hempel group annual report 2010-11

Annual Report 2010/11

“By remaining curious, creative and self-critical, we can embrace change and create even more value for our customers.”

Pierre-Yves Jullien Group President and CEO

Introduction to the Hempel Annual Report 2010

For Hempel, 2010 was a busy year in which we fixed our sights on growth and managed to gain some real momentum in our target markets. Despite the high prices of raw materials and the low activity in some of our key markets, we managed to return a positive result. After successfully delivering on our previous strategy, we launched our new strategy, One Hempel – One Ambition, with the full support of the Board of Directors of Hempel A/S and our shareholders in December. And, by the end of the year we delivered our best net profit result ever.

Opening new factories in China and Poland improved our supply chain and helped us to deliver an even better service to our customers in these highly competitive markets. And, with growth on the agenda, we laid plans for four major new production facilities: in Russia, Argentina, India and Saudi Arabia.

It was a busy year for introducing innovative products at Hempel. We launched a range of eco-friendly waterborne coatings capable of out-performing solvent-based coatings. We extended our R&D facilities in Barcelona and France, enabling us to deliver solutions quickly to customers who need to meet

ever-changing environmental legislation. And our new Hempasil X3 package helped Marine customers consume less fuel, bring down their carbon footprints, and measure their savings.

During the year, we worked on many challenging and rewarding projects with our customers in Decorative, Protective and Marine, including the delivery of decorative coatings for seven new skyscrapers in Qatar. And we continued to win awards and prizes all over the world for the innovation, sustainability and quality of our products and services.

For many of us, our work didn’t stop at the end of office hours. Many Hempel employees continued to volunteer their spare time, helping out on projects to improve the education and welfare of children in some of the world’s poorest regions.

You can read these stories, and more, in this year’s Annual Report. However, to experience the year at Hempel in all its richness, take a look at our interactive Annual Report, which brings our stories to life with videos, images and sound. Simply go to www.hempel.com and click on the link to the Annual Report 2010.

What we do In the top ten by 2015 02

The official strategy launch 03

Highlights from 2010 06

Decorative 08 High performance solutions for interiors and exteriors

Protective 10 Protecting customers’ investments

Marine 12 Products and services for the marine industry

Container 14 Advanced solutions for the container industry

Yacht 15 A full portfolio of products for sailing enthusiasts

About Hempel CEO statement 16 Fast response, consistency and a strong future

About Hempel 18 World-leading coatings supplier

Health, Safety and the Environment 19

Corporate Social Responsibility 20

The Hempel Foundation 21

Hempel Management Team and Board of Directors of Hempel A/S 24

Financials Performance in 2010 25

Introduction to the 2010 financial results 26

Key figures 2010 27

Profit & loss account 28

Balance sheet 29 Assets as at 31 December 2010

Balance sheet 31 Liabilities and shareholders’ equity as at 31 December 2010

List of subsidiaries 32


WHAT WE DO | ABOUT HEMPEL | FINANCIALS

Our strategy One Hempel – One Ambition will enable us to gain market share and grow sales by focusing on three core businesses:

Decorative, Protective and Marine Maintenance

As the coatings industry continues to change, with customers and suppliers becoming larger while operating costs continue to rise, Hempel needs to generate larger volumes to compete. We did the groundwork with our previous strategy One Hempel – Everywhere, successfully aligning our internal processes, improving our skills and capabilities with focused training programmes, and standardising our technology and operational systems. As a result, we managed to raise efficiency across every function in our organisation. And, despite the economic downturn, we made sure our company remained financially secure.

Our new strategy, One Hempel – One Ambition, will propel us into the world’s ten largest coatings suppliers by 2015. Launched in December 2010, the new strategy was quick to gain momentum, and we were already reaching some early milestones in the first quarter of 2011. For us, implementing our new strategy is a bit like building a house. With the foundation in place, thanks to our previous strategy, we can work on constructing the rest of the house. We start with five pillars: a sequence of focused projects across five key organisational functions. On completion, the pillars will provide solid support for the house’s roof structure: our company’s three core segments, Decorative, Protective and Marine Maintenance, enabling Hempel to take its place among the world’s ten largest coating suppliers.

In the top ten by 2015


High noon, 16 December 2010: the strategy is go! Everyone at Hempel, wherever they were in the world, came together to launch our new strategy, One Hempel – One Ambition.

Built on the solid foundation of One Hempel – Everywhere, our new strategy aims to put Hempel in the world’s top ten largest coatings suppliers by 2015. The official strategy launch gave everyone at Hempel the opportunity to take ownership of the new strategy and discuss how they would set about moving toward the goals together. On pages four and five, you can see a little of what went on at some of the strategy launch gatherings around the world.

From launch to implementation “These aren’t just grand plans from top management,” says Klaus Møller, Group Vice President, Marketing & Business Development. “Everyone at Hempel is keen to build on what we’ve accomplished so far.” After the strategy launch, all the ideas were collected, reviewed and the best of them were adopted to help us turn the new strategy into everyday business activities for everyone at Hempel.

The official strategy launch

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4 Annual Report 2010/11

New advanced factories in Poland and China Our two new production facilities may be thousands of kilometres apart,

but when it comes to efficiency, and the ability to meet growing demand

for advanced coatings, they stand side by side.

High capacity and low emissions in PolandThe first batch of coatings rolled off

the production lines at our new factory

in Buk, Poland, in April 2010. With low

emissions and no industrial waste water,

the factory’s environmental impact is

minimal. The factory also features an

automatic materials handling system that

all but eliminates strenuous manual work for

the people who work there. With a capacity

of 40 million litres a year, our Buk factory

is helping us meet the demand for

advanced coatings in Europe.

Huge capacity and strong R&D focus in ChinaWith its integrated R&D facility and capacity

of 55 million litres a year, the new factory

in Guangzhou is our largest to date – and is

already helping us meet increasing demand

for our coatings in China. Yet, despite its

enormous production capacity, the plant’s

carbon footprint is low, and it produces no

industrial waste water. The factory has an

automatic batching system that reduces dust

emissions and minimises the need to handle

powders manually, and a recovery system

that recycles solvents for future use.

These stories show our new

strategy in action. By the end

of 2010, we were already

working toward achieving our

goals and propelling Hempel

into the world’s top ten largest

coatings companies by 2015.

Highlights from 2010


Waterborne coatings out-perform solvent-borne coatingsHempel’s EcoBoxcoat line of fully waterborne

products promises to revolutionise the

coating industry – meeting fast line speeds,

reducing volatile organic compounds and

maintaining the anticorrosion benefits of zinc.

Our EcoBoxcoat products can substitute

for solvent-borne coatings currently used

at modern container factories in China that

operate at line speeds as high as three to

four minutes – too high for conventional

waterborne coatings. EcoBoxcoat’s plug

and spray approach meets line speed

requirements, is better for the environment

and matches or surpasses solvent-borne

coatings on anticorrosion protection and

aesthetic performance.

Yacht matches offerings to market needs Yacht continued to meet customer needs

with innovative new products in 2010, such

as Mille Baltic and Mille Performer, antifouling

coatings developed specifically to meet the

strict environmental requirements on the

Swedish east coast.

2010 saw the launch of three new boatcare

products that help boat owners with the

long-term maintenance of their boats: Bilge

Clean, Mildew Remover and Barnacle Remover.

And, with our entire product range and service

offerings available throughout Europe for the

first time, our European network of Hempel

Ambassadors continued to offer us valuable

feedback on Hempel products, contributing

to a series of successful product launches

throughout the year.

Explorer – Next Generation is part of reaching our ambitionWe know that Hempel’s strongest and most

important resource is our people. Not only

will we need to take on a significant number

of people over the next few years to meet

our plans for growth, we will also identify

and develop the talent we already have. That

is why we recently launched our new talent

programme Explorer – Next Generation.

Created by Hempel’s Human Resources

team, Explorer – Next Generation will not only

help us develop future leaders with specific

strategic capabilities, it will also encourage

a large number of people throughout the

company to develop their leadership skills.

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Our wide range of high-performance products protects homes and buildings around the world, inside and out,

and keeps them looking attractive.

Performance in 2010With a key role to play in our new strategy for growth, Decorative succeeded in living up to the Group’s expectations in 2010 and returned a positive result of nine per cent growth in revenue over 2009. However, there were clear indications that there is room to improve our performance, particularly in Europe.

Decorative worked hard to establish a presence in the Chinese market, achieving growth of more than 22 per cent for the year. Our operations in the Middle East increased in volume, thanks in large part to business activity picking up in Saudi Arabia and Kuwait, and we finished the year with a promising outlook.

Decorative: high performance solutions for interiors and exteriors


Leading the market in the Middle East With new projects in Saudi Arabia, Kuwait and Qatar, Hempel Decorative enjoyed success in the Middle East in 2010. Because there are so many new construction projects in the Middle East, and because Decorative is not yet a mature market in the region, there is plenty of opportunity to grow our business.

One of the most exciting projects of 2010 was the Barwa Al Saad Development Complex in Qatar. Working with Barwa’s main contractor, Midmac Contracting Company, we provided decorative coatings for seven new office, hotel and residential towers. “In all, we supplied more than 300,000 litres of paint for this project,” says Chris Sharkey, Decorative Sales Manager, Middle East East. “And we hope to join Barwa on four more huge development projects in the near future.” While the amount of development in the region is immense, competition is also on the rise. “We’re working closely with our customers and launching new products to make sure we keep ahead of the curve,” says Chris. “So despite the challenges, we’re very energised about our future.”

Know-how and service help capture market share in SpainDespite the worldwide financial crisis and a highly competitive Decorative market, Hempel Spain is seeing a gradual but strong recovery that bodes well for our future. “We’re in a fragmented market with many Decorative manufacturers,” says Joan Maestre, Product Marketing Manager, Europe. “But we are able to take the marketing and product know-how we have from other segments and apply them in Decorative. This is helping us stand out and gain market share.”

Several factors contributed to our recovery in 2010. We worked closely with our customers to develop high-performance, environment-friendly paints. And we widened our range of additional services, such as field training and precision tinting systems. “Our customers recognise the quality and reliability of our paints and other coatings,” says Joan. “And they also trust us to provide full-service support so they can market to their own end-user customers.”

Decorative China wins award for best professional contributionHempel China’s Decorative Division won the 2010 Best Professional Contribution Award from Vanke, a major Chinese property development company. Including a significant cash prize, the award recognised the efforts of our sales staff in providing outstanding customer service.

Hempel employees in Chengdu, China decided to divide the cash between two great causes. The first sum covered the transport costs and expenses of the Chengdu Decorative employees who travelled out to the Szechuan Province to visit and help care for children suffering from congenital heart disease. The second sum was used to help fund team-building activities for all of the Chengdu Decorative employees.

“We’re so proud of the achievements of our team in Chengdu,” says Yanmin Shao, General Manager of Decorative China.

“Not only have they set a benchmark in customer service, they have also demonstrated their generosity and team spirit.”

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All over the world, our products protect man-made structures, including road bridges,

power stations and wind turbines, from the harmful effects of corrosion.

Performance 2010Accounting for more than 40 per cent of the Group’s total revenue, Protective is a major segment for our company in terms of both volume and margin. Once again, our operations in the US paved the way, growing by more than 37 per cent and demonstrating the value of our brand – and our potential in this key market. Protective China continued to fight for market share and achieved double-digit growth by the end of the year.

In Europe, some service issues negatively affected performance. By the end of the year, however, the outlook was more positive, and Russia in particular delivered a good result, living up to the promise it showed in 2009. As a result, we decided to go ahead with plans to build a new state-of-the-art factory outside Moscow, Russia, that will come online in 2012.

In the wake of developments in the region’s oil and gas industry and finance sector, our business in the Middle East slowed down, and a good deal of it was postponed or cancelled. As a result, we undertook a review of our portfolio, looking for ways to extend our customer base and become less reliant on a few dominant accounts. We began a programme of reorganising our operations in Asia Pacific, enabling us to offer our customers even higher levels of service.

We shifted our Protective operations up a gear in India and parts of Africa to cater to a rapidly growing customer base. As the number of projects there continue to rise dramatically, our experienced teams will be on hand to offer high levels of reliable service.

Protective: protecting customers’ investments


Custom solutions meet strict EU standardsAfter a EUR 2 million investment, our extended Barcelona R&D Centre opened in January 2010, enabling us to develop products and solutions faster, respond to customer needs more efficiently and help customers conform to rapidly changing environmental legislation.

“Protective is a major focus at the Barcelona Centre,” says R&D protective specialist Laura Maranges. She and her colleagues work on customisations, new solutions and support to sales and customers. “Many of our projects are to do with the protection of wind turbines,” Laura says. “But we also work with pipes for potable water and gas, storage tanks, machinery, bridges and other infrastructure – and steel structures in general.” Hempel has a strong track record of developing products that meet the needs of our Protective, Decorative and Yacht clients – especially to do with environmental legislation. This is particularly critical for businesses in Europe where legislation can vary from country to country.

Global opportunity with ABBAfter several months of tendering, ABB, the world’s leader in power and automation technologies, confirmed that Hempel was successful and would be invited to participate in the programme of plant improvements that ABB planned to drive throughout its Transformers business worldwide, which included factories in Europe, Americas and Asia-Pacific. ABB’s key objectives were to improve paint line efficiency, reduce VOC emissions and consolidate its supplier base. In addition to our global network and our multinational coordination set-up, that was focusing exactly on the needs of global customers like ABB, one key factor was our ability to put forward very low VOC alternatives, including waterborne and hybrid systems. At the end of 2010, ABB was the most recent of many success stories in which global companies trusted Hempel to assist them early on in the specification phase of their projects, knowing that they would have a reliable partner throughout the entire lifecycle of their assets.

Focus brings success in RussiaSpanning nine time zones and featuring a wide range of environments, languages and cultures, Russia is the largest country in the world. And, with the world’s largest reserves of mineral and energy resources, Russia is both an energy superpower and a major market for Protective coatings. All of these factors make the Russian market complicated – and full of opportunities for us to support our customers’ businesses.

Hempel entered the Russian market in 2004 with a lean, focused assortment, allowing us to maintain the high service levels that our customers expect from the Hempel brand. “We started a domino effect when we entered the market,” says Hempel Russia General Director Stephan Schramm. “Word about our service and products spread fast, and now we are preparing to build a state-of-the-art factory not far from Moscow.” The new factory is due to come online in 2012, enabling us to meet local demand for a wider product range and provide our Russian and CIS customers with an even better service.

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From large crude carriers to river-bound barges, almost every type of marine vessel uses Hempel products.

Comprehensive technical service and training support our extensive range of coatings, including award-winning

Hempasil X3 and all-purpose Hempadur Quattro.

Performance 2010With a revenue exceeding 40 per cent of the Group’s total business, Marine faired well in 2010. Marine Maintenance did particularly well, returning top-line growth of almost seven per cent and showing that our know-how, technology and high levels of service can add real value to our Marine customers’ businesses.

Although newbuilding in China showed signs of rallying by the end of the year, it remained slow in Europe. Most of the world’s newbuilding in 2010 was concentrated in Asia, particularly Korea and China. The market in Korea, however, was extremely competitive, and our newbuilding operations there focused on efficient operations, enabling us to maintain our margins and deliver great service.

Marine: products and service for the marine industry


Hempasil X3 creates waves in the shipping industryThe third generation of our breakthrough fouling release coating, Hempasil X3, continued to guarantee fuel savings, lower CO2 emissions and meet increasingly stringent environmental regulations. And, in 2010, it became available as a three-component package, helping change the way the world fleet operates – for the better.

The new package consisted of X3’s unique hydrogel-based silicone fouling release coating, software for monitoring fuel savings, and Nexus X-Seal tiecoat for one-coat application, straight-forward touch up and quick repairs. “By the end of 2010, Hempasil X3 had already saved our customers more than USD 35 million in fuel bills and reduced global CO2 emissions by 250,000 tonnes,” says Jannik Allentoft, Group Marketing Director.

But that is just the tip of the iceberg. Applied to the entire world fleet, the Hempasil X3 package could save the atmosphere from 90 million tonnes of CO2 a year – the same annual CO2 emission as the whole of Greece.

Sustainability rewarded by the marine industry As demand for sustainable products in the marine industry increased throughout 2010, the outlook for Hempel looked healthy. Products such as Hempasil X3 made a positive impact on the shipping industry’s CO2 emissions and fuel costs in 2010, and sales continued to rise through the beginning of 2011. It would appear that biocide-free products low in VOCs hold a strong appeal for businesses affected by tough environmental regulations. “There were already self-cleaning, fouling release products on the marine market that worked at speeds over 15 knots,” says Peter Thorlaksen, part of the Hempel R&D team responsible for developing Hempasil X3. “But Hempasil X3 is the only product that’s self-cleaning at low speeds, so very few organisms settle on the hull when the vessel is idle.” International organisations have acknowledged Hempasil X3’s environmental credentials with a succession of awards, including the Seatrade Award for the Protection of the Marine and Atmospheric Environment, the Ingeniørens Product Award from the Danish Society of Engineers, the Frost & Sullivan Award for Product Differentiation Innovation of the Year and the Eurocoat Golden Coat Award for the best technical communication of a product. And, in late 2010, Hempasil X3 won the Lloyd’s List DCN Environmental Transport award for initiatives that benefit the environment.

Hempadur Ultra-Strength 47500 wins Innovative Technology AwardHempel won the prestigious “Innovative Technology Award” at the 2010 IBJ Awards ceremony held at the Savoy Hotel in London in November. The marine industry’s leading awards event, the IBJ Awards are organised by the trade publication International Bulk Journal, and are awarded to companies for their contribution to the world’s maritime bulk industry. Hempel was the only coatings supplier nominated in any of the 15 categories. And it was the first time a coatings supplier had ever won the Innovation Technology Award.

We won the award for Hempadur Ultra-Strength 47500, an advanced coating capable of withstanding the brutal conditions of the cargo hold. Whereas other bulk coatings last only two to three years, Hempadur Ultra-Strength 47500 lasts up to 10 years. Longer intervals between coatings simplifies our customers’ maintenance planning and leads to less downtime and lower costs.

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We are one of the leading suppliers of coating solutions to the container industry, with most of our activity concentrated in the

Asia-Pacific region, particularly China.

Performance 2010After almost disappearing in 2009, Container made a comeback in 2010, producing around 2.5 million TEU (twenty-foot equivalent units) compared to 0.2 million TEU the year before. This made a positive impact, accounting for 7.5 per cent of the Group’s total business by the end of the year.

The 2010 market was competitive, and our team in China worked hard to raise their professionalism, putting our Container operations firmly back on the map.

Container: advanced solutions for the container industry


Yacht: a full portfolio of products for sailing enthusiasts

Our Yacht segment covers all types of pleasure and racing boats, from small motor boats to large racing yachts.

Performance 2010With almost all of our business in Europe, Yacht remained steady in 2010, achieving growth of nearly seven per cent. By the end of the year, there were further opportunities for modest growth in specialist markets, mostly in France and Italy.

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When we presented the Board of Directors of Hempel A/S with our new, ambitious strategy for growth in September 2010, they approved it unanimously. The support of our boards was a testament to our company’s achievements in the last five years, and has put us in control of our own destiny. Now, we are destined for growth.

Size mattersThe world – and the coatings industry – is changing fast and, in such a business environment, size matters. That’s why we need to grow our business and become one of the world’s top ten largest coatings companies by 2015. It’s an ambitious goal, but I believe we have the people, the competencies and the financial solidity to achieve it.

Hempel’s performance in 2010In spite of a slow start to the year in the Middle East and Europe and a new wave of increases in the cost of raw materials, the Group came close to achieving all of its key objectives, and delivered an acceptable financial performance. And, with turnover picking up momentum during the last quarter of 2010, we had grounds for cautious optimism as we entered 2011.

CEO statement:

Fast response, consistency and a strong future

“By remaining curious, creative and self-critical, we can embrace change

and create even more value for our customers.”


Focus – and a fast responseThe Group returned a double-digit EBIT in 2010, proving that even in a challenging business environment, we can control our costs, anticipate changes in the market and react fast. This has enabled us to realise our long-term plans for investment: our new factory in Poland, which came online in April 2010, is already playing a key role in helping us deliver a great service to our European customers. And our new factory in China – the largest we have ever built – opened in December. Its huge capacity, integrated R&D facility and low carbon footprint put our Chinese team in a very strong position to meet growing demand for our coatings and, again, provide the kind of excellent service our customers won’t forget.

Decision and implementationOur US teams showed admirable consistency when they reacted to a rapidly changing market in 2009. They looked for – and found – new customers, and took an innovative approach in introducing our existing portfolio into new markets. In 2010, the entire Group began to notice the results of their efforts, which led to impressive growth and put Hempel back on the map in the US.

In India, our new team managed to get operations off to an impressive start. By the end of 2010, production there was close to coming online, and our Indian staff were showing the rest of our company what can be achieved in a short time with commitment and focus; because in the present business climate, there is only room for new operations that are planned with care and carried out with speed and determination.

By remaining curious, creative and self-critical, I am confident that we can stay agile enough to embrace change and create even more value for our customers.

Strong futureIt became clear in 2010 that the financial crisis had changed the world’s markets for good. But it’s worth remembering that a crisis is a point in time, not a period of time. That particular crisis is over, and now it’s time to take stock of the changes, accept the difficulties and adjust to new market demands – fast. We are financially sound and we enjoy the full support of our boards and shareholders – two factors crucial to funding our plans for growth, enabling us to be first with new products, new services and new ways of supporting our customers’ businesses all over the world.

I would like to extend my warmest thanks to everyone at Hempel – particularly those involved in shaping our new strategy. The work was detailed and painstaking, but now we can face the future with a clear idea of what success for our company looks like in 2015 and, more importantly, how we will get there. I would also like to express my gratitude to all of our customers, business partners and stakeholders who stayed loyal, challenged us and helped us become even better at what we do in 2010.

Pierre-Yves JullienGroup President and CEO

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Hempel – world-leading coatings supplier for decorative, protective, marine, container and yacht markets.

Think of the world’s great suspension bridges, civic architecture, skyscrapers… Hempel coatings are helping keep these kinds of big investments safe and beautiful for longer. From R&D and production to professional coating applications, Hempel is helping protect the long-term value of customer assets against corrosion. Low in solvents and biocides, big on value and sustainability, our high-performance waterborne coatings help customers hit their environmental targets; and our advanced marine coatings can help shipping companies save fuel and reduce the carbon footprint of their ocean-going vessels.

Our 3,600 employees live and work in more than 80 countries around the world. And, with 20 factories, 48 sales offices and more than 150 stock points, we make sure our customers enjoy great service wherever they are.

About Hempel


State-of-the-art factories, global commitment.

Hempel has long been dedicated to excellence in HSE, and 2010 was no exception. While continuing our commitment to health and safety across our organisation and product portfolio, we’ve also made some exciting advancements in environmental performance, including the opening of two new factories in Poland and China. With innovative energy and waste conservation features – including solar power and in-plant wastewater treatment – these state-of-the-art facilities represent the future of Hempel and our investments in HSE. The drive to inspire best practices across our organisation culminated in Hempel’s first ever HSE competition. The aim of this competition was to challenge our factories to create new, effective safety or conservation measures.

Every single Hempel factory around the world participated, which is possibly the most compelling indicator of our global commitment to HSE.

With some truly outstanding contributions, including new ideas for recycling, cleaning equipment, waste reduction and installation redesign, our first HSE competition was an inspiring success.

See the winning ideas and more about Hempel’s HSE commitment in our Group Environmental Report 2010/11 at www.hempel.com.

Health, Safety and the Environment

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As a global company with operations in different countries encompassing many cultures all over the world, we endeavour to create a workplace for our people that is safe, healthy and

diverse – and respects local differences.

We believe that as a coatings company, we need to do everything in our power to protect the environment while adhering to sound business practices. We consider complying with local and international legislation to be the bare minimum of our operational objectives. We also work on developing sustainable coating solutions to reduce the environmental impact of our customers’ businesses, and strive to minimise the environmental footprint of our own operations around the world.

We also believe that the success, future growth and reputation of our company depend on high business standards. These are outlined in our Code of Conduct, which is available in eight languages on our website – and is mandatory reading for every Hempel employee. But corporate responsibility is about more than good business practice. It is also about contributing to the communities in which we work. That is why we, through the Hempel Foundation, give back to society, by supporting projects for the common good around the world.

At Hempel, we have good reason to be proud of our people and how they do business.

Find out more Read more about our Code of Conduct and our commitment to environmental sustainability in our Group Environmental Report 2010/11 at www.hempel.com

Corporate Social Responsibility


The main purpose of the Hempel Foundation is to own, secure and provide a sound economic basis for the continued existence and development of the business carried out by the Hempel Group worldwide.

The Hempel Foundation also supports charitable projects of a cultural, humanitarian and scientific nature around the world, especially if they help meet the world’s environmental and poverty challenges. To make this contribution as effective as possible, the Foundation focuses on two key issues: the education of children in need, and research into environmentally sustainable technologies. With these international projects, the Foundation strives to do what it can to help make the world a better place. This annual report highlights projects in China, Argentina and Cambodia. You can read about other Hempel Foundation projects at www.hempelfoundation.com

Viggo Kragh-Hansen’s portrait of J.C. Hempel,

currently on display in the foyer of Hempel’s head office, Denmark.

The Hempel Foundation

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School project in Battambang, CambodiaCambodia is one of the world’s poorest countries, so its children are in desperate need of a good education. Through SOS Children’s Villages, the Hempel Foundation co-supported the building of a school outside of Battambang and contributes to the running of the school every year.

More than 500 children in need receive an education at the school, giving them the opportunity to create a brighter future for themselves – and for Cambodia.

SOS Children’s Village in Lujan, ArgentinaDespite being a member of the G-20 economic forum, nearly 14 per cent of Argentina’s population lives below the poverty line – and it is their children that suffer most.

The SOS Children’s Village in Lujan, just outside Buenos Aires, offers orphaned and vulnerable children the chance to be part of a new family, and receive all the love, care and education they need. Only 20km from Hempel’s office, the SOS Children’s Village gives our employees the opportunity to volunteer their spare time, if they wish.

SOS Children’s Village in Chengdu, ChinaThe feeling of belonging is essential for a child’s well-being and ability to learn. In the SOS Children’s Village in Chengdu, the Hempel Foundation funds a family house where eight children live with their SOS mother and new brothers and sisters. The caring and attention the children receive in a truly nurturing environment gives them every opportunity to grow and learn.

The Children’s Village is close to the Hempel office, and local Hempel employees volunteer their spare time to visit the children regularly and help out.

Projects supporting the education of children in need

The most effective tool against poverty is education, which makes

long-term, sustainable development possible for people and the

communities in which they live. Although there is general agreement

that societies cannot develop and prosper without education, millions

of children in the world today still lack even the most basic education.

Projects supported by the Foundation aim to give children the opportunity to

build a better future for themselves, their society and, eventually, their own

children. However, the Foundation would like to do much more, and in 2011 it will support even more

education projects around the world, giving many more children

the chance of getting off to a good start in life.


Volunteers from each Hempel region visit SOS Children’s Villages school in CambodiaFive employees, each representing a different region of the world, went on a week-long visit to the SOS Children’s Villages school in Cambodia to see for themselves the positive impact of Hempel Foundation charity work. During the week, the five visitors talked to the children about the traditional dances, games and stories from their own cultures; they cooked a typical meal from their respective countries; and they built a playground in the school yard.

Hempel employees volunteer at SOS Children’s Village in Chengdu, ChinaWhen employees from our office in Chengdu realised what poor condition the buildings were in at the SOS Children’s Village in Chengdu, they decided to help out. In a series of visits, they gave three key buildings a face-lift, cleaning up and painting the common spaces where the children sing and play every day.

“I feel proud to be part of a company that is making a big effort to give kids and their families hope and progress through education.”Marcela Ferrario Hempel USA

“In Cambodia, I realised how unstable the living conditions are. I saw many poor families with their children – how they feel and suffer.”Saleem Al-Taha Hempel Saudi Arabia

“This journey to Cambodia gave us the opportunity to witness and contribute to the actual work being done to help elevate the living standards and the education of children in need.”Sofia Mavropoulou Hempel Greece

“We went to Cambodia to help at the SOS Children’s Village school. However, I think we got more in return. That’s what volunteering and charity are all about.”Kelly Kim Hempel Korea

Our volunteersBeing a responsible corporate citizen goes beyond policies and projects. It’s about making Corporate Social Responsibility (CSR) part of the mindset of everyone at Hempel. One of the ways we achieve this is by encouraging our employees to volunteer their time to the causes that mean most to them. Not only do the volunteers help those in need, they also get some great learning experiences, underlining the importance of actively taking responsibility for the world in which we live.

During 2010, a few fortunate Hempel employees had the opportunity to visit Hempel Foundation projects in Cambodia and China and get to experience first hand the rewards of making a positive difference to people’s lives.

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Executive Group Management Team (EGMT)

Pierre-Yves Jullien Group President and CEO

Kim Junge Andersen Group Executive Vice President and CFO

Jacob Gulmann Group Vice President, Europe

Peter Kirkegaard Group Vice President HR,

Services and Compliance

Group Management Team (GMT)

Lars Johansen Group Vice President, Americas

Mark Rees Group Vice President, Middle East East

Karsten Pedersen Group Vice President, Middle East West

Jesper Bødtkjer Group Vice President, IT

Klaus Møller Group Vice President,

Marketing & Business Development

Plus the members of the EGMT

Functional Management Team (FMT)

Søren Hansen Group Director, Production & Engineering

Christian Aage Group Technical Service Director

Jannik Allentoft Group Marketing Director,

Marine and Protective

Gruska F. Musaeus Group Director, Compliance Management

Tom Froberg Group General Counsel

Arne Bachmann Olesen Group Procurement Director

Malte V. Eggers Group Communication Director

Lillian B. Stephensen Group Director, Tax

Alain Gunther Group Treasury Director

Josep Palasi Group Director, Technology & Innovation

Martin Engelmand Olsen Director, Group Reporting

Bente Mølgaard Group CSR Director

Umesh Chandra Singh Regional Director, South Asia

Plus the members of the EGMT and GMT

Hempel’s management teams

Richard Sand Chairman

Lars Aaen Vice Chairman

Ulf Lennart Holm

Anders Pettersson

Peder Holk Nielsen

Søren Nyborg Rasmussen Employee Representative

Louise Krüger Kofoed Employee Representative

Henrik Bach Falkenberg Employee Representative

Board of Directors of Hempel A/S

The company has three main management teams: the Executive

Group Management Team (EGMT), the Group Management Team (GMT) and

the Functional Management Team (FMT). Below, you can see the members and

positions of each team member.


Following the downturn in the global economy, in 2010 Hempel focused on ‘resisting and preparing for the future’ – a future that called for growth. Thanks to a combination of strategic acquisitions and significant growth in Asia and the Americas, Hempel’s revenue grew by eight percent – an improvement on the previous year, and the rate of growth increased toward the end of the year. Operating profits and liquidity were positive, adding up to a satisfactory result for 2010.

The Hempel Group achieved a total revenue of EUR 889 million in 2010 (2009: EUR 826 million). While some of this increase was due to the return of Container business in China, our company achieved positive growth across every segment. In the last quarter of 2010, our company gained momentum, particularly in top-line performance, to finish the year in a good position, and with a firm platform for growth in 2011.

Once again, raw material prices continued to increase throughout 2010, putting pressure on our gross profits and margins. Despite higher sales, our company’s gross profits ended at the same level as in 2009 and, with the price of raw materials remaining high at the end of 2010, there was no sign of a let up in the pressure on our gross margins going into 2011. As a result, the Group began 2011 by revising selling prices across our entire portfolio.

Our company returned an operating profit of EUR 92 million in 2010 (2009: EUR 92 million). Once again, operating profits were affected by the cost of restructuring production facilities in Europe and Asia. Adjusted for these non-recurring items, Hempel delivered a decent operating margin of 11 per cent.

Hempel returned a net profit of EUR 53 million in 2010 – significantly higher than last year, and a record high for the Group. This was partly a result of acquiring additional shares in Middle East at the beginning of 2010, leaving a lower proportion of the profit to minority shareholders.

Performance 2010

25


The following financial data show a condensed release of the Danish statutory consolidated financial

statements of Hempel A/S for the year ended 31 December 2010 audited by PricewaterhouseCoopers.

The full year result of Hempel entities in the Middle East (formerly associated companies) has been included in the consolidated financial statements after the acquisition of additional shares in February 2010. Financial data for the year ended 31 December 2009 have been restated for comparison (formerly classified as Group numbers).

The Hempel consolidated statements consist of financial statements of Hempel A/S and all the companies in which Hempel A/S directly or indirectly has either a controlling interest (subsidiaries) or a significant influence on the operational and financial management (associates).

The consolidated statements presented for 2009 are based on similar accounting principles to those applied in preparation of the Danish statutory consolidated financial statements.

Introduction to the 2010 financial results


400

600

800

1000

20102009200820072006 150

200

250

300

20102009200820072006

2500

3000

3500

4000

20102009200820072006 20

40

60

80

20102009200820072006 20

40

60

80

20102009200820072006

Key figures 2010

Net profit after tax (€ million) excluding non-recurring items

Net profit after tax (€ million)

External sales (million litres)External sales (€ million)

Employees

27


Group

EUR ‘000 2010 2009

NET SALES 889,144 825,918

Cost of goods sold, incl. production costs 569,442 507,968

GROSS PROFIT 319,702 317,950

Sales and distribution expenses 163,400 150,809

Administration expenses 64,691 75,339

OPERATING PROFIT 91,611 91,802

Part of net profit in associated companies 2,359 –

PROFIT BEFORE FINANCIAL ITEMS 93,970 91,802

Financial items, net 7,184 10,772

PROFIT BEFORE TAXES 86,786 81,030

Income taxes 25,756 22,167

NET PROFIT FOR THE YEAR 61,030 58,863

External shareholders 8,154 14,467

HEMPEL NET PROFIT FOR THE YEAR 52,876 44,396

Profit and Loss account


Group

EUR ‘000 2010 2009

FIXED ASSETS

Goodwill 24,624 16,552

Software 2,332 847

Software under development 6,007 4,958

Customer relationships 21,737 24,127

Other intangible assets 7,202 6,145

Intangible fixed assets 61,902 52,629

Land and buildings 95,218 76,700

Technical plant and machinery 29,451 19,936

Other tangible assets 9,082 8,682

Tangible fixed assets 133,751 105,318

Deferred tax assets 6,185 4,762

Other financial fixed assets 12,947 10,010

Financial fixed assets 19,132 14,772

TOTAL FIXED ASSETS 214,785 172,719

Balance sheet as at 31.12.10 – Assets

29


Group

EUR ‘000 2010 2009

CURRENT ASSETS

Raw materials and consumables 59,982 42,862

Work in progress 1,198 1,005

Finished goods and commercial goods 92,749 69,442

Inventories 153,929 113,309

Trade receivables 283,706 229,702

Tax receivable 3,548 2,777

Other receivables 29,886 21,043

Prepayments 4,782 5,343

Receivables 321,922 258,865

Bonds 31 40

Cash at bank and on hand 72,764 129,076

TOTAL CURRENT ASSETS 548,646 501,290

TOTAL ASSETS 763,431 674,009

Balance sheet as at 31.12.10 – Assets (continued)


Group

EUR ‘000 2010 2009

Share capital 15,426 15,435

Retained earnings 300,842 249,623

TOTAL SHAREHOLDER’S EQUITY 316,268 265,058

EXTERNAL SHAREHOLDERS 32,561 37,261

Deferred taxes 6,964 8,593

Pension obligations 10,008 8,386

Other provisions 28,454 31,046

TOTAL PROVISIONS 45,426 48,025

Bank loans 67,725 69,581

Other long-term liabilities 1,122 1,362

TOTAL LONG-TERM LIABILITIES 68,847 70,943

Bank loans 70,082 42,300

Short-term part of mortgage and other loans 22,370 33,463

Trade payables 115,448 88,958

Tax payable 10,560 9,051

Other current liabilities 81,869 78,950

TOTAL CURRENT LIABILITIES 300,329 252,722

TOTAL LIABILITIES 369,176 323,665

TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES 763,431 674,009

Balance sheet as at 31.12.10 – Liabilities and shareholder’s equity

31


Country Name Sales Production Others Holding

Argentina Hempel Argentina S.R.L. x x2 100%

Australia Hempel (Australia) Pty. Ltd. x 100%

Bahrain Hempel Paints (Bahrain) W.L.L. x x 51%

Bahrain Dahna Paint Middle East Holding B.S.C. (Closed) x 51%

Belgium Hempel (Belgium) N.V. x 100%

Brazil Hempel Tintas do Brasil Ltda. x 100%

Canada Hempel (Canada) Inc. x 100%

Chile Hempel A/S (Chile) Ltda. x 100%

China, Hong Kong Hempel (China) Limited x 100%

China Hempel (Kunshan) Coatings Co. Ltd. x x 100%

China Hempel (Yantai) Coatings Co. Ltd. x x 100%

China Hempel (Guangzhou) Coatings Co. Ltd. x x1 100%

China Hempel-Hai Hong Coatings (Shenzhen) Co. Ltd. x x 100%

China Hempel (Seagull) Coatings Co. Ltd. x 100%

Croatia Hempel Coatings (Croatia) Ltd. x x 98%

Cyprus Hempel (Cyprus) Ltd. x 100%

Czech Republic Hempel (Czech Republic) s.r.o. x 100%

Denmark Hempel A/S x x3 x 100%

Denmark HSA (Danmark) A/S x 100%

Ecuador Hempel (Ecuador) S.A. x 100%

Egypt Hempel Egypt L.L.C. x 100%

Finland OY Hempel (Finland) AB x 100%

France Hempel (France) S.A. x x 100%

Germany Hempel (Germany) GmbH x 100%

Greece Hempel Coatings (Hellas) S.A. x 100%

India Hempel Paints (India) Pvt. Ltd. x x2 100%

Indonesia P.T. Hempel Indonesia x x 100%

Ireland Hempel (Ireland) Ltd. x 100%

Italy Hempel (Italy) s.r.l. x 100%

Korea Hempel Korea Co. Ltd. x 100%

Kuwait Hempel Paints (Kuwait) K. S. C. C x x 51%

Country Name Sales Production Others Holding

Malaysia Hempel (Malaysia) Sdn. Bhd. x 100%

Malaysia Hempel Manufacturing (Malaysia) Sdn. Bhd. x 100%

Malta Hempel (Malta) Ltd. x x 65%

Malta Hempel (Malta) Marketing Ltd. x 65%

Mexico Hempel (Mexico) S.A. de C.V. x 100%

Mexico Pinturas Hempel de Mexico S.A. de C.V. x 100%

Morocco Hempel (Morocco) SARL x 99%

Norway Hempel (Norway) AS x 100%

Poland Hempel (Poland) Sp. z o.o. x 100%

Poland Hempel Manufacturing (Poland) Sp. z o.o. x1 100%

Portugal Hempel (Portugal) Lda. x x 100%

Qatar Hempel Paints (Qatar) W.L.L. x x 29%

Romania Hempel (Romania) S.R.L. x 100%

Russia ZAO Hempel x 100%

Saudi Arabia Hempel Paints (Saudi Arabia) W.L.L. x x 51%

Saudi Arabia Saudi Arabian Packaging Industry W.L.L. x4 18%

Singapore Hempel (Singapore) Pte. Ltd. x x 100%

Spain Pinturas Hempel S.A. (Spain) x x 100%

Sweden Hempel (Sweden) AB x 100%

Syria Hempel Paints (Syria) L.L.C. x x 43%

Taiwan Hempel (Taiwan) Co. Ltd. x 100%

Thailand Hempel (Thailand) Ltd. x 100%

The Netherlands Hempel (The Netherlands) B.V. x 100%

Turkey Hempel Coatings San. Ve Tic Ltd. Sti. x 100%

United Arab Emirates Hempel Paints (Abu Dhabi) L.L.C. x 23%

United Arab Emirates Hempel Paints (Emirates) L.L.C. x x 29%

United Arab Emirates SAPIN United Arab Emirates L.L.C. x4 18%

United Kingdom Hempel UK Ltd. x 100%

Uruguay Hempel (Uruguay) S.A. x 100%

USA Hempel (USA) Inc. x x 100%

Vietnam Hempel Vietnam Company Limited x x 100%

1 Started operations in year 2010.2 Under construction and plan to commence operations in year 2011.

3 Ceased operations in year 2010.4 Associated company.

List of subsidiaries



HEMPEL A/S Lundtoftevej 150 DK - 2800 Kgs. Lyngby Denmark

Tel: +45 4593 3800 Fax: +45 4588 5518 www.hempel.com

hempel group annual report 2010-11

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