http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/RSS.ashxRoyal Greenland PagesTue, 24 Jan 2012 14:36:06 +0100http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=1http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=1AnnuAl RepoRt Royal Greenland A/S - 2010/11 October 1st 2010 – September 30th 20112012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=2http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=22012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=3http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=3Royal Greenland A/S - 2010/11 October 1st 2010 – September 30th 2011 AnnuAl RepoRt Reg.no. 184.991 The annual report has been prepared and approved by the ordinary Annual General Meeting on January 23rd 2012 Gedion Jeremiassen Chairman of the Annual General Meeting2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=4http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=4COnTenTS StatementS and reportS Statement by the Management on the Annual Report - 5 Auditors’ report - 5 annual review Company details - 6 Group chart - 6 Supervisory Board and executive Board - 7 The Royal Greenland fleet - 8 Production units - 10 Financial highlights and key ratios -14 Management’s review - 15 Corporate Governance - 29 annual report Accounting policies - 31 Income statement October 1st 2010 – September 30th 2011 - 37 Balance sheet at September 30th 2011 - 38 Statement of changes in equity - 40 Consolidated cash flow statement October 1st 2010 – September 30th 2011 - 42 notes to the annual report - 432012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=5http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=5Royal Greenland A/S - 2010/11 5 Reports Statement by the management on the annual report The Supervisory and Executive Boards have today considered and adopted the annual report of Royal Greenland A/S for the financial year October 1st 2010 – September 30th 2011. The annual report has been presented in accordance with the Danish Financial Statements Act. We consider the applied accoun­ ting policies appropriate for the annual report to provide a true and fair view of the Group’s and the Parent’s assets, equity and liabilities, financial position, financial performance, results and the consolidated cash flow. We recommend the annual report for adoption at the Annual General Meeting. Copenhagen, December 14th 2011 executive Board Mikael Thinghuus Supervisory Board Niels Harald de Coninck­Smith Otto Eliassen Sara Heilmann Lars Berthelsen Niels Ole Møller Nils Duus Kinnerup Sven Lyse Marie Fleischer Svend Bang Christiansen Peter Korsbæk to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. auditors’ responsibility and basis of opinion Our responsibility is to express an opinion on the annual report based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the annual report is free from material misstatement. An audit involves performing procedures to obtain audit evi­ dence about the amounts and disclosures in the annual report. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of annual report, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and presentation of consolidated financial statements and parent company financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriate­ ness of accounting policies used and the reasonableness of ac­ counting estimates made by Management, as well as evaluating the overall presentation of the annual report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. opinion In our opinion, the annual report gives a true and fair view of the Group’s and the parent company’s financial position at 30 September 2011 and of the results of the Group’s and the par­ ent company’s operations and consolidated cash flows for the financial year 1 October 2010 – 30 September 2011 in accordance with the Danish Financial Statements Act and Danish Accounting Standards. Copenhagen, December 14th 2011 KpmG Grønland - Statsautoriseret Revisionsanpartsselskab Claus Hammer­Pedersen ­ State Authorised Public Accountant Jens Weiersøe Jakobsen ­ State Authorised Public Accountant independent auditors’ report to the shareholder of royal Greenland a/S We have audited the annual report of Royal Greenland A/S for the financial year 1 October 2010 – 30 September 2011, comprising the statement by the Executive Board and the Supervisory Board, Management’s review, accounting policies, income statement, balance sheet, statement of changes in equity and notes for the Group as well as for the parent company and consolidated cash flow statement. The annual report is prepared in accordance with the Danish Financial Statements Act and Danish Accounting Standards. management’s responsibility Management is responsible for the preparation and presentation of an annual report that gives a true and fair view in accordance with the Danish Financial Statements Act and Danish Acco2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=6http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=6ANNuAL REvIEW Company detailS Royal Greenland A/S Qasapi 4 P.O. Box 1073 3900 nuuk Telephone: +299 32 44 22 Telefax: +299 32 33 49 www.royalgreenland.com Reg.no. 184.991 FinanCial year: October 1st – September 30th reGiStered in: Kommuneqarfik Sermersooq The Government of Greenland owns all shares in the Company. auditorS: KPMG Grønland Statsautoriseret Revisionsanpartsselskab GROuP CHART ROYAL GREENLAND A/S Royal Greenland Seafood A/S ­ 100% ­ Royal Greenland Seafood GmbH ­ 100% ­ Royal Greenland Seafood Sp. zoo ­ 100% ­ Eastern Quebec Seafoods Ltd. ­ 100% ­ Royal Greenland Norway AS ­ 100% ­ Royal Greenland Sweden AB ­ 100% ­ Royal Greenland uK Ltd. ­ 100% ­ Royal Greenland France S.A.S. ­ 100% ­ Royal Greenland Japan Ltd. ­ 100% ­ Royal Greenland Inc. ­ 100% ­ Iquique u.S. LLC ­ 18,63% associated ­ Royal Greenland GmbH ­ 100% ­ Royal Greenland Italy Spa. ­ 100% ­ Fishinsea Denmark A/S ­ 47,5%, associated Nuussuaq Fish ApS ­ 100% Sandgreen ApS ­ 100% 7170629 Canada Inc. ­ 100% Ittu A/S ­ 100% Kuunnaat Trawl A/S ­ 100% Gaia Fish A/S ­ 50% Ice Trawl Greenland A/S ­ 50% ­ Qaleralik A/S ­ 50%, associated ­ Gaia Fish A/S ­ 50% Associated companies ­ upernavik Seafood A/S ­ 50% ­ Agama Royal Greenland LLC ­ 50% ­ Angunnguaq A/S ­ 49,4% ­ Frans Peter ApS ­ 43,6% ­ Polar Raajat A/S ­ 43% ­ Lennert og Sønner ApS ­ 40% ­ Savik ApS ­ 35% ­ Ejendomsselskabet Suliffik A/S ­ 30,3% ­ Sisimiut Fish ApS ­ 30% ­ Akia Sisimiut A/S ­ 17,5%2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=7http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=7Royal Greenland A/S - 2010/11 7 SuPERvISORY BOARD nielS Harald de ConinCK-SmitH Sven lySe Svend BanG CHriStianSen Chairman Deputy Chairman Boardmember marie FleiSCHer Sara Heilmann otto eliaSSen Boardmember Boardmember Boardmember larS BertHelSen *) peter KorSBÆK *) nielS ole mØller *) Boardmember Boardmember Boardmember ExECuTIvE BOARD miKael tHinGHuuS nilS duuS Kinnerup CeO CFO *) employee representatives The managerial positions held by members of the Supervisory Board and Executive Board are shown in note 282012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=8http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=8THE ROYAL GREENLAND FLEET Royal Greenland’s fleet consists of three ocean­going prawn production trawlers, an ocean­going trawler for catches of halibut, cod, redfish, etc., and a number of vessels for coastal fishing. The ocean­going trawlers are floating factories, equipped to catch and process prawn, cod, halibut, haddock, redfish and coalfish. The prawns are boiled and frozen on board, and the fish are fil­ leted and frozen as high­quality frozen­at­sea products, or cleaned for further processing on shore. The ocean­going trawlers mainly operate off the coast of Greenland and in the Barents Sea. Royal Greenland’s trawler division is responsible for operating a modern, hi­tech fleet. We continually work to reduce fuel con­ sumption and promote the use of gentle catch methods. All trawls used in our own fishing are equipped with Nordmore grates and panels in order to reduce unwanted bycatch as much as possible. The smaller, coastal vessels supply raw materials such as prawn and halibut directly to our land­based factories along the west coast of Greenland. In addition to our own fleet, we also work closely with local craft and independent fishermen who land their catches at Royal Greenland. aKamaliK - 2001 length/width: 75,8 x 14,5 m production capacity: 110 tons/day Catch capacity: 7-10,000 tons/year Hold capacity: 450-750 tons Crew: 22-26 trawler type: Ocean-going prawn trawler ownership: RG 100% QaQQatSiaQ - 2002 length/width: 70 x 14,6 m production capacity: 110 tons/day Catch capacity: 7-10,000 tons/year Hold capacity: 450-750 tons Crew: 22-26 trawler type: Ocean-going prawn trawler ownership: RG 100% SiSimiut - 1992 length/width: 66 x 14 m production capacity: 25-30 tons/day Catch capacity: 5-6,000 tons/year Hold capacity: 750 tons Crew: 24-34 trawler type: Ocean-going fish trawler ownership: RG 100% nataarnaQ - 2001 length/width: 67,5 x 14,5 m production capacity: 110 tons/day Catch capacity: 7-10,000 tons/year Hold capacity: 600 tons Crew: 22-24 trawler type: Ocean-going prawn trawler ownership: RG 50%2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=9http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=9Royal Greenland A/S - 2010/11 9 lomur - 1988 length/width: 43,2 x 9,6 m production capacity: 60 tons/day Catch capacity: 6,000 tons/year Hold capacity: 130 tons Crew: 11 trawler type: Coastal prawn trawler ownership: RG 50% SermiliK - 1986 length/width: 26 x 8 m production capacity: 20 tons/day Catch capacity: 2,500 tons/year Hold capacity: 45 tons Crew: 6-9 trawler type: Coastal prawn trawler, iced prawns ownership: RG 100% ittut - 1988 length/width: 22,2 x 9,2 m production capacity: 20 tons/day Catch capacity: 1,600 tons/year Hold capacity: 40 tons Crew: 6-9 trawler type: Coastal prawn trawler, iced prawns ownership: RG 100% nielS - 2002 length/width: 14,3 x 4,52 m production capacity: 3 tons/day Catch capacity: 150-300 tons/year Hold capacity: 14 tons Crew: 3-5 trawler type: Coastal halibut vessel ownership: RG 100% aBidtleraQ - 1993 length/width: 19,4 x 5,2 m production capacity: 3 tons/day Catch capacity: 150-300 tons/year Hold capacity: 30 tons Crew: 3-5 trawler type: Coastal halibut vessel ownership: RG 100% laila S - 2004 length/width: 14,4 x 5,2 m production capacity: 3 tons/day Catch capacity: 1,600 tons/year Hold capacity: 15 tons Crew: 3-5 trawler type: Coastal halibut vessel ownership: RG 100%2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=10http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=10PRODuCTION uNITS, GREENLAND uummannaq uuM Nuugaatsiaq Nuu ukkusissat uKK Saattut SAA Ikerasak IKE Qaarsut QAA Qeqertarsuaq QEQ Ilulissat ILu Saqqaq SAQ Kangaatsiaq KAN Niaqornaarsuk NIQ Ikerasaarsuk IKK Qasigiannguit QAS Sisimiut SIS Paamiut PAA Nuuk Nuu Kangaamiut KAT Atammik ATA Qeqertarsuatsiaat QET Narsaq NAR Arsuk ARS production units, Greenland Royal Greenland’s 21 factories and first sales plants in Greenland are scattered along the west coast of the country from uumman­ naq in the north to Narsaq in the south. Our Greenlandic production is based on local species, the most important of which are prawn, cod, halibut, snowcrab and lump­ fish roe. The production units in Greenland produce both finished products, such as prawns and natural fillets, and semi­processed products for further processing at our other production sites.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=11http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=11Royal Greenland A/S - 2010/11 11 OTHER PRODuCTION uNITS Aalborg Glyngøre Koszalin Matane, Canada Cuxhaven Wilhelmshaven other production units Royal Greenland’s production units outside Greenland work both with further processing and packing of the Greenlandic raw mate­ rials, as well as processing of external raw materials. In Denmark, Royal Greenland owns and operates two production units: the central prawn packing plant in Aalborg, and the MAP and brine products factory in Glyngøre. In Germany and Poland, the company operates three production units. The factories in Wilhelmshaven in Germany and Koszalin in Poland are the focal point for the production and processing of highly competitive products in which efficiency, price and low margins are key concepts. Through the acquisition of the roe factory in Cuxhaven, Royal Greenland has achieved significant synergies between this production and the supply of lumpfish roe in Greenland. In Canada, a prawn processing plant is operated in Matane, pro­ ducing MSC­certified boiled and peeled prawns.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=12http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=12PRODuCTION uNITS, GREENLAND Factory manager: Abia Thorsteinsen main species: Halibut Finished products: Whole halibut, heads, tails, fillets Capacity: 40 tons/day Cold store capacity: 1,100 tons number of employees: 10 low- / 50 high season uummannaQ - 1949 The current location dates from 1966, but the plant has been expanded in several stages, most recently in 2003. Factory manager: Johanne Knudsen main species: Halibut Finished products: J-cut, heads, tails, whole fish Capacity: 4,5 tons/day Cold store capacity: 100 tons number of employees: 1 low- / 10 high season nuuGaatSiaQ - 1990 Factory manager: Job Mikaelsen main species: Halibut Finished products: J-cut, heads, tails, whole fish. In winter, drying of halibut strips Capacity: 4,5 tons/day Cold store capacity: 100 tons number of employees: 1 low- / 10 high season Factory manager: Marie Knudsen main species: Halibut Finished products: J-cut, heads, tails, whole fish Capacity: 7 tons/day Cold store capacity: 400 tons number of employees: 1 low- / 15 high season The current plant was rebuilt in 1998, when the large cold store also came into use. uKKuSiSSat - 1989 Saattut - 1986 Factory manager: elisabeth Filemonsen main species: Halibut Finished products: Whole fish, fillets, with/ without skin Capacity: 20 tons/day Cold store capacity: 80 tons number of employees: 2 low- / 25 high season iKeraSaK - 1990 The plant has been rebuilt to a lesser degree since its establishment. QaarSut - 1995 Factory manager: Managed from Uummannaq main species: Roe in season Finished products: Roe in barrels Capacity: 5 tons/day Cold store capacity: no cold store number of employees: 0 low- / 6 in the roe season Factory manager: Knud Mølgård main species: Crab, cod, roe Finished products: Crab sections, fish blocks, roe in barrels Capacity: 10 tons/day crab, 1 ton/day fish Cold store capacity: 100 tons number of employees: 3 low- / 30 high season QeQertarSuaQ - 1934 The plant has previously produced prawn, meat and frell, and now produces crabs and fish. iluliSSat - 1920s Factory manager: niels Ole Møller main species: Prawn, halibut Finished products: IQF prawns, shrimpmeal, whole halibut, cod Capacity: 120 tons/day prawns, 20 tons/day fish Cold store capacity: 1600 tons number of employees: 100 low- / high season The current factory was established in 1961 and rebuilt several times. new halibut factory opened 1998, closed 2009. Prawn factory renovated in 2010. Factory manager: Ole Vestergård main species: Halibut, other fish, roe Finished products: Halibut fillet, frell, heads, IQF fillets, loins Capacity: 25 tons/day halibut Cold store capacity: 1,800 tons number of employees: 130 low- / high season QaSiGiannGuit - 1940s Rebuilt to prawn factory in 1952, rebuilt in 1960 and several more times until closure in 1997. Current new factory opened 2000. Factory manager: Rune Berthelsen main species: Cod, roe Finished products: Salt fish Capacity: 5 tons/day Cold store capacity: no cold store number of employees: 1 low- / 10 high season Rebuilt and renovated in 1995. niaQornaarSuK - 1948 Factory manager: nielsine Hansen main species: Halibut, other fish Finished products: Whole halibut in blocks Capacity: 8 tons/day Cold store capacity: 80 tons number of employees: 2 low- / 10 high season The plant burned down in 2003, and the current plant opened in 2005. SaQQaQ - 1983 Factory manager: Olina Themothæussen main species: Cod, roe Finished products: Cod in blocks, roe in barrels Capacity: 15 tons/day freezing Cold store capacity: 100 tons number of employees: 2 low- / 25 high season The factory was refurbished/rebuilt in 1986 to its current form, for cod production. Today, cod and other fish are frozen, and roe is processed in season. Factory manager: Lars Karlsen main species: Cod, roe Finished products: Salt fish Capacity: 5 tons/day Cold store capacity: no cold store number of employees: 1 low- / 10 high season Renovated in 1995. iKeraSaarSuK - 1950 SiSimiut - 1914 KanGaatSiaQ - 1950erne Factory2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=13http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=13Royal Greenland A/S - 2010/11 13 PRODuCTION uNITS, GREENLAND Factory manager: Theo Didriksen main species: Cod, halibut, redfish, catfish, roe Finished products: Roe, fish for export, domestic market products Capacity: 18-20 tons/day Cold store capacity: 200 tons number of employees: 12 low- / 40 high season nuuK - 1959 Godthåb Fiskeindustri taken over in 1990, prawn production ceased in 2002. OTHER PRODuCTION uNITS Factory manager: Jack Møller main species: Prawn Finished products: Retail and food service shellfish packing Capacity: 15-18,000 tons/year number of employees: 50-70 low- / high season lanGeraK - 1988 Factory manager: Peter Kreutzmann main species: Cod, catfish, halibut, roe Finished products: Whole fish, winter-dried cod, catfish strips, roe in barrels Capacity: 5 tons/day Cold store capacity: 30 tons number of employees: 4 low- / 16 high season Renovated in 1994/5. KanGaamiut - 1944 GlynGØre - 1982 Factory manager: Jack Møller main species: Prawn, crayfish tails, surimi Finished products: Brine and MAP products Capacity: Brine products 7-8 tons/day, MAP 25 tons/day number of employees: 70-80 low- / high season Factory manager: Mikael Poulsen main species: Cod, catfish, roe Finished products: Whole fish, salt fish, roe in barrels Capacity: 3 tons freezing, 4 tons salting/day Cold store capacity: 8 tons number of employees: 4 low- / 20 in the roe season atammiK - 1992 wilHelmSHaven - 1996 Factory manager: Allan Jensen main species: Alaska pollack, cod, hake, hoki Finished products: Fish fingers, natural fillets, gourmet fillets, Fish ‘n’ Chips Capacity: 80,000 ton/year number of employees: 420 low- / high season Factory manager: Konrad Boye main species: Cod, roe Finished products: Salt fish, IQF cod, roe in barrels Capacity: 8 tons/day Cold store capacity: 80 tons number of employees: 6 low- / 16 high season QeQertarSuatSiaat - 1983 CuXHaven - 2010 Factory manager: Helgi Helgason main species: Lumpfish roe Finished products: Lumpfish roe in jars Capacity: 125,000 jars/day number of employees: 19 low- / 60 high season Factory manager: Pele nathansen main species: Crab, cod, roe, other fish Finished products: Crab sections, fish blocks Capacity: 10 tons/day crab Cold store capacity: 500 tons number of employees: 10 low- / 50 high season Converted from cod production to smokehouse in 1997. Closed 2003. Prawn and crab production established in 2004. Factory manager: Meinhard Jacobsen main species: Plaice, flounder, cod Finished products: Breaded flatfish with filling, natural fillet, salmon sides with topping Capacity: 20,000 tons/year number of employees: 425 low- / high season paamiut - 1920 KoSZalin - 2006 Factory manager: niels Peter Mikaelsen main species: Cod, roe Finished products: IQF cod, roe in barrels Capacity: 5 tons/day Cold store capacity: 80 tons number of employees: 1 low- / 6 high season Factory manager: Lars Juul Petersen main species: Prawn Finished products: Cooked and peeled prawns Capacity: 30 tons/day number of employees: 120 low- / high season arSuK - 1973 matane - 2006 Factory manager: niels Sakariassen main species: Roe, cod, halibut Finished products: Roe, whole fish Capacity: Fish freezing, 20 tons/day Cold store capacity: 600 tons number of employees: 1 low- / 15 high season Built as lamb slaughterhouse and for cod production in 1951. Slaughterhouse sold in 1995. Converted to prawn production in 2003, transferred to seasonal production in 2009. narSaQ - 19512012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=14http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=14FINANCIAL HIGHLIGHTS AND KEY RATIOS PROFIT/LOSS Key FiGureS - dKK mill. net revenue Profit from ordinary operating activities (eBIT) net financials net profit before tax net profit for the year 2010/11 2009/10 4,724 171 (40) 131 79 4,249 73 (88) (15) (43) 2008/09 4,741 (86) (124) (210) (196) 2007/08 5,173 50 (99) (49) (78) 2006/07 5,130 98 (34) 63 52 BALANCE SHEET Key FiGureS - dKK mill. Fixed assets net working capital equity net interest-bearing debt Balance sheet total Investments in property, plant and equipment 2010/11 2009/10 1,303 1,480 882 1,773 3,934 130 1,334 1,545 803 1,976 3,652 98 2008/09 1,365 1,411 831 1,859 3,704 168 2007/08 1,452 1,814 816 2,340 3,867 221 2006/07 1,431 1,826 894 2,233 3,951 236 RATIOS IN % 2010/11 2009/10 eBIT-margin eBT-margin ROIC including goodwill Return on equity (ROe) equity ratio net interest-bearing debt / eBITDA 3.6 2.8 6.8 10.2 22.4 4.9 1.7 (0.4) 2.9 (4.3) 22.0 8.0 2008/09 (1.8) (4.4) (3.0) (23.4) 22.4 18.8 2007/08 1.0 (0.9) 1.7 (8.8) 21.1 10.5 2006/07 1.9 1.2 3.4 6.7 22.6 9.0 NuMBER OF EMPLOYEES 2010/11 2009/10 Greenland Denmark Other locations total 793 236 859 1,888 826 251 857 1,934 2008/09 855 297 928 2,080 2007/08 1,015 386 812 2,213 2006/07 1,003 418 621 2,0422012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=15http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=15Royal Greenland A/S - 2010/11 15 review Management’s 2010/11 naleraq 2013 – a new agenda In the wake of the turnaround achieved in the last financial year, the new management team has laid down a new agenda and drawn up a new strategy for Royal Greenland. The Naleraq 2013 strategy is based on dividing Royal Greenland into two business areas, each with its own agenda. The North Atlantic business area relies on the species of fish that are native to the North Atlantic, and encompasses the Company’s activities in Greenland, Denmark and Canada. The European business area is based on products from the factories in Germany and Poland. The main task of the North Atlantic business is the optimisation of value on the basis of a limited resource, while the key words for the European business are continued growth in a market with low margins. The strategy process has defined seven overall projects • Structure and reporting • Sales-promoting activities • Optimisation of purchasing • Production optimisation • Factory structure • Administrative structure • Working capital The projects are defined within each business area, with different content, in accordance with the two different agendas. The strategy process sharpens the Company’s market­oriented focus and the process of change that the organisation has under­ gone in the past few years. The aim is to double operating profit in three years, and thereby create an attractive company on the basis of the two business areas, to the benefit of Royal Greenland’s owners, the govern­ ment of Greenland. However, it will also be necessary to reduce Royal Greenland’s interest­bearing debt from present DKK 1.8 billion to a level of around DKK 1 billion, so that the Company can achieve sufficient financial freedom to pursue its strategic objectives. The financial year 2010/11 has confirmed the value of the policy laid down by Naleraq 2013. Net profit for the year amounted to DKK 79 million, corresponding to a profit improvement of DKK 122 million. Operating profit was DKK 171 million, corresponding to a margin of 3.6%, as against 1.7% last year. At the same time, interest­bearing debt has been reduced by DKK 203 million. The Company’s financial performance has lived up to expectations and is thus satisfactory.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=16http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=16With its natural starting­point in Greenland, Royal Greenland’s overall objective is to be the leading supplier of North Atlantic seafood and related products. This focus is capable of making Royal Greenland one of the most profitable companies in the industry, while at the same time al­ lowing Royal Greenland to act responsibly in Greenlandic society, where the Company plays a very important role. We wish to have a strong presence in the awareness of the Greenlandic population, and we wish to be an attractive employ­ er, both inside and outside the country. Our strategic focus is simple and attractive. Our behaviour must in all ways correspond to the high quality of our products. The increased revenues are attributable to the North Atlantic products, with very positive trends in shell­on prawns, boiled and shelled prawns, lumpfish roe and crab, in particular. It is particu­ larly gratifying to note that the expansion of the lumpfish roe business through the purchase of the factory in Cuxhaven in 2010 has been an economic asset. European operations have experienced a decline due to lower earnings in the range from Wilhelmshaven, despite higher volumes. In this context it should however be noted that the financial year 2009/10 was a very good year for Wilhelmshaven. Activities in Koszalin, Poland, have continued to show a positive trend in both volume and earnings. Financial items have fallen by DKK 39 million, which is attribu­ table to favourable currency hedges for uSD and GBP relative to the current exchange rate. Conversely, provisions of DKK 25 million more have been set aside for tax due to the positive trends in the Greenlandic products. The effective tax rate is now 31%. Pre­tax profit amounts to DKK 131 million, as against DKK (15) million last year. interest-bearing debt (dKK mill.) interest-bearing debt / eBitda Accounts The profit improvement in 2010/11 is based on an 11% growth in turnover and significantly improved operating earnings. net turnover (dKK mill.) eBit-margin (%) 5,200 5,000 4,800 4,600 4,400 4,200 4,000 2006/07 2007/08 2008/09 2009/10 2010/11 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2,500 20 18 2,000 16 14 1,500 12 10 1,000 8 6 500 4 2 0 0 2006/07 2007/08 2008/09 2009/10 2010/11 Growth has been realised in both volume and prices. Growth was achieved in all major markets, with Asia and Scandinavia showing particular improvement. The increase in turnover has at the same time been favoured by the market situation, especially in prawns and halibut, resulting in significant price rises. eBit (dKK mill.) 200 150 100 50 0 -50 -100 -150 -200 2006/07 2007/08 2008/09 2009/10 2010/11 Interest­bearing debt has been reduced by DKK 203 million, and comprises a factor of 4.9 in relation to EBITDA, as opposed to 8.0 last year. In 2008/09, the interest­bearing debt was 18.8 times EBITDA. This trend is driven by a reduction in working capital, as well as by positive trends in financial performance. Working capital has fallen from DKK 1,545 million to DKK 1,480 million, but has been influenced by rising inventories due to rising prices in raw materials. At the same price levels as last year, inventories, and thereby working capital, would have been DKK 350 million lower. Working capital remains high, and as part of the Naleraq 2013 strategy, work is being done on a series of initiatives to further reduce this. result (dKK mill.)2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=17http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=17Royal Greenland A/S - 2010/11 17 Balance (dKK mill.) equity ratio (%) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006/07 2007/08 equity (dKK mill.) 23.0% 22.5% 22.0% 21.5% 21.0% 20.5% 20.0% 2008/09 2009/10 2010/11 Sales/market After a number of years of falling revenue as a consequence of difficult market conditions and structural adjustments, Royal Greenland is now once again a company in growth. In 2010/11, revenue amounted to DKK 4.7 billion, as against DKK 4.2 billion in 2009/10. The increased revenue has been generated through greater focus on the growth markets in Asia and healthy growth in sales of processed products in the competitive European markets. The goal of profitable growth has primarily been met by the North Atlantic raw materials. Demand for prawn, halibut, snowcrab and lumpfish roe has exceeded supply, resulting in good price rises. In the European business area, products from Poland have made a particular contribution to increased revenue and earnings. In the sales organisation, the past year has seen the initiation of comprehensive category work to ensure organisational under­ standing of the goals of the individual products and categories. As a result, cooperation and coordination between the various markets has increased significantly, and an improved ability to respond to changes in the market has been generated. The Company’s equity has risen from DKK 803 million to DKK 882 million. The Company’s equity ratio is 22.4%, down from 22.0% last year. Including the subordinated loan from the Company’s owner, the Company’s equity ratio now comprises 26.6%. under the loan agreement, DKK 50 million has been repaid of the subordinated loan in 2010/11, after which it amounts to DKK 200 million. Fish Day at City Hall Square in Copenhagen Exhibition stand at ESE – the European Seafood Exposition2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=18http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=18In the individual markets, the following may be highlighted: international The most important markets in the International sales area are China, Russia, Taiwan, Spain and the uSA. Common to all of these markets is that the vast majority of the products sold are based on raw materials from the North Atlantic. Demand from all markets has been strong, but the availability of raw materials has limited the level of sales. The favourable market situation has created very positive developments in the value of the products sold. It is important to have a strong position in the future growth mar­ kets of China and Russia, and Royal Greenland has thus strength­ ened its position in the course of the year. Germany The German organisation has focused on establishing and strengthening strong customer relations on the basis of a high level of professional skill. This has made Royal Greenland a valued partner and soundingboard for our customers. France Turnover on the French market has remained stable, at last year’s high levels. Sales of lumpfish roe have contributed to improved earnings. In the financial year 2010/11, Royal Greenland has extended this range with the successful launch of retail­packaged lumpfish roe. For the rest of the range, the market in France is still dominated by the financial crisis and a consequent significant focus on price. There is an overcapacity in the market for breaded products, with all parties struggling to achieve satisfactory capacity utilisation. In this difficult market, Royal Greenland has been able to ma­ noeuvre satisfactorily and achieve its stated goals. Scandinavia The Scandinavian market has developed very positively. All of the markets are in positive development, and are delivering both sales and earnings results that have exceeded the set targets. In Sweden and Norway, the rising sales have primarily been in shell­on prawns. In Sweden, the positive trend is also continuing in processed products from the European factories. Denmark has seen a particularly strong increase in sales of breaded products from the factory in Poland. Over the past few years, the Danish sales organisation has focused on improving the distribution of Royal Greenland products. This has now succeeded to a degree which has created a foundation for im­ plementing more extensive consumer marketing than previously. This will commence at the start of the new financial year. uK The uK has traditionally been the biggest market for frozen boiled and peeled prawns. The lower supply of prawn to the factories has had a negative impact on turnover in Britain. This is due to the fact that, overall, it has been more attractive to sell prawns in other markets, where it has been possible to achieve higher prices than in the uK. As a result of improved market prices, however, the British sales organisation has been able to maintain earnings at last year’s level. Targeted work has been performed to establish stable sales of breaded products on the uK market, and an interesting contract has been won at year­end in this product group. Japan Sales of North Atlantic products on the Japanese market have been stable in relation to last year. The major earthquake which unfortu­ nately hit the country in spring 2011 has however presented great challenges to our Japanese organisation. To begin with it was a question of simply getting everyday life to function again, and this was followed by changes in the demand for various products. All of the challenges have now been resolved, and the organisa­ tion in Japan has once again this year demonstrated the great importance of the company for Royal Greenland’s overall earnings. The financial year saw significant growth in those markets served by the German organisation, which has made a positive contribu­ tion to improved capacity utilisation in the factories in Poland and Germany. The German market is characterised by significant competition for processed products, which has placed pressure on earnings 2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=19http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=19Royal Greenland A/S - 2010/11 19 Royal Greenland markets a wide range of products under its own brand name2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=20http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=20Sample tasting of own and competing products in Wilhelmshaven italy/poland For Royal Greenland, both Poland and Italy are relatively new mar­ kets. Both have enjoyed healthy growth in relation to the previous year, and the decision to establish subsidiaries in the two markets is beginning to show its value. operations – north atlantic raw materials Access to raw materials is crucial for Royal Greenland. During the year, the Group’s vessels fished 28,700 tons, and Royal Greenland additionally purchased 40,000 tons of Greenlandic raw materials for the factories. The total volume of raw materials purchased in first sales in Greenland has been on the same level as last year, but with shifts in the mix of materials, and higher prices Species (tons) Prawn Halibut Crab Lumpfish roe Cod Other 2010/11 27,008 7,069 1,237 1,061 3,264 709 40,565 2009/10 23,359 9,535 1,733 777 3,867 1,168 40,449 product development Product development and innovation in Royal Greenland must underpin the strategy adopted with respect to growth, value creation and the optimisation of business activities in the North Atlantic and European business areas, respectively. The vision for Royal Greenland is to be seen as a strong supplier that is able to interpret and create trends in the market and de­ velop saleable products that are in demand among consumers. There has been a satisfactorily high level of activity in the depart­ ment, both in its own projects and in partnerships with customers. In the course of the year, a turnover of DKK 250 million in new products has been realised, corresponding to 5% of overall turn­ over. The objective is that at least 5% of turnover each year will derive from new products. During the year, a new process for control and idea generation was also developed and implemented, ensuring that the best projects are prioritised and allocated the right resources. There has been particular focus on supporting growth in the European business area, which has generated significant additional revenue. The product development costs incurred during the financial year derive mainly from new products and flavours in the existing product range. These costs have been included in the profit and loss account on the basis of a caution principle, inasmuch as it is difficult to attribute them to individual products. In general, the year has been marked by major increases in raw materials prices for some species. This reflects the growing de­ mand for Greenlandic products on world markets, which has had a knock­on effect on the price of the primary species in Greenland. Overall, prices have risen by DKK 1.24 per kg or 19% compared to last year, with the greatest increases in halibut by 44%, crab by almost 27%, lumpfish roe 23%, prawn 13% and cod 10%. The price rises in the various species, together with an altered mix in the fishing, have in all brought about increased payments of more than DKK 50 million to the coastal fishermen who supply Royal Greenland.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=21http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=21Royal Greenland A/S - 2010/11 21 prawn After two years of declining volumes, Royal Greenland has expe­ rienced rising supplies of iced prawns in Greenland. The level is higher than it has been for the past three years. This development is due to higher quotas and transfers of quotas from deep­sea to coastal fishing. The overall TAC (total allowable catch) for prawn in West Green­ land was raised to 124,000 tons, of which 4,000 tons is reserved for Eu vessels. The TAC for East Greenland remained unchanged at 12,400 tons, of which 7,000 tons is allocated to Eu vessels. The distribution between coastal and ocean­going fishing remains unchanged, with 57% for ocean­going fishing, with a 25% landing requirement, and 43% for coastal fishing. The picture from the previous year, when the prawn fishing moved northwards, has been reinforced, and the coastal prawn fishing now mainly takes place in Disko Bay and further north. The favourable market conditions on world markets have meant that first sales have occurred at higher prices. First sales prices, including mix alterations, rose on average by 13% in 2010/11. In 2010/11, as a supplement to the Greenlandic prawn, Royal Greenland purchased 2,500 tons of prawn from Canada. The Canadian market has been characterised by a very high level of demand in relation to supply, resulting in rising prices. The Canadian prawn was purchased under a duty­free quota of 20,000 tons to the Eu. It is expected that the Eu and Canada will conclude a free trade agreement in 2012, which will further exacerbate the price situation. Halibut The TAC for Disko Bay was unchanged at 8,000 tons, while for the uummannaq and upernavik areas it was increased to 6,000 tons and 6,500 tons, respectively. The quotas in Disko Bay and uum­ mannaq are based on the biological advice, while such advice is still lacking for the area around upernavik. Royal Greenland’s first sales purchases of iced halibut fell by 26% in 2010/11 as a consequence of the tougher competition. The increased competition and changes in world market prices for fin­ ished halibut products has meant price increases in first sales by as much as 44%. Royal Greenland is the only operator in Green­ land processing halibut that is subject to landing requirements. Crab First sales purchases of crab fell by 28%, reflecting the negative trend in the fishing. As a result, first sales prices rose by 27%. Cod In 2011 the TAC for cod remained at 15,000 tons, divided between 5,000 tons for coastal fishing (trial quota) and 10,000 tons for deep­sea fishing, in which the Eu has a considerable share. Supplies to Royal Greenland’s landbased factories fell by 15% in relation to 2009/10. This was due to a reduced TAC for near­shore fishing, the presence of first sales ships in particular areas, and the prioritisation of fishing for lumpfish roe, due to the record­high first sales prices for roe. First sales prices for cod rose however by 10%. External purchases of cod amounted to 9,600 tons. Most of the cod is sent for processing in China, and onwards to the European factories in Koszalin and Wilhelmshaven, as well as for direct sales to customers lumpfish roe With a rise of 37%, supplies of roe were at a record level in 2010/11, and have laid the foundation for interesting sales activi­ ties in 2011/12. First sales prices for roe rose by 22%. In contrast to previously, whole fish were also traded in first sales and sold on the world market. This has given both the fishermen and Royal Greenland higher earnings on lumpfish than before.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=22http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=22Salmon Salmon is the second­largest source of raw materials for Royal Greenland, with total purchases of DKK 550 million. This corre­ sponds to 21,500 tons of salmon, of which Atlantic salmon com­ prises two­thirds. Fresh iced salmon was mainly purchased from Norwegian fish farms. Purchase prices for salmon have fallen by 40% since the beginning of 2011. Commercial fishing of salmon is not permitted in Greenland. trawlers Royal Greenland’s current fleet consists of three prawn trawlers, a trawler for halibut, cod, etc., and a number of vessels for coastal fishing. The Company also participates in other trawlers via co­ ownership. The trawler department employs a total of 156 persons. Greater investments in near­shore fishing, especially for prawn and halibut, are strategically important in order to safeguard the supply of raw materials. Despite the lower catch rates in recent months, deepsea prawn fishing was 5% greater than last year. The surplus trawler Labrador Storm remains chartered out for prawn fishing in Canada. Catches of halibut, cod, haddock, coalfish and redfish with the trawler Sisimiut are at the same level as last year. unfortunately, Royal Greenland was not granted the expected quota of redfish in East Greenland. If this has been the case, catches would have risen. Two shipyard visits were carried out in 2010/11, corre­ sponding to an investment of DKK 31 million. Royal Greenland paid DKK 6 million this year in prawn and quota charges. production Greenland Royal Greenland operates 21 factories of varying size in Green­ land, of which five are operated under a service contract with the government of Greenland. The prawn processing plant in Ilulissat achieved a number of improvements this year as a consequence of major investments in the factory last year. Significant improvements were achieved in profits, as well as savings in payroll costs and energy. (The factory set an unofficial world record in May with a monthly production of 1,000 tons of finished goods, on the basis of 2,500 tons of raw materials.) The good operations at the plant also resulted in an increase in the number of regular suppliers. The plant in Sisimiut was closed from Christmas until after Easter for a comprehensive modernisation process of the same magnitude as that of Ilulissat. This has brought about lower activity than in pre­ vious years, but at the start of 2011/12, Royal Greenland will have the most modern and efficient prawn processing plants in the world. Activity at the three crab processing factories has been lower than the previous year. All three crab factories have been operating throughout the year. A major project has been completed with the aim of standardising the products and processes between the factories, which has improved the value of the crab activity.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=23http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=23Royal Greenland A/S - 2010/11 23 Royal Greenland’s production of iced halibut takes place in Qasi­ giannguit and uummannaq, as well as in four village plants that are operated as satellites of the factory in uummannaq. The factory in Qasigiannguit was rebuilt in the spring with the aim of increasing the degree of processing of the halibut. Expectations have been met, and retail products are now being produced for customers in Europe, while at the same time, finished products and intermediate products for further processing in Asia are also being produced. Qasigiannguit is an important source of interme­ diate products for Royal Greenland’s production of sushi/sashimi products in China for the Japanese market. In terms of employ­ ment, Qasigiannguit is now Royal Greenland’s largest factory in Greenland, with over 130 year­round employees. Activity in the uummannaq area has been high. During 2011, the government of Greenland introduced quarterly quotas, together with a higher TAC, in order to spread the fishing over a longer period. This initiative has resulted in peak loads at the factory, as fishing activity has been high at the beginning of each quarter. The production pattern in the uummannaq area has therefore been to freeze the raw materials in the high season due to the lack of manpower, and carry out processing in peripheral periods when there are lower supplies of fish and sufficient manpower. The factory in uummannaq and the satellite facility in Ikerasak have been rebuilt throughout the year, so that they, like Qasigiannguit, can process halibut with a full focus on the use of by­products. denmark Royal Greenland’s production of prawns in brine and MAP products takes place in Glyngøre. The market for prawns in brine is charac­ terised by stiff competition due to overcapacity in the production segment, and the price of raw materials is also rising sharply. The latter is especially due to the reduced prawn quotas in Canada, as a significant proportion of the purchased raw materials for prawns in brine are Canadian prawns. The level of activity has remained unchanged for prawns in brine during 2010/11, while it has been increasing for MAP products. A number of projects have been carried out to improve efficiency and competitiveness through cost savings and profit improve­ ments. Over the summer, an increase was achieved in orders for delivery in the coming year. Activity at the prawn packing plant in Aalborg has fallen due to fewer shell­on prawns for packing, as well as the relocation of packing tasks to the new joint venture packing plant in Russia. All smoked products are currently being produced by a Danish subcontractor. Royal Greenland focuses on high­quality products, and thereby avoids the most highly competitive areas – which in Northern Europe are typically retail products. Against the background of the many quality issues that have been raised concerning the cheaper smoked goods producers in both Denmark and Poland over the past year, Royal Greenland experienced significant progress in its own smoked products. Of the total production of smoked products, around 25% is based on halibut from Greenland. russia In co­operation with a Russian partner, Royal Greenland has con­ structed a prawn packing plant in Moscow. The plant began ope­ rations in December 2010. The project has encountered a number of problems in connection with the running­in of the packing plant, together with revised rules for the glazing of seafood in Russia, and not least, lower demand for shell­on prawns in Russia due to rising retail prices. The activity cost Royal Greenland DKK 5 million in 2010/11, but has now stabilised, so Royal Greenland can in the future expect to achieve a significant position in one of the world’s most important markets for shell­on prawns. Canada Production at the Royal Greenland factory in Matane in Quebec has been operationally satisfactory, but supplies have fallen by 10%. Competition has been sharp, driven by th2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=24http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=24operations in europe raw materials The raw materials for our European business area, primarily Alaska pollock, cod, hake, plaice and flounder, have been characterised by major fluctuations in both supply and prices. This has been due to the large quota changes in, amongst others, Alaska pollock and cod, and growing demand from Asia. Through various strategic initiatives, Royal Greenland has been able to handle the volatility of the market in its favour. alaska pollack This raw material constitutes a purchase of DKK 0.7 billion – the largest single item in the overall purchase portfolio of DKK 2.3 billion. Once again this year, Royal Greenland has occupied a strategic position in the Alaska pollock market on the basis of back­to­back sales contracts. In price terms, the pattern has been the same as in previous years, with prices peaking toward the end of the year. Supplies of plaice from the Danish auctions have been steady for a long time, but with increasing competition during the summer and the early autumn. Royal Greenland is also experiencing in­ creased competition from the Netherlands, amongst other things in MSC­certified plaice, resulting in rising prices. Royal Greenland purchased 6,200 tons of flatfish for the factory in Koszalin, most of which were flounder. The price of flounder has remained relatively stable throughout the period. production wilhelmshaven The factory in Wilhelmshaven produced nearly 60,000 tons of finished products, which is a record. The growth was driven by fish fingers, natural fillets, gourmet fillets and not least fish ‘n’ chips, the level of which tripled in relation to the previous year. Overall, the growth was 4,000 tons. In parallel with the increasing demand, investments have been made to convert the production lines to natural fillets and fish ’n’ chips. There have also been a number of reorganisations of pro­ duction to eliminate bottlenecks. The capacity is now present to handle future growth. The competitive situation will be sharpened in the coming year following the purchase by Pacific Andes of the competing Pickenpack companies. Koszalin The factory in Koszalin continues to make progress. volume increased by 25%, and now comprises 11,000 tons. There is growth within all areas of activity. After a difficult start and running­in period, the factory is now developing into an important element of the European business area. Alaska Pollack MSC The uS quota rose from 813,000 tons in 2010 to 1,240,000 tons in 2011. The market has largely been able to absorb the increased volume, but with slightly lower prices for fillets as a result. In sales terms, we continue to see a shift toward MSC­certified products. Alaska Pollack Russia Russian MSC approval is still pending, and is not now expected before some time in 2013. Consequently, prices for Russian Alaska pollock are lower than those of the uS. The Russian quota is sta­ ble at around 1,650,000 tons, and the price level is also stable. Flatfish Plaice and flounder comprise the principal flatfish in Royal Greenland’s product range. Plaice is mainly bought at auctions in Denmark, while flounder is purchased in Poland. The factory in Wilhelmshaven produced almost 60,000 tons of finished products, consisting mainly of fish fingers, natural fillets, gourmet fillets and fish ‘n’ chips2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=25http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=25Royal Greenland A/S - 2010/11 25 Production costs are now at a level corresponding to initial expec­ tations. In terms of both quality and delivery performance, the factory fully lives up to the standard of Royal Greenland’s other factories. Continued growth is expected in the coming years in both volume and operations. China / vietnam Activities in China are based on the processing of own raw materi­ als and purchases of intermediate products, both of these with a view to further processing in Poland and Germany. Royal Greenland has chosen to continue to buy Alaska pollock in Russia for further processing in China, and only to a lesser extent to buy blocks of Alaska pollock directly from Chinese producers. A number of factories are also engaged in filleting cod, haddock and salmon. Besides supplying factories in Europe, Royal Greenland also has a significant production of highly­processed sushi and sashimi products for Japan, primarily based on Greenlandic species such as halibut, prawn and crab. There are challenges in obtaining sufficient labour for the fish factories in China. As a consequence of this, Royal Greenland has an increasing level of activity in vietnam, primarily focusing on products for Japan. Production is gradually being transferred from China to vietnam, and attempts are made to locate new products in vietnam. Skills have been particularly upgraded in the areas of purchasing, logistics, category, marketing and administrative support functions. There has been a focus on the strengthening of management skills in order to create job satisfaction and better results. Perfor­ mance, goals and following­up are a natural hub of daily life. Fancy dress party for the families of the Staff club in Nuuk Hr Despite the increased activity, the workforce has fallen by 2.4%. This reduction has been achieved through efficiency improve­ ments at the factories. There has been a general adaptation of the organisation, both to achieve efficiency improvements and in order to add new skills. no. of employees Greenland denmark 2,000 621 1,500 812 928 857 859 Due to the geographical dispersion, differences in level of skill, and cultural differences within the Group, HR activities are prioritised and adapted to match the current needs in the Group’s various parts. A development and performance interview system has been implemented, in order to focus on performance and development. In Greenland, where the training needs have extra importance, the training initiatives cover technical courses, semiskilled worker training, management training, personal development and talent development. As an element in this, the Royal Greenland Academy is being revived, with the focus not just on the hourly­waged workers, but also on the primary management level in the factories. The families of employees will moreover be involved on a voluntary basis, by which means Royal Greenland will help to en­ hance the level of education in Greenland. The ambition is to make Royal Greenland the most attractive workplace in Greenland. When recruiting new employees, it is in general the Group’s policy to prioritise skills. It is necessary that employees possess the right skills, in order for Royal Greenland to maintain a reputation as a credible, competent, efficient and professional organisation. External recruitment is an especially difficult task in Greenland, for which reason efforts are made to fill positions internally or by persons residing in Greenland. The focus is on filling positions with qualified persons from Greenland. The Group’s rate of staff turnover has been decreasing. The num­ ber of new recruitments fell by 10% in the past year. However, it remains difficult to find and attract job candidates, for which reason some of the vacancies have remained unfilled for long periods. It is encouraging to note that we continue to experience great stability among the employees in Greenland. other locations 1,000 418 386 297 251 236 500 1.003 1.015 855 8262012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=26http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=26royal Greenland and Greenlandic society In 2010/11, Royal Greenland commissioned an image analysis of leading companies in Greenland. The analysis revealed that Royal Greenland has a negative image in Greenland, and that the level of knowledge of the Company is surprisingly low, given its size and history in the country. Royal Greenland’s poor position in the consciousness of the population is largely due to the fact that the major media stories about Royal Greenland for many years have dealt with repeated losses, capital injections received from the government, frequent replacement of members of the Supervi­ sory Board and golden parachutes, low first sales prices, lay­offs of employees etc. Royal Greenland has not been good at commu­ nicating the many positive things that the Company also does. The popular perception of Royal Greenland’s participation in Greenlandic society is largely based on negative factors. It is not an image that Royal Greenland deserves. Royal Greenland generates a not inconsiderable share of the total employment, production, turnover and capital of Greenland. Globally, with an export share of close to 100%, the Group is an important international ambassador for Greenland. Royal Greenland’s total consumption in Greenlandic society amounted to more than DKK 1.1 billion in 2010/11, and thereby comprised a significant portion of Greenland’s total GDP. Besides the 793 staff members employed in Royal Greenland itself, the Company also employs around 1,000 agents in the fishery trade, and many employees of subcontractors. Directly and indirectly, Royal Greenland employs a significant proportion of the total workforce of 40,000 people in Greenland. Behind Royal Greenland stand skilled and committed employees. When a company like Royal Greenland, from a country with such a small population, gains an international position, it deserves a better reputation in Greenlandic society. It is our ambition that Royal Greenland will no longer appear to be a mysterious giant. The demystification must occur by highlighting the realities of the Group, namely that Royal Greenland is funda­ mentally a responsible and commercially skilled company. Royal Greenland wishes to be Greenland’s most attractive em­ ployer. As an integral part of Greenlandic society, Royal Greenland aims to build bridges between the Company, suppliers and inte­ rest groups, and, both directly and through our trade association, represent the fishing industry in the best way. Royal Greenland participates in CSR Greenland, the purpose of which is to create a better and more visible social anchoring for its member companies in Greenland. This context also includes the previously­mentioned activities in connection with the Royal Greenland Academy, through which the Company takes on a responsibility for educational tasks in Greenland. As a part of its policy of social responsibility, Royal Greenland sponsors a number of activities in Greenland, including the Sports Confederation of Greenland, the Arctic Circle Race, the Greenland Cancer Society, and other activities within the fields of culture, sports and education. Royal Greenland wishes to have a more visible and open image in Greenland, and to be a company that Greenlanders can feel proud of. This will require clear and open communication, active participation in society, and in particular, better and more stable economic performance. Sustainability, the environment and quality On the basis of an analysis carried out among Royal Greenland’s customers in the spring of 2011, the key CSR topics are: • • • • Sustainable fishing Social conditions Energy consumption Materials consumption, especially packaging The first two issues are the most important for our customers. Northern European customers prioritise sustainable fishing, while southern European customers tend to stress social conditions. Similarly, there is an increasing awareness of the issue of sustain­ able fishing in Japan, while customers in East2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=27http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=27Royal Greenland A/S - 2010/11 27 Sustainable fishing Royal Greenland works with 54 different stocks of fish and shell­ fish. The vast majority derives from fishing, and only a small part from fish farming. The main raw materials in terms of quantity are cold­water prawns from Greenland and Canada, Alaska pollock from Russia and the uSA, and halibut from Greenland. On the farming side, salmon is the main raw material. Royal Greenland has divided up the species according to their sustainability. For this evaluation, publicly­available sources have been utilised, such as biological advice and NGO assessments. The assessment is designed to focus on critical fish stocks and the establishment of a better data foundation. MSC­certification of cold­water Greenland prawns is a key element in this work. As a member of Sustainable Fisheries Greenland, Royal Greenland is an important partner in achieving MSC certifi­ cation. Several significant improvements occurred in 2010/11: • Formulation of management plan • Closure of areas where the presence of corals has been demonstrated • Adaptation of legislation governing fishing gear and bycatch registration • Seabed photography Cold­water prawns from Royal Greenland’s factory in China are already MSC­certified. Alaska pollock originates from the Bering Strait between Russia and Alaska. Around a third of the raw materials are MSC­certified, while the remainder is under certification. Royal Greenland actively supports this process. With the certification of fishing for Greenland cold­water prawns and Russian Alaska pollock, the vast majority of Royal Greenland’s resources will be MSC­certified, and thereby approved as sustain­ able. The goal for 2012/2013 is to achieve this certification. In relation to salmon farming in 2011, we have demanded certi­ fication from our primary suppliers. This means that most of the salmon supplied to Royal Greenland will be Global GAP certified by the end of 2011. Royal Greenland supports the ASC (the Aqua­ culture Stewardship Council), but the standard for salmon has not yet been issued in its final version, for which reason Global GAP represents an important step in the direction of sustainability. the environment The focus areas within environmental matters in the seafood industry are: • • • • • Energy consumption and emissions Fresh water consumption and wastewater Transport Organic byproducts/waste Chemical waste During the year, several energy efficiency projects were carried out. In connection with the rebuilding of the factory in Sisimiut, investments were made in modern boiling equipment and heat recovery from refrigeration equipment, and diesel motors were replaced with electric motors. Overall, this has brought about a reduction in oil consumption by 40%, and in electricity consump­ tion by 12%. An energy project was also carried out in Qasigiannguit, with the focus on general energy savings, control of condenser pressure and optimisation of air separators. In total, this has provided a reduction in electricity consumption by 15%. In Glyngøre and Aalborg electricity consumption is expected to be reduced by 8% and 13%, respectively, as a result of general energy savings and control of condenser operations.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=28http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=282012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=29http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=29Royal Greenland A/S - 2010/11 29 Social conditions In the supply chain, we utilise the British ETI (Ethical Trading Initia­ tive) base code and the German BSCI (Business Social Compli­ ance Initiative). The factory in Wilhelmshaven has been audited according to the ETI base code. Similarly, Royal Greenland’s suppliers have confirmed that they work with approved working and environmental conditions. Several subcontractors have been audited in accordance with the ETI base code. Quality All of Royal Greenland’s factories, as well as the smoked products factory in Hirtshals, have a quality management system to ensure that quality levels and food safety are maintained and the legisla­ tion adhered to, so that consumers can feel secure in buying our products. The following factories are certified by an external agency (Det Norske veritas, DNv) in accordance with the following standards: IFS (the International Food Standard), BRC (the British Retail Consortium), and MSC (the Marine Stewardship Council): The Board has established three committees: • Audit Committee • Risk Committee • Recruitment Committee The management consists of two executives: CEO Mikael Thing­ huus and CFO Nils Duus Kinnerup. The management team also includes Group Sales Director Bruno Olesen and Group Production Manager Lars Nielsen. The overall Group management consists in total of eight people. The other positions of the members of the Supervisory Board and the Executive Board are stated in Note 28. There is no age limit for board members. remuneration The remuneration of members of the Supervisory Board is ap­ proved at the Annual General Meeting of the Company, and is further specified in note 3. The fee consists solely of a basic fee. The remuneration of the management is negotiated with the Board and consists of a fixed basic salary, a performance bonus and other customary non­monetary benefits, such as a company car, etc. The remuneration of the management is stated in note 3. There are no unusual severance agreements in the management contracts. evaluation An evaluation of the Board is undertaken each year on the basis of an external evaluation process. activities Six board meetings were held in 2010/11, including a strategy seminar on the Naleraq 2013 plan. Meetings of the Supervisory Board were held in Aalborg, Nuuk (twice), Copenhagen, Wilhelms­ haven/Bremen and Sisimiut. The Audit Committee held three meetings, one of which concerned the financial year 2009/10. 6 Sites (Wilhelmshaven, Koszalin, Glyngøre, Aalborg, Cuxhaven og Hirthals) 7 Sites (Wilhelmshaven, Koszalin, Ilulissat, Sisimiut, Aalborg, Matane og Cuxhaven) iFS Higher level BrC, Grade a mSC CoC 7 Sites (Wilhelmshaven, Koszalin, Glyngøre, Sisimiut, Ilulissat, Aalborg og Matane) All of these factories achieved the highest score in the certification. The other factories follow the same concept in relation to the internal quality management system. Our Greenlandic prawn processing plants in Sisimiut and Ilulissat were MSC approved in 2011. events following the conclusion of the financial year No material events have occurred subsequent to the conclusion of the financial year which have a bearing on the annual report. Corporate Governance Royal Greenland is led by a Supervisory Board and a Executive Board. The Supervisory Board consists of nine persons, of whom three are staff representatives elected for periods of four years, and six are elected every two years according to a rotation scheme. Three board members are thus elected by the general assembly each year at the Company’s AGM. The six elected board members are independent (in accordance with the definition in the recommendation of the “Committee on Corporate Gover­ nance”). The Supervisory Board is led by the chairman of the board, Niels de Coninck­Smith. The chairman is appointed for a period of two years at a time. In combination, the board members possess a range of experience drawn from Danish, Greenlandic and interna­ tional busines2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=30http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=30Risks are hedged through the adjustment of prices, close moni­ toring and back­to­back currency hedging in relation to major contracts and sales agreements. Financial risks As a consequence of its operations, investments and financing, Royal Greenland is vulnerable towards alterations in exchange rates and interest levels. The parent company centrally manages the Group’s financial risks and coordinates its liquidity control, in­ cluding capital generation and the investment of surplus liquidity. The Group pursues a financial policy which operates with a low risk profile, so that currency exposure, interest rate exposure and credit risks arise only in connection with commercial matters. The Group’s use of derivatives is regulated by a written policy adopted by the Supervisory Board, and by internal working proce­ dures, which, amongst other things, lay down amount limits and specify which derivative financial instruments may be applied. Currency risks The Group’s activities are influenced by exchange rate fluctua­ tions, as sales are primarily invoiced in foreign currency, while costs, including salaries, are incurred in DKK, EuR, PLN and uSD. The Group will thus be exposed in net positions in a number of currencies. 92% of the Group’s turnover derives from countries other than Greenland and Denmark, primarily countries in the euro zone, along with Japan, China, the uK and Sweden. Revenues in EuR and DKK comprise approximately 65% of Royal Green­ land’s total revenues, and are thus not assessed to represent a serious exchange rate risk. The Group is also influenced by fluc­ tuations in exchange rates as a consequence of the fact that the profit and equity of a number of subsidiaries is translated into DKK at year­end on the basis of average exchange rates and balance sheet date rates, respectively. Royal Greenland’s currency exposure is mainly covered by match­ ing incoming and outgoing payments in the same currency, and through forward contracts. The Group’s currency policy is to hedge at least 75% of the anticipated exchange rate exposure within the first six months, and thereafter at least 50% of the exchange rate exposure in the remaining 6­12 month period, together with larger contracts, which are settled individually. The exchange rate exposure in relation to EuR is not hedged. interest rate risks The interest­bearing debt is mainly denominated in DKK and EuR. Divided between variable and fixed­interest debt, the variable part comprised 39% at the close of the financial year, and a rise of one percentage point in the general rate of interest would induce a rise in the Group’s annual interest expenses of approxi­ mately DKK 7 million. Royal Greenland’s large burden of interest­bearing debt exacer­ bates the financial risks, for which reason further debt reduction is a strategically important focus area for the Company. the future The financial year 2010/11 has been used to define a new stra­ tegy, Naleraq 2013, with the ambition of doubling the Company’s operating profit over a three­year period and reducing interest­ bearing debt to DKK 1 billion. The raw materials situation in Greenland is very uncertain, and there are signs that the quotas for prawn may be reduced by 20­30%. Similarly, the intense competition continues in connection with halibut. Both of these factors will affect both quantities and prices. Thus far, Royal Greenland has been able to navigate through the economic and market­related turmoil caused by the financial crisis. unless markets and demand are significantly affected by the general uncertainty in the global economy, expectations for the coming financial year 2011/12 are positive, with a growth in turnover of 5% ­8% and an EBIT margin of 5%, corresponding to an operating profit in excess of DKK 200 million. This development will be driven by both the North Atlantic and the European business areas, with the European business being the major engine of growth, whilst the majority of earnings are driven2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=31http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=31Royal Greenland A/S - 2010/11 31 Accounting policies accounting policies Basic of accounts The annual report of Royal Greenland A/S has been prepared in accordance with the provisions of the Danish Financial Statements Act governing state­owned limited companies in reporting class D enterprises and Danish accounting standards. recognition and measurement Assets are recognised in the balance sheet when it is probable that future economic benefits will flow to the Group and the value of the assets can be measured reliably. Liabilities are recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Group, and the value of the liabilities can be measured reliably. On initial recognition, assets and liabilities are measured at cost. Measurement subsequent to initial recognition is effected as described below for each item. Anticipated risks and losses that arise before the time of presen­ tation of the annual report and that confirm or invalidate affairs and conditions existing at the balance sheet date are considered at recognition and measurement. Income is recognised in the income statement when earned, whereas costs are recognised by the amounts attributable to the financial year. value adjustments of financial assets and liabilities are recorded in the income statement as financial income or financial expenses. Consolidation The consolidated financial statements include Royal Greenland A/S (Parent) and the group enterprises (subsidiaries) in which the Parent directly or indirectly holds more than 50% of the voting rights or in any other way has a controlling interest. Enterprises in which the Group has significant, but not controlling influence, are regarded as associates. The Group structure is shown in the Management’s Review. The consolidated financial statements consolidate the financial statements of the Parent and of the individual subsidiaries which have all been prepared applying group accounting policies. Intra­ group receivables and payables, income and expenses, dividends, unrealised internal profits and losses are eliminated along with intra­group shareholdings.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=32http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=32minority interests Group profit/loss and group equity includes a separate item, which specifies the proportionate share of the subsidiaries’ profit/ loss and equity attributable to minority interests. Foreign currency translation On initial recognition, foreign currency transactions are translated applying the exchange rate at the transaction date. Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the balance sheet date, are translated using the exchange rate at the balance sheet date. Exchange differences that arise between the rate at the transac­ tion date and the one in effect at the payment date, or the rate at the balance sheet date, are recognised in the income statement as financial income or financial expenses. The income statements of foreign subsidiaries and associates are translated into Danish kroner using the annual average rate of exchange and the balance sheets are translated using the rate of exchange in effect on the balance sheet date. Differences in the exchange rate, which arise when translating the foreign subsidia­ ries’ equity at the beginning of the year at the rates of exchange ruling at the balance sheet date are recognised directly on equity. This also applies to exchange rate differences arising out of the translation of the income statement from annual average rates of exchange to the exchange rates ruling at the balance sheet date. derivative financial instruments On initial recognition in the balance sheet, derivative financial instruments are measured at cost and subsequently at fair value. Derivative financial instruments are recognised under financial fixed assets and long­term liabilities respectively. Changes in the fair value of derivative financial instruments classified as and complying with the requirements for hedging of the fair value of a recognised asset or a recognised liability are recorded in the income statement together with changes in the value of the hedged asset or the hedged liability. Changes in the fair value of derivative financial instruments classified as and complying with the requirements for hedging future transactions are recognised directly on equity. When the hedged transactions are realised, the changes are recognised in the relevant items. For derivative financial instruments that do not comply with the requirements for being treated as hedging instruments, changes in fair value are recognised currently in the income statement as financial income or financial expenses. Business combinations Newly acquired or newly established enterprises are recognised in the consolidated financial statements from the time of acquiring or establishing such enterprises. Divested or wound­up enter­ prises are recognised in the consolidated income statement up to the time of their divestment or winding­up. The purchase method is applied in the acquisition of new enter­ prises where the Parent obtains a controlling interest. under this method, identifiable assets and liabilities of these enterprises are measured at fair value at the acquisition date. On acquisition of enterprises provisions are made for costs relating to decided and published restructurings in the acquired enterprise. Allowance is made for the tax effect of the restatements. Positive differences in amount (goodwill) between cost of the acquired share and fair value of the assets and liabilities taken over are recognised under intangible assets, and they are amor­ tised systematically over the income statement based on an individual assessment of their useful life, however, no more than 20 years. Negative differences in amount (negative goodwill), corresponding to an estimated adverse development in the rele­ vant enterprises, are recognised in the balance sheet as deferred income, and they are recognised in the income statement as such adverse development is realised. At intra­group restructurings the consolidation method is applied. Profits or losses fro2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=33http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=33Royal Greenland A/S - 2010/11 33 income statement revenue Revenue from the sale of manufactured goods and goods for resale is recognised in the income statement when delivery is made and risk has passed to the buyer. Revenue is recognised net of vAT, duties and sales discounts. other operating income and expenses Other operating income and expenses comprise income and expenses of a secondary nature to the Group’s primary activities research and development costs Research and development costs comprise costs, including wages and salaries, attributable to the research and development activi­ ties carried out by the Group. Research costs are recognised in the income statement in the year in which they are paid. Development costs paid in relation to maintenance and optimisa­ tion of existing products or production processes are expensed. Costs related to the development of new products are recognised in the income statement unless the criteria for recognition in the balance sheet have been met for the individual development project. Financial income and expenses These items comprise interest income and expenses, the inte­ rest portion of finance lease payments, realised and unrealised capital gains and losses on securities, payables and transactions in foreign currencies, mortgage amortisation premium relating to mortgage debt, cash discounts etc as well as tax surcharge and repayment under the Danish Tax Prepayment Scheme. income taxes Tax for the year, which consists of current tax for the year and changes in deferred tax, is recognised in the income statement by the portion attributable to the profit/loss for the year and recognised directly on equity by the portion attributable to entries directly on equity. The portion of the tax taken to the income statement, which relates to extraordinary profit/loss for the year, is allocated to this entry whereas the remaining portion is taken to the year’s profit/loss from ordinary activities. The current tax payable or receivable is recognised in the balance sheet, stated as tax calculated on this year’s taxable income, adjusted for prepaid tax. Deferred tax is recognised and measured applying the liabi­ lity method on all temporary differences between the carrying amount and tax­based value of assets and liabilities, where the tax­based value of assets is calculated based on the planned use of each asset. Deferred tax is not allocated on stocks in subsidi­ aries according to the planned use. Deferred tax is measured based on the tax regulations and tax rates of the relevant countries that will be in effect, using the laws at the balance sheet date, when the deferred tax is estimated to be triggered as current tax. Changes in deferred tax resulting from changed tax rates are recognised in the income statement. Deferred tax assets, including the tax base of tax loss carryfor­ ward, are recognised in the balance sheet at their estimated realisable value, either as a set­off against deferred tax liabilities or as net tax assets. Balance sheet intangible assets Goodwill and goodwill on consolidation Goodwill is amortised straight­line over its estimated useful life, which is fixed based on the experience gained by Management for each business area. The amortisation period is usually 5 years, however, it may be up to 20 years for strategically acquired enter­ prises with a strong market position and a long­term earnings pro­ file if the longer amortisation period is considered to give a better reflection of the Group’s benefit from the relevant resources. The carrying amount of goodwill is assessed currently and written down to recoverable amount if the carrying amount exceeds the estimated future net income from the enterprise or activity to which the goodwill is related. Quotas, IT and licences Acquired intangible rights in the form of quotas, IT and licences are measured at cost less accumulated amortisation. Amortisa­ tion is carried out on a straight­line basis over a period of 5­10 yea2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=34http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=34Development costs Development costs comprise costs, wages and salaries and amortisation directly and indirectly attributable to the Company’s development activities and which comply with the criteria for recognition in the balance sheet. Capitalised development costs are measured at the lower of cost less accumulated amortisation and recoverable amount. Capitalised development projects are amortised straight­line on the basis of the completion ratio of the development project over the estimated economic life of the project. The period of amorti­ sation is usually 5­10 years. property, plant and equipment Land and buildings, vessels, plant and machinery as well as other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and impairment losses. Land is not depreciated. Cost comprises the acquisition price, costs directly attributable to the acquisition, and preparation costs of the asset until the time when it is ready to be put into operation. For company­manufac­ tured assets, cost comprises direct and indirect costs of materials, components, subsuppliers and labour costs. Interest expenses on loans for financing the manufacture of pro­ perty, plant and equipment are included in cost if they relate to the manufacturing period. All other financing costs are recognised in the income statement. The basis of depreciation is cost less estimated residual value after the end of useful life. Straight­line depreciation is made on the basis of the following estimated useful lives of the assets: Buildings vessels Plant included in the item “vessels” Plant and machinery Other fixtures and fittings, tools and equipment 10 ­ 50 years 7 ­ 16 years 5 ­ 10 years 5 ­ 10 years 3 ­ 5 years Property, plant and equipment are written down to the lower of recoverable amount and carrying amount. Profits and losses from the sale of property, plant and equipment are calculated as the difference between selling price minus selling costs and the carrying amount at the time of sale. Profit or loss is recognised in the income statement with depreciation and impairment losses. Fixed asset investments Investments in subsidiaries and associates Investments in subsidiaries and associates are recognised and measured under the equity method. This means that in the bal­ ance sheet investments are measured at the pro rata share of the enterprises’ equity, cf. description above under consolidated annual report, plus or less unamortised goodwill or negative goodwill on consolidation and plus or minus unrealised intra­ group profits and losses.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=35http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=35Royal Greenland A/S - 2010/11 35 The Parent’s share of the enterprises’ profits or losses after elimi­ nation of unrealised intra­group profits and losses and minus or plus amortisation of positive, or negative, goodwill on consolida­ tion is recognised in the income statement. Subsidiaries and associates with a negative equity value are measured at zero value, and receivables from these enterprises are written down by the Parent’s share of such negative equity value if it is deemed irrecoverable. If the negative equity exceeds the amount receivable, the remaining amount is recognised under provisions if the Parent has a legal or constructive obligation to cover the liabilities of the relevant enterprise. Net revaluation of investments in subsidiaries and associates is taken to reserve for net revaluation under the equity method if the carrying amount exceeds cost. prepayments Prepayments comprise incurred costs relating to subsequent financial years. Prepayments are measured at amortised cost, which usually corresponds to the nominal value. equity Dividends are recognised as a liability at the time of adoption at the general meeting. The proposed dividends for the financial year are disclosed as a separate item under equity. provisions Provisions are recognised when the Group has a legal and con­ structive obligation as a result of a prior event, and it is probable that future economic benefits will flow out of the Company to meet the obligation. Provisions that are estimated to mature more than one year after the balance sheet date are discounted at the average bond yield. Other fixed asset investments Other fixed asset investments primarily include long­term recei­ vables and unlisted investments. Investments and receivables not held to maturity are measured at cost on acquisition and subsequently at fair value. If the fair value cannot be fixed reliably, the measurement is made at cost. Receivables held to maturity are measured at cost on acquisition and are subsequently measured at amortised cost. In the event that fixed asset investments are written down to a lower value, such writedown takes into account the risk of loss associated with each individual asset. inventories Stock of raw materials is measured at the lower of cost using weighted average prices or net realisable value. Stock of consumables comprises for instance packaging, operating goods and fish boxes. Stock of fish boxes is measured at a fixed amount. Supplementary acquisition of gear is expensed on a current basis. All other stocks of consumables are measured at the lower of cost using the FIFO method and net realisable value. Goods in progress and finished goods, including finished goods produced on board own trawlers, are measured at the lower of cost using weighted average prices or net realisable value. Cost of manufactured goods consists of costs of raw materials, consuma­ bles and direct labour costs as well as indirect production over­ heads. Indirect production overheads are allocated on the basis of the normal capacity of the individual production entities. Indirect production overheads comprise indirect materials and labour costs, costs of maintenance of and depreciation and impairment losses on trawlers, factory buildings, machinery and equipment applied for the manufacturing process as well as costs of factory administration and management. receivables Receivables are measured at amortised cost, usually equalling nominal value less provisions for bad debts. liabilities other than provisions Financial liabilities Liabilities are measured at cost at the time of borrowing corre­ sponding to the proceeds received less transaction costs incurred. The liability is subsequently measured at amortised cost, which corresponds to the capitalised value when using the effective interest method so that the difference between the proceeds and the nominal value is included in the income statement over the borrowing period. If a financial liability has been su2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=36http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=36Cash flow statement The cash flow statement of the Group is presented using the indirect method and shows cash flows from operating, inves­ ting and financing activities as well as the Group’s cash and cash equivalents at the beginning and the end of the financial year. No separate cash flow statement has been prepared for the Parent because it is included in the consolidated cash flow statement. Cash flows from acquisition and divestment of enterprises are shown separately under cash flows from investing activities. Cash flows from acquired enterprises are recognised in the cash flow statement from the time of their acquisition, and cash flows from divested enterprises are recognised up to the time of sale. Cash flows from operating activities are calculated as the opera­ ting profit/loss adjusted for non­cash operating items, working capital changes and income taxes paid. Cash flows from investing activities comprise payments in con­ nection with acquisition and divestment of enterprises and activi­ ties as well as purchase and sale of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from financing activities comprise changes in the size or composition of the Group’s share capital and related costs as well as the raising of loans, instalments on interest­bearing debt, and payment of dividends to shareholders. Cash and cash equivalents comprise cash and short­term securi­ ties with an insignificant price risk less short­term bank debt. Segment information The primary segment of the Group is the business segment. The geographical markets comprise the secondary segment. Informa­ tion on business segments and geographical markets is in com­ pliance with the internal financial management of the Group. Management is of the impression that the Group solely operates with one individual business segment why the business segment information required in respect net revenue, profit/loss before fi­ nancial items, value of fixed assets and value of liabilities appears from the consolidated income statement and balance sheet. The geographical markets are split into European countries and other markets. Financial highlights The financial highlights and ratios have been compiled as shown below. The key figure ‘net interest­bearing debt’ is derived offsetting derivatives recognised as financial fixed assets. Calculating equity ratio and net interest­bearing debt/EBITDA derivatives recognised as financial fixed assets are offset in balancesheet total as well as in net interest­bearing debt. EBIT-margin EBT-margin ROIC including goodwill Return on equity (ROE) Equity ratio Net interest-bearing debt / EBITDA = = = = = = EBIT x 100 Revenue EBT x 100 Revenue EBITA x 100 Average invested capital including goodwill Net profit/loss for the year x 100 Average equity Equity x 100 Balance sheet total Net interest­bearing debt EBITDA2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=37http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=37Royal Greenland A/S - 2010/11 37 INCOME STATEMENT Group Note Revenue Change in inventories of finished goods Other operating income 2 1 2010/11 DKK 1,000 4,723,987 (105,151) 27,733 4,646,569 Costs of raw materials and consumables Other external expenses Staff costs Depreciation, amortisation and impairment losses Operating profit 3 4 (2,905,718) (737,550) (643,446) (188,357) 171,498 2009/10 DKK 1,000 4,249,188 (62,948) 30,811 4,217,051 (2,660,521) (686,872) (622,367) (174,540) 72,751 2010/11 DKK 1,000 1,665,775 (17,523) 19,419 1,667,671 (693,625) (354,479) (368,592) (91,885) 159,090 Parent 2009/10 DKK 1,000 1,458,413 (21,697) 22,886 1,459,602 (585,947) (339,840) (373,645) (96,075) 64,095 Profit/loss from investments in group enterprises Profit/loss from investments in associates Financial income Financial expenses Profit before tax 5 6 7 8 0 24,879 53,253 (118,279) 131,351 0 15,916 35,506 (139,239) (15,066) (9,949) 1,771 58,830 (89,914) 119,828 (92,680) 4,576 67,117 (82,828) (39,720) Tax on profit Profit after tax 9 (45,535) 85,816 (20,076) (35,142) (40,389) 79,439 (2,819) (42,539) Minority interests’ share of profit/loss after tax of group enterprises PROFIT FOR THE YEAR (6,377) 79,439 (7,397) (42,539) ­ 79,439 ­ (42,539) Proposed distribution of profit Reserve for net revaluation according to the equity method Retained earnings 11,264 68,175 79,439 (14,266) (28,273) (42,539)2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=38http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=38ASSETS AT SEPTEMBER 30th Group Note Intangible assets Buildings Plant and machinery vessels Other fixtures and fittings, tools and equipment Fixed assets in progress Property, plant and equipment Investments in group enterprises Receivables from group enterprises Investments in associates Receivables from associates Derivatives Other fixed asset investments Deferred tax asset Fixed asset investments FIXED ASSETS Inventories Trade receivables Receivables from group enterprises Receivables from associates Other receivables Prepayments Receivables Cash CURRENT ASSETS ASSETS 16 17 15 14 19 11 12 13 12 13 10 2011 DKK 1,000 66,060 329,465 321,579 328,622 15,439 13,945 1,009,050 0 0 101,716 66,261 131,829 19,414 40,783 360,003 1,435,113 1,617,386 517,271 0 3,133 62,921 14,386 597,711 415,707 2,630,804 4,065,917 2010 DKK 1,000 54,472 359,802 326,188 352,460 16,737 40,712 1,095,899 0 0 91,986 56,554 95,669 17,999 17,475 279,683 1,430,054 1,302,577 688,861 0 1,974 46,250 18,795 755,880 259,149 2,317,606 3,747,660 2011 DKK 1,000 22,864 138,009 113,953 210,856 8,572 7,473 478,863 1,689,507 42,049 63,387 57,261 131,829 11,812 0 1,995,845 2,497,572 319,850 9,338 295,224 3,125 6,817 1,821 316,325 129,828 766,003 3,263,575 Parent 2010 DKK 1,000 9,837 140,237 80,561 226,905 8,752 37,019 493,474 298,942 59,074 55,339 47,554 95,669 13,158 10,400 580,136 1,083,447 341,700 15,179 1,516,731 1,972 7,065 13,368 1,554,315 156,940 2,052,955 3,136,4022012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=39http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=39Royal Greenland A/S - 2010/11 39 EQuITY AND LIABILITIES AT SEPTEMBER 30th Koncern Note Share capital Reserve for net revaluation under the equity method Retained earnings EQUITY Minority interests Deferred tax Other provisions PROVISIONS Subordinated loans Mortgage debt Other credit institutions Derivatives Long-term liabilities other than provisions Short­term portion of long­term liabilities other than provisions Credit institutions Trade payables Payables to group enterprises Payables to associates Income taxes Other payables Deferred income Short-term liabilities other than provisions LIABILITIES OTHER THAN PROVISIONS EQUITY AND LIABILITIES Assets charged and contingent liabilities Other notes 24 25­28 9 22 23 21 18 19 20 2011 DKK 1,000 850,000 0 32,057 882,057 41,442 58,791 28,155 86,946 150,000 66,970 1,363,895 94,861 1,675,726 493,610 151,042 424,089 0 22,695 34,818 198,394 55,098 1,379,746 3,055,472 4,065,917 2010 DKK 1,000 850,000 0 (47,344) 802,656 37,794 38,542 24,119 62,661 200,000 87,226 1,750,508 106,836 2,144,570 67,126 119,200 255,561 0 7,782 3,073 191,512 55,725 699,979 2,844,549 3,747,660 Moderselskab 2011 DKK 1,000 850,000 0 32,057 882,057 14,392 3,000 17,392 150,000 0 1,363,212 92,342 1,605,554 477,389 0 82,641 62,245 0 14,548 112,573 9,176 758,572 2,364,126 3,263,575 2010 DKK 1,000 850,000 0 (47,344) 802,656 0 1,542 1,542 200,000 0 1,751,680 103,518 2,055,198 50,000 0 46,654 50,798 0 931 125,941 2,682 277,006 2,332,204 3,136,4022012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=40http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=40STATEMENT OF CHANGES IN EQuITY - GROuP Share capital DKK 1,000 Equity at September 30th 2009 Exchange adjustment, foreign entities Fair value adjustments recognised in equity Other capital adjustments Net profit for the year Equity at September 30th 2010 Exchange adjustment, foreign entities Fair value adjustments recognised in equity Other capital adjustments Net profit for the year Equity at September 30th 2011 850,000 0 0 0 0 850,000 0 0 0 0 850,000 Reserve under the equity method DKK 1,000 ­ ­ ­ ­ ­ ­ ­ ­ ­ - Retained earnings DKK 1,000 (18,918) 16,274 (2,008) (153) (42,539) (47,344) (12,550) 12,512 0 79,439 32,057 Total DKK 1,000 831,082 16,274 (2,008) (153) (42,539) 802,656 (12,550) 12,512 0 79,439 882,0572012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=41http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=41Royal Greenland A/S - 2010/11 41 STATEMENT OF CHANGES IN EQuITY - PARENT Share capital DKK 1,000 Equity at September 30th 2009 Exchange adjustment, foreign entities Fair value adjustments recognised in equity Other capital adjustments Net profit for the year Equity at September 30th 2010 Exchange adjustment, foreign entities Fair value adjustments recognised in equity Other capital adjustments Net profit for the year Equity at September 30th 2011 850,000 0 0 0 0 850,000 0 0 0 0 850,000 Reserve under the equity method DKK 1,000 0 16,274 (2,008) 0 (14,266) 0 (12,063) 799 0 11,264 0 Retained earnings DKK 1,000 (18,918) 0 0 (153) (28,273) (47,344) (487) 11,713 0 68,175 32,057 Total DKK 1,000 831,082 16,274 (2,008) (153) (42,539) 802,656 (12,550) 12,512 0 79,439 882,057 The companys Share Capital consists of 850,000 stocks of DKK 1,000 or multiples. The Share capital is not divided into classes. There have been no changes in the Share capital since October 1st 2006 except for the increase in Capital of DKK 250,000k in 2008/09.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=42http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=42CONSOLIDATED CASH FLOW STATEMENT OCTOBER 1st 2010 TO SEPTEMBER 30th 2011 Note Net profit for the year Adjustments relating to net profit for the year Working capital changes Cash flows from operating activities before net financials 29 30 2010/11 DKK 1,000 79,439 278,867 36,893 395,199 2009/10 DKK 1,000 (42,539) 295,765 (177,516) 75,710 Ingoing payments relating to financial items Outgoing payments relating to financial items Cash flows from ordinary activities 35,555 (109,603) 321,151 33,840 (107,453) 2,097 Taxes refunded/(paid) Cash flows from operating activities (23,295) 297,856 (4,600) (2,503) Purchase of assets connected to business acquisition Takeover of liabilities connected to business acquisition Purchase of fixed assets Sale of fixed assets Dividends received from associates Cash flows from investing activities (34,310) 11,310 (130,938) 33,565 19,167 (101,206) (47,729) 29,729 (106,682) 30,372 3,777 (90,533) Proceeds from obtaining/(instalments on) long­term liabilities Dividends paid during the year to minority interests Cash flows from financing activities (69,206) (2,728) (71,934) (116,242) (1,023) (117,265) Increase/decrease in cash and cash equivalents 124,716 (210,301) Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 31 139,949 264,665 350,250 139,9492012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=43http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=43Royal Greenland A/S - 2010/11 43 NOTES TO THE ANNuAL REPORT Group Parent 2009/10 DKK 1,000 3,675,053 574,135 4,249,188 2010/11 DKK 1,000 1,478,796 186,979 1,665,775 2009/10 DKK 1,000 1,342,504 115,909 1,458,413 1 net turnover - Geographical markets 2010/11 DKK 1,000 3,863,899 860,088 4,723,987 Europe Other markets 2 Other operating income 10,907 1,020 9,220 913 5,673 27,733 11,925 1,950 8,041 3,000 5,895 30,811 10,907 3,690 3,048 913 861 19,419 11,925 3,410 2,294 3,000 2,257 22,886 Service agreement Management Fees Rental income Sale of quotas Other operating income 3 Staff costs The total amount of wages and salaries etc. is specified as follows: Wages and salaries Pension contributions Other social security costs 557,893 46,614 38,939 643,446 Average number of employees 1,888 552,797 33,691 35,879 622,367 1,934 329,421 17,965 21,206 368,592 879 341,755 13,996 17,894 373,645 930 Remuneration for the Parent’s Supervisory Board and Executive Board Remuneration for the Supervisory Board Executive Board Mikael Thinghuus (signed on 01.02.2011) Nils Duus Kinnerup Resigned members of the Executive Board Total remuneration for the Executive Board 2010/11 Total remuneration for the Executive Board 2009/10 Fixed salary 2,333 2,426 2,000 6,759 Bonus 560 250 0 810 2,893 2,676 2,000 7,569 24,750 2,100 2,1002012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=44http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=44NOTES TO THE ANNuAL REPORT Group Parent 2009/10 DKK 1,000 36,102 73,256 45,913 6,311 3,133 7,669 5,764 90 (5,282) 1,584 174,540 2010/11 DKK 1,000 20,506 27,879 32,210 2,705 ­ 2,056 3,548 0 0 2,981 91,885 2009/10 DKK 1,000 23,234 26,045 31,455 3,289 ­ 4,574 5,735 0 0 1,743 96,075 4 Depreciation, amortisation and impairment losses 2010/11 DKK 1,000 41,215 76,768 48,871 5,281 3,622 7,665 3,582 124 (5,310) 6,539 188,357 Buildings Plant and machinery vessels Other fixtures and fittings, tools and equipment Goodwill on consolidation Quotas Software Licences Received grants (Gain)/loss from sale of fixed assets 5 Profit Loss Profit/loss from investments in group enterprises 0 0 0 0 0 0 0 0 37,343 (17,575) (29,717) (9,949) 8,768 (70,746) (30,702) (92,680) Change in intra­group profits 6 Profit Loss Profit/loss from investments in associates 33,953 (7,617) (1,457) 24,879 19,197 (1,823) (1,458) 15,916 9,395 (7,617) (7) 1,771 6,406 (1,823) (7) 4,576 Depreciation of differential value2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=45http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=45Royal Greenland A/S - 2010/11 45 NOTES TO THE ANNuAL REPORT Group Parent 2009/10 DKK 1,000 26,493 1,666 ­ 4,938 1,749 660 35,506 2010/11 DKK 1,000 1,512 0 52,774 2,670 1,872 2 58,830 2009/10 DKK 1,000 13,513 0 47,730 4,125 1,749 0 67,117 7 Financial income 2010/11 DKK 1,000 29,628 17,698 ­ 3,342 1,873 712 53,253 Realised capital gains unrealised capital gains Interest from group enterprises Interest on bank deposit Income from fixed asset investments Other financial income 8 Financial expenses 17,590 8,676 88,906 363 2,744 118,279 15,175 39,171 84,006 887 ­ 139,239 0 8,372 80,152 3 1,387 89,914 0 12,069 70,256 4 499 82,828 Realised capital loss unrealised capital loss Interest on bank and mortgage debt Other financial expenses Interest to group enterprises 9 Tax on profit (45,545) (6,131) 50 6,091 (45,535) (5,791) 0 0 (14,285) (20,076) (14,548) (1,049) 0 (24,792) (40,389) (2,819) 0 0 0 (2,819) Current tax for the year Impact of changes in tax rate start of year Adjustment to previous years Deferred tax for the year Reconciliation of tax rate Greenland tax rate Other taxes Adjustment of tax rate in foreign enterprises Adjustment for utilization of tax losses and other adjustments concerning previous years Tax rate expensed 32% 5% (6%) 4% 35% 32% 0% (2%) 103% 133% 32% 1% 0% 1% 34% 32% 0% 0% (25%) 7%2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=46http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=46NOTES TO THE ANNuAL REPORT Group Group goodwill DKK 1,000 50,660 0 0 0 50,660 (15,167) 0 (3,622) 0 (18,789) 31,871 35,493 10 Intangible assets Quotas DKK 1,000 109,310 0 25,613 0 134,923 (94,711) 0 (7,665) 0 (102,376) 32,547 14,599 IT DKK 1,000 18,373 (17) 658 0 19,014 (14,309) 9 (3,582) 0 (17,882) 1,132 4,064 Licenses DKK 1,000 949 12 311 0 1,272 (633) (5) (124) 0 (762) 510 316 Cost at October 1st 2010 value adjustment at closing price Additions for the year Disposals for the year Cost at September 30th 2011 Amortisation and impairment losses at October 1st 2010 value adjustment at closing price Amortisation for the year Amortisation regarding disposals for the year Amortisation and impairment losses at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 20102012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=47http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=47Royal Greenland A/S - 2010/11 47 NOTES TO THE ANNuAL REPORT Parent 10 Intangible assets Quotas DKK 1,000 88,903 18,000 0 106,903 (83,012) (2,056) 0 (85,068) 21,835 5,891 IT DKK 1,000 18,201 631 0 18,832 (14,255) (3,548) 0 (17,803) 1,029 3,946 Cost at October 1st 2010 Additions for the year Disposals for the year Cost at September 30th 2011 Amortisation and impairment losses at October 1st 2010 Amortisation for the year Amortisation regarding disposals for the year Amortisation and impairment losses at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 20102012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=48http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=48NOTES TO THE ANNuAL REPORT Group 11 Property, plant and equipment Buildings DKK 1,000 878,827 (9,526) 7,128 12,183 (8) 888,604 (519,025) 1,093 (6,915) (34,300) 8 (559,139) 329,465 359,802 Plant and machinery DKK 1,000 1,088,205 (13,375) 19,992 62,704 (14,281) 1,143,245 (762,017) 6,213 0 (76,768) 10,906 (821,666) 321,579 326,188 vessels DKK 1,000 733,166 0 41 51,732 (78,792) 706,147 (380,706) 0 (3,000) (45,871) 52,052 (377,525) 328,622 352,460 Other fixtures etc. DKK 1,000 64,562 (226) 67 6,253 (6,315) 64,341 (47,825) 174 0 (5,281) 4,030 (48,902) 15,439 16,737 Fixed assets in progress DKK 1,000 40,712 (5) (27,228) 12,464 (11,998) 13,945 ­ ­ ­ ­ ­ Cost at October 1st 2010 value adjustment at closing price Transferred from assets in progress Additions for the year Disposals for the year Cost at September 30th 2011 Depreciation and impairment losses at October 1st 2010 value adjustment at closing price Impairment losses for the year Depreciation for the year Depreciation regarding disposals for the year Depreciation and impairment losses at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 2010 13,945 40,712 Value according to public land assessment The public land assessment relating to property in Denmark amounts to DKK 45,000k. The buildings in Denmark have a carrying amount of DKK 48,057k. No public land assessment is made in Greenland. The carrying amount of properties in Greenland amounts to DKK 138,009k. Financing costs have been capitalised in previous years amounting to of DKK 6,118k. Accumulated depreciation of capitalised financing costs amounts to DKK 6,118k of which DKK 0k is recognised in 2010/11.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=49http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=49Royal Greenland A/S - 2010/11 49 NOTES TO THE ANNuAL REPORT Parent 11 Property, plant and equipment Buildings DKK 1,000 543,186 7,128 11,150 0 561,464 (402,949) 0 (20,506) 0 (423,455) 138,009 140,237 Plant and machinery DKK 1,000 500,164 19,881 44,156 (12,329) 551,872 (419,603) 0 (27,879) 9,563 (437,919) 113,953 80,561 vessels DKK 1,000 453,755 41 21,298 (39,170) 435,924 (226,850) (3,000) (29,210) 33,992 (225,068) 210,856 226,905 Other fixtures etc. DKK 1,000 42,314 67 2,761 (2,047) 43,095 (33,562) 0 (2,705) 1,744 (34,523) 8,572 8,752 Fixed assets in progress DKK 1,000 37,019 (27,117) 7,330 (9,759) 7,473 ­ ­ ­ ­ 7,473 37,019 Cost at October 1st 2010 Transferred from assets in progress Additions for the year Disposals for the year Cost at September 30th 2011 Depreciation and impairment losses at October 1st 2010 Impairment losses for the year Depreciation for the year Depreciation regarding disposals for the year Depreciation and impairment losses at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 2010 No public land assessment is made in Greenland. The carrying amount of properties in Greenland amounts to DKK 138.009k. In previous years, financing costs have been capitalised at DKK 6,118k, Accumulated depreciation of capitalised financing costs amounts to DKK 6,118k of which DKK 0k is recognised in 2010/11.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=50http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=50NOTES TO THE ANNuAL REPORT Group Parent Group enterprises DKK 1,000 645,216 1,504 1,411,500 0 2,058,220 (348,844) 1,689 (12,063) (9,949) 799 (2,728) (371,096) 1,687,124 2,383 1,689,507 298,942 12 Investments in group enterprises and associates Associates DKK 1,000 58,467 (2,957) 9,222 0 64,732 33,491 (3,481) 329 24,879 0 (19,172) 36,046 100,778 938 101,716 91,986 Associates DKK 1,000 33,389 (1,504) 9,222 0 41,107 21,922 (1,689) (487) 1,771 0 (175) 21,342 62,449 938 63,387 55,339 Cost at October 1st 2010 Transferred Additions for the year Disposals for the year Cost at September 30th 2011 value adjustments at October 1st 2010 Transferred value adjustment at closing price Share of profit/loss for the year Capital adjustments for the year Dividends Value adjustments at September 30th 2011 Carrying amount before setoff of receivables Setoff of receivables Carrying amount at September 30th 2011 Carrying amount at September 30th 2010 In the Group, the differential value on acquisition of investments in associates amounts to DKK 15,943k. The carrying amount at September 30th 2011 amounts to DKK 2,909k.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=51http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=51Royal Greenland A/S - 2010/11 51 NOTES TO THE ANNuAL REPORT Group Parent Group enterprises DKK 1,000 59,074 0 (17,025) 42,049 0 0 0 0 42,049 59,074 13 Receivables from group enterprises and associates Associates DKK 1,000 61,821 10,818 (5,440) 67,199 (5,267) (910) 5,239 (938) 66,261 56,554 Associates DKK 1,000 47,583 10,839 (223) 58,199 (29) 0 (909) (938) 57,261 47,554 Cost at October 1st 2010 Additions for the year Disposals for the year Cost at September 30th 2011 Impairment losses at October 1st 2010 Additions for the year Disposals for the year Impairment losses at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 2010 Group Parent DKK 1,000 21,974 4,753 (6,062) 20,665 (8,816) (37) (8,853) 11,812 13,158 14 Other fixed asset investments DKK 1,000 26,815 11,758 (7,562) 31,011 (8,816) (2,781) (11,597) 19,414 17,999 Cost at October 1st 2010 Additions for the year Disposals for the year Cost at September 30th 2011 Provisions for bad debts at October 1st 2010 Change in provisions for the year Provisions for bad debts at September 30th 2011 Carrying amount at September 30th 2011 Carrying amount at September 30th 20102012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=52http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=52NOTES TO THE ANNuAL REPORT Group Parent 30.09.2011 DKK 1,000 16,739 123 247,325 55,663 319,850 15,665 30.09.2010 DKK 1,000 19,168 1,176 264,848 56,508 341,700 26,757 15 Inventories 30.09.2011 DKK 1,000 868,191 36,657 582,573 129,965 1,617,386 30.09.2010 DKK 1,000 456,661 38,906 686,721 120,289 1,302,577 57,336 Raw materials Goods in progress Finished goods Other goods Goods at net realisable value included in booked value of inventories 24,044 16 Other receivables 6,561 22,368 33,992 62,921 4,608 26,599 15,043 46,250 0 0 6,817 6,817 0 0 7,065 7,065 Tax receivable vAT and duty receivable Other receivables 17 Prepayments 6,224 799 7,363 14,386 5,530 860 12,405 18,795 0 88 1,733 1,821 4,611 250 8,507 13,368 Derivative financial instruments at fair value Prepaid rent and consumption taxes Other prepayments 18 Minority interests 37,794 0 6,377 (2,729) 41,442 33,668 (2,248) 7,397 (1,023) 37,794 Minority interests at October 1st 2010 Disposals in the year Share of profit/loss for the year Dividend and capital adjustments Minority interests at September 30th 20112012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=53http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=53Royal Greenland A/S - 2010/11 53 NOTES TO THE ANNuAL REPORT Group Parent 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 19 Deferred tax 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 Deferred tax incumbent on the following items: Property, plant and equipment Fixed asset investments Other items 77,341 0 (18,550) 58,791 Deferred tax assets incumbent on the following items: Loss carried forward Other tax assets 24,842 15,941 40,783 4,991 12,484 17,475 0 0 0 550 9,850 10,400 37,960 396 186 38,542 32,942 0 (18,550) 14,392 0 0 0 0 20 Other provisions 24,119 8,273 (4,237) 28,155 31,684 0 (7,565) 24,119 1,542 1,500 (42) 3,000 9,500 0 (7,958) 1,542 Other provisions at October 1st 2010 Additions for the year Disposals for the year Other provisions at September 30th 2011 Other provisions are public grants to investments, pensions and contractual risks.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=54http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=54NOTES TO THE ANNuAL REPORT Group Parent 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 21 Long-term liabilities other than provisions 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 The following amounts fall due for payment after five years or more: Bank debt Mortgage debt 537,332 9,972 547,304 1,059,720 28,994 1,088,714 537,332 0 537,332 1,059,720 0 1,059,720 Interest and terms to maturity of long-term liabilities (Group, translated into DKK) Subordinated loan Mortgage debt Private Placements Weighted term (years) 4 5 4 Fixed/ floating Fixed Fixed Fixed/ floating Effective rate of interest 10/11 09/10 5.00% 7.20% 3.94% 5.00% 7.18% 3.66% Nominal value DKKm 10/11 09/10 200 83 1,772 2,055 250 98 1,774 2,122 Weighted average effective rate of interest 4.06% 3.98% The subordinated loan from the Government of Greenland steps down for other creditors. The loan has yearly installments of DKKm 50. Group Parent 30.09.2011 DKK 1,000 23,010 28,186 24,490 26,387 10,500 112,573 30.09.2010 DKK 1,000 34,622 28,645 22,694 32,145 7,835 125,941 22 Other payables 30.09.2011 DKK 1,000 45,874 39,171 24,972 41,455 46,922 198,394 30.09.2010 DKK 1,000 54,890 34,764 24,092 45,031 32,735 191,512 Wages and salaries, personal income taxes, social security costs, etc payable Holiday pay obligation Interest vAT and duties Other costs payable 23 Deferred income 5,974 49,124 55,098 0 55,725 55,725 5,974 3,202 9,176 0 2,682 2,682 Derivative financial instruments at fair value Other deferred income2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=55http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=55Royal Greenland A/S - 2010/11 55 NOTES TO THE ANNuAL REPORT Group Parent 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 24 Assets charged and contingent liabilities 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 Assets charged Mortgage debt has been secured on property, plant and equipment as well as intangible assets at a carrying amount of Contractual obligations Contracts have been made relating to delivery of fixed assets within two years at a carrying amount of Lease commitments falling due within five years after the balance sheet date amount to Hereof due within one year Recourse and non­recourse guarantee commitments Associates Third party Group enterprises 2,990 10,852 ­ 990 12,601 ­ 2,990 10,852 569,898 990 12,601 569,051 35,429 126,871 62,838 13,800 129,609 44,440 35,429 90,169 38,785 13,800 113,513 37,584 165,063 171,929 831 1,687 Contingent liabilities The Royal Greenland Group has some pending lawsuits, including inquiries from the tax authorities. Management believes that the outcome of these lawsuits and inquiries will not have material impact on the Group’s financial position.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=56http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=56NOTES TO THE ANNuAL REPORT Group Hedged by forward exchange contracts and options DKK 1,000 25 uSD GBP SEK JPY Financial exposure Receivables DKK 1,000 Liabilities DKK 1,000 Net position DKK 1,000 Positions in the most important currencies: 121,635 7,404 24,412 34,861 188,312 Foreign exchange contracts solely cover commercial positions. (83,276) (1,691) (10,774) (82) (95,823) 208,227 (58,723) (30,074) (168,208) (48,778) 246,586 (53,010) (16,436) (133,429) 43,711 Interest rate exposure The agreed reassessment and repayment dates of the Group’s financial assets and liabilities are specified below according to maturity date. The effective interest rates have been determined based on the current interest level at September 30th 2011. Group Reassessment/maturity date Hereof fixed­rate loan DKK 1,000 (1,081,071) Effective rate of interest % 1.8­7.4 Within one year DKK 1,000 Mortgage and credit institutions, loans (493,064) Within two­five years DKK 1,000 (950,996) After five years DKK 1,000 (547,304) Cash and cash equivalents amounts to DKK 415,707k and has a bearing effective rate of interest from 0.0 to 3.0%. Short­term credits amount to DKK 151,042k. Short­term credits have a bearing effective rate of interest from 1.5% to 3.2%.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=57http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=57Royal Greenland A/S - 2010/11 57 NOTES TO THE ANNuAL REPORT Group Parent 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 26 Deloitte Fees to auditors appointed by the general meeting 30.09.2011 DKK 1,000 30.09.2010 DKK 1,000 Audit fee Other declarations from auditor Tax advisory services Other services Adjustments concerning previous years 0 0 869 451 143 1,463 3,129 0 692 2,097 62 5,980 0 0 598 246 123 967 1,225 0 457 1,219 44 2,945 KPMG Audit fee Other declarations from auditor Tax advisory services Other services 2,375 0 175 339 2,889 0 0 0 0 0 1,200 0 75 183 1,458 0 0 0 0 0 27 Related parties Related parties of the Group are the members of the Supervisory and the executive Boards as well as the owner, the Government of Greenland. In the current financial year, the Group has not carried out trade with the Supervisory and executive Boards. Management remuneration is disclosed in note 3.2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=58http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=58NOTES TO THE ANNuAL REPORT 28 The managerial positions held by members of the Supervisory Board and executive Board in other Greenlandic and Danish public limited companies The managerial positions held by members of the Supervisory Board and Executive Board in other Greenlandic and Danish public limited companies except for managerial positions in wholly owned subsidiaries. Supervisory Board Company Orifarm Group A/S NCS 4 A/S Rambøll Gruppen A/S Nordic Aviation Capital A/S Dovista A/S Nordatlantisk venture A/S Naqitat A/S MSE Holding A/S MSE A/S MSE grus og sten A/S Naqitat A/S Grønlands Bådcenter A/S Godthåb Transportservice A/S Fyrværkerieksperten A/S Proinvent A/S Teknologiudvikling P.G. Sørensen, Skanderborg A/S Bach Composite Industry A/S BC Group A/S videometer A/S Proinvent Group Holding A/S Tigervej 12 A/S vejle Eksportslagteri A/S Scancom A/S Skare Food A/S All Times Company A/S Managerial position Chairman Chairman Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Chief Executive Officer Chief Executive Officer Chairman Chairman Chairman Deputy Chairman Member of the Supervisory Board Member of the Supervisory Board Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Niels de Coninck­Smith Chairman Sven Lyse Deputy Chairman Svend Bang Christiansen Executive Board Company Managerial position Mikael Thinghuus, CEO Polar Raajat A/S upernavik Seafood A/S Ice Trawl Greenland A/S Toms Gruppen A/S Deputy Chairman Deputy Chairman Member of the Supervisory Board Member of the Supervisory Board Nils Duus Kinnerup, CFO upernavik Seafood A/S Polar Raajat A/S Carnad A/S Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=59http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=59Royal Greenland A/S - 2010/11 59 NOTES TO THE ANNuAL REPORT Group 29 Adjustments relating to net profit for the year 2010/11 DKK 1,000 188,357 6,377 65,026 45,535 (1,549) (24,879) 278,867 2009/10 DKK 1,000 174,540 7,397 103,733 20,076 5,935 (15,916) 295,765 Depreciation, amortisation and impairment losses Minority interests Financial items allocated to profit for the year Income taxes expensed Provisions Profit from associates 30 Working capital changes 164,950 (314,013) 185,956 36,893 (81,559) (129,195) 33,238 (177,516) Change in receivables Change in inventory Change in trade payables and other payables 31 Cash and cash equivalents, end of year 415,707 (151,042) 264,665 259,149 (119,200) 139,949 Cash and cash equivalents, end of year Credit institutions, end of year2012-01-24T14:36:06+01:00http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=60http://innovisio.ipapercms.dk/RoyalGreenland/Div/AnnualReport20102011/?Page=60Royal Greenland A/S - 2010 /112012-01-24T14:36:06+01:00