AR2004

Transcription

AR2004

The East Asiatic Company Ltd. A/S
(A/S Det Østasiatiske Kompagni)
Building Brands
Creating Choices
Growing Markets
>AR2004
Contents
Highlights / Financial Summary
01 Building Brands and Creating Choices
in Growing Markets
Mission, Values, Strategy and Vision
02 Financial Review
05 Outlook for 2005
06
14
22
28
34
Nutrition
Foods
Industrial Ingredients
Moving & Relocation Services
Other Activities and
Disposed Businesses
37 Financial Report
The Annual Report 2004 has been prepared
in Danish and English. The Danish text shall
be the governing text for all purposes and in
case of any discrepancy the Danish wording
shall be applicable.
Management Statement
Statement by the Supervisory Board
and the Executive Board on the
Annual Report
Executive Board of The East Asiatic
Company Ltd A/S
Mark A. Wilson
The Supervisory Board and the Executive
Board have today considered and
adopted the Consolidated Financial
Statements and the Parent Company
Financial Statements of the East Asiatic
Company Ltd. A/S for the financial year
ended 31 December 2004.
The Financial Statements were
prepared in accordance with Danish
Financial Statements Act, Danish
accounting standards and the general
requirements of the Copenhagen Stock
Exchange on the financial reporting of
listed companies.
We consider the accounting policies
applied appropriate, and in our opinion
the Consolidated Financial Statements
and Parent Company Financial
Statements give a true and fair view of
the assets and liabilities, financial position,
profit for the year and cash flow of the
Group and the Parent Company.
We recommend that the Financial
Statements be adopted at the Annual
General Meeting.
Copenhagen, 31 March 2005
Supervisory Board of The East Asiatic
Company Ltd A/S
Jan Erlund,
Chairman
Torsten Erik Rasmussen,
Deputy Chairman
Flemming Aaskov Jørgensen
Winston Yau-Lai Lo
Knud Mohr
Tan Yam Pin
Kaare Vagner
Ole P. Wissing
Auditor’s Report
To the shareholders of The East Asiatic
Company Ltd. A/S (EAC)
We have audited the Annual Report of
the EAC Group and the Parent Company
for the financial year 1 January - 31
December 2004, prepared in accordance
with the Danish Financial Statements Act,
the Danish Accounting Standards and
other financial reporting requirements of
the Copenhagen Stock Exchange.
The Annual Report is the responsibility of
the Supervisory Board and the Executive
Board. Our responsibility is to express an
opinion on the Annual Report based on
our audit.
Basis of opinion
We conducted our audit in accordance
with Danish and International Auditing
Standards (ISA). Those standards require
that we plan and perform the audit to
obtain reasonable assurance that the
Annual Report is free of material
misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures
in the Annual Report. An audit also includes
assessing the accounting policies applied
and significant estimates made by
Management, as well as evaluating
the overall annual report presentation.
We believe that our audit provides a
reasonable basis for our opinion.
Our audit has not resulted in
any qualification.
Opinion
In our opinion, the Annual Report gives a
true and fair view of the financial position
at 31 December 2004 of the Group and
the Parent Company and of the results
of the Group and the Parent Company
operations and consolidated cash flows
for the financial year 1 January - 31
December 2004 in accordance with the
Danish Financial Statements Act, the
Danish Accounting Standards and other
financial reporting requirements of the
Copenhagen Stock Exchange.
Copenhagen, 31 March 2005.
PricewaterhouseCoopers
Statsautoriseret
Revisionsinteressentskab
Carsten Gerner
Søren Skov Larsen
State Authorised Public Accountants
KPMG C.Jespersen
Statsautoriseret
Revisionsinteressentskab
J.P. Bærentsen
Steen Blomquist
State Authorised Public Accountants
Financial Summary
Balance Sheet
Total assets, end of year
Working capital employed, end of period
Net interest-bearing debt, end of period
Net interest-bearing debt, average
Invested capital, end of period
Minority interests
Equity
Cash and cash equivalents
Investments in intangible assets and
property, plant and equipment
Ratios
Operating margin (%)
Solvency ratio (%)
Return on invested capital (%)
Return on equity (%)
EPS (in DKK)
Equity per share (Book value per share)
Stock exchange quotations, end of period
Number of employees, end of period
Exchange rate DKK / USD end of period
Exchange rate DKK / USD average
2003
2002
2001 *
2000 *
4,464
4,116
6,204
7,641
7,768
558
410
-10
7
119
288
229
512
367
-31
2
92
246
225
519
353
-15
-5
133
200
190
728
567
-47
75
142
453
421
843
683
-88
-5
132
458
414
3,834
669
-908
-948
1,639
184
2,402
1,278
4,177
693
-988
-943
1,705
180
2,613
1,489
4,345
685
-897
-448
1,751
146
2,623
1,383
5,092
1,049
1
-4
2,795
223
2,691
823
5,406
944
-9
164
2,377
285
2,292
1,080
133
256
228
312
308
9.2
62.6
24.5
9.1
12.1
127.0
285.8
5,797
8.9
62.5
21.2
8.6
11.9
138.2
257.6
5,826
5.7
60.4
15.5
7.2
9.6
132.1
162.0
5,859
7.4
52.8
21.9
16.9
20.6
131.8
186.8
6,534
8.8
42.4
29.8
21.0
20.2
112.0
168.7
6,451
546.76
598.35
595.76
658.08
708.22
789.11
840.95
833.10
802.05
807.23
*The comparative figures for 2001 and 2000 have been restated to reflect the adjustments following the
implementation of the new Danish Financial Statements Act adopted by the Company with effect from
1 January 2002.
Definitions, see page 95.
The ratios were calculated in accordance with the guidelines of the Danish Association of Financial Analysts
(Finansanalytikerforeningen).
Financial Summary
Income Statement
Net sales
Earnings before interest, taxes,
depreciation and amortisation (EBITDA)
Operating profit (EBIT)
Net financials
Revaluation of fixed assets investments
Tax on result of ordinary activities
Result after tax of ordinary activities
Net profit
2004
Highlights
DKK million
Highlights
• The EAC Group surpassed expected growth and profit targets supported by a
strong finish to the year.
• Group net sales grew by 20 per cent in Q4 and 18 per cent for the year in local
currencies.
• Group operating profit reached DKK 410m, a growth of 28 per cent when adjusted
for non-recurring items.
• Group net profit increased by 45 per cent in local currencies after adjustment of
non-recurring items.
• The strategic businesses grew in net sales by 18 per cent and operating profit by
32 per cent in local currencies after adjustment of non-recurring items.
• A dividend of DKK 4.00 per share is proposed for 2004.
• A share repurchase programme of DKK 500m is proposed.
• Outlook for net sales for 2005 is again a double-digit growth measured in local
currencies.
Note that comparative figures for 2003 are
stated in brackets. All currency effects
refer to translation effects from reporting
currencies unless otherwise stated.
Net sales for the Group reached DKK
4,464m (DKK 4,116m), a growth of 18 per
cent in local currencies and 8 per cent in
DKK.
The operating profit for the Group
exceeded expectations at DKK 410m
(DKK 367m) and DKK 403m (DKK 316m),
excluding non-recurring items, driven by
improved net sales performance in all four
strategic businesses. The operating
margin for the Group increased to 9.0 per
cent (7.8 per cent) when adjusted for nonrecurring items.
The net profit of DKK 229m (DKK 225m)
was above expectations and was driven
by a strong Q4 performance. Net profit
increased by 45 per cent in local currencies after adjustment of non-recurring
items.
Investment levels in brand building and
market expansion remained high with a
spending of DKK 411m in advertising and
promotion (DKK 359m) or an increase of
24 per cent in local currencies. During the
year, the Group invested DKK 133m (DKK
256m) in fixed assets, including initial
investments in a new plant in India.
Equity decreased to DKK 2,402m (DKK
2,613m). Foreign currency translation
adjustment effects of DKK 142m were partly
offset by hedging gains of DKK 43m, in line
with EAC’s policy to manage currency risks.
The share buy-back programmes executed
in 2004 reduced equity by DKK 268m and
dividend payments by a further DKK 72m.
The return on invested capital was 24.5
per cent (21.2 per cent).
Earnings per share were DKK 12.1 (DKK
11.9).
A dividend of DKK 4.00 per share (DKK
3.75), or 5.7 per cent of nominal capital, is
proposed for 2004 (5.4 per cent). A share
repurchase programme of DKK 500m is also
proposed for the one-year period from the
date of the Annual General Meeting 2005.
The share price at year-end was DKK
285.84 (DKK 257.60).
Annual Report 2004
>01
Building Brands
Creating Choices
Growing Markets
Through careful development of
leading brands, strategic extensions
of product ranges and expansion
in chosen markets, EAC delivers
strong growth.
• Nutrition continues to develop new products
and leverage the successful Dumex brand
into premium market segments across its
markets in Asia.
• Product innovation delivers more choice
for consumers across the processed meat
marketplace in Venezuela.
• EAC leverage strengths in industrial ingredients
and became more profitable in tandem with
economic growth in South East Asia.
• As foreign investment flows into Asia, it drives
demand for EAC’s market-leading moving
and relocation services, now in eight countries
and 22 locations.
Mission
EAC is intent on creating value for all
stakeholders: be they shareholders,
customers, business partners or
employees, by investing in and developing
our own brands.
Values
In all aspects of our activities, EAC
is committed to the core values of
Customers, Performance, Innovation,
People and Integrity.
Strategy
EAC will:
• Increasingly focus and deploy
resources to build our market-leading
Nutrition business.
• Grow our Nutrition business organically,
both geographically and by product
extension.
• Increase our presence in the nutritional
foods area, through the addition of
brands and products.
• Grow the business by acquisition,
taking advantage of our conservative
capital structure.
• Invest in and nurture our market-leading
Foods, Industrial Ingredients and
businesses to maximise future value.
Vision
Through this strategy, EAC will build a solid
platform for profitable growth and achieve
our goal of being a Leading Nutritional
Food Company in Asia.
Financial Review
It is EAC’s overall strategic aim to
become a leading nutritional food
company in Asia. EAC Nutrition
constitutes the backbone of the future
EAC and substantial investments
and developments have taken place
in EAC Nutrition in 2004 to support
EAC’s overall vision. At the same time,
EAC continues to nurture and invest in
its three other strategic businesses to
enhance their future value.
Annual Report 2004
Brand building, market and product
expansion
EAC increased its investment in building
the EAC Nutrition brand portfolio in 2004.
Advertising and promotion spending
reached DKK 358m corresponding to 18.8
per cent of net sales (+1 percentage point).
The focus for the advertising and
promotion spending was to support EAC
Nutrition’s moves into the Super Premium
and Premium market segments in its key
markets. These segments offer more
attractive growth rates and better margins
than the Standard market segments
typically led by EAC Nutrition.
With a series of product launches in 2003
and early 2004, EAC Nutrition made
further gains in the Premium market
segments in H2. Overall, the move into the
Premium segments is progressing ahead
of expectations. Over 30 per cent of EAC
Nutrition’s sales in 2004 came from
products launched in the last five years
demonstrating the effective
commercialisation of the strong product
development pipeline.
The advertising and promotion spending
along with the product innovation and
continued market development fuelled
EAC Nutrition’s growth, with a 17 per cent
increase in local currencies, up from 12
per cent in 2003. Growth accelerated
during 2004 with a growth rate of above 20
per cent in H2 versus 12 per cent in H1.
China was the main growth driver
although competition intensified in that
market. Therefore, significant investments
in advertising and promotion spending
were dedicated to strengthen the brand
equity of Dumex in China and also to
support the ongoing market entries in
India and the Philippines.
In India, Dumex took over the sales from
Pfizer of the market-leading protein
supplement, Protinex, in additional
territories and as of 1 December
controls sales in about 75 per cent of the
country. Sales in the territories managed
by Dumex continue to perform well
ahead of Pfizer’s previous performance.
Protinex has been re-launched with a
new packaging design. At the same
time, two new variants were launched,
one targeting the nutritional needs of
India’s large and growing group of
diabetics.
After delays in the approval and
importation process, the first Dumex
infant and child nutrition products were
launched in India in Q4 in selected
regions. Dulac and Dupro IFFO (Infant
Formula and Follow-on) products will be
rolled out in more territories in 2005.
EAC expects to commence local
production in India in H2 2006. Land
was acquired and the construction of
the plant commenced in late 2004. At
EAC Nutrition’s existing plants in
Shanghai and Bangkok, investments in
the value chain that commenced in
2004 were completed.
In the Philippines, the development of
the Dumex brand continued in a very
competitive landscape. Double-digit
growth and market share improvements
continued in this challenging market.
In China, the infant cereal company
Hangzhou Future had a difficult year.
Significant changes were made to the
<02
>03
Weilai (Future) brand and the product
range was revitalised following very
substantial raw material price increases.
Late in 2004, product quality problems
affected sales, but it is believed that the
business is now well set to achieve growth
in the market for cereals for infants and
young children in 2005.
Business and brand acquisitions
Following the acquisition of Protinex in
India in 2002 and Hangzhou Future in
China in 2003, EAC continues to see
acquisition as a potentially important part
of its growth strategy. This is as a
complement to the continuance of strong
organic growth of the business, as
demonstrated in 2004. Efforts in the
acquisition area are unrelenting and
systematic search processes remain in
place and active. The search has revealed
candidates and screening continues,
along with discussions with owners of
brands and with companies that fit EAC's
Vision. The predictability of definitive
results from this activity, by its nature, is
uncertain and not completely within the
control of EAC. Whilst no further
acquisitions were made in Asia in 2004, it
remains a clear objective to add to organic
growth through further joint ventures,
acquisitions or alliances in 2005 and
onwards to better utilise the opportunities
afforded by the conservative capital
structure of EAC.
In Venezuela, EAC Foods entered into an
agreement to acquire the outstanding 62.5
per cent of the shares in the Venezuelan
pig farm, Agropecuaria Fuerzas
Integradas C.A., at a price of USD 7.5m
(DKK 41m). However, the transaction is
still awaiting government approval for
currency remittance, which is expected
in 2005. In December 2004, EAC Foods
acquired a Venezuelan feed mill at a
price of USD 1.9m (DKK 10m).
Divestments
During the year, EAC disposed of a
number of minor, non-strategic assets
resulting in a profit of DKK 7m.
Continued shareholder value
creation
During 2004, EAC channelled DKK
290m back to the shareholders through
share buy-back programmes, while the
dividend for the year 2003 amounted to
DKK 72m. EAC’s share price rose 11 per
cent in 2004.
The proposed dividend of DKK 4.00 per
share (2003: DKK 3.75) follows EAC’s
policy to allocate one-third of the year’s
net profit for dividends. In line with
EAC’s adherence to shareholder value
creation, the Supervisory Board also
will, propose to shareholders an
increased share repurchase programme
of DKK 500m (2003: DKK 250m) at the
Annual General Meeting.
This move reflects EAC’s commitment
to return capital, to the shareholders,
which the Group cannot allocate for
acquisition purposes over a short time
horizon. Due to its strong financial
position and the expected cash flow
from operations, EAC retains the
strength to increase growth by
investments and acquisitions, thereby
creating the basis for continued
attractive shareholder returns.
Annual Report 2004
Outlook for 2005
Note that 2004 comparative figures for the
outlook section are restated to reflect IFRS
compliance, as discussed on pages 58-59.
The expectations for the Group in 2005
assume the current composition of
businesses. They are based on the
average exchange rates of DKK/USD
550.00, while the actual results for 2005
will be consolidated using the average
exchange rates for the year. This could
potentially cause significant variances,
depending on movements in exchange
rates.
The Group is expected to achieve doubledigit growth in net sales measured in local
currencies and slightly higher net sales in
DKK compared to 2004 (DKK 4,464m).
Operating profit for the Group, based on
underlying operations, is expected to be
similar to 2004 (DKK 361m), and the
associates are also expected to contribute
at a similar level to 2004 (DKK 34m net
according to IFRS).
The above outlook for 2005 reflects
management’s expectations of future
events and must be viewed in the context
of the business environments and
currency markets, which may cause
actual results to deviate materially from
those projected by EAC.
<04
>05
“Dumex helped my first child
develop into a strong four-year-old
boy and I’ll trust it for my next.”
Sandra Lee
27 years old,
Pregnant Mother
Annual Report 2004
<06
>07
Nutrition
EAC Nutrition grew by 17 per cent in
net sales measured in local currencies
in 2004, bringing growth in local
currencies over the last two years to
30 per cent. It continued to strengthen
its brands and a number of new
products were launched in 2004,
both as range extensions as well as
into new categories. These product
developments were one of the key
factors driving record sales in most
major markets in 2004 and an
important step towards achieving
EAC’s goal, a position as a leading
nutritional food company in Asia.
Company and Product Introduction
EAC Nutrition dates back to the 1950s
in Malaysia and the 1960s in Thailand.
In China, Indo-China and the Middle East,
EAC Nutrition has been represented for
more than ten years.
The cornerstone of the product range is
Dumex Infant Formula and Follow-On
(IFFO) milk powder and Growing-Up Milk
(GUM) powder. Other parts of the portfolio
include UHT liquid milk, cereals, protein
supplements and specialised formulations
for pregnant women.
Dumex Infant Formula is designed
for infants up to six months of age and
Dumex Follow-On milk powder covers
the age group from six to twelve months.
The formulas are developed in close
cooperation between the EAC Nutrition
product development centre in
Copenhagen and local teams in order to
ensure adherence to both international
and local health care regulations. In every
market, EAC Nutritional Advisors work
with Health Care Professionals to provide
education and information to mothers
whose children need a supplement to
breast milk.
The GUM products are marketed under
three sub-brands: Dumex 1Plus (one to
three years of age), Dumex 3Plus (three to
six years of age) and Dumex 6Plus (six to
ten years of age). These products are
offered in a large variety of flavours and
nutrients, mainly in the form of milk
powder but also in UHT liquid milk in
Thailand, the Ready-to-drink category.
“At this age, tempting his taste
buds is the best way to convince
him to stop playing and start
getting the right nutrition.
He really likes his Dumex.“
Agnes Tan,
37 years old,
Mother
Major Brands
Dumex is the main brand under which
most of the products are marketed in
South East Asia.
In 2004, new products were introduced
under several sub-brands into the
Premium and Super Premium segments
and achieved very encouraging results.
Similarly, specially designed formulas
that are targeted at consumers with
special needs are strengthening the
Dumex position as a nutritional expert
that delivers more choice for consumers.
Malaysia and Singapore
Mamex Gold and Mamil Gold, the new
ranges of Super Premium products in
the IFFO and GUM categories, achieved
record market shares. Since 2002, the
market share of Dumex Premium products
in the IFFO category has more than
doubled. During the same period,
EAC Nutrition’s position in the Premium
segment rose from No. 8 to No. 4.
Mamil Nite is the market’s first night feed
formula for infants from six to twelve
months of age. It contains a unique blend
of milk, pre-cooked rice carbohydrates and
protein to support quality sleep.
In order to defend the leadership of Dumex
products in the Standard segment, the first
GUM with fine cereal was successfully
launched. Subsequently, the Dumex share
of the Standard GUM segment reached
record high levels of above 40 per cent thus
reflecting its growing dominance.
Thailand
The Premium IFFO product range,
branded as Hi-Q Step One and Two,
gained significant market share and has
reached just over 10 per cent in one year
since its launch in December 2003.
EAC Nutrition’s new Premium GUM
products are also marketed under the
Hi-Q umbrella and together with the newly
launched Dumex 3Plus Honey, performed
very strongly with market share gains in an
overall stagnant market.
GUM became the fastest growing UHT
category four years ago. Dumex Readyto-drink is now the fastest growing brand
in that segment and, with four flavours
under the Dumex 1Plus and Dumex 3Plus
brands, it now accounts for 9 per cent of
EAC Nutrition’s total sales in Thailand.
China
At the end of 2003, the Premium IFFO
product range was launched under the
Dumex Gold brand. This concept was
expanded further in 2004 with the launch
of Dumex Gold Premium GUM products.
After a slower than expected start at the
beginning of 2004, the Premium market
shares began to rise, with encouraging
performance, especially towards the latter
part of the year.
Another Premium product, Dumex Mama,
was launched as a specially designed
formula for pregnant and nursing mothers,
a small but rapidly growing specialty
category. This product addresses a
strategic opportunity to widen the
spectrum of the Dumex brand while also
creating an element that will support the
continued expansion of child nutrition
products.
In late 2003, EAC acquired the infant
cereals brand Weilai (Future) from
Hangzhou Future Foods Co. Ltd in China.
Annual Report 2004
The products are targeted at infants and
young children. Both product volumes
and brand positioning had a challenging
year in 2004 following sharp price
increases due to substantial raw material
cost increases as well as adjustments to
the distributor network and production
methods, following quality problems in
Q4 2004.
India
Dulac Infant Formula and Dupro FollowOn milk powder products were launched
in October in West Bengal, Tamil Nadu and
Andhra Pradesh states. Due to delays in
the approvals process and importation
this was later than originally planned.
Initial interest was positive, though.
Based on a groundnut formula, the protein
supplement product, Protinex Classic, is
the mainstay of the India product range
that was acquired from Pfizer in late 2002.
During 2004, a completely redesigned
package was launched and significantly
modernised the image of the products.
Some consumers prefer the taste of the
original Protinex Classic, but to others
it is a barrier. In order to recognise this
and deliver more choices to consumers,
Protinex Vanilla, a milk based alternative,
was developed. Parallel to this launch in
October, another product was introduced:
Protinex Diabetes. It is estimated that
there are 30 million diabetics in India and
this represents an opportunity to gain
market leadership in this niche by building
on the trust connected with the Protinex
brand.
Major Markets
Dumex and the related brands are
represented in most of the Asean region,
including Brunei, Indo-China, Malaysia,
the Philippines, Singapore and Thailand
as well as in China and India. A number
of Middle East and East African markets
as well as Russia are also covered.
The main markets are China, Thailand
and Malaysia and in all three markets,
EAC Nutrition maintained or expanded
its No. 1 or No. 2 market position
during 2004.
Dumex bulk formulas are sourced from
suppliers in New Zealand and Australia;
ingredients and packaging material are
obtained from a variety of international
and local suppliers. Production, which
consists mainly of blending and
packaging, takes place at three EAC
owned ISO and HAACP certified plants in
China, Malaysia and Thailand, while
technical expertise and product
development is centralised in Denmark.
The plant in Shanghai features a spray
tower for the production of milk powder
from locally sourced liquid milk. The
suppliers are carefully selected and
trained to ensure adherence to EAC’s
demands for high quality.
Hangzhou Future products are produced
at rented facilities in Hangzhou, China.
All of the Dumex cereals and UHT
milks, and Protinex protein supplement
products are produced by contract
manufacturers under close monitoring
by the Quality Assurance organisation
based in Denmark.
<08
>09
“With the new enhanced Nutrition
organisation, we will be able to
leverage the experience and
strength of the many great talents
in the Group. This will give us a
strong foundation for continued
progress towards realising
our vision.”
Mark A. Wilson,
President and CEO, EAC
Market Development
In China, the net sales of Dumex products
grew just over 30 per cent in 2004 despite
a relatively slow start. The Dumex Gold
Step 1 and Step 2 products primarily
fuelled this growth.
In the AC Nielsen retail audit report for
2004, INC Shanghai ranked a combined
No. 1 in Infant Milk Formula retail sales
value and volume in four key cities: Beijing,
Chengdu, Guangzhou and Shanghai.
Furthermore, Dumex ranked No. 1 in
aggregate sales volume in the same four
key cities and 23 A-cities (mainly provincial
capital cities) in China.
Market shares in China were largely
maintained. However, with major
international competitors increasing
their advertising and promotion spending
by 150 per cent compared to 2003, and
with local competition closing the gap
with multinational companies, in terms of
marketing capabilities and product quality,
the competitive environment is getting
more challenging.
In Thailand, the company’s overall market
share hit the highest level in the two years
since the recall in mid 2002. Hi-Q Premium
IFFO and Standard GUM products
performed well ahead of expectations
and primarily drove the increase in market
share in spite of a relatively flat overall
market. Dumex entered the fast-growing
UHT category only four years ago, yet
Dumex Ready-to-drink was the fastest
growing brand in the category and held
a solid No. 3 position not far below the
two category leaders.
Dumex Thailand set new sales records in
every quarter in 2004 and sales grew an
impressive 14 per cent in local currencies
compared to 2003.
The Malaysian market was almost flat,
yet Dumex Malaysia delivered good
single-digit growth. The key drivers of
growth were the Premium products within
both IFFO and GUM categories, which
achieved all-time high market shares at
the end of 2004. The more established
Standard GUM segment also reached
record high market shares.
In the Philippines, competition continued
to be extremely fierce and even though
growth was well into double-digit territory,
sales were below target. Dumex growth
was greater than that of the market, thus
increasing its market share, but the overall
tight economic environment made the
Standard and Premium segments drift
further apart in terms of pricing and
negatively impacted the EAC position in
the lower end of the Premium segment.
As at 1 December 2004, Dumex India
increased control of Protinex sales to
about 75 per cent of India’s territories.
The sales territories now controlled
by Dumex significantly surpassed the
historical performance of Pfizer, as well
as surpassing current performance
in the states that it still runs.
Land was acquired in the Punjab state of
India for a production plant. The facilities
are expected to be operational in 2006.
Financial Result
EAC Nutrition attained net sales of DKK
1,900m in 2004, representing a growth
of 17 per cent in local currencies and
Annual Report 2004
<10
>11
8 per cent in DKK compared to 2003.
These strong sales were a result of record
sales in several business units, but were
largely driven by China and Thailand.
In addition, the expansion of activities into
more territories in India as well as the
repositioning of Hangzhou Future in
China required increased costs.
World milk powder prices rose
significantly during 2004. However,
the milk powder price agreement with
the main supplier limited the impact and
for the most part cost increases were
offset by price increases and thus overall
margins were largely protected.
Assets
At the end of 2004, total assets amounted
to DKK 1,316m, an increase of DKK 124m
compared to 2003. The increase came
from additional cash holdings. Of the total
assets, DKK 538m is related to goodwill,
trademark, and property, plant and
equipment. During the year, EAC Nutrition
invested DKK 50m in tangible assets,
including the acquisition of land and
commencement of construction of a new
plant in India, completion of an investment
in a wet mixer in Shanghai and
commencement of an investment in
additional blending facilities in Bangkok.
The launches of Premium GUM products
in all markets were backed by substantial
marketing campaigns that accounted for
a 23 per cent growth in local currencies
in advertising and promotion spending
compared to 2003. The Premium IFFO
products were supported by a series of
conferences for General Practitioners
and other Health Care Professionals
with child-nutrition and health experts
as keynote speakers.
Dumex Thailand’s dispute with local
customs authorities over the duty
classification of some products imported
from 2000 to 2003 has not reached a
conclusion as yet. Provisions have been
made to cover a potential change in the
classification, but Dumex Thailand still
expects a positive outcome.
The operating profit for EAC Nutrition
reached DKK 175m representing an
operating margin of 9.2 per cent. The
reduction in operating margin compared
to 2003 is a reflection of exchange rate
fluctuation, higher advertising and promotion spending in all major markets and
geographic expansion. The commitment
to build the business in the Philippines
still involves a significant investment.
Financing and Cash Flows
Cash flow from operating activities is
mainly delivered through profit generation.
Net cash provided from operating
activities amounted to DKK 190m,
compared to DKK 110m in 2003.
Intellectual Capital
The most valuable intellectual capital in
EAC Nutrition is the Dumex brand. This
brand, along with the other sub-brands,
has shown its strength in the transition
into the significantly higher pricing points
of the Premium and Super Premium
segments. During 2004, EAC Nutrition
launched products into new segments,
e.g., nutritional supplements for mothersto-be, that have not traditionally been
markets for Dumex, yet consumers
responded very positively.
According to AC Nielsen Winning Brands
Brand Equity Index, Dumex in China
achieved the No. 1 position in all four
segments (IFFO, GUM 1-3 years, GUM
3-6 years) of the Infant Milk Formula
market in Beijing, Chengdu, Guangzhou
and Shanghai. The brand equity score is
derived from quantitative research where
mothers indicate their favourite brand,
a brand that they would recommend,
and a brand for which they would pay
a price premium.
In the Indian market, Protinex is the
leading protein supplement. The upgrade
of the product, in its range, packaging
design and general branding, has had
positive research results with consumers.
The recent launch of the range extensions,
Protinex Vanilla and Protinex Diabetes,
are natural steps towards a further
development of the Protinex brand profile.
Risk Profile
Economic Risk
EAC Nutrition is exposed to the political
stability, macro-economic development,
economic policies in respect of foreign
ownership, import duties, etc., of all of
the countries in which the products are
sold. Local management manages this
risk and influence is sought via
participation in local industry associations
as well as coordination with regional
management in Singapore.
Economic Currency Exposure
The most important cost element is milk
powder. While this is procured from the
world market in USD, Dumex products
are sold in local currencies, predominantly
in CNY, MYR, THB, PHP and INR, all of
which are strongly correlated to the
USD and some directly pegged. This
management of currency exposure is
described in the Finance and Treasury
Risks section under Currency Risks on
Page 37-38.
Product Risk
As a manufacturer of products for infants,
unquestionable product quality standards
are critical. Therefore all of the Dumex
factories are HACCP and ISO certified.
In addition, internal and external Good
Manufacturing Practice audits are
performed regularly. The coordination
of product risk management, more
specifically powder procurement,
product quality assurance, technical
management and documentation,
is centralised in Copenhagen.
Commodity Risk
Under the price agreement with a major
supplier in New Zealand, prices are fixed
annually on the basis of the average price
over recent years. This has significantly
reduced price fluctuation and thus
increased EAC Nutrition’s ability to
minimise the impact of seasonal
fluctuation in the main commodity.
Environmental Compliance
All Dumex factories are certified in
accordance with HACCP and ISO
standards. Procedures are constantly
reviewed to identify potential
environmentally damaging waste as
well as to optimise opportunities for
recycling and minimising resources.
Dumex Malaysia has had ISO 14001
environmental certification since 2003
and this audit was also passed by INC
Shanghai in November 2004. Preparations
are well underway for Dumex Thailand to
gain the same certification. During 2004,
Dumex Malaysia improved the waste
water system in Nilai and it now complies
with Malaysia’s highest standard.
Outlook 2005
Note that 2004 comparative figures for
the outlook section are restated to reflect
IFRS compliance, as discussed on pages
58-59.
The emphasis in 2005 will remain on
expansion of the EAC Nutrition business
base in products and geographic territories. Strong double-digit sales growth in
local currencies, at a similar level as 2004
(+17 per cent), is expected to continue
into 2005. This will be supported by the
Premium product range gaining further
footholds in the main markets and new
markets boosting sales. China, and to a
lesser degree Thailand, will continue to
be the main growth drivers, while Dumex
Malaysia is expected to continue to grow
faster than the market. The Philippines,
India and Hangzhou Future in China are
expected to deliver high double-digit
growth rates.
The sharp rise in world market milk-powder prices will be somewhat softened by
the long-term purchase agreement with
the main supplier, Fonterra Co-operative
Group Ltd., but will still increase EAC
Nutrition’s cost base by an estimated
DKK 50m. However, increased sales of
high-margin Premium products along
with efficiency improvements are expected to keep the gross margins at a similar
level to 2004.
Fixed costs will increase in line with
the expansion of activities in the EAC
Nutrition Group. The main increase will
Annual Report 2004
be in advertising and promotion
spending. The spend will counter more
competition in China, support a
continued push into the new Premium
segments as well as protect the existing
Standard product ranges, and support
the continued geographic expansion into
India and the Philippines.
<12
>13
Market Presence
The operating margin is expected to be
similar (9.7 per cent) to 2004, with profit
growth due to increases in net sales
being offset by the increased powder
costs, increased advertising and promotion investments to support Premium
product development and new market
expansion in the Philippines and India.
China
Shanghai
Saudi Arabia
India
Thailand
Cambodia
Vietnam
Malaysia
Singapore
Philippines
Brunei
market presence
factory
Nutrition
DKK million
Net sales
Operating profit
Total assets
Working capital employed
Invested capital
Return on invested capital in % p.a.
Cash flows from operating activities
Cash flows from investing activities
Employees, number year-end
2004
2003
2002
1,900
175
1,316
290
676
25.2
190
-51
9.2
2,221
1,764
175
1,192
305
715
24.9
110
-124
9.9
2,160
1,876
179
1,292
299
694
25.0
229
-149
9.5
1,965
“The taste of Plumrose
ham reminds me
of home.”
Jose Luis Escobar,
27 years old,
Entrepreneur
Nutrition
Annual Report 2004
<14
>15
Foods
Net sales grew by 50 per cent in
local currency in a recovering
economy and EAC Foods continues
to dominate the market for branded
processed meat products in Venezuela.
With the acquisition of a feed mill
in December 2004, EAC Foods’
activities now encompass the
entire meat production value chain
including pig breeding, slaughtering,
processing, sales, marketing and
distribution. This represents a
significant strategic and financial
advantage as EAC Foods can
produce quality products with
prime raw materials at competitive
costs. The resultant customer loyalty
is reflected in high market share.
The product portfolio includes, among
others, hams, shoulders, mortadella,
bologna, bacon, sausages, processed
chicken products and specialties. These
products are sold under several brands at
different pricing points; Plumrose, Oscar
Mayer, Fiesta and Louis Rich are the
main brands.
EAC Foods dominates the market in
customer service, distribution innovations,
and in the launching of new products.
Close monitoring of product performance
helps to detect opportunities for product
improvement and innovation.
Six new products were launched in 2004
including Fiesta devilled ham and Fiesta
sausages to complete the product offering
in this intermediate-price segment of the
market. Two new turkey breast products
were launched under the Plumrose and
Louis Rich brands.
The Food Service unit, addressing the
catering sector, was introduced in 2004
and surpassed objectives for the first year
by serving more than 400 new clients. This
unit targets restaurants, hotel chains and
fast food chains.
Processing facilities are strategically
located in the central region of Venezuela
and products are distributed through the
company’s own distribution network.
There are six distribution centres across
the country and EAC Foods has
developed a managed distribution system
with the incorporation of elite distributors
as commercial allies. EAC Foods is the
only company offering 24-hour delivery
service in major cities.
“My family loves the taste
of Oscar Mayer meats and
I rely on the quality.”
Carla Herrera,
34 years old,
Nurse
Annual Report 2004
Activities are supported by a
comprehensive SAP information
technology platform. During 2004,
the implementation of payroll modules
was completed.
Politics and Economics
In August 2004, a referendum on the
president’s leadership was held and
almost 60 per cent of the voters favoured
the continuity of the incumbent president.
The referendum eased political tensions
and other government measures helped
the economy recover.
Inflation dropped to 19.2 per cent from the
2003 rate of 27.1 per cent. Lower inflation
in 2004 was partly due to price controls
and a fixed exchange rate. Price controls
continued throughout the year on
mortadella and fresh hams, but were
lifted on pork chops in April.
Oil prices hit record highs and
strengthened international reserves
allowing the government to continue
with strong fiscal spending. GDP grew
by 17.3 per cent in 2004 practically
recovering the GDP declines of 7.6 per
cent in 2003 and 8.9 per cent in 2002.
The average annual unemployment rate
dropped to 15.2 per cent from the 2003
rate of 18.3 per cent, positively affecting
consumer purchasing power.
The exchange controls established
in February 2003 remained in force
throughout 2004. EAC Foods has
operated normally under the exchange
controls and no major difficulties have
been encountered.
<16
>17
On 9 February 2004, the Central Bank of
Venezuela devalued the VEB by 16.6 per
cent, lifting the official rate from VEB/USD
1,600 to VEB/USD 1,920.
Market Development
EAC Foods is the undisputed market
leader with 52 years of presence in
Venezuela. Advertising and segmentation
strategies together with aggressive and
consistent trade marketing programmes
throughout 2004 yielded excellent results
as reflected in the market share
development of different product
categories. This success across a number
of different segments confirmed its overall
No. 1 market position.
Market share trends of Plumrose’s
audited categories
Categories
2004
2003
2002
Hams
Chicken
Turkey
Wiener Sausages
Devilled Hams
42.3
25.4
31.4
77.2
20.4
37.3
30.4
21.8
77.9
16.8
41.5
30.7
21.4
81.7
12.4
Figures above in percentage
Average January to December 2002, 2003, 2004
The target categories of Plumrose
hams and devilled hams ended 2004
with important volume increases over
2003 of 20 per cent and 42 per cent,
respectively. The Oscar Mayer brand
of wiener sausages recovered by
16 per cent.
Other categories that displayed significant
annual growth are:
• Turkey based products, which rose 120
per cent largely due to the launching of
new breast meat products
• Deli sausages, which rose 48 per cent
thanks in part to a Plumrose franchise for
high quality hot dog street vendor stands
• Canned products, which rose 28 per
cent
• Economy sausages, which rose 27 per
cent
• Mortadella products, which rose 26 per
cent driven by a government food
programme
• Bacon in bulk packaging, which rose 25
per cent
Only chicken products showed a negative
trend as the category was affected by
increases in the cost of raw chicken
during 2004.
The Venezuelan government financed
massive programmes during 2004, such
as MERCAL/CASA (government owned
or franchised stores), in order to offer the
general population a cheaper food basket.
Its strategy was to satisfy the needs of
a large segment of the population in
the lowest income bracket. EAC Foods
entered into an important sales and
distribution agreement with MERCAL/
CASA to supply economical products,
mainly mortadella.
Strong results at the company’s farms
contributed significantly to the total
operating profit. Productivity, quality and
cost control were the focus areas during
2004 as far as the processing activities are
concerned. An ongoing review of
formulations to ensure consistently
high product quality without sacrificing
profitability was among the top priorities.
Significant capacity increases were
achieved in the economy ham product
line, the pre-mixing line and the filling line
for mortadella through different
productivity initiatives. These enabled
EAC Foods to respond more efficiently
to incoming sales orders. Significant staff
reductions helped to achieve record high
productivity figures.
Financial Result
EAC Foods’ results are presented on
a consolidated basis including the
companies that operate the pig farms:
Plumrose Farms C.A.: 55.6 per cent
ownership and Procer C.A.: 51 per cent
ownership.
Net sales increased by 50 per cent over
2003 in VEB. This growth was 21 per cent
in USD and 7 per cent in DKK. The 2004
results reflect the effects of the 17 per cent
devaluation of the VEB against the USD
and the 9 per cent depreciation of the USD
against the DKK during the year.
Sales performance was mainly achieved
by intensive advertising and promotional
activities throughout the year and price
increases. In terms of volume, the total
tonnage of processed meat products
sold during 2004 increased by 12 per cent
over 2003.
The operating margin was 12.9 per cent
of sales, which ranks very high compared
with industry peers. Operating profit in
Annual Report 2004
2004 surpassed that of 2003, which
included the one-off profit from the sale
of Ecuadasa of DKK 68m.
Disregarding the one-off profit on the sale
of Ecuadasa, EAC Foods 2004 operating
profit increased by 78 per cent in local
currency over 2003.
Assets
Total assets amounted to DKK 767m
at the end of 2004. The manufacturing
facilities and investments in the pig farms
are the main fixed assets with an annual
capacity of 72,800 tonnes and 166,000
pigs per year, respectively.
A feed mill was acquired in December
2004 at a price of DKK 10m (USD 1.9m).
The feed mill capacity is 6,000 tonnes
per month in one shift. This will allow EAC
Foods to fulfil feedstuff requirements for
its own farms, estimated at 5,000 tonnes
per month. Excess capacity will be sold to
independent pig breeders, which provide
hogs to EAC Foods slaughterhouse. The
start-up of the plant is planned for 1 April
2005, following cleaning, repairs, and civil
and electrical work.
Investments in intangible and tangible
fixed assets were DKK 46m during 2004
and mainly consisted of renovations to
production machinery and equipment at
the factory, renewal of the transport fleet,
those necessary to secure compliance
with environmental standards, and IT
projects. A significant portion of
investments was devoted to IT projects
that were considered strategic and critical
to maintain the operations’ efficiency and
competitive edge.
<18
>19
The balance sheet includes the following
financial investments:
• Plumrose Farms C.A.: 55.6 per cent
ownership, through which EAC Foods
owns 37.55 per cent of the share capital
of Agropecuarias Fuerzas Integradas
C.A., which operates a pig farm located
in Guarico state.
• Procer C.A.: 51 per cent ownership; it
operates a pig farm located in Lara state.
The investments in these subsidiaries are
considered strategic for EAC Foods
because they represent a secure source of
quality raw materials at controlled prices.
Financing
The net bank debt balance represented
25 per cent of the approved credit line
facilities at year-end.
The success of EAC Foods is underpinned
by in-depth market expertise, product
development know-how, modern
distribution infrastructure and strategic
investments in information technology:
• Deep understanding of consumer
behaviour, needs and habits as well as
effective advertising and promotion has
allowed EAC Foods to develop the
Oscar Mayer and Plumrose brands so
that they can command premium prices.
• Product development know-how has
positioned EAC Foods as a leader in
product innovation.
• Modern distribution centres supported
by 24-hour delivery in major cities and
one of the largest refrigerated fleets in
the country give EAC Foods a powerful
distribution arm.
• Steady investments in information
technology, including sales force
automation, are key to the efficiency
and control of EAC Foods’ operations.
Risk Profile
Financial & Treasury Risk
EAC Foods’ financial risk management
is coordinated by its Treasury Department
within the policy framework issued by
EAC’s Group Treasury. The policy focuses
on reducing the Company’s exposure
to financial market and funding risks;
in particular, the policy aims to reduce
the volatility of the Company’s cash flow
as a result of these risks.
Currency Risk
For 2005 and onwards, EAC will calculate
currency risk and exposure under
International Financial Reporting
Standards (IFRS), which means that the
functional currency will be the VEB.
Previously EAC Foods had adopted the
US dollar as its functional currency based
on the Financial Accounting Standards
Board (FASB) Statement 52.
The Company’s policy is to hedge all
booked transaction and translation risks
as and when they occur to the extend
possible. Currency exposure is managed
from a strategic perspective and is dealt
with in the Company’s strategic planning
process. EAC Foods constantly monitors
all exposures.
Interest Risk
The interest rate environment in Venezuela
has a high degree of volatility. EAC Foods
manages this risk by fixing rates using
debt instruments with the longest
maturities available in the local financial
market, which vary between one and six
months. The Company also manages this
exposure by ensuring a smooth rollover
profile with staggered maturities to the
extend possible.
Commodity Risk
Pork meat is the primary raw material for
the production of EAC Foods’ products
and the company secures a supply at
controlled prices through long-term
relations with main suppliers, breeding
activities and maintenance of adequate
inventory levels. To this effect, EAC Foods
owns pig farms, which are considered
among the most important and modern
breeding facilities in Venezuela and supply
a significant portion of own requirements.
The profitability of the farms could be
adversely affected if the government was
to open up for imports of pig meat.
Liquidity and Funding Risk
EAC Foods is funded via a combination of
equity and VEB debt. All cash excess to
the normal operating requirements is
transferred to EAC Ltd. A/S on a frequency
agreed between EAC Group and EAC
Foods, by way of dividends, royalty
payments or internal deposits.
EAC Foods is constantly investing to
comply with environmental standards
and legislation. It plans to construct
new oxidation lagoons at the pig farms
to manage manure for later use as
liquid fertiliser.
The environmental impact of slaughtering
and meat processing activities includes
water use, wastewater, and wastewater
emissions of phosphors, nitrogen, biogen
oxygen demand, suspended matter and
sludge.
In order to minimise the the environmental
impact, EAC Foods emphasises safety
procedures, controls water consumption,
installs filters, tests additives to reduce
phosphor, biogen oxygen demand and
other elements, and plans to upgrade its
wastewater treatment plant.
Outlook for 2005
EAC Foods expects around 15 per cent
net sales growth expressed in USD and an
operating margin of around 10 per cent
under the following macro-economic
assumptions:
• Oil prices (Venezuelan basket) will
remain above USD 30 per barrel and will
thus support Venezuela’s foreign
reserves and economic growth.
• The country’s GDP will grow by 5 per
cent (17 per cent in 2004).
• The VEB/USD exchange rate of 1,920
at the beginning of 2005 will end the
year at 2,150, implying a devaluation of
10.7 per cent. The current foreign
exchange control regulations will
remain in force.
• Inflation will reach 21 per cent, mainly
fuelled by devaluation.
Annual Report 2004
• Corporate lending rates will be an
average of 18 per cent per annum.
<20
>21
Market Presence (Venezuela)
In line with what EAC has previously
stated, a larger supply of pigs to the
market is expected to normalise pig
prices, which reached historical highs in
2004. This will bring down the cost of
goods sold and improve margins in EAC
Foods’ meat processing activities, but
conversely reduce earnings contribution
from the two pig farms. As both farms
were previously minority interests, this
conversion of profit for the 100 per cent
owned meat-processing activities would
reduce profits attributable to minorities.
Valencia
Maracaibo
Barquisimeto
Caracas
Main office
Barcelona
Cagua
Quibor
Calabozo
Ciudad Bolivar
Furthermore, intensified competition
resulting from greater supply of pigs is
expected to put more pressure on
margins.
production
factory/distribution centres
sales/distribution centres
Foods
DKK million
Net sales
Operating profit
Total assets
Invested capital
2004
2003
2002
1,250
161
767
228
499
31.1
146
-43
12.9
1,993
1,133
176
851
232
538
34.0
14
17
15.5
2,133
1,422
98
786
158
497
16.5
143
-53
6.9
2,313
“Purchasing is a difficult job but
EAC makes it easier by stocking
a wide range of specialty ingredients
for personal care products.”
Nitthaya Viriyaprapaikit
35 years old,
Purchasing Manager, Personal Care
Annual Report 2004
<22
>23
With 24 per cent net sales growth
in local currencies, EAC Industrial
Ingredients out-performed its
objective of growing at double the
rate of GDP growth in 2004. Strong
sales growth in Indonesia and the
Philippines and a further broadening
of product assortment were the
key factors.
As a regional distributor for industrial
ingredients in South East Asia,
EAC pursues a role as an industry
specialist. The objective is to achieve
market leadership through provision
of a broad offering of appropriate
ingredients supported by
comprehensive technical and
commercial services.
In addition to its distribution activities,
EAC Industrial Ingredients has
investments in various associates in
Thailand, which relate directly and
indirectly to the construction industry.
Major Services
EAC Industrial Ingredients offers the
manufacturing industry an effective
and cost efficient route to market within
specific industry and product segments
where the Company has an established
position. The service is offered on a
regional basis covering South East Asia
as well as on a dedicated country basis.
Supply chain planning is a strong
competitive factor. During 2004, a central
supply channel was established, and
EAC Industrial Ingredients is now capable
of consolidating its purchases from key
partners for subsequent redistribution
on a just-in-time basis to individual
markets. This initiative aims to lower
the costs of the supply channel through
the placement of more economical order
sizes with suppliers, while improving
customer fulfilment, despite reduced
inventory holdings.
Market Development
EAC Industrial Ingredients achieved an
overall growth in net sales in local
currencies of 24 per cent, well ahead
of its objective relative to national GDP
in its main markets. The rate of growth
was augmented by price increases, and
it is conceivable that customers increased
their inventories to protect future costs.
In Thailand, a growth rate of 13 per cent
was achieved, compared with a growth
in GDP of about 6.2 per cent. Significant
growth was attained in sales of nickel
and nickel chemicals to plating industries,
which offset the loss of supply chain
services provided during 2003 to a
multinational account. Gross profits
did not grow fully in line with net sales,
partly due to difficulties in passing on
price increases and partly due to the
fact that some of the net sales growth
was achieved in commodity products
with lower margins. Nevertheless,
increased sales made up for lower
margins.
Financial Result
Strong growth was registered in all
markets as net sales increased by 24 per
cent in local currencies. Substantial
progress was achieved in Indonesia and
the Philippines through increased market
penetration and new product
representation. Overall performance
benefited from customers purchasing for
inventory in anticipation of price increases,
just as net sales growth was amplified by
some low-margin spot sales.
Net sales in the other regional markets
increased by 39 per cent overall, driven by
exceptional net sales growth in Indonesia
and the Philippines. These markets are in
a phase of rapid growth, as sales
penetration is improving and the product
assortment is expanding. Net sales in
Vietnam continued to develop on the basis
of a strong economy, although largely
through organic growth. Net sales in the
newer markets of Malaysia and Singapore
are starting to progress, but have yet to
reach a meaningful level. The focus in
these more mature markets remains on
organisational development and, as the
skill base is enhanced and the company’s
reputation is established, sales are
expected to develop.
Results in DKK were still affected by
the depreciating USD, to which local
currencies are highly correlated, but to
a lesser extent than in 2003. Thus, net
sales of DKK 750m were 15 per cent
ahead of the previous year.
Operating profit increased by 22 per cent
in local currencies (14 per cent in DKK),
in line with net sales growth. The joint
venture investments continued their
substantial contribution to operating
profit, generating earnings growth
comparable to that of the distribution
business in Thailand.
Assets
Assets are mainly deployed in working
capital, joint venture investments and
in properties in Thailand, including the
Bangkok distribution centre. Total assets
increased by DKK 19m primarily due
to investments in working capital and a
warehouse in Indonesia. The increase
was partly offset by dividends paid
and translation effects from the
strengthening DKK.
Annual Report 2004
<24
>25
Financing and Cash Flow
Strong cash flow from operations
was augmented by dividends from
associates and other payments
from investments.
The long-term viability of the business
depends upon the ability to provide an
effective channel to market for industrial
ingredient products. Business philosophy,
commercial and technical skills, customer
relationships, and economies of scale are
all key success factors.
As a service provider, EAC Industrial
Ingredients depends upon the skills and
drive of its people. Staff development and
retention are therefore critical factors in the
execution of its strategy.
Risk Profile
Operating Risk
As an agent or distributor for leading
international manufacturers, EAC
Industrial Ingredients key responsibility is
to increase or maintain its relationships by
providing value added services such as
geographical coverage, scale and
technical expertise.
Product and Commodity Risk
The product portfolio consists of a wide
variety of materials, ranging from
commodities to specialties. Overall, the
assortment is skewed towards specialty
products, making inventory values less
sensitive to replacement cost.
The activities of EAC Industrial
Ingredients, comprising importation,
storage, handling and delivery to
customers, may directly affect the
external environment.
Economic and Political Risk
The main business activity is to provide
raw materials to a broad range of
industries that serve both domestic and
export markets. While such diversification
may cushion political and economic
fluctuations, business growth remains
dependent on the overall economic
progress and export competitiveness of
the countries in which EAC Industrial
Ingredients operates.
The environmental measures taken by
EAC Industrial Ingredients are based on
suppliers’ Material Safety Data Sheets.
These instructions provide appropriate
information on the environmental and
health risks posed by individual products
and how to handle an incident, such as a
spillage or direct exposure to materials.
The Bangkok distribution centre is built for
safe handling and storage of chemicals.
The investments in manufacturing
associates in Thailand are, for the most
part, directly and indirectly related to the
local construction industry.
Product stewardship activities to ensure
that products are also correctly stored and
handled by customers contribute to the
mitigation of risk.
Annual Report 2004
Outlook for 2005
Note that 2004 comparative figures for
the outlook section are restated to
reflect IFRS compliance, as discussed
on pages 58-59.
<26
>27
Market Presence
EAC Industrial Ingredients expects that
pricing of both chemical specialties and
commodities will stabilise in 2005, following strong volatility through the
greater part of 2004. The volatility was
caused partly by the cost of oil and
partly by an imbalance in supply and
demand leading customers to build
inventory in the later part of 2004. It is
the expectation that customers will
reduce their inventories during Q1
2005, and consequently a lower rate of
growth is expected in the business. The
associates are expected to sustain positive development, in line with the economic growth in Thailand.
Overall, EAC Industrial Ingredients
expects a reduced rate of growth of
around 5 per cent in local currencies
over the high level achieved in 2004,
due in parts to stabilising prices and in
part to the expected readjustment of
customer inventories and an operating
margin that is slightly higher than the
8.5 per cent achieved in 2004 (excluding profit from associates). In line with
IFRS, profit from associates will be
reported net of tax and included in
finance items. Profit from associates
is expected to be at a similar level to
2004 (DKK 30m.).
DKK million
2004
2003
2002
Net sales
Operating profit
Total assets
Invested capital
750
106
452
147
269
41.1
36
18
14.1
443
652
93
433
130
247
36.3
34
36
14.3
409
668
94
452
127
265
31.5
57
22
14.1
431
“Moving isn’t about transportation,
it’s about relying on strangers to
care for our personal belongings.
Santa Fe has earned our trust.”
Michelle Richmond,
31 years old,
Marketing Consultant
Annual Report 2004
<28
>29
EAC Moving & Relocation Services
achieved a 63 per cent increase in
operating profit in 2004 as the number
of relocations to Asia increased and
the demand for value added relocation
services grew.
Under the Santa Fe brand, EAC
provides office, local, domestic and
international household goods moving
services and a wide range of relocation
services. Records management
services are offered in Beijing, Hong
Kong, Jakarta, Manila and Shanghai.
General freight forwarding services
are offered in Hong Kong and China.
Santa Fe is based in Asia with eight
country operations in China, Hong Kong,
Indonesia, Japan, Malaysia, the
Philippines, Singapore and Thailand.
Services are provided to customers
elsewhere in the world through relocation
partners within the OMNI, FIDI and WRN
networks. In operation since 1980, Santa
Fe handles in excess of 17,000 relocations
around the world annually.
Market Development
Improved economic conditions in most
of Asia combined with the recovery from
SARS resulted in double-digit growth in
inbound volumes, while outbound
volumes remained at the same level
as 2003.
The value added relocation services
product line achieved solid growth both
in terms of net sales and contribution.
This growth arose from various factors.
New business arose from overseas
relocation companies who used Santa Fe
as a local services provider for their
customers. The general increase in
relocations to Asia resulted in a larger
customer portfolio as well as increased
demand from existing customers.
The records management business
achieved double-digit growth in volume
terms, despite the loss of one major
account in Hong Kong at the end of 2003.
The web-based platform introduced at
the end of 2003 to improve the service
level has been well received in the
marketplace.
General freight forwarding activities
achieved double-digit growth in terms of
volume and profitability due to a healthy
growth in exports out of China.
Annual Report 2004
<30
>31
“No matter how precious one’s
possessions are, a successful
relocation takes more than careful
packing. Santa Fe helped us to find
a home in Shanghai and is advising
us on cross-cultural matters.”
Karen Hall,
40 years old,
Chief Financial Officer
The operations in China, Hong Kong,
Japan, the Philippines, Singapore and
Thailand performed well ahead of last year
while Indonesia performed at the same
level. The operation in Malaysia performed
below the level of 2003.
As part of the Santa Fe group’s quality
objectives, the Bangkok, Beijing and
Shanghai operations achieved ISO 14001
(environment) certification joining the units
in Hong Kong, Jakarta and Singapore. In
the second half of 2004, Santa Fe
Philippines joined the other Santa Fe units
in becoming a member of OMNI, a global
network of first class household goods
moving companies.
Assets
Overall, total assets increased by DKK
13m to DKK 196m. Total assets increased
as a consequence of increased cash
deposited with EAC Ltd. A/S as well as
the investment in warehouse and office
facilities in Beijing.
The major investment of 2004 was the
construction of the warehouse and office
complex in Beijing.
Financing and Cash Flows
Working capital employed decreased
by DKK 25m to DKK 31m, as a result
of a reclassification of trade
accounts payables.
The Beijing operation moved into its new
warehouse and office complex at the end
of August 2004. The warehouse has a
storage capacity of over 13,000 cubic
meters with a dedicated records
management facility. The 2,308 square
meter office building includes staff
housing, which is important for staff
retention.
Cash flow from operating activities
increased due to the increase in
operating profit.
Financial Result
Net sales reached DKK 468m,
0.5 per cent higher than 2003 in DKK,
but 9 per cent higher when measured
in local currencies.
A strong brand helps to secure new
business, maintain customer loyalty and
provide a sound basis for entering new
markets and offering new services. It is
sustained by the employees’ dedicated
and unrelenting commitment to quality
and customer service, and underpinned
by comprehensive quality procedures and
operational processes.
The operating profit improved by 63 per
cent to DKK 26m, corresponding to an
operating margin of 5.6 per cent.
The Santa Fe brand and its marketleading position constitute key intellectual
capital resources and are also major
drivers of future success.
Santa Fe strives to attract and retain the
best talent available. Each year, staff
members are chosen to participate in
industry seminars, training programmes
and the Santa Fe Internal Exchange
Programme, which allows them to
experience operations at a different Santa
Fe location. The objectives are to
encourage the sharing of best practices,
educate key staff via international
experience and foster long-term loyalty.
As a leader in innovation, Santa Fe
continues to take advantage of the
opportunities provided by new
technologies to provide better customer
service, reduce costs and manage
resources more efficiently. Innovations
include interactive web-based records
management, tenancy & expense
management systems and Move
Manager software.
Risk Profile
Foreign direct investment (FDI) in Asia
drives the relocation business.
Relocations to China have increased as
the economy and FDI into China have
continued to grow. The trend is expected
to continue in the coming years as China
further implements the WTO agreement.
Elsewhere, investment is expected to
increase in tandem with improvements in
the global and regional economies, and in
increased political stability in countries
such as Indonesia and the Philippines.
Environmental aspects influence the
operations of Santa Fe. External impacts
comprise emissions from transportation
activities and recycling in connection with
packing activities. Santa Fe follows the
environmental objectives under ISO
14001 including the reduction of
emissions through the use of low emission
engines, material reduction programmes
and recycling.
Consideration of environmental aspects
of business influences Santa Fe’s
reputation, which contributes to a
competitive advantage.
Outlook for 2005
Net sales in local currencies are expected
to grow by around 6 per cent over 2004.
The operating margin is expected to be in
line with 2004 (5.8 per cent).
This is based on the assumption that
Foreign Direct Investment will continue to
flow into China resulting in a continued
increase in international relocations. It is
assumed that relocations to the main
markets of Hong Kong, Japan and
Singapore will continue to rise during the
year as a result of improved economic
conditions in the US.
The records management business in
Hong Kong is expecting more competition,
but not any significant price erosion.
The growth in the higher margin value
added relocation services product line that
was experienced in 2004 is expected to
continue in 2005.
Annual Report 2004
<32
>33
Market Presence
Shenyang
Beijing
Tianjin
Qingdao
China
Nanjing
Japan
Dalian
Tokyo
Shanghai
Chongqing
Guangzhou
Xiamen
Shenzhen
Hong Kong
Shekou
Thailand
Bangkok
Manila
Philippines
Kuala Lumpur
Malaysia
Singapore
Indonesia
Jakarta
Surabaya
Balikpapan
Denpasar
offices
DKK million
Net sales
Operating profit
Total sssets
Invested capital
2004
2003
2002
468
26
196
31
84
30.6
28
-18
5.6
1,077
466
16
183
56
86
17.5
20
-13
3.4
982
499
15
204
61
97
14.4
4
-11
3.0
992
Other Activities and
Disposed Businesses
EAC TRADING
EAC HOLDINGS (Malaysia)
Activities
EAC Trading, headquartered in
Copenhagen, is involved in the project
management business and supplies
services to projects financed by loans
from, among others, the Nordic
Investment Bank, Danida and Danish
commercial banks.
Activities
Following the disposal of the technical
trading activity in Singapore and EAC
Transport Agencies Malaysia in early May,
the activities of EAC Holdings (Malaysia)
consist of a portfolio of properties, mainly
office buildings and warehouses located
in Petaling Jaya on the outskirts of
Kuala Lumpur.
In addition, EAC Trading has a 34 per cent
investment in a wool company in India,
Global Wool Alliance Ltd.
Results
The results for the year comprise the
project management business, which
showed a considerably better result
compared to last year, following the
execution of projects in Turkey and the
Dominican Republic.
Outlook for 2005
EAC Trading expects positive results in
2005 based on existing project
management contracts, however, not at
the same level as in 2004.
WOOL
In 2003, the results were affected
negatively by the winding down of the
wool business through liquidation of
inventories. This resulted in a nonrecurring operating loss of DKK 17m,
which included a share of loss from the
investment in Global Wool Alliance Ltd of
DKK 5m. As such the 2004 results show a
considerable improvement, an operating
loss of DKK 3m. It is anticipated that the
Wool business will be completely wound
down during 2005.
Results
The results from the property portfolio
were lower than 2003 due to lower
rental income.
Outlook for 2005
The activities are expected to operate at
a minor loss in 2005 as a result of lower
rental income and higher fixed costs.
Annual Report 2004
<34
>35
Other Activities
DKK million
2004
2003
2002
Net sales
96
72
127
Specified as follows:
EAC Trading
Other – (Wool)
11
85
4
68
21
106
6
-17
15
7
2
-3
3
-20
5
5
5
Total assets
438
444
593
Working capital employed, end-of-period
-20
-36
-21
42
45
62
13.8
-32.1
5.2
6.3
-23.6
11.8
10
9
12
DKK million
2004
2003
2002
Net sales
0
29
1,612
29
1,238
374
-1
4
13
-1
4
-8
16
6
-1
Operating profit/loss
EAC Trading
EAC Holdings (Malaysia)
Other – Wool and properties
Invested capital
Return on invested capital (% p.a.)
Disposed Businesses
Technical
Operating profit/loss
Technical
Fibertex
Other (Timber and Plumrose Germany)
The operating loss registered under this segment for 2004 is mainly related to the divestment of
the activities in Malaysia under EAC Holdings (Malaysia).
Annual Report 2004
Financial Report
38 Finance and Treasury Risks
42 Shareholder Information
46 Corporate Governance
48 Social, Ethical and Environmental Responsibility
50 Financial Report 2004
58 International Financial Reporting Standards (IFRS)
62 Accounting Policies
69
70
71
72
74
75
77
95
Income Statements
Balance Sheet, Assets
Balance Sheet, Equity and Liabilities
Statement of Changes in Shareholder’s Equity
Consolidated Statement of Cash Flow
Segmental Information
Notes
Definitions
96 Subsidiaries, Branches and Associates
98 Supervisory Board, Executive Board and Operations Executive Group
Management Statement & Auditors’ Report
<36
>37
Finance and Treasury Risks
Market Risks and Risk Management
Given the international scope of EAC’s
business activities, the Group is exposed
to financial market risk, that is, the risk of
losses as a result of adverse movements
in currency rates, interest rates, securities
and/or commodity prices. It also
encompasses financial counter-party
credit risk and funding risk.
EAC’s market risk management activities
are centrally co-ordinated by EAC’s Group
Treasury within a policy framework
approved by the Supervisory Board. The
risk management procedures are focused
on risk mediation and minimisation, in
particular on reducing the volatility of the
Company's cash flows in local currency
and, to some extent, shareholders’ equity
in DKK.
EAC’s Group Treasury manages the
market risks of the Parent company and
sets treasury policies for each business
unit. The business unit manages
operational market exposures according
to these policies.
Currency Risk
EAC’s business activities are conducted
predominantly in Asian currencies, which
are highly correlated with the USD.
Exceptions to this general rule are the
Danish subsidiaries, where the cost base
is the DKK, and EAC’s Group Treasury
activities that hedge back to the DKK.
Another exception is EAC Foods in
Venezuela where business is conducted in
VEB. In order to minimise the currency
risk, EAC seeks to match the currency
denomination of income and expenses
and of assets and liabilities on a countryby-country basis. Consequently EAC’s
functional currency varies from country to
country and is typically different from the
reporting currency of the listed entity (EAC
Ltd. A/S), which is DKK. The objective of
EAC’s currency management strategy is
to minimise currency risks relating to the
functional currencies, i.e., to protect profit
margins in local currency.
The majority of EAC’s excess liquidity
is held in DKK and is managed by
Group Treasury.
Currency Transaction Risk
EAC is exposed to currency transaction
risks in connection with cross-border
purchases and sales of goods and
services, and in connection with cash
flows relating to financial transactions and
dividend flows. It is EAC's general policy
to hedge all transaction exposures as and
when they occur. When assessing
exposures, all contracted exposures and
projected cash flows, typically for periods
of between three and six months forward,
are taken into account.
Currency Translation Risk
EAC is exposed to currency translation risks
relating to its net investments in overseas
group companies, to receivables and
payables in foreign currencies, and to the
consolidation and conversion risk of the
financial statements of overseas Group
companies into DKK for reporting purposes.
It is EAC’s general policy to only hedge
translation exposures that have a potential
direct adverse impact on the Group’s cash
flow. Consequently, EAC does not hedge
its net investments in Group companies
abroad, nor does it hedge the accounting
or consolidation exposures associated
with translating local currency
denominated financial statements into
Annual Report 2004
EAC Group
Net Sales by Currency
At 31 December 2004, the balance sheet
related USD risk was DKK 82m in the
event of a 10 per cent drop in the value
of the US dollar, assuming stable
correlations. This is well below the limit
of DKK 150m approved by the
Supervisory Board. As illustrated on
the right, the CNY, MYR, THB and USD
are the main contributors to EAC’s
balance sheet related currency risk.
42%
40
36%
30
VN
D
20
24%
21%
10
MYR
8%
0
VEB
-10
-4%
-20
VEB
THB
CNY
MYR
VND
HKD
OTH
Y
CN
THB
Balance Sheet Related Currency Risk
The USD translation risk associated with
EAC’s investments in companies outside
of Denmark, predominantly USD-related
countries in Asia, is managed within a limit
approved by EAC’s Supervisory Board.
The Company’s funding portfolio and
financial derivatives are employed for this
purpose. The USD risk is assessed using
a statistical correlation model. Any
currency exchange differences resulting
from investments in Group companies
and hedges of such are considered equity,
in accordance with International
Accounting Standards (IAS) 39.
50
D
HK
Therefore EAC’s financial performance
measured in DKK tends to be directly
impacted by changes in the USD/DKK
exchange rate, given that EAC conducts
most of its business activities in USD
related currencies. When measured
in local currency, however, currency
exposures are minimised and the profit
margins are protected to the extent
possible through hedging strategies.
The underlying currency denomination
of EAC’s 2004 net sales and net profit
are shown on the right.
Net Profit by Currency
OTH
DKK. It is not deemed that hedging such
risks adds value over time.
<38
>39
Correlation
with USD
Jan
VEB
THB
CNY
MYR
SGD
100
100
100
100
100
28%
20%
19%
11%
6%
4%
12%
-27%
-30
Currency
(%)
CNY
MYR
SGD
THB
VEB
VND Others
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Avg
100
86
100
100
98
32
87
100
100
85
-2
98
100
100
90
100
90
100
100
89
100
49
100
100
59
100
83
100
100
85
100
86
100
100
93
100
70
100
100
94
100
95
100
100
74
100
98
100
100
96
100
82
100
100
100
86
85
100
100
89
Figures above in percentage
Income Statement Related
Currency Risk
Balance Sheet Related
Currency Risk
Refer to Note 27 page 84-86
Refer to Note 27 page 84-86
200
400
150
300
100
200
50
100
0
0
-50
-100
-100
-200
-150
-300
-200
-400
Currency
(DKK million)
CNY
MYR
SGD
VEB
USD Others
Currency
(DKK million)
CNY
MYR
THB
Investment
USD
Others
Hedge
The adoption of IFRS from 2005 onwards
will change the way that net investment
in EAC Foods is recognised in the Group
accounts, from being recognised at
historical USD rates to being recognised
at local currency (VEB) rates.
Consequently, an increased adverse
impact on the Group’s shareholders’
equity must be expected from any future
VEB depreciations.
Economic Currency Exposure
Economic currency exposures are
managed from a strategic perspective and
significant currency mismatches between
revenue and expenses occur in two of
EAC’s core businesses: EAC Nutrition and
EAC Industrial Ingredients. Please refer
to the business reports for further detail.
Currency Risk Management
Methodology
The profit and loss related currency risks
of the EAC Ltd. A/S are monitored using
the value at risk (VAR) method. Subsidiary
currency and balance sheet-related risks
are monitored using the net position
method. At the end of 2004, the currencyrelated VAR of EAC Ltd. A/S was DKK
1.5m. EAC’s Group Treasury
is authorised to operate within a VAR
risk limit of DKK 5.0m.
Value at Risk (VAR)
The VAR is the potential loss at risk
per day from changes in financial
market conditions. The risk is estimated
statistically based on historical prices and
volatility patterns. This risk assessment
methodology is generally accepted and
used by major financial institutions. EAC
bases its calculations on two months of
historical data and a 99 per cent
confidence level.
Interest Rate Risk
EAC is directly exposed to interest rate
fluctuations in connection with its funding
and liquidity portfolio. The risk is managed
by matching the duration of assets and
liabilities and by ensuring a smooth
rollover profile. Derivative instruments
such as forward rate agreements and
interest rate swaps are also used to
manage the net position. EAC is also
indirectly exposed to the impact of interest
rates on the macro economies in the
countries where EAC does business.
This risk is typically managed by fixing
interest rates on the debt portfolio for
up to five years ahead.
EAC uses the duration method to monitor
the overall interest rate exposure of the
Group. The duration methodology
assumes that interest rates move parallel
across the yield curve and across
currencies. EAC considers any position
with a duration of less than six months
to have zero interest rate risk.
At the end of 2004, the combined interest
rate risk of the Group was DKK 0.9m in
the case of a 1.0 percentage point change
in interest rates.
Counter-Party Credit Risk
EAC is exposed to the risk that financial
counter-parties may default on their
obligations towards EAC. This risk is
managed by having maximum exposure
limits on each financial counter-party and
by requiring each counter-party to have a
satisfactory credit rating from one of the
established rating agencies. The current
minimum Moody’s rating required is a
short-term rating of P-2 and a long-term
rating of A3. In countries where this is not
achievable, e.g., Venezuela, the net risk
(net of debt and deposits) is managed to
remain negative.
Commodity Risk
Please refer to the business reports
for information.
Liquidity and Funding Risks
EAC is exposed to the risk that sufficient
funds may not be available should the
Company’s cash flows suddenly and
unexpectedly develop adversely or if new
funding is not forthcoming for refinancing.
EAC manages this risk on the basis of
three different cash flow forecasting tools:
one covering a rolling three-month period,
a second covering a one-year period and
a third model covering a five-year period.
The policy is to ensure that the Group has
sufficient funds to meet all requirements
for a minimum period of two years, i.e.,
a minimum of 120 per cent of peak
borrowing requirements.
At the end of 2004, EAC continued to
have a very low financial gearing and
ample cash available, hence the Group’s
liquidity/funding situation was
comfortable. The Group had net cash
(liquid funds less debt) at the end of 2004
of DKK 908m and total financial resources
of DKK 2,073m were available, well in
excess of the peak borrowing requirement
indicated by the cash flow projections.
Annual Report 2004
<40
>41
Interest Rate Sensitivity
(Parent Company)
Amounts
Duration, Years
Risk
Money market deposits (DKK million)
450
0.1
Securities
Commercial papers
Mortgage bonds
90
201
0.2
0.8
1.7
Loan, EAC Ltd. A/S floating (USD million)
Loan/swap 8.4.2004 (USD million)
Loan/swap 8.4.2004 (USD million)
70
33
-33
0.2
0.2
1.2
-0.4
536
0.2
273
0.1
27
1.3
Interest Rate Sensitivity (Subsidiaries)
Money market deposits (DKK million)
Borrowings with durations
of less than 6 months
Borrowings with durations
of more than 6 months
Net interest rate risk (Group)
-0.3
0.9
Financial Resources
DKK million
2004
2003
Bonds
292
304
Cash & cash equivalents
986
1,185
1,278
-286
1,489
-357
Net liquid assets
Long-term debt
992
84
1,132
-144
Net interest bearing cash
908
988
Liquid funds
Shares
Undrawn current and
non-current credit facilities
1,278
1,489
41
795
834
Financial resources
2,073
2,364
Liquid funds
Short-term debt
Shareholder Information
A Shareholder Value-Driven Company
EAC aims to generate a consistent and
stable return over time on the invested
capital in excess of a market-based
Weighted Average Cost of Capital.
In pursuing this goal EAC follows the
principles of the EVA® concept in
connection with investment and
divestiture planning as well as business
target setting.
on an investment in the KFX and
29 per cent on the KFMX.
A Unique Investment Opportunity
The EAC share offers investors a direct
exposure to the high growth economies
of Asia through its Nutrition, Industrial
Ingredients and Moving & Relocation
Services businesses, including the major
population bases of China (Nutrition and
Moving & Relocation Services) and India
(Nutrition). At the same time investors can
rely on Danish corporate governance
standards throughout the Group. This
combination offers investors a unique
opportunity to gain exposure to some
of the most interesting economies in
the world via the Copenhagen Stock
Exchange through an investment in EAC.
Share Capital Information
EAC’s share capital consists of 20.2m
shares; no special rights are attached
to any share. At 31 December 2004,
1,774,489 shares or 8.8 per cent of the
total share capital was held in treasury;
these shares are held at zero value in
EAC’s books.
Share Price Development
The EAC share appreciated 11 per cent
in value over the year and a dividend of
DKK 3.75 per share was paid, a combined
total return of 12.5 per cent on an
investment in EAC stock at the end of
2003. In comparison, the Danish blue chip
index (KFX) appreciated 17.0 per cent and
the Danish mid cap index (KFMX) grew by
41.0 per cent.
EVA® is a registered trademark of Stern Stewart & Co.
The average annual return excluding
dividend from an investment in EAC
over the last three years amounts to
25 per cent as compared to 5 per cent
Liquidity
The EAC stock continued to enjoy good
investor interest and, as one of the most
liquid stocks in the mid cap index,
provides an attractive alternative for
institutional as well as private Danish
and foreign investors.
During 2004 the treasury stock portfolio
increased by a net total of 814,878 shares.
As part of the share buy-back
programmes a total of 1,009,978 shares
were bought on the open market. Against
that, 195,100 shares were transferred to
senior management in connection with
the exercise of share options under the
Company’s share option schemes.
The portfolio of EAC shares held in
treasury is partly used to hedge the
Group's commitment under the stock
option schemes. The total commitment
hereunder is 536,300 shares as of 31
December 2004 (note 9). The value of the
outstanding stock option programmes as
of 31 December 2004 was DKK 66.9m, of
which DKK 11.2m relates to options
allocated in 2004 (calculated using the
Cox, Ross & Rubinstein option formula).
Annual Report 2004
Dividends
EAC’s current policy is to disburse
approximately one third of annual net
earnings to shareholders as dividends.
In 2004, the Annual General Meeting
declared a dividend of DKK 3.75 per share
in accordance with this dividend policy.
EAC and the KFX & KFMX
Ownership Information
EAC stock is widely held and the
Company has no dominant shareholders.
At the end of 2004 almost 22,000
shareholders were listed in EAC's
shareholder register, representing almost
15m shares or 74.0 per cent of the share
capital. The 20 largest stockholders held
in total 37.0 per cent of the share capital,
with the twentieth accounting for
0.4 per cent.
120
<42
>43
Index
140
130
110
100
90
1.1.04
31.12.04
EAC
KFX
KFMX
Share Data
Stock closing price (DKK)
Stock high/low (DKK)
Total number of outstanding shares
Diluted number of shares
Treasury stock
Nominal value (DKK)
Share capital (DKK million)
Equity
Market value (DKK million)
Earnings per share (DKK)
Equity per share
Dividend per share (DKK)
Market value / shareholders equity
P/E ratio
2004
2003
2002
2001
2000
285.84
295/247
20,247,327
19,343,498
1,774,489
70
1,417
2,402
5,280
12.1
127.0
4.00
2.20
23.6
257.60
262/132
20,247,327
18,910,194
959,611
70
1,417
2,613
4,969
11.9
138.2
3.75
1.90
21.6
162.0
194/125
20,847,327
19,862,183
1,383,739
70
1,459
2,623
3,153
9.6
132.1
3.50
1.20
16.9
186.8
211/133
21,416,927
20,416,787
1,449,018
70
1,499
2,691
3,730
20.6
131.8
1.39
9.1
168.7
195/75
21,416,927
20,464,082
1,126,402
70
1,499
2,292
3,423
20.2
112.0
1.49
8.4
Per share ratios are calculated based on diluted earnings per share.
According to the Danish Company’s Act,
section 28, stockholders with an
aggregate amount of direct and indirectly
controlled ownership or voting rights in
excess of 5 per cent must disclose
themselves. As of 31 December 2004,
the only such shareholder was ATP (Public
Danish Pension Fund) with 7.4 per cent.
EAC encourages shareholders to register
by name in the Company’s Register of
Shares. Such registration should be made
with their bank’s securities department or
their broker. Registered shareholders will
automatically get an option to receive the
Annual Report and an invitation to the
Annual General Meeting.
Investor Relations
The basis of EAC’s Investor Relations
principles and policy is the commitment to
continually provide its stakeholders with
accurate, clear, prompt and simultaneous
information about the Company, at all
times complying with the disclosure
Exchange. Management also endeavours
to ensure that EAC remains an attractive
share with high liquidity, true and fair
market value and a stable upward trend.
During the year, EAC’s management
arranges and participates in more than
100 international presentations and
meetings with analysts and investors,
national information meetings, capital
markets days, and large-scale seminars
for investors. To help maximise
stakeholder reach EAC places emphasis
on continuously improving its on-line
presence providing the best ways for
stakeholders to easily obtain the insight
about EAC they require from the corporate
web site, www.eac.dk. To enhance EAC’s
visibility among a continually wider
audience and to meet the MidCap
disclosure requirements of the
Copenhagen Stock Exchange, corporate
presentation events and the AGM were
webcasted during 2004. Improvement of
this effective and inexpensive way of realtime communication with EAC’s
stakeholders across the globe is
continuously being explored.
For the second year in a row, EAC was
awarded for good investor relations at the
Investor Relations Conference 2004,
which was held at the Copenhagen Stock
Exchange, in the categories: Best MidCap
company and best CEO at Investor
Relations. At the IR Magazines’ annual
Nordic Awards, held at the Helsinki Stock
Exchange, EAC was awarded the IR prize
in the category: Best Danish Company
Investor Relations.
Annual Report 2004
Contact for Institutional Investors,
Analysts and the Media
Iqbal Jumabhoy
Executive VP and Group CFO
+65 6213 9006 Telephone
E-mail: ij@eac.com.sg
Questions from Private Shareholders
Should Be Addressed to
(A/S Det Østasiatiske Kompagni)
Shareholders’ Secretariat
East Asiatic House, 20 Indiakaj
DK-2100 Copenhagen Ø
Denmark
+45 3525 4300 Telephone
+45 3525 4313 Telefax
E-mail: investorinformation@eac.dk
Website: www.eac.dk
<44
>45
COPENHAGEN STOCK EXCHANGE ANNOUNCEMENTS 2004
Date
No.
Subject
05.01.2004
11.02.2004
23.02.2004
25.03.2004
06.04.2004
29.04.2004
30.04.2004
27.05.2004
07.06.2004
23.06.2004
24.08.2004
25.08.2004
08.09.2004
01.10.2004
06.10.2004
18.11.2004
14.12.2004
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
EAC concludes three-year milk powder price agreement
Devaluation of Bolivar assumed in EAC Foods’ budget for 2004
Financial Calendar 2004 & 2005 (revised)
EAC’s Preliminary Statement of Annual Results 2003
Notice Convening EAC’s Annual General Meeting
EAC performed ahead of plans in Q1
Report EAC’s Annual General Meeting
EAC’s Quarterly Report Q1 2004
EAC repurchases DKK 250 million worth of shares
EAC completes share repurchase
EAC’s Interim Report 30 June 2004
Clarification of minority interests in EAC Foods
EAC’s Capital Market days in China
Holding of Shares in Dalhoff Larsen & Horneman A/S
Profits from sale of DLH shares
EAC’s Quarterly Report 30 September 2004
Acquisition of Venezuelan feed mill
FINANCIAL CALENDAR 2005
31.03.2005
28.04.2005
26.05.2005
30.08.2005
17.11.2005
Preliminary Announcement of Annual Report 2004
Annual General Meeting at Radisson SAS Falconér, Copenhagen
Quarterly Report Q1 2005
Interim Report H1 2005
Quarterly Report Q3 2005
Corporate Governance
EAC is committed to the principles
of corporate governance, and is
implementing the recommendations of
the Copenhagen Stock Exchange – the
Nørby Committee Recommendations
(2003) – where these are relevant to the
company and will create greater value
for EAC’s stakeholders.
Information about EAC’s corporate
governance is provided in the following
sections, based on the main areas of
the recommendations made by the
Nørby Committee.
The Role of the Shareholders and their
Interaction with the Management of
the Company
EAC makes use of its web site,
www.eac.dk, for communication to its
stakeholders, and is exploring the further
use of information technology to improve
interaction between the company and
the shareholders.
Any shareholder is entitled to have specific
business transacted at the general
meetings, provided he submits a request
in writing to the Supervisory Board
sufficiently early to permit its inclusion
in the agenda of the general meeting.
The Role of the Stakeholders and their
Importance to the Company
EAC’s management operates and
develops the Group with due
consideration of its stakeholders, and
provides an avenue for dialogue through
the EAC web site. Internal dialogue with
employees is being improved through
an internal intranet.
On an annual basis, the Supervisory Board
reviews and adopts the Social, Ethical and
Environmental Responsibility Policy,
which is addressed on page 48-49
of this report.
EAC emphasises adherence to its Values
stated on page 1 of this report and the
supporting leadership practices.
Openness and Transparency
EAC demands openness and honesty
in all aspects of its activities.
EAC’s management regularly and at least
annually reassesses its policies and
procedures to ensure that disclosure
requirements are met. Similarly,
management reviews EAC’s investor
relations policy, which, among other
factors, is based on the principle of
equal treatment of stakeholders,
regardless of size or location.
EAC releases Annual, Half Year and
Quarterly Reports and, in connection with
such releases, arranges presentations to
the media and financial analysts. These
presentations are available to all
stakeholders on the EAC web site.
Financial statements are presented in
accordance with the provisions of the
Danish Financial Statements Act, Danish
accounting standards and the general
Exchange on the financial reporting of
listed companies. All relevant financial
statements, current and historical,
can be found on the EAC web site.
Financial statements for 2005 will be
prepared in accordance with IFRS, as
discussed on page 58-59.
Annual Report 2004
<46
>47
The Tasks and Responsibilities of the
Supervisory Board
The Supervisory Board formulates and
decides on the vision, strategic focus and
investment policy for the EAC Group.
The present members of the Supervisory
Board that are elected by the shareholders
are independent of EAC and do not have
interests in EAC which conflict with the
interests of the shareholders.
The tasks and responsibilities of the
Supervisory Board are specified in
the Rules of Procedure for the Supervisory
Board, which are updated annually and
are in line with the recommendations
made by the Nørby Committee.
The recommendation to restrict length
of service on the Board is not considered
relevant to the Supervisory Board’s ability
to act in the best interests of EAC and
its shareholders.
Detailed working procedures for approval
of plans and budgets are established
and reviewed.
Meetings of the Supervisory Board are
held at least on a quarterly basis; a twoday conference is held annually at which
the Supervisory Board reviews strategic
issues and plans.
The Chairman and the Group auditors
hold at least one meeting per year to
discuss events and audit matters arising
in addition to the annual statutory
meeting between the Group auditors
and the Supervisory Board.
Composition of the Supervisory Board
The members of the Supervisory Board
have a broad spectrum of business
knowledge, commensurate with EAC’s
core activities and geographical range.
The Supervisory Board comprises not
less than five or more than eight members
elected by the shareholders for a term
of one year. In addition the employees
of EAC elect members to the Board
in accordance with the Danish
Companies Act.
Remuneration of the Supervisory Board
and the CEO
Board fees of the Supervisory Board and
the salary of the CEO are disclosed in note
8 to the financial statements on page 79
of this report.
Share options are not offered as part of
the Supervisory Board’s remuneration.
Details of the share option schemes for
the Operations Executive Group and
certain other executives are included
under note 9 in the financial statements
on pages 80-81 of this report.
A portion of the remuneration of the
management and employees of EAC
is dependent on the economic result
of the EAC Group as well as on
individual performance.
Risk Management
Risk management by the Supervisory
Board includes regular review of EAC
Group performance against plan and
discussion with the Operational Executive
Group about ongoing risk assessments.
The Company has established detailed
crisis management procedures to deal with
the operational risks of the Group. The
Supervisory Board reviews current
insurance arrangements on a regular basis.
Social, Ethical and
Environmental Responsibility
In EAC, we acknowledge our corporate
social, ethical and environmental
responsibility to the communities in which
we operate. We take these responsibilities
seriously and aim to incorporate this
attitude in our general behaviour, our way
of doing business, how we produce our
products and the services we market
and deliver.
Society
EAC is a commercial enterprise with the
principle task of creating long-term added
value for our stakeholders through the
pursuit of good business opportunities in
a legitimate and proper fashion. Our roots
in Asia go back to the late 1800s. Always
an international company, EAC has for
over 100 years given employment to
many thousands of people in more than
100 countries.
EAC is not a political organisation. We do
not take it upon ourselves to be involved
in processes to change governments or
systems that we, or others, may consider
inappropriate. We have demonstrated
our commitment to these principles by
providing employment as best we can
during nationalisation and revolution.
Our role in society is to provide a living
wage and benefits to our staff to enable
them to develop professionally and as
members of their societies. In this way
we contribute positively to the economic
growth and international engagement of
the countries in which we operate. This,
in our experience, rather than boycotts
and isolation, will lead to a deeper and
broader interest in the democratic process
and the promotion of improvements of
human rights.
Our Employees
We feel a strong responsibility towards our
employees in EAC and their right to earn a
living for their families. All our businesses,
wherever they operate, offer healthy and
safe working conditions on par with the
best business practices in each country.
Health and safety considerations are
integrated into our planning and decision
making processes. We also strive to
provide a motivating, challenging and
stimulating working environment, where
employees grow, develop, contribute
and enjoy working with the company.
We are of the strong opinion that our
activities are not, and cannot be,
used to perpetuate or extend any system
of forced, compulsory or child labour.
EAC totally opposes these types of abuse,
and supports the UN Convention on the
Rights of the Child (UNCROC) Article 32.
EAC is an equal opportunity employer. We
do not tolerate discrimination on the basis
of race, nationality, sex or religion, and we
support the Universal Declaration of
Human Rights Article 2.
We respect the right to join legal trade
unions, and we support the Universal
Declaration on Human Rights Article 23 (4)
and the convention on Freedom of
Association and Protection of the Rights
to Organize (adopted 9 July 1948).
Annual Report 2004
The Environment
We are dedicated to ensuring that
environmental considerations have a high
priority in the development, production
and marketing of products and services.
To make this commitment operational,
we pledge to:
• Continuously assess and seek to
reduce the impact of our operations
on the environment.
• Constantly improve energy
efficiency and limit consumption
of natural resources.
• Ensure that health, safety and
environmental considerations are
integrated into our planning and
decision making processes.
• Train and motivate our employees
to take responsibility for and actively
participate in environmental efforts.
• Meet or exceed applicable regulatory
requirements wherever we conduct
our operations.
• Continuously seek to improve our
processes and production facilities
in order to be able to set new standards
in our markets when possible.
<48
>49
Legislation and Codes of Ethics
It is our policy to adhere to the relevant
legislation of the countries in which we
operate and/or to recognised international
codes that may be applicable to business
areas that we cover. This includes the
World Health Organisation 1981
International Code of Marketing of BreastMilk Substitutes or prevailing country
codes of practice for these products,
where they exist. We have a clear policy
of observing recognised international
regulations in trade policy matters.
Fulfilling Our Responsibilities
Fulfilling these responsibilities requires
a commitment from all persons in the
EAC Group.
This commitment is secured by the
managers of each of our businesses,
who are responsible for ensuring that
our corporate policies are implemented
effectively in the different cultures and
markets where we operate.
Financial Report 2004
Exchange Rate Effects
Practically all of EAC Group’s net sales are
generated in USD and USD-related
currencies, as are a significant part of
costs. The continued weakening of the
USD and USD-related currencies towards
the DKK during 2004 therefore had a
significant effect on the financial results
expressed in DKK and in the comparison
to 2003. The average rate for USD/DKK
depreciated by 9 per cent to 598.35
compared to 2003. The year-end
exchange rate for the USD/DKK was
546.76.
Income Statement
Net Sales
Strong growth for all EAC’s strategic
businesses pushed growth in net sales
measured in underlying currencies to 18
per cent. Despite the depreciation of the
USD, net sales expressed in DKK showed
a growth of 8 per cent.
In each quarter in 2004, net sales growth
for the Group exceeded the
corresponding period the previous year by
double-digit percentages, when adjusted
for currency fluctuations. For Q4, the
growth was above expectations; net sales
grew more than 20 per cent in local
currencies versus Q4 2003 and fuelled
better than expected results for the Group.
The Asian region accounted for 70 per
cent of the Group’s net sales and
Venezuela, for most of the remaining part.
In 2004, net sales generated in Denmark
were DKK 96m, 2 per cent of the Group’s
net sales. Net sales growth in Asia was
double-digit at 16 per cent in local
currencies and 7 per cent in DKK. Thailand
is still proportionally the largest country in
Asia measured by net sales, with 29 per
cent of the Group’s net sales in Asia, and
achieved growth of 13 per cent in local
currency. China, the second largest
contributor at 27 per cent, achieved
growth of 24 per cent in local currency.
EAC Nutrition achieved net sales of DKK
1,900m, in line with expectations, a growth
of 17 per cent measured in local
currencies. The strong growth in net sales
was led by China, with an overall growth of
23 per cent in local currencies (including
growth of more than 30 per cent in Dumex
branded products), and by Thailand,
where despite a relatively stagnant
market, Dumex grew by 14 per cent. The
growth rate in net sales for EAC Nutrition in
H2 was above 20 per cent, driven by
significant advertising and promotion
spending supporting the Premium GUM
products in all main markets. The new
operations in the Philippines and India
continued to show high double-digit
growth, albeit from a modest absolute
level.
EAC Foods achieved net sales of DKK
1,250m, which represented a growth of 10
per cent in DKK and 21 per cent in USD
from 2003, when the disposed business in
Ecuador (Ecuadasa) was included for nine
months. EAC Foods in Venezuela
achieved a high double-digit growth of 31
per cent in USD and 19 per cent in DKK,
driven by focused advertising and
promotion activities throughout the year
combined with successful price increases
above inflation. An overall volume growth
of 12 per cent over 2003 and the
consolidation of market shares in different
segments confirmed the market-leading
position of EAC Foods.
Annual Report 2004
EAC Industrial Ingredients continued to
deliver substantial growth in net sales and
grew 24 per cent over 2003 in local
currencies and 15 per cent in DKK to DKK
750m (DKK 652m). The main market of
Thailand achieved double-digit growth.
Several of the regional markets exceeded
expectations for growth, resulting in a
strengthening of the regional platform for
EAC Industrial Ingredients. The regional
markets outside Thailand accounted for
50 per cent of net sales compared to 45
per cent in 2003. Following the rising oil
prices, customers increased inventories to
cushion against future price increases
adding impetus to EAC Industrial
Ingredients’ sales in Q4.
EAC Moving & Relocation Services grew 9
per cent measured in local currencies. In
DKK net sales were DKK 468m (DKK
466m). The main markets of Hong Kong
and China, which account for 65 per cent
of net sales, both achieved double-digit
growth following a strong growth in
inbound relocations, whereas growth
rates in Thailand and Singapore were
slightly lower.
Income Statement
DKK million
2004
2003
Net sales
Cost of sales
4,464
2,879
4,116
2,658
Gross Profit
Share of profit before tax in associates
Selling and distribution expenses
Administrative expenses
Amortisation of goodwill
Other operating expenses
Other operating income
1,585
46
919
309
16
12
35
1,458
34
886
307
19
18
105
Operating profit
Financial expenses and income, net
Revaluation of fixed asset investments
410
-10
7
367
-31
2
Profit before tax
Tax
407
119
338
92
Profit after tax
Minority interests
288
59
246
21
Net profit
229
225
Net Sales in local currencies
Growth in Net Sales
2%
43%
Nutrition
%
10
17%
Foods
21%
Industrial
Ingredients
24%
17%
Moving &
Relocation Services
•
•
•
•
•
9%
Nutrition
Foods
Others
28%
Cost of sales
As a per centage of net sales, cost of sales
was at a similar level as the year before. A
small increase in cost of sales for EAC
Nutrition was offset by savings on cost of
sales by EAC Foods. Milk-powder cost
increases for EAC Nutrition were not fully
recovered by higher selling prices,
although a higher proportion of sales of
Premium products alleviated the impact
and the decrease in gross margin was
kept below 1 percentage point. EAC
Foods continued to deliver growth in
profitability and the gross margin
<50
>51
0%
10%
20%
30%
increased by 2 percentage points to above
29 per cent, with a strong contribution
from the pig farms.
Associates
The share of profit before tax from
associates of DKK 46m was a significant
increase compared to 2003. The main
contributors were the associates in
Thailand under EAC Industrial Ingredients
with DKK 42m. The associated company
UNZA in Vietnam, which is reported under
EAC Nutrition, also performed satisfactorily and achieved a share of profit of DKK
4m.
An increase in selling and distribution
expenses of less than 4 per cent resulted
in an improvement in the productivity ratio
for the selling and distribution activities of
almost 1 percentage point, with the ratio to
net sales reducing from 21.5 per cent to
20.6 per cent in 2004. A significant part of
selling and distribution expenses is related
to marketing activities and during 2004 the
advertising and promotion expenses
increased by more than 14 per cent to
DKK 411m, or 9.2 per cent of net sales.
EAC Nutrition accounted for almost 90 per
cent of the advertising and promotion
spending. Support for launches of new
Premium products and investments in
China as well as in India and the Philippines
led to an increase in EAC Nutrition’s
advertising and promotion spending
expressed in percentage of net sales to
18.8 per cent (+1 percentage point).
Administrative expenses increased by less
than 1 per cent (6.5 percent in local
currencies) to DKK 309m. This resulted in
an improvement in the ratio to net sales of
0.5 percentage points to just below 7 per
cent. The unallocated expenses
decreased slightly by DKK 2m to DKK
78m.
Amortisation of goodwill at DKK 16m was
mainly related to the previous purchase of
minority shareholdings in Dumex Thailand,
Dumex Malaysia and INC Shanghai, and
of the business of Hangzhou Future and
Global Silverhawk.
Other operating expenses of DKK 12m
were mainly legal costs.
Other operating income of DKK 35m
included gains from sale of subsidiaries
and other investments of DKK 17m. The
Group had external rental income of about
DKK 11m, primarily from the properties in
Malaysia and the rental of warehouse
space in Thailand and Malaysia.
Operating profit
The higher than expected growth in net
sales, especially during the second half of
the year, resulted in an operating profit
above expectations at DKK 410m, a
growth of 28 per cent when adjusted for
non-recurring items.
Adjusted for translation effects of DKK
42m and non-recurring items of DKK 7m,
the operating profit in 2004 would have
been DKK 445m in comparison to the
adjusted operating profit for 2003 of DKK
316m, an increase of 41 per cent.
In March, EAC expected a full-year
operating profit excluding one-offs similar
to that of 2003, namely DKK 316m. In the
Q1 report in May, EAC upgraded its
expectations to DKK 350m and in the Q3
report in November the outlook was
further upgraded to DKK 375m. The actual
operating profit of DKK 403m (excluding
one-offs of DKK 7m) represents a
significant improvement from the March
outlook:
• EAC Nutrition performed slightly ahead
of expectations and achieved growth of
15 per cent when adjusted for currency
effects and non-recurring items.
• EAC Foods delivered an operating profit
significantly above 2003 with an increase
of more than 60 per cent after
adjustment for translation effects and
one-off items.
• EAC Industrial Ingredients and EAC
Moving & Relocation Services both
showed very positive developments
when adjusted for currency effects and
non-recurring items with growth in
operating profit of 22 per cent and 67 per
cent, respectively.
Operating Profit - Strategic Business
Adjusted for non-recurring items and the
effect of currency fluctuations the
strategic businesses’ comparable
operating profit for 2004 would have been
DKK 517m versus DKK 392m in 2003, an
increase of 32 per cent.
The operating margin for the Group
increased to 9.0 per cent as compared to
7.8 per cent in 2003, when adjusted for
non-recurring items. The increase in
margin can primarily be credited to EAC
Foods and to some extent to EAC Moving
& Relocation Services. EAC Foods
Financial Report 2004
Annual Report 2004
increased its operating margin by 3.3
percentage points to 12.9 per cent, after
one-off adjustments in 2003. The
operating margin for EAC Moving &
Relocation Services increased to 5.6 per
cent, an increase of 2.2 percentage points.
Operating Profit (EBIT)-Strategic Businesses
Financing
Although the Group is net debt free and
has a net cash balance of DKK 908m, the
debt equity policy for the businesses
results in interest-bearing debt in a
number of units. Notably, interest
expenses in EAC Foods of DKK 46m
contributed significantly to the Group’s
overall interest expenses.
EAC divested its shareholding in Dalhoff
Larsen & Hornemann A/S on 1 October
resulting in a profit of DKK 15m. This gain
is booked under interest income. In 2003,
a gain of DKK 16m was booked from the
market value increase in the shares in
Dalhoff Larsen & Hornemann A/S.
Taxes
Taxes amounted to DKK 119m resulting in
a calculated tax rate of 29 per cent versus
27 per cent in 2003. Taxes include a
change in deferred tax amounting to DKK
16m, primarily originating from tax
depreciations on fixed assets in the Parent
Company, and are partly offset by a
capitalisation of tax losses carried
forward, which are expected to be utilised.
Minority Share of Profit
Minority share of profit was significantly
higher than 2003 due to the excellent
results of both pig farms in Venezuela,
Procer C.A. and Agropecuaria Fuerzas
Integradas C.A., in which the minorities
hold 49 per cent and 62.5 per cent,
respectively.
<52
>53
DKK million
2004
2003
Change %
Nutrition
175
175
-
Foods *
161
108
49
106
93
14
26
16
63
468
392
19
2004
2003
Interest income
49
60
Interest expenses
61
78
-12
-18
Exchange gains / losses
2
-13
7
2
-3
-29
Total
* 2003 operating profit adjusted for gain from sale of Ecuadasa of DKK 68m.
Financing
DKK million
Interest expenses and income, net
Net profit
The net profit of DKK 229m is above
expectations and a measure of the very
good operating performance of the
strategic businesses. In order to make a
valid comparison to the profit from 2003,
an adjustment of translation effects and
non-recurring items must be made. The
comparable result adjusted for exchange
rate differences and non-recurring items
would have been DKK 246m against an
adjusted net profit in 2003 of DKK 174m,
an increase of 41 per cent.
A proposal for a payment of dividend of
DKK 4.00 per share will be made at the
Annual General Meeting in April. This will
total DKK 74m.
Balance Sheet
The comparison of year-ending balances
for 2004 with 2003 was significantly
affected by developments in the foreign
exchange rates used in translation. A
majority of EAC’s investments in Group
companies have USD or USD-related
translation exposures. The year-end
exchange rate for the USD versus the DKK
was 546.76 as compared to 595.76 in
2003, or an 8 per cent appreciation of the
DKK to the USD. For total assets, the
translation effect was a reduction of the
ending balance for 2004 of DKK 211m.
Balance Sheet
DKK million
2004
2003
Intangible assets
Property, plant and equipment
Fixed assets investments
338
763
175
353
833
203
Total fixed assets
Inventories
Accounts receivable
Marketable securities
Bank and cash balances
1,276
474
806
292
986
1,389
459
799
345
1,185
Total current assets
2,558
2,788
Total assets
3,834
4,177
Share capital
Retained earnings
1,417
985
1,417
1,196
Equity
Minority interests
Provisions
Long-term debt
Short-term debt
2,402
184
59
84
1,105
2,613
180
68
144
1,172
Total equity and liabilities
3,834
4,177
Annual Report 2004
Investment in fixed assets
During the year, the Group invested DKK
133m in fixed assets, almost all within the
strategic businesses. Some of the major
more significant investments included:
• Initial investment in a new EAC Nutrition
plant in India with the acquisition of land
and commencement of
construction.
• Completion of an investment in a new
wet mixer for EAC Nutrition’s plant in
Shanghai.
• Commencement of an investment in
new blending facilities at EAC Nutrition’s
plant in Bangkok
• EAC Foods acquired a feed mill in
December, which has capacity to supply
all of EAC’s farms in Venezuela
• New warehouse and office complex in
Beijing for EAC Moving & Relocation
Services
• Investment in an expanded SAP
platform for EAC Nutrition and Group
Operational Centre established under a
shared IT service centre located in
Malaysia
The strategic investments totalled DKK
58m while replacement and maintenance
investment was DKK 75m. Annual
depreciation was DKK 133m, and
amortisation of goodwill was DKK 16m.
Financial fixed assets reduced by DKK
28m to DKK 175m, mainly as the result of
currency translation effects.
<54
>55
Current assets
Inventories ended the year at DKK 474m
were slightly higher than last year, mainly
in EAC Nutrition. The turnover ratio for
inventory expressed in number of days
fell from 73 to 67 days, with EAC Foods
having lower stock at the end of 2004
compared to the end of 2003. EAC
Nutrition also reduced its inventory
expressed in days compared to the
end of 2003.
The balance of accounts receivable e
nded the year at DKK 800m, unchanged
from the year before. The turnover ratio
measured in days reduced from 52 to
48 days.
Marketable securities consist of a portfolio
of bonds, shares and other securities held
in the Parent Company. EAC divested its
shareholding in Dalhoff Larsen &
Hornemann A/S on 1 October, resulting
in a profit of DKK 15m.
Bank and cash balances ended the year
with a lower balance of DKK 986m
compared to DKK 1,185m at the end of
2003. The main reasons for the reduction
were the share buy-back and purchase of
own shares amounting to DKK 274m and
a dividend payment of DKK 72m.
Equity
The foreign currency translation
adjustment on opening balances was
significant and, coupled with translation
adjustments on the movements on equity
the foreign currency translation
adjustment reached negative DKK 143m.
In Q1, the Company completed the share
repurchase programme announced at the
Annual General Meeting in 2003 with the
acquisition of 147,952 shares thus
returning DKK 40m to shareholders,
reflecting an average share price of DKK
269.
At the Annual General Meeting in 2004 a
share repurchase programme was
approved up to a total amount of DKK
250m. The acquisition of shares under this
programme was completed in Q2 with the
purchase of 862,027 shares at an average
share price of DKK 292.
During the year, the number of share
options exercised was 195,100 shares.
At the end of 2004, the Company’s
portfolio of own shares was 1,774,489, or
8.8 per cent of the share capital. The
Supervisory Board intends to seek
approval from shareholders to cancel
1,450,000 shares at the Annual General
Meeting in 2005.
At the Annual General Meeting in 2003, the
Supervisory Board announced a dividend
policy to distribute one third of the net
result earned by the company.
Accordingly, at the Annual General
Meeting in 2004 the Supervisory Board
proposed and the shareholders approved
a dividend of DKK 3.75 per share
amounting to a payment of DKK 72m.
Minority interest
The minority interests of DKK 184m
comprised mainly the minority
shareholdings in Dumex Malaysia Sdn
Bhd, Procer C.A., Agropecuaria Fuerzas
Integradas C.A., EAC Holdings, Malaysia
and Sino Santa Fe International Transport
Services.
Long-term targets
The long-term targets established at the
Annual General Meeting in 2000 for
fulfilment at the end of 2004 were a return
on equity of 15 per cent, an annual
compounded growth rate of 30 per cent
in earnings per share and a return on
invested capital of 25 per cent.
Provisions
Provisions of DKK 59m included deferred
tax liabilities of DKK 12m and other
provisions of DKK 47m. The latter
continues to include the provision against
a disputed duty tariff classification in
connection with the importation of raw
materials by EAC Nutrition into Thailand
(DKK 36m) and various minor provisions
amounting to DKK 10m.
Return on equity for 2004 was 9.1 per cent
based on a net profit of DKK 229m and an
average equity of about DKK 2,500m. The
shortfall to the original targets is primarily a
consequence of lower than expected debt
to equity level, increased investments in
future organic growth in new markets and
products, as well as the appreciation of
DKK against USD.
Liabilities
The balance of long-term debt of DKK
84m at year-end was reduced as
compared to end of 2003, primarily from a
repayment of long-term debt at the Parent
Company. Sino Santa Fe International
Transport Services took up a new longterm loan in connection with the financing
of the new warehouse and office complex
in Beijing; the balance of this at the end of
2004 was DKK 5m. The Group also took
on new long-term debt for the acquisition
of the feed mill in Venezuela with a yearend balance of DKK 8m.
Short-term debt was reduced by DKK
67m to DKK 1,105m at year-end, which
mainly reflected a lower balance of shortterm bank loans in EAC Foods.
The average growth in earnings per share
for the period 1999 to 2004 was 73 per
cent surpassing the target.
The invested capital at year-end was DKK
1,639m compared to DKK 1,705m at the
end of 2003. The difference is largely due
to the significant change in currency
translation rates. The change measured in
underlying currencies was a small
increase over 2003 related to a slightly
higher invested capital balance in EAC
Industrial Ingredients.
The return on invested capital of 24.5 per
cent was higher than anticipated and each
of the strategic businesses recorded
return on invested capital in excess of 25
per cent.
Annual Report 2004
Cash flow statement
Cash flow from operating activities of DKK
337m came primarily from the net profit
adjusted for annual depreciation and
amortisation, with minimal working capital
changes.
Cash flow used for investing activities was
net DKK 86m after receipt of dividends
from associates and inflow from sale of
financial fixed assets offset by the outflow
used for investments in intangible and
tangible assets.
Cash flow from financing activities
included dividend payments by the Parent
Company, purchase of own shares and
changes in bank borrowings.
<56
>57
Equity
DKK million
Share
Capital
Retained
Earnings
Equity
Opening balances
1,417
1,196
2,613
229
-72
229
-72
-143
-143
40
40
3
-268
3
-268
985
2,402
DKK million
2004
2003
Cash flow from investing activities and disposals
337
-86
-440
182
-51
40
Net cash provided
Translation adjustments of cash and cash equivalents
-189
-22
171
-65
1,278
1,489
Net profit
Dividends paid to shareholders
Foreign currency translation
adjustments
Adjustments to unrealised exchange
gains/losses on long-term hedging
net investments
Realised exchange gains on long-term
items where hedging has ceased
Purchase / sales of own shares, net
31 December 2004
1,417
Cash Flow Statement
Cash and cash equivalents, end of year
International Financial
Reporting Standards (IFRS)
The consolidated interim and full-year
financial statements for 2005 will comply
with IFRS and include a restatement of
comparative figures for 2004. Condensed
unaudited pro forma restatements of the
financial statements for 2004 are
presented below including the financial
impact of transition to IFRS on the result
for 2004, total assets and shareholders’
equity as at 1 January and 31 December
2004, respectively.
The condensed restated IFRS financial
summary has been prepared in
accordance with the requirements under
IFRS including the transitional provision
outlined in IFRS 1 First-time Adoption of
International Financial Reporting
Standards. The IFRS financial summary
has been prepared on the basis of those
standards, which were effective as at 1
January 2005. The Annual Report for 2005
will be prepared on the basis of standards
effective as at 31 December 2005.
Consequently, changes may occur.
For 2004, the impact of adopting IFRS is
as follows:
The most significant differences between
the current accounting policies and IFRS
relating to recognition and measurement
are summarised below. In addition, IFRS
disclosure requirements in a number of
areas are somewhat more detailed and
comprehensive than those governing
publicly listed Danish companies.
However, the disclosure requirements are
not included in the summary below.
Presentation of financial statements
(IAS 1)
No restatements are required for EAC as a
result of applying IAS 1. However, the
structure and format of the balance sheet,
income statement, statement of changes
in equity, cash flow statement and last, but
not least, notes, disclosures and summary
of significant accounting policies will
require amendments. For example, and of
significance to EAC, share of result of
associates should be recognised net of
tax and included as part of financial items.
Consequently when IAS 1 is applied, the
share of profit of associates will not be
included in operating profit. Furthermore,
the minority interests are included in the
equity and profit and loss of EAC.
• Operating profit decreased by DKK 42m.
• Net profit increased by DKK 39m.
• Total assets as at 31 December 2004
decreased by DKK 42m.
• Shareholders’ equity as at 31 December
2004 decreased by DKK 70m.
Employee benefits (IAS 19)
Post-employment benefits and other
long-term employee benefits are
recognised and measured in accordance
with IAS 19. In accordance with IFRS 1,
any unrecorded employee liabilities are
included in shareholders’ equity in the
IFRS opening balance as at 1 January
2004.
Annual Report 2004
The effect of changes in foreign
exchange rates (IAS 21)
Following the transition to IFRS, all
goodwill, etc., arising on acquisition of
a foreign entity and any fair value
adjustments to the carrying amounts of
assets and liabilities arising on acquisition
of that foreign entity shall be treated as
assets and liabilities of the foreign entity.
Hence, such goodwill, etc., will be
translated at the closing rate.
economy and the 2004 impact on EAC
Foods of adopting IFRS has been
prepared on this basis. Due to the social,
political and economic crisis in Venezuela
in 2003 and 2004, which may have a
strong influence on the local inflation,
Venezuela remains under observation for a
shift to hyperinflation. Financial reporting
for EAC Foods will be prepared in
accordance with IAS 29, if the Venezuelan
economy moves into hyperinflation.
Financial reporting in hyperinflationary economies (IAS 29)
EAC operates businesses in certain
countries where the b12 economy has
from time to time been hyperinflationary,
e.g. Plumrose Latinoamericana (EAC
Foods) in Venezuela. The financial
reporting for such businesses will be
prepared in accordance with the
requirements under IAS 29.
Financial instruments – Recognition
and measurement (IAS 39)
IAS 39 will be effective for financial periods
beginning on or after 1 January 2005.
Hence, there are no restatements for EAC
in respect of the result for 2004, total
assets and equity as at 1 January and 31
December 2004, respectively.
In line with the exemption provisions of
IFRS 1, EAC has adopted a deemed cost
approach and used the fair value of
property, plant and equipment in EAC
Foods at the date of transition (1 January
2004). Adoption of hyperinflationary
accounting regarding property, plant and
equipment is applicable for periods after
the date of transition only and subject to
economies being hyperinflationary
according to IAS 29.
Although the local inflation in Venezuela
since the beginning of the Millennium has
been high (annual CPI in the range of 13%
to 31%), the 3-year cumulative inflation
has not exceeded the indicative threshold
of 100%. IAS 29 does not establish
absolute criteria at which hyperinflation is
deemed to arise. Venezuela is currently
not regarded as a hyperinflationary
Agriculture (IAS 41)
IAS 41 is applicable for EAC’s pig farms in
Venezuela. Consequently, all biological
assets, e.g., piglets and immature pigs,
are recognised and measured at fair value
(market value) and taken up as inventory.
However, given the scope and nature of
the pig farm business in Venezuela, the
financial impact of applying IAS 41 is
limited.
Share based payment (IFRS 2)
In accordance with the transitional
provisions in IFRS 2, share options
granted after 7 November 2002 with a
vesting date after 1 January 2005 will be
treated in accordance with the provisions
of IFRS 2.
<58
>59
At the date of grant, an estimate of the
number of options that will ultimately vest
will be made. EAC will recognise an
expense over the period from grant to
vesting (vesting period) based on this
estimate and subsequent adjustments to
the original estimate, i.e., number of
options only. Consequently, the total
expense over the vesting period will
correspond to the fair value at date of
grant of the number of options that
ultimately vest. The fair value of the
options will be measured on the basis of
the Cox, Ross and Rubinstein formula.
Business combinations (IFRS 3)
Goodwill, brands and other intangible
assets with an indefinite life will no longer
be subject to amortisation. Going forward,
such assets will be subject to annual
impairment reviews to ensure that the
value in use at least equals the carrying
amount of the assets in question.
Other intangible assets with a definite life
will continue to be subject to amortisation.
IFRS Restatement
Consolidated Income Statements
(Unaudited)
Annual Report 2004
2004
DKK million
Previous GAAP
IFRS Effect
IFRS
Net sales
Cost of sales
4,464
2,879
10 (1)
Gross profit
Share of results before tax in associates
1,585
46
-10
-46 (2)
1,575
1,631
-56
1,575
919
309
16
12
35
1,221
2 (3)
-16 (4)
4,464
2,889
919
311
12
35
-14
Operating profit
Financing expenses and income, net
Share of profit in associates
410
-10
7
-42
11 (1)
Profit before income tax
Provision for income tax
Share of tax of profits in associates
Minority interests
407
107
12
59
3
-24 (1)
-12 (2)
Net profit
229
39
34 (2)
1,207
368
1
7
34
410
83
59
268
Operating profit - previous GAAP
(1)
Cessation of hyperinflation accounting
(2)
Reclassification of share of profit
in associates
(3)
Share-based payment
(4)
Cessation of systematic amortisation
410
-10
Operating profit - IFRS
368
Net profit - previous GAAP
(1)
(3)
Share-based payment
(4)
229
25
-2
16
Net profit - IFRS
268
-46
-2
16
IFRS Restatement
Consolidated Balance Sheet
(Unaudited)
Annual Report 2004
<60
>61
1 January 2004
DKK million
Previous
GAAP
IFRS
Effect
31 December 2004
IFRS
Previous
GAAP
306
909
203
460
799
345
1,185
338
763
175
474
806
292
986
IFRS
Effect
Intangible assets
Property, plant & equipment
Inventories
Accounts receivable
353
833
203
459
799
345
1,185
-47 (1)
76 (2)
Total assets
4,177
30
4,207
3,834
-42
3,792
Equity
Minority interests
Provisions
Long-term debt
Short-term debt
2,613
180
68
144
1,172
-29
37 (2)
30 (3)
2,402
184
59
84
1,105
-70
18 (2)
20 (3)
-8 (3)
2,584
217
98
144
1,164
-10 (3)
2,332
202
79
84
1,095
4,177
30
4,207
3,834
-42
3,792
1 (2)
-44 (1)
-10 (2)
10 (2)
2 (2)
IFRS
294
753
185
476
806
292
986
1 January 2004
31 December 2004
Equity - previous GAAP
(1)
(2)
Deemed cost
Deferred tax asset
Fair value; Farms
Minority interest
(3)
Provisions
Employee benefits
Deferred tax liabilities
Reclassifcation
2,613
-47
2,402
-44
76
-10
10
2
-18
-20
-10
8
-20
Equity - IFRS
2,584
2,332
1
-37
10
Accounting Policies
The Annual Report of The East Asiatic
Company Ltd. A/S for 2004 is presented
in accordance with the provisions of the
Danish Financial Statements Act, Danish
accounting standards and other general
requirements made by the Copenhagen
Stock Exchange on the financial reporting
of listed companies.
The Annual Report has been prepared
in accordance with the following
accounting policies, which are unchanged
from last year.
General Recognition and
Measurement Criteria
Assets are recognised in the balance
sheet when it is probable that future
economic benefits attributable to the
asset will flow to the Group, and the value
of the asset can be measured reliably.
Liabilities are recognised in the balance
sheet when it is probable there will be an
outflow of future economic benefits from
the Group, and the value of the liability
can be measured reliably.
Upon initial recognition, assets and
liabilities are measured at historical
cost. Subsequently, assets and liabilities
are measured as described for each
item below.
Consolidated Financial Statements
The Consolidated Financial Statements
comprise the Parent Company, The East
Asiatic Company Ltd. A/S and
subsidiaries in which The East Asiatic
Company Ltd. A/S directly or indirectly
holds more than 50 per cent of the votes
or otherwise has dominant influence.
Companies in which the Group holds
between 20 per cent and 50 per cent of
the votes and exercises significant but
not dominant influence are classified
as associates.
On consolidation, elimination is made
of intercompany income and expenses,
shareholdings, dividends and accounts
as well as of realised and unrealised gains
and losses on transactions between the
consolidated companies.
The financial statements used for the
purpose of the Group’s Annual Report
have been prepared in accordance with
the accounting policies of the Group. The
Group’s Annual Report has been prepared
on the basis of financial statements of
the Parent Company and subsidiaries
by combining accounting items of a
uniform nature.
Newly acquired or newly established
subsidiaries are recognised in the
consolidated financial statements as of
the date of acquisition. Companies sold
or wound up are recognised in the
consolidated income statement up until
the date of disposal. Comparative figures
are not restated for newly acquired, sold
or wound up companies.
For acquired companies, the purchase
method is applied under which the
identifiable assets and liabilities of the
acquiree are measured at fair value at the
time of acquisition. Provision is made for
the costs of restructuring of the acquiree
upon the acquisition, where such costs
have been decided upon and announced.
The tax effect of the revaluation made is
taken into account. Any remaining positive
differences (goodwill) is recognised in
intangible assets in the balance sheet
as goodwill, which is amortised
Annual Report 2004
systematically in the income statement on
a straight-line basis based on an individual
assessment of its useful life, but not
exceeding 20 years. Any remaining
negative difference (negative goodwill)
corresponding to an expected
unfavourable development of the
subsidiaries in question is recognised in
deferred income in the balance sheet as
negative goodwill and is recognised as
income in the income statement as the
circumstances to which the difference
in value relates materialise. Negative
goodwill not related to an expected
unfavourable development is recognised
in the balance sheet at an amount equal
to the fair value of non-monetary assets,
which is subsequently recognised in
the income statement over the average
useful life of the non-monetary assets.
Any remaining negative goodwill is
recognised in the income statement at
the date of acquisition.
Goodwill and negative goodwill relating
to acquired companies may, due to
changes in the recognition and
measurement of net assets, be adjusted
up until the end of the financial year
following the date of acquisition.
Gains or losses from the disposal or
winding-up of subsidiaries are stated as
the difference between the selling price
or proceeds from the winding-up and the
carrying amount of net assets at the time
of disposal including non-amortised
goodwill and expected costs of sale
or winding-up. Gains or losses are
recognised in the income statement.
Minority Interests
In the statement of group results and
group equity, the parts of the profit and
equity of subsidiaries attributable to
minority interests are stated as separate
items in the income statement and the
balance sheet. Minority interests are
recognised on the basis of a revaluation of
acquired assets and liabilities to fair value
at the time of acquisition of subsidiaries.
Discontinuing Operation
Discontinuing operation of which the
Group’s strategic plan dictates disposal,
closure or cessation is classified as
discontinuing operation. Disclosure of
the amounts at which discontinuing
operations are included in the items
‘Net sales’, ‘Net profit/loss’, ‘Fixed assets’,
‘Current assets’ and ‘Short-term debt’
is made in the notes.
Foreign Currency Translation
For the purpose of initial recognition,
transactions in foreign currencies are
translated at the exchange rates at the
transaction date. Gains and losses arising
between the exchange rates at the
transaction date and the exchange rates
at the settlement date are recognised in
‘Financial expenses and income, net’
in the income statement.
Receivables, payables and other
monetary items in foreign currencies not
settled at the balance sheet date are
translated at the exchange rates at the
balance sheet date. Differences between
the exchange rates at the balance sheet
date and the exchange rates at the time
of the occurrence of the receivable or
the payable or of recognition in the latest
financial statements are recognised in
‘Financial expenses and income, net’
<62
>63
All subsidiaries and associates of the
Group are considered independent
entities. Foreign subsidiaries and
associates are recognised by translating
the income statements of these
companies at the average exchange rates
for the year, whereas balance sheet items
are translated at the exchange rates at
the balance sheet date. Exchange rate
adjustments arising upon translation
of the equity of these companies at the
beginning of the year at the exchange
rates at the balance sheet date and upon
translation of the income statements of
these companies from the average
exchange rates for the year to the
exchange rates at the balance sheet
date are recognised directly in equity.
Exchange rate adjustment of accounts
with independent foreign subsidiaries
regarded as part of the total investment
in the subsidiary is recognised directly
in equity. Similarly, exchange gains and
losses on loans and derivative financial
instruments entered into for the purpose
of hedging foreign subsidiaries are
recognised directly in equity.
Where deemed appropriate, foreign
subsidiaries and associates have reported
the financial statements in their functional
currency. Most importantly this applies to
subsidiaries in Venezuela with high rates
of inflation, where the US dollar is
considered the functional currency.
For assets and liabilities the conversion
from local currencies to US dollars is
made using historical exchange rates for
non-monetary items and using year-end
exchange rates for all other items. For
items in the income statement the
conversion is in general made using
average exchange rates, however, for
items directly derived from non-monetary
balance sheet items the conversion is
made using historical exchange rates.
All currency adjustments arising from
translation of local currencies to
US dollars (functional currency) are
recognised in the income statement
as a financial income or expense.
Derivative Financial Instruments and
Hedging Activities
Derivative financial instruments are initially
recognised in the balance sheet at their
fair value. Positive and negative fair values
of derivative financial instruments are
included as pre-payments and deferred
income respectively.
The method of recognising the resulting
gain or loss depends whether the
derivative is accounted for as a hedge
or not. On the date when a derivative
contract is entered into, it is either
designated as a hedge of a net investment
in a foreign entity, or not treated as an
accounting hedge. Certain derivative
transactions, while providing effective
financial hedges under the Group’s risk
management policies, do not qualify for
hedge accounting under the applicable
accounting rules. Changes in the fair
value of any derivative instruments that
do not qualify for hedge accounting
are recognised immediately in the
income statement.
When a hedging instrument expires or
is sold, or when a hedge no longer meets
the criteria for hedge accounting under
the applicable accounting rules, any
cumulative gain or loss existing in equity
at that time remains in equity and is
recognised when the net investment
is recognised in the income statement.
Net investments in foreign entities are
hedged by derivatives. Any gain or loss
on the hedging instrument is recognised
in equity.
At the inception of the transaction,
the Group documents the relationship
between hedging instruments and hedged
items, as well as its risk management
objective and strategy for undertaking
various hedge transactions. This process
includes linking all derivatives designated
as hedges to specific assets. The Group
also documents its assessment, both
at the hedge inception and on an
ongoing basis.
contractual cash flows at the current
market interest rate available to the
Group for similar financial instruments.
Incentive Programmes
The Operations Executive Group and
a number of other senior executives
participate in a share option programme.
The key terms and conditions of the
programme are disclosed in the notes to
the financial statements. Expenses related
to option based incentive programmes
are taken directly to shareholders’ equity
in accordance with the accounting
policies applied for own shares.
INCOME STATEMENT
The fair values of various derivative
financial instruments used for hedging
purposes are disclosed in the notes.
Movements on the hedging reserve in
shareholders’ equity are also shown in
the notes.
Assessment of Fair Value
The fair value of listed securities that
are not intended to be held to maturity,
is based on quoted market prices at the
balance sheet date.
In assessing the fair value of non-listed
securities and derivative financial
instruments as well as other financial
instruments, the Group uses a variety of
methods and makes assumptions that
are based on market conditions existing
at the balance sheet date.
The face values less any estimated credit
adjustments for financial assets and
liabilities with a maturity of less than one
year are assumed to approximate their fair
values. The fair value of financial liabilities
is estimated by discounting the future
Net Sales
Net sales of goods for resale and finished
goods are recognised in the income
statement if delivery has been made and
risk has been transferred before year-end,
and provided that the income can be
reliably measured and may reasonably
be expected to be received. Net sales
are measured net of VAT and indirect
taxes and less price reductions by
way of discounts.
Cost of Sales
Cost of sales comprises costs incurred
to achieve net sales for the year. Cost
comprises raw materials, consumables,
direct labour costs and production
overheads such as maintenance and
depreciation, as well as operation,
administration and plant management.
Cost of sales also includes development
costs. Amortisation of goodwill is also
included to the extent that goodwill relates
to production activities.
Annual Report 2004
Selling and Distribution Expenses
comprise costs in the form of salaries to
sales and distribution staff, advertising
and marketing expenses as well as
operation of motor vehicles, depreciation,
etc. Amortisation of goodwill is also
included to the extent that goodwill
relates to distribution activities.
Administrative Expenses
Administrative expenses comprise
expenses for management, administrative
staff, office expenses, depreciation, etc.
Amortisation of goodwill is also included
to the extent that goodwill relates to
administrative activities.
Other Operating Income and Expenses
Other operating income and other
operating expenses comprise items of
a secondary nature to the Group’s main
activity, including gains and losses on
the sale of intangible assets and property,
plant and equipment.
Financial Expenses and Income
Financial expenses and income comprise
interest receipts and expenses, changes
in the fair values of securities and
derivative financial instruments not
acquired for hedging purposes, exchange
gains and losses on debt and transactions
in foreign currencies, amortisation of
financial assets and liabilities as well as
surcharges and allowances under the tax
on account scheme, etc.
Corporation Tax and Deferred Tax
The Parent Company is jointly taxed with
wholly owned Danish and certain foreign
subsidiaries. The tax for the year consists
of current tax and movements in deferred
tax for the year. The tax relating to the
<64
>65
profit for the year is recognised in the
income statement, whereas the tax
relating to items recognised in equity
is recognised directly in equity.
due to changed tax rates are recognised
Deferred tax is measured under the liability
method on all temporary differences
arising between the tax bases of assets
and liabilities and their carrying amounts
in the financial statements. However,
no provision is made for temporary
differences in respect of goodwill that
cannot be amortised for tax purposes
and other items on which temporary
differences-except for business
acquisitions-have arisen at the time of
acquisition without affecting the net profit
for the year or taxable income.
Intangible Assets
Goodwill
Goodwill is amortised using the straightline method over its estimated useful life
determined based on management’s
experience within the individual business
activities. The amortisation period is
between 2 and 20 years, the longest
period applying to strategic acquisitions
with a strong market position and a longterm earnings profile.
In cases where the tax base may be
determined under alternative taxation
rules, deferred tax is measured on the
basis of the intended use of the asset or
the planned settlement of the liability.
Deferred tax assets, including the tax
value of tax losses to be carried forward,
are measured at the value at which the
asset is expected to be realised, either
by utilisation against tax on future earnings
or by offsetting against deferred tax
liabilities within the same legal tax entity
and jurisdiction.
ASSETS
The carrying amount of goodwill is
assessed regularly and is written down
to recoverable amount in the income
statement if the carrying amount exceeds
the expected future net revenues from the
business or the activity to which goodwill
is related.
Trademarks and Rights
Acquired trademarks and rights are
measured at cost less accumulated
amortisation. Trademarks are amortised
on a straight-line basis over 2 to 20 years.
Rights are amortised over the term of the
agreement, but not exceeding 20 years.
Adjustment is made for deferred tax
concerning unrealised intercompany
profits and losses eliminated.
Acquired trademarks and rights are
written down to their recoverable amount
where the recoverable amount is lower
than the carrying amount.
Deferred tax is measured on the basis of
the tax rules and tax rates of the respective
countries that will be effective under the
legislation at the balance sheet date when
the deferred tax is expected to crystallise
as a current tax. Changes to deferred tax
Property, Plant and Equipment
Land and buildings, plant and machinery
and other installations, equipment and
fixtures are measured at cost less
accumulated depreciation and
impairment losses.
Cost comprises cost of acquisition
and expenses directly related to the
acquisition up until the time when the
asset is ready for use.
Interest expenses on borrowings for
financing the construction of property,
plant and equipment relating to the period
of construction are included in cost. All
other borrowing expenses are recognised
Depreciation is calculated on a straightline basis over the expected useful lives
of the assets, which are:
Buildings
Plant and machinery
Other installations,
equipment and fixtures
20 - 30 years
05 - 10 years
as the other property, plant and equipment
of the Group.
The capitalised remaining lease obligation
is recognised as a liability in the balance
sheet, and the interest element of the
lease payment is charged to the income
statement when incurred.
All other leases are classified as operating
leases. Payments made under operating
leases are charged to the income
statement over the period of the lease.
Investments in Subsidiaries
and Associates
Investments in subsidiaries and
associates are recognised and measured
in the Parent Company’s Annual Report
under the equity method.
03 - 10 years
Depreciation is recognised in the
income statement in cost of sales, selling
and distribution expenses and
administrative expenses, respectively.
Leases
Leases concerning property, plant and
equipment where the individual group
companies have substantially all the risks
and rewards of ownership (finance leases)
are recognised in the balance sheet at
the fair value of the leased assets,
if measurable. Alternatively, they are
recognised at the lower present value
of the future lease payments at the time
of acquisition. For the purpose of
calculating the present value, the interest
rate implicit in the lease or an approximate
value is used as a discount factor.
Assets acquired under finance leases
are depreciated and written down
under the same accounting policy
The item ‘Share of profits from ordinary
activities before tax of subsidiaries’ in the
income statement of the Parent Company
includes the Parent Company’s pro rata
share of the subsidiaries’ profits before
tax for the year less goodwill amortisation,
whereas the Parent Company’s share of
the subsidiaries’ tax is included in the
item ‘Tax on profits from ordinary activities
for the year’.
The item ‘Share of profits before tax of
associates’ in the income statement of
both the Group and the Parent Company
includes their pro rata shares of the
associates’ profits before tax for the year
less goodwill amortisation, whereas their
shares of the tax of the associates are
included in the item ‘Tax on profits from
ordinary activities for the year’.
The item ‘Investments in associates’ in the
balance sheet of the Group includes the
Group’s pro rata ownership share of the
net asset value of the associates
calculated according to the accounting
policies of the Parent Company with
deduction or addition of the pro rata
share of unrealised intercompany
profits and losses and with addition or
deduction of goodwill or negative
goodwill, respectively.
The items ‘Investments in subsidiaries’
and ‘Investments in associates’ in the
balance sheet of the Parent Company
include the pro rata ownership share
of the net asset value of the companies
calculated according to the accounting
policies of the Parent Company with
deduction or addition of unrealised
intercompany profits and losses and
with addition or deduction of goodwill
or negative goodwill, respectively.
Subsidiaries and associates with a
negative net asset value are valued at
DKK 0. Where the Parent Company has
a legal or constructive obligation to cover
the companies’ negative balance, the
obligation is recognised by way of a
provision.
Upon profit distribution, the total net
revaluation of investments in subsidiaries
and associates is allocated to a “Reserve
for net revaluation under the equity
method” in the financial statements of
the Parent Company.
Goodwill or negative goodwill relating to
the acquisition of interests in subsidiaries
and associates is stated and treated under
the method described under consolidated
principles. However, any goodwill or
negative goodwill is included in the item
Annual Report 2004
‘Investments in subsidiaries’ in the
balance sheet of the Parent Company.
Assessment of Impairment
The carrying amounts of intangible assets
and property, plant and equipment as well
as fixed asset investments are reviewed
periodically to determine whether there
are any indications of impairment other
than that expressed by amortisation and
depreciation. If so, the asset is written
down to its recoverable amount if the
recoverable amount is lower than the
carrying amount. The recoverable amount
of the asset is calculated as the higher of
net selling price and value in use. Where a
recoverable amount cannot be
determined for the individual asset, the
assets should be assessed in the smallest
group of assets for which a reliable
recoverable amount can be determined
based on a total assessment.
Inventories
Inventories are measured at the lower
of cost under the FIFO method and net
realisable value.
The cost of goods for resale, raw materials
and consumables equals landed cost.
The cost of finished goods and semifinished goods comprises the cost of
raw materials, consumables, direct labour
and production overheads. Production
overheads comprise the cost of indirect
materials and labour as well as
maintenance and depreciation of the
machinery, factory buildings and
equipment used in the production
process and costs of factory
administration and plant management.
Borrowing expenses are excluded.
Furthermore, cost of inventories includes
transfers from equity of gains/losses on
cash flow hedges relating to inventory
purchases in foreign currencies.
Net realisable value of inventories is the
estimated selling price in the ordinary
course of business less the expenses
of completion and selling expenses,
taking into account marketability,
obsolescence and development of
expected selling price less the calculated
expenses related to the sale.
Receivables
Receivables are measured in the balance
sheet at the lower of amortised cost and
net realisable value. Provisions for bad
debts are made.
Prepayments and Deferred Income
Prepayments comprise expenses paid
relating to subsequent financial years
including adjustments to the fair value
of derivative financial instruments with
a positive fair value.
Deferred income comprises payments
received relating to income in subsequent
years and adjustments to the fair value of
derivative financial instruments with a
negative fair value.
Securities
Securities recognised in current assets
comprise listed shares and bonds
measured at fair value at the balance sheet
date. Unlisted securities are measured at
estimated fair value.
<66
>67
SHAREHOLDERS’ EQUITY
Dividends
Dividends are recognised as a liability at
the time of adoption at the Annual General
Meeting. Dividends proposed for the year
are shown as a separate equity item.
Own Shares
Own shares acquired by the Parent
Company are recognised at cost and
written down to DKK 0 directly against
equity. Upon subsequent disposal of
own shares, any consideration is also
recognised directly in equity. No dividend
is declared on own shares.
LIABILITIES
Pension Obligations
Contributions to defined contribution
plans are charged to the income
statement as incurred. Any difference
between the charge to the income
statement and the contributions payable
is recognised in the balance sheet.
For defined benefit plans the recognised
amount in the balance sheet is determined
as the present value of the defined benefit
obligation adjusted for the actuarial gains
or losses not recognised and less any past
service costs not yet recognised.
Other Provisions
Provisions comprise expected costs
of restructuring and other liabilities, etc.
Provisions are recognised when the
Group has a present legal or constructive
obligation as a result of a prior event, and
it is probable that an outflow of resources
from the company will be required to settle
the obligation.
For acquired companies, provisions for
the costs of restructuring of the acquiree,
where such costs have been decided
upon and announced as at or before the
time of acquisition, are included in the
computation of cost, and thus in goodwill.
Financial Debt
Debts to mortgage banks and financial
institutions are recognised initially at the
proceeds received net of transaction
expenses incurred. In subsequent periods
the debt is measured at amortised cost
equal to the capitalised value by using
the effective interest method in order for
the difference between the proceeds and
the redemption value to be recognised in
the income statement over the period of
the loan.
Debt also includes the capitalised
remaining lease obligation on
finance leases.
Other debt comprising trade payables,
payables to subsidiaries and associates
and other payables are measured at
amortised cost.
CASH FLOW STATEMENT
The statement of cash flow shows the
Group’s cash flow for the year broken
down by operating, investing and
financing activities, the change in cash
and cash equivalents for the year and the
Group’s cash and cash equivalents at the
beginning and end of the year.
Cash Flow from Operating Activities
Cash flow from operating activities are
stated as the consolidated profit/loss
adjusted for non-cash operating items,
including depreciation, amortisation and
impairment losses, provisions and
changes in working capital, interest
received and paid and corporation taxes
paid or received. Working capital
comprises current assets less short-term
debt excluding the items included in cash
and cash equivalents.
Cash Flow from Investing Activities
Cash flow from investing activities
comprise cash flow from business
acquisitions and sales and cash flow from
the purchase and sale of intangible assets,
property, plant and equipment and fixed
asset investments.
The cash flow effect of the acquisition and
sale of companies is shown separately
in cash flow from investing activities. Cash
flow relating to acquisitions are recognised
in the statement of cash flow as of the date
of acquisition, and cash flow relating to
sales are recognised up to the date of sale.
Cash Flow from Financing Activities
comprise changes in the amount or
composition of the Group’s share capital
and related expenses as well as cash
flows from borrowing, repayment of
interest-bearing loans, purchase of own
shares as well as payment of dividends
to shareholders.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash
and bank balances as well as short-term
securities with a term to maturity of less
than three months which are easily
realisable and only subject to immaterial
risk of change in value.
The statement of cash flows cannot
be derived solely from the financial
records disclosed.
Information is specified by business
segment and geographical market. The
information on business segments and
geographical markets is based on the
Group’s returns and risks and its internal
financial reporting systems.
Segment fixed assets consist of the fixed
assets used directly for segment
operations, including intangible assets,
property, plant and equipment and
investments in associates. For segment
reporting at parent company level,
fixed assets also include investments
in subsidiaries.
Current assets are allocated to segments
to the extent that they are directly
attributable to segment operations,
including inventories, trade receivables,
other receivables, pre-payment and cash
and bank balances.
Segment liabilities comprise segment
operating liabilities, including trade
payables and other payables.
Income Statement
Annual Report 2004
DKK million
Note
<68
>69
Parent
2004
Group
2003
2004
2003
Net sales
Cost of sales
13
8
4,464
2,879
4,116
2,658
Gross profit
5
1,585
1,458
46
34
1,631
919
309
16
12
35
1,492
886
307
19
18
105
Share of profit before tax of ordinary
activities in subsidaries
384
384
347
75
352
2
79
3
5
6
5
73
311
32
82
270
40
1,221
410
-10
7
1,125
367
-31
2
343
310
407
338
114
85
119
92
Profit after tax on ordinary activities
229
225
288
246
Minority interests
Net profit
229
225
59
229
21
225
Proposed distribution of profit
Proposed dividend for the year
Retained earnings
74
155
72
153
229
225
Operating profit
1
2
3
4
Profit of ordinary activities before tax
Provision for income taxes on profit on
ordinary activities
Audit fees
Average number of employees
Salaries, wages and fees, etc.
Incentive schemes
5
6
7
8
9
Balance Sheet as at
31 December
Assets
DKK million
Parent
Note
Group
2004
2003
2004
2003
25
18
338
353
1
1
1
1
398
193
82
30
60
442
213
82
40
56
2
2
763
833
1,862
20
1,916
10
89
64
28
79
32
0
Fixed assets
Intangible assets
10,11
Property, plant & equipment
Land and buildings
Technical plant and machinery
Other installations, equipment & fixtures
IT equipment
Prepayments and construction in progress
12,13
Investment in subsidiaries
Loans to subsidiaries
Investment in associates
Loans to associates
Other investments
Deferred tax asset
Other receivables
Own shares
15
15
16
16
18
5
18
19
Total fixed assets
Current assets
Inventories
Inventories
Prepayments to suppliers
Accounts receivable
Trade accounts receivable
Receivables from subsidiaries
Receivables from associates
Other receivables
Prepayments
32
42
0
0
24
59
3
0
1,914
1,968
175
203
1,941
1,988
1,276
1,389
1
412
62
401
58
1
474
459
7
241
607
599
20
360
46
45
1
17
149
33
4
150
46
406
294
806
799
292
41
304
292
41
304
292
345
292
345
451
805
986
1,185
Total current assets
1,149
1,445
2,558
2,788
Total assets
3,090
3,433
3,834
4,177
Shares
Bonds and other securities
21
22
23
Annual Report 2004
Equity & Liabilities
DKK million
<70
>71
Parent
Note
Equity
Share capital
Retained earnings
Dividend for the year
Group
2004
2003
2004
2003
1,417
911
74
1,417
1,124
72
1,417
985
1,417
1,196
2,402
2,613
2,402
2,613
184
180
Minority interests
Provisions
Provision for deferred tax
Other provisions
Long-term debt
Bank loan
Other long-term debt
Accounts payable to subsidiaries
Short-term debt
Bank loans
Prepayments from customers
Trade accounts payable
Income taxes
Other payables
Deferred income
5
24
11
12
47
16
52
10
11
59
68
78
6
144
84
144
286
37
377
357
1
363
25
25
326
358
326
358
25
25
5
26
Amortisation, depreciation and write-downs
Foreign exchange and interest rate risk
including derivative instruments
Contingent liabilities
Lease obligations
Related parties
10
14
27
28
29
30
3
327
2
427
14
8
22
33
363
9
25
418
8
352
451
1,105
1,172
3,090
3,433
3,834
4,177
Statement of Changes in
Shareholders’ Equity
Group
DKK million
Share
Capital
Retained
Earnings
Equity
1.1.2003
1,459
1,164
2,623
225
-68
-245
225
-68
-245
78
78
38
-38
-42
38
-38
42
1,417
1,196
2,613
229
-72
-143
229
-72
-143
40
40
3
-268
3
-268
985
2,402
Net profit
Foreign currency translation adjustments
Adjustment to unrealised exchange
gains / losses on long-term items hedging
net investments
Realised exchange gains/losses on longterm items where hedging has ceased
Purchase / sale of own shares, net
Reduction in share capital
1.1.2004
Net profit
Adjustment to unrealised exchange
gains / losses on long-term items hedging
net investments
Realised exchange gains/losses on longterm items where hedging has ceased
31.12.2004
1,417
Annual Report 2004
Parent
<72
>73
DKK million
Share
Capital
Retained
Earnings
Dividend
for the Year
Equity
1.1.2003
1,459
1,096
68
2,623
-68
-245
225
-68
-245
78
78
38
-38
42
-72
38
-38
72
1,124
72
2,613
-72
-143
229
-72
-143
40
40
3
-268
-74
3
-268
74
911
74
Net profit
Dividend paid to shareholders
gain / losses on long-term items
(in the Parent Company and in
subsidiaries) hedging net investments
Realised exchange gains / losses on
long-term items (in the Parent Company
and in subsidiaries) where hedging
has ceased
Reduction in share capital
1.1.2004
225
-42
1,417
Net profit
Dividend paid to shareholders
gain / losses on long-term items
(in the Parent Company and in
subsidiaries) hedging net investments
Realised exchange gains / losses on
long-term items (in the Parent Company
and in subsidiaries) where hedging
has ceased
31.12.2004
229
1,417
In the period 2000-2002, no changes in the share capital has taken place.
2,402
Consolidated Statement of Cash Flow
Group
DKK million
Net profit
Depreciation and amortisation
Revaluation of financial current assets
Adjustments to reconcile net profit to net cash flows from operating activities
Changes in working capital
Note
2004
2003
31
32
229
148
-14
29
-55
225
146
-16
-104
-69
337
182
24
-133
8
39
-175
38
-87
Net cash provided in operating activities
Cash flow from investing activities
Dividends received from associates
Investments in intangible assets, and property, plant and equipment
Proceeds from sale of fixed / financial assets
Acquisition of activities
Acquisition of associates
Proceeds from sale of activities
Decrease in fixed assets investments
33
-22
12
25
122
12
Net cash used in investing activities
-86
-51
Net cash provided in operating and investing activities
251
131
Changes in short-term bond and bank loans
Repayment of long-term debt
Proceeds from long-term debt
Changes in shares under current assets
Dividend to minority shareholders in subsidiaries
Purchase of own shares, net
Dividends paid out by the Parent Company
Foreign currency translation and other adjustments
-79
10
-48
56
-7
-268
-72
-32
41
42
-56
-1
-12
-38
-68
132
Net cash used / provided in financing activities
-440
40
Changes in cash and cash equivalents
Cash and cash equivalents at beginning of year
Translation adjustment of cash and cash equivalents
-189
1,489
-22
171
1,383
-65
Cash and cash equivalents at end of period
1,278
1,489
34
Industry Segments
DKK million
Net sales
Annual Report 2004
Nutrition
2004
Industrial
Ingredients
Foods
2003
2004
<74
>75
Moving &
Relocation
Services
Other
Activities
Disposed
Business
2004
Group
2003
2004
2003
2004
2003
2004
2003
1,900 1,764 1,250 1,133
750
652
468
466
96
72
29 4,464 4,116
-2
42
38
1
-1
-5
-5
-17
0
-17
46
- of which non-recurring
Non-recurring items (incl. associates)
Result from operations
Segment operating profit
4
3
-9
180
175
172
175
161
161
68
110
176
64
106
55
93
1
24
26
16
16
9.2
9.9
12.9
15.5
14.1
14.3
5.6
3.4
2003
2004
2003
4
4
-8
435
473
34
-5
51
357
447
13.8
10.6
10.9
Unallocated corporate expenses
Non-recurring items
-78
15
-80
Group operating profit
Group operating margin (%)
410
9.2
367
8.9
Fixed assets
Current assets
Segment assets, end of year
Unallocated corporate assets *
550 595
743 588
1,293 1,183
23
9
340
427
767
384
467
851
69
311
380
72
88
278
366
67
71
123
194
2
69
112
181
2
7
6
-1
-1
6.3 -23.6
61
386
447
-9
91
367
458
-14
2
115
117
9 1,093 1,236
154 2,105 1,966
163 3,198 3,202
88
64
548 911
Total assets
Segment liabilities, end of year
Unallocated corporate liabilities
Liabilities
Interest bearing debt
Minority interests
Equity
3,834 4,177
386
353
161
155
140
119
75
79
61
83
18
Segment invested capital
Unallocated invested capital
Consolidated invested capital
Return on invested capital - Group (%)
Capital expenditure
Unallocated corporate capital expenditure
Total capital expenditure
Segment depreciation/amortisation
Unallocated depreciation/amortisation
Total depreciation/amortisation
40
841 829
37
54
878 883
370 501
184 180
2,402 2,613
3,834 4,177
190 110
-51 -124
676 715
146
-43
499
14
17
538
36
18
269
34
36
247
28
-18
84
20
-13
86
25.2
24.9
31.1
34.0
41.1
36.3
30.6
17.5
50
93
46
102
6
6
18
14
1
1
59
58
63
64
6
5
12
12
3
4
42
45
13.8 -32.1
-14
337 182
-86 -51
-12 1,556 1,619
83
86
1,639 1,705
22.6 29.8 27.2
24.5 21.2
121 216
12
40
133 256
1 143 144
5
2
148 146
* Including bank and cash balances as well as marketable securities in the Parent Company.
Geographical Areas
Asia
DKK million
Net sales
Result from operations incl.
non-recurring items
Segment operating profit
2004
2003
2004
3,118 2,911
47
41
96
-1
2004
2003
2004
2003
72 1,250 1,133 4,464 4,116
-5
0
-2
46
34
404
438
10.6
Unallocated corporate expenses
-70
-71
Group operating profit
Group operating margin (%)
410
9.2
367
8.9
Segment liabilities, end of year
Unallocated corporate liabilities
Liabilities
Minority interests
Equity
Segment invested capital
Unallocated invested capital
Consolidated invested capital
Return on invested capital - Group
Capital expenditure
Unallocated corporate capital expenditure
Total capital expenditure
Segment depreciation/amortisation
Unallocated depreciation/amortisation
Total depreciation/amortisation
242
283
9.7
2003
Group
434
480
10.8
Fixed assets
Current assets
Segment assets, end of year
Unallocated corporate assets *
Total assets
268
315
10.1
South
America
Europe
763 834
1,235 1,105
1,998 1,939
98
78
5 -16
4 -21
4.2 -29.2
161
161
12.9
178
176
15.5
9
122
131
-9
27
141
168
-14
340
427
767
384 1,112 1,245
467 1,784 1,713
851 2,896 2,958
89
64
849 1,155
3,834 4,177
591
80
103
161
155
1,085 1,124
-35
-50
499
538 1,549 1,612
90
93
1,639 1,705
34.0 30.4 26.7
24.5 21.2
102 122 216
11
40
133 256
64 143 144
5
2
148 146
620
28.5
24.0
76
113
80
80
31.1
1
46
63
861 849
17
34
878 883
370 501
184 180
2,402 2,613
3,834 4,177
* Including bank and cash balances as well as marketable securities in the Parent Company.
Notes
Annual Report 2004
<76
>77
Parent
DKK million
1
2
3
4
Group
2004
2003
2004
2003
Losses on sale of properties and activities
Provisions and other charges
3
6
1
11
2
16
Total
3
6
12
18
17
6
71
Gains on sale of properties
Gains on sale of activities
Rental income, management fees
and other
5
5
18
28
Total
5
5
35
105
Financial income / expenses
Financial income:
Receivables from subsidiaries
Other interest income
11
22
14
33
33
43
Gains on marketable securities
Income from other investments
33
15
1
47
16
1
33
15
1
43
16
1
Total financial income
49
64
49
60
Financial expenses:
Payables to subsidiaries
Other interest expenses
13
2
18
4
61
78
Total financial expenses
15
22
61
78
Total translation adjustment and
exchange gains / losses, net
-2
-2
2
-13
Total
32
40
-10
-31
Revaluation of fixed assets
investments
Other
7
2
Total
7
2
Notes
Parent
DKK million
5
Group
2004
2003
2004
2003
Tax on ordinary profit
114
85
119
92
Total taxes charged to income statement
114
85
119
92
Tax payable
Change in deferred tax
Tax related to subsidiaries
Tax related to associates
10
104
1
84
91
16
83
-2
12
11
Total tax charge
114
119
92
30.0
30.0
-3.8
-6.0
1.0
1.6
Tax provision
85
Corporation tax rate adjustments
Danish corporate tax rate (%)
The tax effect from:
Differences from non-taxable income/
non-deductible expenses (%)
Non-tax deductible amortisation
of goodwill (%)
Difference in tax rate of non-Danish
companies (%)
Other including non-capitalised
tax losses (%)
-9.2
-7.1
11.3
8.7
Effective tax rate (%)
29.3
27.2
Group 2004
DKK million
Group 2003
Assets
Liabilities
Assets
Liabilities
29
21
25
5
25
8
57
45
1
6
25
19
Deferred tax assets / liabilities
Set-off within legal tax unit
80
-21
33
-21
109
-30
46
-30
Deferred tax assets / liabilities
59
12
79
16
Deferred tax
Fixed assets
Current assets, net
Losses carried forward
Provisions
2
Notes
Annual Report 2004
<78
>79
Parent
DKK million
Group
2004
2003
2004
2003
0
0
25
28
91
83
83
86
0
33
25
2004
2003
2004
2003
PricewaterhouseCoopers:
Audit
Other assistance
1.2
2.2
1.1
2.2
4.2
2.7
4.3
3.4
KPMG C.Jespersen :
Audit
0.2
0.2
0.2
0.2
7
Average number of employees
33
58
5,739
5,843
8
Salaries, wages and fees, etc.
7
5
488
501
Tax payable
1.1
Movements:
Provision for income taxes
Payment of income taxes
31.12
0
Parent
DKK million
6
Group
Audit fees
Salaries and wages to employees
Salaries, wages and other staff expenses
in branches and representative offices
Salaries to the Executive Board of the
Parent Company
Board fees to the Supervisory Board
of the Parent Company
Early retirement costs for overseas staff
Contribution to pension schemes
Social security and other staff expenses
Total
5
5
5
5
5
2*
2*
4
1
2
20
17
2
4
24
18
532
554
1
15
22
* Including DKK 0.2m (2003, DKK 0.3m) to the chairmanship for special assignments.
Notes
9
Incentive schemes
Share Options
EAC A/S operates two share option schemes (the New Share Option Scheme and the Share
Option / Share Purchase Scheme) for the Executive Board, other Operations Executive Group
members, the Operations Management Team and some other senior executives.
The objective of the Schemes is to enhance the immediate focus on creating shareholder
value by combining the intent of strengthening the Executive Board, other Operations
Executive Group members, the Operations Management Team and a group of other senior
executives commitment to make decisions and act with shareholders’ interest in mind with
the incentive tied to improved share price by creating a direct link between competitive senior
executives rewards and share price gains, while at the same time building long term loyalty
and staff retention.
New Share Option Scheme
The exercise price for the options granted exceeds the market price of the EAC share at
the date of granting.
The exercise of the options granted under this scheme is conditional upon the option holder
being employed by the EAC Group at the time of exercise.
Share Option / Share Purchase Scheme
The exercise price for the options granted exceeds the market price of the EAC share at
the date of granting.
The number of options granted under this scheme is conditional upon the executive’s
purchase of EAC shares at market price, and the exercise of the options granted under this
scheme is conditional upon the option holder being employed by the EAC Group at the time
of exercise.
This Share Option / Share Purchase Scheme expired in 2001 and no future options
will be granted under this scheme. The last tranche of Share Options under this scheme
was taken up in 2002.
Share options are not offered as part of the remuneration of Supervisory Board members
in their capacity as Supervisory Board members. There may, however, be situations where
other senior executives are elected to the Supervisory Board as employee representatives
and receive share options.
Senior Executives’ Share Options
Annual Report 2004
<80
>81
Executive
Board
Other
Operations
Executive
Group
Members
Operations
Management
Team
Other
Senior
Executives
Total
New Share Option Scheme
Outstanding at 1 January 2004
Granted in 2004
Exercised in 2004
Expired in 2004
150,500
25,000
-45,000
97,000
24,000
-32,000
85,000
24,000
-23,000
198,700
68,000
-57,500
-3,200
531,200
141,000
-157,500
-3,200
Outstanding at 31 December 2004
130,500
89,000
86,000
206,000
511,500
15,000
25,000
25,000
25,000
15,500
25,000
6,000
10,000
10,000
24,000
15,000
24,000
10,000
2,000
5,000
5,000
24,000
16,000
24,000
8,000
28,000
61,000
41,000
68,000
10,000
23,000
48,000
68,000
134,000
87,500
141,000
130,500
89,000
86,000
206,000
511,500
6,000
18,800
-18,800
0
25,600
-12,800
12,800
62,400
-37,600
24,800
3,200
9,600
3,200
21,600
12,800
24,800
Share options (number)
Granted in the following years /
exercise period and price:
1999 / 01.09.00 - 31.08.05, DKK 65
1999 / 31.03.02 - 30.03.07, DKK 80
2000 / 17.04.03 - 16.04.10, DKK 109
2001 / 30.03.04 - 29.03.11, DKK 171
2002 / 15.04.05 - 14.04.12, DKK 186
2003 / 28.04.06 - 27.04.13, DKK 172
2004 / 19.04.07 -18.04.14, DKK 292
Share Option / Share Purchase Scheme
Outstanding at 1 January 2004
Exercised in 2004
Outstanding at 31 December 2004
6,000
12,000
-6,000
6,000
Granted in the following years /
exercise period and price:
2000 / 29.03.03 - 28.03.05, DKK 109
2001 / 30.03.04 - 29.03.06, DKK 171
6,000
6,000
6,000
6,000
0
The total value of the outstanding New Share Option Scheme and the Share Option /
Purchase Schemes as of 31 December 2004 was DKK 66.9m of which DKK 11.2m relates
to options allocated in 2004. (Calculated using the Cox, Ross & Rubinstein option formula
including the following assumptions: Volatility 19.65 per cent, Spot Price 285.84, Risk Free
Interest Rate 3.66 per cent, Dividend Yield 1.30 per cent, Latest expiry date, No tenure risk
included, Computed 31.12.04).
Notes
10 Intangible assets
Goodwilll
Know-how,
Trademarks,
Rights, etc
332
-9
205
-2
Group
DKK million
Cost
1.1.2004
Translation adjustments
Additions
Disposals
Reclassification
31.12.2004
Amortisation
1.1.2004
Amortisation for the year
Disposals
Reclassifications
Software
Prepayment and
Construction
in Progress
13
Total
-9
34
-2
17
4
20
-13
584
-13
17
4
-2
323
194
65
0
582
119
-2
16
91
-1
0
-9
21
-2
8
4
7
231
-5
24
4
-2
31.12.2004
133
81
30
0
244
Carrying amount 31.12.2004
190
113
35
0
338
Software
Prepayment and
Construction
in Progress
Total
11 Intangible assets
Parent
DKK million
Cost
1.1.2004
Additions
Reclassification
Know-how,
Trademarks,
Rights, etc
16
5
10
13
13
-13
34
10
0
31.12.2004
16
28
0
44
Amortisation:
1.1.2004
Amortisation for the year
16
0
3
0
16
3
31.12.2004
16
3
0
19
0
25
0
25
Annual Report 2004
<82
>83
12 Property, plant and equipment
Land and
Buildings
Technical
Plant and
Machinery
Other
Installations,
Equipment
and Fixtures
IT
Equipment
Cost
1.1.2004
Translation adjustment
Additions
Disposals
Reclassification
689
-53
4
4
4
554
-45
26
28
-8
276
-22
16
41
30
141
-9
4
14
9
-58
1,716
-134
117
87
-23
31.12.2004
640
499
259
131
60
1,589
247
-29
24
341
-31
44
28
-20
194
-9
33
39
-2
101
-9
23
13
-1
0
883
-78
124
80
-23
31.12.2004
242
306
177
101
0
826
398
193
82
30
60
763
Group
DKK million
Depreciation
1.1.2004
Translation adjustment
Depreciation for the year
Disposals
Reclassification
Prepayment
and
Construction
in Progress
56
-5
67
Total
Finance expenses
Financial leasing
0
0
13 Property, plant and equipment
Land and
Buildings
Other
Installations,
Equipment
and Fixtures
Cost
1.1.2004
Reclassification
2
31.12.2004
Parent
IT
Equipment
Total
5
15
-2
22
-2
2
5
13
20
Depreciation
1.1.2004
Reclassification
1
4
15
-2
20
-2
31.12.2004
1
4
13
18
1
1
0
2
DKK million
Finance expenses
Financial leasing
0
0
The carrying amount of real estate in Denmark is DKK 1m. According to the official land
assessment as of 1.1.2004 the cash value of real estate was DKK 1m.
Notes
Parent
DKK million
2004
Group
2003
2004
2003
83
25
24
16
75
26
26
19
148
146
Investment
in Subsidiaries
Loans
to Subsidiaries
1,911
-143
10
14 Amortisation, depreciation and
write-downs
Amortisation, depreciation and
write-downs of intangible assets
and property, plant and equipment
are included in the profit and loss
account under the following captions,
according to the use of the assets:
Cost of sales
Total
3
1
3
1
15 Investment in subsidiaries
Parent
DKK million
Investment in subsidiaries at equity,
including goodwill 1.1.2004
Foreign currency translation
Additions
Share of profit before tax
Share of taxes on profit
Equity movements in subsidiaries
Dividends
Investment in subsidiaries at equity,
Reclassification of negative equity
to other provisions and receivables
10
383
-89
-46
-159
1,857
20
5
1,862
Investments in subsidiaries as of 31.12.2004 include goodwill of DKK 190m.
20
Annual Report 2004
<84
>85
Group
Investment
in Associates
DKK million
16 Investment in associates
Investment in associates at equity
Additions
Disposals
Share of profit after tax
Dividends
64
-8
24
1
34
24
89
DKK million
17 Number of active companies
Parent Company
Foreign branches
Danish subsidiaries
Foreign subsidiaries
Associates
Total
Parent
DKK million
2004
2003
1
9
37
11
1
2
9
41
11
58
64
Group
Other
Investments
Other
Investments
Other
Receivables
18
64
-3
4
17
2
37
-16
6
50
3
18
36
-1
9
5
18 Other fixed assets investments
Cost
1.1.2004
Additions
Disposals
Reclassification
31.12.2004
Reduction
1.1.2004
Disposals
Reclassification
12
12
10
-8
-5
31.12.2004
6
26
0
0
24
3
Notes
DKK million
Number
of Shares
Nominal
Value
% Share
Capital
1,774,489
124
8.76
19 Own shares
Total 31.12.2004
At year-end the market rate was DKK 285.84. Accordingly the total market value of own shares
was DKK 507m.
157,500 shares have been exercised under ‘New Share Option Scheme’ and 37,600 shares
have been exercised under the ‘Share Option / Share Purchase Scheme’.147,952 shares have
been acquired under a share repurchase programme initiated in November 2003 and 862,027
shares have been acquired under a share repurchase programme of own shares up to a total
amount of DKK 250m, approved at the Annual General Meeting in April 2004.
Parent
DKK million
2004
Group
2003
20 Inventories
Raw materials
Work in progress
Finished goods
Total
2004
2003
159
63
190
149
58
194
0
0
412
401
46
45
136
15
142
8
46
45
149
150
0
292
30
302
0
292
30
302
Total
292
332
292
332
Market value, shares
Market value, bonds
0
292
41
304
0
292
41
304
Total
292
345
292
345
21 Other receivables
Other receivables and prepayments, etc.
Receivables from sale of activities
Total
22 Marketable securities
Cost, shares
Cost, bonds
Danish shares (%)
100
100
Annual Report 2004
<86
>87
Parent
DKK million
23 Bank and cash balances
Cash at bank and in hand
Total
Group
2004
2003
2004
2003
451
805
986
1,185
451
805
986
1,185
At the balance sheet date, cash at bank included cash in various banks denominated
in various currencies.
The weighted average interest rate on short-term bank deposits was 2.26 per cent
as compared to 2.27 per cent in 2003 and these deposits have an average maturity
of six months.
Group
Amount
Group Interest
rate (%)
DKK million
Currency
2004
2003
2004
2003
DKK
USD
MYR
CNY
VEB
Other
357
225
107
123
65
109
691
241
82
54
28
89
2.7
1.8
2.4
1.3
1.1
2.2
2.1
0.9
2.2
1.2
4.1
1.1
Total
986
1,185
2.3
2.3
Provision Relating
to Subsidaries
Other
with Negative
Provisions
Equity
Total
Foreign currency balances are translated at year-end exchange rates.
DKK million
Tax & Duty
Dispute
24 Other provisions
Group
1.1.2004
Utilised
Reclassified
Provided
37
-2
1
15
-2
1
-2
1
52
-4
1
-2
2
31.12.2004
36
11
0
47
1.1.2004
Utilised
6
1
5
11
1
31.12.2004
5
5
10
Parent
Notes
25 Borrowings
The EAC Group has entered into the
following long-term loans:
Loan
Interest Type
USD
Floating
VEB
Floating
HKD
Floating
PHP
Floating
CNY
Floating
Total carrying amount (DKK)
Weighted average interest rate
Group
Group
Carrying
amount
Interest
rate (%)
2004
2003
2004
2003
4
4,911
55
29
8
84
13
5,995
55
31
4.2
144
2.6
14.0
2.6
14.7
1.9
16.2
2.5
13.1
5.0
4.5
Parent
DKK million
Long-term debt
Bank loans
Other long-term debt
Short-term debt
Bank loans
Total borrowings
2004
Group
2003
2004
2003
78
6
144
84
144
286
357
326
358
326
358
327
427
327
427
286
357
653
785
370
501
Annual Report 2004
<88
>89
Maturity of current and non-current
borrowings (excluding finance
lease liabilities)
Group
DKK million
2004
2003
0 - 1 year
1 - 5 years
286
84
357
144
370
501
The EAC Group has a long-term loan with a face amount of USD 100m. The loan agreement
has covenants that gives the lender a right to call the loan, if breached. At the balance sheet
date the EAC Group is in compliance with the covenant.
The EAC Group has the following
undrawn facilities:
Group
DKK million
2004
2003
Committed facilities
Uncommitted facilities
421
374
444
390
Total undrawn current and
non-current facilities
795
834
At 31 December 2004, no EAC Group borrowings were collaterised by assets pledged or
by mortgages.
Parent
DKK million
Group
2004
2003
2004
2003
14
22
363
418
26 Other payables
Other payables
Taxes and duties, accrued interest, etc.
Notes
27 Foreign Exchange and Interest Rate
Risk including Derivative Instruments
It is EAC's policy to hedge financial translation exposures, but equity investments in Group
companies as well as accounting or consolidation exposures connected with translating local
currency results into DKK are not hedged. Foreign exchange exposures are hedged using
foreign exchange contracts, foreign currency loans and currency swaps.
EAC monitors interest rate fluctuations by ensuring appropriate balance between fixed and
floating interest rates, by ensuring a smooth rollover profile, and by matching durations of
assets and liabilities. Interest rate risk are hedged using interest rate swaps.
Balance Sheet Related Currency Risk
as at 31 December 2004
Group
Currency (000)
THB
CNY
MYR
USD
INR
HKD
SGD
PHP
Other (DKK)
Net (DKK)
Exchange
Rate
NetAssets
0.1400
0.6606
1.4387
5.4676
0.1252
0.7031
3.3377
0.0974
1.0000
2,288,098
343,294
167,770
78,386
326,341
147,270
32,755
217,151
22,400
1,514,348
Hedged Amount/
Intercompany
Loan
31,531
-61,795
-110,601
-26,322
827
-482,580
Net PositionLocal Currency
Net PositionDKK
2,288,098
374,825
167,770
16,591
326,341
36,669
6,433
217,978
22,400
320,334
247,609
241,371
90,713
40,857
25,782
21,471
21,231
22,400
1,031,768
1,031,768
Annual Report 2004
<90
>91
Income Statement Related Currency
Risk as at 31 December 2004
Parent
Currency (000)
USD
SGD
EUR
HKD
PHP
CNY
VEB
MYR
Exchange
Rate
Total
Assets
Total
Liabilities
Financial
Contracts
Future Cash
Flow
Net Position
DKK
5.4676
3.3377
7.4381
0.7031
0.0974
0.6606
0.0028
1.4387
21,865
-4,242
-3,709
-1,687
-24,823
-173
-2,170
-20,707
-2,100
-5,254
-5,809
-1,687
-9,610
-173
8,166
6,979,341
25,597
-28,726
-19,389
-12,548
-6,757
-16
5,394
19,877
36,826
Total (DKK)
15,213
8,166
5,779,341
25,597
178,229
1,200,000
-65,591
-1,168
-116,809
-5,339
All of the Parent Company's Income Statement related currency exposures mature in
less than one year.
Group
Currency (000)
USD
SGD
EUR
HKD
MYR
VEB
CNY
Others (DKK)
Total (DKK)
Exchange
Rate
Total
Assets
Total
Liabilities
Financial
Contracts
Future Cash
Flow
Net Position
DKK
5.4676
3.3377
7.4381
0.7031
1.4387
0.0028
0.6606
1.0000
135,109
3,358
1,320
19,922
51,726
147,180,468
124,110
116,469
-137,074
-13,502
-3,635
-44,867
-26,454
-122,474,140
-43,413
-26,853
18,976
2,968
-315
3,998
-32,660
-99,406
-45,981
-555
431
3,670
44,573
505,399
71,887
31,382
-28,970
-7,731
-2,199
-17,277
37,185
25,211,727
152,584
21,592
-158,396
-25,804
-16,356
-12,148
53,498
71,803
100,797
21,592
1,465,799
-1,295,512
-32,266
-103,035
34,986
In addition to above, the EAC has entered into a Currency Option strategy to hedge part
of the inherent NZD currency risk associated with the procurement of milk powder from
New Zealand. This derivative strategy is mark-to-market evaluated and recognised in
accordance with Danish GAAP and IAS 39.
Notes
Interest Rate Sensitivity Parent Company
DKK million
Amount
Duration, years
Risk
Money Market Deposits (DKK)
450
0.1
-
Securities (DKK)
Commercial papers
Mortgage bonds
90
201
0.2
0.8
1.7
Loan, EAC A/S floating (USD)
Loan, Swap 23/03/2005 (USD)
Loan, Swap 23/03/2006 (USD)
-70
33
-33
0.2
0.2
1.2
-0.4
536
-273
-27
0.2
0.1
1.3
-0.3
Interest rate sensitivity (Subsidiaries)
Liquidity (DKK)
Borrowings with interest dur. < 6 months
Borrowings with interest dur. > 6 months
Net interest rate risk (Group)
0.9
The weighted average interest rate is calculated using interest rates on the balance sheet date.
Balances with duration less than six months are in terms of risk management considered risk
free and therefore set at zero in above table.
At the end of 2004 the combined interest rate exposure of the EAC Group was DKK 0.9m.
In other words EAC’s net interest rate cost would increase by DKK 0.9m if interest rates move
up by one percentage point and visa versa. This is assuming a parallel shift of the yield curve
and across different currencies.
Credit Risk
EAC has no significant concentration of credit risk. The EAC Group has policies in place that
ensures that sales of products and services are made to customers with an appropriate credit
history. The credit risk from derivative financial instruments lies in the potential insolvency of a
counterpart and is thus maximally equal to the sum of the positive net market values in respect
of the corresponding business partners. The EAC Group has policies that limit the amount of
credit exposure to any one financial institution.
Notes
Annual Report 2004
<92
>93
Parent
DKK million
28 Contingent liabilities
Book value of pledged assets
Guaranties and similar commitments
relating to subsidaries
Maximum exposure in Parent Company
relating to subsidaries
Other guarantees
Minority shareholders’ portion of
guarantees and pension commitments
2004
Group
2003
113
168
502
636
29 Lease obligations
Lease obligations relate mainly
to leases of production equipment,
offices, vehicles, office equipment etc.
Total commitments fall due as follows:
2004
2005
2006
2007
2008
2009 and later
2003
2
-
37
297
1
8
32
20
11
6
2
Total
30 Related parties
2004
71
33
19
9
5
3
69
The EAC Group has no related parties with controlling interests.
Related parties in the EAC Group comprise affiliated companies and associates, as listed
on pages 96-97, members of the Supervisory Board, Operations Executive Group and other
senior executives.
The EAC Group has certain transactions with associates, which are all performed on arm’s
length basis. Except for inter-company transactions, all performed on arm’s length basis and
eliminated in the consolidated accounts, and salaries on market conditions to the Executive
Board, etc., no other transactions with related parties have taken place during the year.
Notes
Group
DKK million
31 Adjustments to reconcile net profit to net cash flows from operating activities
Minority interests
Share of earnings after tax in associates
Gains / losses and provision relating to fixed assets
Gains / losses relating to acquisition/disposal of activities
Changes in provisions
Tax provided
Deferred tax
Tax paid
Total
32 Changes in working capital
Changes in inventories
Changes in trade accounts receivable
Changes in trade accounts payables
Changes in other receivables / payables
Total
2004
2003
59
-35
-2
-16
-3
91
16
-81
21
-23
-8
-69
-28
82
2
-81
29
-104
-52
-69
33
33
-33
26
-86
24
-55
-69
33 Acquisition of activities
Fixed assets
Inventories
Current receivables
Current liabilities
Minority interests
-81
-29
-2
-1
36
31
Net assets acquired
Goodwill
-46
-42
Total
Cash and cash equivalents in companies acquired
-88
1
Total
-87
34 Proceeds from sale of activities
Fixed assets
Inventories
Current receivables
Current liabilities
Minority interests
2
1
37
9
-48
1
38
4
23
20
-13
Net assets sold
Provision
Profit on sale
2
3
16
72
Total
Cash and cash equivalents in companies sold
21
-9
142
-20
Total
12
122
70
Definitions
Annual Report 2004
Equity per share
Equity divided by the number of shares of DKK 70 nominal value each adjusted for portfolio
of own shares and dilution effect of share options.
<94
>95
Stock exchange quotations /
internal value
Year-end quotation divided by equity per share.
Market value
Year-end stock exchange quotation times number of shares.
EPS
Earnings per share equals net profit in DKK per share of DKK 70 nominal value each adjusted
for portfolio of own shares and dilution effect of share options.
P/E ratio
Year-end stock exchange quotation divided by earnings per share.
Operating margin
Operating profit in per cent of net sales.
Return on invested capital
Operating profit in per cent of average invested capital.
Return on parent equity
Net profit in per cent of equity (average opening/closing balances).
Solvency ratio
Equity in per cent of total assets.
Bank and cash balances and bonds classified as current assets.
Inventories plus trade accounts receivable less trade accounts payable and prepayments
from customers.
Invested capital
Intangible and tangible fixed assets plus investments in associates plus current assets
(excluding receivables from associates, bank and cash balances, shares and bonds) less:
non-interest bearing liabilities and provisions.
Long-term debt plus short-term bank debt, bills payable and accounts payable to associates.
Net interest bearing debt
Interest bearing debt less cash and cash equivalents
Subsidaries, Branches and Associates
Share in %
Share capital
Entities per business
Direct
EAC
100.00
100.00
100.00
100.00
100.00
100.00
80.00
100.00
100.00
100.00
97.18
100.00
100.00
100.00
100.00
100.00
100.00
80.00
100.00
100.00
30.00
97.18
94.95
100.00
100.00
100.00
51.00
50.00
49.00
33.33
40.00
50.00
2.80
99.70
49.00
98.12
93.16
98.12
98.12
98.12
51.00
49.06
100.00
32.70
39.25
49.06
20.19
99.70
100.00
98.12
50.00
100.00
25.00
100.00
100.00
95.00
100.00
100.00
100.00
50.00
50.00
25.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
EAC Nutrition
CNY
USD
DKK
DKK
DKK
INR
MYR
PHP
SGD
SGD
THB
240,000,000
3,700,000
51,000,000
10,010,000
3,100,000
480,000,000
30,000,000
355,000,000
20,000
1,000,000
30,000,000
Representative Office
International Nutrition Co. Ltd., China
Hangzhou Future Nutrition Foods Co., Ltd., China
EAC Nutrition Ltd. A/S, Denmark
INC Shanghai (Holding) Ltd. A/S, Denmark
International Nutrition Co. Ltd. A/S, Denmark
Dumex India Pvt. Ltd., India
Dumex (Malaysia) Sdn. Bhd., Malaysia
Dumex Philippines, Inc., The Philippines
International Nutrition Company Pte. Ltd., Singapore
Unza Indochina Pte. Ltd. Singapore
Dumex Ltd., Thailand
International Nutrition A/S (Vietnam), Vietnam
EAC Industrial Ingredients
USD
MYR
PHP
SGD
THB
THB
THB
THB
THB
THB
THB
THB
THB
THB
6,740,519
2,400,000
60,000,000
7,100,000
150,000,000
40,000,000
112,000,000
3,750,000
115,000,000
10,000,000
121,500,000
1,000,000
216,328,300
900,000,000
Representative Office
PT EAC Indonesia, Indonesia
EAC Industrial Ingredients Sdn Bhd., Malaysia
EAC Industrial Ingredients (Philippines) Inc., The Philippines
EAC Chemicals Singapore Pte. Ltd. Singapore
Asiatic Acrylics Company Ltd., Thailand
Berli Asiatic Soda Co Ltd., Thailand
East Asiatic Service Ltd., Thailand
ICI Paints (Thailand) Ltd., Thailand
INEOS ASIATIC Chemical Company Limited, Thailand
Siri Asiatic Company Ltd., Thailand
Thai Poly Acrylic Public Company Ltd., Thailand
Thai-Dan Corporation Limited, Thailand
Thai-Dan Enterprises Ltd., Thailand
The East Asiatic (Thailand) Public Company Limited, Thailand
EAC Chemicals Singapore Pte. Ltd., Vietnam
EAC Moving & Relocation Services
CNY
CNY
HKD
HKD
HKD
USD
JPY
JPY
MYR
PHP
11,046,000
100,000
600,000
27,000,002
920,000
420,000
252,428,718
10,000,000
355,908
16,000,000
SGD
THB
500,000
45,150,000
Sino Santa Fe International Services Corporation, China
Sino Santa Fe Real Estate (Beijing) Co. Ltd, China
Griffin Travel (HK) Ltd, Hong Kong
Santa Fe Holdings Ltd., Hong Kong
Santa Fe Transport International Limited, Hong Kong
PT Santa Fe Indonusa, Indonesia
Global Silverhawk, Inc., Japan
Santa Fe Transport International (Japan) Ltd., Japan
Santa Fe Relocation Services Sdn. Bhd., Malaysia
Santa Fe Moving & Relocation Services Philippines, Inc.,
The Philippines
Santa Fe Relocation Services (S) Pte. Ltd., Singapore
Santa Fe (Thailand) Ltd., Thailand
Annual Report 2004
<96
>97
Share in %
Share capital
Entities per business
Direct
EAC
67.55
100.00
51.00
100.00
37.55
100.00
51.00
100.00
EAC Foods
VEB
VEB
VEB
VEB
4,995,520,400
12,353,359,010
17,400,000,000
10,145,000,000
Agropecuaria Fuerzas Integradas, C.A, Venezuela
Plumrose Latinoamericana C.A., Venezuela
Procer C.A, Venezuela
I.E.N.C.A Inversiones C.A, Venezuela
Share in %
Share capital
Other entities per country
Direct
EAC
Hong Kong
The East Asiatic Company (Hong Kong) Limited
100.00
100.00
China
Beijing Zhongbao Drinking Water Co Ltd.
The East Asiatic Company (China) Ltd.
34.89
100.00
34.89
100.00
33.84
33.84
Asia
HKD
100,000,000
CNY
USD
2,605,000
10,000,000
INR
246,100,000
MYR
MYR
82,485,300
300,000
Malaysia
EAC Holdings (Malaysia) Sdn. Bhd.
EAC Shared Services Sdn. Bhd.
60.00
100.00
60.00
100.00
SGD
10,000,000
Singapore
The East Asiatic Company (Singapore) Pte. Ltd.
100.00
100.00
India
Global Wool Alliance Ltd.
Europe
DKK
DKK
DKK
DKK
DKK
DKK
87,614,000
1,000,000
600,000
1,000,000
15,000,000
200,000
Denmark
DS Industries ApS
EAC Consumer Products Ltd. ApS
EAC Technical Marketing Services Ltd. ApS
EAC Timber Ltd. A/S
EAC Trading Ltd. A/S
Ejendomsanpartsselskabet af 31. Maj 1996
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
EUR
42,692,981
Germany
Die Ostasiatische Kompagnie G.m.b.H. & Co.
100.00
100.00
Supervisory Board,
Executive Board and
Operations Executive Group
Supervisory Board
Jan Erlund
Chairman
Attorney-at-law, Gorrissen Federspiel
Kierkegaard, Copenhagen
Joined the Supervisory Board 1992.
Born 1939, Danish nationality.
Curriculum Vitae
Partner, Gorrissen Federspiel
Kierkegaard 1996.
President of the Danish Bar Association
1991-1995.
Partner, Gorrissen & Federspiel 1989.
Partner, N J Gorrissen 1971.
Trainee, Haight, Gardner Poor & Havens,
New York 1969.
N J Gorrissen 1965.
Stipendiate Nordic Institute for
Maritime Law 1964-1965.
Graduated Aarhus Universitet 1964.
Other Board Assignments
Chairman of the Board of Directors:
Dansk Skovselskab A/S
Falcon Shipping A/S
Homarus Holding A/S
Member of the Board of Directors:
Bimco Informatique A/S
PSA International Pte Ltd, Singapore
Rederiet Fabricius A/S
Skagerak Holding A/S
Stiftelsen Sorø Akademi
Annual Report 2004
Torsten Erik Rasmussen
Deputy Chairman
President & CEO, Morgan Management
ApS, Bredsten
Curriculum Vitae
President & CEO, Morgan Management
ApS 1997.
International Senior Managers’ Program,
Harvard Business School, Boston 1985.
Executive Vice President, Operations &
Member of the Group Management,
LEGO A/S 1981-1997.
President & CEO, LEGO Overseas
A/S 1978.
Vice President Logistics, LEGO System
A/S 1977.
Head of Logistics, LEGO System
A/S 1975.
CFO, LEGOLAND A/S 1973.
Assistant to Group Management,
LEGO System A/S 1973.
MBA, IMEDE, Lausanne, Switzerland
1972.
Assistant Manager, and later General
Manager, Northern Soft- & Hardwood
Co. Ltd, Congo 1967.
Business trainee, Dalhoff Larsen &
Horneman A/S 1961.
<98
>99
Amadeus Invest A/S
Bekaert Handling Group A/S
Best Buy Group A/S
uni-chains A/S
Deputy Chairman of the Board
of Directors:
Bang & Olufsen A/S
JAI A/S
TK Development A/S
Arvid Nilsson A/S
BISON A/S
Coloplast A/S
ECCO Sko A/S
Louis Poulsen Holding A/S
NatImmune A/S
Outdoor Holding A/S
Scandinavian International Management
Institute (SIMI) Fonden
Schur International A/S
Vestas Wind Systems A/S
Vola Holding A/S
Members
Flemming Aaskov Jørgensen
(Elected by the employees)
Group Director, Group Treasury, EAC,
Singapore
Curriculum Vitae
International Executive Program, INSEAD,
France 2001.
Group Director, Group Treasury 2000.
Departmental Manager, EAC Corporate
Finance 1996.
Portfolio Manager, EAC Corporate
Finance 1994.
Graduate Diploma in Business
Administration (HD), Majoring in Finance,
Odense University, Denmark 1992.
Portfolio Manager, Sydbank A/S 1990.
Corporate FX dealer, Sydbank A/S 1987.
Apprentice, Sydbank A/S 1985.
Resignation from the Supervisory Board
Following his resignation from EAC,
Mr Flemming Aaskov Jørgensen will,
accordingly, resign from the Supervisory
Board on 30 April 2005.No replacement is
currently planned.
Winston Yau-Lai Lo
Executive Chairman, Vitasoy International
Holdings Ltd, Hong Kong
Born 1941, Chinese nationality.
Curriculum Vitae
Member of the National Committee of
Chinese Political Consultative Conference
1993.
Executive Chairman, Vitasoy International
Holdings Ltd 1994.
Managing Director, Vitasoy International
Holdings Ltd 1978.
General Manager, Vitasoy International
Holdings Ltd 1975.
Dept Head of Quick Food Division, Vitasoy
International Holdings Ltd 1972.
Technical Director, Vitasoy International
Holdings Ltd 1969.
Research Assistant, Vitasoy International
Holdings Ltd 1967.
Master’s Degree, Food Science, Cornell
University 1967.
Bachelor’s Degree, Food Science,
University of Illinois 1965.
Bank of East Asia, Limited
Annual Report 2004
Knud Mohr
Export Manager, International Nutrition
Co. Ltd A/S, Copenhagen
Curriculum Vitae
MBA, Henley Management College,
UK 2005.
Export Manager, INC, Copenhagen 2005.
Business Development Manager,
EAC Trading, Copenhagen 2001-2004.
Young Managers’ Programme, INSEAD,
Fontainebleau, France 2000.
Trainee, EAC Informatics Division
1988-1990.
>100
<101
Tan Yam Pin
Chartered Accountant, Singapore
Born 1940, Singaporean nationality.
Curriculum Vitae
Managing Director, Fraser and Neave
Group of Companies, Singapore
1993-2002.
Director and CEO, Asia Pacific Breweries
Group 1990.
Group General Manager, Asia Pacific
Breweries Group, Singapore 1981.
Financial Controller to Group General
Manager, Cold Storage Holdings Ltd,
Singapore 1971.
Chartered Accountant, The Canadian
Institute of Chartered Accountants 1969.
Audit Manager, Thome Gunn & Co.,
Chartered Accountants, Vancouver,
Canada 1968.
Lecturer, Business Administration,
University of Singapore 1965.
MBA, University of British Columbia,
Canada 1965.
BA (Hons), University of Singapore 1962.
BHP Steel Limited, Australia
International Enterprise Singapore
Keppel Land Limited, Singapore
PowerSeraya Limited, Singapore
The Great Eastern Holdings Limited,
Singapore
Kaare Vagner
Managing Director, N&V Holding ApS,
Odense
Curriculum Vitae
Managing Director, N&V Holding ApS,
Denmark 1999.
President and CEO, Adtranz (DaimlerBenz Transportation Ltd), Berlin 1996.
Executive Vice President and member of
the Group Executive Committee,
ABB Ltd, Zurich, 1993.
President and CEO, ASEA Brown Boveri
A/S, 1988.
President & Country Manager, ASEA
Danmark A/S, 1986.
Executive Vice President, LK-NES A/S,
1982.
General Factory Manager, Danavox A/S,
1979.
Production Manager, De Danske
Sukkerfabrikker, 1972.
Naval Officer, Royal Danish Navy, 1969.
LKE Electric Europe A/S
Næsby Maskinfabrik A/S
Rederiet Fabricius A/S
Riegens A/S
Riegens Lighting Ltd
Riolux j.s.c.
Sea Invest Chartering A/S
Skygate Holding A/S
Strandøre Invest A/S
Deputy Chairman of the Board
of Directors:
BaneDanmark A/S
Sea Saigon Shipping Ltd
Ole P. Wissing
Commercial Director, EAC Industrial
Ingredients, Thailand
MS Invest A/S
Odense Congress Center A/S
SILVATEC A/S
SILVATEC Skovmaskiner A/S
SKAKO A/S
Strandøre Management A/S
Curriculum Vitae
Commercial Director, EAC Industrial
Ingredients, Thailand 1998.
Management positions within EAC,
including Corporate Vice President,
Corporate Office, EAC Copenhagen
from 1983 until 1998.
President, EAC USA Inc., New York,
USA 1980.
Assigned to EAC’s import / export
activities in Thailand 1964.
Apprentice, EAC 1958.
Annual Report 2004
Supervisory Board
01
02
03
04
05
06
07
08
Supervisory Board
01 Jan Erlund
02 Torsten Erik Rasmussen
03 Knud Mohr
04 Winston Yau-Lai Lo
05 Tan Yam Pin
06 Ole P. Wissing
07 Flemming Aaskov Jørgensen
08 Kaare Vagner
>102
<103
Operations
Management Team
01
02
03
04
05
06
07
Operations Management Team
01 Mark A. Wilson
02 Niels Henrik Jensen
03 Iqbal Jumabhoy
04 Lars Lykke Iversen
05 Jan Dam Pedersen
06 Bent Ulrik Porsborg
07 Christopher R. Stratton
Executive Board
Mark A. Wilson
Managing Director
Chairman or member of the Board
of a number of EAC subsidaries.
Operations Executive Group
Mark A. Wilson
President & Chief Executive Officer
Niels Henrik Jensen
Executive Vice President
Iqbal Jumabhoy
Executive Vice President and
Chief Financial Officer
East Asiatic House
20 Indiakaj
DK-2100 Copenhagen Ø
Denmark
www.eac.dk
CVR No. 26 04 17 16
Shareholders’ Secreteriat
+45 35 25 43 00 Telephone
+45 35 25 43 13 Telefax
investorinformation@eac.dk
EAC Group Operational Centre
The East Asiatic Company
(Singapore) Pte Ltd
47 Scotts Road
#06-00 Goldbell Towers
Singapore 228233
Republic of Singapore
+65 6213 9000 Telephone
+65 6735 0020 Telefax

AR2004

Transcription

Similar documents

Making the case for Shared Risk Contracts!

Non-life insurance

InterMail has a strong standing within digital and mail

Impact of Piracy on Cultural Diversity of European Music

egypt - African Development Bank

March 2016

Fall 2015 - Quilts Kingston

The euro banknotes and coins

this edition

Being an Equity-Oriented Leader

2013 - Euroland