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Annual Report 06

HEMPEL A/S
Annual Report 06

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www.hempel.com

HEMPEL
Annual
Report 06
k ey f igures

Financial Results

Hempel Group’s net sales rose by experienced an increase of 18 per in 2006 had a strong year. Decora-
19 per cent in 2006 to EUR 780 cent in working capital, mainly from tive continued the positioning and
million, up from EUR 655 million in higher trade account receivables. strengthening of our brand and the
2005. Operating profit was up 36 Efforts to optimise inventory holding results were satisfactory. By the end
per cent to EUR 61 million from EUR have improved inventory turnover of the year, Hempel managed to
45 million. days by more than 10 per cent. Over- maintain the sales volumes of
Net profit was EUR 37 million, all, cash generated from operations 2005.
up from EUR 30 million last year. was below expectation mainly due to The Yacht segment saw a steady
Several key markets achieved the increase in trade account receiv- but limited growth also in 2006.
healthy double-digit growth in net ables.
sales, which helped drive the high Cost of Sales
operating profit. Raises in raw mate- Segment overview In 2006, raw material prices contin-
rial cost continued to have a nega- The Protective segment had another ued to surge, as copper, zinc and
tive effect on gross margin as we strong year in 2006, with a growth crude oil reached new highs. The
have not been able to fully pass on over 2005 of close to 30 per cent. delay in implementing necessary fur-
this additional cost to the market. The growth was especially strong ther price increases resulted in a
Another important reason for the within the Oil & Gas and Wind sub- decline in Hempel’s contribution
higher operating profit was a healthy segments, confirming Hempel’s lead- margin by more than two percentage
improvement in the Group’s produc- ing position within these areas. points compared to 2005.
tivity. This was achieved through a The container segment started
combination of benefits from the slow in 2006, but picked up in activ- Balance sheet
planned alignment within the organi- ity in the second half of 2006. The balance sheet has been further
sation and a careful control of devel- Hempel focussed on improving gross strengthened. Net interest bearing
opments in fixed expenses. margins as they have been under debt has been reduced from EUR 28
The most significant investment strong pressure in the last few years. million in 2005 to EUR 26 million in
included a new factory in Vietnam Marine Maintenance saw an 2006.
and expansion of production facilities unchanged volume over 2005,
in Portugal and China. The Group whereas Marine Newbuildings again
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Key figures
800,000
750,000
700,000
650,000
600,000
800,000
550,000
750,000
800,000
External Sales in EUR ‘000
500,000
700,000
750,000 2002 2003 2004 2005 2006
650,000
800,000
700,000
600,000
650,000
750,000
550,000
600,000
700,000
500,000
550,000
650,000
2002 2003 2004 2005 2006
500,000
600,000
550,000 2002 2003 2004 2005 2006

250,000
500,000
2002 2003 2004 2005 2006
230,000

210,000

190,000
External Sales in litres ‘000
250,000
170,000
230,000
250,000
150,000
210,000
230,000 2002 2003 2004 2005 2006
250,000
190,000
210,000
230,000
170,000
190,000
210,000
150,000
170,000
190,000 2002 2003 2004 2005 2006
150,000
170,000 2002 2003 2004 2005 2006
40,000
150,000
35,000
30,000 2002 2003 2004 2005 2006
Net Profit After Tax in EUR ‘000
25,000
20,000
15,000
40,000
10,000
35,000
40,000
5.000
30,000
35,000 2002 2003 2004 2005 2006
25,000
30,000
40,000
20,000
25,000
35,000
15,000
20,000
30,000
10,000
15,000
25,000
5.000
10,000
20,000 2002 2003 2004 2005 2006
5.000
15,000
2002 2003 2004 2005 2006
10,000
5.000
Employees
2002 2003 2004 2005 2006

3,500

3,400

3,300

3,200
k ey f igures

3,500
3,100
3,400
3,500
3,000
3,300
3,400 2002 2003 2004 2005 2006
3,500
3,200
3,300
3,400
3,100
3,200
3,300
3,000
3,100 
3,200 2002 2003 2004 2005 2006
PRESIDENTS MESSAGE

“One Hempel – Everywhere”
lays firm foundation for success
in a changing world

Market trends in 2006 continued the challenge of costlier raw materi- industries and in the world and are
along the same broad lines as in als. To increase production capacity, making their choices and use of
2005, with sustained high levels of we opened a new factory in Viet- paint mean more. Today, coatings
trade and construction activity world- nam, our first facility in that country. are a key parameter that determines
wide, and unprecedented increases We drafted a new strategy, known performance in a range of industries
in the cost of raw materials. Hempel as One Hempel – Everywhere. Involv- – affecting container ship fuel con-
was able to take advantage of the ing more than 100 employees who sumption, for instance, or a compa-
worldwide growth, delivering a 19% showed great insight and resource- ny’s record on environmental per-
increase in turnover and 9% higher fulness, this strategy provides a formance.
volumes, which totalled 244 million platform for Hempel’s growth for the From our industry-leading
litres for the year. next five years. I am confident that research and development work to
Again in 2006, our Protective we can and will achieve the goals our coating advisors giving crucial
business showed very encouraging we have set. In a vote of confidence advice in the field, Hempel delivers
growth in all markets, while Hempel for all of Hempel, both our Boards of performance. We need to become
also performed well in the Marine Directors approved One Hempel – better at communicating this to our
market. Hempel Container segment Everywhere in May 2006. customers – and better at ensuring
performed very well and our Decora- Showing further our ability to take that we are duly recognised for the
tive and Yacht segments remained decisive action in the face of new considerable value we add when a
steady. opportunities is our acquisition of customer chooses to work with
The cost of raw materials rose Germany’s Lacor, a goal we worked Hempel.
sharply during the year – with the towards throughout 2006. This acqui-
price of zinc more than tripling over sition is a result of One Hempel – A good year
an 18-month period. We managed Everywhere, and it shows clearly In many respects 2006 was a year
to partly compensate the negative that Hempel will act boldly in order of significant improvements for
impact of this, primarily through an to meet the objectives. I would like Hempel and the best for many years.
intensive drive to ‘do things smart- to take this opportunity to person- We accomplished much and laid a
er’. This meant improving efficiency ally welcome Lacor’s employees into firm foundation for more successes
in operations while still achieving the Hempel family. to come. I was impressed by the
significant growth. However, it has to Going forward, we need to make abilities, dedication and resourceful-
be said that we have not been able the sense of urgency that Hempel ness that Hempel employees around
to maintain product margins. employees have shown in the past the world showed. I am truly grateful
two years a permanent part of our for their hard work throughout the
Proven ability to change corporate culture. Only in this way year. I would also like to thank our
If 2005 was a year for accepting the can we ensure that Hempel will customers, business partners and
need for change, 2006 proved that achieve the goals we have set and shareholders for their continued sup-
A nnua l R eport 2 0 0 6

Hempel is both willing and able to continue to serve as an industry port and loyalty. Encouraged by our
adapt quickly to changing market leader. achievements in 2006, we can all be
conditions. We did this on a number confident in the future of Hempel. I
of fronts during the year. Realising our value
We increased sales and delivered Our customers no longer view paint
better results, improving efficiency as a mere commodity. They under- Pierre-Yves Jullien
across the company to overcome stand complex changes in their Group President & CEO


Highlights

I In many respects, 2006 was a year of
significant improvements for Hempel
I New record sales revenue of EUR 780 million
I Operating profit was up 36% over 2005
to EUR 61 million
I Net profit was up 23% to EUR 37 million
I Several key markets achieved healthy double-
digit growth
I Continued productivity improvements offset
some effects of higher raw materials
this is hempe l

I Approval of One Hempel-Everywhere strategy
for starting in 2007
I Preparations were made for Lacor in Germany
to join the group, and a factory in Vietnam
was opened

 

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container
Container

The increase in raw materials prices contin-
ued throughout 2006, with the price of zinc
rising 318% in just 18 months. However,
the market picked up quickly in the spring,
and Hempel was set to take advantage of
the upturn.
container


container

In uncertain times, Container
Segment delivers strong results

Container comes out on top, despite an unpredictable
market and higher costs for raw materials

Challenging market clear, focused leadership. Our Sup- container industry – and Hempel is
At the start of the year, there was ply Chain department implemented committed to leading the way.
some concern about the prospects a range of efficiency measures that
for the Container segment in 2006. reduced costs significantly. We also A meeting point for the industry
Demand had declined by 22% in late raised prices to distribute the bur- Hempel again took part in the Inter-
2005, and raw materials costs were den of higher raw materials costs modal fair, held in Hamburg, Germa-
rising steeply. The increase in raw more fairly. And we continued to ny. Maintaining our high level of vis-
materials prices continued through- apply our unique industry insight ibility, the Hempel stand served as a
out 2006, with the price of zinc ris- and R&D capabilities to add value meeting point for the entire contain-
ing 318% in just 18 months. How- for our customers. er industry at this key marketing
ever, the market picked up quickly in event.
the spring, and Hempel was set to A water-borne future The Intermodal fair confirmed our
take advantage of the upturn. After We also demonstrated leadership in sense that mood in the container
a slowdown in the summer, the mar- 2006 in the area of environmentally industry is upbeat, as the world
ket recovered again in the autumn, sound products. Work continued on economy and global trade remain
leading to strong sales towards the bringing water-borne products to the strong. We believe this means good
end of the year. container market, and with product prospects for the Container segment
testing well underway, Hempel in 2007. I
Industry leaders expects to begin delivering solutions
Hempel responded to challenging in 2007. We are convinced that
market conditions by demonstrating water-borne is the way forward in the
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container
decorative

Decorative

The Luneng Star City residential project
in China was supplied more than 400,000
litres by Hempel-Hai Hong

Meliá Group’s hotels in Havana Cuba
are protected by Hempel products
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10
Hempel-Hai Hong helped bring
new life to this Nan Hai hotel in
Sheikou, China

decorative

Lisbon’s Casino used Hempel’s paints

11
decorative

A bullfighting arena in Lisbon was restored
and modernised with Hempel products

A power plant was renovated with Hempel
coatings and converted into a science
museum focusing on electricity
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12
Hempel’s Decorative segment
turns heads by applying Hempel
know-how in new areas

A new strategy pays off in China, while Decorative is in position
to gain from a construction boom in the Middle East

Large-scale success in China 80,000-apartment complex requiring Lucrative niche adds to
Decorative performed extraordinarily 400,000 litres of Hempel paint to the bottom line
well in China during the year, as a cover 300,000 square metres of The Decorative segment continued
strategy targeting property develop- exterior wall space. This and similar to perform well in Southern Europe,
ers began to pay off. The strategy in- projects allowed Hempel to increase where high-end niche products for
volved a refocusing of attention from our share of the Chinese market facades, protection and floor coat-
general retail towards major property considerably during 2007. ings enjoy a strong position. This rel-
development projects, which can be atively small market remains impor-
very large in China. We are offering Ready for Middle East growth tant to the segment and to our range
property developers a range of prod- Construction has been picking up in of high-value specialty products.
ucts and services that help them the Middle East, and we worked With construction picking up
ensure the successful completion of throughout the year to position our- speed in the Middle East and the
large-scale projects – even providing selves to take advantage of the boom in China expected to continue
on-site coating advisors, a novelty coming boom. The Hempel brand in 2007 and beyond, Hempel sees
in Chinese residential development. remains strong in the segment’s big- considerable potential for more
gest market, and a renewed focus growth. And greater focus on high-
80,000 apartments on both large-scale projects and value products and services will help
One example of a successful project retail is helping us strengthen our profits keep pace with the increase
in China is Luneng Star City, an business throughout the region. in sales. I
decorative

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MARINE
Marine

MARINE

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MARINE
Strong demand for global
transport pushes Marine
segment sales higher

As the boom in global trade continued, Hempel’s Marine segment
bolstered its business by delivering high-performance products

Economic growth drives to sail ten years between dry-dock-
demand for transport ings. Hempel worked closely with
Hempel’s Marine segment benefited APL to achieve this breakthrough,
from continued high worldwide growth and while the specification is guaran-
rates in 2006. Across many vessel teed for ten years, it has a potential
segments there was considerable lifetime of twenty years in total.
demand throughout the year, with
order books full at yards across Asia High-performance products
and Europe. This led to continued In early 2006, Hempel launched
strong business for both our Marine GLOBIC NCT, an advanced antifouling
Maintenance and our Marine New- product based on a unique nano-
buildings sub-segments. capsule technology. Offering an array
of high-value advantages, GLOBIC
Overcoming higher costs NCT was promoted extensively at
Our Marine business was negatively the SMM trade fair in Hamburg, Ger-
affected by considerable increases many, during global presentations for
in the cost of raw materials in 2006 customers, and at training sessions
– especially the price of copper, a key for Hempel’s sales and technical
component in our antifouling prod- staff.
ucts. Nevertheless, Marine delivered In September, Hempel launched
higher turnover, with sales rising 12% HEMPADUR FIBRE, an innovative
compared to 2005. Good results coating for a ship’s highly vulnerable
were achieved by a combination of ballast tanks. HEMPADUR FIBRE
innovative, value-adding products, uses synthetic mineral fibres to
a group-wide efficiency drive and, provide a more flexible coating that
where necessary, price increases extends the service life of ships
by reducing crack formation. Initial
Ten years at sea reactions to both these products
Hempel achieved an important break- have been very positive.
through in 2006, using our silicone- Hempel is confident that a strong
based HEMPASIL fouling-release sys- programme of innovative products
tem to produce the industry’s first and ongoing focus on improving effi-
ten-year dry-docking interval guaran- ciency in our supply chain, combined
tee. The APL Jeddah, a medium-sized with continued high growth in the
container ship owned by APL Co. Pte worldwide transport sector, will lead
MARINE

Ltd (American President Lines), has to better results for the segment in
been certified by Det Norske Veritas 2007. I

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PROTECTIVE

Protective
19
PROTECTIVE
PROTECTIVE

Hempel’s Protective segment
delivers strong growth on
all fronts worldwide

In the Protective segment, Hempel seized new opportunities in Asia,
Europe and the Americas, with a new focus on combining Hempel’s
strong local presence with our global reach

Local presence around the globe
2006 was an exciting year for
Hempel’s Protective segment. From
infrastructure projects in China and
complex pipe-coating deals in Rus-
sia to expansion in Germany and
continued success in the USA, this
segment delivered strong results –
with very satisfying growth for the
second year running. The key to our
success in this segment is our dedi-
cated local presence and increas-
ingly synchronised global opera-
tions.

Strong growth in China
The Protective segment showed yet
another year of strong performance
in China, fuelled by continued eco-
nomic growth and investment in the
country’s infrastructure. We were
involved in several bridge projects
during the year, and there are excel-
lent prospects for future success in
China’s infrastructure development,
which is expanding at a rapid pace.

Hempel expands in Europe
Hempel worked throughout the year
to prepare for the acquisition of
A nnua l R eport 2 0 0 6

Lacor, one of Germany’s leading sup-
pliers of protective coatings. An
excellent fit with Hempel’s strategy in
Germany and Central Europe, the
acquisition will bolster our coverage
significantly, paving the way for accel-
erated growth in this key market.

20
American offshore success
Our growth in the United States was
driven again by success in the oil
and gas sector, with several major
jack-up rig projects completed during
the year. We also achieved growth in
the rail-car market in the US. The
vast North American market holds
tremendous potential for our Protec-
tive business, so we expect contin-
ued growth in the Hempel position
in the years.

Innovative products
2006 saw considerable success for
HEMPAXANE 55000, our innovative
polysiloxane-based topcoat that was
used in several key projects during
the year. We launched HEMPATHANE
HS 55610 in selected markets in
Europe. This new topcoat offers an
attractive combination of low VOC
levels and superb application proper-
ties – helping our customers to com-
ply with environmental legislation
using a product that also creates
added value for their business. As
technologically advanced high-value
products, these coatings demon-
strate Hempel’s commitment to lead-
ership in the Protective segment.
Hempel is deeply committed to
ensuring the continued strong
PrOTECTIVE

growth of our Protective segment in
all regions. We feel there is vast
potential for new business in this
segment in 2007 and beyond. I

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YA C H T

Yacht
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YA C H T
YA C H T

Hempel Yacht holds the line
with new products, marketing
initiatives and expansion

Innovative products and packaging, growth in Greece and a new deal
in France keep turnover for Hempel’s Yacht segment moving upwards

High-end products ment. The deal, struck with the during 2006, taking part in the IMS
It was full speed ahead for Hempel French sister company of our Ger- 600 world championships in Spain,
Yacht in 2006, led in large part by man distributor, was launched in the Rolex Sydney Hobart Yacht Race,
the successful introduction of two December at the Paris Boat Show. the Lord Howe Island Race, the
new high-end products in key mar- Volvo Ocean Race and the Velux 5
kets. Glide Speed and Glide Cruise Market analysis and visibility Oceans Race.
premium antifoulings featuring Tec- Hempel devoted considerable With continued economic growth
Cel™ technology were launched in resources to analysing its markets in in Europe, new product launches
Germany, Greece, Norway, Spain and 2006, working to determine where planned for 2007 and the opportuni-
the Middle East during the year. the greatest opportunities lie and to ties that our expansion into France
focus our efforts where they count has created, Hempel is optimistic
Complete package most. The segment also worked to about the Yacht segment’s near-
In Northern Europe, the segment improve the Hempel brand’s visibility term prospects. I
launched an innovative new packag-
ing concept, with application tools
bundled together with paint to provide
complete yacht paint solutions. Com-
bined with eye-catching new shop dis-
plays and targeted campaigns, this
helped our Northern Europe opera-
tions achieve a substantial increase
in sales for the year.

Growth in Greece
Yacht worked closely with our Greek
agent in 2006 to boost sales through
increased shop exposure and dealer
training. Delivering a twenty per cent
increase in sales for the year, our
efforts in Greece helped the Yacht
A nnua l R eport 2 0 0 6

segment increase its overall sales
for 2006.

Push into France
2006 saw a new distribution deal in
France, a market that holds consid-
erable potential for the Yacht seg-

24
Hempel’s entry in the
“XXV Copa del Rey”

YA C H T

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W O R K I N G AT H E M P E L

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Working at Hempel

27
W O R K I N G AT H E M P E L
W O R K I N G AT H E M P E L

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28
Hempel people
making a difference

Hempel’s Human Resources department works to
attract and keep the industry’s best employees

An attractive place to work cant impact on all of us at Hempel. company Lacor. The successful inte-
Our Human Resources department The call for competency develop- gration of Lacor’s dedicated staff
spent much of 2006 ensuring that ment will help us reach our goals of into the Hempel family will be a key
Hempel remains an appealing place continuing to maintain and improve goal for 2007.
to work – everywhere we operate. upon the quality of products Hempel
The development of Hempel’s new is known for. We have already start- Career development
strategy involved crucial input from ed identifying the skills we need, at Hempel Academy
employees, and we established a and a comprehensive programme of Transferred to Human Resources in
group-wide Code of Conduct. We employee training will ensure that 2005, Hempel Academy was a great
also worked to help our employees we acquire these skills. success again in 2006. We offered
gain new skills and expertise, most One way Hempel will achieve our 27 courses during the year, com-
notably via our successful Hempel goal of greater alignment across pared to 19 in 2005. Hempel par-
Academy training programmes. departments and regions is via our ticipants were up, and the number
new Code of Conduct, also adopted of participants from outside the
One Hempel – Everywhere during 2006. The Code of Conduct company more than doubled. Hemp-
Hempel’s new One Hempel – Every- helps to define what it means to be el Academy is expected to continue
where strategy, which was developed a Hempel employee, and it will prove growing in 2007 and beyond, ensur-
in 2006, has been anything but a invaluable as Hempel continues to ing that Hempel has the skills we
one-way directive. Hempel employ- grow worldwide. need, and providing our employees
ees around the globe were involved An early test of both our One and customers with crucial training
in the process, contributing valuable Hempel – Everywhere strategy and and opportunities for advancing
insight and ideas right from the our new Code of Conduct will be the their careers. I
start. The strategy will have a signifi- acquisition in 2007 of the German
W O R K I N G AT H E M P E L

29
research & deve l opment

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30
Research &
development

31
research & deve l opment
research & deve l opment

Innovative thinking helps R&D
in developing better and more
environmentally friendly products

R&D’s 2006 goals to improve technical and environmental performance were
met by new product launches to match market and customer demands, and
by looking forward at legislated requirements.

Leading the way ticular. Hempel is preparing to switch fouling release system won a huge
Being a leader involves delivering to water-borne paints for certain cus- vote of confidence in 2006, when a
first-rate performance also in local tomers in the Container segment, vessel treated with HEMPASIL was
markets around the world. Likewise and has invested heavily in high-solid granted the industry’s first ten-year
it entails a serious commitment to coatings, especially in the USA and dry-docking interval guarantee.
the future together with continuous Europe. The need and interest in HEMPASIL, GLOBIC NCT and HEMPA-
investment in technologies of the low-solvent coatings is also arising DUR FIBRE demonstrate the consid-
future. Throughout 2006 Hempel’s in China and APAC erable scale of Hempel’s investment
R&D group has worked towards rais- in research and development.
ing the bar for performance, reliabil- Hi-tech products push
ity and environmental friendliness performance REACH – New European
within the coating industry. 2006 saw the launch of two ground- Chemicals legislation
breaking products – HEMPADUR December 18, 2006 marked the
Reducing emissions with low- FIBRE and GLOBIC NCT – and an date the European Council passed
solvent coatings industry-leading milestone for HEMP- the new European Chemicals legisla-
Public concern about environmental ASIL, our silicon-based fouling tion with the acronym, REACH (Regis-
issues saw an increase in 2006, release system. Reinforced with syn- tration, Evaluation and Authorisation
and resulted in a greater demand thetic mineral fibres, HEMPADUR of Chemicals). The new legislation
for products with a reduced content FIBRE is a rugged, uniquely flexible enters into force on 1 June 2007.
of organic solvents. Governments coating for ballast tanks that dra- HEMPEL is dedicated to comply-
responded by adopting new legisla- matically reduces the risk of crack- ing with the rules and regulations
tive measures in order to meet ing. GLOBIC NCT is an antifouling which cover its operations. Efforts
these concerns. solution that uses nano-capsule and commitment to work with cus-
To meet this challenge, the R&D technology to help operators ‘tune’ tomers and suppliers will be made
group has been focussing on water- the coating to different conditions. to secure adequate and timely com-
borne and high-solid coatings in par- Our advanced, non-stick HEMPASIL pliance to REACH. I
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research & deve l opment
34
A nnua l R eport 2 0 0 6
f inancia l resu l t
Financial
Results
The following pages show a
condensed version of the Danish
statutory consolidated financial
statements of Hempel A/S for the
year ended 31 December 2006

f inancia l resu lt

35
f inancia l resu l t

Introduction to the
Annual Report Financials

The following financial data shows tion of the Danish statutory consoli- The complete Annual Report has
a condensed release of the Danish dated financial statements, apart been audited by Pricewaterhouse-
statutory consolidated financial from the following: Coopers, Statsautoriseret Revision-
statements of Hempel A/S for the sinteressentskab.
year ended 31 December 2006. I The total Hempel Group unaudited
To give a more comprehensive proforma combined financial data Management’s Statement
and complete picture of the Hempel includes full line-by-line consolida- on the Annual Report
activities the following condensed tion of all subsidiaries and associ- The Board of Directors and Manage-
financial data also includes unau- ated companies, i.e. the unaudit- ment have considered and adopted
dited proforma combined financial ed proforma combined financial the Annual Report of Hempel A/S
data (i.e. combined profit and loss data is based on the financial for the financial year 2006.
account and balance sheet) for the statements of Hempel A/S and of The Annual Report is prepared in
total Hempel Group. The unaudited the subsidiaries and associated accordance with the Danish Finan-
proforma combined financial data companies and is prepared by cial Statements Act. We consider
includes the financial statements of combining items of a uniform the applied accounting policies
Hempel A/S and all the companies nature and eliminating intercom- appropriate and the estimates made
in which Hempel A/S directly or indi- pany transactions, shareholdings, reasonable. Furthermore, we con-
rectly has either a controlling influ- balances and unrealised intercom- sider the overall Annual Report pres-
ence (subsidiaries) or a significant pany profits and losses. entation true and fair. Therefore, in
influence on the operational and our opinion the Annual Report gives
financial management (associated The complete Annual Report with a true and fair view of the financial
companies). details of the accounting standards position of the Group and the Parent
The unaudited proforma combined used can be downloaded from the Company, and of the results of the
financial data of the total Hempel Danish Commerce and Companies Group and Parent Company opera-
Group is based on similar account- Agency (Erhvervs- og Selskabssty- tions. I
ing principles as applied in prepara- relsen www.eogs.dk).

The Annual Report is adopted at the Annual General Assembly.
Kgs. Lyngby March 2007

Management of Hempel A/S Board of Directors of Hempel A/S

Pierre-Yves Jullien Claus Colliander Lars Aaen
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Group President & CEO Chairman Vice Chairman

Peder Holk Nielsen John Schwartzbach
Anders Pettersson Lennart Holm

Søren Nyborg Rasmussen Allan Katz
Employee Representative Employee Representative

36
Profit & Loss Account

Group Consolidated

EUR ‘000 2006 2005 2006 2005

NET SALES 779.726 654.549 500.831 427.634

Cost of goods sold, incl. production costs -524.584 -433.728 -318.566 -268.036

GROSS PROFIT 255.142 220.821 182.265 159.598

Sales and distribution expenses -135.338 -130.006 -99.081 -99.037

Administration expenses -59.064 -46.102 -42.833 -35.853

OPERATING PROFIT 60.740 44.713 40.351 24.708

Part of net profit in associated companies - - 6.411 2.345

PROFIT BEFORE FINANCIAL ITEMS 60.740 44.713 46.762 27.053

Financial items, net -5.200 -1.281 -2.604 -827

PROFIT BEFORE TAXES 55.540 43.432 44.158 26.226

Income taxes -18.628 -13.645 -15.199 -12.255

NET PROFIT FOR THE YEAR 36.912 29.787 28.959 13.971

External shareholders -8.458 -16.273 -505 -457

HEMPEL NET PROFIT FOR THE YEAR 28.454 13.514 28.454 13.514
f inancia l resu lt

37
f inancia l resu l t

Balance sheet as at 31/12
Assets

Group Consolidated

EUR ‘000 2006 2005 2006 2005

FIXED ASSETS
Intangible fixed assets:
Goodwill 93 130 93 130
Software 1.469 2.252 1.469 2.252
Software under development 67 449 67 449
1.629 2.831 1.629 2.831

Tangible fixed assets:
Land and buildings 53.967 68.259 30.245 32.705
Technical plant and machinery 19.976 21.595 11.387 13.389
Other tangible assets 13.671 15.603 7.507 7.875
87.614 105.457 49.139 53.969

Financial fixed assets:
Investments in associated companies - - 32.308 35.472
Investment in other companies - 46 - -
Deferred tax assets 2.889 4.079 2.379 2.936
Other receivables 9.976 10.787 5.939 1.313
12.865 14.912 40.626 39.721
TOTAL FIXED ASSETS 102.108 123.200 91.394 96.521

CURRENT ASSETS
Inventories:
Raw materials and consumables 43.942 38.651 23.809 19.400
Work in progress 1.060 959 1.040 959
Finished goods and commercial goods 76.742 66.641 54.039 45.711
121.744 106.251 78.888 66.070

Receivables:
Trade receivables 241.372 210.156 129.106 114.374
Receivables from associated companies - - 14.375 13.193
Tax receivable 5.416 1.803 4.612 1.269
Other receivables 25.326 16.690 11.593 6.397
A nnua l R eport 2 0 0 6

Prepayments 11.397 16.572 6.908 10.394
283.511 245.221 166.594 145.627

Bonds 2.541 11.324 2.541 11.324
Cash at bank and on hand 61.987 56.775 43.886 37.040
TOTAL CURRENT ASSETS 469.783 419.571 291.909 260.061
TOTAL ASSETS 571.891 542.771 383.303 356.582

38
Balance sheet as at 31/12
Liabilities and Shareholder’s Equity

Group Consolidated

EUR ‘000 2006 2005 2006 2005

SHAREHOLDER’S EQUITY
Share capital 15.423 15.414 15.423 15.414
Share premium - - - -
Retained earnings 166.338 144.151 166.338 144.151
TOTAL SHAREHOLDER’S EQUITY 181.761 159.565 181.761 159.565

EXTERNAL SHAREHOLDERS 74.073 87.426 1.845 1.814

PROVISIONS
Deferred taxes 217 204 217 204
Pension obligations 3.904 3.217 3.386 2.578
Other provisions 26.342 22.872 11.850 11.142
TOTAL PROVISIONS 30.463 26.293 15.453 13.924

LONG TERM LIABILITIES
Bank loans 38.885 42.090 34.329 38.394
Mortgage debt 28 38 28 38
Leasing commitments 1.058 188 - 188
Other loans - 1.196 - -
TOTAL LONG TERM LIABILITIES 39.971 43.512 34.357 38.620

CURRENT LIABILITIES
Bank loans 46.891 41.523 25.006 20.848
Short term part of mortgage and other loans 3.369 10.748 3.369 10.748
Trade payables 112.285 78.761 61.676 45.610
Payables to associated companies - - 3.580 1.943
Payables to related parties - 11.750 - 11.750
Tax payable 7.726 3.563 6.471 2.344
Other liabilities 75.352 79.630 49.786 49.416
TOTAL CURRENT LIABILITIES 245.623 225.975 149.888 142.659
TOTAL LIABILITIES AND PROVISIONS 316.057 295.780 199.698 195.203
TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES 571.891 542.771 383.303 356.582

f inancia l resu lt

39
H E A lT H , S A F E T Y & E N V I R O N M E N T

200
200

Environmental report 2006 180
180

160
160

140
140

120
120
2002
2002 2003
2003 2004
2004 2005
2005 2006
2006

Protecting health, safety and the Total waste in kg per tonne paint manufactured
environment is an integral part of
Hempel’s business strategy, and pre-
44
44 100
venting accidents, reducing waste 100
and improving energy efficiency are 42
42 80
80
of vital importance.
40
40
Our associates are key to this 60
60
endeavour – and in 2006, all Hemp- 38
38
el production units submitted data 40
40
36
36
used to monitor and document our
34 20
20
key performance indicators (KPIs). 34
32
32 00
Waste 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 22
Worldwide in 2006, Hempel pro-
duced approximately 33 kg of waste
per tonne of paint produced, a Hazardous waste in Kg per tonne product manufactured
reduction of 1.5% compared to last
year. This is the result of our ongo- 20
20
20 20
ing focus on waste reduction.
Total waste comprises both haz-
15
15
ardous and ordinary waste. The 18
18
main ordinary waste streams at
10
10
Hempel sites are wood, paper and
plastic. Hazardous waste includes 16
16
all kinds of waste classified as haz- 55
ardous under the laws of the coun-
tries where the waste is produced. 14
14 00
Hazardous waste accounts for 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 22
approximately 47% of the total
waste produced, and the reduction
from 2005 to 2006 figures amount- Total energy in kWh per tonne product manufactured
ed to 5% less. This number is con-
sidered satisfactory especially given
200
that individual countries continue to
extend their lists of hazardous
wastes. In effect, volumes of hazard- 180

ous waste can increase just by iden-
A nnua l R eport 2 0 0 6

tification of new items as waste, 160
without changes in the actual waste
volumes produced at sites. Regard- 140
less of this development, all Hempel
companies will continue working to 120
further reduce the amount of waste 2002 2003 2004 2005 2006
produced, and to increase recycling.

40
44
Health, Safet y and Environment Indicators 2006 Energy consumption
Energy consumption at Hempel
Total waste in kg* 33.23 decreased by 14% per tonne from
2005 to 2006. The main sources of
Hazardous waste in kg* 15.73
energy are electricity, gas and oil.
Total energy in kWh* 125.76 These are combined and converted
Index number of accidents 28 as a whole into kWh per tonne of
paint produced. The reduction in
Accidents per 1 million working hours 7.2 energy consumption shown is attrib-
*per tonne of product produced
uted to the improved economy of
scale achieved by the increases in
Hempel’s overall annual production.
2006
2006
Accidents
In 2006, the number of accidents
INDEX Number of accidents resulting in one or more days’
absence from work totalled 28
across the group. This figure is high-
100
100 er by one than the figure for 2005.
Our corporate LTI (Lost Time Inci-
80
80
dents) figure of 7.2 injuries per 1
60
60
million working hours will be chal-
lenging to improve on in future
40
40 years. Reducing accidents however
is a top priority for Hempel, and the
20
20 various companies will be enhancing
their training efforts to help our
00
2006
2006 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 employees protect their safety, fol-
low procedures and avoid hazardous
actions. It is possible – and neces-
Accidents per 1 million working hours sary – to further reduce the number
of accidents at Hempel. I
20
20

15
15

10
10
hse in detai l s

55

00
2006
2006 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006

41
Q & H S E - P roducts

Quality & Health, Safety
and Environment

documenting our compliance with
international and local environmen-
tal regulations, Hempel Indonesia
achieved ISO 14001 certification.
Indonesia now joins Singapore and
Malaysia as countries covered by
our multi-site certificate in Asia
Pacific.
In Northern Europe, Hempel’s
multi-site certificate also now covers
Germany, the Netherlands and Bel-
gium, in addition to eight countries
previously ISO 14001 certified.
Several other Hempel companies
are ISO 14001 certified, which has
led to savings from recycling initia-
tives, waste reduction and resource
use minimisation, in addition to our
securing documentation of compli-
ance with environmental legislation.

REACH – New chemicals
legislation in Europe
On 18 December 2006, the Euro-
Hempel Singapore Laboratory It was a proud Regional Quality and pean Council passed new chemicals
achieves ISO 17025 certification HSE Products Manager who accept- legislation known as REACH (Regis-
Thanks to a tremendous team effort, ed the award on behalf of Hempel tration, Evaluation and Authorisation
Hempel Singapore achieved ISO Singapore at the Singapore Accredi- of Chemicals). The new legislation
17025 certification on 16 August tation Council’s Annual Awards Pres- enters into force on 1 June 2007.
2006. While all Hempel laboratories entation on 19 October 2006. HEMPEL is dedicated to comply-
A nnua l R eport 2 0 0 6

follow our internal standards – as ing with the rules and regulations
well as ISO 9001 requirements for Environmental certification for covering our operations. We are fully
calibration and documentation – Hempel in Indonesia, Germany, committed to working with our cus-
the ISO 17025 certification was a the Netherlands and Belgium tomers and suppliers to secure ade-
specific requirement from Australia, Further strengthening our commit- quate and timely compliance with
which is supplied from Hempel Sin- ment to minimising the environmen- REACH. I
gapore. tal impact of our operations and

42
43
input to A nnua l R eport 2 0 0 6
H E M P E L’ s M A I N S A L E S O FF I C E S

Argentina France Peru
sales@ar.hempel.com sales@fr.hempel.com omo@pe.hempel.com
+54 (11) 4816-3137 +33 (0) 344082890 +51 (1) 242 1683

Australia Germany Poland
smel@au.hempel.com sales_marine@de.hempel.com hempel_poland@pl.hempel.com
+61 (03) 93600933 +49 41 01 707 0 +48 (58) 5218900

Bahrain Greece Portugal
+973 17 728668 sales@gr.hempel.com sales@pt.hempel.com
+30 (210) 4143400 +351 212 352 326
Belgium
sales@be.hempel.com Hungary Qatar
+32 (03) 2206160 general.hu@hu.hempel.com hempelqa@qatar.net.qa
+36 (1) 411 1090 +974 4600881
Canada
hempel@us.hempel.com Iceland Romania
+1 (604) 273-3200 slippfelagid@slippfelagid.is office@rohema.net
+354 5888000 +40 788 000781
Chile
sales@cl.hempel.com India Russian Federation
+56 32 2 639006 hempel@vsnl.com moscow-office@ru.hempel.com
+91 (22) 25559910 +7 (495) 974 1448
China, People’s Republic Of
hhh@hk.hempel.com Indonesia Saudi Arabia
+852 28577663 hempel_indonesia@id.hempel.com hempelsa@sa.hempel.com
+62 21 884 3385 +966 (03) 8471616
Corporate site
hempel@dk.hempel.com Ireland Singapore
+45 4593 3800 sales@uk.hempel.com info@sg.hempel.com
+353 (1) 8261822 +65 67998383
Croatia
hempel-umag@email.htnet.hr Italy Slovakia
+385 (052) 741777 it_sales@it.hempel.com HEMPEL (Czech Republic) S.R.O., Branch
+39 (010)- 8356947 +421 455 400 290
Cuba
hempelcuba@hempel.co.cu Korea, Republic Of Spain
+53 (7) 8668128/8668144 sales@kr.hempel.com general@es.hempel.com
+82 (051) 647 5854 +34 937130000
Cyprus
sales@cy.hempel.com Kuwait Sweden
+357 (25) 385873 kw_sales@kw.hempel.com sales.se@se.hempel.com
+965 4813366 +46 (31) 695250
Czech Republic
general.cz@cz.hempel.com Latvia Syrian Arab Republic
+420 545 423 611 +371 (7) 336688 +963 11 2315402

Denmark Lithuania Taiwan, Province Of China
hempel.dk@dk.hempel.com +370 (5) 249 0567 info@tw.hempel.com
+45 45933800 +886 (2) 2706-5535
Malaysia
Ecuador info@my.hempel.com Thailand
sales@ec.hempel.com +60 3 7845 3037 info@th.hempel.com
+593 (4) 2111444 +66 (2) 260 3325/7
Malta
Egypt sales@mt.hempel.com Turkey
hempel@tedata.net.eg +356 21 822268 hempel.tr@tr.hempel.com
+20 2736 4638 +90 (216) 585 1010
Morocco
Emirates hempelmaroc@menara.ma United Kingdom
hempelae@eim.ae +212 22 355373 sales@uk.hempel.com
+971 (06) 5283307 +44 (01633) 874024
Netherlands
Estonia sales@nl.hempel.com United States Of America
A nnua l R eport 2 0 0 6

estonia-office@ee.hempel.com +31 (0)10 4454000 hempel@us.hempel.com
+372 6398793 +1 (936) 523 6000
Norway
Finland sales@no.hempel.com Vietnam
sales@fi.hempel.com +47 55958000 sales@vn.hempel.com
+358 (0) 207-590800 +84 (8) 910205

go to www. hempe l . com to see the f u l l l ist

44
Annual Report 06
HEMPEL A/S
Annual Report 06

Design, production and print: Datagraf AS
Lundtoftevej 150
DK-2800 Kgs. Lyngby
Denmark
Tel: +45 45 93 38 00
Fax: +45 45 88 55 18
www.hempel.com

HEMPEL