0.1 0.7 0.7 (6.5) 4.3 0.0 (10.0) (0.2) 0.0 0.0 0.7 0.7 (4.5) 9.6 14.4 16.0 8.5 19.5 30.0 51.5 42.0 Nominal amount in currency GBP USD CAD PLN PLN EUR SEK NOK 10.58 1.04 1.53 2.04 70.28 257.96 0.80 0.95 2008 2008 2008 2008 2008 2008 2008 2008 - - 0.2 (0.3) (2.3) (2.4) 0.2 (0.3) (2.3) (2.4) 8.0 22.0 90.0 Nominal amount CAD CAD DKK - 2009 2012 2011 (1.0) (1.0) (1.0) (1.0) 0.6 0.6 0.6 0.6 9.6 USD 20082009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=79http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=79FINANCIAL STATEMENTS 20 0 8 notes 79 supplementary notes 32. Related party transactions Group The related parties of Hartmann consist of members of the Group’s Board of Directors and Executive Board. amounts in DKKm Related parties also include subsidiaries and associates, see notes 13 and 15, in which Brødrene Hartmann A/S exercises control or a significant influence. Hartmann has engaged in the following significant related party transactions: Group 2008 2007 Parent company 2008 2007 Sales of finished goods to subsidiaries Sales of machines and spare parts to subsidiaries Purchases of raw materials from associates Sales of services to subsidiaires 0.0 0.0 36.2 0.0 0.0 0.0 39.6 0.0 359.5 62.8 28.3 7.9 441.0 64.9 31.2 8.9 In 2008, Hartmann carried out transactions totalling DKK 4.9 million with the law firm PLESNER, of which Peter-Ulrik Plesner, a member of the Board of Directors of Brødrene Hartmann A/S, is a partner. The balance at 31 December was DKK 0.3 million. There have been no material transactions with other related parties. For information on remuneration of members of the Board of Directors and the Executive Board, see note 4 (p. 51). 33. new accounting regulation IASB has interalia, issued the following new financial reporting standards (IAS and IFRS), which are not mandatory for the Hartmann Group in connection with the presentation of the Annual Report 2008. Unless otherwise stated, they have also been adopted by the European Union. Hartmann expects to implement the above IAS and IFRS effective from the mandatory date. None of the new standards or interpretations are expected to have a significant impact on the presentation of financial statements by Hartmann. * IAS 1 Presentation of financial statements, applicable to financial years beginning on or after 1 January 2009. The standard will change the presentation of the financial statements in 2009. * IAS 23 Borrowing costs, applicable to financial years beginning on or after 1 January 2009. The standard demands recognition of borrowing costs in the costs for a qualifying asset (non-current assets and inventories). Manufacturing of a major qualifying asset with a longer production period IAS 23 will have an impact on the presentation of the financial statements for the Group. * IAS 27 Consolidated and separate financial statements, applicable to financial years beginning on or after 1 July 2009. The EU has not yet adopted IAS 27. * IFRS 2 Share-based payment, which applies to share-based payments made in financial years beginning on or after 1 January 2009. * IFRS 3 Business combinations, which applies to business combinations carried out in financial years beginning on or after 1 July 2009. The EU has not yet adopted IFRS 3. 34. subsequent events As announced in company announcement no. 1/2009 of 18 February 2009, Hartmann has implemented a management change in its European production organisation. As a result, Managing Director of the Group’s largest subsidiary, Hartmann-Hungary Kft. has left the company. Management has commenced a recruitment process to find a new manager to head the factory in Hungary. The management change will not affect the European production structure or the role of the Hungarian factory within the Group. As announced in company announcement no. 2/2009 of 4 March 2009 Brødrene Hartmann A/S has reached a settlement with Lactosan Sanovo Holding A/S regarding a number of previously notified claims for up to DKK 50 million relating to Hartmann’s sale of the loss-making operations in South America. As a consequence of the settlement, the five-year agreement on distribution of profit between buyer and seller no longer applies.The other details of the settlement are confidential, but it can be disclosed that the effects, of the settlement on Hartmann’s profit will be very limited. No other significant events have occurred since 31 December 2008.2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=80http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=8080 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes 35. accounting policies dividends, balances, and realised and unrealised gains and losses on intragroup transactions are eliminated. The parent company’s investments in the consolidated subsidiaries are set off against the parent company’s share of the subsidiaries’ fair value of identified net assets determined at the date of consolidation. Business combinations Enterprises acquired or formed during the year are recognised in the consolidated financial statements from the date of acquisition or formation. Enterprises divested or liquidated are recognised in the consolidated income statement until the date of divestment. The comparative figures are not restated to reflect acquisitions. Discontinued operations are stated separately, cf. below. Acquisitions of enterprises in which the parent company obtains control are accounted for by using the purchase method. Identifiable assets, liabilities and contingent liabilities of acquired enterprises are stated at their fair value at the date of acquisition. Identifiable intangible assets are recognised insofar as they are separable or arise from contractual rights and a reliable fair value can be calculated. Deferred tax is recognised on revaluations. Positive differences (goodwill) between the cost and the fair value of the acquired identifiable assets, liabilities and contingent liabilities are recognised as goodwill under intangible assets. Goodwill is not amortised, but is tested annually for impairment, the first impairment test being performed before the expiry of the year of acquisition. Upon acquisition, goodwill is allocated to the cash-generating units subsequently providing a basis for the impairment tests. If uncertainties regarding measurement of identifiable assets, liabilities and contingent liabilities exist at the acquisition date, initial recognition will take place on the basis of preliminary fair values. If identifiable assets, liabilities and contingent liabilities are subsequently determined to have a different fair value at the acquisition date than first assumed, goodwill is adjusted up until 12 months after the acquisition. The effect of the adjustment is recognised in equity, and the comparative figures are restated accordingly. Gains or losses on the divestment or liquidation of subsidiaries and associates are stated as the difference between the sales amount or liquidation amount and the carrying amount of the net assets including goodwill at the date of divestment plus anticipated divestment or liquidation costs. foreign currency translation A functional currency is designated for each of the reporting entities in the Group. The functional currency is the currency used in the primary economic environment in which the individual reporting entity operates. Transactions denominated in currencies other than the functional currency are transactions in foreign currency. On initial recognition, transactions denominated in foreign currency are translated into the functional currency at the exchange rate prevailing at the transaction date. Gains and losses arising between the transaction rate and the rate prevailing at the date of payment are recognised in the income statement under financial income and expenses, net. Receivables, payables and other monetary items denominated in foreign currency are translated into the functional currency at the exchange rate prevailing at the balance sheet date. Differences between the balance sheet rate and the transaction rate or the exchange rate stated in the latest annual report are recognised in the income statement under financial income Basis of accounting The Annual Report 2008 of Brødrene Hartmann A/S has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for the annual reports of listed companies, cf. the disclosure requirements for annual reports of listed companies issu2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=81http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=81FINANCIAL STATEMENTS 20 0 8 notes 81 supplementary notes and expenses, net. On recognition of foreign subsidiaries and associates with functional currencies other than DKK, income statement items are translated at transaction rates, and balance sheet items including goodwill are translated at balance sheet rates. Transaction rates are calculated as the average rate of the individual month to the extent that this does not significantly distort the presentation of the underlying transactions. Foreign exchange adjustments arising on the translation of opening equity of these entities at the balance sheet rates and on the translation of income statement items from average rates to the balance sheet rates are recognised in the consolidated financial statements as a separate reserve directly in equity. Foreign exchange adjustments of intra-group balances with foreign subsidiaries, which are considered part of the total investment in subsidiaries with functional currencies other than DKK, are recognised in the consolidated financial statements as a separate reserve directly in equity. Similarly, foreign exchange gains and losses on such parts of loans and derivative financial instruments designated as hedges of foreign subsidiaries which effectively set off foreign exchange gains and losses on investments in the subsidiary are also recognised in the consolidated financial statements as a separate reserve directly in equity. Upon the complete or partial divestment of a foreign entity or upon the settlement of intra-group balances that are considered part of the net investment, such part of the accumulated foreign exchange adjustment as is recognised directly in equity relating to that foreign entity is recognised in the income statement concurrently with the recognition of any gains or losses from the divestment. Derivative financial instruments Derivative financial instruments are recognised and measured in the balance sheet at fair value. Positive and negative fair values of derivative financial instruments are included in other receivables and payables, respectively, and positive and negative values are set off solely when the enterprise has the right to and intends to settle several contracts net. The fair value of derivative financial instruments is calculated on the basis of current market data. Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement together with changes in the fair value of the hedged asset or liability as regards the hedged part. Changes in such part of the fair value of derivative financial instruments as has been designated as and qualify for recognition as a hedge of future cash flows, and which effectively hedges against changes in the value of the hedged item, are recognised in equity. Income and expenses relating to such hedging transactions are transferred from equity upon the realisation of the hedged item and are recognised in the same line item as the hedged item. For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement under interest income and expense and similar items as they occur. Changes in the fair value of derivative financial instruments used as a hedge of net investments in foreign subsidiaries and which effectively hedges against changes in foreign exchange rates in these enterprises are recognised in the consolidated financial statement in a separate translation reserve under equity. Income statement Revenue Revenue from the sale of goods for resale and finished goods is recognised in the income statement provided that delivery and transfer of risk to the buyer has taken place at the balance sheet date and that the income can be reliably measured and is expected to be received. Revenue is measured at the fair value of the consideration receivable exclusiv2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=82http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=8282 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes Profit/(loss) from investments in associates in the consolidated financial statements The proportionate share of the profit/(loss) from associates after tax and minority interests and after elimination of the proportionate share in intra-group profit/(loss) is recognised in the consolidated income statement. Dividend from investments in subsidiaries and associates in the parent company’s financial statements Dividend from investments in subsidiaries and associates is recognised as income in the parent company’s income statement in the financial year it is declared. However, where the amount of declared dividend exceeds the accumulated earnings after the date of acquisition, dividend is recognised as impairment of the investment cost. financial income and expenses, net Financial income and expenses, net comprise interest, realised and unrealised foreign exchange adjustments, revaluation of securities, amortisation of liabilities and surcharges and refunds under the on-account tax scheme. Also included are realised and unrealised gains and losses relating to derivative financial instruments not qualifying for hedge accounting. tax on the profit/(loss) for the year The parent company is subject to the Danish rules on joint taxation of the Danish subsidiaries in the Group. Subsidiaries are covered by the joint taxation arrangement for as long as they are included in the consolidation in the consolidated financial statements. The parent company is the management company for the joint taxation arrangement and handles the settlement of all corporate tax payments to the tax authorities. For the purpose of the settlement of joint taxation contributions, the actual amount payable in Danish corporate tax is divided among the jointly taxed companies in proportion to their taxable income. In this connection companies with a tax loss will receive joint taxation contributions from companies capable of utilising these losses to reduce their own taxable profit (full distribution). Tax for the year, comprising current corporate tax for the year, joint taxation contributions for the year and changes in deferred tax for the year, including such changes as follow from changes in the tax rate, is recognised in the income statement for such part of it as can be attributed to the profit/(loss) for the year, and directly in equity for such part of it as is attributable to amounts recognised directly in equity. items, changes in working capital, interest paid and interest received, corporate taxes paid and restructuring costs paid. cash flows from investing activities Cash flows from investing activities comprise payments in connection with acquisitions and divestments of intangible assets and property, plant and equipment, including acquisitions of enterprises. cash flows from financing activities Cash flows from financing activities comprise the raising and repayment of loans, changes in the amount or composition of the share capital including acquisitions and divestments of treasury shares and related costs and dividend payments to shareholders. cash flows from discontinued operations Cash flows from discontinued operations are determined as the total amount of cash flows from the discontinued operations, including cash flows from operating activities and investing activities as well as from financing activities. Cash flows from discontinued operations are determined for the full financial year. cash and cash equivalents Cash and cash equivalents comprise cash, current bank debt and marketable securities with a term of three months or less that can readily be turned into cash, and which are subject to an insignificant risk of changes in value. Balance sheet Goodwill Goodwill is initially recognised in the balance sheet at cost as described in business combinations, with subsequent recognition at cost less accumulated impairment. Goodwill is not amortised. The carrying amount of goodwill is all2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=83http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=83FINANCIAL STATEMENTS 20 0 8 notes 83 supplementary notes Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and impairment. Cost comprises the purchase sum and any costs directly attributable to the acquisition until such time as the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs related to wages and salaries, materials, components and subsuppliers. Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately. Subsequent costs, e.g. for the replacement of components of property, plant and equipment, are recognised in the carrying amount of the asset when it is likely that the expenditure of the replacement involves future financial benefits to the Group. The carrying amount of the replaced components is no longer recognised in the balance sheet, but is transferred to the income statement. All other costs related to general repair and maintenance are recognised in the income statement as and when incurred. Property, plant and equipment are depreciated on a straight-line basis over the expected useful life of the assets/components. The expected useful lives are as follows: • Buildings and building parts 15–25 years • Technical plant and machinery 5-15 years • Operating equipment and fixtures 5-10 years • IT equipment including basic programmes 3-5 years Depreciation is not provided on land. The depreciation basis is determined taking into account the scrap value of the asset less any impairment losses. The scrap value is determined at the time of acquisition and is revalued annually. If the scrap value exceeds the carrying amount of the asset, depreciation will cease. The effect on depreciation of changes in the depreciation period or scrap value is recognised prospectively as a change in accounting estimates. Depreciation is recognised in the income statement as production costs, divestment and distribution costs and administrative expenses respectively. Gains and losses on the divestment of property, plant and equipment are determined as the difference between the sales price less divestment costs and the carrying amount at the date of divestment. Gains or losses are recognised in the income statement both in other operating income and other operating costs. leases (parent company) Leases relating to property, plant and equipment in which the parent company obtains the title, but for which all material risks and maintenance obligations are assigned to the subsidiary (finance leases), are recognised in the balance sheet of the parent company in the same way as other noncurrent assets. The cost of finance leases is stated at the net present value of future lease payments. For the calculation of the net present value, the interest rate stated in the leases is used as the discount rate. Investments in associates in the consolidated financial statements Investments in associates are measured according to the equity method. Investments in associates are measured in the balance sheet at the proportionate share of the enterprises’ equity value calculated in accordance with the Group’s accounting policies minus or plus the proportionate share of unrealised intragroup profits and losses and plus the carrying amount of goodwill. Investments in subsidiaries and associates in the parent company’s financial statements Investments in subsidiaries and associates are measured at cost. Where the cost is higher than the recoverable amount, the investments are written down to the lower of the two. Cost is reduced by such an amount in declared dividend as exceeds the accumulated earnings after the date of acquisition. Impairment of non-current assets Goodwill and intangible assets with indefinite useful lives are tested for impairment annually, the first impairment test being performed prior to the expiry of the year of acq2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=84http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=8484 notes FINANCIAL STATEMENTS 20 0 8 supplementary notes The net realisable value of inventories is determined as the selling price less costs of completion and costs necessary to make the sale and is determined taking into account marketability, obsolescence and developments in the expected selling price. Receivables Receivables are measured at amortised cost. Write-downs are made on the basis of probability of default. Impairment is made on the basis of probability of default when depreciation is estimated to occur. Write-downs are made individually and on a portfolio basis. contract work in progress Contract work in progress is measured at the selling price of the work performed. The selling price is measured by reference to the stage of completion at the balance sheet date and the total expected income from the individual contracts. The stage of completion is determined on the basis of an assessment of the work performed. Contract work in progress for which the selling price of the work performed exceeds progress billings and expected losses is recognised in receivables. Contracts for which progress billings and expected losses exceed the selling price are recognised in liabilities. Prepayments from customers are recognised in liabilities. Selling costs and costs incurred in securing contracts are recognised in the income statement as and when incurred. Prepayments Prepayments recognised in assets comprise costs incurred that relate to subsequent financial years. Incentive programme The programmes are equity-settled, which are measured at the grant date fair value recognised in the income statement under staff costs over the vesting period. The offsetting entry is recognised directly in equity. The fair value of the granted options at the date of grant is based upon a Black-Scholes model. Pension obligations Payments made to defined contribution plans, under which the Group regularly pays fixed contributions into an independent pension fund, are recognised in the income statement in the period to which they relate, and outstanding payments are recognised in the balance sheet under other payables. For defined benefit plans, annual actuarial calculations are made of the present value of future benefits payable under the pension plan. The calculation of the present value builds upon assumptions about the future developments of factors such as wages and salaries, interest rates, inflation and mortality. The present value is calculated solely for those benefits that have been earned by the employees in return for past service rendered to the Group. The present value as calculated by actuaries, less the fair value of any plan assets, is recognised in the balance sheet under pension obligations. The total pension costs of the year, based upon actuarial estimates and a financial forecast at the beginning of the year, are recognised in the income statement. The difference between the forecast development in pension assets and liabilities and the realised values is called actuarial gains or losses and is recognised directly in equity. If a pension plan net is an asset, such asset is recognised only insofar as it leads to future refunds under the plan or a reduction in future contributions. corporate tax and deferred tax According to the rules on joint taxation, the parent company in its capacity of management company assumes liability for the payment of corporate tax of the Danish subsidiaries by reference to the payment by the subsidiaries of joint taxation contributions. Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account. Joint taxation contributions payable and receivable are recognised in the balance sheet of the parent company under intra-group balances with affiliates. Deferred tax is measured using the balance sheet liability method on all temporary differences between the ca2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=85http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=85FINANCIAL STATEMENTS 20 0 8 notes 85 supplementary notes Provisions Provisions mainly consist of warranty obligations and restructuring obligations. Other obligations are recognised when, as a result of events occurring before or at the balance sheet date, the Group incurs a legal or constructive obligation and it is probable that there may be an outflow of financial resources to settle the obligation. Other obligations are measured at the best estimate of Management with regard to the amount required to settle the obligation. Warranty obligations are recognised when goods and services are sold on the basis of warranty costs incurred in previous financial years. Restructuring costs are recognised as liabilities provided that a detailed, formal restructuring plan has been announced to the persons involved not later than at the balance sheet date. financial liabilities Amounts owed to mortgage credit institutions and banks are recognised at the date of borrowing at the net proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortised cost corresponding to the capitalised value using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value (capital loss) is recognised in the income statement over the term of the loan. Other liabilities are measured at net realisable value. Prepayments Prepayments included in liabilities comprise payments received concerning income in subsequent financial years. Government grants Government grants received are recognised in the income statement in the period in which the corresponding costs are recognised. Grants relating to property, plant and equipment are recognised as liabilities in the balance sheet. The grants are recognised in the income statement over the useful lives of the assets. assets held for sale Assets held for sale include non-current assets and divestment groups held for sale. Assets are classified as ‘assets held for sale’ if their carrying amount will be recovered primarily by a sale within 12 months according to a formal plan rather than by continued use. Assets or divestment groups held for sale are measured at the lower of the carrying amount and fair value less costs to sell. No depreciation and amortisation is performed on assets from the time they have been classified as ‘assets held for sale’. Impairment losses occurring in connection with the initial classification as ‘assets held for sale’, and gains or losses in relation to subsequent measurement at the lower of the carrying amount and fair value less costs to sell are recognised in the income statement under the items to which they relate. Gains and losses are disclosed in the notes to the financial statements. Assets and related liabilities are recognised separately in the balance sheet, and the main items are disclosed in the notes to the financial statements. Presentation of discontinued operations Discontinued operations constitute an entity for which it is possible to clearly distinguish its activities and cash flows from the rest of the Group both operationally and for financial reporting purposes, and where the entity either has been divested or is held for divestment, with divestment expected to take place • • • • Egg Packaging Europe Egg Packaging North America Industrial Packaging Other segments, including the combined heat and power plant, Hartmann Technology and Group functions within twelve months pursuant to a formal plan. Profit after tax on discontinued operations and revaluations after tax of related assets and liabilities are recognised separately in the income statement with comparative figures. Revenue, costs, revaluations and tax discontinued operations are disclosed in the notes to the financial statements. Assets and related liabilities for discontinued operations are recognised separately in the balance sheet, cf. the section ‘assets held for sale’, and the main items are disclosed in the not2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=86http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=8686 contact aDDRes s es FINANCIAL STATEMENTS 20 0 8 contact addresses on the Group’s website www.hartmann-packaging.com Production sites Sales offices Canada USA Finland Denmark Denmark Germany England Poland France Germany Hungary Switzerland Croatia Serbia the Group has production sites in 7 countries and sales offices in 12 countries. Israel2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=87http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=87FINANCIAL STATEMENTS 20 0 8 DefInItIon s of fInancIal R atIos 87 Definitions of financial ratios net working capital (nwc) Inventories plus receivables plus other operating current assets less trade payables less other operating current liabilities Invested capital (Ic) Net working capital plus property, plant and equipment plus intangible fixed assets plus deferred tax assets plus corporate tax, receivables less deferred tax less public grants less corporate tax, payables Operating profit/(loss) (EBIT) Average invested capital Net interest-bearing debt x 100 Total equity at year-end Profit/(loss) for the year x 100 Total equity at year-end Profit/(loss) for the year Average no. of shares The calculation of diluted EPS is adjusted for outstanding share options, ’in the money’ Return on average invested capital(RoIc) Gearing Return on equity earnings per share (ePs) Book value per share Price/earnings Pay-out ratio cash flow per share Total equity (less minority interests) at year-end No. of shares (less treasury shares) at year-end Listed price Earnings per share (EPS) Dividend paid x 100 Profit/(loss) for the year Cash flows from operating activities Average no. of shares (less treasury shares) The Annual Report 2008 has been prepared in accordance with International Financial Reporting Standards as approved by the European Union and additional Danish disclosure requirements for annual reports of listed companies The Annual Report 2008 of Brødrene Hartmann A/S is published in Danish and English. In case of discrepancies between the two versions and in case of doubt, the Danish version shall prevail. All brands such as trade names and other names and designations highlighted in this report are trademarks protected by and owned by Brødrene Hartmann A/S. © 2009 Brødrene Hartmann A/S layout Blue Pen A/S Photos Niclas Jessen and Morten Bjarnhoff2009-03-23T10:59:45+01:00http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=88http://ipaper.ipapercms.dk/HartmannPackaging/AnnualReport2008/?Page=88Brødrene Hartmann A/S Ørnegaardsvej 18 DK-2820 Gentofte Denmark tel: +45 45 97 00 00 fax: +45 45 97 00 01 e-mail: bh@hartmann-packaging.com http://www.hartmann-packaging.com cVR no. 63 04 96 112009-03-23T10:59:45+01:00