Annual Report 2012 - Hempel

Annual Report
1

The company
Hempel A/S
Lundtoftegårdsvej 91
DK-2800 Kgs. Lyngby
Denmark
Tel.: +45 4593 3800
Fax: +45 4588 5518
Website: www.hempel.com
CVR no. 59946013
Financial year: 1 January – 31 December
Board of Directors
Richard Sand, Chairman
Lars Aaen, Deputy Chairman
Peder Holk Nielsen
Ulf Lennart Holm
Anders Pettersson
Leif Jensen
Ann Louise Krüger Kofoed, elected by the employees
Henrik Bach Falkenberg, elected by the employees
Executive Board
Pierre-Yves Jullien, Group President and CEO
Kim Junge Andersen, Group Executive Vice President and CFO
Auditors
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Strandvejen 44
DK-2900 Hellerup
Denmark
Banker
Nordea Bank Danmark A/S
HSBC Gruppen
SEB (Skandinaviska Enskilda Banken)
BNP Paribas

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Financial statements
About Hempel
Hempel is a world-leading coatings supplier working in the decorative,
protective, marine, container and yacht markets.
Hempel’s coatings help protect man-made structures –
from wind turbines and bridges to ships and homes – from
the corrosive forces of nature. With a strong focus on
R&D, advanced production techniques and professional
coating advice, we work around the globe to help keep
our customers’ assets safe, attractive and corrosion-free
for longer.
Our coatings enable structures to remain in active service
for longer by extending their product lifecycles. This
helps reduce the overall environmental impact of each
structure during its lifetime, and increases the overall
return on investment for our customers. We are also
committed to conducting business in a socially responsible
manner and with respect for the environment, and
so focus on developing coating solutions that both add
value to our customers and help them achieve their
environmental targets.
We supply marine coatings, for example, that help shipping
companies cut fuel bills and reduce emissions
from their vessels. We also produce high-performance
coatings for the protective industry that provide longterm
protection from corrosion while reducing drying
times and the number of required coats, helping customers
increase production speeds and reduce costs.
And our broad portfolio of high-performance waterborne
decorative coatings enables homeowners to protect
and bring colour to their homes.
Hempel is present in more than 80 countries around the
world. We have over 5,000 employees, 24 factories, 48
sales offices and more than 150 stock points located
strategically around the globe – and make sure our customers
enjoy great service, no matter where they are.
Learn more about Hempel at www.hempel.com
The Hempel Foundation
The Hempel Foundation is the sole
shareholder of the Hempel Group.
Established in 1948, the Foundation’s
main objectives are to ensure the Group
maintains a sound economic basis for
its continued existence and development
worldwide and to support charitable
causes of a cultural, humanitarian and
scientific nature.
This work focuses on two key issues:
the education of children in need and
research into environmentally sustainable
solutions for the coatings industry.
Read more about the Hempel Foundation
and its work at www.hempelfoundation.com
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Contents
Report
CEO statement: pursuing opportunities for growth 6
Management’s statement 8
Board of Directors 9
Independent auditor’s report 10
Key figures 12
Our segments 16
2012 in review 34
Strategy and objectives 36
Special risks 37
Research and development 38
Corporate responsibility 40
Financial statements
Accounting policies 44
Income statement 52
Balance sheet as at 31 December 54
Statement of changes in equity as at 31 December 56
Cash flow statement 58
Notes to the financial statements 60
5

CEO statement:
pursuing opportunities for growth
As expected, 2012 was a challenging year. However, these challenges were not always in the areas
we anticipated, which illustrates how important it is for us to be able to adjust our Group quickly,
evolve our approach to traditional markets and seize new opportunities.
This does not mean we have changed our main goals,
which remain both ambitious and achievable. However,
we recognise that the path to success in some regions
and markets is different from the ones we established
in our strategy One Hempel – One Ambition two years
ago.
We worked hard in 2012. We adjusted our business,
while retaining the same long-term goals, values and
dedication to increasing value for our customers through
our products and services – and we expect to see our
efforts pay dividends already in 2013.
Hempel´s performance
We ended 2012 with acceptable growth of 15 per cent,
driven by a solid performance in our core Protective segment,
the inclusion of Crown Paints for the full year and
the positive impact of currency exchange. Despite a stabilisation
of raw material prices and an improved gross
profit margin from the low level in 2011, our EBITDA
margin was only slightly above 10 per cent. This was
below our expectations, however we have implemented
a number of initiatives to ensure that the Group reaches
more satisfactory earning levels.
I am pleased to report that our cash generation has
been satisfactory, despite the fact that collection has
been an issue in some parts of the world. This has given
us the financial capability to look at new investment opportunities
that fit our strategy in the coming years.
As in 2011, we maintained a high level of investment
– to expand production capacity, develop new products
and acquire new business – as we know that these investments
remain key to ensuring a sustainable future
for the Group.
One Hempel – One Ambition: stage 2
In 2011, we acquired Crown Paints, one of the strongest
decorative brands in the UK and Ireland. The first full year
with Crown Paints as a member of the Group has been
a great success, despite tough market conditions. The
skills brought to us by Crown’s employees have started
spreading through the Group with very positive results –
and there is no doubt that we now have the right platform
to reach our ambitious goals in the decorative market.
In 2012, we acquired Blome International Inc., a USbased
protective coatings manufacturer with a broad
range of high technology products. This acquisition will
help support the fast growth of Hempel US, especially
in the protective market. The company’s products will
enable us to penetrate attractive US markets, starting
with the oil & gas industry, and will also be of great value
to our protective customers around the globe.
We can already see that Hempel and Blome International
Inc. are an unbeatable match. The two companies complement
each other well and we believe the partnership
will be a success already in 2013. I would like to take
this opportunity to welcome all our new colleagues to the
Hempel family – and thank them for their commitment,
right from the first day.
As well as acquisitions, we also achieved satisfactory
organic growth in 2012. In Europe, for example, we performed
well despite the pressures of a tough market.
This proves that value-creating products, professionalism,
hard work and expert service keep customers loyal in a
rapidly changing market.
In China, we faced tougher pressure in some of our traditional
markets than we expected. However, the measures
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we took quickly, as well as our strong team in China and
a willingness to fight and adjust, makes me confident
that we will begin to see growth again already in 2013.
Hempel performed well in new areas in 2012. Our
Brazilian team proved that it was right to re-enter the
Brazilian market and we are now looking into investing
in a new factory in the area. In India, we grew steadily
and are planning to increase our production capacity
in the country, and our performance in South Africa
confirms that this is the right base for us on the African
continent.
Our continued business success relies on the continual
development of advanced products that add value to
our customers – and in 2012 we continued to add new
products to our portfolio. We successfully launched the
first products in our new passive fire protection range,
for example, which means we can now offer customers
both corrosion protection and fire protection. We also
launched a new range of low-solvent antifouling products,
which enable customers to reduce fuel bills and meet
increasingly tough environmental legislation.
We also continued our efforts to restructure our business
in order to become more professional and more
efficient in all areas of our company. This included the
implementation of a new global Customer Relationship
Management system that will help us better understand
the markets we operate in and the needs of our customers
– so we can provide them with even better service in the
future.
The future
The keys for our long-term success are clear. We must remain
focused on our goals, adaptable in a fast-changing
world and quick to implement new ideas. We must also
increase our understanding of our markets and customers
– and offer innovative solutions that add value to
their business. These will be our priorities as we move
ahead.
We will keep going with our investments in 2013,
including capacity expansion in India, Saudi Arabia
and Russia, the extension of sales channels in Asia,
increasing production efficiency in Decorative in the UK
and further investment in Brazil and Africa. At the same
time, we must ensure that we deliver a return on all the
initiatives we have started since 2010 to ensure they
contribute to strong growth in the years ahead.
We are aware that financing this ambitious plan requires a
certain level of earnings and cash generation. Professionally
managing our working capital is vital – and everyone
in the Group has a part to play in this.
I would like to thank everybody in Hempel who works
every day to make our company stronger, as well as the
Board of Directors of Hempel A/S and the Board of the
Hempel Foundation for their trust and support.
I want also to express my gratitude to all our customers,
business partners and other stakeholders for their loyalty.
I can assure you that everything we do is done to serve
you better and justify your confidence in us.
We still have more to do to fully optimise our Group, but
we have shown that we have the will to change and act
when needed.
Pierre-Yves Jullien
Group President and CEO
7

Management’s statement
The Board of Directors and the Executive Board have
today considered and adopted the Annual Report of
Hempel A/S for the financial year 1 January – 31 December
2012.
The Annual Report has been prepared in accordance
with the Danish Financial Statements Act.
In our opinion, the management’s review includes a true
and fair account of the development of the Group and
the parent company’s operations and financial affairs,
the profit for the year and the Group’s and the parent
company’s financial position together with a description
of the principal risks and uncertainties that the Group
and the parent company face.
In our opinion, the parent company’s financial statements
and the consolidated financial statements give a true and
fair view of the assets, liabilities and financial position at
31 December 2012 of the parent company and the Group
and of the results of the parent company’s and the Group’s
operations and the consolidated cash flows for 2012.
The Annual Report has been submitted for adoption at
the Annual General Meeting.
Kgs. Lyngby, 3 April 2013.
Executive Board
Pierre-Yves Jullien
Group President and CEO
Kim Junge Andersen
Group Executive Vice President and CFO
Board of Directors
Richard Sand
Chairman
Lars Aaen
Deputy Chairman
Peder Holk Nielsen
Ulf Lennart Holm Anders Pettersson Leif Jensen
Ann Louise Krüger Kofoed
Elected by the employees
Henrik Bach Falkenberg
Elected by the employees
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Board of Directors
Leif Jensen Richard Sand Lars Aaen
Peder Holk Nielsen Ulf Lennart Holm Anders Pettersson
Henrik Bach Falkenberg
Ann Louise Krüger Kofoed
9

Independent auditor’s report
To the shareholder of Hempel A/S
Report on the consolidated financial statements
and the parent company financial statements
We have audited the consolidated financial statements and
the parent company financial statements of Hempel A/S
for the financial year 1 January – 31 December 2012,
which comprise accounting policies, income statement,
balance sheet, statement of changes in equity and notes
for both the Group and the parent company as well as
the cash flow statement for the Group. The consolidated
financial statements and the parent company financial
statements have been prepared in accordance with the
Danish Financial Statements Act.
Management’s responsibility for the consolidated
financial statements and the parent company financial
statements
Management is responsible for the preparation of consolidated
financial statements and parent company financial
statements that give a true and fair view in accordance with
the Danish Financial Statements Act, and for such internal
control as management determines is necessary to enable
the preparation of consolidated financial statements and
parent company financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on the consolidated
financial statements and parent company financial
statements based on our audit. We conducted
our audit in accordance with international standards on
auditing and additional requirements in accordance with
Danish audit regulation. This requires that we comply
with ethical requirements and plan and perform the audit
to obtain reasonable assurance that the consolidated
financial statements and the parent company financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated
financial statements and the parent company financial
statements. The audit procedures selected depend on
the auditor’s judgement, including the assessment of the
risk of material misstatement in the consolidated financial
statements and the parent company financial statements,
whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant
to the enterprise’s preparation 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 enterprise’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation
of the consolidated financial statements and the
parent company financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
The audit has not resulted in any qualification.
Opinion
In our opinion, the consolidated financial statements and
the parent company financial statements give a true and
fair view of the Group’s and the parent company’s assets,
liabilities and financial position as at 31 December 2012
and of the results of the Group’s and the parent company’s
activities as well as the consolidated cash flows
for the financial year 1 January – 31 December 2012 in
accordance with the Danish Financial Statements Act.
Statement on the management’s review
We have read the management’s review on pages 6-7
and 12-43 in accordance with the Danish Financial
Statements Act. We have not performed any procedures
additional to the audit of the consolidated financial statements
and the parent company financial statements. On
this basis, in our opinion, the information provided in the
management’s review is consistent with the consolidated
financial statements and the parent company financial
statements.
Kgs. Lyngby, 3 April 2013.
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
10
Søren Skov Larsen
State-Authorised Public Accountant
Rasmus Friis Jørgensen
State-Authorised Public Accountant

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11

Key figures
Key figures in EUR million
Profit 2012 2011 2010 2009 2008
Revenue 1,242.3 1,077.3 889.1 714.2 598.6
EBITDA 126.2 105.1 118.3 93.0 60.8
Amortisation, depreciation and impairment 42.8 33.6 26.7 19.7 10.8
Operating profit 83.4 71.5 91.6 73.3 50.0
Share of net profits of associates 2.6 2.3 2.4 4.1 9.0
Net financials (20.8) (13.0) (7.2) (11.6) (7.7)
Profit before tax 65.3 60.9 86.8 65.8 51.2
Net profit for the year 34.6 34.8 52.9 44.4 36.1
Balance sheet
Balance sheet total 1,066.7 1,063.5 763.4 599.6 421.6
Equity 355.7 326.9 316.3 265.1 210.3
Cash flows
Cash flow from:
Operating activities 128.1 63.0 31.0 127.0 32.5
Investing activities (36.4) (191.6) (59.6) (103.2) (36.9)
– including investments in property, plant
and equipment and intangible assets (28.4) (32.1) (39.8) (24.8) (11.4)
Financing activities (62.6) 126.6 (56.3) 67.2 (25.8)
Change in cash and cash equivalents 29.2 (2.0) (84.9) 91.0 (30.2)
Employees
Average number of employees 4,977 4,468 3,638 2,867 2,168
Ratios (%)
Gross margin 37.2 34.3 36.0 38.8 36.5
Profit margin 6.7 6.6 10.3 10.3 8.4
Return on assets 7.8 7.8 13.4 14.4 12.3
Solvency ratio 33.3 30.6 41.4 44.2 49.9
Return on equity 10.1 10.8 18.2 18.7 17.5
For definitions, see Accounting policies.
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FiNANCiAL STATEmENTS
Revenue (EUR million)
Average number of employees
599 714 889 1,077 1,242
2,168 2,867 3,638 4,468 4,977
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
EBITDA (EUR million)
Cash flow from operating activities
(EUR million)
61 93 118 105 126
33 127 31 63 128
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
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Decorative:
high-performance solutions
for homes, inside and out
Our colourful Decorative coatings make homes and buildings around the world more beautiful
while protecting them against wear and tear.
Hempel’s Decorative segment saw strong growth in
2012, with revenue increasing by over 50 per cent compared
to 2011. While the majority of this growth came
from the integration of Crown Paints, organic growth was
also satisfactory. In all, our Decorative segment made
up 25 per cent of the Group’s total revenue in 2012,
and it will be an important growth area for Hempel in
the coming years, particularly in Europe, the Middle East
and China.
Hempel acquired the UK-based company Crown Paints in
2011 and Crown Paints was successfully integrated into
the Hempel Group in 2012. This has added new expertise,
brands, formulations and critical mass to the Group.
The vast majority of Crown Paints’ sales are still in the
UK and in Ireland. In 2012, Crown Paints strengthened
its market position following continued investment in a
strong brand portfolio and marketing activities in both
the retail and trade sectors.
in markets where Crown Paints is already established. In
some markets, we will work with a multi-brand strategy
using both the Hempel brand and brands from the Crown
portfolio, beginning in the Middle East.
In the Middle East, we increased the number of retail outlets
in 2012, and our new factory in Jeddah will be operational
in autumn 2013. Producing water-based coatings
mainly for the Decorative segment, the factory will help
us increase efficiency in the region.
In China, the majority of our Decorative sales are exterior
coatings for large real estate development projects. We
expect the Chinese construction market to slowdown in
the near future but, due to our current market position,
there is still room for growth. We established a new product
portfolio and organisation in 2012 to help increase
sales through distributors.
Our goal now is to bring the Crown brand to new markets
outside of the UK as well as strengthening its position
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Decorative in focus:
express yourself through colour
Crown Paints made a splash in 2012 with an ad campaign that encouraged consumers
to consider how they express their personality through their choice of colour.
With TV adverts, radio slots, in-store promotions and
more, Crown Paints’ 2012 advertising campaign successfully
connected with millions of consumers across
the UK. The TV slot took a unique approach to advertising
paint, using ground-breaking real-flow fluid simulation
technology to make paint literally splash and swirl across
the screen.
“Are you quirky? Cheeky? Or just wild?” the viewers are
asked.
“Whatever your personality,” they are told, “Crown can
bring it out.”
The idea behind the campaign was to create something
visually different that encouraged consumers to show
their personalities through the colours they choose. This
builds on Crown Paints’ successful “It’s not just paint.
It’s personal.” brand strategy, by showing consumers
how a room’s personality can be affected by colour.
The TV advert was seen by 19 million people in the late
summer and early autumn of 2012, but it was just one
part of coordinated advertising campaign. The campaign
included radio spots on more than 40 stations, in-store
promotions and social media initiatives on Facebook,
Twitter and video on demand. As a direct result of the
campaign, consumer awareness of Crown Paints’ products
has risen significantly. Crown is now one of the
‘top of mind’ brands consumers mention when asked
to name various paint brands – and this has a direct
influence on the choices they make when they buy paint.
Following the completion of the integration work with
Crown Paints in 2012, we are now looking to take Crown
products to a wider international market in 2013 and
beyond.
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Protective:
advanced protection from corrosion
From bridges to power stations and windmills, our coatings protect our customers’
investments from the corrosive forces of nature.
Global demand for protective coatings increased in general
in 2012. While traditional high-growth markets such
as China showed less growth than expected, this was
partly compensated for by growth in the rest of the Asia,
South America and Eastern Europe. Much of this growth
came from the oil & gas industry, while power generation,
infrastructure and civil construction also showed
moderate growth.
The Protective segment remains a key area for Hempel
and we successfully increased market share in the global
protective market in 2012. In Asia, sales increased over
previous years despite unfavourable conditions in some
core markets, while Eastern Europe, the Americas and
the Middle East also contributed to our strong Protective
performance.
We continued our expansion into new markets in 2012,
including South Africa, Brazil and India. To complement
this geographical expansion, we also increased our product
portfolio via in-house product development and acquisitions
of key technologies.
The acquisition of US-based Blome International Inc. in
2012 helped further expand our portfolio in tank linings
and other specialist areas, both in the US and around
the globe. We also launched the first products in our
new intumescent range in 2012, enabling us to offer
customers both corrosion protection and fire protection
for the first time.
Our investment in a new coordination team for multinational
customers and projects also began to pay off
in 2012. Taking advantage of our global presence and
broad product portfolio, team provides services to projects
that span a number of countries.
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Protective in focus:
new fi re protection range gives
customers full package
The launch of two intumescent coatings for passive fire protection means we now offer customers
the complete range of protective coatings, including both fire protection and corrosion protection.
All common building materials lose strength when exposed
to high enough temperatures. in extreme cases,
even steel can buckle and collapse in a matter of minutes.
Launched in September 2012, our new HEmPACORE intumescent
coatings insulate structural steel against heat.
The two coatings, HEmPACORE ONE and HEmPACORE
ONE FD, can be used in a range of buildings – from
industrial halls and public buildings to stadiums and
supermarkets – and both have achieved excellent results
in official fire tests.
Applied in thin coats, the coatings expand when exposed
to high temperatures (roughly 200°C) to produce a layer
of char that insulates the steel beneath. As a result, the
steel can maintain its load-bearing capacity for up to two
hours longer, which can prove critical for firefighting and
rescue.
The two new products are just the first offerings in our
new intumescent range. We’ve invested in intumescent
development since 2009, and are dedicated to developing
more value-adding intumescent products in the
future.
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Marine:
advanced products and technical
service for the marine maintenance and
newbuilding industries
From large crude oil carriers to river-bound barges, every type of marine vessel uses Hempel products.
Due to a stuttering world economy, the marine market
experienced another tough year in 2012. Freight rates
remained low due to the overcapacity built up between
2007 and 2009, and orders were scarce in the marine
newbuilding market. Despite this, the number of ships
in the world fleet grew by around six per cent in 2012.
The global fleet has never been larger and the marine
maintenance market remains strong, although not strong
enough to compensate for the declining newbuilding
market.
for customers. This included a new range of low-VOC
antifouling coatings with some of the highest volume
solids in the industry. As well as lowering paint consumption,
these coatings offer our customers outstanding
potential fuel savings and help lower the amount
of CO 2
produced by each vessel. Together with our
award-winning biocide-free antifouling HEMPASIL X3,
these new products mean we are ready to support our
customers when SEEMP, the IMO’s new concept for fuel
efficiency, comes into force in 2013.
Despite the tough market conditions, Hempel succeeded
in maintaining its market position in the marine industry
in 2012 and our strategy remains the same: to offer
efficient coating solutions for all ship segments, with
significant cost-saving benefits for ship operators.
Following this strategy, we launched a number of new
products in 2012 with special focus on decreasing costs
In addition, we launched a new product to complete
our cargo hold coating range, gained PSPC-approval
for several coatings for crude oil carriers and received
ice-coating certification for HEMPADUR MULTI-STRENGTH
GF35870 from Lloyds Register. A growing niche market,
we expect demand for ice coatings to increase over the
coming years as the northern trade route between Europe
and Asia remains open for longer each year.
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Marine in focus:
documented results, dependable value
Choosing the right antifouling can lead to significant savings in fuel bills. But how do you choose
the right one? To make this decision easier, we now state estimated fuel-savings on all our
fouling control systems.
As a leader in marine coatings, we know that the difference
between the cheapest and the best antifouling
solution can mean a huge difference in return on
investment for our customers: a lower-cost solution may
reduce up-front costs, but this initial saving can mean
missing out on much larger savings in the long term.
To clearly illustrate the difference in fuel-saving performance
between our antifouling products, we collected
data under controlled conditions and calculated average
fuel-savings for all our antifouling coatings. Now, our customers
can clearly see how much fuel they can expect to
save between docking intervals.
range includes GLOBIC 6000 and GLOBIC 9000 – two
products that incorporate our patented nano-capsule
technology – and all the products have been reformulated
to ensure lower emissions of volatile organic compounds
during application.
Greek ship operator Minerva Marine chose to apply the
new high-solids version of GLOBIC 6000 to its oil tanker
M/T Minerva Georgia in autumn 2012. When asked why
they chose GLOBIC 6000, the company said they were
impressed by its strong performance and the excellent
reputation of the proven technology behind it.
This new concept coincided with the launch of a new
high-solids antifouling range in September 2012. The
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Container:
advanced solutions for the container industry
Our coatings can be found on containers around the globe, protecting them
from harsh cargoes, bad weather and rough treatment.
The container market in general has been contracting
for a number of years. This continued in 2012,
particularly in China, which has traditionally been the
largest container-producing country in the world. In
2012, the number of containers produced worldwide
dropped compared to 2011 and manufacturers faced
increasing price pressure from buyers. As one of the
world’s leading suppliers of coatings to the container
industry, Hempel was affected by this slowdown in
2012.
Hempel is at the forefront of developing environmentally
sustainable solutions for the container industry.
EcoBoxcoat, for example, is a fully waterborne series
of products for the container industry first launched in
October 2010. Feedback from owners, as well as our own
inspections of EcoBoxcoat-protected containers, shows
that performance is inline with – or better than – equivalent
solvent-borne systems. As a result, EcoBoxcoat is
widely accepted by container manufacturers as a viable
alternative to existing solvent-borne systems.
However, container manufacturers remain unwilling to
switch to a new system during such difficult economic
times. We believe that these solutions will be widely
adopted once the industry picks up, with the change
either driven by manufacturers themselves or by the
introduction of tougher environmental regulations that
further limit emissions of volatile organic compounds.
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Yacht:
a full range of products for sailing enthusiasts
We produce products for all types of pleasure and racing boats,
from small motorboats to large racing yachts.
The European coatings market for yachts can be split
into two distinct areas. In Northern Europe, the coatings
market for yachts experienced a slight decline in 2012.
The Southern European market showed signs of stabilising
in 2012, particularly the maintenance and boat
care markets. However, the Southern European market
is still characterised by great uncertainty.
Across the whole of Europe, the yacht newbuilding
industry experienced increasing problems in 2012, and
a number of yacht construction companies closed during
the year.
To counteract the negative trends in the industry, we
focused on upgrading our in-store materials in 2012.
This will help increase our visibility and accessibility
among shoppers, particularly those looking for maintenance
and boat care products, and promote our broad
product mix throughout the retail industry.
We also launched a new fouling release product for
yachts at the start of the year, which ensures the yacht
maintains a smooth and hydrodynamic hull, as well as a
number of more traditional antifouling products.
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2012 in review:
A look at last year and
our development expectations
Hempel acquired 100 per cent of the shares in Blome International Inc.
in early July 2012, and the company has therefore been counted as a
full member of the Hempel Group from 1 July 2012. Blome International Inc.
had revenue of EUR 4 million in the second half of 2012. The acquisition
of Crown Paints in 2011 had a major impact on the Group’s results in 2012.
The purchase of Blome International Inc. continues our
strategy of growth through acquisitions.
The Hempel Group’s revenue rose by 15 per cent in
2012 compared to 2011, primarily due to the acquisition
of Crown Paints on 1 June 2011. Hempel achieved
organic growth of 4 per cent in 2012 (adjusted for the
acquisitions of Crown Paints and Blome International
Inc.), primarily due to strong growth in the markets in
North America and the Middle East. There was a significant
increase in liquidity from operations during 2012,
and the overall result for the Hempel Group is seen as
satisfactory.
Total revenue rose to EUR 1,242 million in 2012 from
EUR 1,077 million the year before. The main reason
for this was the strategic acquisition of Crown Paints in
2011, which meant revenue in our Decorative segment
rose by over 50 per cent in 2012. As outlined in our One
Hempel – One Ambition strategy, revenue from our Protective
segment again saw double-digit growth in 2012.
The remaining business segments saw minor declines
compared to 2011, except Marine newbuilding. However,
this is not believed to be due to loss of market share in
these business segments, but rather a declining global
market.
We focused on re-establishing our gross margin throughout
2012. This led to necessary price increases and,
combined with moderate raw material price increases,
this improved the Group’s overall gross margin in 2012.
The gross margin will continue to receive the greatest
attention, and additional projects to improve efficiency
will be initiated in the years ahead.
We launched the One Hempel – One Ambition strategy
in 2011, which sets out our goals up to 2015. The first
priority in the strategy was to establish a strong platform
for growth in the Decorative segment. This platform was
established with the acquisition of Crown Paints, and
integration continued throughout 2012. The next phase
is to ensure this acquisition is fully exploited.
Due to company acquisitions, we are continuing to focus
on EBITDA, as amortisation of intangible assets represents
a considerable amount of the total depreciation
and amortisation. EBITDA amounted to EUR 126 million
in 2012 compared to EUR 105 million last year. The
EBITDA recorded was the best result in the Group’s
history and was achieved in a year when major investments
were made. Taking into account these strategic
investments, the financial statements are considered
satisfactory. However, a number of initiatives have been
launched to ensure the company achieves a more satisfactory
level of earnings in 2013.
Operating profit amounted to EUR 83 million compared
to EUR 72 million in 2011 – and a number of activities
have been started to support strategic growth. Adjusted
for non-recurring items, Hempel achieved operating profit
with a margin on underlying operations of 8 per cent
compared to 7 per cent last year.
After net financial expenses of EUR 21 million and calculated
corporation tax of EUR 19 million, net profit after
minority interests amounted to EUR 35 million for the
year. The Group’s effective tax rate was 30 per cent in
2012, compared to 31 per cent in 2011.
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Financial statements
The company’s equity increased to EUR 356 million from
EUR 327 million in 2011, corresponding to a solvency
ratio of 33 per cent.
We began construction of our new headquarters in
Denmark in spring 2012 and this work is expected to
be completed during the summer of 2013. We also
continued clearing our former factory site in Kgs. Lyngby,
Denmark, and this should be complete in spring 2013.
The former factory site and administration buildings
have been classified as assets held for sale as a sales
agreement with final transfer in 2013 has been made.
The average number of employees increased to 4,977,
primarily as a result of the acquisition of Crown Paints,
which had full effect in 2012. Hempel’s staff, excluding
Crown Paints and Blome International Inc., grew by 37
people in 2012.
Capital resources
The two main banks of the Hempel Group, Nordea and
HSBC, have made credit facilities of EUR 157 million
available for operating purposes, 52 per cent of which is
a confirmed facility to be renegotiated in 2014.
Nordea accounts for EUR 50 million, while HSBC
accounts for EUR 107 million. The bank loan of EUR
221 million with Nordea was provided in connection with
the acquisition of shares of Hempel Hai-Hong China
in 2009 and Crown Paints in 2011. The loan must be
repaid by 2016, with annual repayment of EUR 25 million
and a total repayment of EUR 145 million on expiry.
At the end of 2012, net interest-bearing debt amounted
to EUR 192 million compared to EUR 253 million at the
end of 2011.
Working capital declined during 2012, amounting to EUR
250 million at the end of 2012 compared to EUR 278
million at the end of 2011. There was constant focus
throughout 2012 on reducing receivables and inventories,
and this focus will continue into 2013.
35

Strategy and objectives
Strategy
Hempel continues to pursue its five-year strategy aimed
at positioning the company as a leading player in the
global coatings industry. Our target is still to be among
the top 10 largest coatings suppliers by 2015, in order
to better leverage economies of scale across the Group.
In 2012, we succeeded in maintaining our revenue level
and market position from 2011 in our Marine segment.
We launched a number of new products that offer significant
cost saving opportunities for shipping companies,
and we expect these to have a positive effect on our
future market position.
This growth is expected to be achieved through three key
areas. We will grow our Decorative segment, increase
our market presence in the protective industry and maintain
our current market position in the marine industry.
We have been active in the Decorative segment in a few
selected countries for a number of decades. However,
we increased focus on our Decorative segment in 2011,
and supported this work by acquiring Crown Paints, one
of the largest decorative coatings companies in the UK
and Ireland. We continued to focus on integrating Crown
Paints in 2012, while also utilising Crown Paints’ expertise
in our other markets.
Our strategy requires investments in new production
capacity and product development across business segments,
and these requirements remain unchanged. We
are already working to establish new factories in India,
Saudi Arabia and Russia and this work will continue in
2013.
Expectations for the year ahead
Market development expectations for next year vary
greatly. While we expect significant growth in North and
South America and the Middle East, we anticipate slower
growth in Europe and Asia. We also expect that growth
will continue to be slow in China in 2013.
Growth in the Protective segment is based of our longterm
plan of building on our leading position in established
markets, while also establishing or expanding
operations in new growth markets. The acquisition of
Blome International Inc. has significantly strengthened
our position in the US protective market. The majority of
our protective markets experienced double-digit growth
rates throughout 2012, and this is expected to continue
in 2013.
Hempel’s global presence across several segments
enables us to balance our business in the face of considerable
differences in regional growth rates. Overall,
revenue and earnings are expected to increase in 2013
compared to 2012.
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Financial statements
Special risks
Market risks
The global development in world trade is crucial to development
in the marine industry, and we expect to see an
activity level in 2013 similar to the level in 2012. However,
there is uncertainty surrounding the development
in world trade in the years ahead, which causes some
uncertainty in our growth estimates.
Our growth strategy will lead to greater diversity in our
business areas, and this will reduce our reliance on
certain geographical markets and business segments.
The development in oil and metal prices continues to
have a significant impact on the price we pay for raw
materials, and so oil and metal prices remain a key risk.
Currency risks
As significant parts of the Hempel Group’s activities
are carried out outside the eurozone, there is a considerable
currency risk relating to the US dollar, US
dollar-linked currencies and the British pound. It is our
policy to hedge our commercial currency risk, primarily
by achieving a better natural balance between sales
and purchases. We hedge the remaining risk through
forward exchange contracts and options based on the
Group’s net cash flow positions.
As a general rule, translation risks relating to investments
in foreign subsidiaries and associates are not
hedged. This is because we believe current currency
hedging of this type of long-term investment is not
optimal from an overall risk and cost perspective.
Interest rate risks
In order to limit financial cost fluctuations, the Hempel
Group’s loan financing has been obtained through a mixture
of medium and long-term floating-rate loans. The
interest rate risk on long-term loans is also hedged
through interest rate swaps that match the term and
repayment profile of the loan.
Credit risks
Hempel has no material risks relating to single customers
or business partners, and our company policy is to
rate major customers and business partners on a current
basis.
37

Research and development:
constantly innovating, always
improving
Our R&D focuses on innovative technologies that add value to our
customers and improve environmental performance.
Taking into account health, safety and the environment
is a natural part of our R&D work. It supports Hempel’s
environmental policy, which states that we should
promote the use of safer materials, and enables us to
deliver products that both meet technical specifications
and help our customers meet strict environmental
legislation.
In 2012, we gave particular focus to reducing the use
of volatile organic compounds (VOCs) in our products
for the Marine segment. As a result of this work, we
managed to reduce the average concentration of VOC in
marine products sold from 451 grams per litre in 2011
to 420 grams per litre in 2012 – a reduction of seven
per cent.
Increasing fuel efficiency in marine coatings
In 2012, we reformulated three of our best-selling
antifoulings – GLOBIC, OCEANIC, and OLYMPIC – with a
higher-solids level to ensure lower VOC emissions during
application. We also optimised the polishing rates and
biocides in the coatings to deliver even stronger protection
against fouling, ensuring a ship’s hull remains more
hydrodynamic and helping cut fuel consumption and associated
CO 2
emissions.
In addition to these new products, HEMPASIL X3, our
biocide-free fouling release coating with a fuel-saving
guarantee, achieved record sales figures during 2012.
This confirms that the benefits of HEMPASIL X3 – including
reduced fuel consumption, reduced CO 2
emissions
and no leaching of biocides – are well accepted by our
customers.
Faster production speeds
In the Protective segment, we launched HEMPAREA, a
a new fast-drying direct-to-metal coating that provides
corrosive protection with just one coat. Developed in
close cooperation with our manufacturing customers,
the solution offers manufacturers significantly increased
production speeds compared to standard two and threecoat
systems. HEMPAREA uses polyaspartic fast-cure
technology and firmly places Hempel at the forefront of
this new technology.
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Financial statements
New range of intumescent coatings
With the expansion of our R&D centre in Spain in 2011,
we intensified our focus on fire protection technologies.
Following comprehensive testing programmes during
2011 and 2012, two new fire protection solutions were
approved according to European and British standards.
The subsequent launch of these coatings in selected
countries in Europe and the Middle East enables us to
offer a complete range of protective coatings, including
both fire protection and corrosion protection, and we
intend to launch the solutions in other countries in 2013.
Advanced technologies from Blome International Inc.
Hempel acquired the US-based protective linings and
coatings manufacturer Blome International Inc. in mid
2012. Blome International Inc. produces a range of
specialist products in a number of areas, including tank
linings and chemical resistant coatings.
Following the acquisition, we began the work of adding
Blome International Inc. products to our global portfolio.
This work will continue into 2013 and will enable us to
offer an even more comprehensive product range, not
only in the US, but to customers around the world.
Reclassifying cobalt salts
Under REACH legislation, there was an environmental
reclassification of certain cobalt salts in December
2010, with the likelihood of a health reclassification
to follow in 2013 (to a category 1B carcinogen). In
response, our Decorative R&D facility in the UK reformulated
all solvent-based materials using alternative
drying agents in 2012. This proactive initiative gives us
an extra year to introduce these new and more environmentally
friendly materials into our products.
39

Corporate responsibility
At Hempel, we believe that a company has a responsibility that stretches
beyond business – and we are committed to working in a socially and
environmentally responsible manner in everything we do.
All our employees are required to follow our ethical rules,
which are laid out in our Code of Conduct. The Code
of Conduct provides guidelines for our employees about
how to act when dealing with our customers, our suppliers,
each other, and anyone else we come into contact
with. These guidelines help ensure that all Hempel employees,
wherever they work, conduct business with the
same high ethical standards.
Our Code of Conduct also extends to our suppliers.
When signing a Supply Agreement with Hempel, our suppliers
agree to conduct their business in a way that does
not compromise our Code of Conduct. In order to ensure
that our suppliers adhere to our Supplier policy, we entered
into an agreement with an external partner in 2012
to audit a number of our suppliers to check compliance
with requirements and regulations.
Our coatings extend the lifecycle of man-made structures,
helping reduce their overall environmental impact.
However, our products contain chemicals, so we invest
in developing low-solvent and waterborne products that
reduce the amount of chemicals released into the environment.
organic compounds into the environment during application.
In addition, we invested in solvent recovery units
and wastewater treatment in an effort to reduce waste.
This investment, along with other waste reduction projects,
led to a four per cent drop in the amount of waste
produced per ton of product manufactured compared to
2011.
We also believe that we have a responsibility to contribute
to positive development in the communities where
we live and work. Ending poverty and hunger by providing
universal education are part of the eight Millennium Development
Goals conceived by the United Nations, and
our owner, the Hempel Foundation, has joined with others
to try to make these goals a reality.
The Hempel Foundation more than doubled the number
of education projects it supports in 2012, from 8 to 18.
Spanning 12 countries, these projects are seen as important
ways that we can make a small difference to
communities around the world.
Our Corporate Responsibility Report provides a detailed
account of our work and goals in these and other areas.
In 2012, this work focused particularly on our marine
products, and we launched a number of low-solvent versions
of established products that release less volatile
You can read our Corporate Responsibility Report on
www.corporate-responsibility.hempel.com
40

Report
Financial statements

Accounting policies:
General
The Annual Report of Hempel A/S for 2012 has been
prepared in accordance with the provisions of the Danish
Financial Statements Act (Årsregnskabsloven) applying
to large enterprises of reporting class C.
The accounting policies applied remain unchanged from
previous years. The Annual Report for 2012 is presented
in EUR thousands.
Recognition and measurement
The financial statements have been prepared under the
historical cost method.
Revenues are recognised in the income statement as
earned. Furthermore, value adjustments of financial
assets and liabilities measured at fair value or amortised
cost are recognised. Moreover, all expenses incurred
to achieve the earnings for the year are recognised in
the income statement, including depreciation, amortisation,
impairment losses and provisions as well as reversals
due to changed accounting estimates of amounts
that have previously been recognised in the income
statement. Value adjustments of financial assets and
liabilities are recognised in financial income or financial
expenses in the income statement.
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 asset can be measured
reliably.
Liabilities are recognised in the balance sheet when
the Group has a legal or constructive obligation due to
a past event, and it is probable that future economic
benefits will flow out of the Group, and the value of the
liability can be measured reliably.
Assets and liabilities are initially measured at cost. Subsequently,
assets and liabilities are measured as described
for each item below.
Recognition and measurement take into account predictable
losses and risks occurring before the presentation
of the Annual Report which confirm or invalidate affairs
and conditions existing at the balance sheet date. EUR
is used as the measurement currency. All other currencies
are regarded as foreign currencies.
Basis of consolidation
The consolidated financial statements comprise Hempel
A/S (the parent company) and the enterprises (subsidiaries)
in which the parent company exercises control,
see Group chart (note 23). Control is achieved by the
parent company directly or indirectly holding more than
50 per cent of the voting rights or otherwise being
able to exercise, or actually exercising, control. Enterprises
in which the Group directly or indirectly exercises
significant influence but not control are classified as
associates.
The consolidated financial statements are prepared on
the basis of financial statements prepared under the
same accounting policies as those applied by Hempel
A/S and its subsidiaries. The consolidated financial
statements are prepared by combining items of a uniform
nature. On consolidation, elimination is made of
intercompany income and expenses, accounts and dividends
as well as of profits and losses on transactions
between the consolidated enterprises.
The parent company's investments in the consolidated
subsidiaries are set off against the parent company's
share of the net asset value of subsidiaries stated at the
time of consolidation.
On acquisition of subsidiaries, the difference between
cost and net asset value of the enterprise acquired is
determined at the date of acquisition after the individual
assets and liabilities have been adjusted to fair value
(the purchase method). This includes allowing for any
restructuring provisions determined in relation to the enterprise
acquired. Any remaining positive differences are
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Financial statements
recognised in intangible assets in the balance sheet as
goodwill, which is amortised in the income statement on
a straight-line basis over its estimated useful life, not
exceeding 20 years.
Any remaining negative differences are recognised as
negative goodwill under deferred income in the balance
sheet. Amounts relating to expected losses or costs are
recognised as income in the income statement in line
with the realisation of the events on which such amounts
are based. In the event of negative goodwill not related
to expected losses or costs, an amount corresponding
to the fair value of non-monetary assets in the income
statement is recognised over the average useful lives of
such assets.
Positive and negative differences from enterprises acquired
may, due to changes to the recognition and measurement
of net assets, be adjusted until the end of the
financial year following the year of acquisition. These
adjustments are also reflected in the value of goodwill or
negative goodwill, including in amortisation already made.
Minority interests
On statement of Group results and Group equity, the
shares of results and equity of the subsidiaries attributable
to minority interests are recognised as separate
items in the income statement and the balance sheet.
the income statement on a straight-line basis over the
lease term.
Foreign currency translation
Transactions in foreign currencies are initially translated
at the exchange rates at the dates of transaction.
Receivables, debt and other monetary items in foreign
currencies that have not been settled at the balance
sheet date are translated at the exchange rates at the
balance sheet date. Exchange adjustments arising due
to differences between the transaction date rates and
the rates at the dates of payment and the rates at the balance
sheet date, respectively, are recognised in financial
income and expenses in the income statement. Fixed
assets acquired in foreign currencies are translated at
the transaction date rates.
Income statements of foreign subsidiaries and associates
are recognised at average exchange rates for the
months which do not differ materially from the transaction
date rates. Balance sheet items are translated
at the exchange rates at the balance sheet date. Any
exchange adjustments arising on the translation of the
opening equity at the exchange rates at the balance
sheet date and from the translation of income statements
from average exchange rates to the exchange
rates at the balance sheet date are recognised directly
in equity.
On subsequent changes to minority interests, the changed
share is included in results as of the date of change.
Leases
Leases in terms of which the enterprise assumes substantially
all the risks and rewards of ownership (finance
leases) are recognised in the balance sheet at the lower
of the fair value of the leased asset and the net present
value of the lease payments calculated by applying the
interest rate implicit in the lease or an approximated
value as the discount rate. Assets acquired under
finance leases are depreciated and written down for impairment
under the same policy as determined for the
other fixed assets of the enterprise.
The remaining lease obligation is capitalised and recognised
in the balance sheet under debt, and the interest
element of the lease payment is charged continuously to
the income statement.
All other leases are considered operating leases. Payments
made under operating leases are recognised in
Exchange adjustments of Group loans with independent
foreign subsidiaries regarded as part of the total
investment in the subsidiary in question are recognised
directly in equity.
Derivative financial instruments
Derivative financial instruments are initially recognised in
the balance sheet at cost and subsequently at their fair
values. Derivative financial instruments are recognised
in other receivables and other payables, respectively.
Changes in the fair values of derivative financial instruments
that are designated and qualify as fair value
hedges of a recognised asset or a recognised liability
are recognised in the income statement as are any
changes in the value of the hedged asset or the hedged
liability.
Expected future cash flows are hedged where exchange
rates exceed a pre-determined level. Exchange gains and
losses on these hedging transactions are recognised directly
in equity.
45

Income statement
Revenue
Revenue from the sale of goods for resale and finished
goods is recognised in the income statement when
delivery has been made and risk has passed to the
purchaser, a binding sales agreement has been made,
the selling price has been determined and payment has
been received or may with reasonable certainty be expected
to be received. Revenue is recognised exclusive
of VAT and net of discounts relating to sales.
Licensing income is recognised on the basis of the accrued
revenue of licensees and is recognised in the
income statement in the period to which it relates.
A breakdown of revenue on geographical markets is provided.
Production costs
Production costs comprise direct and indirect costs incurred
to achieve revenue for the year. Production costs
comprise raw materials, consumables as well as production
labour costs and indirect production costs such as
maintenance, depreciation of plant etc. as well as costs
relating to the operation, administration and management
of factories.
Income from investments in subsidiaries and associates
The items ‘Income from investments in subsidiaries’ and
‘Income from investments in associates’ in the income
statement include the proportionate share of the profit
before tax for the year less goodwill amortisation.
Financial income and expenses
Financial income and expenses comprise interest income
and interest expenses, realised and unrealised
exchange gains and losses on current asset investments,
debt and transactions in foreign currencies, amortisation
premium relating to mortgage debt, cash discounts
etc. as well as extra payments and repayment under the
on account taxation scheme.
Tax
Tax for the year consists of current tax for the year and
changes in deferred tax. The tax attributable to the profit
for the year is recognised in the income statement,
whereas the tax attributable to equity transactions is
recognised directly in equity. Extra payments or repayment
in connection with payment of the tax are classified
as financial income and expenses and are not included
in the tax expense.
Production costs also include research and development
costs that do not qualify for recognition in the balance
sheet as well as amortisation of recognised development
projects.
Selling and distribution expenses
Selling and distribution expenses comprise expenses
incurred to distribute sales and for sales campaigns,
including expenses for sales and distribution staff, advertising
expenses and depreciation.
Administrative expenses
Administrative expenses comprise expenses incurred for
management and administration of the Group, including
expenses for administrative staff and management as
well as office expenses and depreciation.
Withholding tax arising on repatriation of dividends from
foreign subsidiaries is expensed in the year of receipt.
Current tax liabilities and receivables, respectively, are
recognised in the balance sheet at the amount calculated
on the basis of the taxable income for the year
adjusted for tax paid on account.
Deferred tax is recognised and measured under the
balance sheet liability method on the basis of all temporary
differences between the carrying amount and
tax base of assets and liabilities. The tax value of the
assets is calculated on the basis of the planned use of
the individual assets.
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Financial statements
Deferred tax is measured on the basis of the tax rules
and tax rates of the respective countries that will be
effective under the legislation at the balance sheet
date when the deferred tax is expected to crystallise as
current tax. Changes to deferred tax due to changed tax
rates are recognised in the income statement.
Deferred tax assets, including the tax base of tax loss
carry-forwards, are measured at the value at which the
asset is expected to be realised, either by elimination
in tax on future earnings or by a set-off against deferred
tax liabilities.
Hempel A/S is jointly taxed with the Danish consolidated
enterprises. Foreign subsidiaries are not subject to the
joint taxation.
47

Balance sheet
Intangible assets
Goodwill is amortised on a straight-line basis over the
estimated useful life determined on the basis of management’s
experience within the individual business areas.
The maximum amortisation period is 5-20 years, the longest
period being applicable to acquired enterprises with a
strong market position and a long-term earnings profile.
Development projects concerning products, processes
and software that are clearly defined and identifiable
and in respect of which technical feasibility, sufficient
resources and a potential future market or development
opportunity in the enterprise can be demonstrated, and
where it is the intention to manufacture, market or use
the product or process in question, are recognised as
intangible assets. Other development costs are recognised
as costs in the income statement as incurred.
Development costs comprise expenses, including salaries
and amortisation, directly or indirectly attributable
to the development projects.
Upon completion of the development project, development
costs are amortised on a straight-line basis over
the estimated useful life. The usual amortisation period
is 4-5 years.
Customer relations are measured at cost less accumulated
amortisation and impairment losses. The period of
amortisation is 3-17 years.
Other intangible assets are measured at cost less accumulated
amortisation and impairment losses. The assets
are amortised on a straight-line basis over their
estimated useful lives.
Property, plant and equipment
Land and buildings, 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 cost of acquisition and expenses
directly related to the acquisition as well as expenses
for making the asset ready for use. In the case of assets
of own construction, cost comprises direct and indirect
expenses for materials, components, sub-suppliers and
labour.
Interest expenses on loans for financing the construction
of property, plant and equipment are recognised in cost
if they relate to the period of construction. Any other
finance costs are recognised in the income statement.
Depreciation is based on cost reduced by any estimated
residual value at the end of the useful life. The assets
are depreciated on a straight-line basis over their expected
useful lives, which are:
Buildings max.
Laboratory equipment
Plant and machinery
Other fixtures and fittings,
tools and equipment
50 years
10 years
10 years
3-5 years
Leasehold improvements are included in other operating
equipment and are recognised at cost and depreciated
over the term of the lease; however, not exceeding 10
years.
Depreciation is recognised in production costs, selling
and distribution expenses and administrative expenses
in the income statement.
Assets costing less than EUR 3,500 per unit are expensed
in the year of acquisition.
Profits and losses on the sale of property, plant and
equipment are calculated as the difference between selling
price less costs to sell and carrying amount at the
date of sale. Any difference between selling price and
carrying amount at the date of sale is recognised as a
profit or loss in production costs, selling and distribu-
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Financial statements
tion expenses or administrative expenses in the income
statement.
Impairment of fixed assets
The carrying amounts of intangible assets and property,
plant and equipment are reviewed on an annual basis
to determine whether there is any indication of impairment
other than that expressed by amortisation and
depreciation. If so, an impairment test is carried out
to determine whether the recoverable amount is lower
than the carrying amount, and the asset is written down
to its lower recoverable amount.
under equity. The reserve is reduced by dividend distributed
to the parent company and adjusted for other equity
movements in subsidiaries and associates.
Subsidiaries and associates with a negative net asset
value are recognised at EUR 0. Any legal or constructive
obligation of the parent company to cover the negative
balance of the enterprise is recognised in provisions.
Inventories
Inventories are measured at the lower of cost under the
FIFO method and net realisable value.
The impairment test is performed on an annual basis
for development projects in progress irrespective of any
indication of impairment.
The recoverable amount of the asset is calculated as
the higher of net selling price and value in use. Where
a recoverable amount cannot be determined for the individual
asset, the assets are assessed in the smallest
group of assets for which a reliable recoverable amount
can be determined based on a total assessment.
Goodwill and other assets for which a separate value
in use cannot be determined as the asset does not on
an individual basis generate future cash flows are reviewed
for impairment together with the group of assets
to which they are attributable.
Investments in subsidiaries and associates
Investments in subsidiaries and associates are recognised
and measured under the equity method. This implies
that the investments are measured in the balance
sheet at the proportionate ownership share of the net
asset value of the enterprises with deduction or addition
of shares of unrealised intercompany profits and losses.
The total net revaluation of investments in subsidiaries
and associates is transferred upon distribution of profit
to ‘Reserve for net revaluation under the equity method’
The cost of goods for resale, raw materials and consumables
comprises the purchase price plus landing costs.
The cost of finished goods and work in progress comprises
the cost of raw materials, consumables and direct
labour as well as indirect production costs.
Indirect production costs comprise the cost of materials
and labour and of maintenance, depreciation and impairment
of the machinery, factory buildings and equipment
used in the manufacturing process as well as costs of
factory administration and management. Finance costs
are not recognised in cost.
Obsolete and slow-moving items are written down to net
realisable value.
The net realisable value of inventories is calculated as
estimated selling price less costs of completion and expenses
incurred to realise the sale.
Receivables
Receivables are measured at amortised cost, which substantially
corresponds to nominal value, less provisions
for bad debts. Provisions for bad debts are determined
on the basis of an individual assessment of each receivable,
and in respect of trade receivables, a general provision
by group is also made based on experience from
previous years.
49

Prepayments
Prepayments comprise expenses incurred relating to
subsequent financial years such as rent, insurance premiums,
interest as well as unrealised exchange adjustments
relating to financial instruments. Prepayments are
measured at amortised cost, which usually corresponds
to nominal value.
Current asset investments
Current asset investments comprising primarily listed
bonds are measured at their fair values (market price)
at the balance sheet date. Both realised and unrealised
exchange adjustments are recognised in the income
statement.
settle the obligation. Pension obligations are measured
at net present value based on an actuarial calculation.
Actuarial gains and losses are amortised and recognised
in the balance sheet over the remaining period until delivery
of the service.
Other provisions comprising provisions for environmental,
warranty and restructuring obligations as well as
other obligations not covered by insurance are recognised
and measured based on a best estimate of the
expenses necessary to fulfil the obligations at the balance
sheet date. Provisions with an expected maturity
exceeding one year from the balance sheet date are
discounted at the average bond yield.
Equity
Dividend is recognised as a liability at the time of adoption
at the General Meeting. Dividend proposed for the
year is disclosed as a separate equity item.
Provisions
Provisions are recognised when – in consequence of an
event having occurred before or on the balance sheet date
– the Group has a legal or constructive obligation and it
is probable that economic benefits must be given up to
Financial debt
Fixed interest loans, such as mortgage loans and loans
from credit institutions, are recognised initially at the
value of the proceeds received net of transaction expenses
incurred. Subsequently, the loans are measured
at amortised cost corresponding to the capitalised
value under the effective interest method. Other debt is
measured at amortised cost, substantially corresponding
to nominal value.
50

Report
Financial statements
Cash flow statement
Cash flow statement
The consolidated cash flow statement is presented under
the indirect method and shows cash flows from
operating, investing and financing activities for the year
as well as the Group’s cash and cash equivalents at
the beginning and end of the year. No separate cash
flow statement has been prepared for the parent company
as this is included in the consolidated cash flow
statement.
Cash flows from investing activities comprise payments
relating to acquisitions and disposals of intangible assets,
property, plant and equipment as well as fixed asset investments.
Cash flows from financing activities comprise changes to
the amount or composition of the Group’s share capital
and related expenses as well as long-term borrowing and
repayment of long-term loans and payment of dividend.
Cash flows from operating activities are calculated as
profit from operating activities adjusted for non-cash
operating items, changes in working capital as well as
income tax paid.
Cash and cash equivalents comprise cash at bank and
in hand as well as current asset investments with an
insignificant price risk with deduction of overdraft facilities.
Financial highlights
Financial ratios have
been calculated as
follows:
Gross margin = Gross profit x 100
Revenue
Profit margin = Operating profit x 100
Revenue
Return on assets = Operating profit x 100
Average assets
Solvency ratio = Equity at year-end x 100
Total assets
Return on equity = Net profit for the year x 100
Average equity
51

Income statement
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
1 Revenue 1,242,254 1,077,324 82,430 86,461
Production costs -780,498 -707,959 -42,805 -44,380
Gross profit 461,756 369,365 39,625 42,081
Selling and distribution expenses -259,802 -212,526 -12,688 -11,292
Administrative expenses -118,519 -85,338 -23,407 -24,029
Operating profit 83,435 71,501 3,530 6,760
7 Income from investments in subsidiaries 37,039 34,068
8 Income from investments in associates 2,581 2,314
Profit before financial income and expenses 86,016 73,815 40,569 40,828
2 Net financials -20,756 -12,951 -1,673 -2,036
Profit before tax 65,260 60,864 38,896 38,792
4 Income tax -18,800 -18,031 -4,309 -3,946
Profit after tax 46,460 42,833 34,587 34,846
Minority interests’ share of the profit in subsidiaries -11,873 -7,987
Net profit for the year 34,587 34,846 34,587 34,846
Parent company
Distribution of profit 2012 2011
Proposed distribution of profit:
Proposed dividend 25,000 66
Reserve for net revaluation under the equity method 37,193 34,771
Retained earnings -27,606 9
34,587 34,846
52

Report
Financial statements

Balance sheet as at 31 December
– assets
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
Fixed assets
Goodwill 69,359 68,232 – –
Software 6,832 5,002 1,385 913
Software under development 3,430 5,762 2,066 5,251
Customer relationships 40,704 49,834 – –
Other intangible assets 46,018 47,683 4,809 4,191
5 Intangible assets 166,343 176,513 8,260 10,355
Land and buildings 108,513 105,139 8,597 8,846
Land and buildings for sale 5,662 5,685 5,665 5,685
Assets under construction 15,882 17,009 8,035 388
Plant and machinery 48,723 40,493 301 431
Other fixed assets 14,429 15,585 236 107
6 Property, plant and equipment 193,209 183,911 22,834 15,457
7 Investments in subsidiaries 293,830 299,341
8 Investments in associates 12,312 11,015 – –
Loans to Group enterprises 69,463 53,795
12 Deferred tax assets 25,784 10,108 – –
13 Pension assets 5,600 4,986 – –
Deposits etc. 3,205 3,103 546 492
Fixed asset investments 46,901 29,212 363,839 353,628
Fixed assets 406,453 389,636 394,933 379,440
Raw materials and consumables 53,316 63,664 1,156 1,527
Work in progress 1,846 2,464 – –
Finished goods 110,203 118,260 5,136 5,783
Inventories 165,365 184,388 6,292 7,310
Trade receivables 324,391 341,799 3,734 3,043
Receivables from Group enterprises 109,754 110,802
Income tax 4,219 3,715 – –
Other receivables 28,599 27,565 14,257 11,339
10 Prepayments 10,664 10,103 2,184 1,526
9 Receivables 367,873 383,182 129,929 126,710
Cash at bank and in hand 127,010 106,288 3,441 11,720
Current assets 660,248 673,858 139,662 145,740
Assets 1,066,701 1,063,494 534,595 525,180
54

Report
Financial statements
Balance sheet as at 31 December
– equity and liabilities
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
11 Share capital 15,414 15,468 15,414 15,468
Reserve for net revaluation under
the equity method – – – 11,142
Retained earnings 315,320 311,319 315,320 300,177
Proposed dividend for the year 25,000 66 25,000 66
Total equity 355,734 326,853 355,734 326,853
Minority interests 43,149 37,005
12 Provision for deferred tax 34,286 28,602 – –
13 Pension obligations 10,893 10,066 749 759
7 Subsidiaries with negative equity 285 863
14 Other provisions 35,192 34,592 1,498 2,522
Provisions 80,371 73,260 2,532 4,144
15 Bank loans etc. 199,967 223,781 104,127 117,973
15 Derivative financial instruments 10,301 7,990 6,539 4,851
Long-term debt 210,268 231,771 110,666 122,824
Overdraft facilities 91,740 100,629 18,843 24,672
15 Short-term part of bank loans etc. 27,173 34,798 13,847 21,347
15 Derivative financial instruments 1,209 1,107 767 569
Trade payables 123,815 142,806 2,212 1,726
Payables to Group enterprises 13,021 2,988
Income tax 18,642 10,316 707 1,706
Other payables 114,600 104,949 16,266 18,351
Short-term debt 377,179 394,605 65,663 71,359
Debt 587,447 626,376 176,329 194,183
Equity and liabilities 1,066,701 1,063,494 534,595 525,180
16 Fee to the auditors appointed by the General Meeting 20 Change in working capital
17 Contingent liabilities and other financial obligations 21 Balance sheet items of acquired enterprises
18 Related parties 22 Cash and cash equivalents, net
19 Adjustment for non-cash operating items 23 The Hempel Group including foreign branches
55

Statement of changes
in equity as at 31 December
In EUR thousands
Group
Note
Share
capital
Reserve
for net
revaluation
Retained
earnings
Proposed
dividend
Total
Equity
Equity at 1 January 2011 15,426 – 275,842 25,000 316,268
Net profit for the year 34,846 34,846
Exchange adjustment at year-end rate 42 8,289 8,331
Hedging of future transactions -7,592 -7,592
Dividend distributed -25,000 -25,000
Proposed dividend -66 66 –
11 Equity at 31 December 2011 15,468 – 311,319 66 326,853
Net profit for the year 34,587 34,587
Exchange adjustment at year-end rate -54 -2,360 -2,414
Hedging of future transactions -3,226 -3,226
Dividend distributed -66 -66
Proposed dividend -25,000 25,000 –
11 Equity at 31 December 2012 15,414 – 315,320 25,000 355,734
56

Report
Financial statements
In EUR thousands
Parent company
Note
Share
capital
Reserve
for net
revaluation
Retained
earnings
Proposed
dividend
Total
Equity
Equity at 1 January 2011 15,426 3,101 272,741 25,000 316,268
Net profits of subsidiaries 34,771 34,771
Dividend received -32,084 32,084 –
Exchange adjustment at year-end rate 42 8,315 -26 8,331
Hedging of future transactions -2,961 -4,631 -7,592
Net profit of parent company 75 75
Dividend distributed -25,000 -25,000
Proposed dividend -66 66 –
11 Equity at 31 December 2011 15,468 11,142 300,177 66 326,853
Net profits of subsidiaries 37,193 37,193
Dividend received -46,614 46,614 –
Exchange adjustment at year-end rate -54 -1,838 -522 -2,414
Hedging of future transactions -1,321 -1,905 -3,226
Retained earnings 1,438 -1,438 –
Net loss of parent company -2,606 -2,606
Dividend distributed -66 -66
Proposed dividend -25,000 25,000 –
11 Equity at 31 December 2012 15,414 – 315,320 25,000 355,734
57

Cash flow statement
In EUR thousands
Group
Note 2012 2011
Cash flows from operating activities
Operating profit 83,435 71,501
19 Adjustment for non-cash operating items 43,022 37,765
20 Change in working capital 23,986 -13,466
Income tax paid -22,310 -32,834
Total cash flows from operating activities 128,133 62,967
Cash flows from investing activities
21 Acquisition of enterprises -9,844 -160,683
21 Divestment of enterprises 691 –
6 Purchase of property, plant and equipment -26,532 -28,758
5 Purchase of intangible assets -2,881 -4,672
Sale of property, plant and equipment 1,033 1,158
Sale of intangible assets – 155
8 Dividend received from associates 1,174 1,243
Total cash flows from investing activities -36,359 -191,557
Cash flows from financing activities
Change in bank borrowings etc. -35,406 167,280
Interest income and expenses, net -15,673 -12,355
Change in minority shares (dividend distributed etc.) -4,376 -5,114
Other financial assets -704 607
Dividend distributed to shareholders -66 -25,000
Capital losses and gains, net -6,338 1,158
Total cash flows from financing activities -62,563 126,576
Change in cash and cash equivalents 29,211 -2,014
22 Cash at bank and in hand and current asset investments
less overdraft facilities, beginning of year 5,659 2,713
Exchange adjustment 400 4,960
22 Cash at bank and in hand and current asset investments
less overdraft facilities, end of year 35,270 5,659
Bank facilities available 169,605 190,554
Capital resources available 204,875 196,213
58

Report
Financial statements

Notes to the financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
1 Segment information
Geographical markets: 1)
Europe 615,018 487,040 82,430 86,461
North and South America 93,310 71,317 – –
Asia and Oceania 379,485 388,832 – –
Middle East 154,441 130,135 – –
1,242,254 1,077,324 82,430 86,461
2 Net financials
External interest income 2,473 2,667 907 1,361
Interest income from subsidiaries 6,559 4,965
External interest expenses -18,400 -14,956 -6,780 -7,186
Interest paid to subsidiaries -101 -117
Dividend 116 100 116 100
Realised and unrealised exchange gains/losses, net -4,945 -762 -2,374 -1,159
-20,756 -12,951 -1,673 -2,036
3 Staff
Average number of employees 4,977 4,468 226 237
Staff expenses:
Directors’ fees 715 649
Remuneration of the Executive Board 2,264 1,985
Wages and salaries etc. 197,997 159,245 20,806 19,822
Pension contributions 11,613 8,687 1,822 1,866
209,610 167,932 25,607 24,322
Staff expenses have been recognised in the
income statement as follows:
Production costs 51,174 40,518 7,509 7,232
Selling and distribution expenses 115,516 93,557 5,803 5,931
Administrative expenses 42,920 33,857 12,295 11,159
209,610 167,932 25,607 24,322
1)
For competitive reasons, a breakdown of revenue on activities has been left out (in accordance with section 96 of the Danish Financial Statements Act).
60

Report
Financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
4 Calculated income tax
Hempel Group:
Profit for the year before tax 65,260 61,083
Income from investments in associates -2,581 -2,314
62,679 58,769
Tax on profit for the year:
Total tax -18,964 -18,251 -18,964 -18,251
Tax in respect of subsidiaries 14,655 14,305
Tax in respect of associates 164 220 – –
-18,800 -18,031 -4,309 -3,946
Current tax for the year -27,026 -25,656 – _
Deferred tax for the year 5,186 6,126 – _
Adjustment in respect of previous years 3,040 1,499 – –
Income tax -18,800 -18,031 -4,309 -3,946
Effective tax rate of the Group 30.0% 30.7%
Reconciliation of tax rate:
Danish tax rate 25.0% 25.0%
Higher/(lower) tax rates of foreign subsidiaries -4.0% -3.6%
Weighted tax rate of the Group: 21.0% 21.4%
Permanent differences 4.2% 2.8%
Non-capitalised losses 3.3% 3.7%
Utilisation of non-capitalised losses -2.1% -1.3%
Adjustments in respect of previous years -4.8% -2.5%
Dividend tax and other taxes at source 8.4% 6.6%
Effective tax rate of the Group 30.0% 30.7%
At 31 December 2012, the Group has a non-recognised tax asset of EUR 28 million (2011: EUR 27 million),
of which the parent company represents EUR 13 million (2011: EUR 11 million).
61

Notes to the financial statements
In EUR thousands
Group
Note Goodwill Software
Software
under
development
Customer
relationships
Other
intangible
assets
Total
5 Intangible assets
Costs, beginning of year 79,011 10,112 5,762 76,667 52,781 224,333
Exchange adjustment at year-end rate 572 66 -13 199 970 1,794
Acquisition of enterprises 6,627 – – 1,577 1,669 9,873
Additions for the year – 1,779 1,055 – 47 2,881
Disposals for the year – -41 – – – -41
Transfer to/from other items – 4,037 -3,374 – -663 –
Costs, end of year 86,210 15,953 3,430 78,443 54,804 238,840
Accumulated amortisation,
beginning of year 10,779 5,110 – 26,833 5,098 47,820
Exchange adjustment at year-end rate -95 25 – -396 55 -411
Amortisation for the year 6,280 3,688 – 11,554 4,009 25,531
Exchange adjustment between
average rate and year-end rate -113 -11 – -252 -26 -402
Reversal of amortisation of assets
sold – -41 – – – -41
Transfer to/from other items – 350 – – -350 –
Accumulated amortisation, end of year 16,851 9,121 – 37,739 8,786 72,497
Carrying amount, end of year 69,359 6,832 3,430 40,704 46,018 166,343
62

Report
Financial statements
In EUR thousands
Parent company
Note Goodwill Software
Software
under
development
Customer
relationships
Other
intangible
assets
Total
5 Intangible assets
Costs, beginning of year 401 3,612 5,251 – 7,131 16,395
Exchange adjustment at year-end rate -1 -14 -18 – -25 -58
Acquisition of enterprises – – – – 1,669 1,669
Additions for the year – 1,059 – – 25 1,084
Disposals for the year – – -3,167 – – -3,167
Transfer to/from other items – – – – – –
Costs, end of year 400 4,657 2,066 – 8,800 15,923
Accumulated amortisation,
beginning of year 401 2,699 – – 2,940 6,040
Exchange adjustment at year-end rate -1 -12 – – -11 -24
Amortisation for the year – 585 – – 1,064 1,649
Exchange adjustment between
average rate and year-end rate – – – – -2 -2
Reversal of amortisation of
assets sold – – – – – –
Accumulated amortisation, end of year 400 3,272 – – 3,991 7,663
Carrying amount, end of year – 1,385 2,066 – 4,809 8,260
Group
Parent company
2012 2011 2012 2011
Amortisation and impairment are specified as follows:
Production costs 128 151 94 140
Selling and distribution expenses 324 230 65 81
Administrative expenses 25,079 18,666 1,490 1,257
25,531 19,047 1,649 1,478
63

Notes to the financial statements
In EUR thousands
Group
Note
Land and
buildings
Land and
buildings
for sale
Plant and
machinery
Other fixed
assets
Assets
under construction
Total
6 Property, plant and equipment
Costs, beginning of year 150,218 10,339 165,422 79,696 17,009 422,684
Exchange adjustment at year-end rate 437 -39 1,258 592 -953 1,295
Acquisition of enterprises – – 503 254 – 757
Divestment of enterprises – – -355 -278 – -633
Additions for the year 1,160 – 4,657 3,665 17,050 26,532
Disposals for the year -473 -3,200 -4,372 -4,999 -671 -13,715
Transfer to/from other items 6,645 – 9,148 760 -16,553 –
Costs, end of year 157,987 7,100 176,261 79,690 15,882 436,920
Accumulated depreciation,
beginning of year 45,079 4,654 124,929 64,111 – 238,773
Exchange adjustment at year-end rate -143 -16 532 464 – 837
Acquisition of enterprises – – 368 180 – 548
Depreciation for the year 4,765 – 7,443 5,057 – 17,265
Exchange adjustment between
average rate and year-end rate -73 – -76 -65 – -214
Divestment of enterprises – – -306 -267 – -573
Reversal of depreciation of assets
sold -154 -3,200 -5,352 -4,219 – -12,925
Transfer to/from other items – – – – – –
Accumulated depreciation, end of year 49,474 1,438 127,538 65,261 – 243,711
Carrying amount, end of year 108,513 5,662 48,723 14,429 15,882 193,209
including leased assets of 3,645 – – – – 3,645
including interest expenses of 166 – 116 2 – 284
64

Report
Financial statements
In EUR thousands
Parent company
Note
Land and
buildings
Land and
buildings
for sale
Plant and
machinery
Other fixed
assets
Assets
under construction
Total
6 Property, plant and equipment
Costs, beginning of year 11,617 10,339 5,483 1,606 388 29,433
Exchange adjustment at year-end rate -38 -36 -22 -5 -1 -102
Additions for the year – – 82 299 7,648 8,029
Disposals for the year – -3,200 -262 -124 – -3,586
Transfer to other items – – – – – –
Costs, end of year 11,579 7,103 5,281 1,776 8,035 33,774
Accumulated depreciation,
beginning of year 2,771 4,654 5,052 1,499 – 13,976
Exchange adjustment at year-end rate -10 -16 -18 -5 – -49
Depreciation for the year 221 – 79 170 – 470
Reversal of depreciation of assets
sold – -3,200 -133 -124 – -3,457
Transfer to other items – – – – – –
Accumulated depreciation, end of year 2,982 1,438 4,980 1,540 – 10,940
Carrying amount, end of year 8,597 5,665 301 236 8,035 22,834
including leased assets of – – – – – –
including interest expenses of – – – – – –
Group
Parent company
2012 2011 2012 2011
Depreciation and impairment are specified as follows:
Production costs 9,552 7,909 258 282
Selling and distribution expenses 4,756 4,119 51 208
Administrative expenses 2,957 2,527 161 413
17,265 14,555 470 903
65

Notes to the financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
7 Investments in subsidiaries
Costs, beginning of year 285,571 277,919
Additions for the year 7,674 7,652
Disposals for the year -347 –
Costs, end of year 292,898 285,571
Net revaluations, beginning of year 11,142 3,101
Exchange adjustment at year-end rate -1,838 8,315
Hedging of future transactions -1,321 -2,961
Profit before tax 57,793 52,973
Amortisation of goodwill -6,280 -4,600
Tax for the year -14,320 -13,602
Dividend received -46,614 -32,084
Net revaluations, end of year -1,438 11,142
Carrying amount, end of year 291,460 296,713
Recognised in the balance sheet as follows:
Subsidiaries with negative equity -2,370 -2,628
Investments in subsidiaries 293,830 299,341
291,460 296,713
Subsidiaries with negative equity are recognised
in the balance sheet as follows:
Recognised in provisions -285 -863
Recognised in receivables from subsidiaries -2,085 -1,765
Net value, end of year -2,370 -2,628
66

Report
Financial statements

Notes to the financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
8 Investments in associates
Costs, beginning of year 84 84 – –
Costs, end of year 84 84 – –
Net revaluations, beginning of year 10,931 9,209 – –
Exchange adjustment at year-end rate -274 431 – –
Net profit 2,745 2,534 – –
Dividend received -1,174 -1,243 – –
Net revaluations, end of year 12,228 10,931 – –
Carrying amount, end of year 12,312 11,015 – –
9 Receivables
Receivables 367,873 383,182 129,929 126,710
of which due more than one year from
the balance sheet date 6,180 4,906 – 1,109
10 Prepayments
Prepayments comprise prepaid expenses relating to rent, insurance premium and interest as well as unrealised
exchange adjustments relating to financial instruments.x
11 Share capital
The share capital amounts to DKK 115 million comprising 110 A shares of DKK 1 million each, one A share
of DKK 900,000, four B shares of DKK 1 million each and four B shares of DKK 25,000 each. B shareholders
enjoy special dividend rights.
68

Report
Financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
12 Deferred tax
Deferred tax (net) relates to the following items:
Intangible assets -18,704 -22,464
Property, plant and equipment -1,039 -3,314
Fixed asset investments -1,015 -568
Inventories 761 962
Trade receivables 2,375 868
Provisions and other payables 3,746 4,139
Tax losses 5,374 1,883
-8,502 -18,494 – –
The net value is recognised in the balance sheet
as follows:
Deferred tax assets 25,784 10,108
Deferred tax liabilities -34,286 -28,602
-8,502 -18,494 – –
69

Notes to the financial statements
In EUR thousands
Note
13 Pension assets and liabilities
The majority of the employees are covered by defined-contribution plans. Only a few employees are covered by
defined-benefit plans. Defined-benefit plans are primarily used in the UK, Ireland and Germany.
Group
Parent company
2012 2011 2012 2011
Pension obligations comprise:
Pension obligations 45,968 38,423 749 759
Fair value of assets related to the plans -33,434 -30,192 – –
Unhedged pension obligations (net) 12,534 8,231 749 759
Non-recognised actuarial gains/(losses) -7,241 -3,151 – –
Pension obligations recognised in the balance sheet (net) 5,293 5,080 749 759
Relating to:
Defined-contribution plans 7,385 6,659 – –
Defined-benefit plans -2,092 -1,579 749 759
Pension obligations recognised in the balance sheet 5,293 5,080 749 759
Defined-benefit plans
Specification of plan assets:
Shares and properties 42% 40% – –
Fixed interest current asset investments 53% 56% – –
Cash at bank and in hand 5% 4% – –
Total 100% 100% – –
Weighted average assumptions:
Discount rate 3.9% 5.0% 4.3% 4.3%
Expected return on assets 4.6% 4.3% – –
General wage inflation 2.9% 3.2% – –
General price inflation 1.8% 1.9% – –
70

Report
Financial statements
In EUR thousands
Group
Note
Environmental
obligations
Warranty
commitments
Other
provisions
Total
14 Provisions
Total provisions, beginning of year 24,017 6,449 4,126 34,592
Exchange adjustments 81 – 45 126
Additions for the year – 3,765 142 3,907
Reversed -381 – -1,766 -2,147
Disposals for the year -1,015 – -271 -1,286
Total provisions, end of year 22,702 10,214 2,276 35,192
Maturities are expected to be:
Within 1 year 1,498 – – 1,498
Between 1 and 5 years 21,204 10,214 2,276 33,694
22,702 10,214 2,276 35,192
71

Notes to the financial statements
In EUR thousands
Note
15 Bank loans and derivative financial instruments:
Risk management policy of the Group:
Due to its operations, investments and financing, the Group is exposed to changes in exchange rates and interest
rates. The Group’s financial management is focused only on managing financial risks relating to operations and
financing. Accordingly, it is Group policy not to speculate actively in financial risks. For further information on the
Group’s exchange and interest rate risks and the management of these risks, see the management’s review.
Group
Parent company
2012 2011 2012 2011
Long-term bank borrowings etc. including short-term part:
Due within 1 year 27,173 34,798 13,847 21,347
Due within 1 to 5 years 199,967 223,589 104,127 117,973
Due after 5 years – 192 – –
227,140 258,579 117,974 139,320
Bank borrowings
etc. Cash flow Terms
Financial instruments at 31 December 2012 227,140
Average term
to maturity
2.6 years
Average fixed
interest rate
of 3.8%
Total payables of EUR 227.1 million comprise loans denominated in EUR of EUR 122.9 million and loans denominated
in other currencies, primarily GBP, of EUR 104.2 million. The effect of interest rate swaps of EUR 117.7
million and GBP 84.6 million (EUR 103.5 million), respectively, is included in the calculated interest. The fair value
adjustment of interest rate swaps of EUR -11.5 million in total at 31 December 2012 is recognised directly in
equity. The weighted average effective interest rates as at the balance sheet date were as follows:
Group
Parent company
2012 2011 2012 2011
Bank borrowings etc. 3.8% 3.9% 4.0% 4.0%
72

Report
Financial statements
In EUR thousands
Note
15 Bank loans and derivative financial instruments (continued):
Currency risks:
Open foreign currency hedges at 31 December 2012 entered into in order to hedge future purchases and sales
as well as receivables and payables in foreign currencies are specified as follows:
EUR million
Contract amount based
on exercise price 1)
Fair value
Term to maturity
(months)
PLN -24.5 0.1 1
ZAR -2.2 0.0 4
USD -48.0 -0.1 1
0.0
1)
Positive principal amounts equal a purchase of the currency in question and negative amounts equal a sale.
Value adjustments of derivative financial instruments are recognised in the income statement except for fair
value adjustment of sale of a total of EUR 4.6 million of USD against KRW. Gains on these contracts, totalling
EUR 0.2 million, have been recognised in equity.
Credit risks:
The Group has no material risks relating to a single customer or business partner. It is the Group’s credit policy to
rate major customers and other business partners on a current basis. For further information on the Group’s credit
risks and covering of these risks, see the Special risks section of the management’s review (page 37).
73

Notes to the financial statements
In EUR thousands Group Parent company
Note 2012 2011 2012 2011
16 Fee to the auditors appointed at the General Meeting
Audit fee 958 1,009 218 166
Other assurance engagements 24 38 – –
Tax advice 198 208 48 2
Other fees 727 184 568 43
1,907 1,439 834 211
17 Contingent liabilities and other financial obligations
Rental and lease obligations:
Due within 1 year from the balance sheet date 9,050 9,456 358 324
Due within 1 to 5 years from the balance sheet date 22,594 17,906 532 432
Due more than 5 years from the balance sheet date 9,404 5,735 – –
41,048 33,097 890 756
Guarantees:
For local loans and bank credits to subsidiaries 1) 214,827 223,745
Other guarantees 3,163 3,697 189 710
3,163 3,697 215,016 224,455
1)
Unutilised guarantees for local loans and bank credits to subsidiaries amount to EUR 21,822 thousand (2011: EUR 29,435 thousand).
Security
Mortgages registered to owners of EUR 4,035 thousand at 31 December 2011 to cover bank borrowings of EUR
7,500 thousand at 31 December 2011 have been cancelled in 2012 through a repayment of the borrowings.
Other contingent liabilities:
As part of its current operations, the Group is a party to certain legal disputes, and certain claims have been
advanced against the Group concerning complaints, pollution and environmental issues. It is management’s
assessment that these disputes and claims will have no material effect on the Group’s financial position.
Hempel A/S is jointly taxed with the Danish companies of the Hempel Holding Group.
The Group’s Danish enterprises are jointly and severally liable for Danish taxes at source and income taxes.
74

Report
Financial statements
In EUR thousands
Note
Basis
18 Related parties and ownership
Controlling influence:
Hempel Foundation, Amaliegade 8, 1256 Copenhagen K, Denmark
Hempel Holding A/S, Amaliegade 8, 1256 Copenhagen K, Denmark
Ultimate parent company
Majority shareholder
(100%)
Members of the Executive Board and Board of Directors of Hempel A/S as well
as the Board of Directors of the Hempel Foundation and Hempel Holding A/S
are also regarded as related parties. The members of the Boards of Directors of
the Hempel Foundation and Hempel Holding coincide.
Other related parties:
Saudi Arabian Packaging Industry WL.L, P .O. Box 1966, Dammam 31441,
Saudi Arabia
Sapin United Arab Emirates L.L.C., P .O. Box 115132, United Arab Emirates
Associate
Associate
Hempels Medarbejderfond, Amaliegade 8, 1256 Copenhagen K, Denmark
Hempels Kulturfond, Amaliegade 8, 1256 Copenhagen K, Denmark
Brænderupvænge ApS, Amaliegade 8, 1256 Copenhagen K, Denmark
Keldskov ApS, Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Related party
Related party
Related party
75

Notes to the financial statements
In EUR thousands
Group
Note 2012 2011
19 Adjustment for non-cash operating items
Amortisation, depreciation and impairment, including goodwill 42,796 35,052
Provisions 1,373 87
Exchange rate adjustment, operating profit -893 3,469
Gains and losses on the sale of fixed assets -254 -843
43,022 37,765
20 Change in working capital
Change in receivables 14,782 -7,458
Change in inventories 19,420 2,535
Change in trade payables -10,216 -8,543
23,986 -13,466
76

Report
Financial statements
In EUR thousands
Group
Note 2012 2011
21 Balance sheet items of acquired enterprises
Intangible assets 8,204 128,890
Property, plant and equipment 209 15,719
Fixed asset investments 1 4,986
Inventories 532 32,855
Receivables 1,619 40,686
Cash at bank and in hand 508 12,338
Provisions – -27,878
Long-term payables -1,160 –
Short-term payables -1,206 -56,997
Net assets 8,707 150,599
Intangible assets of parent company 1,669 –
Property, plant and equipment of parent company – 21,836
Acquisition costs 10,376 172,435
Cash at bank and in hand -532 -12,338
Exchange adjustment – 586
Net cash flows from acquisitions 9,844 160,683
Balance sheet items of divested enterprises
Property, plant and equipment 60 –
Inventories 854 –
Receivables 581 –
Short-term bank borrowings -344 –
Short-term payables -653 –
Minority interests -173 –
Selling price 325 –
Net overdraft facility of divested enterprise 344 –
Exchange adjustment 22 –
Net cash flows from divestment 691 –
77

Notes to the financial statements
In EUR thousands
Group
Note 2012 2011
22 Cash and cash equivalents, net
Cash at bank and in hand, beginning of year 106,288 72,764
Bonds, beginning of year – 31
Overdraft facilities, beginning of year -100,629 -70,082
5,659 2,713
Cash, end of year 127,010 106,288
Overdraft facilities, end of year -91,740 -100,629
35,270 5,659
78

Report
Financial statements

The Hempel Group
including foreign branches
Note 23 Name Currency Share capital Ownership
Denmark Hempel A/S DKK 115,000,000
Argentina Hempel Argentina S.R.L. ARS 71,524,200 100%
Australia Hempel (Australia) Pty. Ltd. AUD 700,000 100%
Bahrain Hempel Paints (Bahrain) W.L.L. BHD 300,000 51%
Bahrain Dahna Paint Middle East Holding B.S.C. (closed) USD 65,637,500 51%
Belgium Hempel (Belgium) N.V. EUR 62,000 100%
Brazil Hempel Tintas do Brasil Ltda. BRL 6,045,670 100%
Canada Hempel (Canada) Inc. CAD 1,776,005 100%
Chile Hempel A/S (Chile) Ltda. CLP 6,558,960 100%
Cyprus Hempel (Cyprus) Ltd. EUR 17,100 100%
Cyprus Hempel Coatings (Cyprus) Limited EUR 1,000 100%
Denmark Hempel Decorative Paints A/S DKK 1,000,000 100%
Denmark Hempel Properties A/S DKK 1,000,000 100%
Denmark HSA (Danmark) A/S DKK 10,000,000 100%
Ecuador Hempel (Ecuador) S.A. USD 100,000 100%
Egypt Hempel Egypt L.L.C. EGP 200,000 100%
Finland OY Hempel (Finland) AB EUR 63,000 100%
United Arab Emirates Hempel Paints (Abu Dhabi) L.L.C. AED 150,000 23%
United Arab Emirates Hempel Paints (Emirates) L.L.C. AED 4,000,000 29%
United Arab Emirates Sapin United Arab Emirates L.L.C.* AED 1,000,000 18%
France Hempel (France) S.A. EUR 1,220,000 100%
Greece Hempel Coatings (Hellas) S.A. EUR 7,800,000 100%
The Netherlands Hempel (The Netherlands) B.V. EUR 250,000 100%
India Hempel Paints (India) Pvt. Ltd. INR 200,000,000 100%
Indonesia P.T. Hempel Indonesia USD 2,000,000 100%
Ireland Crown Paints Ireland Ltd. EUR 127 100%
Italy Hempel (Italy) s.r.l. EUR 50,000 100%
China Hempel (China) Limited HKD 106,000,000 100%
China Hempel (Kunshan) Coatings Co. Ltd. CNY 38,400,015 100%
China Hempel (Yantai) Coatings Co. Ltd. CNY 17,860,466 100%
China Hempel (Guangzhou) Coatings Co. Ltd. CNY 185,327,620 100%
China Hempel-Hai Hong Coatings (Shenzhen) Co. Ltd. HKD 40,000,000 100%
China Hempel (Seagull) Coatings Co. Ltd. HKD 20,000,000 100%
Korea Hempel Korea Co. Ltd. KRW 1,450,000,000 100%
Croatia Hempel Coatings (Croatia) Ltd. HRK 31,019,200 98%
Kuwait Hempel Paints (Kuwait) K.S.C.C. KWD 600,000 51%
Malaysia Hempel (Malaysia) Sdn. Bhd. MYR 5,000,000 100%
Malaysia Hempel Manufacturing (Malaysia) Sdn. Bhd. MYR 9,500,000 100%
Morocco Hempel (Morocco) SARL MAD 2,500,000 99%
Mexico Hempel (Mexico) S.A. de C.V. MXN 50,000 100%
Mexico Pinturas Hempel de Mexico S.A. de C.V. MXN 9,935,870 100%
New Zealand Hempel (New Zealand) Ltd. NZD 300,000 100%
80

Note 23 name Currency Share capital ownership
Norway Hempel (Norway) AS NOK 4,981,428 100%
Oman Hempel (Oman) L.L.C OmR 500,000 20%
Poland Hempel (Poland) Sp. z o.o. PLN 5,000,000 100%
Poland Hempel manufacturing (Poland) Sp. z o.o. PLN 55,500,000 100%
Portugal Hempel (Portugal) Lda. EUR 1,246,995 100%
Qatar Hempel Paints (Qatar) W.L.L. QAR 4,000,000 29%
Romania Hempel (Romania) S.R.L. EUR 420,100 100%
Russia ZAO Hempel RUR 95,000 100%
Saudi Arabia Hempel Paints (Saudi Arabia) W.L.L. SAR 24,500,000 51%
Saudi Arabia Saudi Arabian Packaging industry W.L.L.* SAR 20,000,000 18%
Singapore Hempel (Singapore) Pte. Ltd. SGD 2,700,000 100%
Spain Pinturas Hempel S.A. (Spain) EUR 1,202,000 100%
UK Crown Brands Ltd. GBP 1 100%
UK Crown Darwen Ltd. GBP 200 100%
UK Crown Decorative Production Ltd. GBP 2 100%
UK Crown Paints Ltd. GBP 1 100%
UK Grown Paints Group Ltd. GBP 1,000,000 100%
UK Crown Paints Holding Ltd. GBP 1,000,000 100%
UK Donald macpherson And Company Ltd. GBP 50,000 100%
UK Hempel Decorative Paints UK Ltd. GBP 2,000 100%
UK Hempel UK Ltd. GBP 4,100,000 100%
UK Reebor Ltd. GBP 100 100%
Sweden Hempel (Sweden) AB SEK 2,500,000 100%
South Africa Hempel Paints (South Africa) Pty Ltd. ZAR 15,999,475 100%
Syria Hempel Paints (Syria) L.L.C. SYP 121,600,000 49%
Taiwan Hempel (Taiwan) Co. Ltd. TWD 20,000,000 100%
Thailand Hempel (Thailand) Ltd. THB 3,000,000 100%
Czech Republic Hempel (Czech Republic) s.r.o. CZK 30,000,000 100%
Turkey Hempel Coatings San. Ve Tic Ltd. Sti. TRY 2,789,300 100%
Germany Hempel (Germany) GmbH EUR 1,533,876 100%
Ukraine Hempel Ukraine LLC UAH 121,000 100%
Uruguay Hempel (Uruguay) S.A. UYU 8,000,000 100%
USA Hempel (USA) inc. USD 9,000,000 100%
USA Blome international, inc. USD 18,314 100%
Vietnam Hempel Vietnam Company Limited USD 2,690,017 100%
Foreign branches
Cuba
Hungary
Slovakia
Vietnam
india
Pinturas Hempel (Cuba)
Hempel (Czech Republic) s.r.o. magyarorszagi Fioktelepe
Hempel (Czech Republic) s.r.o. org. zlozka Slovensko
Hempel (Singapore) Pte. Ltd. Vietnam Representative Office
Hempel (india) Liaison Office
* Associate
81

HEMPEL A/S
Lundtoftegårdsvej 91
DK-2800 Kgs. Lyngby
Tel: +45 4593 3800
Fax: +45 4588 5518
www.hempel.com