Still, the cash position of the Group improved. At year-end, the Group had a
positive cash position of NOK 3 388 million compared to NOK 2 956 million
as of 31 December 2020.
The Group continued to invest in production capacity and R&D facilities
in 2021, with total investments amounting to NOK 1 363 million compared
to NOK 1 407 million in 2020. Investment activities have mainly been
related to investments in new production facilities in Egypt and Vietnam,
construction of a new regional headquarter and R&D facility in Dubai and
facility upgrades in Norway.
The net interest-bearing debt for the Group was NOK 1 807 million as of 31
December 2021, compared to NOK 1 514 million as of 31 December 2020.
The increase in net interest-bearing debt is primarily driven by short-term
borrowings in the subsidiaries to finance working capital needs. At yearend,
Jotun A/S had NOK 2 540 million in outstanding bonds, of which NOK
640 million was short-term. In addition, Jotun A/S had NOK 408 million in
bank debt outstanding, of which NOK 163 million was short-term. External
borrowing in the subsidiaries is primarily short-term and through local
banks.
Jotun A/S has NOK 1 600 million in long-term credit lines and NOK 400
million in short-term credit lines. This committed funding serves as a
strategic reserve for financing of the Group as well as a backstop for shortterm
certificate loans. At year- end, these credit lines were unused.
The Group’s equity ratio was 53 per cent at the end of the year as compared
to 54 per cent in 2020. The Group is in a strong financial position.
In its regular business operations, Jotun is exposed to financial risks
relating to customer credit and fluctuations in raw material prices, currency
exchange rates, and interest rates. Procedures and guidelines for managing
these risks are established in the Jotun’s Treasury policy. The Group primarily
manage financial risks through their normal operations, for example, by
increasing prices, when possible, to compensate for higher raw material
costs and utilising credit management systems to reduce credit risk.
In addition, the parent company Jotun A/S hedges currency risk related to
net cash flows in foreign currencies using forward contracts, options, and
foreign currency loans. Currency risk related to the parent company’s net
investments in subsidiaries, associates, and joint ventures, is generally not
hedged. Jotun’s procedures and measures are considered satisfactory in
relation to the Group’s exposure to financial risks.
In accordance with section 3-3a of the Norwegian Accounting Act, the
Board confirms that the Group fulfils the requirements necessary to operate
as a going concern, and that the 2021 financial statements have been
prepared on the basis of this assumption.
3. THE MARKETS
Decorative Paints
Despite continued margin pressure and easing profitability, Jotun achieved
double-digit sales growth in the Decorative Paints segment, resulting in the
second-best earnings in the company’s history. Government responses to
the coronavirus pandemic impacted sales of interior and exterior decorative
paints in different countries at different times in 2021. For example, in
the Middle East, border closures created labour shortages resulting in
project delays early in the year, followed by a robust recovery when travel
restrictions were eased. In South East Asia, sales growth momentum in
the first months of the year were slowed by movement control orders
implemented in the spring. In Scandinavia, sales growth was flat compared
to the record volumes experienced in 2020, while in Turkey, Jotun achieved
record profitability.
Despite challenging circumstances, the company continued to develop and
launch innovative, regionally focused products. To reach key stakeholders
stuck at home, Jotun utilised digital tools and social media engagement. In
some markets, Jotun invited architects, designers, and dealers to “pop-up”
shops, which featured digital presentations of new products or Jotun’s 2022
Global Colour Trend Collection, “Together.” The company also continued to
work with social media influencers and encouraged user-generated content.
Protective Coatings
Despite challenges related to the coronavirus pandemic, Jotun achieved
record-high sales the Protective Coatings segment. Growth has been driven
by success in all regions where Jotun is active, including China, where Jotun
is the market leader. While gross margins were impacted by high raw
materials costs, the company’s implementation of price increases and a
focus on controlling manageable costs helped the segment achieve modest
year-end profits. The strong results were supported by double-digit sales
through dealers.
To accelerate growth in the infrastructure market, Jotun will leverage its
R&D expertise in specialised intumescent coatings and provide stakeholders
the products and data needed for “green building” certification. Jotun will
continue to pursue contracts in oil and gas industries, with a special focus
on maintenance projects in the hydrocarbon processing industry. Jotun has
also identified opportunities in the growing wind energy sector, where the
company has developed “single-source” coatings solutions.
Jotun anticipates that sales growth in the Protective Coatings segment will
continue in 2022, but profitability is likely to be impacted by persistently
high raw materials prices, at least in the first half of the year. Nevertheless,
the segment is a strong position to accelerate growth in the years ahead.
Marine Coatings
The pandemic has disrupted the shipping industry, creating challenges
for Jotun Marine Coatings in 2021. Rising steel prices have depressed
newbuilding orders and soaring freight rates have encouraged many
owners to postpone scheduled maintenance to keep vessels in service.
Despite these challenges, the organisation performed well in a difficult year.
Thanks to the hard work of the organisation, Jotun’s focus on the seastock
and drydock business helped offset losses in the newbuilding market.
Jotun’s global presence also helped the company mitigate business risk. For
example, positive growth in the Middle East, South East Asia and Turkey
partially helped to make up for some of the losses the company experienced
in West Europe and North East Asia, two of Jotun’s most important markets.
Global supply chain disruptions are likely to persist into 2022. The shipping
industry is facing increasingly strict global and regional regulations on
emissions. To help customers meet this challenge, Jotun has taken steps to
Board of Directors
10 I Jotun Annual Report 2021
Back to contents >