Annual report 2003
Last year we served more than 1.5 billion meals.
Wraps ”Wraps has already established a place in Norwegian eating habits. The Wraps success will be broadened this spring with the introduction of two new tastes, in order to maintain interest in the product and create category growth”
5 6 8
18 20 22 24 26 27
Quality and food safety Environmental report
28 30
Directors’ report Corporate governance
33 40
Accounts Key figures Management of foreign exchange and interest rate risk Shares and shareholders
42 74
Adressess
80
Financial report
Value drivers Product development Brand building Value-creating acquisitions Internal improvements Reduced capital employed
Directors’ report
14 16
Environment and food safety
Consumers in change Changing markets
Strategy
10 12
Challenges in the market
Western Europe Central and Eastern Europe
Presentations of operations
Our aim is to serve even more delicious meals in the future.
2
Overview
Heading forward CEO remarks About Rieber & Son Business Units Brands
77 78
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
1
Heading forward expertise and stimulate co-operation between business areas and across borders. In line with our strategy, Nopal was acquired in June 2003, and a key priority was to integrate the company quickly and effectively in order to extract cost synergies. After seven months the process of integration was completed, and our new colleagues and five new brands will be important for our further growth. 2003 was a mixed year. It is gratifying that in Western Europe both sales and EBITA were above our strategic objectives, but in CEE we have had to deal with a lower top line and weak results. Some costs have been reduced in order to improve future earnings and strengthen our competitive position. In order to extract economies of scale across national boundaries the Group has been reorganised and now comprises nine business units. It has been important to focus on a better and increased level of internal communication, in order to promote the transfer of
Vitana Bouillon ”Bouillon powder in a jar will attract new consumers in the younger age group and thus strengthen its position in the bouillon category in the Czech and Slovak markets. The same concept has already been launched in Norway under the Toro brand in 2004”
The establishment of common, integrated systems for key work processes is important. The introduction of a new ERP-system (the RIGHT project) in the period from 2002 to 2005 is therefore a project of strategic significance. It will lead to greater integration, facilitate the transfer of ”best practice” and contribute to the dismantling of language barriers. As a focused food company, the objectives and the way ahead are clearly defined in our strategy. Four main areas of attention have been identified: internal improvements, organic growth, reduce capital
Overview
Key figures 2003|
Figures in NOK m
% NOK NOK
3 222 6.3 % 330 10.2 % 17.4 2.35 1.10
3 031 3.8 % 326 10.7 % 20.1 2.48 7.00
2001| 2 920 4.7 % 299 10.2 % 19.8 1.87 0.85
2000| 2 789 3.8 % 260 9.3 % 16.5 1.72 0.80
1999| 2 687 -2.4 % 267 9.9 % 16.0 4.36 1.85
Presentations of operations
Net sales Change from previous year EBITA EBITA-margin Gross ROCE Earnings per share (EPS) Dividend per share
2002|
Definitions page 74
and innovative, and we shall contribute to profitable growth for our customers. The high pace of product launches will be maintained and we will continue to focus on making the existing products even better also going forward.
Challenges in the market
employed, and value-creating acquisitions. Focus on these value drivers will result in more added value for our shareholders. Projects have been initiated and steps taken in each of these areas. This will make great demands of our competent personnel, and I take the opportunity to thank them all for their commitment and untiring efforts in 2003.
Asbjørn Reinkind President and CEO
Environment and food safety
In 85% of Czech households it is the woman who makes the food.
Strategy
Through our strong brands and close co-operation with customers we seek to achieve category growth. Our consumers shall perceive us as exciting, reliable
Directors’ report Financial report Adressess
1
2
3
4
5
6
1. Geir-Arne Åsnes, Director King Oscar (b. 1962). Graduate of the Norwegian School of Economics and Business Administration (NHH). Formerly with International dep. in DnB, he joined Rieber & Søn as head of management accounting in 1992. He has worked on business development with in foods. Director of King Oscar since 1997 2. Tor Lund, CFO (b. 1949 ). State Authorised Public Accountant. Joined the Rieber & Søn Group in 1969, working in the area of accounts, controller functions and finance. CFO since 1994.
4
RIEBER & SØN -
Group Management 3. Morten Vike, Director - Foods CEE (b. 1971). Graduate of the Norwegian School of Economics and Business Administration (NHH) and CEMS master (St. Gallen). Started to work in staff group management. Later, part of management in Natural Stone Division. Business developer and member of the senior management team in CEE. Head of CEE since 2001.
5. Stein Klakegg, Group Director - Western Europe (b. 1957). Graduate of the Norwegian School of Economics and Business Administration (NHH). Joined Rieber & Søn in 1989 after various positions with Nevi Finans in Norway and the Netherlands. Among various positions, he headed the Natural Stone Division and then Toro from 1997. Head of segment Western Europe since 2003.
4. Asbjørn Reinkind, President & CEO (b. 1960). Graduate of the Norwegian School of Economics and Business Administration (NHH) and AMP INSEAD. Headed business development at Toro from 1984, head of Denja then Toro. Managing director of Hydro Seafood 1997-2001. President & CEO of Rieber & Søn since 1 January 2002.
6. Bjørnar Gulliksen, Director - Strategic Development (b. 1965). Graduate in economics and business management and MSc from the University of Aalborg, Denmark. Joined Rieber & Søn in 1990, firstly as product manager. Subsequently head of Nordic Market for Denja and Assistant Divisional Director, Toro. Director of Treschow Fritzøe 200001. Director of Strategic Development, Rieber & Søn, since 2002.
ANNUAL REPORT 2003
Overview Presentations of operations
Rieber & Søn – an international food group For reporting purposes, Rieber & Søn’s activities are split into two main segments - Western Europe and Central and Eastern Europe (CEE) - which were organised into nine business units in 2003.
In August 2001, after 161 years as an industrial conglomerate, the Board of Rieber & Søn decided to concentrate the company’s activities on foods. This was done in order to be more competitive and thereby create greater shareholder value.
Business concept: “We shall inspire people to prepare and enjoy exciting and tasty food in an easier way.”
Local Taste Champion: Vision: ”We shall be the Local Taste Champion and leading Brand Builder, and will develop attractive food based on consumer needs.”
Strategy
This means that Rieber & Søn shall be the local taste champion. We shall have the best understanding of national tastes and adapt both national and international dishes to local taste preferences and make the products easier to prepare. Rieber & Søn shall drive and develop the categories through continuous improvement of existing products and the introduction of new ones.
Environment and food safety
Rieber & Søn has leading brands such as Toro, Denja, Mr.Lee, King Oscar, Vossafår, Vestlandslefsa, Sopps, Black Boy, Geisha, Ming, Trondhjems, Mrs.Cheng’s, Cronions, Delecta, Anatol, Vitana, Bask, Chaka and Emarko.
Challenges in the market
Rieber & Søn is one of Norway’s leading food groups. The main markets are Norway, the other Nordic countries and selected countries in Western Europe and Central and Eastern Europe (CEE), where the Group has a considerable market share for food products in the retail market. Rieber & Søn is also a major supplier to the food service market, as well as being a producer of ingredients to food manufacturers.
Directors’ report
Organisation chart CEO
CFO King Oscar
CEE
Toro
King Oscar
Vitana
Denja
Delecta
Cronions
Rieber Russia
Strategy and business development
Financial report
Western Europe
FoodService Rieber Food Ingredients Western Europe
Adressess
Group Management
CEE Business Units
RIEBER & SØN -
ANNUAL REPORT 2003
5
Business Units Toro Toro produces and markets soups, casseroles, pasta dishes, condiments, sauces, bouillons etc. for the Norwegian consumer market and for export markets such as Sweden and Iceland. The production plants are at Indre Arna close to Bergen and in Elverum. In addition to the main brand - Toro - the business unit also has well known brands such as Sopps, Black Boy, Ming, Trondhjems, Mrs.Cheng’s and Mr.Lee.
Denja Denja has strong brands in the area of chilled salads, dressings and herring which are sold under the Denja brand name, as well as Vossafår which a brand name for smoked sausage. The main markets are the consumer markets in Scandinavia. Denja has three factories, of which two are in Norway (Larvik and Voss) and one in Denmark (Randers).
Cronions Cronions produces and markets crispy onion. The
In 2050, 50% of the population will be over the age of 46.
Lasagne ”Toro was first on the Norwegian market with Lasagne and set the taste standard. Today, Toro Lasagne is the market leader and one of Rieber & Søn’s biggest Italian products”
production takes place at Randers (Denmark) and St. Maartensdijk (the Netherlands). Cronions are sold as a taste additive in the consumer and industrial markets in most European countries, the main markets being Germany, Denmark, Sweden and Norway.
King Oscar King Oscar sells tinned seafood, including familiar products such as sardines, mackerel in tomato sauce, cod roe and cod liver. King Oscar sardines are sold worldwide, with the USA as the biggest market. The production is at Askøy outside Bergen and in Gniewino, Poland.
Rieber Food Ingredients Rieber Food Ingredients produces and exports taste ingredients to other food manufacturers. The main products are spice mixes and bouillons as taste additives, as well as a range of different tastes based on fish and shellfish. Production takes place at the Toro factory in Indre Arna, but during 2004
Overview
FoodService
Vitana
Since 1816 Delecta has been producing and marketing products such as cakes, cake mixes, bakery ingredients, desserts and ready-made dinners etc. under the Delecta brand name, as well as the hot drink Anatol for the Polish consumer market. Production takes place at four factories in Wloclawek and one near Bydgoszcz in Poland.
Rieber Russia Rieber Russia produces and markets a variety of nuts under the Emarko and Chaka brand names. The range includes peanuts, pistachio nuts, cashew nuts etc. The production plant is located at Elektrostal, east of Moscow.
Strategy
The Czech- and Slovak business unit Vitana is the market leader in several areas, including soups, bouillons, condiments, cake mixes, sauces, noodles and rice in the Czech Republic. Vitana is the country’s third largest food manufacturer, producing around 300 million consumer units annually at four factories. The main brand - Vitana - is one of the most familiar
Delecta Challenges in the market
FoodService has responsibility for the development, sale and marketing of products for the food service market in Norway, Denmark, Sweden, the Czech Republic and Slovakia. The products supplied have well known brand labels such as Toro, Black Boy, King Oscar, Vestlandslefsa, Denja, and Vitana, all adapted to the foodservice market. Parts of the range are trading products.
food brands in the Czech Republic. The company’s other brands are Emarko (snacks), Klasik (liquid taste additives) and Bask (rice). Vitana products are also sold in Slovakia (No. 2 position). There we also have the sub-brand name Tatranska, in addition to this there are exports to neighbouring countries in CEE.
Presentations of operations
production will also be started at Vitana’s plant in Bysice in the Czech Republic.
Environment and food safety Directors’ report Financial report Adressess
CEE
20 brands in 12 countries
8
RIEBER & SØN -
ANNUAL REPORT 2003
Rieber & Søn acquires Bøe Lefsebakeri AS and the Vestlandslfsa brand.
Vossafår (established in 1936) is taken over.
1996
Denja gains access to the Swedish market through the acquisition of Salatmästeren.
Delecta, the Polish food company founded in 1816, is acquired. Mr.Lee becomes a part of Rieber & Søn. King Oscar is acquired. Bask and Emarko in the Czech Republic are acquired and co-ordinated with Vitana.
Rieber & Søn’s involvement in Central and Eastern Europe starts with the acquisition of Vitana (established in 1919) in the Czech Republic in connection with the process of privatisation after the fall of communism.
1997
Denja, a salad producer since the 1950s, is acquired.
1990
Toro stock cubes are launched, marking the basis of what was to become one of Norway’s strongest brands.
Rieber & Søn, the building materials company Jacob Neumann and Nodest Industrier decide to merge. Following the merger Rieber & Søn is listed on the Oslo Stock Exchange.
1989
Paul Gottlieb Rieber sets up a trading company and vinegar factory in Bergen.
Bergensk Fiskesupppe (Bergen Fish Soup) is launched, marking the start of a new epoch in Toro’s history where the preparation of established national dishes and products is simplified, making them accessible for the consumer.
1985
Rieber & Søn ventures into the food industry with ersatz coffee as its first product.
1948
1839
1933
Rieber & Søn a historical perspective
Trondhjems – tinned meals in Norway Denja – a brand name for salad, dressing and herring products for the Norwegian and Swedish markets Vossafår – a well known cured meat brand in Norway Vestlandslefsa - a traditional brand Chaka and Emarko - brand names for nuts in Russia Anatol – a brand name for chicory coffee in Poland with long traditions Bask – rice, lentils, dumplings etc. in the Czech Republic J.C. Horn – our second brand for spices in the Czech Republic Masox – bouillon in the Czech Republic and Slovakia
1992
Product brands: Mr.Lee – the Noodle King in Norway Sopps – pasta and Italian food in Norway Black Boy – a broad selection of spices, spice mixes and marinades in Norway Ming and Geisha – rice brands in Norway
1991
Main brands: Vitana - one of the strongest brands in the Czech Republic with long traditions and a broad assortment of products, ranging from soups, bouillons and casseroles to cake mixes.
1987
The brands can be split into main brands and product brands:
Delecta – a strong brand name in Poland for cakes, cake mixes, bakery ingredients, desserts and ready-made dishes. Toro – one of Rieber & Søn’s strongest brands with an assortment of more than 250 products. King Oscar – a brand name for tinned seafood since 1903, with worldwide sales and distribution. Mrs.Cheng’s – a brand name in the growing category of Asiatic food in Sweden
1964
Rieber & Søn has brands with a long history and strong positions, both in the Nordic region and in Central and Eastern Europe. A fully stocked grocery store in Norway has approximately 600 different products from Rieber & Søn, while the corresponding figure is 320 in the Czech Republic.
Denja takes over the Danish salad and onion producer Dacapo and its production plant at Randers, Denmark (established in 1923).
Overview
Western Europe
Presentations of operations Challenges in the market Strategy
Geographic overview – brands and production units Western Europe Iceland
Sweden Denmark
UK
The Netherlands Belgium Germany The Czech Rep.
Latvia
Russia
Environment and food safety
Norway
CEE
Lithuania Poland Ukraina The Slovak Rep.
Bulgaria Albania
Export *
Directors’ report
Hungary Romania
Prod. units Prod. Units decided closed/moved 2003/2004
2003
An onion factory in the Netherlands is taken over and together with our onion business in Randers (Denmark) this strengthens our position in the European market.
2004
2002
Rieber & Søn acquires Big Fish in Poland, tinned seafood (established in 1991). Rieber & Søn Salesforce Polska established as a joint sales organisation for Delecta and Big Fish. Alamar, which produces tinned seafood (cod roe and cod liver) with production plant in Svolvær, is acquired and integrated with King Oscar.
FoodService and Ingredients are established as business units. Acquisition of Nopal AS, which includes the brands Black Boy, Ming, Geisha, Trondhjems and Sopps.
Rieber & Søn is a focused food company with 22 factories in 7 countries and sales and marketing offices in a further 5 countries.
RIEBER & SØN -
ANNUAL REPORT 2003
Adressess
1998
Anja Cake (established in 1991) is acquired and integrated with Delecta. Rieber & Søn acquires Chaka, a plant and brand for snacks and peanuts in Russia (established in 1996). Decision to focus on food. Divestment of non-core businesses (turnover NOK 5bn and 4000 employees).
Financial report
2000
*Also export to USA, Australia and Japan
9
Presentation of operations
1 881
15.1%
01
15.1%
15.9%
1 695
2 221
Western Europe
02
03
Rieber & Søn has operations in 7 countries in Western Europe, with Norway the largest by far when measured by turnover. The company’s brands have performed well, in terms of both market development and results. The acquisition and integration of Nopal has been a success.
Rieber & Søn’s operations in Western Europe comprise businesses with production and sales in Western Europe, and some exports. In 2003, the segment had total sales of NOK 2 221m and EBITA of NOK 336m.
Structural changes Net sales NOK m EBITA-margin
Geographical distribution of turnover 2003 Norway 73.1% Sweden 6.0% Germany 4.9% USA 4.9% Denmark 2.1% Others 9.0%
10
RIEBER & SØN -
Nopal AS was taken over by Rieber & Søn in June. With factories in Elverum and Eskilstuna (Sweden), Nopal produces brands such as Black Boy (spices), Sopps (pasta), Geisha and Ming (rice) and Trondhjems (tinned foods). Vitaplex, the health food’s part of Nopal, was sold in December 2003. The acquisition was followed by a process of integration whereby Nopal’s sales organisation was co-ordinated with Toro’s and Denja’s external sales network and Nopal’s head office was closed. The co-ordination of activities has reduced the number of full-time positions by 50. Nopal is now fully integrated with three of Rieber & Søn’s business units Toro, Rieber Food Ingredients and FoodService. A joint Norwegian/Swedish organisation has also been established to focus on the retail/catering market by merging the
ANNUAL REPORT 2003
management of Grillfagmannen and Eurospice. The steps taken are expected to provide net cost synergies of around NOK 30m annually, with accounting effect from 2004. The acquisition of Nopal will strengthen Rieber & Søn’s product range and provide a better basis for product development. Structural changes are taking place within the trade in the Nordic region, with hard discounters entering the market, increasing the focus on price and putting margins under further pressure. This in turn highlights the need for greater productivity. We must therefore take steps to ensure that our customers have competitive terms and receive higher margins through internal improvements and a better product mix. In order to increase efficiency and reduce the future cost levels and reinvestment requirements, the Group has concentrated production among a smaller number of plants. Two factories in Norway were closed in 2003 and one in Sweden is due to close in 2004.
Overview Presentations of operations
Denja 2003 was a good year for Denja, inspiring the organisation to make further improvements. In 2003 Denja launched four salad mix variants - salads with a finer consistency - in the Norwegian and Swedish markets. Denja has taken an aggressive position in both Norway and Sweden. Through improvement projects a sound economic base will be established which will be used in the coming years for costeffective brand building and the launch of innovative products.
King Oscar
Cronions
Rieber Food Ingredients Rieber & Søn is also an international supplier of ingredients to other food manufacturers. Main product groups are bouillons, stock, marine powder and spice mixes. There was a slight dip in demand in the first half of 2003, partly due to import restrictions in the USA, but sales recovered in the second halfyear. We are investing in increased capacity for ingredients and a new plant is due to open in the Czech Republic in 2004.
RIEBER & SØN -
ANNUAL REPORT 2003
Adressess
Rieber & Søn is Europe’s largest producer of crispy onion. Parts of
FoodService covers all sales to hotels, restaurants, canteens, caterers, institutions, petrol stations and kiosks, - in one word all food that is consumed outside the home. It is a segment growing faster than the retail segment in several of the countries where Rieber & Søn is active. It is a growth area where Rieber & Søn intends to participate. Organisationally, Food Service transcends national borders, with sales in Norway, Sweden, Denmark, the Czech Republic and Slovakia.
Financial report
In Norway, King Oscar mackerel in tomato has created good category growth, with a market share of 12%. During the year the King Oscar range was strengthened with the launch of two mackerel products and three variants of tuna.
FoodService
Directors’ report
Vossafår is a market leader in the area of cured meat, with a market share of 28%. In 2003 the product range was broadened with the introduction of four new variants of smoked sausage.
the business that was bought from Danisco Foods in 2002 have been fully integrated with our other onion business. Cronions, the brand name for crispy onion, is a niche product which has enjoyed good growth in the consumer, foodservice and industrial markets. In 2004, the focus will be on reinforcing market positions and improving margins.
Environment and food safety
Mr.Lee noodles has over 70% of the noodle market in Norway, and the brand enjoyed good sales growth in 2003. Three variants of Mr.Lee Sumo Dinner, a new dinner dish, were launched during the year.
Rieber & Søn strives to be a good and dynamic business partner for other players in the trade, and in 2003 Toro and Denja were crowned ”Supplier of the Year” by Norgesgruppen.
Strategy
Toro is one of Norway’s strongest brands with around 250 product variants. A continuous focus on product development and brand building has resulted in average organic sales growth of 9% annually over the last 25 years. 2003 saw growth in all Toro categories, as well as higher market shares. The launch of new products and revitalisation of the existing range are key stimulants to growth. Toro Wraps is an example of the first. The combination of wheat tortillas, a marinade mix and a dressing mix has been a success in the marketplace, presenting considerable scope for broadening the range. Toro was first to launch Wraps on the Norwegian market. The firm of analysts AC-Nielsen selected Tortilla Wraps as one of the year’s most successful product launches. Cake mixes illustrate how Toro drives and develops a ”new” category, by introducing new products such as cheese cake and longform chocolate cake in a way that makes them much easier for the consumers to make. The revitalisation of established categories is another important stimulant to growth.
Challenges in the market
Toro
11
Presentation of operations
01
1 030
1 164
1.3%
5.2%
2.1%
1 232
Central and Eastern Europe
02
03
Net sales NOK m EBITA-margin
Geographical distribution of turnover 2003 The Czech Rep. 49.7% Poland 27.4% Slovakia 8.9% Russia 7.4% Others 6.6%
The market in Central and Eastern Europe is changing rapidly, and this presents a number of challenges. The results in 2003 were varied. In the Czech Republic and Slovakia our market shares were stable, but the decline in size of some of our main categories has continued. Developments in Poland were far from satisfactory in the first half of the year, but various steps taken reversed the trend in the second half-year. The segment represented by Central and Eastern Europe (CEE) covers businesses with production and sales in the Czech Republic, Slovakia, Poland and Russia, and some exports. In 2003, the segment had sales of NOK 1 030m, while EBITA stood at NOK 13m. Vitana and Rieber Russia produced good results, but the performance in Poland was poor. Rieber & Søn’s total sales in CEE, based on the number of consumer units, was around 730 million, compared with 180 million units in the Nordic region. Despite this, the CEE market is much smaller than the Nordic market in terms of turnover, as the value per unit is lower in CEE. The higher standard of living that will result from EU membership, combined with a higher degree of product processing, will lead to higher prices and potentially increase the value of each unit sold.
Structural changes The factories in CEE have now been upgraded and approved in accordance with quality standards set by the EU.
12
RIEBER & SØN -
ANNUAL REPORT 2003
At the same time, steps have been taken to increase production efficiency. One factory in the Czech Republic and two in Poland will be closed in 2004 and the production transferred to other plants.
RIGHT In 2003 the implementation of a new Enterprise Resource Planning system (ERP) started within the Group, firstly in Poland. The project, designated RIGHT, is intended to establish ”best practice” in all business units and thus simplify and improve Rieber & Søn’s work practices. RIGHT was introduced at Delecta and King Oscar in Poland in 2003. The project has required considerable resources.
Vitana The Czech Republic is the CEE country where Rieber & Søn has the strongest position. Vitana is one of the strongest brands in the Czech Republic, with long traditions. Despite a drop in sales, Vitana maintained acceptable profitability in 2003.
Overview Presentations of operations Challenges in the market
In Russia Rieber & Søn has two strong nut brands: Emarko and Chaka. 2003 got off to a slow start, but changes to the system of distribution in Moscow led to a good level of sales in the second half of the year. Natalia Strelbina has been appointed Managing Director of Rieber Russia with effect from January 2004.
Financial report
Piotr Sienko was appointed Managing Director of Delecta in April 2003.
King Oscar King Oscar’s market shares in Poland have fallen, while the loss of private label contracts resulted in a sharp decline in exports to the USA and
RIEBER & SØN -
Adressess
Delecta has strong positions in Poland, mainly in the area of cakes,
Vitina, a corn-based between meal snack, was launched at the end of 2002. Considerable resources were allocated to the introduction, but so far the product has not been a success.
Rieber Russia
Directors’ report
Delecta
In response to the decline, improvements were made to the sales network. At the same time, Delecta developed a common design for all of its dessert products in order to create greater appeal and establish a uniform profile in the shops. The steps taken have produced a positive effect on sales. Delecta’s series of ready dinners in jars were given new recipes which improved profitability and increased Delecta’s competitive position in a category focused on price. As yet, the desired results have failed to materialise.
Australia. Activities in Poland continue to run at a loss. The transfer of production entailed some costs of a non-recurring nature. The Big Fish brand name is now being converted to King Oscar in order to have one brand name for tinned seafood. The turnaround initiated in the autumn of 2002 has not been sufficiently effective, and steps have been taken to reduce costs further. The benefits of these measures will materialise in 2004. Part of the production of King Oscar sardines was transferred from Norway to Poland in 2003.
Environment and food safety
Positive sales growth was recorded in Slovakia as a result of higher market shares. 2003 saw the launch of a sub-brand by Vitana, with soups and bouillon using specially adapted Slovak recipes. The launch was in line with Rieber & Søn’s philosophy which seeks to provide products adapted to local taste preferences. The sub-brand is called Tatranská, after the large mountain range in Slovakia with the same name.
cake mixes, baking ingredients and desserts. Delecta had a poor first half-year, due to a decline in the total market for the product categories, stock reductions among retailers and wholesalers, and lower sales of the jam powder ”Dzemix”.
Strategy
There was a decline in the total market for some of Vitana’s main categories, but market shares were maintained. Among the measures taken in response to the decline were quality improvements, upgrading of design and the launch of new products. Vitana also intends to develop new categories, such as snacking products, main meal solutions and cakes. A good example is the instant soup product ”Bistro” which Czech consumers voted the product of the year in the fast food category. The trend in condiments and cake mixes was positive, and the new cake variant ”Tiramisu” was voted the product of the year by the Czech magazine Moderní Obchod.
ANNUAL REPORT 2003
13
Consumers in change In Western Europe households are becoming smaller and the pace of life is increasing. There is an increasing interest in food, but at the same time the ability to prepare food is diminishing. In CEE, traditional family dinner still have a strong position. In most cases, meals continue to be prepared from the basic ingredients, but in the cities the way of life is undergoing major changes, as are eating habits. At the same time, EU membership may well bring about further significant changes.
Western Europe The traditional family structures and core families are changing. The trends are clear in all the West European countries: more but smaller households, more couples with no children, more divorced parents, and an increase in the elderly. The number of singleperson households has increased. Norway is no exception. While slightly more than 150 000 people lived alone in 1960, today they number almost 750 000. The most common type of family in Oslo is a single mother with one child. At the same time, the population is getting older: in 2050 every second Norwegian will be over 50 and probably
slightly less able to prepare food. This will lead to increased consumption of processed food. At the same time there is a big difference between weekdays and weekends. While people prefer easy mealtime solutions and quick snacks in a stressful working week, the weekend is regarded as the time for making food, eating together and enjoyment. All this tells us something about consumer needs. They want exciting, delicious food, but they do not always have the time or the ability to make it. Rieber & Søn’s possibility lays in offering the consumers tasty meals that can be prepared in an easy way. Our food shall be good and simple enough for everyday needs, and interesting and exotic enough for the weekend.
Overview
Central and Eastern Europe (CEE)
Environment and food safety
Norway has around 750 000 single-person households.
Strategy
From May 2004 Poland, the Czech Republic and Slovakia will all be members of the EU. One consequence of this will be the abolishment of custom barriers on exports to the EU. Together with investment in infrastructure, this can contribute to higher economic growth, which in turn should result in increased purchasing power and therefore a greater need for processed food.
Challenges in the market
In the Czech market we also see trend towards simpler meals. The large family dinners with three courses are losing ground. This poses challenges for us, including our ability to get people to regard soup as a main course instead of a starter. These are changes that we have experienced in Norway, and we know that the conversion period can be demanding.
There is scope for growth by getting people to accept solutions that make it easier to prepare traditional dishes. This can be done by offering the consumers products that are just as good as, and preferably better, than the ones they make themselves.
Presentations of operations
Today the CEE-markets ,with a population of 53 million people in the Czech Republic, Slovakia, Poland and 145 million in Russia, are considerably bigger than the Nordic market with a total of 23 million people. In CEE the traditional family dinners are more important than in Western Europa. Preparing meals and cakes/desserts from scratch is a matter of pride. Stock cubes, taste enhancers (such as spices) and bakery ingredients are therefore still the dominating products. The trend shows that there is an increasing acceptance of more processed foods. Lower cost levels means that the competition from restaurants and other kinds of eating places in CEE is greater for our products than is the case in the western european markets.
At the same time, there is big difference between built up areas and the countryside. In cities like Prague there are large groups with a decidedly urban lifestyle, demanding jobs and a great need for easily prepared food. Outside the large cities, the approach to food is still more traditional.
Directors’ report Financial report
”With a modern design, authentic taste adapted to Norwegian taste preferences, an ethnic flavour attractive to the Norwegian palate, and moreover easy to prepare, Toro will create growth in the category for Asiatic sauces”
Adressess
Chow Mein
Changing markets The structure of the retail market has changed greatly in the last few decades. The market is dominated by a small number of major players, but in Central and Eastern Europe the picture is more complex: International hypermarket and hard discount chains have been present for a long time, but there is still a large number of traditional, independent small shops. The trend is towards fewer but larger units.
Western Europe In the Nordic region, 3-4 chains dominate more than 90% of the grocery market. To an increasing extent, the players in the trade collaborate across national borders and there is a trend towards chains with a Nordic or a European profile. At the same time, international hard discounters are establishing new positions. ”Hard discounters” are defined as chains with low prices, few brands and a high proportion of own labels. It is still too early to say how they will affect the Nordic market, but if experience in Finland is anything to go by the new ”hard discounters” will to some extent be stockists of a limited number of product groups. From Central
Europe we see that chains of this kind have low market shares in Rieber & Søn’s main product categories. In the Nordic region, Rieber & Søn has good contact with the players in the trade. As a supplier of strong brands, we have worked closely with the grocery chains to create growth and profitability in product categories. New structures in the retail sector bring not only risks, but also opportunities. Competition with the trade’s own brands presents a challenge, making it necessary to be in a strong first or second place and at the same time providing our customers with good earnings. Eating habits are more local than many people think, and there is a high preference for branded products.
Overview
Central and Eastern Europe (CEE)
Challenges in the market Strategy
The structure is changing, with the chains gradually increasing their market shares. In the Czech Republic the chains increased their market shares by 7 percentage points in 2002, at the expenses of smaller entities. In the CEE countries there are usually 2-5 small suppliers in each category, and often the three largest suppliers in a category have no more than 50-60% of the market. In Western Europe it is common to find
Future growth will call for strong category and brand positions. Vitana and Delecta are both strong players in their respective markets. There is great potential for driving the categories and establishing close co-operation with the trade in order to benefit from category development and increase market shares as smaller suppliers fall by the way, and also to establish an early position in new categories.
Presentations of operations
In CEE there are great contrasts between the shops. Pan-European chains have been in place for a long-time, typically in the form of vast, modern hypermarkets with a huge range of goods and high quality. International ”hard discounters” are also well represented in the marketplace. But at the same time, the market is still dominated by small units and the traditional shop on the corner. In the Czech Republic small units make up 45% of the total, while in Slovakia the figure is 54% and in Poland 63%.
three players in a typical category: a market leader with more than 50% of the market, a runner-up, and another supplier or a private label in third place. We envisage a similar development in CEE. With the gradual emergence of a stronger chain structure, the chains will also prefer to have a smaller number of nationwide suppliers in each category, also to act as category drivers. This will present interesting opportunities.
Environment and food safety
The first Czech hypermarket was opened in 1998. In 2003 they accounted for 38% of sales in the grocery sector.
Directors’ report Financial report
Gyros Adressess
”Vitana shall be a ”category driver” in the category for ready-made dinner solutions which is relative new in the Czech Republic. The launch of exciting new high-quality products is designed to stimulate consumer interest in this category. It is important to establish positions early in categories with growth potential”
Strategy for growth
?
Reduce capital employed
Value-creating acquisitions
CAP.M. 2002
Improve internal operations
18
RIEBER & SØN -
ANNUAL REPORT 2003
LONG TERM CAP.M.
Organic growth
Overview Presentations of operations Challenges in the market Strategy Environment and food safety
Value drivers:
Organic growth will play a central role in the creation of value in the future. Category driving and the creation of growth will be mainly based on a strong focus on product development and brand building.
Long-term objectives: Growth • Organic growth of over 5% • Double the size of the company within 3-5 years
Profitability • EBITA-margin from around 10% towards 15% • ROCE (return on capital employed) of more than 17.5% • EPS-annual growth of more than 10%
Leading brand positions • Strong no.1 or no.2 brand positions • Drive and develop product categories
RIEBER & SØN -
ANNUAL REPORT 2003
Adressesss
Rieber & Søn aims to double the size of the company within 3-5 years. In order to achieve this goal, organic growth will be supplemented through value-creating acquisitions. Acquisitions in the other Nordic countries and some of the countries of CEE will have priority. In
The performance of the Group Management will be measured against and bonuses paid in relation to the extent to which the goals of the Group strategy have been met.
Financial report
Internal improvements shall be made to enhance the operations, while focusing on synergies that can be extracted in production, product development, marketing and distribution. Through better logistics, better procedures and fewer and more efficient production units the level of capital employed shall be reduced.
the food industry it is important to have a critical mass in the markets where we operate. Directors’ report
Rieber & Søn’s strategy aims to promote shareholder value. Internal improvements, organic growth, reduced capital employed and value-creating acquisitions are the four main elements of our strategy.
19
Organic growth
Product development: ”Local Taste Champion” Product development is key in maintaining and developing a brand. Rieber & Søn shall be ”The Local Taste Champion”, with a deep understanding of how products can be developed and renewed in order to meet consumer preferences and the needs of our customers.
Even between neighbouring countries there are considerable differences in consumer taste preferences. One example that illustrates this: Tomato soup is the favourite soup in Norway and the largest variant in Toro’s range of soups. In Sweden, tomato soup is a marginal product, while aspargus soup is the favourite. The taste preference of the same variant also varies from country to country.
A business philosophy seeking to be “The Local Taste Champion”, with products specially tailored for each market, distinguishes us from our international competitors who often have identical products in many countries. It is a strategy which creates strong product associations among the consumers, while bringing a good turnover and earnings for our customers.
We are careful to note differences of this kind. When Vitana was planning to increase its market share in Slovakia in 2003, the sub-brand Tatranskà was developed with recipes adapted to Slovak taste preferences. The launch has been a success.
Poland has a population of more than 38 million. Cakes are an important tradition.
Karpatka ”Delecta has an impressive 40% share of the market for bakery ingredients and cake mixes in Poland. A delicious taste and easy preparation have turned Delecta Karpatka cake into a best-seller”
Where international dishes are involved, it is important to be among the ”first movers” in the market. The
HIGH
Systematic product development
Ex. Wok & Wrap
Ex. Noodles
New eating habits/situations Ex. Tiramisu
INNOVATION
New dishes
New tastes
LOW
Faster preparation known products
Challenges in the market
We also add a national touch to other dishes. The original Indian tandoori chicken and Greek moussaka are adjusted according to the Norwegian taste preferences. And when ”Norwegian” casseroles were to be launched in the Czech Republic under the Vitana name, the taste was adapted to Czech taste preferences. Conversely, Czech goulash soup was adapted to the Norwegian taste before being launched in Norway.
Ex. Thai Chickensoup
Presentations of operations
launch of Wraps in 2003 was a case in point. Here, we were the first on the Norwegian market with an international trend. This enabled us to set both the taste and the standard for the category, making it more difficult for competitors to enter the market.
Overview
Organic growth
DEVELOPMENT OVER TIME
Product development is an important factor in driving categories and to maintain/increase sales and create top-line growth. Product development also plays a
key role in the process of steering the product mix towards high margin products. We have an ongoing process which measures the organic growth in business units, product groups and markets. The share of sales recorded by new products is also measured.
Strategy
In order to find the right taste, Rieber & Søn works systematically, using tasting panels in the different countries. Toro early started this practice, and it is now implemented in other business units.
Environment and food safety Directors’ report Financial report Adressesss
Organic growth
Brand building: Creating confidence and preferences among consumers Brand building is a core competence at Rieber & Søn. Through long-term brand building Rieber & Søn creates added value for the consumers, the trade and the shareholders.
For the trade it is also important to have recognised brands on the shelves. They boost sales and enhance the customer’s impression of the shop. A strong brand is thus necessary to be sure of good shelf space in strong competition with other branded products and private labels.
Brand building is about creating value that goes beyond the physical product. The brand is the set of perceptions and associations that the consumer has in relation to a specific product. A strong brand therefore means more than just being well known. A strong brand means that the name arouses positive associations. It means that the brand is reliable and liked, and that the consumers identify with the brand and associate it with qualities which make them choose this brand rather than other goods. The stronger these preferences are, the stronger is the brand.
But positive brand associations can never be established unless the product is right. Brand building goes hand in hand with product development. On of the main factors in the long-term development of a brand is the ability to improve, renew and develop the products in line with changes in the market. Innovation plays a crucial role in making the products attractive to new consumers and in category development. A strong brand provides a sound basis for product development and makes it easier to introduce new
Diagram: Market shares in chosen categories in Western Europe 73
Market share in %
73
2003 2002 56
56 53 47 40
42
31
31 23 18
Soup* Norway
Sauce* Norway
Spices Norway
* The category includes both dry, chilled and frozen products
22
RIEBER & SØN -
ANNUAL REPORT 2003
Cake mixes Norway
Salads Norway
Salads Sweden
17
18
Sardines USA
Source : AC-Nielsen
Overview Presentations of operations Challenges in the market
of expertise and brand building across both national and functional boundaries throughout the Group.
products. If the product is good, repeat orders are placed. The brand strength gives the consumer confidence in the product - confidence that they will be able to prepare it and that they will like the taste. We strive to ensure that nothing we do reduces the level of confidence in our brands.
Environment and food safety
Rieber & Søn is represented in markets with a total of 250 million people. We communicate with these markets through advertising and product exposure, and to ensure that this communication is as consistent and effective as possible, Rieber & Søn has developed its own branding school. The need to think in terms of brand building is not something that only applies to the market departments. It must be actively implemented throughout the organisation, pervading all activities and present at every stage in the value chain. Rieber Branding School represents a programme that has been specially established for the transfer and development
Strategy
King Oscar is one example of the benefits that have been gained by Rieber & Søn from the transfer of brand building expertise. King Oscar did exist as a sardine brand in the export market for almost 100 years, but it was not launched in the Norwegian market until 1998, and two years after it was taken over by Rieber & Søn. Nevertheless, the consumers quickly came to regard King Oscar as a high quality brand with long traditions, and as such one that they could rely upon. Gradually this acceptance of King Oscar has been used to broaden the name as a general brand name for all tinned seafood. The latest addition to the product range is mackerel in tomato sauce which has won large market shares in a short space of time. Similar steps are being taken to broaden other brand lines. This includes the launch of four new ”Vossafår” cured meat products in 2003.
Directors’ report
Diragram: Market shares in chosen categories in CEE 2003 2002
Market share in %
52
Financial report
52
51 48
21
20
20
17
Soup The Slovak Rep.
15
Spices The Czech Rep.
43
Canned seafood Poland
16
Desserts Poland
Adressesss
Soup The Czech Rep.
43
Cake mixes Poland
Source: Memrb
RIEBER & SØN -
ANNUAL REPORT 2003
23
Value-creating acquisitions
Value-creating acquisitions In the food industry it is important to have a certain size, so that we rank among the main business partners for the retailers in the various countries where we are represented. This is why one of Rieber & Søn’s goals is to double in size within 3-5 years. Around one third of the growth shall be organic, while two thirds will be through acquisitions.
In June 2003 Rieber & Søn acquired Nopal. Nopal has leading market positions with strong brand names such as Black Boy (spices), Sopps (pasta), Ming and Geisha (rice) and Trondhjems (tinned meals). The health food part of Nopal, Vitaplex is also a very strong brand, but as we did not have the right kind of expertise to be a category driver, Vitaplex was divested in December 2003.
Potential acquisitions and related product categories have to be compatible with our strategy and add value for the shareholders. A rapid integration is decisive for a successfull acquisition.
Nopal’s product categories fit in well with Rieber & Søn’s existing product categories in Norway, the Czech Republic and Slovakia. Seven months after the acquisition Nopal is fully integrated with three business units and a separate organisation has been established
In Norway, 55% of all main meals are still prepared from scratch.
Sopps Spaghetti Sauce ”Sopps is the brand name for everyday Italian food, with a special focus on children and young families. Sopps Spaghetti was launched in 2004”
Overview
In a period after large acquisitions the return on capital employed (ROCE) can be slightly reduced. Our target is that within 18 months after a business is acquired it shall have a positive contribution on EPS.
Strategy
The Wok & Wrap project is a practical illustration of what a successful acquisition is all about: As well as integrating administration, production and sales functions, we have also managed to extract co-ordination benefits based on an internal transfer of expertise and pooled creativity to develop new products and create growth.
Future acquisitions will take place primarily in markets where we need to strengthen our position and acquire critical mass: We will grow in the Nordic region and increase our market penetration in selected countries of CEE.
Challenges in the market
The concept of Wok & Wrap launched for the food service market is an example of synergies that have been extracted in connection with the acquisition of Nopal. Wok & Wrap is a total concept where ethnic dishes and specialities are combined with spice mixes, sauces, dressings and wheat tortillas. The sauces were a joint development project between Toro and Nopal. Denja supplied the dressings, the spice mixes were developed by Toro, while packing were done by Nopal in Elverum.
In 2002 Rieber & Søn acquired a Dutch producer of crispy onion. At the time, Rieber & Søn was already producing crispy onion at a plant in Denmark. After the acquisition the two production units were integrated and re-organised as a single business unit, Cronions, the product name Cronions has been launched in several countries under the TORO, Denja and Vitana brand names.
Presentations of operations
to focus on sales to deli-counters. Integration was achieved at a rapid pace and Nopal made a positive contribution to EPS in the fourth quarter.
Environment and food safety Directors’ report Financial report Adressesss
Improve internal operations
Internal improvements Coordination of competence and resources Rieber & Søn has been a focused food company since 2001, with operations in several countries. There is great potential for internal improvements through rationalisation, better procedures and uniform practice across national boundaries.
So far, the RIGHT project has been implemented by Delecta and King Oscar in Poland. While the initial phase was not without problems, it provided us with useful experience that can be drawn on when the project is implemented in other parts of Rieber & Søn continuing to the end of 2005.
Rieber & Søn has production plants in seven countries and sales and market offices in a further five. One of our challenges is to establish a good flow of expertise between departments, transcending national cultural identities and language barriers. In order to ensure that the Group’s front-line expertise is applied and that it is ”best practice” that sets the standard, the Group has set up special schools for brand management and management development – Rieber & Søn Branding School and Rieber & Søn Management School. Rieber & Søn also has an internal online newspaper and a printed version, both in six different languages.
Other kinds of projects that will provide synergies include co-operation between market and product development departments, joint purchasing by the business units and concentration of production in fewer factories. For example, the cake mix Tiramisu for the Czech, Slovak, Norwegian and Polish markets will be produced in Poland, but of course with different recipes to take account of local taste preferences.
2003 also saw the introduction of a new Enterprise Resource Planning system (ERP) within the Group. The aim is to establish common work processes in all business units. The project is named the RIGHT project (”Rieber & Søn Goes Harmonised Together”). The project seeks to harmonise Rieber & Søn’s business processes in the area of purchasing, production, orders, financial functions and personnel through common procedures and information systems.
26
RIEBER & SØN -
ANNUAL REPORT 2003
Much of the restructuring being carried out within the Group is very demanding. But at the same time it is necessary if we are to be competitive and reinforce our position in the market. Carrying out internal improvements is important in order to improve the EBITA-margin towards our strategic goal at 15%.
Overview
Reduce capital employed
Presentations of operations Challenges in the market
Reduce capital employed: Releasing capital and increase cashflow
Similarly, there are gains to be made from production rationalisation. In 2003, the production of King Oscar Sardines at Eikelandsosen and in Stavanger
Fewer production units give reduction in cost, reinvestment requirement, workforce, and administration. Environment and food safety
One specific example is stock control. Traditionally, large stocks have been considered necessary in order to have a reliable delivery capability, and production has therefore been aimed at covering sales requirements for several months ahead. As a result, considerable amounts have been tied up in stocks. With more effective logistics it is possible to release some of this capital.
was terminated and moved to Gniewino in Poland. It has also been decided to close one factory in Sweden, as well as one in the Czech Republic and two in Poland in 2004. Production is being concentrated on fewer factories.
Strategy
As the RIGHT project is implemented, we expect to have tools to increase the cashflow.
Through the RIGHT project and the introduction of common systems there will be improvements in both the flow of goods and administrative procedures. Fewer and bigger production units will provide a better return for Rieber & Søn’s shareholders.
Directors’ report Financial report Adressesss
RIEBER & SØN -
ANNUAL REPORT 2003
27
Food safety: The highest possible safety for the food we serve Rieber & Søn is right in the middle of a long quality chain stretching ”from field to table” or ”from fjord to table”, where the focus on quality starts as soon as the seeds are sown or the fish spawn. As we are only involved in part of the chain it is of key importance that we have proof of quality when we purchase our raw materials. It is important that Rieber & Søn’s purchasing team only selects suppliers who can show that the quality requirements have been met in the first part of the chain, especially when raw materials are involved. There is no place for doubtful raw materials in our products. When the raw materials have arrived, and have been checked, it is up to Rieber’s product developers, production plants, inspection units and sales team to ensure that quality is maintained within our sphere of responsibility. When the food is served at the table it must be appealing to the eye and delicious to taste, and there must be no doubt about the basic quality - what may be called the ”technical quality”. The products shall be reliable. But the way the consumer experiences the quality is just as important: ”I succeed when I prepare a product from Rieber & Søn. I get it right, and I get what I have paid for. My family and friends know what they like, and they like what I serve.”
28
RIEBER & SØN -
ÅRSBERETNING 2003
Quality initiatives in 2003 The focus on quality has also brought clear internal benefits. As well as being motivating, it makes the staff proud to work in company that is not prepared to compromise on customer expectations, public requirements or its own quality standards. When each of us is responsible for the quality produced at our own work station, not leaving it to an inspection unit, it is easier to avoid the production of non-conforming and sub-standard products. We feel that we are co-responsible. The preparations for the extended EU were among the main driving forces behind quality assurance work in 2003. Our factories in the Czech Republic and Poland have considerably heightened the level of motivation and commitment to ensure that they meet the new EU requirements, and they have received ISO certification. Vitana has also received HACCP certification (HACCP = Hazard Analysis of Critical Control Points). This means that the company has demonstrated that it has control of the critical points in the production process. At the same time, Delecta in Poland is building a modern production plant which will ensure that there is a better flow of goods. On 1 May 2004 the EU gates will be opened to the Czech Republic and Poland, and when that time comes, our business will be properly equipped to benefit from the new situation.
Overview Presentations of operations Challenges in the market
In order to implement Rieber & Søn’s strategy aimed at extracting synergies across national boundaries, the respective units must have established common quality control systems and a uniform perception of quality. In conjunction with the RIGHT project, steps are therefore being taken to develop systems of this kind that can be used by all business units. The platform has already been selected (ISO with a link to SAP), and the certification mentioned above will facilitate this process. In this respect, 2004 will be an important year. One of the main projects is to train a group of us to be skilled quality auditors, primarily to ensure that raw materials have a uniform and high quality. At the same time, new quality standards are in the pipeline. Requirements within the trade are becoming gradually stricter, and a new ISO standard is being developed for the food manufacturing industry. Rieber & Søn will have to consider its relevance for each factory, but a number of new requirements will be of decisive importance for our activities in the near future.
Directors’ report Financial report
Risk is a crucial element in all quality work. In our business activity, we must constantly be aware of concepts such as risk analyses, risk assessment, risk management and risk communication. As well as managing the technical and objective risk (risk that can be responded to on the basis of scientific documentation), we have to relate to individual customers and groups which create their own risk scenarios, influencing the media, politicians and the trade. Among the risks we encounter are emotions and fear, and it is just as necessary to respond to reactions of this kind. Many people are guided by the view that ”I have already made up my mind, so don’t bother me with facts”. A considerable number of our analyses, investments and other initiatives are motivated against a backdrop of emotionally created risk perceptions. Such perceptions arise because many people have little faith in science or the authorities. It is therefore important that indepen-
Common quality systems Environment and food safety
Risk awareness
dent scientific committees are involved to a significant extent in the new food legislation in the EU and Norway, in conjunction with the establishment of forums where risk can be properly understood. This topic will also be taken up in both national and international branch organisations, and Rieber will be involved in this work.
Strategy
Improvements are also being made in Norway. Denja Larvik is upgrading its plant. Toro Elverum is planning new solutions to meet hygiene requirements contained in new food legislation, and the proposed measures have been approved by the authorities. At the same time, Toro Arna is engaged in an ”allergy project” in conjunction with the construction of a new mixing unit. Further steps are being taken to ensure that there is no accidental mixing of products that contain allergens with those that do not.
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
29
Environmental Report Rieber & Søn produces food under brand names in the Nordic region and in certain countries in Central and Eastern Europe. Strong brands are based on the trust of the consumers. We are continuously developing better systems to monitor and improve the various internal and external environmental factors. Rieber & Søn’s environment policy Environmental awareness is part of the Group’s corporate culture. The environmental consequences of our production methods and products shall be constantly assessed in relation to the consumption of resources and the use of the products. We constantly seek to reduce any negative effect our activities may have on the environment by using new knowledge and technology. Rieber & Søn’s activities shall give priority to the use of renewable and recycled input factors in operations and value creation. We set environmental standards for our suppliers
King Oscar Tuna ” In the USA tuna fish accounts for 72% of the tinned seafood category. In Australia the figure is 60%, but in Norway it is only 12%. King Oscar is the first brand supplier of tuna fish in Norway and intends to create growth in a ”sleeping” category which so far has consisted of private label products”
and business partners. Consideration for the internal and external environment is a management responsibility.
Value chain Rieber & Søn has production units in seven countries with different regulatory frameworks. Locally, the production management complies with the terms and licence conditions set by the authorities. In 2003 no violations were reported in any of the businesses conducted by Rieber & Søn. Our production processes are designed to meet a number of fundamental requirements. Common to all production is that the raw materials are handled to give the best possible utilisation and least possible waste. Input in the value chain consists of raw materials from the agricultural and fisheries sectors, water and energy. Processing is controlled by highly qualified personnel and automated technology. In addition to the aforementioned resources, we use ready-made packaging which is a prerequisite for the distribution of finished products. The value chain output consists of processed
Overview
and portion packed food products, waste and water.
In the autumn of 2003 the Toro plant in Arna received ISO 14001certification in accordance with the requirements of the Danish Standard for environmental management and control. The Arna plant already had ISO 9001 certification, in line with most of Rieber & Søns’ production plants.
The international Organization for Standardization (ISO) is engaged in the international development of standards and certificates for quality, safety and the environment. ISO certification systematises and sets out required standards, consumer and public requirements, and company-specific requirements for enterprises engaged in industry, trade and commerce.
At year-end, the Group had 3 498 employees consisting of 1 921 women and 1 577 men - and 67% of the workforce worked outside Norway. The incidence of sick leave rose from 6.7% in 2002 to 7.2% in 2003. There is active co-operation between the management, the personnel/HES functions and employee representatives to reduce the factors which lead to absence from work and focus on initiatives that can increase the work attendance rate. Action plans are drawn up and revised regularly, and systematic work in this area continues to have a high priority.
Challenges in the market
Facts about ISO:
Presentations of operations
Environmental certification
In 2003 the Group recorded 73 injuries involving absence from work and 36 injuries with no absence from work. This corresponds to an injury incidence rate of 21, which means the number of injuries involving sick leave per 1 000 full-time positions.
Strategy
Health, environment and safety HES activities are well integrated in all the Group’s business areas.
Environment and food safety
33% of Norway’s population are concerned about food safety.
Directors’ report Financial report Adressess
5
4 2
1
3 7
9 8
6
The Board of Directors 2003 4. Adler Ekanger
1. Barbara R. Thoralfsson President, NetCom AS, formerly with Midelfart & Co AS as Managing Director and Kraft USA. Board member since 2001.
2. Terje H. Sparbo Sales consultant with Rieber & Søn ASA since 1972. Employee-elected Board member since 2003.
3. Connie Astrup-Larsen International Director, Bryggerigruppen A/S, Denmark. Formerly Managing Director of Dandy AS and Cadbury. Board member since 2003
32
RIEBER & SØN -
Section Manager, Packing Plant at Toro factory in Arna. Employee-elected Board member since 2000.
5. Torgny Eriksson Senior Partner at Booz Allen Hamilton, Sweden. Formerly with Unilever, Arvid Nordquist and Modo. Board member since 1999.
6. Bjarne Rieber Vice-Chairman of the Board Chairman of A/S Atlantis Vest. Member of governing bodies of the Rieber Group since 1968. Board member since 1986.
ANNUAL REPORT 2003
7. Leiv L. Nergaard Chairman of the Board Formerly with Norsk Hydro where positions included CFO, member of Group Management, and President of Norsk Hydro Germany. Board member since 1997 and Chairman since 2000.
8. Fritz T. Rieber Partner, Borea AS and Managing Director of A/S Atlantis Vest Board member since 1996.
9. Tore Nielsen Operator at Toro factory in Arna Employee-elected Board member since 2003.
Overview Presentations of operations
Directors' report 2003
Market shares in Western Europe were affected by low GNP growth of 1-2% in 2003. Private consumption remains stagnant and the level of retail sales was largely unchanged throughout 2003.
The overall sales recorded by FoodService were slightly down. While the trend was positive in Norway, harder competition led to a decline in the Czech market. A number of steps have been taken to increase the rate of growth in the future.
Adressess
In Norway, there was a sharp fall in interest rates in 2003, and a corresponding weakening of the krone exchange rate. This has increased the level of domestic disposable income, and consumption increased by around 3% in 2003. At the same time, sales of food products have risen by 4.9%.
Sales to the food service market, as represented by restaurants, hotels, institutions, schools etc. show a higher growth rate than the grocery sector. In order to be better placed to benefit from the expected growth in this area, FoodService has been organised as a separate Business Unit, with operations in Scandinavia, the Czech Republic and Slovakia.
Financial report
Market segment - Western Europe:
The continuous improvement of existing products and the launch of new products contributed to Toro’s positive sales trend in 2003. Toro has had a high pace of product launches, creating growth in both new and established categories. Toro’s market shares have been stable or slightly up on the previous year. The introduction of new concepts has contributed to sales growth.
Directors’ report
Market shares were stable or increasing in all markets. In Western Europe, the launch of new products has helped to develop the total market and boost sales. In spite of stable market positions, 2003 was a challenging year for our businesses in Poland and the Czech Republic due to an overall market decline in the Group‘s categories as well as a general decline in stock levels within the trade. In total, our target growth figure was not reached.
In 2003, sales in Western Europe totalled NOK 2 221m (1 881m), of which NOK 235m was attributable to the acquisition of Nopal (consolidated from 1 June 2003). Sales were 18% up, with organic growth accounting for 3.3%. EBITA for the year stood at NOK 336m (284m), with Nopal accounting for NOK 17m. The EBITA margin in this segment was 15.1% (15.1%).
Environment and food safety
Sales and profits in Western Europe have developed well, and the acquisition of Nopal has given us added strength. The acquisition was part of our strategy to increase our critical mass in our main markets. The results from operations in Central and Eastern Europe (CEE) reflect falling sales and a weak performance in Poland, although the decline flattened out to some extent in the second half of the year. The trend in both sales and results in Slovakia and Russia was positive, while Czech activities showed acceptable results, despite a decline in sales. After a poor first half-year, the Group recorded EBITA growth of +18% in the last six months of the year.
The structure of the trade in the Nordic region has long been characterised by a small number of retail chains in each country, accounting for more than 90% of the market. International hard discounters have established positions in the Nordic countries, competing mainly on price. These chains account for relatively small shares of Rieber & Søn‘s main product groups.
Strategy
Rieber & Søn provided the shareholders with an overall return of +20% in 2003 (Oslo Stock Exchange Benchmark Index (OSEBX): +48%). Since the strategic decision was taken in August 2000 to focus on foods, the Rieber share has shown a return of +24% (OSEBX -16%).
Challenges in the market
Group profits in 2003 were in line with the previous year. Rieber & Søn’s strategy as a focused food company is to increase shareholder value by focusing on four main areas; internal improvements, organic sales growth, a reduction in the level of capital employed, and valuecreating acquisitions. A number of improvement initiatives are under way, some of which have the effect of increasing costs in the short term. Altogether, these projects have had only a limited effect on the results for 2003. The acquisition of Nopal has increased our critical mass in Norway, and the company has been rapidly integrated.
King Oscar’s sales were down on 2002, reflecting the loss of private label deliveries to the USA. The transfer
RIEBER & SØN -
ANNUAL REPORT 2003
33
of sardine production from Norway to Poland has positively affected King Oscar’s results. Denja’s sales failed to match 2002 due to the loss of distribution to one of the major chains in Sweden, but the negative trend was reversed in the course of the year. A better product mix and lower costs have had a positive effect on the results, with EBITA showing a considerable improvement on the previous year. The sales recorded by Rieber Food Ingredients were in line with 2002, but the overall results were negatively affected by problems related to sales to the USA and the strength of the Norwegian krone in the early part of the year. Cronions experienced a positive trend in both sales and profits, despite the phase-out of trading products that were part of the portfolio on takeover. Acquisition and integration of Nopal Rieber & Søn acquired Nopal with effect from 1 June. Seven months after the acquisition Nopal was fully integrated in three different business units. Specification of Nopal’s share of business activities will not be prepared in the future.
Bergen Fish Soup ”Product quality on a par with the home-made equivalent and continuous improvements in taste and packaging design have been a recipe for success for Bergen Fish Soup for 40 years”
The sales organisations were co-ordinated in August and Nopal’s head office in Billingstad was closed in the autumn, resulting in the shedding of 50 full-time positions. Along with other steps taken, this will bring net cost synergies of NOK 30m which will be fully reflected in the results for 2004. The Group aims to co-ordinate more brands over time in order to extract further synergies.
Market segment - Central and Eastern Europe (CEE): Growth in GNP has declined considerably in CEE in the last 2-3 years and was between 2% and 5% in our main markets in 2003. The economic situation in the region varies greatly from country to country. Russian and Slovakia are still in a positive phase of development, and in the Czech Republic the situation is stable. Poland has been hit especially hard by recession in recent years and as a result there is high and increasing unemployment, currently close to 20%. Food accounts for a high proportion of consumption per capita, and the demand for processed food is affected by overall economic developments. In a period of
Overview
increasing unemployment this impacts negatively on the demand for processed food.
Environment and food safety
Products launched by Toro in the period 1995 - 2003 made up 40% of Toro’s sales in 2003.
Strategy
Group sales in 2003 totalled NOK 1 030m (1 164m), reflecting a decline of 12% and a 10% drop in organic sales. EBITA came to NOK 13m (61m), after charges of NOK 16m for write-downs and non-recurring costs related to factory closures plus ERP costs of NOK 13m. The EBITA margin was 1.3% (5.2).
Delecta‘s organic sales in Poland fell by 13% in 2003. Delecta’s market shares have been relatively stable, but sales were substantially down on 2002 due to a reduction in the total market for our product categories and stock reductions within the value chain. EBITA improved in the second half-year, but because of the poor performance in the first half of the year the overall result for the year was a considerable drop in profits.
Challenges in the market
The market situation for our products in CEE is complex, and remains challenging. Group sales in Poland fell in 2003, but the decline slowed up towards yearend. The sales trend in the Czech market was also negative due to a further fall in sales in our main categories. In both Russia and Slovakia sales increased.
Vitana’s market shares in the Czech Republic and Slovakia were stable or increased in 2003. Changes in the product mix have increased the gross margin by 4.3 percentage points. Despite the decline in sales, the EBITA margin was maintained, and at a satisfactory level. Sales and marketing work is being directed towards a higher level of activity on site at retail level in order to increase the effectiveness.
Presentations of operations
Within the trade itself, international chains have been overinvesting in new retail outlets in the last few years, and as a result competiton has intensified. Their share of the total market is steadily increasing. 2003 was also characterised by significant stock reductions by both retailers and wholesalers, especially in the first half-year, which had a negative effect on Group sales.
Vitana’s sales in the Czech and Slovak markets were 7.6% down on the previous year. There was a further decline in the total market for some of our main categories, mainly due to competition from other food categories. As yet, new launches have not compensated for this decline.
Directors’ report Financial report Adressess
02
03
Net sales ( NOK m)
EBITA NOK m
Sales outside Norway (%)
EBITA-margin (%)
King Oscar‘s market shares in Poland have fallen slightly in a flat total market. Exports of canned seafood from Poland to the USA and Australia have declined because of the loss of private label contracts. For a transitional period, the transfer of production from Norway to Poland resulted in lower productivity and some non-recurring costs. King Oscar’s results in Poland are still negative. The turnaround initiated in the autumn of 2002 has not been sufficiently effective, and steps have been taken to reduce costs further. The benefits of these measures will materialise in 2004. The Group’s business in Russia can report rising sales, and this together with an improvement in the EBITA margin has provided a good result.
Group results Sales in 2003 totalled NOK 3 222m (3 031m), including the figures for Nopal from 1 June. In nominal terms, sales rose by 6.3%, but underlying organic growth was negative at –1.2% after adjusting for currency effects, acquisitions and the a planned phaseout of trading products. Currency conversion effects made a positive contribution, adding NOK 5m to sales revenues in 2003. Sales outside Norway made up 50% of the Group‘s turnover in 2003. The gross margin improved in 2003, rising by 1.2 percentage points to 57.6%, despite the fact that Nopal deluted the average gross margin. Since 2000, when Rieber & Søn became a focused food company, the gross margin has risen by 6 percentage points. New product launches and the phase-out of low margin products have been major contributors to this development. In order to increase the gross margin, sales and
RIEBER & SØN -
ANNUAL REPORT 2003
20.1% 17.5%
19.8% 16.5%
10.2%
16.0% 01
Delecta‘s main factory in Wloclawek has received ISO 9001 certification which will strengthen Delecta’s position as producer of high quality food and offers the prospect of exports to the EU.
36
330
326 00
10.7%
267 99
260
299
3 222 03
10.2%
02
9.9%
01
9.3%
00
50%
3 031 56%
2 920 57%
2 789 59%
2 687 59% 99
99
00
01
02
03
Gross ROCE (%)
marketing costs have risen from 10.4% of net sales in 2000 to 11.6% in 2003, which has helped to strengthen our brand positions. At the end of 2002 a three-year project was started aimed at establishing common work processes and systems in all business units, partly by adapting to and using a new ERP system. The establishment of a uniform platform can bring cost savings and reduce the level of capital employed. The system was implemented in Poland in 2003, but the process required considerable resources. It has already made it possible to establish a Shared Service Center for the Group‘s businesses in Poland. Project costs of NOK 21m have been charged against profits in 2003. On an accumulated basis, EBITA totalled NOK 330m (326m) in 2003. The EBITA margin for the year as a whole fell by 0.5 percentage points from 10.7% to 10.2%. After a poor first half-year, EBITA rose by 18% in the last six months of the year. The Group‘s net financial costs totalled NOK 9m, compared with net income of NOK 5m in 2002. The change reflects the fact that the Group was a net investor in 2002, changing into a net borrower in 2003 due to the payment of an extraordinary dividend and the acquisition of Nopal. After taxes of NOK 100m, the accounts show a net profit of NOK 177m for the year (190m). The gross return on capital employed was in line with the strategic target of 17.5% (20.1). The decline was due an increase in the capital base following the acquisition of Nopal. The cash flow from operations was NOK 404m (320m), but NOK 70m of the improvement relates to the refund of a disputed tax claim which was paid in 2002. Rieber & Søn ASA paid an ordinary and an extraordinary dividend totalling NOK 528m in 2003. EPS for 2003
1 014 3 357
930
877 01
02
2 343
2 479
2 971 00
03
Challenges in the market
Equity ratio (%)
99
2 466
03
2 798
45.7% 37.8% 02
3 409
3 903 932
3 343
3 654 856
52.8%
47.2% 40.2%
01
Presentations of operations
00
Overview
99
No. of man-years, Norway No. of man-years, outside Norway
at maintaining and improving the working environment and Health, Environment & Safety (HES) through training and social and cultural activities.
In accordance with section §3-3 of the Accountancy Act, the Board confirms that the annual accounts have been prepared on a going concern basis.
A share subscription programme for employees in Norway has been implemented for the fifth consecutive year. A total of 485 employees (42%) purchased 153 shares each in 2003.
Strategy
totalled NOK 2.35 (2.48). The reduction corresponds to the effect of the extraordinary dividend of NOK 6 per share which was paid in May 2003.
Organisation and equality
In 2003 Nopal was integrated with the Rieber & Søn organisation, and at the same time manpower reductions were effected.
Two of the nine business units are headed by women, and one of the staff functions is led by a woman. At intermediate management level the number of women is increasing, which is important for recruitment to higher management levels.
In common with the other production units, the factories in CEE have now been approved in accordance with the quality standards set by the EU. Environmental awareness is part of the Group’s corporate culture. In 2003 there were no reports of discharges or pollution in contravention of current legislation and regulations in any of the countries. For further information, please refer to the separate environmental report on page 30.
Food safety Rieber & Søn places a strong emphasis on quality and food safety. Raw materials, production processes and packaging are subject to strict controls and secure procedures. The Group has contingency plans for product recalls and crisis management. For further information, please refer to the separate article on food safety on page 28.
Productivity The Board wishes to concentrate production on fewer plants in order increase productivity, reduce cost levels and reduce future reinvestment requirements.
RIEBER & SØN -
ANNUAL REPORT 2003
Adressess
Rieber & Søn is considered to have a good working environment. The incidence of sick leave in 2003 stood at 7.2% (6.7) and the Group as a whole recorded 73 (71) injuries involving absence from work. There is a continuous programme of initiatives aimed
Toro’s factory in Arna received ISO 14001 environmental certification in 2003.
Financial report
Women make up 22% of the Board of Directors, and all the female representatives are shareholderelected.
Environment
Directors’ report
At year-end the Group had workforce of 3 498, consisting of 1 921 women and 1 577 men. Of these, 1 617 women were in full-time employment while 304 worked part-time. The corresponding figures for men were 1 540 full-time and 37 parttime employees.
The Board wishes to thank the employees for their untiring efforts throughout the year.
Environment and food safety
In order to stimulate profitable growth and facilitate the extraction of synergies, the Group is split into business units, each with separate responsibility for profits. There are currently nine business units, organised to some extent across geographical borders and segments.
37
00
01
11.7%
7.3%
2.35
5.4%
1.87
2.48
13.0%
14.9%*
4.36* 1.72 99
02
99
03
Earnigs per share NOK (EPS)
00
01
02
03
Return on equity (%)
* Includes profit from sales of non-core businesses
The process of restructuring sardine production was successfully completed in 2003. The factory at Eikelandsosen closed in January and the plant in Stavanger closed in June. Production has been transferred to Gniewino in Poland and Askøy outside Bergen. A further four factories are due to close in 2004 and the production will be transferred and concentrated at other plants. Implementation will require an investment of NOK 35m, but the annual cost level will be reduced by more than NOK 10m. There is scope for further productivity gains through reorganisation of the production structure.
The Rieber & Søn share At the end of 2003, the Rieber & Søn Group had a market capitalisation of NOK 3 979m, based on 79.6 million shares and a traded price of NOK 50.00, and NOK 3 775m after adjusting for the company‘s holdings of its own shares. In 2003, the total return to the shareholders, including dividends paid, stood at 20%, while the Oslo Stock Exchange (OSEBX) rose by 48% in the same period.
Cash flow
The Board proposes an ordinary dividend of NOK 1.10 (1,00) per share for 2003, corresponding to 47% of EPS.
In 2003, the cash flow from operations was NOK 404m, of which NOK 35m represents the effect of a disputed tax demand.
At year-end, the company owned 4.1 million of its own shares.
Rieber & Søn is involved in tax disputes for a total amount of NOK 20m. The disputed amounts relate to the financial years 2001 and 2002 and no provisions have been made in the accounts for these items (ref. note 22).
Profit for the year and allocations
Investments (excl. acquisitions) in 2003 amounted to NOK 291m. The largest individual investments were a new mixing unit at the Toro factory in Arna, the ERP system and a processing plant for taste ingredients in the Czech Republic. Capital employed totalled NOK 1 892m (1 619m), with net working capital accounting for NOK 504m (468m).
Ordinary dividend Other equity Total allocations
The purchase price for the share capital of Nopal AS was NOK 258m. On takeover, Nopal had net interestbearing debt of NOK 179m. Vitaplex, which was a part of Nopal, was sold in December which reduced the enterprise value of Nopal by NOK 60m to NOK 377m. Dividends totalling NOK 528m were paid in 2003, consisting of an ordinary dividend of NOK 1 and an
38
extraordinary dividend of NOK 6, corresponding to a total dividend of NOK 7 per share.
RIEBER & SØN -
ANNUAL REPORT 2003
The parent company - Rieber & Søn ASA - recorded a profit for the year of NOK 186m. The Board proposes an ordinary dividend of NOK 1.10 per share and the following allocation of the profit for the year: NOK 83m NOK 103m NOK 186m
The equity ratio at year-end stood at 46%, which includes positive currency conversion effects totalling NOK 66m due to the weakening of the Norwegian krone. Provided that the AGM approves the dividend proposed by the Board, Rieber & Søn ASA will have free equity of NOK 327m (367m).
Corporate Governance For the Board, it is important to ensure that the Group is managed on the basis of sound governing principles. For further information, please refer to the separate article on corporate governance on page 40.
Overview
The objectives of Rieber & Søn‘s strategy are to create added value for the shareholders by focusing on four main areas: internal improvements, organic growth, a reduction in the level of capital employed and valuecreating acquisitions. For further information please refer to pages 18-27.
Bergen,
Environment and food safety
A more efficient production structure is necessary in order to reduce cost levels, and in 2004 one more factory will be closed in Sweden and three in CEE.
In Western Europe the Group has had satisfactory organic growth over a long period, but in CEE this has presented a challenge. The co-ordination of activities and transfer of expertise across national borders will continue to be a main focus of attention. A high level of activity will be maintained in the area of product development, market initiatives and sales promotion in order to develop our categories. The launch of new products and concepts supported by market investments will help to create a basis for future growth in both sales and profits.
Strategy
Considerable resources have been allocated by the Group to the establishment of a new and integrated ERP system which will allow cost savings to be made longer term. The system has been fully implemented in Poland and is due for installation in the other business units in the course of 2004 and 2005. This is one of a number of measures designed to reduce the level of capital employed and ensure higher profitability in the long term.
In January 2004 Mrs. Cheng’s was acquired. Mrs. Cheng’s is one of Sweden‘s leading brands in the growing Asiatic food niche market. The business will be integrated with the Group‘s other operations in Sweden. Mrs. Cheng‘s had sales of SEK 32.4m in 2003 and EBITA of approximately SEK 2.5m. The acquisition is in line with a strategy which seeks to increase the critical mass in selected countries where the Group has a market position.
Challenges in the market
The objective of the Group‘s overall financial strategy is to hedge the interest rate and foreign currency exposure related to balance sheet items and parts of the company‘s revenues/costs denominated in foreign currency (further information is provided on page 77). Liquid assets are invested in interest-earning instruments with a limited credit risk.
High wage growth in Norway in the last few years has contributed to a substantial increase in pension costs. In consultation with the employee organisations the terms and conditions related to pensions and pension insurance have been changed. This will reduce pension costs by about NOK 10m annually with effect from 2004.
Presentations of operations
Strategic objectives and prospects
31 December 2003
Directors’ report
18 March 2004
Leiv L. Nergaard
Bjarne Rieber
Fritz T. Rieber
Chairman
Vice-Chairman
Barbara Thoralfsson
Torgny Eriksson
Adler Ekanger
Tore Nielsen
Terje H. Sparbo
Asbjørn Reinkind
Financial report
Connie Astrup-Larsen
President and CEO
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
39
Corporate governance Objectives and governing principles Rieber & Søn is managed according to objectives and governing principles that shall ensure openness, integrity and accountability. Openness is assured through a flow of correct information between business units, the Management and the Board, and to the various partners (owners and the external environment). Integrity is achieved through the establishment of uniform norms and regulations and by following moral and ethical principles. Honesty is central to our activity. In relation to accountability, we strive to have a correct division of responsibility between the various levels of the organisation (business units, the Management and the Board).
carry the same shareholder rights. The documentation relating to matters to be considered by the AGM is sent out not later than 14 days before the date of the AGM. Where shareholders are prevented from attending, they may appoint a proxy to attend the AGM in their place.
Corporate Assembly The AGM appoints the Corporate Assembly who in turn elects the Board of Directors of Rieber & Søn ASA. The Corporate Assembly has 15 members, ten of whom are elected by the shareholders and five by the employees. The Corporate Assembly may make recommendations to the Group Board of Directors on any matter. It may also make recommendations to the AGM on proposals made by the Board concerning the consolidated accounts.
Rieber & Søn’s set of values Our customers, employees, shareholders and the public at large can rely on us. We are open and trustworthy as regards communication and attitudes to individuals and groups. We are innovative and interested in finding better solutions and new ways of dealing with challenges. Our products and ideas inspire the consumer to serve a tasteful dishes in an easier way.
Equal treatment of shareholders and shareholder communication The Group emphasises the importance of giving correct and detailed information about the Company’s financial and commercial position. This done through quarterly and annual reports, investor presentations and regular contact with analysts and the press. The Group also has an Investor Relations function which attends to shareholder matters. Rieber & Søn ASA has strict requirements concerning the provision of information and the equal treatment of all shareholders. As a listed company, Rieber & Søn ASA observes the strict standard set by the Oslo Stock Exchange in this area.
Election Committee The company has an Election Committee which proposes candidates for the Corporate Assembly and the Board of Directors. It has four members. The Chairman of the Board and the Chairman of the Corporate Assembly are permanent members of the Election Committee in order to ensure continuity of communication and Management responsibility. The AGM in May 2004 will be asked to approve a resolution proposing that the Chairman of the Board of Directors shall no longer be a permanent member of the Election Committee. This is being done in order to prevent a possible conflict of roles. In determining the composition of the Board of Directors the Election Committee attaches importance to experience, competence and diversity, with representation from the food industry and consumer products, and including financial and strategic experience and geographical diversity. CVs for proposed Board candidates will be distributed. The remuneration to the Board of Directors and the Corporate Assembly is proposed by the Election Committee and approved by the AGM.
AGM The AGM exercises the highest authority in the company, and among its functions it elects the members and deputy members of the Corporate Assembly. The company has only one class of shares, and all shares
40
RIEBER & SØN -
ANNUAL REPORT 2003
Board of Directors The Board of Directors of Rieber & Søn is fully aware of its responsibilities in relation to the Management and supervision of the Company’s activities. The Board is
Overview Presentations of operations
The Board appoints the Managing Director and determines the systems of remuneration for the Management.
The Group carries out control functions in all business units. The company also has a central accounting department and a finance department with responsibility for drawing up the internal control and reporting guidelines. The accounting and finance departments ensure that the company is in compliance with current laws and regulations and good accounting practice, and that the parameters and strategies set by the Board are followed. Good systems provide a basis for and contribute to good controls and reporting. In order to strengthen work in this area, the process of implementing an ERP system in all business areas started in 2003. Using this tool, the Management will have a basis for better understanding of the Company’s risk profile in relation to its current strategy, operations and transactions, while strengthening its ability to meet business challenges in the period ahead.
Strategy Environment and food safety
The Board has an established board strategy, board instructions and an annual plan. Each year the Board makes an assessment of its work. The Senior Management group also makes an overall assessment of the Board’s work and its co-operation with the Management.
Control functions Challenges in the market
responsible for the strategic development of the Group, and in this connection it has established internal procedures and controls to ensure that the business is run within the parameters and in accordance with the strategies approved by the Board. The Board ensures that it is fully informed about the financial position of the company at all times and is responsible for drawing up plans and budgets for the Company’s business activities.
Independence If other renumeration than Board fees for services are to be paid to any member, this shall be approved in advance be the superior body. No Board members have been employed by the company in the last few years, nor do they have any family links with the Managing Director. With the exception of two board members from the Rieber family, non of the other members have cross relationships with other Board members or the Managing Director. The Board members do not have performancelinked Board fees or options in the company, and they have no significant commercial links with the company.
Equity
Remuneration to Management
Auditing
The notes to the accounts contain information pertaining to remuneration to the Managing Director and the bonus schemes to Management. The salary and other remuneration to the Managing Director is set by the Board of Directors. The Managing Director’s options agreement requires him to have direct ownership of the underlying shares in order to increase the degree of symmetrical interest with the Company’s shareholders. In both form and size, the bonus schemes for the Management are designed to contribute to a concurrence of interests between the owners, the Managing Director and other Management.
Ernst & Young is Rieber & Søn’s independent auditor. The Group has guidelines limiting the use of the auditor for other services. The auditor also participated in board meetings in order to present special problems and conclusions related to the audit.
Directors’ report
The Company’s equity is adequate to support its objectives, strategy and risk profile, as communicated to the market. In this light, an extraordinary dividend was paid in 2003 in order to bring the share capital into line with current strategic objectives.
Dividend The Board has a clearly defined dividend policy which forms the basis of the dividend proposed to the AGM. The dividend is defined as around 40% of EPS.
Financial report
The notes to the accounts contain full disclosure of remuneration to the auditor, split between audit and other services.
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
41
Profit and Loss Account 2003
Note|
Figures in NOK 1 000
Net sales Cost of sales Gross profit
7,8 10 9
Other items Net financial items Profit before taxes Taxes Group profit for the year Minority interests
2002|
2001|
*) See the definition of key figures on page 74.
ANNUAL REPORT 2003
27 -701 -181 -685 285
249 983 558 949 963
36 -653 -160 -609 287
100 656 214 160 739
20 -627 -160 -553 225
811 851 443 911 630
5 4,18
-8 530 277 433
5 272 293 011
-9 991 11 437 227 076
22
-99 962 177 471
-102 920 190 091
-81 982 145 094
59
-10
52
2,35 1,10
2,48 1,00 6,00 527 945
1,87 0,85
15
Earnings per share *) (NOK) Proposed dividends per share (NOK) Extraordinary dividends per share (NOK) Proposed dividends
RIEBER & SØN -
2003|
6 3 221 506 3 030 758 2 920 455 4 -1 393 302 -1 356 090 -1 373 432 1 828 204 1 674 668 1 547 023
Other operating revenues Payroll costs Depreciation Other operating expenses Operating profit
42
for the Rieber & Søn Group
15
83 044
65 331
Figures in NOK 1 000
Overview
Balance sheet at 31 Dec. 2003
for the Rieber & Søn Group
Note|
2003|
2002|
2001|
Presentations of operations
ASSETS CAPITAL ASSETS Intangible fixed assets Licences, concessions and trademarks Goodwill Total intangible fixed assets
Financial assets Shareholdings and investments Pension plan assets Other long-term receivables Total financial assets Total capital assets
15 650 215 840 231 489
10 10 10
668 522 102 1 293
894 654 119 667
486 403 57 947
454 415 768 637
499 430 25 956
980 964 553 496
12 8 13
11 23 7 42 1 653
745 353 692 791 641
7 9 21 37 1 148
352 018 214 584 810
24 15 89 128 1 316
409 074 284 767 753
14
21
413 795
457 27 484 357 1 255 2 909
522 098 620 192 607 248
409 862
371 23 395 1 301 2 106 3 255
976 249 225 679 766 576
430 299
370 34 404 1 073 1 908 3 225
619 226 845 671 816 569
Environment and food safety
Receivables Accounts receivable Other receivables Total receivables Cash and bank deposits Total current assets TOTAL ASSETS
10 630 152 959 163 589
Strategy
CURRENT ASSETS Stocks
81 298 235 886 317 184
Challenges in the market
Tangible fixed assets Land, buildings and other real estate Ships, machinery and plant Operating assets, fittings, office equipment etc. Total tangible fixed assets
10 10,11
Directors’ report Financial report Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
43
Balance sheet at 31 Dec. 2003
for the Rieber & Søn Group
Note|
Figures in NOK 1 000
2003|
2002|
2001|
LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity Paid-in capital Retained earnings Minority interests Total shareholders' equity Liabilities Provisions for obligations Pension obligations Deferred taxes Total provisions for obligations Other long-term liabilities
754 573 1 1 329
949 815 057 821
766 458 5 1 230
620 995 114 729
767 930 5 1 703
431 810 124 365
8 22
110 59 169 779
093 634 726 968
65 79 144 758
050 640 691 017
38 109 147 750
019 699 718 117
80 209 66 10 83 179 629 1 579 2 909
138 426 556 645 044 924 733 427 248
198 172 73 2 527 146 1 122 2 024 3 255
379 567 858 898 945 491 139 847 576
152 132 76 12 65 185 624 1 522 3 225
611 474 031 216 331 705 368 203 569
18
Current liabilities Bank overdrafts Accounts payable Taxes payable Public debt Dividends payable Other current liabilities Total current liabilities Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
Bergen,
15,16,17 15 15
4,21 22 15
31 December 2003
18 March 2004
Leiv L. Nergaard
Bjarne Rieber
Chairman
Vice-Chairman
Connie Astrup-Larsen
Fritz T. Rieber
Barbara Thoralfsson
Torgny Eriksson
Adler Ekanger
Tore Nielsen
Terje H. Sparbo
Asbjørn Reinkind President and CEO
44
RIEBER & SØN -
ANNUAL REPORT 2003
for the Rieber & Søn Group
Note|
Figures in NOK 1 000
18 15 17 17
277 -119 181 22 36 4 403
433 214 551 863 486 651 770
293 -158 160 21 72 -69 319
011 084 282 913 529 990 661
227 -153 147 1 -47 -80 94
076 728 347 841 896 524 116
25 -648 -3 -30 -657
687 867 400 453 032
10 -178 7 83 -76
785 603 484 611 722
142 -117 26 168 220
664 030 379 724 737
1 485 9 405 -111 886 4 859 -62 071 -527 945 -5 072 -691 225 -944 487
-64 54 952 -1 220 8 039 -11 307 -65 331 -14 931 228 008
-1 1 -84 47 3 -230 -62
691 016 341 232 083 782 745 -328 228 -13 375
1 301 679 -944 487 357 192
1 073 671 228 008 1 301 679
1 087 046 -13 375 1 073 671
Environment and food safety
Liquid assets at 1 Jan. Net change in liquid assets Liquid assets at 31 Dec.
2001|
Strategy
Cash flow from financing activities Change in long-term interest-free debt New interest-bearing debt (short and long-term) Repayment of interest-bearing debt (short and long-term) Inflow of equity (issue) Inflow of equity (sale of own shares) Outflow of equity (purchase of own shares) Dividends paid Minority interests Net cash flow from financing activities Net change in liquid assets
10 10
2002|
Challenges in the market
Cash flow from investment activities Fixed assets sold Fixed assets bought Net purchases/sales of shares and investments in other companies Net proceeds of other investment activities Net cash flow from investment activities
10
2003|
Presentations of operations
Cash flow from operations Profit before taxes Taxes paid Depreciation, incl. gain/loss on disposal of fixed assets Pension costs accrued not paid Change in stocks, accounts receivable and accounts payable Change in other accruals Net cash flow from operations
Acquisitions are classified as cash flow from investment activities, split on fixed assets bought, net
Overview
Cash Flow Statement 2003
purchases/sales of shares and investments in other companies and net proceeds of other investment activities.
Directors’ report Financial report Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
45
Note 1 | Accounting principles The annual accounts have been prepared in accordance with the Accounting Act of 1998 and generally accepted accounting practice. The accounts are based on the following basic accounting principles in accordance with generally accepted Norwegian accounting practice; the transaction principle, the earned income principle, the matching principle, the prudence concept, the congruence principle, hedging and use of estimates, the going concern assumption together with a uniform use of principles. Consolidation principles The consolidated accounts include the parent company Rieber & Søn ASA and its subsidiaries, as shown in note 2. The consolidated accounts incorporate companies where the parent company directly or indirectly owns more than 50% of the voting share capital, and/or has a controlling interest. Acquired subsidiaries or part of subsidiaries meant for temporary ownership are not consolidated. The gross method of accounting is applied to jointly controlled activities. The equity method of accounting is applied to companies where the Group has a significant influence and longterm owner interests. In the accounts of the parent company, shareholdings in subsidiaries, jointly controlled activities and associated companies are incorporated using the cost method of accounting. Companies acquired during the year are consolidated from the date of acquisition. Companies sold during the year are consolidated for the period up to the date of sale. The consolidated accounts are prepared applying uniform accounting principles, with subsidiaries applying the same accounting principles as the parent company. All material inter-company transactions and balances are reconciled and eliminated. When subsidiaries are acquired, the cost price of the shares in the parent company is eliminated against the subsidiary’s equity at the date of acquisition. Where the purchase price exceeds the book equity of the subsidiary, the difference is posted to the identifiable assets and liabilities and they are thereby stated at their actual value at the date of acquisition. Any surplus value that cannot be attributed to assets or liabilities, is posted as goodwill. In posting surplus value to assets and liabilities, deferred taxes are taken into account and posted in the balance sheet. Goodwill is posted net. Surplus values and goodwill attributable to foreign subsidiaries are restated in the relevant foreign currency at the exchange rate at the date of acquisition.
46
RIEBER & SØN -
Investments in associated companies are considered as a strategic, operating-related investment, in such a way that the share of the profit is entered as income on the line other operating revenues. Translation of foreign subsidiaries For consolidation purposes, the profit and loss accounts of foreign subsidiaries are translated into Norwegian krone at the average exchange rate for the accounting period. The balance sheets are translated at the year-end rates. Surplus values and goodwill are correspondingly translated into Norwegian krone at the same rate used for the subsidiary to which they relate. Any translation differences are posted directly to Group equity. Minority interests Minority's share of equity is calculated at actual value of identified assets and liabilities at the date of acquisition. The share of profits and tax attributable to minority interests is shown separately after the Group profit for the year. The share of equity attributable to minority interests is shown separately under specification of the Group equity. Recording of income As a main rule, income is recorded in the accounts on the basis of the amount earned at the transaction date. Income is thus not posted until both control and risk have been transferred. Cut-off Cut-off is based on matching of income and expenses during the period, while exercising prudence in accordance with generally accepted accounting practice. Unrealised losses which are likely and quantifiable, and unqualified liabilities and imposes are charged in the accounts in accordance with generally accepted accounting practice. Valuation and classification principles Assets which are meant for permanent ownership or use are classified as fixed assets. Other assets are classified as current assets. Debt which is due more than one year after year-end, and the first year’s instalment on this debt, is classified as long-term debt. Other debt is classified as short-term debt. Other items The Group’s profit and loss account down to operating profit is presented for continued activities. This also applies for the comparative figures for previous years. Activities which are to be sold or which have been sold before the rendering of accounts 2003 are presented as Other items. Other items are specified in Note 5. Activities which are to be sold are written down to fair market value when this is lower than book value. Gain on disposal and write downs regarding activities which are to be sold
ANNUAL REPORT 2003
or which have been sold, are included in Other items. Receivables Accounts receivable and other receivables are stated at nominal value in the balance sheet, after deducting provisions for expected losses. The Group’s loss provisions are determined on the basis of a specific assessment of each account receivable, in addition to an assessment of the accounts receivable as a whole. Stocks Stocks of purchased goods are valued at the lower of purchase cost and fair market value. Manufactured goods are valued at full production cost. Provisions are made for obsolete stock. Foreign exchange Cash items, receivables and liabilities in foreign currency are recalculated at the year-end exchange rates. The Group’s foreign exchange policy is to balance out differences between receivables and liabilities in foreign currencies by using financial instruments such as foreign exchange bank accounts, forward foreign currency transactions and options. Foreign exchange effects on cash items in foreign subsidiaries which are not independent enterprises, are charged to the profit and loss accounts as financial items. Foreign exchange gains/losses related to the flow of goods are included in the gross profit. Foreign exchange gains/ losses not related to the flow of goods are classified in correspondence with the underlying transaction. Unrealised gains on foreign exchange positions intended to hedge against unrealised losses on corresponding foreign exchange positions, and which are effective in doing so, are offset. Intangible assets Costs related to research and development are charged directly to the profit and loss account. Goodwill is depreciated over the expected useful life, estimated by calculations made at the time of the acquisition. The value of goodwill is assessed regularly to consider any factors or events since the acquisition which require the book value of goodwill to be written down. Payment for concessions, rights and other intangible assets is depreciated over the period for which the rights apply/extraction period, or over its expected lifetime. Fixed assets Fixed assets are entered in the balance sheet at historical cost less depreciation. Direct maintenance of fixed assets is charged as an operating expense as it arises, while additions or improvements are added to the cost price of the fixed asset in question, and are depreciated in pace with the fixed asset. The straight-
Overview
Note 1 |
continued
The Group’s various pension schemes are valued individually and classified as net pension funds to the extent that this represents overfunding which can be used in the future to cover premium or re-allocated to the company. Underfunded schemes are classified as net pension obligations.
Shareholdings and long-term investments Shareholdings and other securities are classified as fixed assets and valued at historical cost. Write downs are carried out on individual shareholdings if the market value is less than historical cost, and this is not of a temporary nature. Gains and losses on shareholdings and other securities are included as financial items.
Statement of cash flows The Group statement of cash flows shows the aggregate cash flow from operations, investments and financing activities. The statement shows the effect of the individual activities on the level of liquid assets. Liquid assets include cash, bank deposits and other liquid investments which can be converted into cash immediately and with no material conversion risk. The cash flow from sales of fixed assets and intangible assets in companies sold, is classified as «Fixed assets sold». Net cash flow related to the remaining assets and liabilities is included in «Net proceeds of other investment activities».
Pensions: Economic assumptions regarding discount rate and return on pension assets is continuously adjusted according to the market rate. The practice in Norway and for Rieber & Søn has been to change the interest rate only in case of material changes compared to the market rate. Financial instruments: Financial instruments to manage financial exposure should be recognised in the balance sheet at fair value, and unrealised gains/losses are charged directly to equity. This does not necessarily lead to material effects in the profit and loss account compared to the principles used today. The requirements of documentation and additional information are considerably extended. Research and development costs: According to the principles of today, research and development costs are charged as they arise. According to IFRS, development costs should be capitalized and depreciated if certain criteria are met. Rieber & Søn presume that the company does not have material development costs that should have been capitalized according to IFRS.
RIEBER & SØN -
ANNUAL REPORT 2003
Adressess
Net pension costs for the period are included in payroll and social security costs and are the total of pension benefits earned during the period,
One year of comparative information is required, and the identification of differences in accounting principles between IAS and the Norwegian Accounting Act has started. Rieber & Søn aim at adapting the opening balance sheet at 1 Jan. 2004 to IFRS within the first half year of 2004, to be able to present one year of comparative figures. Work is in progress to collect information and establish new routines to meet the requirements according to IFRS.
Intangible assets: Goodwill will not be depreciated, but tested periodically for impairment.
Financial report
Pension costs and obligations The basis for calculating benefit plan based pension costs, is a linear distribution of pension entitlements and the expected final salary. Changes in plan benefits are amortised over the expected remaining accretion period, as are deviations in estimates in excess of 10% of the largest of pension obligations and pension funds (corridor).
Differences in accouting principles according to IAS/IFRS and the accounting principles of Rieber & Søn. In February 2001 the EU Commission resolved that all companies listed on the stock exchange should present the consolidated accounts according to IFRS (International Financial Reporting Standards) published by IASB (International Accounting Standards Board), effectively from 1 Jan. 2005. This implies that companies listed on the stock exchange in Norway, under the EEA-agreement are subject to the same requirements when presenting the accounts as companies within the EU. Rieber & Søn will based on this report according to IFRS as from 2005.
Income statement, balance sheet and notes: • More flexible format as regards to presentation, but Rieber & Søn will probably continue to present expense by nature. • Some items such as long term debt will be reclassified. • The notes will be extended.
Directors’ report
Taxes Taxes in the profit and loss account consist of the change in net deferred taxes and taxes payable for the year. Deferred tax in the balance sheet is calculated applying the nominal tax rate to the temporary timing differences arising between the accounting and tax values, and taking account of the tax loss carried forward at the end of the accounting year. Temporary positive and negative differences which will or can be reversed in the same period are netted. Deferred tax on surplus values due to the acquisition of subsidiaries is not netted. Deferred tax that cannot be netted is entered in the balance sheet if it can be established that the deferred tax asset can be applied in the future. Deferred tax and deferred tax assets are netted in the balance sheet.
Rieber & Søn will principally be influenced in the following areas when adapting to IFRS:
Environment and food safety
Extraordinary items Only items which are unusual, irregular and material to the overall activities of the Group are treated as extraordinary items.
IFRS is more focused on balances than the Norwegian Accounting Act as it is today, and IFRS makes it possible to use fair market values more extensively. Preliminary analysis indicate that there are no material differences between the principles used by Rieber & Søn today and the principles according to IFRS.
Strategy
Leasing agreements where the company has most of the risk and the benefits of the fixed assets are entered in the balance sheet as fixed assets and liabilities.
However, Rieber & Søn will not present the accounts according to IFRS before 1Q 2005, due to continuously development of both IFRS and Norwegian Accounting Act. The work with the Accounting Standards will probably continue during 2004, and the principles to be implemented in 2005 will based on this not be identical to existing IAS (International Accounting Standards). NRS will in the period up to 2005 adapt their Standards to changes in IAS, and Rieber & Søn will in high degree comply with these recommendations.
Challenges in the market
Fixed assets are written down when an individual assessment indicates that the fair market value is less than the book value. A fair market value is the higher of the sales price and the discounted value of the expected future cash-flow. Write-downs of this kind are charged to operating profit as part of depreciation. Gains and losses on the disposal or obsolescence of fixed assets are included in depreciation in the profit and loss account, as a correction of insufficient or excessive depreciation in previous years.
interest expenses on the calculated obligation and the expected return on pension funds, in addition to amortisation of changes in plan benefits and deviations in estimates. The pension obligations are calculated on the basis of long-term expectations of the future discount rate, rate of return, wage and salary growth, inflation and pension regulation.
Presentations of operations
line method of depreciation is used, based on an assessment of the technical/economical lifetime of the individual fixed assets.
47
Note 1 |
continued
Fixed assets: Compounded fixed assets are often depreciated based on one common depreciation rate. IFRS requires a greater degree of decomposition of fixed assets with different depreciation rates. The effect for Rieber & Søn is assumed to be immaterial. Dividends According to IFRS, dividends should be recognised when approved, while
practice in Norway is to recognise the dividends in the year it relates to (i.e. one year previous).
• Business combinations prior to 1 Jan. 2004 will not be restated. • Deviations in estimates not amortised related to pensions at 1 Jan. 2004 will be reset to equity. This is not applicable for changes in plan benefits not amortised kept for future amortization. • Accumulated translation differences at 1 Jan. 2004 are reset. This will have no impact on equity as at 1 Jan. 2004, but will influence the calculations of gain/ losses on future disposals of businesses.
Opening balance sheet 1 Jan. 2004: When establishing the opening balance at 1 Jan. 2004, IFRS 1 on first time adoption gives several options. Rieber & Søn will probably not choose to revalue fixed assets at fair value, but the following permitted simplifications will probably be used:
Note 2 | Shares in subsidiaries The consolidated accounts for 2003 comprise the following companies: Share and voting rights of the Group at 31 Dec. 2003
Figures in currency 1 000
Parent company Rieber & Søn ASA
Norway
NOK
795 757
Subsidiaries Alamar AS Anja Cake Sp. z o.o. Delta-Nor Sp. z o.o. Denja AB Denja AS Denja A/S Denja BV Eurospice AB Fellesfrost AS Grillfagmannen AS Helsetorget AS King Oscar Inc. King Oscar Sardiner AS Nature Pharma AS Nopal AS Norway Foods AS Norway Foods(Europe) b.v. Phønix AB Przedsiebiorstwo Magazynowania Ryb. Sp. z o.o. Ren Jord A/S Rieber Foods Polska S.A. Rieber & Son AB Rieber & Son GmbH Rieber & Son Oy Rieber & Son Plc. Rieber & Son Production Russia ZAO Rieber & Son Sales Russia ZAO Rieber & Søn A/S Rieber Folie AB Storaneset 12 AS Toro AS Veiservice AB Vitana a.s. Vitana AS Vitana Slovensko s.r.o.
Norway Poland Poland Sweden Norway Denmark The Netherlands Sweden Norway Norway Norway USA Norway Norway Norway Norway Belgium Sweden Poland Denmark Poland Sweden Germany Finland United Kingdom Russia Russia Denmark Sweden Norway Norway Sweden Czech Rep. Norway Slovakia
NOK PLN PLN SEK NOK DKK EUR SEK NOK NOK NOK USD NOK NOK NOK NOK EUR SEK PLN DKK PLN SEK EUR EUR GBP RUR RUR DKK SEK NOK NOK SEK CZK NOK SKK
4 000 135 100 950 0 800 2 000 100 2 800 100 100 50 100 460 428 0 62 0 4 5 000 4 377 2 000 26 6 438 200 21 112 1 712 50 000 0 9 000 0 0 526 402 100 340 100
Eurospice AB, Grillfagmannen AS, Helsetorget AS and Nature Pharma AS were taken over in connection with the acquisition of Nopal AS 1 June 2003. When acquiring Nopal AS, the most essential part of the business was demerged. Norway Foods AS took over
48
Nominal share capital
Registered office
RIEBER & SØN -
the demerged business. Then the assets and liabilities were sold from Norway Foods AS to Rieber & Søn ASA, with subsequent liquidation of Norway Foods AS. Rieber Folie AB, Veiservice AB and Phønix AB are merged into Rieber & Son AB in 2003. The minority
ANNUAL REPORT 2003
100 100 100 100 0 100 100 100 100 100 60 100 100 100 100 0 100 0 49 100 100 100 100 100 100 100 100 100 0 100 0 0 100 100 100
% % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % %
in Fellesfrost AS was bought out in 2003, and the share increased from 50% to 100%. For companies which are liquidated, merged or sold during the year, the holding of shares is set to 0% at 31 Dec. 2003.
Overview
Note 3 | Effect of changes in Group composition 87.79% share of SE Labels ASA, together with the wholly-owned subsidiaries Etikett Service AS and Riflex Film AS, and an increase of the capital of NOK 226.4m, were transferred to Nye SE Labels AS for a
Figures in NOK m
settlement to the shareholders of Rieber & Søn ASA in the form of shares in Nye SE Labels AS. Nopal and Denja BV are included in the Group's accounting figures with the following amounts;
2002|
2001|
3
1
-
392 138 -14 -50 -445
39 20 -11 -29 -3
-
2003|
2002|
2001|
Share of Group profit for the year Fixed assets Current assets Provisions Long-term debt Short-term debt
Challenges in the market
2003|
Presentations of operations
Nopal is acquired and consolidated from 1 June 2003. Denja BV is consolidated in the Group accounts with effect from 1 April 2002. The Rieber and Son Group demerged in 2001 in such a way that the Group's
Figures in NOK 1 000
Profit and Loss Account - continued activities Cost of sales Change in stocks of work-in-progress and finished goods Total cost of sales
Strategy
Note 4 | Items merged in the accounts
Profit and Loss Account - Group Dividends Gains on shareholdings Interest income Financial income on liquid funds Other financial income Total financial income
89 6 315 43 758 2 615 46 784
-39 -13 -1 -55 -8
929 711 675 314 530
14 4 81 8 109
156 177 642 498 616 088
-68 431 336 353 189 272
-57 -32 -6 -97 11
981 980 691 652 437
-51 -27 -2 -81 5
Directors’ report
Loss on shareholdings Interest on long-term debt Interest on short-term credit facilities Other financial expenses Total financial expenses Net financial items
61 434 85 707 260 86 461
Environment and food safety
-1 359 442 -1 351 278 -1 367 841 -33 860 -4 812 -5 591 -1 393 302 -1 356 090 -1 373 432
All bank credits are debt to credit institutions.
Financial report
Note 5 | Other Items Other items include a cost of NOK 10.0m in 2001. This transaction represents an increase of existing
provisions related to sold units as a consequence of two disputes which were unsettled 31 Dec. 2001. Later
these disputes have been solved within the frame of the provisions.
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
49
Note 6 | Net sales Figures in NOK 1 000
Gross sales Sales deductions Net sales
2003|
2002|
2001|
4 022 688 -801 183 3 221 506
3 721 683 -690 925 3 030 758
3 528 254 -607 799 2 920 455
Sales deductions include outgoing freights, insurance, discounts, claims and customer bonuses/commisions.
Net sales, divided into product groups Soups, sauces, Casa d'Italia, kits etc. Seafood Ingredients Baking ingredients, cakes and sweets Salads Fried onion Snacks Net sales
1 858 424 95 330 261 153 96 3 221
551 613 605 552 976 335 873 506
1 632 480 68 361 265 113 109 3 030
260 142 165 488 119 732 853 758
1 556 450 71 388 257 63 134 2 920
213 253 060 138 244 354 193 455
Net sales, divided into sales channels Consumer Food service Industry Net sales
2 667 421 132 3 221
216 804 485 506
2 543 366 120 3 030
619 524 615 758
2 470 355 94 2 920
449 315 691 455
Segment information is presented on page 75 and 76.
Note 7 | Salaries, number of employees, remuneration, loans to employees etc. 2003|
Figures in NOK 1 000
Salaries National insurance contributions Pension costs (incl. payroll tax) Other benefits Total payroll costs
309 552 592 531 983
497 56 47 52 653
310 246 756 344 656
2001| 483 60 39 44 627
527 456 240 627 851
Loans to employees
4 752
3 808
6 371
Average number of employees in continued activities
3 533
3 519
3 772
Annual salary to President and CEO Asbjørn Reinkind in 2003 amounts to NOK 3 282 971, of which bonus related to 2002 amounts to NOK 624 999. Pension premium paid amounts to NOK 678 804, together with other reported taxable payments of NOK 150 831. Under a bonus scheme dependent on the results of the Group, the CEO is entitled to an amount not exceeding 50% of the annual salary. In 2003 the acquired bonus amounts to NOK 437 500. This amount will be paid in 2004. When his employment terminates, the CEO will be entitled to leaving pay on pre-defined conditions,
50
537 61 43 59 701
2002|
RIEBER & SØN -
corresponding to two times his annual salary. The CEO`s early retirement agreement gives him the right and obligation to retire when reaching the age of 60, with remuneration equivalent to 66% of the pension base. The early retirement agreement is based on 30 years earning in the Norwegian National Insurance. The CEO has an option to buy 100 000 Rieber & Søn shares yearly from 2002 to 2006, adding up to 500 000 shares. The option is to be executed in the period from publication of the preliminary annual accounts the year following the year of assignment, to
ANNUAL REPORT 2003
three years after the date of assignment. The exercise price of the option is NOK 47.99, plus 12 month NIBOR deducted for dividends paid up to the date of exercise. Calculated call price as of 31 Dec. 2003 is NOK 44.94. The value of this option per 31 Dec. 2003 was NOK 1 012 000. CEO Asbjørn Reinkind has according to his contract of employment undertaken to possess his own holding of Riebershares equivalent to the value of his annual gross salary. Per 31 Dec. 2003 the CEO owned 20 976 shares.
Overview
Note 7 |
continued
CFO Tor Lund, together with the Directors Stein Klakegg, Morten Vike and Geir Arne Åsnes, have all on predefined conditions an agreement whereby they are entitled to severance pay equal to two years salary when the conditions of employment come to an end. Tor Lund and Stein Klakegg are covered by an early retirement scheme under which they will retire at the age of 64. The matter of early retirement from the age of 60 may be taken up by Mr Lund and Mr. Klakegg or by the company. Tor Lund has an interest-free loan from the company amounting to NOK 937 500 with fixed instalments and maturity.
Remuneration to the Board of Directors is paid after the General Meeting in May. Total remuneration to the Board of Directors for the period from 1 May 2003 to 30 April 2004 amounts to NOK 1 810 000, of which NOK 400 000 applies for the Chairman Leiv L. Nergaard. The Chairman has received additional NOK 50 000 for consultancy services in 2003. Remuneration to the Corporate Assembly and Nomination Committee totalled NOK 244 800.
Strategy
In 2003 all the Norwegian employees were offered to buy shares for NOK 7 500 each, with 20% discount from the company. 485 employees accepted the offer. In this connection, the
employees were offered to borrow the net amount from the company. As of 31 Dec. 2003 the aggregate remaining amount of the loan was NOK 2 127 610 with the last instalment due in August 2004. Some of these employees are members of the company’s Corporate Assembly and Board of Directors. Apart from this, the company has not rendered any loans or loan security for members of the Board of Directors or Corporate Assembly.
Challenges in the market
The Group has a bonus scheme, that in addition to the CEO`s already mentioned arrangement, includes 59 of the managers in the Group. Each of these can achieve a bonus maximized to 25-35% of their annual salary. For
2003 acquired bonus , included social security costs, amounts to NOK 2.8m.
Presentations of operations
The other five Directors in the Group management all have a bonus scheme dependent on the development in the rate of the share. Each of them acquire a right to bonus payment based on 30 000 underlying shares per year, from 2002 to 2006, a total of 150 000 shares per person. The bonus may be required paid in the period from publication of the preliminary annual accounts the year following the year of assignment, to three years after the date of assignment. The bonus is determined as the difference between the market price and the exercise price per share multiplied with the number of underlying shares at the date of exercise. The exercise price is equal to the exercise price for the CEO. The value of the bonus schemes per 31 Dec. 2003 were NOK 1 366 200.
Note 8 | Pension benefit costs, obligations and plan assets
Defined in contribution-based plans: Cost of contribution-based pension schemes
2003|
2002|
2001|
4 139
1 773
1 698
27 37 -33 7 39 43
RIEBER & SØN -
419 952 628 709 453 592
32 34 -33 12 45 47
554 814 522 137 983 756
34 30 -33 6 37 39
ANNUAL REPORT 2003
468 417 582 239 542 240
Adressess
Defined benefit plans: Present value of benefits earned during the year incl. payroll tax Interest cost on benefit obligations Return on pension plan assets Net amortisations and deferrals Net pension cost of benefit-based schemes Aggregate pension cost in Group accounts
Benefit based schemes in other countries: • A Group pension scheme for businesses in the Netherlands. The scheme includes 54 employees. • A statutory pension scheme for the business in Poland corresponding one months salary for personel employed at achieved retirement age.
Financial report
Figures in NOK 1 000
ment pension from the age of 60. This scheme covers three employees at the end of 2003. In addition, provisions have been made for the company’s own contribution and gift pension related to CPAs (contractual pension agreements) in Norwegian businesses, together with individual operational pensions.
Directors’ report
The Rieber & Søn Group has the following pension schemes which are managed by Norwegian life insurance companies: • A Group pension scheme which covers salaries up to 12G (G = social security contribution ceiling) for employees engaged in the company’s Norwegian businesses. The scheme covers 1 185 employees at the end of 2003. • A pension scheme with a retirement age of 67 for employees in Norway with a pensionable base in excess of the maximum limit under Norwegian tax law. This scheme covers the difference between 12G and the current salary. This scheme covers 28 employees at the end of 2003. • For members of the Group’s management team, the retirement age is 64. Both the company and the employee can raise the question of early retire-
Environment and food safety
Rieber & Søn has pension schemes which provide the employees with future pension benefits. The benefits are in accordance with the conditions governing the pension schemes at any given time. The pension benefits which, according to the «Norwegian Accounting Standard for the Accounting Treatment of Pension Costs», are regarded as benefit plans, are actuarially calculated based on the employee’s salary at the date of retirement and the number of years of accrued pension rights. The Accounting Standard forms the basis of the calculation of pension costs and pension obligations on benefit based schemes as they appear in the accounts and in this note. The Group’s legal obligations are unaffected by the Accounting Standard. Overfunding has been assessed, and the accounting treatment assumes that all overfunding can be utilized.
51
Note 8 |
continued
2003|
Figures in NOK 1 000
2002|
2001|
Financial status pension plans: Accumulated benefit obligations incl. payroll tax Projected effect of future salary increases Projected benefit obligations Plan assets at market value Plan assets larger/less than projected benefit obligations Unrecognised net actuarial gain and loss Unrecognised part of pension plan alteration Net pension plan assets/pension liabilities
-678 -88 -766 539 -227 102 38 -86
Balance sheet value of overfunded schemes Balance sheet value of underfunded schemes Net financial status of pension schemes
23 353 -110 093 -86 740
9 018 -65 050 -56 032
15 074 -38 019 -22 945
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
2003|
2002|
2001|
The 2003 figures include the acquisition of Nopal from the time of acquisition.
717 055 772 319 452 139 573 740
-628 -67 -696 539 -157 59 42 -56
971 980 951 444 507 438 037 032
-541 -56 -597 503 -94 42 28 -22
233 114 347 009 338 748 645 945
Nopal is not included in the corresponding figures for 2002 and 2001.
Cost for contribution-based pension schemes is related to foreign subsidiaries. Economic assumptions: Discount rate Return on pension assets Salary increase Pension increase Inflation/increase in social security contribution ceiling (G) Turnover Estimated rate of participation in CPA: 10% at the age of 62 and further 75 % at the age of 64.
The actuarial calculations were made in year 2003 based on death rate table K63 and disability rate table IR73.
Note 9 | Other operating costs and expenses Figures in NOK 1 000
Production costs Sales and marketing costs Bad debts Other operating costs *) Total other operating costs and expenses
163 374 5 141 685
850 814 625 661 949
152 343 5 107 609
915 184 896 164 160
138 304 3 107 553
738 292 268 613 911
*) Includes auditor's fee and other fees, research and development, leasing and rent of administration buildings, together with other operating costs.
52
RIEBER & SØN -
ANNUAL REPORT 2003
Overview
Note 9 |
continued
Research and development costs Research and development costs are charged as they arise. There is an assumption that aggregated expected earnings from ongoing research and development is at least equal to the aggregate costs charged. Product development is organised in the respective areas of activity. Product development is a driver to develop the brands in the Rieber & Søn Group. Through continuous renewal of the
products, our brands are added new energy and value. Product development is carried out along different paths, which can lead to new utilisation of existing products, new packaging and portions, development of new tastes within existing categories or by developing new product categories.The Group aim at a offensive care of assortments, where products that do not increase their volume is replaced by new products and solutions.
Figures in NOK 1 000
Subsidiaries audited by others
1 645 1 087 1 555 38
1 664 206 298 104
474 13 8 306
2003|
2002|
2001|
Strategy
Auditor's fee Audit related services Tax advisory services Other accounting related services
Parent company
Subsidiaries audited by parent company’s auditor
Challenges in the market
Auditor's fee
Presentations of operations
Transactions with related parties Rieber & Søn ASA rents office premises from AS Inventor Eiendommer, which along with AS Atlantis Vest is part of the Bjarne Rieber Group. AS Atlantis Vest is the largest shareholder of Rieber & Søn ASA. Rent amounting to NOK 11.3m was paid in 2003, NOK 11.1m in 2002 and NOK 10.8m in 2001. The leasing agreement expires at 31 Dec. 2007.
Note 10 | Intangible and fixed assets
Depreciation Write down Net gain on disposals Depreciation in profit and loss account Licences, concessions, other rights
156 487 4 000 -273 160 214
Trademarks
Goodwill
Total
442 488 108 514 551 002
469 700 185 114 181 654 995
274 40 315 235
290 47 337 317
115 4 567
22 760 76 600 66 99 426
Acc. depreciation and write down at 1 Jan. 2003 Ordinary depreciation Acc. depreciation and write down at 31 Dec. 2003 Balance sheet value at 31 Dec. 2003
3 509 528 4 037 529
12 6 18 80
418 239 658 769
136 980 116 886
157 24 -21 160
606 622 785 443
063 748 811 184
Financial report
Cost at 1 Jan. 2003 Added through acquisitions Additions 2003 Cost at 31 Dec. 2003
Economic lifetime Depreciation method
4 452
719 567 729 558
Directors’ report
Intangible assets:
175 12 -6 181
Environment and food safety
Figures in NOK 1 000
10 - 20 years 10-20 years 10-20 years Linear Linear Linear
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
53
Note 10 |
continued
Fixed assets:
Ship
Cost at 1 Jan. 2003 Revaluated before 1 Jan. 2003 Added through acquisitions Additions 2003 Disposals 2003 Cost at 31 Dec. 2003
12 833
12 833
Acc. depreciation at 1 Jan. 2003 Disposals Ordinary depreciation Write down *) Acc. depreciation at 31 Dec. 2003 Balance sheet value at 31 Dec. 2003
27 1 7 1 -3 34
728 18 67 127 -5 936
351 360 957 194 202 660 1
469 469 33 846
264 -1 26 12 301 635
380 540 673 098 612 047
589 826 516 784
17 564
8 844
1 206 6 963 5 870
10 - 12 years Linear
Machinery and plant
769 617 500 154 724 315
5 757
Annual rent, assets not included in balance sheet: Economic lifetime Depreciation method
Land
Buildings and other real property
942 871 75 125 -38 106
943 989 193 610
530 876 -26 814 85 765
Operating assets, fittings etc.
Total
124 299 1 836 19 2 282 153 55 541 309 -2 091 -49 180 032 2 270
122 977 683 878 210 449
65 483 -1 898 14 327
866 -30 127 12 77 912 976 102 119 1 293
497 252 971 567 783 667
5 166
31 574
5 - 40 years 3 - 20 years 3 - 10 years Linear Linear Linear
*) Write downs in 2003 concern assets that are redundant for future operations. These are written down to expected market value.
Individual transactions Nopal was acquired at 1 June 2003. Additions on intangible and fixed
assets related to the opening balance of Nopal, are presented as "Added through acquisitions" in this note.
Note 11 | Goodwill on acquisition Acquisition cost Book value at Year of acquisition 31 Dec. 2003 31 Dec. 2003
Figures in NOK 1 000
Nopal Big Fish Delecta Denja Vitana / Emarko / Bask Others Total
2003 1998 1996 1996 1992/1998
Goodwill and surplus values attributable to foreign subsidiaries are translated to NOK at the exchange rate at 31 Dec. 2003. The original goodwill and the book value at 31 Dec. 2003 have been translated to NOK at the
54
RIEBER & SØN -
same rate as used for the subsidiary to which they relate. Goodwill is amortised over the expected lifetime, estimated for each acquisition. The value of goodwill is
ANNUAL REPORT 2003
108 62 74 126 101 77 551
514 207 667 666 658 290 002
104 30 20 21 31 25 235
872 891 791 948 470 914 886
Depreciation period
20 10 10 10 10 10
years years years years years years
assessed regularly to consider any factors or events after the acquisition which require the book value to be written down.
Overview
Note 12 | Other shareholdings
Holding
Figures in NOK 1 000
Czech Rep. Norway
074 400 655 129
Balance sheet value
30.6 % 20.0 %
1 3 12 17
1 3 7 11
2003|
2002|
2001|
7 692
21 214
89 284
2003|
2002|
2001|
Presentations of operations
Severofrukt Travcice Naturkost S. Rui AS Sundry shareholdings where holding is less than 10% Value of other long-term shareholdings
Acquisition costs
074 400 271 745
Figures in NOK 1.000
Receivables due more than 1 year later than the balance sheet date
Challenges in the market
Note 13 | Other long – term receivables
Note 14 | Stocks
Based on total stocks at 31 Dec. 2003, NOK 404.9m is valued at initial cost,
200 37 176 413
692 080 024 795
207 24 177 409
928 652 282 862
227 19 184 430
018 227 054 299
Environment and food safety
Raw materials and packaging Work-in-progress and semi-manufactured goods Finished goods Stocks
Strategy
Figures in NOK 1.000
while NOK 8.9m is valued at actual value.
Note 15 | Equity 2002|
2001|
1 225 615 177 471 -59 -83 044 -57 212
1 698 241 190 091 10 -527 945 -3 424
2 235 125 145 094 -52 -66 962 -227 418 47 232 -489 216 24 622 16 834
65 1 328 1 1 329
-131 1 225 5 1 230
12 1 698 5 1 703
993 764 057 821
358 615 114 729
981 241 124 365
2000|
1999|
2 305 123 12 -61 -182
528 848 204 114 929
2 331 352 -1 -147 -47
163 458 432 694 416
24 12 2 235 29 2 264
823 765 125 694 819
-181 2 305 41 2 347
551 528 549 077
Financial report
Majority shareholders' equity at 1 Jan. Group profit for the year Minorities' share of profit Allocated to dividends Effect of purchase/sale of own shares Preferred issue Demerger of Nye SE Labels Minorities’ share of demerged values Allocation of shares in Nye SE Labels on demerger Change due to previous years consolidation Currency translation differences Majority shareholders' equity at 31 Dec. Minorities' equity at 31 Dec. *) Shareholders' equity at 31 Dec.
2003|
Directors’ report
Figures in NOK 1.000
*) The minorities' equity at 31 Dec.2002 was solely related to Fellesfrost. During the year the rest of the shares in Fellesfrost is bought. As a consequence of the acquisition of Nopal 1 June 2003 the Group acquired 60% of Helsetorget AS.
Dividends payable are reduced with dividends to own shares per 18 March 2004.
Adressess
The Board of Directors proposes a dividend of NOK 1.10 per share for year 2003.
The company has not bought own shares in the period from 2 Jan. to 18 March 2004.
RIEBER & SØN -
ANNUAL REPORT 2003
55
Note 15 |
continued
Dividend 2003|
Figures in NOK 1.000
Dividend all shares at 31 Dec. 2003 Effect on dividends of own shares per 18 March 2004 Allocated dividends in financial statement for 2003
-87 533 4 489 -83 044
Note 16 | Share capital and paid-in equity 2003|
Figures in NOK 1.000
Number of shares Share capital (number of shares at face value NOK 10) Value of own shares at face value Paid-in equity
79 575 795 -40 754
2002|
2001|
740 79 575 740 79 575 740 757 795 757 795 757 809 -29 137 -28 326 949 766 620 767 431
An overview of the company's 20 largest shareholders appears on page 79. The CEO has an option to buy 100 000 Rieber & Søn shares yearly from 2002 to
2006, adding up to 500 000 shares. Please refer to note 7 for further information.
Development of share capital / RISK information No. of shares (x 1.000)
Year
1987 1989 1989 1990 1991 1992 1993 1994 1994 1995 1996 1997 1998 1999 2000 2001 2001 2001 2001 2001 2002 2003
56
A-shares B-shares 3 324 0 3 324 0 9 973 0 9 973 1 994 10 970 2 194 12 068 2 413 13 274 2 654 13 274 2 654 13 274 13 274 13 274 13 274 13 274 13 274 13 274 13 643 39 824 40 930 39 824 40 930 39 824 40 930 80 755 85 576 85 576 79 79 79 79
576 576 576 576
Nom. value
25 30 10 10 10 10 10 30 30 30 30 30 10 10 10 10 10 10 10 10 10 10
Type of change
Bonus Split Bonus Bonus Bonus Bonus Bonus Bonus
Issue ratio
share issue share share share share share share
issue (B-shares) issue issue issue issue issue (B-shares)
Issue for employees (B-shares) Split
3:1 1:5 1:10 1:10 1:10 2:3
3:1
Merging A- and B-shares Issue (23 March 01) Demerger (SE Labels) and following bonus issue (13 July 2001) Cancellation of own shares (13 Aug. 01)
The columns for adjustment factor, RISK per share and RISK recalculated for adjustment factor show the change for the year.
RISK-amount for accounting year 2003 will be set by the Directorate of Taxes in 2005, but has been provisionally calculated to NOK 1.53 per share.
When estimating the taxable gain based on sold shares, accumulated RISK from and including the year of purchase, to and including the year prior to sales, must be added to the cost price. With respect to the adjustment factor, the accumulated RISK-amount up to and including the year prior to the adjustment factor year, must be multiplied by the adjustment factor.
Rieber & Søn ASA terminated own shares 13 Aug. 2001. According to the view of the company RISK related to these shares should be distributed to the rest of the shareholders. This implies that all shareholders in Rieber & Søn ASA at 13 Aug. 2001 have to add NOK 0.28 in RISK per share. The taxation authorities disagree with the opinion of Rieber & Søn ASA, and their view is that
RIEBER & SØN -
ANNUAL REPORT 2003
Share capital NOK x 1.000
83 99 99 119 131 144 159 477 796 796 796 807 807 807 807 807 855 855
113 736 736 683 651 817 298 895 491 491 491 555 555 555 555 555 757 757
795 795 795 795
757 757 757 757
Adjust. factor
0.90909 0.60000
0.33333
RISK recalcuRISK lated for per share adjust.factor
11.25 11.62
1.75 1.99
8.00 5.89 8.90 3.03 0.97 1.50 6.38
2.28 1.68 2.54 0.86 0.83 1.28 5.45
3.24 -3.41
3.24 -3.41
0.85485
the RISK by termination of own shares shall be discharged. This decision has been appealed to the tax appeal board by Rieber & Søn ASA. The RISK-amount which is a result of the termination of own shares, is not included in the figures above and will not appear in the RISK-register of the Directorate of Taxes. Each shareholder must by themselves, by later realization of shares in Rieber & Søn ASA, take this RISK into consideration.
Overview
Note 16 |
continued
Directors and Group management at 31 Dec. 2003. The tabular also includes shares owned by a live-in, spouse and children younger than
18 years, as well as shares owned by companies in which the individual parties have a controlling interest.
Number of shares
2 411 960 496
-
116 564 509 081 1 760 626 528 2 022 219 -
-
20 976 10 137 8 259 908 1 506 1 458
200 000 -
-
-
Directors’ report
Group management President and CEO Asbjørn Reinkind Chief Financial Officer Tor Lund Group Director Stein Klakegg Director CEE Morten Vike Director King Oscar Geir-Arne Åsnes Director for strategic development Bjørnar Gulliksen
-
Environment and food safety
Board of Directors Leiv L. Nergaard, Oslo (Chairman) *) Bjarne Rieber, Bergen (Vice-chairman) **) Connie Astrup-Larsen, Århus, Denmark Adler Ekanger, Indre Arna Torgny Eriksson, Stockholm, Sweden Terje H. Sparbo, Lillestrøm Tore Nielsen, Os Fritz T. Rieber, Bergen **) Barbara Thoralfsson, Oslo
200 3 255 871 143 1 801 180
Strategy
Corporate Assembly, representatives elected by the employees: Magnus Andreassen, Ytre Arna Roar Sejersted, Fyllingsdalen Magnar Svellingen, Laksevåg Ingunn Soltvedt, Garnes Kristine Aasheim, Bergen
Options
Challenges in the market
Corporate Assembly, representatives elected by the shareholders: Didrik Munch, Bergen (Chairman) *) Gunn Wærsted, Oslo (Vice-chairman) *) Herman Friele jr., Bergen Einar Jørgen Greve, Oslo Paal Chr. Mowinckel, Bergen Anne Kristine Neumann Lending, Bergen Marianne Lie, Oslo Tore Lindholt, Oslo Jan Reinås, Lysaker Ulf Johan Rieber, Surrey, UK *), **)
Presentations of operations
The tabular below shows the number of shares and share options held, and/or represented, by members of the Corporate Assembly, Board of
*) Nominating committee for the Corporate Assembly and the Board of Directors. **) Bjarne Rieber, Fritz Rieber, Ulf Johan Rieber and Marianne Rieber (deputy member of the Corporate Assembly) own 100% of Atlantis Vest, and Atlantis Vest owned 25 779 670 shares at 31 Dec. 2003. Please refer to page 79 for an overview of the company's 20 largest shareholders. In addition, Atlantis Vest has entered into a total return swap agreement with JP Morgan Chase Bank, and this implies economical exposure for 5 777 586 shares.
Financial report
Note 17 | Own shares At 31. Dec. 2003 the Group owned 4 080 871 of its own shares, bought at an average price of NOK 47.49 (FIFO). The purchase of own shares is considered advantageous for the shareholders.
The purchase and sale of own shares in 2003 reduced the equity of the Group by NOK 57.2m.
RIEBER & SØN -
Adressess
In 2003 the Group bought 1 241 383 of its own shares in the market at an average price of NOK 50.00 (incl. charges). A total of 74 205 own shares were sold to the Group's employees at a market price of NOK 49.07 per share.
ANNUAL REPORT 2003
57
Note 18 | Other long-term debt 2003|
Figures in NOK 1.000
Interest-bearing debt at 1 Jan. New loans Repayment of loans Ordinary instalments Interest-bearing debt at 31 Dec. Other interest-free long-term debt at 31 Dec. Total long-term debt at 31 Dec.
The acquisition of Nopal at 1 June 2003 implied an increase of NOK 125.1m in long-term debt to financial institutions. Of this NOK 107.2m was repaid after the acquisition.
754 132 -107 -4 775 4 779
980 352 167 719 446 522 968
2002|
2001|
747 016 9 184 -1 220 754 980 3 037 758 017
748 461 1 016 -1 821 -640 747 016 3 101 750 117
Average rate of interest in 2003 was 5.15%. Interest amounts to NOK 39.9m.
Repayment structure on interest-bearing debt Year Instalments
2004 712 016*)
2005 4 687
2006 2 813
Total 2007 After 2007 2 908 53 022 775 446
*) One single loan, amounting to NOK 700m, is due in Dec. 2004. The process of re-financing this loan has started, and offers on long-term loans of equal or higher amounts have been received from financial institutions.
Note 19 | Mortgages The Rieber & Søn Group has given plegde to its main bankers regarding limited mortgaging. This pledge limits the Group's mortgaging of its
Norwegian and Swedish property and fixed assets to 60% of the aggregate loan value.
Note 20 | Guarantee liabilities 2003|
2002|
2001|
466 729 142 009
534 873 287 052
444 928 322 419
Figures in NOK 1.000
Nominal value guarantee liabilities Actual guarantee liabilities
Note 21 | Bank credit facilities and liquid assets The Group’s committed credit facilities at 31 Dec. 2003 amounted to NOK 874.4m, of which NOK 100.0m was drawn. Overdrafts in the Group's cash pool in the different banks are off-set against deposits in the same bank. This method results in net overdraft of NOK 80.1m.
58
RIEBER & SØN -
Committed lines related to cash pool amount to NOK 281.9m, while the remaining balance is credit lines renewable annually. The companies in the Rieber & Søn Group are jointly and severally liable for the Group's liabilities.
ANNUAL REPORT 2003
The Group's average balance of liquid assets in 2003 was NOK 583.0m.
Overview
Note 22 | Taxes Figures in NOK 1.000
Division of taxes: Norway Abroad Total
Taxes payable have been adjusted for the effect of sales of own shares: Tax effect from gain/loss on sale of own shares Expected tax effect for the year
and the amount is therefore entered as negative taxes payable in the balance sheet. If the view of the tax authorities is going to be the final result, the taxes in the profit and loss account will increase with the above mentioned amount. At the end of 2002 Rieber & Søn ASA
132 092 -29 172 102 920
127 169 -45 187 81 982
70 010 29 952 99 962
70 505 32 415 102 920
70 218 11 764 81 982
91 789 -25 233 66 556
90 619 -16 761 73 858
107 389 -31 358 76 031
-1 218 -1 218
155 155
-282 -282
had a disputed tax claim of about NOK 35m. By the appeal, Rieber & Søn ASA was given judgement in favour of the company’s view. About NOK 8m of this amount was not repaid before March 2004 and consequently this was also entered as negative taxes payable in the balance sheet.
277 433
293 011
227 076
Expected income tax at nominal rate of tax:
27.4 %
28.1 %
27.7 %
Tax effect of items affecting actual rate of tax: Permanent differences *) Amortiasation of non-allowable goodwill Actual tax charge Actual rate of tax
76 017 15 148 8 797 99 962 36.0%
82 336 11 189 9 395 102 920 35.1%
62 829 9 031 10 122 81 982 36.1 %
Environment and food safety
Reconciliation of nominal and actual rate of tax: Profit before tax
120 589 -20 627 99 962
Strategy
By the tax assessment of Rieber & Søn ASA for the fiscal year 2002 the tax authorities disagreed with some of the company’s evaluations. This has caused an increase of about NOK 20m in assessed taxes which were paid in 2003. Rieber & Søn ASA disagree with the judgement of the tax authorities,
2001|
Challenges in the market
Taxes payable Taxes payable in profit and loss statement Prepaid taxes Taxes payable at 31 Dec.
2002|
Presentations of operations
Taxes in the profit and loss account: Taxes payable Change in deferred taxes Taxes in the profit and loss account
2003|
Directors’ report
*) Permanent differences consist of non allowable costs / taxable income and deferred tax assets which according to the Accounting Act do not qualify as an asset in the balance sheet.
44 741 -4 597 -18 460 58 500 -12 144 -8 406 59 634 27.4 %
44 116 -7 128 -12 395 67 113 -10 622 -1 444 79 640 28.1 %
45 -8 -6 93 -14
530 989 400 014 142 686 109 699 27.7 %
Financial report
Specification of tax effect of temporary differences and tax loss to be carried forward: Fixed assets Current assets Net pension obligations Gains/losses on sales of fixed assets Tax loss to be carried forward Other provisions Total deferred taxes in balance sheet Average rate of tax for deferred taxes: Expiration of tax loss carried forward (tax effect): Figures in NOK 1.000
2004|
2005|
2006|
2008|
2009|
2010|
Amount carried forward
-1 283
-44
-9 164
-1 364
-4
-70
2012| Infinite| -9
Total|
-206 -12 144
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
59
Note 23 | Financial instruments The Rieber & Søn Group uses various financial instruments to manage its financial exposure. Foreign currency exposure Development in foreign exchange rates represents both a direct and an
indirect economic risk for the company. Foreign currency income and expenses denominated in foreign currencies are hedged using hedging instruments such as forward foreign exchange transactions and options. As at 31 Dec. 2003 the Group had entered into
Sold
Figures in NOK 1.000
the following net forward foreign exchange contracts, foreign exchange swap contracts and foreign exchange option contracts for 2003, 2004 and 2005:
Average exchange rates
Bought
Unrealized loss/gain*)
Currency swaps and currency futures: USD 12 800 NOK 58 884 NOK 31 164 CZK 69 600 CZK 300 000 USD 2 400 NOK 24 489 PLN 8 000 NOK 33 780 JPY 75 000 SEK 21 000 SEK 5 000 EUR 907 GBP 600 AUD 3 600 DKK 6 583 CZK 96 420 CZK 19 758 EUR 3 900
NOK EUR USD PLN NOK PLN PLN NOK DKK NOK DKK NOK GBP NOK NOK SEK USD EUR NOK
109 7 4 10 78 9 13 14 30 5 17 4 7 17 8 3 32
842 150 550 220 041 756 600 180 000 215 432 558 657 093 615 000 600 600 462
8.581 8.235 6.849 0.147 26.014 4.065 180.064 177.245 112.600 6.953 1.205 91.150 0.724 11.821 4.893 1.215 26.783 32.930 8.323
23 117 1 368 -700 -230 41 1 125 -513 -18 132 434 260 -74 18 -65 -159 -33 -924 -22 -401
The Rieber & Søn Group had per 31 Dec. 2003 entered into the following FRA - contract: Unrealized Bought NOK NOK
Interest
400 000 300 000
3.39 % 3.29 %
Start
End
loss/gain*)
30.06.04 30.06.04
30.12.04 30.12.04
-1 893 -1 163
*) Unrealized loss/gain is not charged to the profit and loss account.
Interest rate exposure The Rieber & Søn Group has hedged the interest rate by buying FRAcontracts for the above-mentioned loan of NOK 700m for all of 2004. The contract for the period from January to June 2004 for the same
60
RIEBER & SØN -
loan was settled 30 Dec. 2003 and implied a loss of NOK 2.7m. This loss will be charged to the profit and loss account linearly over the term of the FRA-contract in 2004. The average interest rate for all of 2004 will be 3.22%
ANNUAL REPORT 2003
Information For further information we refer to the article on the Group’s interest rate and foreign exchange strategy on page 77.
for Rieber & Søn ASA
Figures in NOK 1 000
5
2003|
1 756 902 5 359 1 762 261
-643 -2 6,8 -445 10 -62 7,9 -356 -1 510 251
13
2002|
1 569 265 11 854 1 581 119
839 -561 739 3 970 -418 146 -55 006 -306 701 -1 338 560 242
2 358 36 108 8 000 572 47 039
2001|
1 469 746 7 877 1 477 623
490 -539 371 -4 473 -405 637 -37 239 -292 467 -1 280 652 196
719 879 907 433 939 877 747
15 70 6 19 112
506 115 893 959 473 813 346 160 059
17
-40 -59 -99 199
370 067 437 162
-62 562 -281 -62 843 306 201
-68 -3 -72 237
Taxes Profit for the year
20
-13 175 185 987
-68 821 237 380
-58 024 179 036
83 044 102 943 185 987
527 945 -290 565 237 380
65 331 113 705 179 036
Provision for dividends Other equity Total allocations
Environment and food safety
Interest expenses Other financial expenses Total financial expenses Profit before taxes
Strategy
6 608 75 195 44 573 15 126 391
Challenges in the market
Operating expenses Cost of sales Change in inventories of work in progress and finished goods Payroll costs Depreciation Other operating expenses Total operating expenses Operating profit
Note|
Presentations of operations
Operating income Net sales Other operating income Total operating income
Financial income and financial expenses Interest from subsidiaries Other interest income Dividends from subsidiaries Other financial income Total financial income
Overview
Profit and Loss account 2003
Directors’ report Financial report Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
61
Balance sheet at 31 Dec.2003
for Rieber & Søn ASA
Note|
Figures in NOK 1 000
2003|
2002|
2001|
ASSETS CAPITAL ASSETS Intangible fixed assets Trademarks Goodwill Total intangible fixed assets Tangible fixed assets Land, buildings and other real estate Machinery and equipment Operating assets, fittings, tools, office equipment etc. Total tangible fixed assets Financial assets Shares in subsidiaries Loans to group companies Shares and investments Pension plan assets Other receivables Total financial assets Total capital assets CURRENT ASSETS Stocks
RIEBER & SØN -
18 716 18 716
21 389 21 389
340 307 91 738
005 484 073 561
200 206 46 453
580 389 430 398
191 210 14 416
017 463 717 197
2 13 3 8 14
857 93 6 23 7 988 1 905
003 763 404 353 606 130 433
798 104 5 9 11 928 1 400
231 640 413 018 117 420 534
853 233 5 15 63 1 171 1 608
427 613 627 074 655 396 982
13 21
ANNUAL REPORT 2003
73 953 104 789 178 742
10 10 10
12
Accounts receivable Other receivables Total receivables Cash and bank deposits Total current assets TOTAL ASSETS
62
10 10,11
236 076 228 12 241 252 730 2 635
730 692 422 900 398 830
202 103 153 5 158 1 226 1 586 2 987
123 394 517 298 918 452
185 523 144 5 150 962 1 298 2 907
979 390 369 608 500 482
Overview
Balance sheet at 31 Dec.2003
for Rieber & Søn ASA
Figures in NOK 1 000
Note|
2003|
2002|
2001|
Presentations of operations
LIABILITIES AND SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY Paid-in capital Share capital Own shares (nominal value) Total paid-in capital
LIABILITIES Provisions for obligations Pension obligations Deferred taxes Total provisions for obligations
795 757 -28 326 767 431
4
473 578 473 578 1 228 527
416 176 416 176 1 182 796
709 354 709 354 1 476 786
8 20
96 357 28 594 124 951
53 064 34 037 87 102
37 772 66 577 104 349
17 17
775 254 870 776 124
754 849 1 062 755 911
746 952 1 254 748 206
21 13 20 4
65 12 101 50 30 83 163 506 1 407 2 635
252 088 840 189 761 044 053 228 303 830
157 12 80 59 28 527 95 961 1 804 2 987
336 299 256 249 929 945 630 644 656 452
128 105 60 72 20 65 124 578 1 430 2 907
861 132 088 866 874 331 989 140 696 482
Environment and food safety
Current liabilities Debt to financial institutions Loans from group companies Accounts payable Taxes payable Public debt Dividends Other short-term liabilities Total current liabilities Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
795 757 -29 137 766 621
Strategy
Other long-term liabilities Long-term debt Other long-term liabilities Total other long-term liabilities
795 757 -40 809 754 949
Challenges in the market
Retained earnings Other equity Total retained earnings Total shareholders' equity
4,16 4,15
Directors’ report Financial report Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
63
Cash Flow Statement 2003
for Rieber & Søn ASA
Note|
Figures in NOK 1 000
Cash flow from operations Profit before taxes Taxes paid Depreciation, incl. gains/losses on disposals of fixed assets Pension costs accrued, not paid Gain(-)/loss (+) on sale of shares Change in stocks, accounts receivable and accounts payable Change in other accruals Net cash flow from operations Cash flow from investment activities Fixed assets sold Fixed assets bought Sale of shares and investments in other companies Investments in other companies Change in purchase/sale of other investments Net cash flow from investment activities Cash flow from financing activities Repayment of long-term interest-free debt New interest-bearing debt (short and long-term) Repayment of interest-bearing debt (short and long-term) Change in inter-company receivables/liabilities Inflow of equity (sale of own shares and new issue) Outflow of equity (purchase of own shares) Dividends paid Net cash flow from financing activities Net change in liquid assets
199 -86 62 22 -4 -2 66 256
10 10
15 15
306 -114 55 21
2001|
237 -127 37 1 -13 -19 -106 8
059 904 433 971 095 640 982 842
818 -187 046 -411 114 6 795 -590 547
2 566 -92 732 55 324 60 755 25 913
38 -88 58 -9 -21 -22
270 256 294 612 210 514
919 932 472 641 853 945 697 398
-192 37 528 -1 157 36 140 8 039 -11 307 -65 331 3 720 263 690
-192 117 223 -227 040 134 129 50 316 -230 782 -62 745 -219 091 -232 763
1 226 298 -973 398 252 900
962 608 263 690 1 226 298
1 195 371 -232 763 962 608
91 -152 6 3 -60 -527 -639 -973
162 980 146 865 270 181 104 845
2002|
201 977 637 347 81 -4 995 -29 237 234 057
10
Liquid assets at 1 Jan. Net change in liquid assets Liquid assets at 31 Dec.
Bergen,
2003|
31 December 2003
18 March 2004
Leiv L. Nergaard
Bjarne Rieber
Chairman
Vice-Chairman
Connie Astrup-Larsen
Fritz T. Rieber
Barbara Thoralfsson
Torgny Eriksson
Adler Ekanger
Tore Nielsen
Terje H. Sparbo
Asbjørn Reinkind President and CEO
64
RIEBER & SØN -
ANNUAL REPORT 2003
Overview
Note 1 | Accounting principles
Presentations of operations
Please refer to the statement of accounting principles in note 1 for consolidated accounts.
Note 2 | Shareholdings in subsidiaries
Country
% % % % % % % % % % % % % % % % % % % % % % % % % %
2001
9 342 98 519 6 300 6 572 38 500 342 100 4 300 4 900 121 4 4 098 22 531 94 50 753 2 223 286 819 112 050 18 691 190 644 100 857 003
9 342 100 98 519 1 500 342 100 100 121 4 4 098 22 531 94 50 753 2 223 286 819 112 050 18 691 100 190 643 100 798 231
9 342 137 442 149 377 100 98 519 1 500 342 100 100 121 4 4 098 67 569 2 789 58 216 2 223 112 050 18 691 100 190 643 100 853 427
Directors’ report
and Nopal AS were acquired 1 June 2003. When acquiring Nopal AS, the most essential part of the business was demerged. Norway Foods AS took over the demerged business. Then the assets and liabilities were sold from
2002
Environment and food safety
The companies Big Fish S.A. and Delecta S.A. merged with effect from February 2002. The new name on the merged company is Rieber Foods Polska S.A. Eurospice AB, Grillfagmannen AS, Nature Pharma AS
100 0 0 0 100 100 100 100 100 100 100 100 0 100 49 100 100 100 100 100 74 100 100 0 100 100
Balance sheet value
2003
Strategy
Alamar AS Norway Big Fish S.A. Poland Delecta S.A. Poland Denja AS Norway Denja AS Denmark Eurospice AB Sweden Fellesfrost AS Norway Grillfagmannen AS Norway King Oscar Inc. USA King Oscar Sardiner AS Norway Nature Pharma AS Norway Nopal AS Norway Norway Foods AS Norway Norway Foods (Europe) b.v. Belgium Przedsiebiorstwo Magazynowania Ryb.Sp z o.o. Poland Ren Jord AS Denmark Rieber & Son AB Sweden Rieber & Son GmbH Germany Rieber & Son Oy Finland Rieber & Son Plc. United Kingdom Rieber Foods Polska S.A. Poland Rieber & Søn A/S Denmark Storaneset 12 AS Norway Toro AS Norway Vitana a.s. Czech Rep. Vitana AS Norway Total balance sheet value of shareholdings in subsidiaries
Holding 31 Dec. 2003
Challenges in the market
Figures in NOK 1 000
Norway Foods AS to Rieber & Søn ASA, with subsequent liquidation of Norway Foods AS. For companies which are sold or terminated during the year, the holding of share is set to 0% at 31 Dec. 2003.
Financial report
Note 3 | Other shareholdings / investments Country
Holding
Sarsia Innovation AS Norway Other shareholdings/investments with less than 10% holding Balance sheet value of other shareholdings/investments
6.1 %
Figures in NOK 1 000
2003|
2002|
2001|
4 700 1 704 6 404
3 700 1 713 5 413
3 700 1 927 5 627
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
65
Note 4 | Equity
Figures in NOK 1 000
Equity at 1 Jan. 2003 Profit for the year Allocated to dividends Effect of purchase/sale of own shares Equity at 31 Dec. 2003
The Board of Directors proposes a dividend of NOK 1.10 per share for
Share capital
Own shares
795 757
-29 137
795 757
-11 672 -40 809
year 2003. Dividends payable are reduced with
Other equity
416 185 -83 -45 473
176 987 044 540 578
Total
1 182 185 -83 -57 1 228
796 987 044 212 527
dividends to own shares per 18 March 2004. Dividend 2003|
Figures in NOK 1 000
Dividend all shares at 31 Dec. 2003 Effect on dividends of own shares per 18 March 2004 Allocated dividends in financial statement for 2003
-87 533 4 489 -83 044
Note 5 | Net sales 2003|
Figures in NOK 1 000
Gross sales Sales deductions Net sales
2 197 272 -440 370 1 756 902
2002|
2001|
1 948 262 -378 996 1 569 265
1 792 586 -322 839 1 469 746
Sales deductions include outgoing freights, insurance, discounts, claims and customer bonuses/commisions.
Net sales, geographical breakdown Nordic region Central- and Eastern-Europe Other areas Net sales
1 551 10 195 1 756
114 493 295 902
1 362 13 193 1 569
507 594 164 265
1 284 8 177 1 469
073 446 227 746
Net sales, split by sales channel Consumer Food service Industry Net sales
1 458 217 81 1 756
275 038 589 902
1 290 203 75 1 569
091 957 218 265
1 195 197 76 1 469
739 713 294 746
Note 6 | Salaries, number of employees, remuneration, loans to employees etc. 2003|
Figures in NOK 1 000
Salaries National insurance contributions Pension costs (incl. payroll tax) Other benefits Total payroll costs
339 48 38 19 445
Loans to employees Average number of employees:
Further details of salaries etc. to executives, Board of Directors and
66
RIEBER & SØN -
093 926 593 358 970
4 408 1 089
Corporate Assembly are shown in note 7 for consolidated accounts.
ANNUAL REPORT 2003
2002| 309 44 43 19 418
841 830 946 855 473
3 304 1 081
2001| 304 49 37 14 405
600 397 269 640 907
6 098 1 132
Overview
Note 7 | Individual transactions Norway Foods AS to Rieber & Søn ASA, with subsequent liquidation of Norway Foods AS. Nopal is fully integrated into remaining business.
Presentations of operations
When acquiring Nopal 1 June 2003 the most essential part of the business was demerged. Norway Foods AS took over the demerged business. Then the assets and liabilities were sold from
Note 8 | Pension benefit costs, obligations and plan assets Challenges in the market
Further details of the employee pension scheme are shown in note 8 for consolidated accounts. 2003|
Figures in NOK 1 000
2001|
563 339 018 709 593
30 34 -33 12 43
977 309 475 135 946
34 30 -33 6 37
197 404 571 239 269
Financial status of pension plans: Accumulated benefit obligations incl. payroll tax Effect of projected future salary increases Projected benefit obligations Plan assets at market value
-663 -87 -750 537
018 981 999 278
-615 -67 -683 537
261 909 171 660
-540 -56 -596 502
893 045 938 836
Plan assets bigger than / less than projected benefit obligations Unrecognised net actuarial gain and loss Unrecognised part of pension alteration Net pension plan assets/pension liabilities
-213 102 38 -73
721 143 573 004
-145 59 42 -44
511 429 037 046
-94 42 28 -22
102 759 645 698
Balance sheet value of overfunded schemes Balance sheet value of underfunded schemes Net financial status of pension schemes
23 353 -96 357 -73 004
9 018 -53 064 -44 046
Environment and food safety
26 37 -33 7 38
Strategy
Defined benefit plans: Present value of benefits earned during the year incl. payroll tax Interest cost on benefit obligations Annual return on pension plan assets Net amortisations and deferrals Net pension cost for the period
2002|
15 074 -37 772 -22 698
Economic assumptions: Discount rate Return on assets Salary increase Pension increase Inflation/increase in social security contribution ceiling (G) Turnover
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
Financial report
Estimated rate of participation in CPA: 10% at the age of 62 and further 75 % at the age of 64.
5.5% 6.5% 3.0% 2.5% 2.5% 2.0%
Directors’ report
This year's figures include Nopal from 1 Oct. 2003. Nopal is not included in the comparative figures for 2002 and 2001.
The actuarial calculations were made in 2003 based on death rate table K63 and disability rate table IR73.
Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
67
Note 9 | Other operating costs and expenses 2003|
Figures in NOK 1 000
Production costs Sales and marketing costs Bad debts Other operating expenses *) Total other operating costs and expenses
67 915 205 641 -350 82 799 356 006
2002| 70 198 180 931 304 54 806 306 239
2001| 67 416 163 699 380 61 444 292 939
*) Includes auditor's fee and other fees, research and developement, leasing and rent of administration buildings, together with other operating costs.
Transactions with related parties Please refer to note 9 to the consolidated accounts.
Research and development costs Please refer to note 9 to the consolidated accounts.
Auditor's fee Please refer to note 9 to the consolidated accounts.
Note 10 | Intangible and fixed assets 2003|
Figures in NOK 1 000
Depreciation Write down Net gain on disposals Depreciation in the profit and loss account
62 351
2001|
-205 62 146
52 071 4 000 -435 55 637
-15 162 37 433
Trademarks
Goodwill
Total
Cost at 1 Jan. 2003 Added through acquisitions Cost at 31 Dec. 2003
75 087 75 087
49 941 92 246 142 188
49 941 167 334 217 275
Acc. depreciation at 1 Jan. 2003 Ordinary depreciation Acc. depreciation at 31 Dec. 2003 Balance sheet value at 31 Dec. 2003
1 134 1 134 73 953
31 6 37 104
31 7 38 178
Intangible assets:
Economic lifetime Depreciation method
Fixed assets:
225 308 533 742
Acc. depreciation at 1 Jan. 2003 Disposals 2003 Ordinary depreciation Acc. depreciation at 31 Dec. 2003 Balance sheet value at 31 Dec. 2003 Annual rent, assets not included in balance sheet: Economic lifetime Depreciation method
Operating assets,
other real property
Machinery and plant
fittings etc.
907 360 280 794 847 493
494 127
90 917
-42 16 057
309 18 68 76 -1 471
76 66 -13 623
317 660 802 302
16 057
135 -1 12 147 323
876 277 946 545 947
288 -6 34 315 307
Land
Cost at 1 Jan. 2003 Accumulated revaluation prior to 1 Jan. 2003 Added through acquisitions Additions 2003 Disposals 2003 Cost at 31 Dec. 2003
RIEBER & SØN -
225 174 399 789
52 595
10-20 years 10-20 years Linear Linear
Buildings and
68
2002|
7 099 1 500 7 500
15 521
1 676 50 964 -265 143 292
902 19 153 194 -15 1 254
050 860 773 418 957 144
148 439 108 818 484
44 488 -256 7 988 52 220 91 073
468 -7 55 515 738
512 972 043 583 561
8 679
3 861
10 - 40 years 5 - 20 years 3 - 10 years Linear Linear Linear
ANNUAL REPORT 2003
Total
28 061
Overview
Note 11 | Goodwill on acquisition Figures in NOK 1 000
Year of acquisition
Nopal Smaks/Denja Others Total
Goodwill is amortised over the expected useful life, estimated by calculations made at the time of the
2003 1996
acquisition. The value of goodwill is assessed regularly to consider any factors or events since the acquisition
Original goodwill
92 25 23 142
246 962 979 188
Book value at 31 Dec. 2003
91 5 8 104
074 192 523 789
Depreciation period
Presentations of operations
Activity:
20 years 10 years 10 years
which require the book value of goodwill to be written down.
Challenges in the market
Note 12 | Stocks 2003|
Figures in NOK 1 000
Based on total stocks at 31 Dec. 2003, NOK 230m is valued at initial
103 20 111 236
331 992 752 076
89 14 98 202
271 598 234 103
2001| 88 10 86 185
534 489 499 523
Strategy
Raw materials and packaging Work-in-progress and semi-manufactured goods Finished goods Stocks
2002|
cost, while NOK 6m is valued at actual value.
Environment and food safety
Note 13 | Inter-Group balances 2003|
Figures in NOK 1 000
9 423 -48 063 -38 640
Loans to Group companies Loans from Group companies Total long-term balances Net inter-company balances
93 -12 81 43
the account "Interest from subsidiaries", interest income amounts to
104 -12 92 94
640 299 340 240
4 080 -2 619 1 460 233 -105 128 129
613 132 481 941
NOK 2.9m and interest expenses amounts to NOK 0.6m.
Financial report
Interest to/from Group companies are presented as net financial income in
763 088 675 035
11 382 -9 482 1 900
2001|
Directors’ report
Receivables from Group companies Debt to Group companies Total short-term balances incl. in other current receivables
2002|
Note 14 | Other receivables 2003|
Receivables due more than 1 year after year-end
7 606
RIEBER & SØN -
2002| 11 117
2001| 63 655
ANNUAL REPORT 2003
Adressess
Figures in NOK 1 000
69
Note 15 | Own shares Please refer to note 17 for consolidated accounts.
Note 16 | Share capital Please refer to note 16 for consolidated accounts.
Note 17 | Long-term debt 2003|
Figures in NOK 1 000
Interest-bearing debt at 1 Jan. New loans Repayment of loans Ordinary instalments Interest-bearing debt at 31 Dec. Other long-term liabilities at 31 Dec. Total other long-term debt at 31 Dec.
The acquisition of Nopal at 1 June 2003 implied an increase of NOK 125.1m in long-term debt to financial
754 132 -107 -4 775
849 352 167 780 254 870 776 124
institutions. Of this NOK 107.2m was repaid after the acquisition. Average rate of interest in year 2003 was
2002|
2001|
746 952 9 053
746 576 1 016
-1 754 1 755
-640 746 952 1 254 748 206
157 849 062 911
5.15%. Interest amounts to NOK 37.5m and is included as financial expenses in the account “Interest expenses”.
Repayment structure on interest-bearing debt Year Instalments
2004 712 016*)
2005 4 687
2006 2 813
Total 2007 After 2007 2 908 52 829 775 254
*) One single loan, amounting to NOK 700m, is due in Dec. 2004. The process of re-financing this loan has started, and offers on long-term loans of equal or higher amounts have been received from financial institutions.
Note 18 | Mortgages The Rieber & Søn Group has given plegde to its main bankers regarding limited mortgaging. This pledge limits
the Group's mortgaging of its Norwegian and Swedish property and fixed assets to 60% of the aggregate
loan value. The debt of the company per 31.Dec. 2003 is not secured by mortgaging of assets.
Note 19 | Guarantee liabilities 2003|
Figures in NOK 1 000
Nominal value guarantee liabilities Actual guarantee liabilities
70
RIEBER & SØN -
ANNUAL REPORT 2003
466 729 142 009
2002| 534 873 287 052
2001| 444 928 322 419
Overview
Note 20 | Taxes 2003|
Figures in NOK 1 000
18 459 -5 443 160 13 175
In the tax assessment of Rieber & Søn ASA for the fiscal year 2002 the tax authorities disagreed with some of the company’s evaluations. This has caused an increase of about NOK 20m in assessed taxes which were paid in 2003. Rieber & Søn ASA disagree with the judgement of the tax authorities,
-10 61 -1 50
and the amount is therefore entered as negative taxes payable in the balance sheet. If the view of the tax authorities is going to be the final result, the taxes in the profit and loss account will increase with the above mentioned amount. At the end of 2002 Rieber & Søn ASA
148 763 639 024
59 094
73 148
155 59 249
-282 72 866
had a disputed tax claim of about NOK 35m. By the appeal, Rieber & Søn ASA was given judgement in favour of the company’s view. About NOK 8m of this amount was not repaid before March 2004 and consequently this was also entered as negative taxes payable in the balance sheet.
199 162 28 %
306 201 28 %
237 059 28 %
55 765
85 736
66 377 -12 153
-44 747 4 610 -2 244 -210 13 175 6.6 %
4 479 -12 485 -8 909 68 821 22.5 %
5 800 -1 947 -53 58 024 24.5 %
Environment and food safety
Expected income tax at nominal rate of 28% Write off/disposal of shares in SE Labels ASA Effect of liquidation of subsidiary *) Other non-allowable expenses Dividends without taxation Other non-taxable income **) Actual taxes Actual rate of tax
73 -36 21 58
Strategy
Reconciliation of nominal and actual rate of tax: Profit before taxes Nominal rate of tax
055 462 218 189
437 540 077 821
Challenges in the market
Taxes payable Gross taxes payable Taxes payable transferred from subsidiary which was liquidated *) Tax effect of sale of own shares Taxes payable as at 31 Dec.
102 -32 -1 68
2001|
Presentations of operations
Taxes in the profit and loss account: Taxes payable Change in deferred taxes Difference between calculated and assessed taxes in previous years Taxes in the profit and loss account
2002|
*) In 2003 Rieber & Søn ASA bought all assets and liabilities from the subsidiary Norway Foods AS which was liquidated after the transaction. Due to the RISK-regulations, Rieber & Søn ASA got a considerable tax loss. Corresponding to this, Norway Foods AS had a taxable gain. **) NOK 7 768t of other non-taxable income in 2002, is the tax effect of the temporary differences per 1 Jan. 2002 that was not included into the accounts of 2001.
-3 159 3 487 -18 384 52 727 -6 077 28 594 28 %
-12 526 2 873 -12 333 66 605 -10 581 34 037 28 %
Directors’ report
Specification of tax effect of temporary timing differences and tax loss carried forward: Fixed assets Current assets Net pension obligations Profit and loss account Other provisions Total deferred tax in balance sheet Average tax rate for deferred tax:
-7 314 3 619 -6 355 92 379 -15 752 66 577 28 %
Financial report Adressess
RIEBER & SØN -
ANNUAL REPORT 2003
71
Note 21 | Bank credit facilities and liquid assets Rieber & Søn ASA`s committed credit facilities on 31 Dec. 2003 amounted to NOK 281.9m, of which NOK 8.7 m. were drawn. The commited credit facilities are overdraft facilities related to cash pool. Overdraft in Rieber & Søn ASA's cash pool in the different banks
are off-set against deposit in the same bank. This method results in a net overdraft of NOK 65.3m. The company is jointly and severally liable for the Group debt.
Note 22 | Financial instruments Please refer to note 23 for consolidated accounts.
72
RIEBER & SØN -
ANNUAL REPORT 2003
Rieber & Søn ASA's average balance of liquid assets in 2003 was NOK 514.9 m.
Overview
Presentations of operations Challenges in the market Strategy
Environment and food safety
Directors’ report
Financial report
Adressess
73
ANNUAL REPORT 2003
RIEBER & SØN -
Group key figures Def.|
2003|
2002|
2001|
2000|
1999|
1998|
PROFIT AND LOSS ACCOUNT Net sales Of which sales outside Norway Gross profit Operating and payroll costs Ordinary depreciation EBITA Amortisation of goodwill and trademarks Non-recurring items EBIT Other items Net financial items Profit/loss before taxes Profit/loss
NOK m % NOK m NOK m NOK m NOK m NOK m NOK m NOK m NOK m NOK m NOK m NOK m
24
5 15 25 26
3 222 50 1 855 -1 388 -138 330 -44
3 031 56 1 711 -1 263 -122 326 -38
2 789 59 1 433 -1 069 -104 260 -39
2 687 59 1 353 -992 -94 267 -38
2 754 62 1 344 -973 -84 286 -40
288 5 293 190
2 920 57 1 568 -1 150 -119 299 -41 -32 226 -10 11 227 145
286 -9 277 177
222 175 -113 284 124
229 466 -135 560 352
246 324 -129 441 291
1 231 37.8 3 256 1 619 169 -348 3 641 3 293
1 703 52.8 3 226 1 609 91 -173 3 684 3 511
2 265 47.2 4 796 1 554 162 92 3 788 3 880
2 347 40.2 5 817 1 621 108 1 724 3 933 5 657
2 363 43.8 5 400 1 515 282 1 284 4 494 5 778
BALANCE SHEET Group equity at 31 Dec. Equity ratio Total assets at 31 Dec. Capital employed* Net investments* Net interest-bearing debt Capitalised value at 31 Dec. Gross capitalisation
NOK m % NOK m NOK m NOK m NOK m NOK m NOK m
11 12 22 17 18 7 6
1 330 45.7 2 909 1 892 630 498 3 775 4 273
% % % % % %
8 4 10 2 2 13
57.6 10.2 8.9 15.2 15.1 11.7
56.4 10.7 9.5 17.8 17.0 13.0
53.7 10.2 7.7 15.3 13.8 7.3
51.4 9.3 7.9 14.5 9.2 5.4
50.4 9.9 8.5 14.2 14.3 14.9
48.8 10.4 8.9 16.4 14.1 13.3
1
3 357 702
3 409 654
3 343 628
3 903 569
3 654 557
3 326 513
PROFITABILITY Gross margin EBITA margin EBIT margin ROCE, excl. "Other items"* ROCE, incl. "Other items" Return on equity
PERSONELL No of man-years at 31 Dec.* Payroll and social security costs*
NOK m
* Concerns continued activities
This year's figures include Nopal from 1 June 2003.
DEFINITIONS: 1. 2.
Number of man-years Return on capital employed (ROCE)
3.
Gross return on capital employed (Gross ROCE)
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.
Gross operating margin/EBITA margin Gross operating profit/EBITA Gross capitalisation Capitalised value Gross margin Direct return Operating margin/EBIT margin Shareholders’ equity Equity ratio Return on equity Earnings per share Goodwill Net working capital Net investments Net interest-bearing debt Share price/recorded equity Price/earnings ratio (P/E) RISK
22. Capital employed 23. Payout ratio 24. Gross profit 25. Non-recurring items 26. Other items
74
RIEBER & SØN -
Number of employees converted into man-years. Operating profit plus net financial revenues (exclusive financial revenues on liquid assets) as a percentage of capital employed (see point 22). Gross operating profit plus net financial revenues (exclusive financial revenues on liquid assets) as a percentage of capital employed (see point 22). Gross operating profit (see point 5) as a percentage of net sales. Operating profit before amortisation of goodwill and trademarks and non-recurring items (see point 25). Shareholder value at 31 Dec. plus net interest-bearing debt. Total number of shares multiplied by quotation at 31 Dec. Gross profit (see point 24) as a percentage of net sales. Last year’s dividends per share as a percentage of quotation at 31 Dec. Operating profit as a percentage of net sales. Recorded shareholders’ equity (incl. minority interests) Shareholders’ equity as a percentage of total assets. Profit for the year as a percentage of average shareholders’ equity. Profit for the year before extraordinary items, divided by the total average number of shares. Not identified surplus value connected to acquisitions of companies, as well as purchased goodwill. Trade debtors plus stocks less interest-free current liabilities. Investments less book value of fixed assets sold. Interest-bearing debt less liquid assets. Shareholder value at 31 Dec. divided by book value shareholders’ equity. Quotation at 31 Dec. divided by earnings per share. The RISK amount for 2003 is provisional. The figure will be finally set after the tax assessment is decided. The RISK supplements for previous years have been adjusted for bonus share issues. Total operating capital and capital invested in fixed assets as a weighted average of the year. Dividends per share as a percentage of earnings per share. Net sales and other operating income less cost of raw materials, packaging and other variable material costs (excl. non-recurring items). Costs/income with one-time effect. Activities which are to be sold or have been sold before rendering of the accounts are presented as Other items
ANNUAL REPORT 2003
Overview
Interim results Figures in NOK m
Def.|
1st Quarter
2003
2002|
2nd Quarter
2003
2002|
3rd Quarter
2003
2002|
4th Quarter
2003
2002|
Presentations of operations
THE RIEBER & SØN GROUP *)
5 15
753 391 441 -320 -31 90 -9 81 2 83 -29 54
769 425 425 -302 -31 92 -10 82 82 -29 53
748 401 429 -346 -35 48 -10 38 -1 37 -14 23
790 485 440 -333 -36 71 -10 61 1 62 -22 40
842 403 473 -343 -36 94 -14 80 -6 74 -26 48
716 394 410 -296 -31 83 -9 74 1 75 -26 49
878 402 512 -378 -36 98 -11 87 -4 83 -31 52
755 406 435 -332 -23 80 -9 71 3 74 -26 48
8 4 3 22
58.6 % 12.0 % 23.6 % 1 531
55.3 % 11.9 % 23.3 % 1 581
57.3 % 6.4 % 11.3 % 1 700
55.7 % 9.0 % 17.4 % 1 638
56.2 % 11.1 % 17.4 % 2 166
57.3 % 11.6 % 20.4 % 1 625
58.3 % 11.1 % 18.1 % 2 172
57.7 % 10.6 % 19.6 % 1 631
24
Challenges in the market
Net sales Of which sales outside Norway Gross profit Operating and payroll costs Ordinary depreciation EBITA Amortisation of goodwill and trademarks EBIT Net financial items Profit before taxes Taxes Profit
KEY FIGURES Gross Margin EBITA margin Gross ROCE Capital employed
Def.|
1st Quarter
2003
2002|
2nd Quarter
2003
2002|
3rd Quarter
2003
2002|
4th Quarter
2003
2002|
Strategy
Figures in NOK m
WESTERN-EUROPE *) 24
5 15
492 311 -206 -17 88 -3 85
460 288 -190 -16 82 -3 79
501 303 -233 -17 53 -4 49
473 287 -216 -21 50 -3 47
586 343 -230 -20 93 -8 85
452 280 -188 -16 76 -3 73
642 392 -274 -16 102 -4 98
495 311 -224 -11 76 -3 73
63.3 % 17.8 % 46.4 % 825
62.6 % 17.9 % 41.1 % 799
60.5 % 10.6 % 23.3 % 912
60.6 % 10.6 % 24.6 % 818
58.4 % 15.9 % 28.3 % 1 315
61.8 % 16.8 % 37.6 % 808
61.1 % 15.9 % 30.7 % 1 340
62.7 % 15.3 % 36.9 % 824
Environment and food safety
Net sales Gross profit 1) Operating and payroll costs 2) Ordinary depreciation 2) Gross operating profit/EBITA Amortisation of goodwill and trademarks Operating profit/EBIT
KEY FIGURES Gross Margin EBITA margin Gross ROCE Capital employed
8 4 3 22
Figures in NOK m
Def.|
1st Quarter
2003
2002|
2nd Quarter
2003
2002|
3rd Quarter
2003
2002|
Directors’ report
1) Compensation-fee related to a closed distribution-agreement in Nopal (NOK 7m in 4th Quarter) is included in 2003. A similar amount related to integration of Nopal is charged to operating costs in 4th Quarter 2003. Compensation-fee related to a closed distributionagreement in Toro (NOK 7m in 2nd Quarter) is included in gross profit in 2002. 2) Costs related to the restructuring of King Oscars' sardine-production affect operating costs and wages (NOK -9m) and depreciations (NOK -4m) in 2nd Quarter in 2002. 4th Quarter
2003
2002|
CEE (Central- and Eastern-Europe) 24
5 15
266 130 -107 -15 8 -6 2
313 138 -107 -15 16 -7 9
254 125 -107 -17 1 -5 -4
318 152 -111 -15 26 -6 20
261 130 -108 -15 7 -6 1
268 131 -103 -15 13 -7 6
248 120 -100 -23 -3 -6 -9
265 126 -106 -13 7 -6 1
48.7 % 2.9 % 3.8 % 809
44.2 % 5.0 % 7.0 % 925
49.3 % 0.6 % 0.8 % 816
47.7 % 8.2 % 11.2 % 926
49.8 % 2.6 % 3.3 % 825
49.0 % 4.7 % 5.7 % 893
48.2 % 785
47.4 % 2.6 % 3.2 % 859
Financial report
Net sales Gross profit Operating and payroll costs Ordinary depreciation 1) Gross operating profit/EBITA Amortisation of goodwill and trademarks Operating profit/EBIT
KEY FIGURES Gross Margin 2) EBITA margin Gross ROCE Capital employed
8 4 3 22
Adressess
1) Due to planned consolidation of production facilities, ordinary depreciations are influenced by write-downs of NOK 10m in 4th Quarter 2003. 2) Gross margin in 3rd Quarter 2002 is positively influenced by insurance claims settlements in the Czech Republic. *) This year's figures include Nopal from 1 June 2003.
RIEBER & SØN -
ANNUAL REPORT 2003
75
Share related key figures Def.| Face value per share Quoted price at 31 Dec. Highest quoted price Lowest quoted price Capitalised value
NOK NOK NOK NOK NOK m
Average no. of shares (ex. own shares) Total number of shares 31 Dec. (ex. own shares)
7
1 000 1 000
Gross operating profit per share Earnings per share Dividend per share Payout ratio Price/earnings ratio Direct return
NOK NOK NOK %
Book equity per share Share price/recorded equity Gross capitalisation/operating profit RISK
NOK
14 23 20 9
%
19 NOK
21
2003|
2002|
2001|
2000|
1999|
10 50 59 45 3 775
10 48 54 41 3 641
10 48 55 42 3 684
10 49 62 39 3 788
10 49 62 41 3 933
10 56 84 48 4 494
75 515 75 495
76 785 76 662
77 419 76 743
78 957 76 893
80 449 79 835
80 755 80 755
4.4 2.35 1.10 46.8 21.3 2.2
4.2 2.48 7.00 282.8 19.2 14.7
3.9 1.87 0.85 45.4 25.6 1.8
3.3 1.72 0.80 46.5 28.6 1.6
3.3 4.36 1.85 42.4 11.3 3.8
3.5 3.56 1.85 51.4 15.6 3.3
18 2.8 13.0 1.5
16 3.0 10.1 -3.9
22 2.2 11.7 3.2
29 1.7 14.9 6.4
29 1.7 21.2 1.5
29 1.9 20.2 1.0
1998
Bridge yearly Profit and loss account
Western Europe 2003 2002|
(Figures in NOK m)
Net sales Gross profit Operating and payroll costs Ordinary depreciation EBITA Amortisation of goodwill and trademarks EBIT
2 221 1 3491 -943 -70 336 -20 316
KEY RATIOS Gross margin EBITA margin EBIT margin Gross ROCE ROCE
60.7% 15.1% 14.2% 31.4% 29.6%
CAPITAL EMPLOYED Average net current capital Average goodwill Average other capital assets Net capital employed
1 881 1 1651 -8182 -632 284 -13 271
1 030 505 -422 -703 13 -24 -11
CEE 2002| 1 164 547 -427 -59 61 -25 36
47.0 5.2 3.1 6.8 4.0
HQ/ELIM 2003 2002|
Group 2003 2002|
-29 2 -23 2 -19 -19
-14 -1 -18 -1 -20 -20
3 222 1 855 -1 388 -138 330 -44 286
3 031 1 711 -1 263 -122 326 -38 288
% % % % %
-
-
57.6% 10.2% 8.9% 17.5% 15.2%
56.4 10.7 9.5 20.1 17.8
% % % % %
49.0% 1.3% 1.6% -
320 140 638 1 098
254 38 520 812
264 104 440 809
325 134 442 901
-80 66 -15
-111 18 -94
504 244 1 144 1 892
468 172 980 1 619
339 156 495
32 64 96
88 88
40 40
47 47
33 33
339 291 630
32 137 169
INVESTMENTS Acquisition investments Other investments Total investments
61.9 15.1 14.4 35.0 33.5
2003
% % % % %
1 Includes compensation-fee related to a closed distribution-agreement in Nopal (NOK 7m) in 4th Quarter 2003. Compensation-fee related to a closed distribution-agreement in Toro (NOK 7m) is included in gross profit in 2nd Quarter 2002. 2 Costs related to the restructuring of King Oscars' sardine-production affect operating costs and wages (NOK -9m) and depreciations (NOK -4m) in 2nd Quarter 2002. 3 Due to planned consolidation of production facilities, ordinary depreciations are influenced by write-downs of NOK 10m in 4th Quarter 2003. This year's figures include Nopal from 1 June 2003.
76
RIEBER & SØN -
ANNUAL REPORT 2003
Overview
Management of foreign exchange and interest rate risk
EUR/NOK 16% SEK/DKK 16% SKK/CZK 5% EUR/CZK 14% USD/CZK 7% USD/PLN 12% EUR/PLN 6% OTHER 9%
Foreign exchange sensitivity A change of +/- 5% in exchange rates between the Group’s main cross currencies has the following accounting effect (taken separately): Cross currencies USD / NOK EUR / NOK SEK / DKK SKK / CZK EUR / CZK USD / CZK USD / PLN EUR / PLN
Effect of +/- 5% change in NOK mill.
Interest-rate sensitivity: As stated above, debt denominated in NOK has been hedged for the whole of 2004. At floating rate an increase/decrease of 1% in Nordic money market rates would have implied an increase/decrease in interest costs of approximately NOK 3m p.a. An increase/decrease of 1% in Eastern European money market rates means an increase/decrease in interest costs of approximately NOK 2m p.a.
2.6 4.1 5.9 1.8 4.9 2.4 4.5 1.3
Financial report
The above calculations assume that there is no correlation between the changes and that there are no hedging contracts, and that changes in exchange rates do not result in a change in the price to the customer or from the supplier. Interest rate risk / credit risk Following the payment of an extraordinary dividend of NOK 6 per share in 2003, the Group no longer in the position of having net surplus liquidity but is a net borrower.
RIEBER & SØN -
Adressess
As a main rule, the Group’s foreign subsidiaries cover their financing requirements in local currency. The financing requirement is partly covered through internal financing from the Group’s central finance department and partly through working capital facilities in the country where the subsidiary is located. Facilities of this kind are negotiated centrally. Where grants are available locally or regionally within the respective countries,
USD/NOK 15%
Directors’ report
The commercial foreign exchange exposure is covered using hedging instruments such as forward foreign exchange transactions, options and loans in foreign currency. All foreign currency hedging transactions are carried out by the Group’s central finance department.
At 31 December 2003 the interest payable by Rieber & Søn had an average net duration of approximately 0.75 years. The relatively short interest-rate horizon should be seen in relation to the Group’s overall activity. The Group is primarily a manufacturer of consumer goods and other goods with a short processing time. An economic situation with rising interest rates is often linked to higher inflation which could normally result in higher sales prices within a relatively short period of time.
Environment and food safety
The expected future net cash flow for each currency is hedged, based on the competitive situation for the activity in question. Separate foreign currency strategies are drawn up for each area of activity, with a defined hedging horizon and hedging proportion. The analysis includes the indirect foreign exchange risk which arises because our competitive ability is affected by changes in the value of our competitors’ domestic currency. Foreign currency strategies are drawn up by the finance department in close collaboration with the business units, and they are considered and approved by the Group management. Wherever possible, contractual accounts receivable and payable are hedged.
The Group’s total foreign exchange exposure, defined as the net annual cash flow in each currency, amounts to approximately NOK 730m equivalent and is distributed as follows among the main currency pairs:
In 2003 the Group entered into forward foreign exchange agreements for debt denominated in NOK payable in 2004. The conditions that apply are shown in note 23, page 60. Debt denominated in foreign currency is at a floating rate.
Strategy
Wherever possible, contractual accounts receivable and payable are hedged, and the related foreign exchange transactions are carried out by the Group’s central finance department.
In June 2003 the Group acquired the Nopal group. This has increased the absolute value of our foreign exchange exposure, but the composition of group exposure is unaffected.
Liquidity is managed in accordance with the governing investment strategy. Funds are invested in short-term interest-earning securities and bank deposits with a low credit risk. There is a pre-defined credit risk requirement and a maximum exposure per issuer.
Challenges in the market
Foreign exchange risk Rieber & Søn has direct and indirect risks related to exchange rate developments. The direct foreign exchange exposure relates to the import and export of goods. The Group comprises businesses which export from their home country and other businesses which import for production and sales in their home countries. The Group’s foreign exchange exposure related to the equity of its foreign subsidiaries is normally not covered and changes are posted in accordance with generally accepted accounting practice.
these are also applied. Rieber & Søn ASA normally provides a guarantee for the local credit facilities, ensuring that the pricing reflects Rieber & Søn`s overall credit standing.
Presentations of operations
The central finance department is responsible for managing the Group’s foreign exchange and interest rate exposure with the aim of reducing the commercial risk in accordance with defined guidelines.
ANNUAL REPORT 2003
77
Shares and shareholders Share price development last 5 years
Share price development 2003
Index 1.1.1999=100
Index 1.1.2003=100
180
150
160
140 130
140
120 120 110 100 100 80
Rieber & Søn
Rieber & Søn has one class of shares, and all shares carry equal rights. Share price development in 2003 The Rieber & Søn share provided an overall return of 20% in 2003, including dividends paid. During the same period, the Oslo Stock Exchange Benchmark Index (OSEBX) rose by 48%. The Rieber & Søn share peaked in May when it was listed at NOK 59.00 and its lowest listing was NOK 45.10 in January. (The dividend of NOK 7 per share was paid on 23 May).
0.85
1.00
1.10
01
02
03
Dividend per share (NOK) Extraordinary dividend (NOK)
99
00
02
Capitalized value (MNOK)
Payout ratio (%) * Inkl. extraordinary dividend 282.3%
78
01
RIEBER & SØN -
03
Dec. 03
Sep. 03
Nov. 03
Jul. 03
Aug. 03
Jun. 03
May 03
Apr. 03
Mar. 03
Jan. 03
Jan. 04
Sep. 03
May 03
Jan. 03
May 02
Sep. 02
Standard & Poor's Consumer Europe 350
The company’s A and B shares were merged into one share class in 2001, and there has been only one share class since 29 March 2001.
Rieber & Søn seeks to pay the dividend into the Norwegian Registry of Securities as soon as is practically possible after the AGM.
Market capitalisation and share liquidity At year-end 2003 Rieber & Søn had a market capitalisation of NOK 3 979m, based on the total number of outstanding shares (NOK 3 775m after deducting holdings of own shares).
An ordinary dividend of NOK 1.10 (1.00) has been proposed for 2003, corresponding to 47% of EPS. The AGM will be held on 12 May 2004 and the dividend will be paid on 2 June 2004. In 2001, in addition to the dividend the shareholders also received a cash payment of NOK 3.77 for each Rieber share owned in connection with the sale of SE Labels, provided that the shareholder still owned the shares in SE Labels in December 2001 and accepted the total takeover bid from Skanem Industrier AS.
In 2003, 16.7 million of the company’s shares were traded with an aggregate market value of NOK 843m, corresponding to a turnover rate of 21%. The shares were traded on 95.6% of the total number of stock exchange trading days, and the average number of transactions per day was 9.2. One stock exchange lot consists of 200 shares. Dividend policy and payment to shareholders The dividend level is a balance between the shareholders’ wish for a regular direct return and the company’s need to retain capital for its own development. It is the stated objective of the Board of Rieber & Søn that the dividend shall be stable over time – and at around 40% of earnings per share, as long as the company’s capital requirements are adequately met. In order to achieve dividend stability, the payout ratio may deviate from the target figure in any single year.
In August 2000 Rieber & Søn decided to focus solely on foods, and as a result all other businesses were sold. Following these divestments, the Group had a high equity ratio in real terms and a balance sheet characterised by considerable surplus liquidity. An extraordinary dividend was paid for 2002 amounting to NOK 6 per share in order to transfer liquidity back to the shareholders that was in excess of the Group’s expected capital requirement as provided for in its strategy as a focused food company. (See chapters on value drivers/strategy in the Annual Report). The Group will be
Shareholder structure at 31 Dec. 2003 No. of shares
3 641
3 684
3 775
3 788
46.8%
40.3% *
45.4%
46.5% 0.80
1.85
42.4%
3 933
7.00
At 31 December 2003 the Rieber & Søn share was listed at NOK 50.00 (47.50), corresponding to a rise of 5.3% in the course of the year.
00
Jan. 02
Oslo Exchange All Share Index
Shareholder policy Through its commercial operations, Rieber & Søn shall provide the shareholders with a competitive return on invested capital over time. The return on shareholders’ capital means the total of the share price appreciation and the dividends paid.
99
Sep. 01
May 01
Jan. 01
Sep. 00
May 00
Jan. 00
Sep. 99
May 99
70
Jan. 99
80
40
Feb. 03
90
60
1 101 1 001 10 001 100 001 1 000 001 Total
No. of shareholders -100 -1 000 -10 000 -100 000 -1 000 000 -100 000 000
470 1947 730 125 25 10 3307
% 14.2 58.9 22.1 3.8 0.8 0.3 100.0
No. of shares
1 4 7 64 79
11 824 879 072 939 847 575
084 766 885 635 572 798 740
% 0.01 1.04 2.36 5.12 9.98 81.49 100.00
At the end of 2003 Rieber & Søn had 3 307 shareholders (3 263). The company had 3 175 Norwegian shareholders and 132 foreign shareholders. At the same date, 9.6% of the company’s shares were held by foreign investors, compared with 5.7% at the end of 2002.
ANNUAL REPORT 2003
Overview
20 largest shareholders at 31 Dec. 2003
25 11 9 5 4 2 2 1 1 1
Own shares At 1 January 2003 the Group owned 2 913 690 of its own shares.
In 2003 Rieber & Søn ASA purchased 1 241 383 of its own shares. In October, 74 205 shares were sold in connection with a share purchase option for the employees. At the end of 2003 the Group owned 4 080 871 of its own shares, bought at an average price of NOK 45.49 per share.
RISK supplement Under current tax legislation in Norway, shareholders liable to tax in Norway are entitled to apply a RISK supplement to adjust the cost price of their shares. The RISK supplement for 2003 will be finally determined by the Directorate of Taxes in 2005. The RISK supplement/deduction for the last three years is as follows (NOK per share): Accounting year 2001 2002 2003 (estimated)
RISK supplement 3.24 -3.41 1.53
In August 2001 Rieber & Søn ASA cancelled 6 000 000 of its own shares. It is the view of the company that the RISK related to these shares should be divided among the other shareholders. Accordingly, all the shareholders of Rieber & Søn ASA should have added NOK 0.28 to the RISK amount per share. The tax authorities disagree with the company’s view and believe that the RISK amount related to cancellation of the shares should be eliminated. Rieber & Søn ASA has taken legal action on this point and the matter is expected to come before Bergen Municipal Court in 2004. For further information please refer to note 16 to the consolidated accounts. Investor Relations The objective of our Investor Relations activity is to provided the stock market with the best prerequisites for a correct pricing of the Rieber & Søn share. Specific steps are therefore taken to create a greater understanding of the Group’s operations, strategy and busi-
11.0%
10.2% 9.6%
8.1% 6.7% 5.7% 5.5%
6.3%
0.1% 0.4% 93
94
95
96
97
98
99
00
01
02
03
Time of purchase
Assumption: The share is purchased before dividend payment in the year of purchase Dividend is reinvested same year as received and purchase price is based on average share price previous year. The figure illustrates the true rate of return up to and including 2003 based on the date of purchase of the Rieber & Søn share. For example, if the share was bought in 1993 the annual true rate of return up to and including 2003 was approximately 11,0% The true rate of return is defined as the share appreciation and the annual dividend continuously reinvested in Rieber shares.
ness among investors and analysts in Norway and abroad. We strive to ensure that information which may be of importance to shareholders is communicated immediately to the finance market in Norway and abroad. Rieber & Søn gives regular presentations in Bergen, Oslo and London in connection with presentation of the annual and interim accounts. In January 2004 the fourth quarter accounts for 2003 were also published on the Internet for the first time in the form of a web-cast in Norwegian and English. Contact person: Benedicte Schilbred Fasmer, Director of Finance & Investor relations, tel. +47 5596 7330 Mob. +47 9506 0034,
[email protected]. www.rieberson.no Share registrar for Rieber & Søn ASA: DnB Verdipapirservice, Stranden 21, 0021 OSLO, Tel.: +47 2248 3580
Financial calendar 2004 29 January 4th Quarter Report 2003 6. May 1st Quarter Report 2004 12. May Annual General Meeting 12. August 2nd Quarter Report 2004 28. October 3rd Quarter Report 2004
Investor presentations will be held on the stated dates, and the second and fourth quarter reports will also be published by online video via webcast.
RIEBER & SØN -
ANNUAL REPORT 2003
Adressess
Sale of shares to employees The Board encourages employees to become shareholders of the company. A share subscription programme for the Norwegian employees offering a tax-free discount was offered in 2003 for the fifth successive year. In October 2003 485 (43.3%) of the employees took up the offer to purchase 153 shares in Rieber & Søn at a price of NOK 49.07 per share. The company sold a total of 74 205 of its own shares to the employees.
% % % % % % % % % % % % % % % % % % % % % % %
Financial report
For information related to equity movements please refer to notes 15,16 and 17.
32.40 14.32 11.33 7.26 5.13 2.93 2.54 2.14 2.02 1.43 1.25 1.03 0.96 0.75 0.62 0.54 0.53 0.51 0.39 0.38 88.4 11.6 100.0
Directors’ report
On 8 May 2003 the AGM authorised the Board of Directors to allow Rieber & Søn ASA to acquire and own its own shares, but not exceeding 7 957 574 shares, corresponding to 10% of the share capital.
670 907 700 586 871 709 039 000 681 635 050 252 657 441 575 000 282 101 400 887 443 297 740
Environment and food safety
able to make acquisitions to help it realise its strategy while at the same time maintaining the equity ratio at the target level of at least 40%.
779 395 018 777 080 329 021 700 609 134 993 816 764 599 491 430 423 406 307 301 70 381 9 194 79 575
22.5%
Strategy
AS Atlantis Vest Orkla ASA Folketrygdefondet JP Morgan Securities Rieber & Søn ASA, egenbeholdning Mowinckel Management A/S Rieber, Fritz T. A/S Flu Rieber, Marianne Frank Mohn AS Bank of New York Ankris A/S Vital Forsikring ASA G.C. Rieber & Co A/S Norsk Hydros Pensjonskasse Skagen Vekst Den norske Bank ASA Rieber, Bjarne J.P. Morgan Bank Sig. Bergesen d.y. og almennyttige stiftelse Total 20 largest shareholders Others Total
(%)
Challenges in the market
No. of shares
Presentations of operations
Name
Average annulised true rate of return on purchase of RIE up to and including 2003
79
HEADQUARTER Rieber & Søn ASA Administration Office: Nøstegt. 58 P.O.Box 987 Sentrum, N-5808 Bergen Tel: + 47 55 96 70 00 Fax: + 47 55 32 11 15 E-mail:
[email protected] http://www.rieberson.no
Iceland
Rieber & Søn - administration, production and sales Rieber & Søn - sales
Toro Office: Nøstegt. 58 P.O.Box 987 Sentrum, N-5808 Bergen Tel: + 47 55 96 70 00 Fax: + 47 55 96 73 93 E-mail:
[email protected] http://www.toro.no
Contact persons Investor Relations Tor Lund, Chief Financial Officer Tel: +47 55 96 70 00 E-mail:
[email protected] Benedicte Schilbred Fasmer, Director of Finance and Investor Relations Tel: +47 55 96 70 00 E-mail:
[email protected]
King Oscar Office: Nøstegt. 58 P.O.Box 987 Sentrum, N-5808 Bergen Tel: + 47 55 96 70 00 Fax: + 47 55 96 76 99 E-mail:
[email protected] http://www.kingoscar.no
Norway Sweden
Denja Norway Office: Yttersøveien 21 P.O.Box 2025 Stubberød, 3255 Larvik Tel: + 47 33 13 32 00 Fax: + 47 33 13 32 10
Rieber Food Ingredients Office: Nøstegt. 58 P.O.Box 987 Sentrum, N-5808 Bergen Tel: + 47 55 96 70 00 Fax: + 47 55 96 76 91 FoodService Office: Nøstegt. 58 P.O.Box 987 Sentrum, N-5808 Bergen Tel: + 47 55 96 70 00 Fax:+ 47 55 96 74 90
Denja Sweden
Denja Denmark Office: Smedevenget 4-6, Øster Bjerregrav P.O. Box 76, 8900 Randers, Denmark Denmark Tel: +45 864 54111 Fax: +45 864 54731
UK
Office: Karl Johansgatan 66-70 Mail: Karl Johansgatan 66-70, 414 55 Göteborg, Sweden Tel: +46 317 072430 Fax: +46 317 072439
Cronions Denja B.V.
The Netherlands
Belgium
Office: Nijverheldsweg 5 St. Maartensdijk P.O. Box 57 NL-4695 ZH St. Maartensdijk The Netherlands Tel: +31 166 66 36 44 Fax: + 31 166 66 36 54 The Czech Rep. Germany
Vitana a.s. (HQ) Vitana a.s. (HQ) Office: Armady 245 Armady 245, 155 00 Praha 5 – Stodulky, The Czech Rep. Tel: +420 2 5161 7920-4 Fax: +420 2 5161 7929 E-mail:
[email protected] http://www.vitana.cz
Vitana a.s. Office: Melnicka 133, 277 32 Bysice, The Czech Rep. Tel: +420 206 696 220-4 Fax: +420 206 696 229 E-mail:
[email protected] http://www.vitana.cz
Rieber & Son Russia Russland
King Oscar Gniewino
Latvia
Litauen
Rieber Foods Polska S.A. Office: 84-250 Gniewino Postadresse: 84-250 Gniewino, Polen Telefon: +48 58 67 06500 Telefaks: +48 58 67 06506 E- post:
[email protected] http://www.bigfish.pl
Kontor: Rabochaya st. 41, 144 001 Electrostal, Moscow Region Postadresse: P.O. Box 41, 144 001 Electrostal, Moscow Region, Russia Telefon: +7 096 57 50 816 Telefaks: +7 096 57 70 520
Delecta Rieber Foods Polska S.A. Office: 87-800 Wloclawek, ul. Prymasa St. Wyszynskiego 14, Postadresse: 87-800 Wloclawek, ul. Prymasa St. Wyszynskiego 14, Polen Telefon: +48 54 41 26000 Telefaks: +48 54 23 14647 E- post:
[email protected] http://www.delecta.pl
Polen
Ukraina
Vitana Slovakia
Slovakia
Ungarn
Office: Chovatelska 1, 917 01 Trnava Postadresse: Chovatelska 1, 917 01 Trnava, Slovakia Telefon: +421 33 591 1146 Telefaks: +421 33 591 1144 E- post:
[email protected] http://www.vitana.sk
Romania
Bulgaria
Albania
Nøstegaten 58 P.O.Box 987 Sentrum N-5808 Bergen T +47 55 96 70 00 F +47 55 32 11 15
Design: Artic Reklamebyrå AS. TORO TM. Photo: Tommy Næss. Kjell Svarstad. Print: Havel AS
www.rieberson.no
