Annual Report
2022
Tel: +45 4593 3800
Email: hempel@hempel.com
CVR no. 59946013
Financial year:
1 January – 31 December
Auditors
Hempel around the world
* Incl. online customers. ** Total number of employees as of 31 December 2022.
8
Brands
Hempel factories
359
Stores
250,000+
Customers*
7,500+
Employees**
17
R&D centres
26
Factories
Front page picture by Farrow &
Ball: Creative Director Charlotte
Cosby (left) and Colour Creator Joa
Studholme (right) in the paint
factory at Wimborne with new
colours Kittiwake (top) and Wine
Dark (bottom) behind them
photographed by Alun Callender.
Contents
4 Highlights 2022
6 Letter to stakeholders
8 Hempel at a glance
9 2022 in review
12 Strategy
14 The industries we serve
18 Corporate governance
21 Our approach to tax
24 Managing risks
29 Sustainability
43 ESG data & accounting policies
48 Management’s statement
50 Board of Directors
52 Independent auditor’s report
54 Independent limited assurance report
on the ESG data 2022
56 Financial statements
* In constant exchange rates
Highlights 2022
12.7%
20212022 2020
3.2
5.9
12.7
Organic growth*
FINANCIAL
vs 2021
Women in leadership positions
(min. 3 direct reports)
Waste to landfill at production sites
(per cent reduction since 2019)
2020
2021
2022
-70%
-83%
-58%
2021
23%
women
2020
21%
women
2022
29%
women
CO
2
e emissions saved for
our Marine customers
CO
2
e emissions in our own operations
(Scope 1 & 2 reduction compared to 2019)
ESG
64%
129
64
59
Cash conversion
20212022 2020
Revenue (in EUR million)
2,159
1,744
1,541
2,159
20212022 2020
EBITDA margin, adjusted
million tonnes saved
20212022
4.5
5.6
2020
3.6
4
|
12%
121212
20212022 2020
2020
2021
2022
-7%
-31%
-56%
Key figures
2022 2021
1
2020
1
2019
1
2018
1
Working capital
Net working capital (NWC) days 72 70 70 67 72
Ratios (%)
Organic growth 12.7 5.9 3.2 2.5 -1.4
Gross margin 36.3 37.8 39.1 39.0 38.2
EBITDA margin 10.1 11.2 11.4 10.2 10.8
EBITDA margin, adjusted 11.9 11.8 12.0 N/A N/A
Operating profit margin 5.3 6.1 6.4 6.0 6.7
Return on invested capital 7. 4 10.6 13.3 13.6 15.1
Equity ratio 19.5 21.3 29.6 34.1 31.7
Cash conversion 64 59 129 86 84
Leverage ratio 4.2 3.7 0.7 N/A N/A
ESG
Scope 1 & 2 emissions (tonnes CO
2
e)
19,090 29,710 39,872 43,089 N/A
Waste to landfill (tonnes) 1,353 1,630 1,666 3,934 N/A
Average number of employees (FTE) 7,343 6,746 6,099 6,219 5,882
Gender diversity in leadership
positions
2
, female/male 29/71
23/77
3
21/79 N/A N/A
Satisfaction and motivation
4
72 73 N/A
5
74 71
Suppliers screened through Hempel
Procurement/Sustainability
Screening (% of spend) 40 22 N/A N/A N/A
In EUR million (unless otherwise stated)
2022 2021
1
2020
1
2019
1
2018
1
Profit and loss
Revenue 2,159 1,744 1,541 1,534 1,346
EBITDA 219 196 176 157 145
EBITDA, adjusted 257 205 185 N/A N/A
Amortisation, depreciation and
impairment 105 90 77 65 55
Operating profit 114 106 99 92 90
Net financials -58 -17 -28 -13 -5
Profit before tax 56 89 71 79 72
Net profit for continuing operations 37 58 N/A N/A N/A
Net profit for the year 35 63 50 50 48
Financial position
Total assets 2,655 2,466 1,542 1,300 1,288
Investment in tangible assets 91 113 77 43 32
Shareholders’ equity 519 526 456 443 408
Net interest-bearing debt 1,052 907 120 86 97
Cash flow
Total cash flow from operating activities 72 69 191 71 86
Cash flow from acquisitions /
divestments of enterprises -28 -511 0 -2 -16
Cash flow from net investments in
property, plant and equipment and
intangible assets -107 -87 -65 -33 -34
Free cash flow -64 -529 126 51 144
1 Comparative figures for 2021 have been restated to reflect changes in accounting policies and presentation of discontinued operations, see note 1.1 and note 2.5. 2020 has not been restated and 2019-2018 are presented in accordance
with the Danish Financial Statements Act, as the Group implemented IFRS on 1 January 2020.
2 Leadership positions with minimum 3 direct reports.
3 Data from Farrow & Ball was not included in 2021.
4 Answers are given on a scale from 1-10 and are subsequently converted to index figures on a scale from 1-100.
5 In 2020, due to COVID-19 and the unusual work environment, the employee engagement survey was only conducted among PC users.
For definitions of financial ratios, see page page 97.
|
5
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Letter to stakeholders
2022 was a year with unusual instability and
with a sequence of unpredictable events. In
these challenging times, we showed that we
are robust and stand together in Hempel to do
our utmost for our customers, colleagues and
the societies that we are a part of. We
continued to deliver a positive impact in line
with our strategic intent. We launched
important new coating solutions, took
necessary steps to further deliver on our
Double Impact strategy and made significant
progress on our sustainability journey. We
welcomed Michael Hansen as our new CEO,
and said goodbye to Lars Petersson who left
Hempel to take up the position of CEO of
VELUX Group.
Continuing our journey
Steeply climbing energy costs, high raw
material prices combined with raw material
shortages, and rising inflation affected all
industries in 2022 – the coatings industry
included. As a responsible company, it is
essential that we react to these external
changes. Therefore, we increased our selling
prices, working proactively and transparently
with customers to ensure full understanding
on both sides. We also initiated further
cost-savings and revenue management
programmes, ensuring value-based price
setting, to remain financially robust and have
the power to invest in our growth journey in
2023 and beyond.
A continuously improving bottom line is
fundamental for us to execute on our
ambitious Double Impact strategy. Our
purpose remains to create a brighter future
with sustainable coating solutions. To do this,
we must be ambitious on behalf of our
customers, our employees and our owner, the
Hempel Foundation. This is the focus of our
Double Impact strategy. By effectively scaling
Hempel, we enable our customers to build
sustainable business models with higher
efficiency, lower emissions and process
circularity. At the same time, a prosperous
Hempel means greater opportunities for our
employees to grow and develop – and higher
returns for our owner, the Hempel Foundation,
to be able to donate more to its extremely
important philanthropic work around the world.
This is and will remain our focus.
Sustainable growth
Our growth path is ambitious and, since we
launched our strategy in 2020, it has been
very focused on sales growth. In a challenging
2022, we grew our revenue in line with our
strategic focus, and we delivered record high
organic growth of 12.7 per cent. This growth is
driven by increased sales prices and product
mix, while at the same time ensuring that the
growth is financially sustainable. In 2022, we
emphasised this focus by reducing costs and
Delivering significant organic
growth and accelerated
progress towards sustainability
leadership despite stiff
headwinds in 2022.
optimising cash to compensate for rising raw
material costs and lower sales volumes to
safeguard a healthy financial result.
In line with our strategy, we want to scale our
business and increase our EBITDA margin. This
will allow us to invest even more in new
sustainable solutions in the future and to grow
without equally increasing our costs. To
strengthen our ability to scale, we reorganised
Hempel’s operating model and our way of
Michael Hansen
Group President & Chief Executive
Officer of Hempel A/S
Richard Sand
Chair of the Board of
Directors of Hempel A/S
6
|
working together across the world, so we can be
even more effective and better support our
customers and employees on a global scale and
across geographical boundaries. Digitalisation,
operational excellence and process excellence
are all key to this journey – and will come into
even greater focus in 2023 and beyond.
Hempel is first and foremost a people
business, and we will continue to put the
safety and wellbeing of our customers and
employees before anything else. By sharing
best practices, standardising our processes
and improving our skills, we are enhancing the
global safety culture for all Hempel colleagues.
It is our people who develop new technology,
drive change and serve our customers.
Unleashing our full potential requires a truly
diverse workforce, taking in the full breadth of
experiences and skills. In 2022, we continued
our efforts within diversity, equity and
inclusion, because we must attract the best
people from different industries and
backgrounds, challenge each other and give
everyone the opportunity to have a positive
impact.
Part of COP27
Hempel was invited to participate in COP27 in
Egypt in 2022. This was our first time at the
United Nations Conference of Parties, and it
gave us the opportunity to influence
discussions about how we can accelerate the
move towards a decarbonised future. It was an
opportunity to learn, meet like-minded
companies and expand our network.
At Hempel, we strive to put sustainability at
the heart of everything we do. Like all
companies, we have a responsibility to lower
emissions from our operations and reduce the
amount of resources we use. We have a very
clear plan and ambitious goals in this area,
which were confirmed and approved by the
Science Based Targets initiative in 2022.
In addition, we received a B rating from CDP in
its annual environmental disclosure and
scoring process. This is regarded as the gold
standard of corporate environmental
transparency, and we are naturally very
pleased to receive this rating in the first year of
our participation. Having our efforts validated
externally is integral to making further progress
towards becoming the sustainability leader
within our core business areas in the industry.
We will continue to invest in actions towards
achieving our ambitious sustainability goals.
The climate is an urgent global challenge –
one that no one can address alone. There are
technologies available to us already. Now is
the time for the world to work together to
implement these solutions, and as businesses
we are obliged to lead the way.
Reaching milestones
Despite the challenging year, we reached
some very significant commercial milestones
in 2022. Our Marine business delivered record
performance, we expanded our own store
network and range for Decorative customers,
launched a ground-breaking new solution for
wind turbine blades, and opened our large
new factory in Yantai, which marks 30 years
with a Hempel factory in China. You can read
more about these achievements, and many
others, in this report.
2023 outlook
In 2023, we expect to see mid to high
single-digit organic revenue growth and
increasing EBITDA margin, leading to an
EBITDA of EUR 260-290 million.
Thank you
As well as a tough market landscape, 2022
was challenging in other ways. We had to make
some difficult decisions and say goodbye to
good colleagues in reaction to steeply rising
costs. The war in Ukraine also occupied our
hearts and minds, and presented a dilemma:
How to cease operations in Russia while
protecting and looking after our employees
there. On 1 March 2022, we stopped all
operations in Russia and on 6 April 2022, we
announced the permanent closure of our
operations in Russia.
Despite rough seas, we navigated 2022 and
delivered on our top-line growth ambition. This
was only possible thanks to the dedication of
our colleagues around the world. On behalf of
the Executive Group Management and the
Hempel Board, we would like to thank our
colleagues for their commitment, engagement,
hard work and continued innovative efforts
during the year. We would also like to thank
you – our customers and other stakeholders
– for your ongoing support.
23.8% 12.7% 12%
Revenue growth
in 2022
Organic revenue growth
in 2022
EBITDA margin, adjusted
in 2022
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7
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Hempel at a glance
Our value chain
8
|
Distribution
Products and solutions are
delivered to customers
across the world.
Innovate & create
Sustainability is a key
driver of product
development and
innovation.
World-leading supplier of
trusted and innovative paints
and coating solutions.
Research & develop
Adjust existing solutions to
improve performance, and
partner with customers to
test in the field.
Produce & scale
Constantly strive for greater
excellence, efficiency and
scalability in production.
Brand & sell
Understand customers’
business and communicate
value and benefits of solutions
to ensure best possible
customer experience.
Advise & support
Ensure efficiency & quality during
application. Help customers
optimise processes to keep their
assets in agreed condition.
Industries we serve
Adding value to our
customers across the
industries we serve.
Suppliers
Work with suppliers to
improve lead times and
collaborate on sustainability.
Marine EnergyDecorative
Customer segments
Product benefits
Infrastructure
Decrease
total cost
of ownership
Decarbonisation
Asset
longevity
Greater
performance
Increase
aesthetics
Delivering sustainable
coating solutions
to customers
2022 marked the second year of our Double
Impact strategy. We closed the year with
organic revenue growth of 12.7 per cent and
revenue of EUR 2,159 million, an increase of
EUR 415 million compared to 2021.
Despite unforeseen and challenging condi-
tions, our expectations of mid to high single
digit organic revenue growth, as outlined in the
2021 outlook, were exceeded. Price increase
and product mix grew our revenue by 19.3
per cent, which was partly offset by 6.6 per
cent impact from lower volumes. The revenue
growth translated into an EBITDA of EUR 219
million (10.1 per cent margin) and an adjusted
EBITDA of EUR 257 million (adjusted EBITDA
margin of 11.9 per cent). Last year, EBITDA
was at EUR 196 million, entailing a margin of
11.2 per cent and adjusted EBITDA was EUR
205 million, entailing an adjusted EBITDA
margin of 11.8 per cent.
This year we have focused intensively on
mitigating a number of challenges, including
high inflation, raw material scarcity, geopoliti-
cal instability and the derived impact on
consumer demand.
Navigating a challenging year
across customer segments
The satisfactory result was spread across all
our strategic customer segments – Decorative,
Marine, Energy and Infrastructure – and
all customer segments delivered important
milestones throughout the year.
Our Decorative customer segment ended the
year with a total revenue of EUR 775 million,
an increase of EUR 120 million, equal to a
revenue growth of 18.3 per cent. Organic
revenue growth was negative 2.9 per cent.
The negative organic growth in Decorative was
due to the inevitable slowdown after the
pandemic-driven home decoration boost in
2020-2021, double-digit inflation and the
cost-of-living crisis, which reduced demand for
Do-It-Yourself products.
Our Marine customer segment closed the year
with revenue of EUR 626 million, an increase
of EUR 162 million, corresponding to an
organic revenue growth of 33.1 per cent. This
is not only an impressive result in a challeng-
ing year; it is the highest ever for this customer
segment. Our silicone hull coatings were
increasingly chosen by customers throughout
the year to decrease fuel consumption and
reduce their environmental impact. The market
for silicone coatings is a low-volume business,
which partly explains our lower volumes in
2022 compared to 2021. However, our
strategic commitment to focus on sustainabil-
ity performance established a trend that is
here to stay.
In our Energy customer segment, we have
earned trust and a better market position
throughout geographies, especially in the wind
industry. Despite this, we still experienced
shrinking margins as the wind market became
increasingly commoditised, challenging our
profitability. However, the launch of
Hempablade Edge signalled a new competitive
advantage that will enable us to work towards
a continued leadership position in a high-vol-
ume market. Overall, our Energy customer
segment’s revenue grew EUR 47 million, from
EUR 266 million in 2021 to EUR 313 million in
2022, entailing organic revenue growth of
5.7 per cent.
2022
in review
|
9
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Through a new globalised structure in our
Infrastructure customer segment, we are
taking learnings from across geographies to
become even more present in every step of
our customers’ value chain. In 2022, we bid
on and won projects utilising our expertise in
approaching all stakeholders, ranging from
governments to applicators. This helped us to
return organic revenue growth of 19.6 per
cent. Revenue in 2022 totalled EUR 445
million, compared to EUR 359 million last year.
Increased earnings despite tough
external conditions
We closed the year with an EBITDA from continu-
ing business of EUR 219 million. This was an
increase of EUR 23 million versus last year, when
we closed at EUR 196 million. Although we
experienced high cost inflation and materially
increasing raw material prices, our EBITDA margin
decreased only by 1.1 percentage points, from
11.2 per cent in 2021 to 10.1 per cent in 2022.
The result is slightly below our 2021 outlook of an
EBITDA between EUR 220-240 million, and an
EBITDA margin between 11 and 12 per cent. This
is mainly due to EUR 30 million in special items
and an adjustment of EUR 8 million for hyperinfla-
tion in accordance with IAS 29. Excluding these
items, our adjusted EBITDA closed at EUR 257
million in 2022, slightly exceeding our 2021
outlook, entailing an adjusted EBITDA margin of
11.9 per cent. This compares with an adjusted
EBITDA in 2021 of EUR 205 million and an
adjusted EBITDA margin of 11.8 per cent.
2022 saw multiple macroeconomic factors
that affected our operational costs. Despite
significant raw material price inflation, and
materially increased freight and energy costs,
we strived to constantly translate our top line
performance into a satisfactory bottom line.
Revenue split by
customer segment
Status of doubling revenue
35%
24%
18%
775 626 445
InfrastructureDecorative Marine
18%
313
Energy
2025
2020 2021 2022
EUR 3.0 billion
EUR 1.8
billion
EUR 2.2
billion
EUR 1.5
billion
Revenue (in EUR million)
Reported growth
1 million
More than one million
cans were taken back
and sent for recycling
through our Can Back
Scheme in 2022.
Read more about this
initiative on page 38
.
10
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We finished the year with operational costs of
EUR 670 million, EUR 116 million higher than
2021. The cost breaks down as: EUR 552
million in sales and distribution costs (EUR 99
million higher than 2021) and EUR 121 million
in administration costs (flat compared to
2021). The higher cost levels incurred in 2022
were mitigated by restructuring our cost
baseline and through multiple cost saving
initiatives resulting in a close to flat cost
development compared to 2021, when
adjusting for the full year impact of the
acquisitions performed in 2021 and special
items. Special items amounted to EUR 30
million in 2022 compared to EUR 8 million in
2021 and comprises internal restructuring
and consequent one-off costs as well as M&A
related cost.
This year’s operating expenses were 31.0 per
cent of our revenues, 0.8 percentage points
lower than last year, proving our ability to react
timely to a challenging environment.
Increased revenues and operational efficiency
helped to partly absorb the absolute cost
increases to close the year with EUR 114
million in operating profit, an increase of EUR
8 million compared to last year.
Interest expenses and foreign exchange
losses driving financial expenses
In 2022, net financial expenses ended at EUR
58 million (EUR 17 million in 2021), impacted
mainly by net foreign exchange losses of EUR
12 million and interest expenses of EUR 28
million. Higher interest expenses resulted from
higher debt following our investments in fixed
assets and acquisitions both in this year and
in prior years, and at the same time, the
increasing market interest rates.
Tax and net profit
Tax on profit of continued business in 2022
amounted to EUR 19 million, entailing an
effective tax rate of 33.9 per cent and bringing
our net profit for the year on continued
business to EUR 37 million. Effective tax rate
for the continued business without hyperinfla-
tion adjustment is 26.8 per cent. 2021 closed
with net profit of EUR 58 million, and an
effective tax rate of 33.5 percent. The effective
tax rate for 2021 without hyperinflation was
32.8 percent. The reduction of the effective tax
rate without hyperinflation was mainly driven by
capitalisation of previously non-recognised tax
losses in the US and Denmark.
Net result from discontinued operations
amounted to a loss for the year of EUR 2 million
compared to a net profit of EUR 5 million in 2021
as a result of the decision to stop and perma-
nently close all operations in Russia during the
year. Net profit for the year ended at EUR 35
million compared to EUR 63 million in 2021.
Cash balances challenged by
net working capital
Free cash flow for the year was negative EUR
64 million, compared to a negative free cash
flow of EUR 529 million in 2021.
Cash flow from operating activities closed at
EUR 72 million in 2022 compared to EUR 69
million in 2021. Revenue growth, product mix
change, and high inflation tied more cash in our
net working capital. Despite the challenges, our
cash conversion increased from 59 per cent in
2021 to 64 per cent in 2022.
Cash flow from investing activities amounted to
a net outflow of EUR 136 million in 2022,
considerably below last year’s level when the
acquisitions of Wattyl and Farrow & Ball were
completed. This year, the main activities were
the continued investment in new factories in
China, which will allow us to materially
increase our capacity in the region, and further
investment in Hempel’s digitalisation, a key
pillar in our long-term strategy. Capital expendi-
ture accounted for 5.2 per cent of the revenue.
Cash flow from financing activities totalled
EUR 79 million as a result of our invest-
ment-related activities and dividend payment
related to 2021 of EUR 33 million. This
brought our net interesting-bearing debt to
EUR 1,052 million, an increase of EUR 145
million, and a leverage ratio of 4.2, still
reflecting 2021 investments.
Environmental performance
For Scope 1 & 2 CO
2
e emissions in our own
operations, we exceeded our target for the
year with a reduction of 56 per cent compared
to 2019. When we look at the comparative
baseline (excl. acquisitions, warehouses and
stand-alone R&D facilities), we achieved a
reduction of 69 per cent in 2022 compared to
2019. This performance is in line with our
validated science-based target for Scope 1 &
2. For Scope 3 CO
2
e emissions, we achieved a
reduction of 14 per cent compared to 2021.
In 2022, we saw a reduction of waste sent to
landfill at our production sites of 45 per cent
compared to 2021. This resulted in a total
reduction of 83 per cent compared to 2019 with
a comparative baseline (excl. acquisitions) and
exceeds our target for the year of 80 per cent.
Social performance
An increased focus on safety led to a decreased
Lost Time Accident (LTA) frequency from 1.72
per 1,000,000 working hours in 2021 to 1.19
per 1,000,000 working hours in 2022. One
accident is one accident too many and we
continue to focus on safety in everything we do.
Diversity and inclusion are key to how we evolve
as a company. Gender equality remains a
significant part of our diversity and inclusion
agenda, and ensuring a balanced workforce is
an important part of our strategy. By the end of
2022, 31 per cent of all our employees were
women and 29 per cent of leadership positions
were held by women. We have now exceeded
our targets for 2022 and will therefore set more
ambitious targets for 2023 and beyond.
Governance performance
In 2022, we saw 44 new cases registered to
our compliance hotline. This is slightly lower
than last year (46 reports), but still reflects a
healthy ‘speak up’ culture. We closed 52
cases in 2022 and therefore ended the year
with 15 open cases. Increasing sanctions
complexity related to Russia required constant
vigilance in 2022. Compliance remains the
foundation for our business model. We
continued to implement GDPR as a standard
data protection compliance framework for all
companies within the Hempel Group. In line
with previous years, we continued to train
employees in our Code of Conduct.
In 2022, we continued the implementation of
our Hempel Procurement Sustainability
Screening to strengthen focus and collaboration
with suppliers on environmental sustainability.
In total, we screened 77 suppliers and started
follow-up screening of 12 low-performing
suppliers from the previous year. 40 per cent
of our spend is now subject to sustainability
screening, exceeding our target for 2022 of
36 per cent.
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11
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Strategy
Our purpose is to shape a brighter future with
sustainable coating solutions. This is extremely
relevant today.
2022 saw rapidly rising raw material prices,
supply chain challenges and geopolitical
unrest – challenging factors affecting all
companies across industries. These were
testing times, but our Double Impact strategy
stood up well. Our new organisational structure
meant that we unfortunately had to let a
number of good colleagues go to continue our
growth journey, which will ensure we remain a
relevant and trusted partner to our customers.
We continued to execute on our strategy in line
with its three pillars: segment leadership,
sustainability leader and trusted partner.
Segment leadership: We continue to build
segment leadership positions in selected
geographies within Marine, Decorative,
Energy and Infrastructure. See how we are
structured on page 18.
At the beginning of 2022, we changed Hempel’s
organisational structure and way of working
together to align better with our strategic intent.
We organised our business to be even closer to
our customers and introduced a globalised
supply chain and global support functions. The
front end of our business is now fully customer-
centric in each of our customer segments. This
change represents a milestone in our strategy
roadmap. Meanwhile our globalised supply
chain and support functions enable us to
release operational synergies, hereby lowering
our costs, and deliver even more specialised
products and services to our customers. This is
core to the continuous underlying development
of our segment leadership positions.
In addition, our technology investments –
such as our Hempaguard hull coatings and
Hempafire Pro passive fire protection systems
– continue to meet our customers’ needs and
keep us at the forefront of the market.
Sustainability leader: We strive to become
sustainability leaders in our industry and core
customer segments.
In volatile times, the world’s commitment to
sustainability quickly comes under pressure as
companies concentrate spend on core
activities. We are very proud to report that we
continued to progress well on our sustainability
agenda, as laid out in our Futureproof
sustainability framework and demonstrated by
strong development in our sustainability KPIs.
We believe that sustainability is not just good
business and what our customers want; it is
simply the right thing to do. We will continue to
pursue our sustainability agenda with great
commitment.
Trusted partner: We work to continuously earn
our customers’ trust by being reliable and
transparent, and by providing products and
services that protect their assets and beautify
homes and buildings.
We continue to relentlessly pursue
improvements to our products and services
– focusing on performance, efficiency and
sustainability. In difficult times, we continue to
support our customers when unavoidable
variation occurs in their operations and we
make it simple for them to find a coating
solution that delivers a high return on
investment and enables them to reach their
environmental targets. For our decorative
customers, we continue to expand the colour
universe we provide, the experience, quality
and sustainable products we deliver and
remain a professional partner to the trade.
At the beginning of 2022, we changed Hempel’s organisational
structure and way of working together to align better with our
strategic intent. We organised our business to be even closer
to our customers and introduced a globalised supply chain and
global support functions. The front end of our business is now
fully organised around our customers.”
“
Double
Impact
Segment
leadership
Sustainability
leader
Trusted
partner
|
13
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Our Decorative customer segment beautifies
homes and inspires consumers through a range
of colourful and easy-to-use solutions and
services. We provide a full portfolio of paints
and wallpapers to private consumers, retailers
and professional painters. Our solutions include
premium brands for the home, coating solutions
for commercial buildings and private label
products for retailers.
Following extraordinary demand during the
COVID-19 pandemic, the Decorative market
declined in 2022. Despite this, we maintained
a stable cost base and continued to invest in
growth by acquiring new infrastructure, opening
new stores and developing stronger partner-
ships with large retail chains.
In 2022, we kept inspiration and sustainability
at the core. Across the segment, we introduced
new intriguing colours, improved our digital
marketing activities and outlet designs and
continued to work with our customers to
improve the sustainability of their paint
solutions.
The power of colour
Decorative
TRENDS
• Flat market following extraordinary demand in
2020-2021
• Return to Do-It-For-Me after strong Do-It-Yourself
during the pandemic
• Demand for more sustainable paint solutions
for interior and exterior use
HIGHLIGHTS
• We acquired the Omani paint producer
Khimji Paints
• We acquired six stores from Paint World in
Australia and five stores from Cap Couleur
in France
• We added 38 new third-party outlets in the
Middle East
• Farrow & Ball launched 11 new colours
• Crown reinvigorated its core range, packaging
and in-store presence
• We reached one million recycled paint cans in
the UK and Ireland
OUR BRANDS
2021 2022
655
775
REVENUE
18%
14
|
READ MORE
Get ready for
CII now
|
15
“
We combine coatings and services to provide
world-class solutions to our customers in the
maritime industry that help them lower
operating costs and carbon emissions.
In 2022, focus on fuel efficiency and carbon
emissions intensified as the deadline for
the IMO’s short-term measures to reach
decarbonisation targets, CII and EEXI
*
, drew
nearer. As a result, our customers are facing
a new set of challenges to stay operational,
and we experienced greatly increased
interest in our solutions.
Throughout the year, we further strength-
ened our position as a trusted partner that
drives the adoption of sustainable solu-
tions. For example, to help customers
comply with the new IMO measures, we
launched a CII calculator that enables them
to assess the potential impact of a hull
coatings upgrade on their CII rating.
We will continue to innovate and adapt to
become the market leader in hull perfor-
mance and grow our leadership in other
areas.
Towards a more sustainable
maritime industry
Marine
TRENDS
• Regulations driving interest in carbon emission
reduction technologies
• Hull coatings competing with - and outperforming
- other decarbonisation technologies, not just
other coatings
• Focus on biocide-free coating solutions
• In the Yacht segment, the second half of 2022
was affected by declining consumer confidence
HIGHLIGHTS
• We reached the milestone of 3,000 ships applied
with Hempaguard
• Hempel attended COP27 to discuss
decarbonisation of the maritime industry
• Introduction of Hempaspeed TF in the Yacht segment
further increased our market share in this segment
• Hempaguard X7 was approved by the Water Revolution
Foundation, the first antifouling product to achieve
this honour
*CII and EEXI: the Carbon Intensity Indicator and the Energy Efficiency Existing Ship Index.
The maritime industry is undergoing tremendous change, and we see the adoption of premium
hull coatings growing exponentially. The properties of these coatings help shipowners and
operators save on fuel consumption and thereby emissions, so they are the obvious choice for
our customers.”
Alexander Enström,
Executive Vice President and Head of Marine
2021 2022
464
626
REVENUE
35%
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
We are committed to support our oil & gas customers in the energy transition by providing
solutions and data to serve emerging challenges. Whether it is for the construction of new
green hydrogen plants or carbon capture storage, our commercial and technical teams are
ready to advise on reliable solutions to fulfil the necessary requirements.”
“
Lucia Torres,
Director, Solution Management, Energy
Our Energy customer segment has a strong
global position in downstream oil & gas and
an emerging presence in chemical and
thermal plants. In the renewables sector, we
hold a leadership position in the wind tower
industry, built on trusted partnerships with
wind OEMs.
There were strong headwinds in the energy
industry in 2022. Competition was fierce and
geopolitical uncertainty affected investments
in this industry. Despite this, our top line
growth remained stable, with profits
experiencing a calculated downturn due to
the surrounding market conditions.
Customers remain at the core of our
inspiration and motivation. We continue our
work to develop a position as the best
supplier across the energy industries,
through trusted partnerships and the launch
of new products and technologies.
The leading edge of a wind turbine blade is exposed to extremely
high wind speed. Impact from rain can cause significant coating
erosion or damage, potentially leading to a loss of performance
and drop in annual energy production of 2-3 per cent.
This makes leading edge erosion one of the wind industry’s most
significant maintenance costs and performance challenges. Our
new Hempablade Edge is a fast-cure, solvent-free coating
delivering the best liquid Leading Edge Protection in the industry.
Increasing safety, driving sustainability
and reducing operational costs
Strong protection. Simple
application. Anywhere.
Energy
TRENDS
• The global energy crisis increased urgency for renewable
energy sources
• The global economic climate and crude oil pricing
increased focus on diversification, with growth in
renewables and power-to-X projects
• Offshore wind investments started to accelerate outside
of Europe, enabling oil & gas supply chains to diversify
HIGHLIGHTS
• Overall revenue growth in our Energy segment, despite
pressure on volumes
• Double-digit volume and revenue growth in the Americas
• Launched market changing Hempablade Edge 171
wind blade edge protection
• Launched market changing Hempafire XTR
100, a hydrocarbon passive fire protection
solution for onshore fire scenarios
WATCH THE VIDEO
Hempablade Edge
2021 2022
266
313
REVENUE
18%
16
|
Sustainability plays an increasingly important role with owners of larger constructions. As
the requirements vary from owner to owner, country to country, the need for both versatile
solutions and reliable documentation goes hand in hand. This is where our solutions –
products and services with trusted documentation – make a difference for our customers.”
“
Monica Li Avram,
Director, Solution Management, Infrastructure
Our Infrastructure segment remained strong
thanks to our diverse and stable position in
traditional protective sub-segments and our
emerging leadership positions in anti-corrosion
and cellulosic passive fire protection (C-PFP).
We remain dedicated to our global and local
customers and partners throughout the
infrastructure industries.
2022 was challenging due to geopolitical and
economic instability. Despite this, our top line
growth was significant, we expanded our sales
footprint in key technologies such as C-PFP, and
we realised excellent market potential through
customer-driven solutions and services.
Sustainability remains a defining pillar of who
we are. We continue to satisfy our customers,
partners and the market’s needs for more
sustainable solutions – for example through our
Avantguard
®
anti-corrosion technology, as well
as through Green Building schemes and
certifications.
Protecting structures, improving
efficiency and driving safety
Infrastructure
TRENDS
• Total cost of project perspectives play a more
important role
• Sustainability criteria throughout construction
becoming more important
• Construction projects began to slow throughout
the second half of 2022
HIGHLIGHTS
• Launched targeted solutions for civil structures &
bridges that reduce consumption & waste and
meet various Green Building schemes’ criteria
• Continued growth in passive fire protection with
an improved portfolio and specification tools for
customers
• Continued strong growth within our Neogard
solutions for roads, flooring and roofing across
the Americas
• Strong growth in our Performance OEM sub-
segment, driven by a targeted portfolio and
new customers
2021 2022
359
445
REVENUE
24%
|
17
READ MORE
Revolutionising corrosion
protection with
Avantguard
®
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Hempel’s management structure
CEO
Intergrated Supply Chain
CPCO
People & Culture
Strategy &
Transformation
CFO
Finance & Digital
MarineDecorative
Technology &
Operations
Energy &
Infrastructure*
18
|
18
|
*Energy and Infrastructure are two seperate customer segments headed by the same Executive Vice President
|
19
Meeting activity 2022
RemCo and NomCo*
25 February
2 December
Board of Directors
25 February
29 April
14 June
Audit Committee
24 February
23 May
20 September
25 November
Name Title Board of Directors Audit commitee RemCo and NomCo*
Richard Sand Chair –
Eric Alström Deputy Chair –
Karsten Munk Knudsen Chair of the Audit Committee –
Susanna Schneeberger Board member – –
Søren P. Olesen Board member –
Leif Jensen Board member
Mark Terrell Sutton Elected by the employees – –
Helle Fiedler Elected by the employees – –
Kim Scheibel Elected by the employees – –
4 October
2 December
The Annual Management Cycle 2022
Executive Group
Management meets
with the Board
to review the
strategy plan
Leaders gather
to set the agenda
for the year ahead
Leaders review
and refine the
company strategy
*Remuneration and Nomination Committee – Not a commitee member
Q3
Board
Strategy
Day
Q4
Hempel
Summer
School
Q2
Hempel
Leadership
Summit
Q1
Absent from meetingAttended meeting
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
notice of 12 months if given by the company
and six months if given by a member of the
Executive Group Management.
Board committees
The Board of Directors establishes dedicated
committees to supervise and solve specific
tasks. Currently, there are two committees: a
Remuneration and Nomination Committee,
and an Audit Committee.
The Remuneration and Nomination Committee
According to its charter, the Remuneration
and Nomination Committee assists the Board
of Directors with the recruitment of its
executives. In addition, it assists with the
establishment of remuneration for the Group’s
executives and helps ensure that the Group’s
general remuneration policies are balanced
appropriately and that the existing long-term
incentive programme is aligned with compara-
ble listed companies. Furthermore, the
committee evaluates the Board of Directors
and the Executive Group Management each
year, and makes recommendations to the
Board of Directors in relation to the skills that
the Board of Directors and the Executive
Group Management must have to best
perform their tasks. The committee also
assists the Board of Directors by selecting
and proposing candidates for executive
positions, often with the assistance of a
professional global search firm. In 2022, the
committee proposed new candidates for the
position of Group President and CEO, as Lars
Petersson, former Group President and CEO,
left the company. The committee convenes as
necessary. However, it has two fixed meetings
during the year.
The Audit Committee
The Audit Committee’s work includes assisting
the Board of Directors with its oversight
responsibilities for the financial reporting
process, the system of internal control, the
internal and external audit process, the
Group’s process for monitoring compliance
with laws and regulations and its Code of
Conduct, as well as risk management. The
Audit Committee reviews the annual report,
main accounting policies, including significant
accounting estimates and judgements,
treasury policy and tax policy. In addition, the
Audit Committee has an oversight role in
relation to the Group’s whistleblower reporting
system and cases. In 2022, the Audit
Committee also oversaw the annual review of
cybersecurity as well as the continued roll-out
of the ERP platform and the progress on
sustainability targets and reporting.
Internal Audit function
The Group Internal Audit function provides
assurance to the Board of Directors, the Audit
Committee and Executive Group Management.
It reports to the General Counsel with a dotted
line to the Group CFO and the Audit
Committee. The Head of Group Internal Audit
acts as the Secretary to the Audit Committee
and participates in all meetings and meets in
private with the Audit Committee at least once
a year. The Group Internal Audit function
provides assessments on the adequacy and
effectiveness of governance, compliance and
control processes. The assessments and
recommendations are reported to relevant
stakeholders, Executive Group Management
and the Audit Committee.
In accordance with its charter, the Audit
Committee annually assesses the need for a
Group Internal Audit function. Based on the
recommendations of the Audit Committee, the
Board of Directors determines whether a
Group Internal Audit function is required. The
Board of Directors’ assessment is that the
Group Internal Audit’s mandate and scope,
processes in place, and planned and per-
formed activities are adequate to provide
independent and objective assurance.
The whistleblower reporting system
Hempel has an internal whistleblower reporting
system. The whistleblower system enables any
employee or external stakeholder to anony-
mously report potentially irregular or unethical
conduct through a secure reporting portal. The
system is an important tool to ensure that
allegations of irregular or unethical conduct are
reported and addressed quickly. All reports are
treated confidentially and followed up by an
objective and independent investigation, led by
the Director of Compliance and Data Protection,
who recommends appropriate action to the
Ethics Committee. The Ethics Committee then
approves how to handle reported issues and
decides on appropriate action following the
investigation, including disciplinary action if
deemed necessary. The Ethics Committee
consists of: The Group CFO, Group Chief People
& Culture Officer and Group General Counsel.
You can read more about our work in the
business ethics and compliance area,
including reporting statistics from our
whistleblower system, on page 40.
20
|
Our approach to tax
Taxes are important for societies to help fund
development, education, healthcare,
infrastructure, etc. Hempel is a global
company and taxpayer with a global revenue
of EUR 2,159 million in 2022.
Global taxes are a complex area. There are
many technical considerations and different
tax systems across the world that do not
always align on cross-border activities. The
international tax system is slowly evolving to
manage these challenges. We believe that we
can help ensure that dialogue about an
international tax system is based on facts.
Being transparent about our tax affairs is
part of this.
Tax governance
We are committed to being open and transpar-
ent about how we conduct our tax affairs and
ensuring the highest level of tax compliance
with laws and regulations in every country
where we operate. We believe this is a key part
of being a responsible corporate citizen.
Our Tax Policy is built upon two pillars;
Compliance and Transparency. It contains the
principles, guidance and expectations, set by
Hempel’s Board of Directors, for how all
Hempel Group companies should approach
tax. Our Tax Policy includes all directors,
managers and employees who are involved in,
or whose actions impact, the management of
taxes within the Hempel Group, and to all
types of taxes (direct, indirect, collected and
borne). Our Tax Policy is reviewed, amended as
needed and approved by the Board of
Directors annually. It can be found at
hempel.com/about/ethics-and-compliance
Sustainability is integrated into our Double Impact strategy
and decision-making processes, including how we approach
and pay tax.
Compliance Transparency
• We have global policies and
procedures to ensure that our
taxes are correct and paid on
time.
• We commit to complying with
the letter of the law and the
spirit of the law.
• We commit to only undertaking
transactions with commercial
substance.
• We commit to paying taxes in
the jurisdictions where value is
created.
• We file tax returns everywhere
required by local legislation.
• We provide regular information
to our external stakeholders
about our approach to tax and
taxes paid.
• Where appropriate, we disclose
information about our tax
position and the choices we
make, as long as such disclo-
sures do not damage our
business or the business of our
partners.
• We take active part in the
global and local debate on tax.
Through our participation in
Dansk Industri’s Tax Panel, we
provide input to Danish and EU
tax legislation if relevant.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
22
|
Global tax
footprint
EUR 89.3m
Total tax footprint
EUR 2.0mEUR 26.6mEUR 120.4m
Hempel
Group
EUR 2,159m
Revenue
EUR 18.1m
EUR
60.6m
EUR
3.9m
EUR
1.5m
EUR
0.1m
In 2022, Hempel’s
global tax footprint
was EUR 238.3m,
including EUR 26.6m
in corporate income
taxes.
EUR 1.0m
Employees
EUR 19m
Corporate
tax accrued
Corporate
tax paid
7,500+
EUR 26.6m
EUR
56m
Profit before tax
Employee-related taxes
Income taxes
Tax borneProduct/sales taxes
Other taxes Tax collected
Map of taxes
paid in 2022
EUR 84.2m
EUR
0.9m
EUR
24.8m
EUR
18.7m
EUR
42.9m
EUR
2.6m
EUR
121.0m
EUR
15.3m
Americas EMEA APAC
EUR
37.8m
EUR
12.4m
EUR 23.8m
EUR
7.0m
Focus areas
within tax in 2022
Effective tax risk management requires
understanding where and how tax risks can
arise, and having clear governance arrange-
ments and guidelines on how to deal with tax
risks in order to achieve our objectives and
strategy. Risks can be caused by a number of
factors, including, but not limited to, a
changing political landscape, business
changes, unintended internal errors and
factual disagreements.
In 2022, we filed 100 per cent of our tax
returns within the deadline set by the relevant
tax authority. In addition, following a number of
acquisitions in 2021, we reviewed and
implemented our tax governance procedures
and transfer pricing set-up in our Decorative
customer segment. Based on this and the
changes to how we organise our customer
segments, we adjusted the governance of
taxes to match the business.
We also continued to improve our tax risk
management framework and controls, in
particular through the use of IT systems that
monitor and report on specific tax risks
automatically.
Transparency
In line with our Futureproof sustainability
framework, we are committed to increased tax
transparency. Our Tax Policy is publicly
available and we reported on our global tax
footprint for the first time in last year’s annual
report. Our global tax footprint for 2022 can
be found on page 22.
We maintain a proactive and transparent
relationship with tax authorities, as set out
in our Tax Policy:
• We act in a professional and courteous
manner.
• We respond to the tax authorities’ inquiries
in a timely and transparent manner.
• Where appropriate and possible, we engage
in early dialogue with the tax authorities if
significant uncertainties related to tax
matters apply to our business operations.
We believe behaving in this way will reduce the
risk of disputes or damages to Hempel’s
credibility or reliability if uncertainties exist in
tax regulations or if tax matters are inadvert-
ently incorrect.
Transfer pricing
We seek to pay taxes in the countries where
value is created. In doing so, we follow
Organisation for Economic Co-operation and
Development (OECD) guidance and apply the
arm’s length principle to intercompany
transactions. These are benchmarked
against comparable transactions to non-
related parties (e.g., customers and suppli-
ers) and reviewed to ensure the profits are
aligned with value creation. We continually
adapt our business strategy. Therefore, we
also adapt our transfer pricing model on a
continuous basis to reflect changes in the
business and to ensure that taxable profits
always reflect where value is created.
In 2022, we continued to improve our tax risk management framework
and controls, for example through the use of IT systems that monitor
and report on specific tax risks automatically.”
“
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Managing risks
|
25
Annual Enterprise Risk Management wheel
AC
BoD
AC
BoD
RC
RCRC
RC
Board of Directors
meeting
BoD
Audit Committee
meeting
AC
Risk Committee
meeting
RC
Q3
Q1
Q2
Q4
Q3
Annual risk
review
Risk and
strategy
review
Q4
Mid-year
risk review
Q2
Risk
planning and
coordination
Q1
Risk Committee
Reviews key and emerging risks and challenges
Hempel’s enterprise risk profile. Allocates
accountability to risk sponsors and approves
reporting.
Segments and brands
Decorative, Marine, Energy
and Infrastructure.
Finance incl. Legal & Digital
People & Culture
Strategy & Transformation
Enterprise Risk Management team
Continuous development of the ERM framework.
Consolidates risk reporting and challenges
activities and mitigating actions.
Risk sponsors
Delegate responsibility to Risk owners and
sign off on risk profile.
Technology & Operations
Procurement, Quality,
Health & Safety, Supply Chain,
Sustainability, R&D.
Enterprise Risk Management structure
Compliance
Provides guidance and expertise to functions
Internal Audit
Provides independent and objective assurance and advice
Board of Directors | Audit Committee
Oversees the effectiveness of ERM
Risk owners
Responsible for risk management activities
and mitigating actions.
Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Key risks
26
|
Risk matrix
Low High
Probability
Low High
Impact
Geopolitical instability
(re-occurring)
Sustainability innovation
(new)
Macroeconomic volatility
(re-occurring)
Cybersecurity
(re-occurring)
Climate adaptation
(re-occurring)
Supply chain disruption
(re-occurring)
Risks on this and the following page are listed in alphabetical order.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
28
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Sustainability governance model
Sustainability is governed at the highest level of Hempel
by the Board of Directors and Executive Group
Management. Sustainability activities and targets are
anchored and executed across Hempel’s customer
segments and functions, worldwide.
Global Sustainability Network
Executive Group Management
Customer segments Functions
Sustainability
Board of Directors Audit Committee
FUTUREPROOF
30
|
Performance
Reducing the
footprint of our
own operations
Partners
Enabling our
partners and
customers to be
more sustainable
Products
Reducing the
footprint of our
products and
packaging
People
Setting even higher
standards on safety,
fairness, inclusivity and
healthier working
practices
We support the UN Sustainable Development Goals and UN Global Compact. We are also proud
members of the Valuable 500 and the EV100 Climate Group.
Disclosure requirements, cf. §99a and 99b of the Danish Financial Statements Act
Disclosure requirements See page
99a
Policies on
• Human rights • 39-40
• Worker and social conditions • 36-37, 39-40
• Environment and climate • 32-35, 38
• Anti-corruption and anti-bribery • 40
Due diligence process • 28, 29-40
Activities during the year
• Human rights • 36-37, 39-40
• Worker and social conditions • 36-37, 39-40
• Environment and climate • 32-35, 38
• Anti-corruption and anti-bribery • 40
KPIs and results • 32-40, 44-47
Sustainability risks • 24-27
99b
Diversity in the Board of Directors
(including current gender composition and target)
• 18-19
Diversity in management
(including policy, activities during the year and results)
• 36, 46-47
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
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33
Reducing CO
2
emissions in our own operations
Performance
Products
PeoplePartners
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Integrity Work environment
Case topics:
Environment, health & safety
Whistleblower statistics, reported cases
0
10
20
30
40
50
60
2019 2020 2021 2022
40
|
Making a
difference
Established in 1948 by J.C. Hempel, the
primary purpose of the Hempel Foundation is
to provide a solid financial base for the
continued existence of the Hempel Group. Its
secondary purpose is to support good causes
around the globe within biodiversity, science
and education. As the sole owner of the
Hempel Group, all dividends from our work are
ultimately paid to make a difference for the
good causes supported by the Hempel
Foundation.
In 2022, the Hempel Foundation supported
15 projects with nine different partner
organisations, which together contribute to
sustaining key biodiversity areas in 2.6m
hectares of tropical forest, hereby improving
the livelihoods of 5,000 families (households)
from local communities living within or outside
these areas.
Since 2011, the Hempel Foundation has
supported 387,000 children with foundational
learning, and in 2022 alone, we supported
251,000 children with foundational learning.
Across Hempel, our people stepped up in
2022 to make a difference to the local
communities that we are a part of. Here are
some examples.
iWITNESS TOUR 2022
TO UGANDA
Nine Hempel colleagues had the opportunity
to travel to Uganda in September 2022 to
learn first-hand about some of the projects
that the Hempel Foundation is involved in to
make a positive impact in the area. The
highlights of the trip included educational
activities at schools supported by the
Foundation, and a visit to the Rwenzori
National Park to see how deforestation and
poaching are being combatted in this
important biodiversity area.
BEACH CLEAN-UP
IN SINGAPORE
The Pow Wow community of Hempel colleagues
in Singapore strengthens relationships within
Hempel teams and engages socially with the
local community. Although regular activities
were disrupted due to COVID-19, the team
started again in 2022, planning and joining
several events, including a beach clean-up.
BEAUTIFYING COMMUNITIES
Inspired by an appreciation of nature and its
inherent beauty, and aiming to foster a sense of
welcoming and belonging in times of big
developmental changes on the Sunshine Coast,
local Australian artist Timothy Birch created the
piece “Holding on” on the exterior of an
apartment building. The artwork resembles the
style of Pablo Picasso and features more than
50 selected Wattyl colours.
SUPPORTING PROJECTS WITH
PAINT DONATIONS
We support communities across the UK and
Ireland, making sure the positive power of
paint reaches those that need it the most. In
2022, we supported projects from schools to
youth schemes and community gardens, for
people to get the most from their local
places. One of these projects is nightsafe.
org, working with young people who are
struggling with homelessness in Blackburn
and Darwen. Crown recently donated paint,
wallpaper, brushes and rollers to restore a
property which will provide assisted living
accommodation for up to six young people.
SUPPORTING UKRAINE
WITH MEDICINE
Hempel worked together with Bevar Ukraine, a
Danish humanitarian organisation, to set up a
collection point for medical donations at our
headquarters in Lyngby.
Colleagues volunteered to man the collection point
and receive donations from the public. Doctors
helped to sort the medicine before it was packed
and sent to Ukraine.
PAINTING SCHOOLS IN MEXICO
Hempel worked together with schools in
Monterrey, Mexico and the COMUNIDAR
Foundation to improve public spaces and
facilities to encourage children to pursue
better opportunities and create social and
environmental value. During this paint for
disposal initiative, colleagues gathered on
weekends together with the school staff to
help them paint and rehabilitate several
schools using Hempel paints which would
have otherwise been disposed of.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
42
|
ESG data &
accounting policies
Basis for preparation
The environmental, social and governance
(ESG) data disclosed in the Consolidated ESG
data section is prepared based on guidance
from the UN Global Compact, recommenda-
tions from the CFA Society Denmark and the
metrics most relevant and material to the
Hempel Group. The conversion of data
reported to CO
2
equivalents is completed by
applying relevant conversion factors from
widely accepted authorities, such as the UK
Department for Business Energy & Industrial
Strategy (BEIS). The consolidation principles
are based on the same consolidation princi-
ples and period as the financial statements
unless otherwise stated. Data from entities
acquired or divested are included/excluded as
of the date of the acquisition/divestment
defined as the date Hempel obtained or
ceaseed control.
The accounting policies set out in this section
have been applied consistently in the prepara-
tion of the consolidated ESG data and related
disclosures for all the years presented.
Estimates & judgements
In preparing the ESG data, management is
required to make judgements, estimates and
assumptions that affect the amounts reported.
The estimates and assumptions are based on
experience, external sources and various other
factors that management considers to be
reasonable under the given circumstances. In
general, carbon footprint scope 3 emissions
have a higher degree of judgement and
complexity, and changes in the assumptions
and estimates could result in different
outcomes than those recorded and presented
in the scope 3 emissions.
Reporting scope
Environmental KPIs include Hempel Group
data from all sites with production or ware-
houses in which Hempel has operational
control. This includes 28 factories (2021: 28),
17 R&D centres (2021: 15) and 24 ware-
houses (2021: 36) referred to as ‘Hempel
sites’.
In 2022, Hempel ceased production in Russia
and closed its factory in Syria. The Khimji
production site in Oman, acquired during the
year, was added to the reporting scope as well
as the new factory located in Yantai, China,
which was completed and fully operational in
Q2 2022.
General accounting policies Emissions from production and warehouses,
purchase of raw and packaging materials,
energy consumption for surface preparation
and VOC in produced products cover all
material activities in Hempel’s value chain.
Environmental data related to retail stores and
HQ offices are considered immaterial and not
included in the ESG data. Emissions from
production at toll manufacturing sites on
behalf of Hempel are included under the
assumption that one tonne of toll-produced
goods requires the same energy and results in
the same waste generation as if the products
had been produced at Hempel sites (i.e. the
impact of these third-party emissions is
estimated using the Hempel average material,
energy and waste impacts per tonne of paint).
The social and governance data covers the
Hempel Group, comprising Hempel A/S and
entities controlled by Hempel A/S unless
otherwise stated in the accounting policy.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Energy & Waste 2022 2021 2020 2019
Renewable energy (kWh) 30,274,856 26,160,687 N/A N/A
Renewable energy through use of RECs (kWh) 12,281,000 0 N/A N/A
Non-renewable energy (kWh) 63,063,036 69,596,587 N/A N/A
Total energy consumption (kWh) 105,618,892 95,757,274 95,248,110 104,555,353
Share of renewable energy
40% 27% N/A N/A
Share of renewable electricity 71% 51% N/A N/A
Energy (kWh / 1,000 L paint produced) 290 263 245 270
Waste generation (tonne) 17,233 17,784 20,426 22,189
Waste generation
(kg/1,000 L paint produced) 47 49 53 57
Waste to landfill (tonne) 1,353 1,630 1,666 3,934
Waste to landfill
(kg / 1,000 L paint produced) 4 4 4 10
% reduction of waste to landfill from
production sites (Baseline: 2019) -83% -70% -58% N/A
Carbon footprint 2022 2021 2020 2019
Carbon footprint scope 1 (tonnes CO
2
e) 8,163 8,952 8,193 8,808
Carbon footprint scope 2 (tonnes CO
2
e) -
Location based 26,317 25,195 26,644 29,344
Carbon footprint scope 2 (tonnes CO
2
e) -
Market based 10,927 20,758 31,679 34,281
Carbon footprint scope 3 (tonnes CO
2
e) 2,402,253 2,803,278 1,902,794 1,922,694
% reduction in absolute CO
2
e emissions
for Scope 1 & 2 (Baseline: 2019)
-56% -31% -7% N/A
Carbon footprint scope 1 (tonnes CO
2
e /
1,000 L paint produced) 0.02 0.02 0.02 0.02
Carbon footprint scope 2 (tonnes CO
2
e /
1,000 L paint produced) Location based 0.07 0.07 0.07 0.08
Carbon footprint scope 2 (tonnes CO
2
e /
1,000 L paint produced) Market based 0.03 0.06 0.08 0.09
Carbon footprint scope 3 (tonnes CO
2
e /
1,000 L paint produced) 6.35 5.68 4.30 3.84
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
* The scope of red raw materials was expanded during 2021 to include candidate list substances as well as respiratory
sensitives. The figures from 2019-2021 are therefore not directly comparable to 2022.
Health & Safety 2022 2021 2020 2019
Lost Time Accident frequency
(number/million work hours) 1.19 1.72 1.61 2.68
Consumption of red raw materials
(kg /1000 L paint produced)* 50.65 26.67 7.90 8.09
Diversity 2022 2021 2020 2019
Average full-time equivalents (FTEs) 7,343 6,746 6,099 6,219
Total no. of employees 7,542 6,922 N/A N/A
Gender diversity in general workforce
(ratio female/male) 31/69 27/73 N/A N/A
Gender diversity in management positions
(ratio female/male) (previous definition) 29/71 23/77 21/79 N/A
Gender diversity in management positions
(ratio female/male) (new definition) 30/70 N/A N/A N/A
Employee engagement 2022 2021 2020* 2019
Response rate 83% 87% N/A 90%
Satisfaction & Motivation 72 73 N/A 74
Learning & Development 80 80 N/A 80
* Employee engagement in 2020 was, due to COVID-19, only conducted among PC users.
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Code of Conduct 2022 2021 2020 2019
Percentage of employees with a Hempel e-mail
address who completed and signed off on Code of
Conduct Refresher 100% 100% 100% 100%
Compliance cases 2022 2021 2020 2019
Open compliance cases, beginning of the period 23 23 16 25
New compliance cases reported during the year 44 46 30 34
- Environment, health & safety 3 3 2 0
- Work environment 13 13 3 1
- Integrity 2
8
30 25 33
Compliance cases closed as substantiated
during the year 21 23 11 18
Compliance cases closed as unsubstantiated
during the year 31 23 12 25
Total cases under investigation, end of period 15 23 23 16
Sustainability Procurement Screening Programme 2022 2021 2020 2019
Suppliers screened 77 41 N/A N/A
% of direct and indirect spend suppliers screened
through Hempel Procurement Sustainability
Screening 40% 22% N/A N/A
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Registered Executive Management
Board of Directors
48
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Executive Group Management
Born 1975 1974 1962 1983
Core capabilities
•
Commercial
•
Strategy development and execution
•
Finance, IT and M&A
•
Audit
•
Commercial (B2C and B2B)
•
Industry knowledge
•
Commercial
•
Industry knowledge
Education
•
IE Business School,
Global Executive MBA
•
Educated as state authorised public
accountant (approval deposited with
the Danish Business Authority)
•
BA (Hons) Business Studies,
Staffordshire University
•
MSc Material Chemistry,
Uppsala University
Born 1971 1965 1980 1972
Core capabilities
•
Commercial and marketing
•
Industry knowledge
•
Operations and supply chain
•
Product management
•
People and HR
•
Sustainability
•
Strategy development and execution
•
Innovation
Education
•
Diploma in Business Administration,
Copenhagen Business School
•
MSc Materials Science, KTH Royal
Institute of Technology
•
MSc Human Resource Management,
Birbeck, University of London
•
MBA Business Administration &
Management, Heriot-Watt University
Michael Hansen
Group President &
Chief Executive
Officer
Joe Devitt
Executive Vice
President,
Decorative
Steen Niemann
Madsen
Executive Vice
President, Energy &
Infrastructure
Lars Jønstrup
Dollerup
Executive Vice
President & Chief
Financial Officer
Katarina Lindström
Executive Vice
President & Chief
Operations Officer
Pernille Fritz
Vilhelmsen
Executive Vice
President & Chief
People & Culture
Officer
Alexander
Enström
Executive Vice
President, Marine
René Overgaard
Jensen
Vice President,
Strategy &
Transformation
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Board of Directors
Richard Sand
Chair
Eric Alström
Deputy Chair
Leif Jensen Karsten Munk
Knudsen
Born 1959 1966 1954 1971
First elected in 2009┘(and Chair since 2010) 2017 2011 2021
Core capabilities
•
Foundation and company
law, M&A
•
Strategy development &
execution
•
Operations
•
Supply chain
•
Industry knowledge
•
Commercialisation
through finance
•
Finance
•
Sustainability
Committees
•
Chair of Nomination and
Remuneration Committee
•
Nomination and
Remuneration Committee
member
•
Audit Committee and
Remuneration & Nomination
Committee member
•
Chair of Audit Committee
Selected positions
and directorships
•
Partner at Bech-Bruun Law
Firm with Right of audience,
The Danish Supreme Court
•
Chair: Aller Holding A/S and
Pressalit Holding A/S
•
Board member: Aller
Foundation
•
President: Danfoss Power
Solutions
•
Managing Director: Benteler
Automotive
•
Chair: Tajco Group A/S and
Strømberg Holding A/S
•
Board member:
WindowMaster
International A/S
•
CFO and EVP Finance,
Legal & Global Solutions:
Novo Nordisk A/S
•
Chair: NNE A/S
Education Selected positions
and directorships Education
•
Master of Law from the
University of Copenhagen
•
MSc Management, Stanford
University Graduate School
of Business
•
MSc in Economics and
Management, Aarhus
University
•
MSc Finance, University
of Aarhus
50
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Søren P. Olesen Susanna
Schneeberger
Helle Fiedler
Elected by
the employees
Kim Scheibel
Elected by
the employees
Mark Terrell Sutton
Elected by
the employees
Born 1967 1973 1963 1960 1966
First elected in 2018 2018 2015 2013-2019, 2022 2019
Core capabilities
•
Industry knowledge
•
Product development
•
M&A
•
Marketing & e-commerce
•
People and HR
•
Product development
•
Innovation
•
Commercial
•
Industry knowledge
•
Innovation
•
Innovation
•
Information technology
Committees
•
Audit Committee member
•
N/A
•
N/A
•
N/A
•
N/A
Selected positions
and directorships
•
CEO: STARK Group A/S
•
Board member: Industriens
Aarbejdsgivere i Danmark,
IAD and Svendsen Sport A/S
•
Chair: Yunex Traffic
•
Board member: SKF Group,
Hennecke Group and
Concentric AB
•
Lead Scientist R&D,
Hempel A/S
•
Customer Futurist,
Hempel A/S
•
Head of GrowHub,
Hempel A/S
Education Education
•
MSc Economics,
Aalborg University
•
MA (Econ), Rijksuniversiteit
Limburg, Maastricht
•
Master of European Affairs
(MBA), MSc International
Business, Lund University
•
MSc Chemical Engineering
•
Board Leadership &
Corporate Governance,
Copenhagen Business
School
•
Executive MBA: Managing for
Growth, Technical University
of Denmark
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Independent
auditor’s report
CVR no. 33771231
mne32800
mne35412
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
To the stakeholders of Hempel A/S
Hempel A/S (Hempel) engaged us to provide
limited assurance on the ESG Data for the
period 1 January - 31 December 2022 on
pages 42-47 in the Annual Report for Hempel
for 2022.
Our conclusion
Based on the procedures we performed and
the evidence we obtained, nothing has come
to our attention that causes us to believe that
the ESG Data on pages 42-47 in the Hempel
Annual Report 2022 have not been prepared,
in all material respects, in accordance with the
ESG Accounting Policies stated on pages
42-47.
This conclusion is to be read in the context of
what we say in the remainder of our report.
What we are assuring
The scope of our work was limited to assur-
ance over the ESG Data on pages 42-47 in
Hempel’s Annual Report.
Professional standards applied and level of
assurance
We performed a limited assurance engage-
ment in accordance with International
Standard on Assurance Engagements 3000
(Revised) ‘Assurance Engagements other than
Audits and Reviews of Historical Financial
Independent
limited assurance
report on the ESG
data 2022
Information’ and, in respect of the greenhouse
gas emissions stated on pages 44-45, in
accordance with International Standard on
Assurance Engagements 3410 ‘Assurance
engagements on greenhouse gas statements’,
issued by the International Auditing and
Assurance Standards Board’. Quantification of
greenhouse gas emissions is subject to
inherent uncertainty because of incomplete
scientific knowledge used to determine
emissions factors and the values needed to
combine emissions of different gases.
A limited assurance engagement is substan-
tially less in scope than a reasonable assur-
ance engagement in relation to both the risk
assessment procedures, including an
understanding of internal control, and the
procedures performed in response to the
assessed risks; consequently, the level of
assurance obtained in a limited assurance
engagement is substantially lower than the
assurance that would have been obtained had
a reasonable assurance engagement been
performed.
Our independence and quality control
We have complied with the independence
requirements and other ethical requirements
in the International Ethics Standards Board for
Accountants’ International Code of Ethics for
Professional Accountants (IESBA Code), which
is founded on fundamental principles of
integrity, objectivity, professional competence
and due care, confidentiality and professional
behaviour and ethical requirements applicable
in Denmark.
PricewaterhouseCoopers applies
International Standard on Quality Control 1
and accordingly maintains a comprehensive
system of quality control including docu-
mented policies and procedures regarding
compliance with ethical requirements,
professional standards, and applicable legal
and regulatory requirements. Our work was
carried out by an independent multidiscipli-
nary team with experience in sustainability
reporting and assurance.
Understanding reporting and measurement
methodologies
The ESG Data needs to be read and under-
stood together with the ESG accounting
policies (pages 42-47), which management of
Hempel is solely responsible for selecting and
applying. The absence of a significant body of
established practice on which to draw to
evaluate and measure non-financial informa-
tion allows for different, but acceptable,
measurement techniques and can affect
comparability between entities and over time.
Work performed
We are required to plan and perform our work
in order to consider the risk of material
misstatement of the ESG Data. In doing so,
we:
• Conducted interviews with data owners to
understand the key processes and controls
for reporting site performance data;
• Obtained an understanding of the key
processes and controls for measuring,
recording and reporting the ESG Data;
• On a sample test basis agreed and
reconciled reported data to underlying
documentation;
• Performed analysis of data from reporting
sites, selected based on risk and materiality
to the Group; and
• Evaluated the evidence obtained.
Management’s responsibilities
Hempel’s management are responsible for:
• Designing, implementing and maintaining
internal controls over information relevant to
the preparation of the ESG Data that are
free from material misstatement, whether
due to fraud or error;
• Establishing objective accounting policies
for preparing the ESG Data;
• Measuring and reporting the ESG Data
based on the accounting policies and the
content of the ESG Data.
Our responsibility
We are responsible for:
• Planning and performing the engagement to
obtain limited assurance about whether the
ESG Data are free from material misstate-
ment, and are prepared, in all material
respects, in accordance with the ESG
accounting policies;
• Forming an independent conclusion, based
on the procedures we have performed, and
the evidence obtained; and
• Reporting our conclusion to the stakehold-
ers of Hempel A/S.
Hellerup, 7 March 2023
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 33771231
Anders Stig Lauritsen
State Authorised Public Accountant
mne32800
Kristian Pedersen
State Authorised Public Accountant
mne35412
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Financial
statements
63 1.1 General accounting policies
66 1.2 Significant accounting estimates
and judgements
Primary
statements
Section 1
Basis of preparation
Section 2
Results for the year
58 63 67
58 Statement of profit and loss
58
Statement of comprehensive income
59
Statement of financial position
60
Statement of changes in equity
61
Statement of cash flows
67
2.1 Revenue
68
2.2 Employee costs
69
2.3 Other operating income
and expenses
69 2.4 Special items
70
2.5 Income tax, tax assets
and liabilities
84 4.1 Share capital, distribution
to shareholder
85
4.2 Borrowings
85
4.3 Financial risks
88
4.4 Financial instruments
89
4.5 Financial income and expenses
90
4.6 Acquisition of enterprises
92 4.7 Discontinued operations & assets
and liabilities held for sale
Section 3
Operating assets
and liabilities
Section 4
Capital structure and
financing items
Section 5
Other disclosures
72 84 93
72 3.1 Intangible assets
76
3.2 Property, plant and equipment
77
3.3 Leases
79
3.4 Inventories
80
3.5 Trade receivables
81
3.6 Pensions and similar obligations
83
3.7 Provisions
83
3.8 Other liabilities
93 5.1 Fee to the auditors appointed
at the General Meeting
93 5.2 Adjustment for non-cash items
93 5.3 Contingent liabilities
and other commitments
94
5.4 Events after the reporting period
94
5.5 Related parties and ownership
95
5.6 The Hempel Group
97
5.7 Financial definitions
Consolidated
financial statements
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Consolidated statement
of profit and loss
Consolidated statement
of comprehensive income
In EUR million
Note 2022 2021
2.1 Revenue 2,159 1,744
2.4 Production costs -1,375 -1,084
Gross profit 784 660
2.4 Sales and distribution costs -552 -453
2.4 Administrative costs -121 -121
2.3 Other operating income 4 20
2.3 Other operating expenses -1 0
Operating profit 114 106
4.5 Financial income 5 4
4.5 Financial expenses -63 -21
Profit before tax 56 89
2.5 Income tax -19 -31
Net profit for the year from continuing operations 37 58
4.7 Net profit / (loss) for the year from discontinued operations -2 5
Net profit for the year 35 63
Attributable to:
Equity holders of Hempel A/S 46 62
Non-controlling interests -11 1
Net profit for the year 35 63
In EUR million
Note 2022 2021
Net profit for the year 35 63
Other comprehensive income:
Items that may be reclassified to profit and loss:
Exchange rate differences on translation of foreign operations and
hyperinflation -23 37
2.5 Tax on other comprehensive income 2 -4
Items that will not be reclassified to profit and loss:
3.6 Remeasurements of defined benefit obligations 5 3
2.5 Tax on other comprehensive income -1 0
Other comprehensive income for the year, net of tax -17 36
Total comprehensive income for the year 18 99
Attributable to:
Equity holders of Hempel A/S 26 95
Non-controlling interests -8 4
Total comprehensive income for the year 18 99
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Consolidated statement
of financial position
In EUR million
Note 31 December 2022 31 December 2021
3.1 Intangible assets 765 766
3.2 Property, plant and equipment 511 477
3.3 Right-of-use assets 161 172
Other financial assets 13 11
2.5 Deferred tax assets 94 60
Total non-current assets 1,544 1,486
3.4 Inventories 343 334
3.5 Trade receivables 476 397
Income tax receivables 4 4
Prepayments 17 21
Other receivables 70 48
Cash 180 176
4.7 Assets held for sale 21 –
Total current assets 1,111 980
Total assets 2,655 2,466
In EUR million
Note 31 December 2022 31 December 2021
4.1 Share capital 15 15
Translation reserve -25 -1
Retained earnings 529 479
Proposed dividend for the year – 33
Hempel A/S shareholders’ share of equity 519 526
Non-controlling interests 28 41
Total equity 547 567
4.2 Borrowings 901 770
3.3 Lease liabilities 129 138
3.7 Provisions 36 41
3.6 Pensions and similar obligations 16 21
2.5 Deferred tax liabilities 99 101
Total non-current liabilities 1,181 1,071
4.2 Borrowings 100 67
3.3 Lease liabilities 36 38
Trade payables 355 344
5.5 Payables to parent company 66 70
Deferred income 7 8
3.7 Provisions 11 11
Income tax payables 26 7
3.8 Other liabilities 320 283
4.7 Liabilities held for sale 6 –
Total current liabilities 927 828
Total liabilities 2,108 1,899
Total equity and liabilities 2,655 2,466
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Consolidated statement
of changes in equity
In EUR million
Note Share capital
Translation
reserve
Retained
earnings
Proposed
dividend
Hempel A/S shareholders’
share of equity
Non-controlling
interest Total equity
Equity at 1 January 2021 15 -31 447 25 456 43 499
Net profit for the year – – 62 – 62 1 63
Other comprehensive income – 30 3 – 33 3 36
Total comprehensive income for the year – 30 65 – 95 4 99
Transactions with owners in their capacity
as owners:
Paid dividends – – – -25 -25 -5 -30
Proposed dividends – – -33 33 – – –
Transactions with non-controlling interests – – – – – -1 -1
Total transactions with owners – – -33 8 -25 -6 -31
4.1 Equity at 31 December 2021 15 -1 479 33 526 41 567
Equity at 1 January 2022 15 -1 479 33 526 41 567
Net profit for the year – – 46 – 46 -11 35
Other comprehensive income – -24 4 – -20 3 -17
Total comprehensive income for the year – -24 50 – 26 -8 18
Transactions with owners in their capacity
as owners:
Paid dividends – – – -33 -33 -5 -38
Total transactions with owners – – – -33 -33 -5 -38
4.1 Equity at 31 December 2022 15 -25 529 – 519 28 547
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Consolidated statement
of cash flows
In EUR million
Note 2022 2021
Cash flows from operating activities
Operating profit 114 106
Operating profit from discontinued operations -5 3
5.2 Adjustment for non-cash items 105 82
Total cash flow from operating activities before financial items, tax
and changes in working capital 214 191
Changes in working capital:
Change in receivables -97 -27
Change in inventories -10 -45
Change in payables 32 -2
Total change in working capital -75 -74
Total net cash flow from operating activities before financial items and
tax 139 117
Income tax paid -27 -31
Interest paid, net -40 -17
Total cash flow from operating activities 72 69
Cash flows from investing activities
Purchase of property, plant and equipment -84 -86
Purchase of intangible assets -28 -11
Sale of property, plant and equipment 5 10
4.6 Acquisition of enterprises -28 -511
Change in deposits -1 –
Total cash flow from investing activities -136 -598
Free cash flow -64 -529
In EUR million
Note 2022 2021
Cash flow from financing activities
4.4 Repayment of lease liabilities -42 -37
Proceeds from borrowings 254 1,250
Repayment of borrowings -95 -748
Transactions with shareholders:
4.1 Dividend distributed to shareholders -33 -25
4.1 Dividend distributed to non-controlling interests -5 -5
Total cash flow from financing activities 79 435
Net cash flow 15 -94
Cash at the beginning of the year 176 265
Exchange rate adjustment -8 5
Cash at the end of the year 183 176
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Section 1
Basis of preparation
1.1
General accounting
policies
Introduction
The consolidated financial statements of
Hempel A/S for the period 1 January – 31
December 2022 comprise Hempel A/S and its
subsidiaries (the Group).
The Board of Directors considered and
approved the 2022 Annual Report of Hempel
A/S on 7 March 2023. The Annual Report will
be submitted to the shareholders of Hempel
A/S for approval at the Annual General Meeting
on 27 April 2023.
Accounting policies
The consolidated financial statements have
been prepared in accordance with the
International Financial Reporting Standards
(IFRS) as endorsed by the EU and additional
Danish disclosure requirements applying to
entities of reporting class C for large companies.
The notes are grouped in sections and include
the relevant accounting policies. The Group’s
significant accounting estimates and judge-
ments are described in note 1.2 Significant
accounting estimates and judgements.
Basis of measurement
The consolidated financial statements have been
prepared under the historical cost basis, except
for derivative financial instruments and assets
held for sale that are measured at fair value.
The accounting policies have, with the excep-
tions described below, been applied consist-
ently in preparation of the consolidated financial
statements and for the comparative figures.
Assets held for sale and discontinued
operations
Non-current assets and disposal groups are
classified as held for sale when their carrying
amount will be recovered through a sale
transaction rather than through continuing
use. Non-current assets and disposal groups
are measured at the lower of the carrying
amount and fair value less costs to sell. Costs
to sell are the incremental costs directly
attributable to the disposal of the disposal
group, excluding finance costs and income tax
expense. Property, plant and equipment,
intangible assets and right-of-use assets are
not depreciated or amortised once classified
as held for sale. Assets and liabilities held for
sale are presented separately as current items
in the statement of the financial position.
Discontinued operations are excluded from the
results of the continuing operations and
presented as a single amount in profit and loss
after tax from discontinued operations in the
statement of profit and loss. For discontinued
operations, comparatives have been restated
in the statement of profit and loss. Refer also
to note 4.7 Discontinued operations and
assets and liabilities held for sale.
New standards, interpretations
and amendments adopted
The Group applied certain standards,
interpretations and amendments, which are
effective for annual periods beginning on or
after 1 January 2022: Amendments to IFRS 3,
IAS 16, IAS 37 and Annual Improvements to
IFRS 2018-2020 cycle.
The amendments listed above did not have
any impact on the amounts recognised in
current or prior periods and are not expected
to significantly affect future periods.
New standards and interpretations
not yet adopted
Certain new accounting standards and
interpretations that have been published are
not mandatory for the 31 December 2022
reporting period and have not been early
adopted by the Group. These standards are
not expected to have a material impact on the
Group in the future reporting periods, or on
foreseeable future transactions.
Change of accounting policy
The Group has changed its accounting policy
related to capitalisation of certain software
costs. This change follows the IFRIC
Interpretation Committee’s agenda decision
published in April 2021 and relates to the
capitalisation of costs of configuring or
customising software under ‘Software as a
Service’ (‘SaaS’) arrangements.
SaaS arrangements are service contracts
providing the Group with the right to access
the cloud provider’s application software over
a contract period. In these arrangements,
the Group does, in accordance with the new
IFRIC agenda decision, not obtain control over
a software intangible asset why implementa-
tion and configurations costs should be
expensed when incurred.
The Group’s accounting policy has historically
been to capitalise most configuration and
customisation costs related to SaaS arrange-
ments as intangible assets in the statement of
financial position.
As a result of the change in accounting policy,
SaaS arrangements were reviewed and
assessed to determine if the Group controls
the software. For arrangements where the
Group does not control the software,
the adoption of the agenda decision has
resulted in restatement of some previously
capitalised intangible assets to an expense in
the statement of profit and loss. This change
in accounting treatment has been accounted
for retrospectively and comparative informa-
tion has been restated accordingly. Operating
profit and net profit for the year 2021 was
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Basis of consolidation
The consolidated financial statements
comprise the parent company, Hempel A/S,
and entities controlled by Hempel A/S
(subsidiaries). Control is achieved when the
Group is exposed to or has a right to variable
returns from its involvement with the investee
and has the power to affect those returns
through its power over the investee.
Subsidiaries are consolidated from the date on
which control commences until the date on
which control ceases.
Control is usually achieved by directly or
indirectly owning or in other ways controlling
more than 50% of the votes or other rights
through agreements of management control.
De facto control and other potential voting
rights at the balance sheet date are also
considered when determining whether control
is achieved. Consolidation is performed by
summarising the financial statements of the
parent company and its subsidiaries. On
consolidation, items of a uniform nature are
combined. Elimination is made of intercom-
pany income and expenses, shareholdings,
dividends and intra-Group balance accounts
as well as of realised and unrealised gains and
losses on transactions between the consoli-
dated enterprises.
When the Group loses control of a subsidiary,
it derecognises assets (including goodwill),
liabilities, the carrying amount of any non-
controlling interests and components of other
comprehensive income attributable to the
non-controlling interests. Any gain or loss is
recognised within other operating income
and expenses.
The acquisition method of accounting is used
to account for business combinations by the
Group (refer to note 4.6 Acquisition of
enterprises).
Non-controlling interests
Non-controlling interests’ share in the results
and equity of subsidiaries is shown separately
in the consolidated statement of profit and
loss, statement of comprehensive income,
statement of financial position and statement
of changes in equity respectively.
The Group treats transactions with non-con-
trolling interests that do not result in a loss of
control as transactions with equity owners of
the Group. A change in ownership interest
results in an adjustment between the carrying
amounts of the controlling and non-controlling
interests to reflect their relative interests in the
subsidiary. Any difference between the amount
of the adjustment to non-controlling interests
and any consideration paid or received is
recognised in retained earnings within equity.
Where a non-controlling interest holds a put
option to sell the remaining minority shares to
the Group, a liability is recognised in the
statement of financial position at fair value
calculated as the present value of the exercise
price of the option. Any subsequent adjust-
ment to the fair value of the put option is
recognised directly within equity under
retained earnings.
Presentation currency
The functional currency of the parent company
is DKK, however the consolidated financial
statements is presented in million EUR as the
Group operates in a global environment with
international stakeholders.
Translation of transactions and balances in
foreign currencies
Items included in the financial statements of
each of Hempel’s entities are measured using
the currency of the primary economic environ-
ment in which the entity operates (functional
currency). Transactions denominated in other
currencies than the functional currency are
considered transactions denominated in
foreign currencies.
Transactions in foreign currencies are
translated into the functional currency defined
for each company using the exchange rates
prevailing at the dates of transaction.
Receivables, payables and other monetary
items in foreign currencies are translated at
the exchange rates on the balance sheet
date. Foreign exchange differences arising
between the exchange rates at the transaction
date and at the date of payment are recog-
nised as foreign exchange gains and losses in
the statement of profit and loss as financial
income or financial expenses.
Non-monetary items recognised in foreign
currencies are measured at the transaction
date rates and are not retranslated
subsequently.
Translation of Group companies
The results and financial position of foreign
operations with a functional currency other
than EUR (and which is not the currency of a
hyperinflationary economy) are translated into
the presentation currency EUR as follows:
• assets and liabilities are translated at the
exchange rate on the balance sheet date
• income and expenses in profit and loss
and in the statement of comprehensive
income are translated at monthly average
exchange rates (unless this is not a
reasonable approximation of the rates
prevailing on the transaction dates, in
which case income and expenses are
translated at the dates of the
transactions)
• share capital denominated in a currency
that differs from the presentation currency
of the consolidated financial statements is
translated at historical cost
• all resulting exchange differences are
recognised in other comprehensive income
and attributed to a separate translation
reserve in equity. However, where the
foreign entity is not wholly-owned, a
proportion of the translation difference is
allocated to the non-controlling interests.
impacted negatively by EUR 3 million.
Consequently, intangible assets and retained
earnings was reduced by EUR 3 million. The
net cash flows remained unchanged in 2021,
however cash flows from investing activities
were improved by EUR 3 million, offset by a
corresponding negative impact on cash flows
from operating activities.
The impact in 2022 of the change in account-
ing policy is considered immaterial.
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Foreign currency translation adjustments of a
loan to or borrowings from subsidiaries which
are neither planned nor likely to be settled in
the foreseeable future, and which are
therefore considered to form part of the net
investment in the subsidiary, are recognised
directly in other comprehensive income under
the separate translation reserve within equity.
When a foreign operation is derecognised, the
associated cumulative exchange rate differ-
ences are reclassified to profit or loss, as part
of the gain or loss on sale. Repayment of loans
considered a part of the net investment in a
subsidiary is not considered a disposal when
Hempel retains its proportionate ownership
interests, thus the cumulative exchange
difference is not reclassified to profit and loss.
Goodwill and fair value adjustments arising on
the acquisition of a foreign operation are
treated as assets and liabilities of the foreign
operation.
Hyperinflation
In foreign subsidiaries that operate in hyperin-
flationary economies, income and expenses are
translated into the presentational currency EUR
at the exchange rate at the balance sheet date.
Prior to translating the financial statements of
foreign operations in hyperinflationary econo-
mies, the income statement and non-monetary
balance sheet items are restated taking into
account changes in the general purchasing
power of the functional currency based on the
inflation up to the balance sheet date (‘inflation
adjustment’). The effect of the inflation
adjustment is recognised in Other comprehen-
sive income within the translation reserve. In
the income statement, gain/loss on the net
monetary position in the foreign entities is
recognised as financial income or expense. The
assessment as to when an economy is
hyperinflationary is based on qualitative as well
as quantitative factors, including whether the
accumulated inflation over a three-year period
exceeds 100%. Currently, Turkey, which entered
into hyperinflation as of 30 June 2022, and
Argentina are considered hyperinflationary
economies and thus the Group’s operations in
Argentina and Turkey have been remeasured in
accordance with the principles described,
applying the national Consumer Price Index
(CPI) of Argentina and Turkey, respectively, for
the inflation adjustment.
As the Group’s consolidated financial state-
ment is presented in a stable currency EUR,
comparatives are not restated as a conse-
quence of Turkey entering into hyperinflation.
The effect on the opening balance of Turkey
entering into hyperinflation is recognised
directly within equity under retained earnings.
Classification of operating expenses
in the statement of profit and loss
Production costs
Production costs comprise costs incurred to
achieve revenue for the year. Costs comprise
raw materials, consumables, direct labour
costs and indirect production costs, such as
maintenance and amortisation and deprecia-
tion, as well as costs for operation, administra-
tion and management of factories. Production
costs also include research and development
costs that do not qualify for capitalisation as
well as amortisation of capitalised develop-
ment costs (except for amortisation of
business application software). Write-downs of
inventory are also included.
Sales and distribution costs
Sales and distribution costs comprise costs
incurred to distribute sales and for sales
campaigns, including costs for sales and
distribution staff, advertising costs, deprecia-
tion of sales equipment and amortisation of
customer relationships.
Administrative costs
Administrative costs comprise costs incurred
for management and administration of the
Group, including costs for administrative staff
and management as well as office costs,
depreciations and write-downs for bad debt.
Amortisation of brands and software business
applications are also recognised in administra-
tive costs.
Cash flow statement
The statement of cash flows is presented using
the indirect method. The statement of cash
flows for the Group shows the cash flows for
the year, broken down into operating, investing
and financing activities and changes in the
Group’s cash and cash equivalents from the
beginning of the year to the end of the year.
The statement of cash flows cannot be
immediately derived from the published
financial records.
Cash flow from operating activities
Cash flow from operating activities are
calculated as the operating profit/loss for the
year adjusted for changes in working capital,
non-cash items such as depreciation,
amortisation and impairment losses and
provisions as well as interest and tax paid.
Cash flow from investing activities
Cash flow from investing activities comprise
cash flows from purchases and disposals of
intangible assets, property, plant and
equipment and acquisitions of enterprises.
Cash flow from financing activities
Cash flow from financing activities comprise
cash flows from raising and repayment of
principal long-term debt, including repayment
of lease liabilities as well as payments to and
from shareholders.
Cash flow from currencies other than the
functional currency
Cash flow in currencies other than the
functional currency are translated at the
average exchange rates for the month, unless
these differ significantly from the rates at the
transaction date, in which case the exchange
rate at the transaction date is applied.
Cash
Cash comprises cash at hand and bank
deposits.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Valuation of deferred tax assets
The deferred tax assets comprise carry-for-
ward tax losses expected to be utilised and
temporary differences.
The Group recognises deferred tax assets,
including the expected value of carry-forward
tax losses, based on an assessment of the
recoverability of the deferred tax assets.
The assessment of the recoverability of the
deferred tax assets involves estimates by
management as to the likelihood of the
utilisation of the deferred tax assets within a
foreseeable future. This depends on a number
of factors, including whether there will be
sufficient taxable profits available in future
periods, against which the carry-forward tax
losses can be utilised. In the event that actual
future taxable profits generated are less than
expected, and depending on the tax strategies
that the Group may be able to implement,
impairment of the deferred tax assets may be
required. Reference is made to note 2.5
Income tax, tax assets and liabilities.
Impairment test of goodwill
In performing the annual impairment test,
management assesses whether the groups of
CGUs to which the goodwill relates will be
able to generate sufficient positive net cash
flows to support their carrying amount
together with other net assets of the respec-
tive groups of CGUs. This assessment is
based on estimates of expected future cash
flows. The cash flows are derived from the
forecast for the next five years and do not
include restructuring activities that Hempel is
not yet committed to or significant future
investments that will enhance the perfor-
mance of the assets of the groups of CGUs
being tested. The recoverable amount is
sensitive to the discount rate used, as well as
the expected future cash inflows and the
terminal growth rate used for extrapolation
purposes. The key assumptions used to
determine the recoverable amount for the
different groups of CGUs are disclosed and
further explained in note 3.1 Intangible
assets.
Impairment test of brand
In performing the annual impairment test of
the Farrow & Ball brand, management assess-
es whether the brand will be able to generate
sufficient positive net cash flows to support
the carrying amount of the brand. The assess-
ment is performed using a relief-from-royalty
method based on expected future cash flows
generated from the royalty savings attributable
to owning the brand. The expected cash flows
are based on assumptions about the royalty
rate, expected future revenue and the discount
rate. The key assumptions used to determine
the recoverable amount of the brand, are
disclosed and further explained in note 3.1
Intangible assets.
Significant accounting judgements
The significant judgements, apart from those
that involve estimations, are the judgements
that management made in the process of
applying the Group’s accounting policies and
that have the most significant effect on the
amounts recognised in the consolidated
financial statements.
Useful life of brands
Management has assessed that certain
brands, mainly the Farrow & Ball brand, have
indefinite useful life as there is no foreseeable
limit to the period over which the brand is
expected to generate net cash inflows, based
on the brand being well-established in its
markets, have existed for decades and have no
legal, regulatory, contractual, competitive,
economic or other factors limiting the useful life
of the brand.
In preparation of the consolidated financial
statements, management is required to make
various accounting judgements and estimates
that affect the reported amounts of assets,
liabilities, income and expenses, including the
related disclosures. A degree of uncertainty is
involved in carrying out these judgements and
estimates, and could result in outcomes that
may deviate from the assessment made at the
reporting date.
The judgements, estimates and the related
assumptions made are based on historical
experience and other factors that manage-
ment considers to be reasonable under the
given circumstances. Estimates and judge-
ments are reviewed on an ongoing basis.
The Group’s significant accounting estimates
and judgements are described below.
Significant accounting estimates
The significant accounting estimates are those
that have a significant risk of resulting in a
material adjustment to the carrying amounts of
assets and liabilities in the following reporting
period.
Warranties
The Group generally offers warranties for its
products. Management makes estimates
regarding the related provisions, including the
probability of pending legal disputes and
future litigation outcomes. When determining
the most likely outcome, management
considers input of internal and external
counsel, historical warranty claim information,
as well as recent trends that might suggest
that historic cost levels do not accurately
represent an approximation of the costs of
future claims. The assumptions made in
relation to the current period are consistent
1.2
Significant accounting
estimates and judgements
with those in the prior year. Factors that could
impact the estimated amounts include
whether the claims are deemed valid, to which
extent the claims are covered by the product
warranty and estimates of the costs of coating
and other associated costs of remediating any
product failure. Reference is made to note 3.7
Provisions for information about the Group's
warranty provision.
The Group has taken out insurance against
product failures. The product failure insurance
is, to a certain extent, linked to the size and
nature of claims. This reduces the combined
estimation uncertainty related to the insurance
asset and warranty provision and the potential
net impact on profit and loss from claims.
Uncertain tax positions
Hempel has activities and subsidiaries in
many different countries, and therefore is
subject to income taxes in tax jurisdictions
around the world. Uncertain tax positions
relate to the uncertainty of the interpretation
of tax legislation in the countries Hempel
operates in.
Significant estimates and judgements are
required in determining the worldwide accrual
for income taxes, deferred income tax assets
and liabilities, and provision for uncertain tax
positions.
In the course of conducting business globally,
transfer pricing disputes with tax authorities
may occur, and management’s judgement is
applied to assess the possible outcome of
such disputes. Hempel believes that the
provision made for uncertain tax positions is
adequate. However, due to the uncertainty,
there is a possibility that, on conclusion of
open tax matters at a future date, the final
outcome may differ significantly. Reference
is made to note 2.5 Income tax, tax assets
and liabilities.
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Section 2
Results for the year
2.1
Revenue
Accounting policies
The Group mainly generates revenue from the
sale of paints and coatings (goods for resale
and finished goods) based on prices and
conditions stated in the contracts with
customers. Sale of finished goods comprise
business to business sales and, in the
Decorative customer category, also retail
sales. In addition, the Group generates a
minor part of its revenue from provision of
technical services.
Revenue from sale of paints and coatings is
recognised when the related performance
obligation is satisfied by transferring control of
the promised goods to a customer. The
Group’s customer contracts usually include
only a single performance obligation. Control of
the paints and coatings is obtained when the
goods are transferred to the customer. Where
the Group provides technical services,
including advice, training, project oversight
and surface management services etc.,
revenue is recognised over time as the
services are rendered.
Revenue from contracts with customers is
measured at an amount that reflects the
consideration to which Hempel expects to be
entitled in exchange for those goods and
services (transaction price), which normally
comprises the price specified in the contract,
net of discounts and customer bonuses.
The Group offers various discounts, including
rebates, bonuses, volume discounts and
payments to customers depending on the
nature of the customer and business. These
discounts are considered variable considera-
tion. Bonuses and discounts payable to a
customer are accrued for as the related
performance obligations are satisfied and
revenue is recognised. Historical experience is
used to estimate and provide for the dis-
counts, using the expected value method.
Variable consideration related to discounts is
only recognised as revenue to the extent that
it is highly probable that a significant reversal
will not occur in a later period. In case of
expected returns, a refund liability and a right
to the returned goods (included in other
current assets) are recognised for the
products expected to be returned.
Disaggregation of revenue
The following table displays revenue disaggre-
gated into sale of goods per geographical
region:
The vast majority of the Group’s performance
obligations are satisfied within one year or
less. Amounts for remaining performance
obligations (order backlog) are therefore not
disclosed in accordance with the practical
expedient in IFRS 15.121.
Payments from customers are due depending
on the type of customer and local business
practices, though typically within 30-90 days.
Retail payments are normally due immediately
after control of the goods has transferred to
the customer. Accordingly, no significant
element of financing is present.
The following table displays revenue disaggre-
gated into sale of goods per commercial
customer category:
In EUR million
2022 2021
EMEA 1,240 1,042
Asia-Pacific 653 537
Americas 266 165
Total revenue 2,159 1,744
In EUR million
2022 2021
Decorative 775 655
Marine 626 464
Infrastructure 445 359
Energy 313 266
Total revenue 2,159 1,744
The comparative figures for 2021 have been restated
to ensure comparability from year to year and to reflect
a new internal customer categorisation implemented in
2022, where customers, which in 2021 were categorised
as “other”, now are presented within Marine, Energy and
Infrastructure.
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
2.2
Employee
costs
Accounting policies
Employee costs include wages and salaries,
pensions, social security contributions,
annual leave and sick leave, bonuses and
non- monetary benefits.
Employee costs are recognised in the financial
year in which the associated services are
rendered. Costs for long-term employee
benefits provided by the Group are recognised
in the period in which they are earned.
For further information about the Group’s
pension plans, reference is made to note 3.6
Pensions and similar obligations.
Key management compensation
Together with the Board of Directors, key
management personnel comprise individuals
in the Executive Board and the Executive
Group Management (EGM). The Executive
Board is a part of the EGM and the EGM
consists of 8 individuals (2021: 8 members).
For a further description of the Executive
Board’s remuneration, reference is made to
Management’s Review.
The compensation paid or payable to the
key management personnel for employee
services is shown below. Total remuneration for
Executive Board and Board of Directors
amounted to EUR 4.3 million in 2022 (2021:
EUR 6.5 million).
In EUR million
2022 2021
Staff costs:
Wages and salaries 381 323
Pensions – defined contribution plans 21 18
Pensions – defined benefit plans 2 1
Other social security contributions 28 24
Other employee costs 23 20
Total employee costs for the year 455 386
Average number of full-time employees 7,343 6,746
Staff costs have been recognised in the profit and loss as follows:
Production costs 131 114
Sales and distribution costs 258 206
Administrative costs 66 66
Total employee costs in the profit and loss 455 386
In EUR million
2022 2021
Executive Board
1
):
Wages and salaries 3.4 3.8
Pensions, defined contribution plans 0.1 0.2
Other long-term benefits -0.3 1.5
Total 3.2 5.5
Other key management personnel
2
):
Wages and salaries 3.9 2.4
Pensions, defined contribution plans 0.3 0.2
Other long-term benefits 1.6 0.3
Total 5.8 2.9
Board of Directors:
Board fee 1.1 1.0
Total 1.1 1.0
Total compensation to key management personnel 10.1 9.4
1) The Executive Board registered with the Danish Business Authority (Erhvervsstyrelsen) at year end 2022 consisted of 2 members
(2021: 3 members).
2) Other key management personnel consists of 6 members at the end of 2022 (2021: 5 members).
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2.42.3
Other operating
income and expenses
Special items
Accounting policies
Other operating income and expenses
comprise items of a secondary nature to the
core activities of Hempel, including gains and
losses on the sale of intangible assets and
property, plant and equipment and certain
government grants.
Government grants are recognised in other
operating income at fair value where there is
a reasonable assurance that the grant will be
received and Hempel will comply with all
attached conditions. Government grants
relating to costs are deferred and recognised
in the statement of profit and loss and
presented in the same line item as the
relating costs, over the period necessary
to match them with the costs that they are
intended to compensate.
Grants received for the acquisition of
property, plant and equipment are recognised
as deferred income, which is recognised in
the statement of profit and loss under other
operating income on a systematic basis over
the useful life of the asset.
Special items include significant income and
expenses of a special nature relative to the
Group's earnings generating operating
activities, such as costs related to M&A
activities, integration of acquired businesses
and restructuring costs. Other significant
amounts of non-recurring nature are also
included in special items such as impairment
of intangible assets and gain/loss on
divestments of subsidiaries.
In 2022, special items comprised employee
redundancy costs and other related costs in
connection with the organisational changes
implemented to reduce costs and ensure the
Group's competitiveness, following the
increases in production costs as a result of,
among other factors, the significant increases
in raw material prices.
Further, special items comprised in both 2022
and 2021 integration costs related to acquired
business as well as M&A related costs.
Integration and M&A costs comprise salaries,
consultancy costs and, to a lesser extent,
travel, accommodation costs, etc.
Other operating income
In EUR million
2022 2021
Gain on sale of property,
plant and equipment 4 3
Government grants – 17
Total other operating
income 4 20
Government grants in 2021 primarily relate to closure of a
factory in Kunshan, China.
Other operating expenses
In EUR million
2022 2021
Loss on sale of property,
plant and equipment -1 –
Total other operating
expenses -1 –
Due to the significant impact on the statement
of profit and loss in 2022, these non-recurring
items of special nature are disclosed sepa-
rately in this note. The special items are
presented in the statement of profit and loss
within the following functions:
Special items, expenses
In EUR million
2022 2021
Restructuring costs 27 –
M&A and integration
related costs 3 8
Total special items 30 8
In EUR million
2022 2021
Production costs 5 –
Sales and distribution
costs
11 –
Administrative costs 14 8
Total special items 30 8
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Deferred tax
Accounting policies
Deferred income tax is provided in full, using
the liability method, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
consolidated financial statements. However,
deferred tax liabilities are not recognised if
they arise from the initial recognition of
goodwill. Deferred income tax is also not
accounted for if it arises from initial recogni-
tion of an asset or liability in a transaction
other than a business combination that, at
the time of the transaction, affects neither
accounting profit nor taxable profit or loss and
at the time of the transaction. Deferred
income tax is calculated using tax rates (and
laws) that have been enacted or substantially
enacted by the end of the reporting period
and are expected to apply when the related
deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax is adjusted for elimination of
unrealised intra-group gains and losses.
Deferred tax assets are recognised if it is
probable that future taxable amounts will be
available to utilise those temporary differences
and losses.
Deferred tax liabilities and assets are not
recognised for temporary differences between
the carrying amount and tax bases of
investments in foreign operations where
Tax for the year
In EUR million
2022 2021
Tax for the year is specified as follows:
Tax on profit for the year -19 -31
Tax on other comprehensive income 1 -4
Total tax for the year -18 -35
Tax on profit for the year is calculated as follows:
Current tax for the year -51 -26
Deferred tax for the year 32 -6
Adjustment in respect of previous years 1 -3
Total tax on total comprehensive income -18 -35
Effective tax rate of the Group
Reconciliation of tax rate:
Danish tax rate 22.0% 22.0%
Higher/(lower) tax rates of foreign subsidiaries -8.6% -5.5%
Weighted tax rate of the Group 13.4% 16.5%
Tax effect of:
Permanent differences -0.1% 0.7%
Unrecognised deferred tax assets 21.8% 11.1%
Recognised deferred tax assets related to prior years -18.3% -7.5%
Adjustments in respect of previous years 1.6% 3.7%
Other adjustments 1.9% 0.4%
Withholding taxes etc. 6.5% 7.9%
Effective tax rate of the Group excluding hyperinflation 26.8% 32.8%
Hyperinflation 7.1% 0.7%
Effective tax rate of the Group 33.9% 33.5%
2.5
Income tax, tax assets
and liabilities
Income tax
Accounting policies
The income tax expense for the year is the
tax payable on the current year’s taxable
income based on the applicable income tax
rate for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributa-
ble to temporary differences and to unused
tax losses, changes due to changes in tax
rates, adjustments to tax from previous years
and changes in provision for uncertain tax
positions.
The current income tax charge is calculated on
the basis of the tax laws enacted or substan-
tively enacted at the balance sheet date in the
countries where the parent company and its
subsidiaries operate and generate taxable
income. Management periodically evaluates
positions taken in tax returns with respect to
situations in which applicable tax regulation is
subject to interpretation. It establishes
provisions, where appropriate, on the basis of
amounts expected to be paid to the tax
authorities.
Current tax payable and receivable are
recognised in the consolidated statement of
financial position as tax computed on the
taxable income for the year, adjusted for tax
on taxable income for prior years and for
prepaid tax.
Current tax and changes in deferred tax are
recognised in profit and loss, except to the
extent that it relates to items recognised in
other comprehensive income or directly in
equity. In these cases, the tax is also recog-
nised in other comprehensive income or
directly in equity, respectively.
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Hempel A/S is able to control the timing of the
reversal of the temporary differences and it is
probable that the differences will not reverse
in the foreseeable future.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
offset current tax assets and liabilities and
when the deferred tax balances relate to the
same taxation authority. Current tax assets
and tax liabilities are offset where the entity
has a legally enforceable right to offset and
intends either to settle on a net basis, or to
realise the asset and settle the liability
simultaneously.
Deferred tax recognised in the balance sheet
In EUR million
2022 2021
Deferred tax,
beginning of year -41 -1
Recognised in profit
and loss 32 -6
Adjustment in respect of
previous year 4 –
Adjustments arising from
business combinations – -34
Tax assets and liabilities
at 31 December, net -5 -41
Specification of deferred tax assets
In EUR million
2022 2021
Intangible assets 17 11
Property, plant and
equipment 10 6
Inventories 2 1
Trade receivables 4 4
Provisions and defined
benefit obligations 17 21
Lease liabilities 3 –
Tax loss carryforwards 41 17
Deferred tax assets at
31 December 94 60
Deferred tax assets and liabilities within the same tax
jurisdiction are presented as either a net asset or net
liability. Last year, deferred tax assets and liabilities were
presented gross. As a result of the change in presentation,
comparative figures have been restated to also present the
deferred tax asset and liabilities on a net basis.
Specification of deferred tax liabilities
In EUR million
2022 2021
Intangible assets 54 45
Property, plant and
equipment 3 7
Inventories – 2
Provisions and defined
benefit obligations 42 47
Deferred tax liabilities at
31 December 99 101
The Group recognises deferred tax assets,
including the expected value of tax loss
carryforwards, based on an assessment of the
recoverability of the deferred tax assets.
At 31 December 2022, Hempel recognised a
deferred tax asset related to tax loss carryfor-
wards of EUR 41 million (2021: EUR 17
million).
Management has considered future taxable
income and applied judgement in assessing
whether deferred income tax assets should be
recognised. The assessment of the recovera-
bility of the deferred tax assets depends on a
number of factors, including whether there will
be sufficient taxable profits available in future
periods in tax juristrictions for which the tax
losses carryforwards can be utilised.
Assessment of the recoverability of the deferred
tax assets is based on taxable income
projections that contain estimates of and tax
strategies for the future taxable income for the
next five years, taking into account the general
market conditions and the Group’s future
outlook. The projections are based on the
Out of not recognised tax loss carryforwards
0% (2021: 0-5%) expire within 1 year, 10-15%
(2021: 10-15%) expire within five years from
the balance sheet date and the remaining
balance has no expiry date.
Deferred tax not recognised in the balance sheet
In EUR million
2022 2021
Temporary differences 9 9
Tax loss carryforwards 36 35
Total tax asset not
recognised 45 44
2022 2021
Deferred tax assets 94 60
Deferred tax liabilities -99 -101
Net at 31 December -5 -41
Group’s five-year forecast and are inherently
subject to uncertainty, as the realisation of the
projections are dependent on the outcome of
future events. It is management’s assessment
that the five-year forecast is achievable and
supports the capitalised deferred tax assets.
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Section 3
Operating assets and liabilities
3.1
Intangible
assets
Accounting policies
Goodwill
Goodwill is initially recognised in the statement
of financial position at cost and allocated to
groups of CGUs at which goodwill is monitored.
Subsequently, goodwill is measured at cost
less accumulated impairment losses. Goodwill
is not amortised.
Brands with an indefinite useful life
Brands acquired in a business combination
are initially recognised in the statement of
financial position at fair value and subse-
quently measured at cost less accumulated
impairment losses. Brands which are consid-
ered to have an indefinitely useful life are not
amortised, since there is no foreseeable limit
to the period over which the brands are
expected to generate net cash inflows.
Software and software under development
Acquired software and developed software are
initially measured at costs and subsequently at
cost less amortisation and impairment losses.
Acquired software and developed software are
amortised on a straight-line basis over the
estimated usefull life, which is 3-10 years,
though typically 5 years for ERP systems.
For software as a service arrangements,
implementation costs are capitalised only
where customisation and configuration of the
SaaS arrangement results in an intangible
asset controlled by the Group. Where customi-
sation and configuration costs do not result in
an intangible asset, costs are either expensed
as incurred or alternatively over the contract
term when the received services are not
distinct from the SaaS solution.
Software under development is recognised at
cost less impairment losses. Software under
development is not amortised.
Customer relationships
Customer relationships acquired in a business
combination are initially recognised at fair value
and subsequently measured at cost less
accumulated amortisation and impairment
losses. Amortisation is calculated on a
straight-line basis over the estimated useful life,
which is 5-12 years.
Other intangible assets
Other intangible assets comprise development
projects such as development of products or
processes, formulas and smaller brands.
Development projects concerning products
or processes (other than software develop-
ment projects) that are clearly defined and
identifiable, and in respect of which, technical
feasibility, sufficient resources and a potential
future market or development opportunity in
the enterprise can be demonstrated, and
where it is the intention to manufacture,
market or use the product or process in
question, are recognised as intangible
assets. Development projects are initially
measured at cost, which comprises
expenses, including salaries, amortisation
and external costs, directly attributable to
these development projects. Development
projects are subsequently measured at cost
less amortisation and impairment losses.
Development projects are amortised on a
straight-line basis over the estimated useful
life, which is 3-10 years.
Formulas and smaller brands are measured
at cost less accumulated amortisation and
impairment losses. The assets are amor-
tised on a straight-line basis over their
estimated useful lives. The amortisation
period is 2-10years.
Amortisation and impairment are included
as follows in the statement of profit and
loss. No impairment was recognised in
2022 or 2021.
Research and development costs
expensed
Research and development costs that are
not eligible for capitalisation are expensed
in the period incurred and are included in
the statement of profit and loss within
production costs. In 2022, this amounted to
EUR 29 million (2021: EUR 31 million).
Re-allocation of goodwill
In 2022, the Group re-allocated goodwill to align
with the new organisational structure announced
in December 2021 and implemented in 2022.
The re-allocation was carried out to reflect the
new internal management reporting and
consequently how goodwill is monitored. Before
the re-allocation of goodwill was carried out, an
impairment test was performed which did not
result in an impairment.
Previously, the Group monitored the Decorative
business separately and the remaining
activities on a regional basis. Now goodwill is
monitored based on four commercial business
units (Marine, Energy, Infrastructure and
Decorative) and one internal business unit
(Technology & Operations).
The four key commercial business units
manage sales and are responsible for
daily contact with the customers.
In EUR million
2022 2021
Production costs 5 1
Sales and distribution
costs – 1
Administrative costs 16 15
Total amortisation and
impairment loss 21 17
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Marine customers comprise both newbuilding
shipyards, ship owners requiring maintenance
in dry dock, or at sea, and maintenance
contractors. Maintenance work relates to every
area of a vessel, most notably hull coating to
protect the metal structure of the vessels.
Energy customers are owners of energy
assets, often subject to harsh weather
conditions such as windmills and other energy
solution assets.
Infrastructure mainly relates to bridges,
transportation assets and other infrastructure
buildings. Customers are e.g. governments
responsible for maintenance of critical
infrastructure, company owners of infrastruc-
ture assets and maintenance contractors.
Decorative sells indoor and outdoor coating
products. Decorative customers are both private
and commercial customers, e.g. retailers.
Technology & Operations is an internal
business unit where most of the Group’s
production and supply chain is managed, and
where R&D activities take place. All products
developed and produced by Technology &
Operations are sold internally to the four key
commercial business units.
The goodwill has been reallocated to the new
groups of CGUs described above based on the
relative headroom, defined as the difference
between the carrying amount of allocated net
assets and the recoverable amount for each
group of CGUs in percentage of the total
headroom. The carrying amount of goodwill
re-allocated to the new groups of CGUs is
shown in the table above.
In performing the re-allocation of goodwill
certain estimates and judgements have been
applied by management in determining both
the recoverable amounts, as well as the
carrying amounts of each group of CGUs,
including forecasting future income and
expenses and allocating assets and liabilities
to the relevant groups of CGUs. Reference is
made to assumptions described in the section
Impairment test goodwill.
Impairment of non-current assets
Goodwill, intangible assets with an indefinite
useful life and software under development
that is not subject to amortisation are tested
annually for impairment, or more frequently if
events or changes in circumstances indicate
that they might be impaired. Other assets are
tested for impairment whenever events or
changes in circumstances indicate that the
carrying amount may not be recoverable. An
impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable
amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the
purposes of assessing impairment, assets are
grouped at the lowest levels for which there
are separately identifiable cash inflows that
are largely independent of the cash inflows
from other assets or groups of assets (CGUs).
Non-financial assets other than goodwill that
suffered an impairment are reviewed for
possible reversal of the impairment at the end
of each reporting period.
Goodwill at time of re-allocation (in EUR million)
Old groups of CGUs New groups of CGUs
Marine Energy Infrastructure Decorative T&O Total
Decorative – – – 161 323 484
Americas 4 3 4 – 23 34
Total goodwill 4 3 4 161 346 518
Impairment test
Hempel has tested the carrying amount of
software under development, brands with
indefinite useful life and goodwill for impair-
ment. The tests did not result in any impair-
ment of carrying amounts (2021: no
impairment loss was recognised).
Goodwill acquired through business combina-
tions is allocated to the groups of CGUs as
follows, which reflects how goodwill is moni-
tored by management:
In EUR million
2022
Marine 4
Energy 3
Infrastructure 3
Decorative 160
T&O 341
Unallocated 18
Total goodwill 529
EUR 18 million goodwill was recognised from the
acquisitions of Paint World and Cap Couleurs and two
smaller acquisitions, all in the second half of 2022 (refer to
note 4.6 Acquisition of enterprises). The goodwill from these
acquisitions has not yet been allocated to groups of CGUs.
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Key assumption Description
Revenue growth and
EBITDA margin
Revenue is for all commercial business units assumed to increase over the forecasting period on average by mid single-digit growth
rates, assuming a slight increase in market share. This is based on assumptions on the general market development in the different
commercial business areas, taking into consideration the maturity of the market and the current challenges with high inflation, high
energy and raw material prices and an assumption of a normalisation of the global economy over the forecasting period. Further,
group and local strategic initiatives are considered when estimating the revenue growth rates for the individual commercial businesses,
including initiatives focusing on increasing sales prices and volumes. A stable EBITDA margin is assumed in all the commercial
business units in the forecasting period, based on the business units ability to generally increase selling prices in line with inflation.
The estimated revenue growth in Decorative is, in particular, to be achieved through our strong market position, brand awareness
and through the in 2021 and 2022 acquired companies and stores that increases Decorative’s accessibility in selected markets. For
Marine, the estimated revenue growth is to be achieved through our strong, competitive products, e.g. within hull coatings, and higher
sales prices through a more value-based price setting model, as well as increased sales volumes based on the assumed continuation
of the trend of increasing demand for products in the marine industry that reduce both fuel consumption and CO2 emissions. For
Energy and Infrastructure, the estimated revenue growth is based on an assumption of a normalisation of the global economy on the
back of COVID-19 with an increased demand for sustainable solutions in the renewable and infrastructure sector and higher sales
prices through a more value-based price setting model.
For Technology & Operations, revenue and EBITDA margin is derived from sales to the four commercial business units. Sales volumes
are therefore based on the expected sales volumes in the four commercial business units. The internal sales prices are adjusted
to reflect an arm’s length selling price. EBITDA margin is assumed to increase slightly over the forecasting period. This is based on
assumptions of a stabilisation of raw material prices, the ability to continuously optimise the production and supply chain, including
higher utilisation of existing production capacity and reduction in production and employee cost as well as the realisation of expected
synergies from acquired businesses during the period and in previous years. In addition, completion of the ongoing construction of
new cost-efficient factories in 2022 and 2023 is assumed to improve the EBITDA margin over the forecasted period.
Long-term growth rate The terminal growth rates do not exceed the expected long-term inflation.
Pre-tax discount rate The pre-tax discount rate reflects the specific risks in the CGUs.
The recoverable amounts of each group of
CGUs are based on value in use calculations
and based on cash flow projections for the
years 2023-2027. The forecast represents
management’s best expectation of the future
cash flows and is assumed to be both
reasonable and achievable. The assumptions
applied by management in forecasting the
future cash flows reflect management’s
expectations considering all relevant factors,
including Hempel’s strategic initiatives, local
initiatives, past experience and external
sources of information, where possible and
relevant. The key assumptions used in the
cash flow projections are revenue growth,
EBITDA margin, long-term growth rate and
pre-tax discount rate (refer to the table to the
right). Cash flows beyond the five-year forecast
period are extrapolated using the estimated
growth rates stated in table.
Long-term
growth
rate
Pre-tax
discount
rate
Marine 2.00% 15.26%
Energy 2.00% 15.11%
Infrastructure 2.00% 15.11%
Decorative 2.00% 14.30%
Technology & Operations 2.00% 14.35%
Sensitivity analysis
Management reasonably considered and
assessed possible changes for the key
assumptions and did not identify any instances
that could cause the carrying amount of
goodwill to exceed its recoverable amount.
Impairment test of the Farrow & Ball brand
The carrying amount of the Farrow & Ball
brand with indefinite useful life of EUR 136
million (2021: 136 million) was tested
separately for impairment as the brand relates
to the Farrow & Ball CGU. The recoverable
amount is calculated based on a re-
lief-from-royalty method, assuming a steady
revenue growth of average 4.8% in the
forecasting period based on expected market
development within the luxury paint business.
Further, the forecast assumes that selling
prices increase in line with raw material price
increases.
The royalty rate applied in the relief-from-roy-
alty calculation is based on a benchmark study
for high-end brands with similar market
position as Farrow & Ball. A royalty rate of
6.15% (2021: 6.15%) and a weighted average
cost of capital (WACC) of 8.79% (2021: 7.0%)
were applied.
Impairment test goodwill
As described under accounting policies,
goodwill was re-allocated to align with the
new internal management reporting structure.
For the purpose of impairment testing,
revenue in Technology & Operations com-
prises internal sales of coating and paint
products to the four commercial business
areas. The internal selling prices in
Technology & Operations and thus COGS in
the commercial business units are, for the
purpose of impairment testing, adjusted to
reflect management’s best estimate of prices
that could have been achieved in an arm’s
length transaction based on the commercial
business units’ operating model. In determin-
ing the carrying amount of net assets of each
group of CGUs, certain allocation keys were
applied.
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In EUR million
Goodwill
Brands
(indefinite life) Software
Software under
development
Customer
relationships
Other
intangible assets Total
Intangible assets
Costs at 1 January 2022 530 145 50 18 139 84 966
Effect of exchange rate adjustment -23 -7 – – 3 2 -25
Additions for the year – – 1 22 – 1 24
Acquisition of enterprises 22 – – – – – 22
Transfers and reclassifications – – 7 -11 – 4 –
Disposals for the year – – -1 – – – -1
Reclassification to assets held for sale – – -1 – – – -1
Costs at 31 December 2022 529 138 56 29 142 91 985
Accumulated amortisation at 1 January 2022 – – 42 – 101 57 200
Effect of exchange rate adjustment – – – – 2 -1 1
Amortisation for the year – – 5 – 9 7 21
Reversal of amortisation of assets disposed – – -1 – – – -1
Reclassification to assets held for sale – – -1 – – – -1
Accumulated amortisation at 31 December 2022 – – 45 – 112 63 220
Carrying amount at 31 December 2022 529 138 11 29 30 28 765
Intangible assets
Costs at 1 January 2021 65 – 41 11 127 81 325
Effect of exchange rate adjustment 14 3 1 – 8 3 29
Additions for the year – – – 15 – – 15
Acquisition of enterprises 449 142 3 – 4 – 598
Adjustments* 2 – – -3 – – -1
Transfer and reclassifications – – 5 -5 – – –
Costs at 31 December 2021 530 145 50 18 139 84 966
Accumulated amortisation at 1 January 2021 – – 37 – 87 50 174
Effect of exchange rate adjustment – – 1 – 6 2 9
Amortisation for the year – – 4 – 8 5 17
Accumulated amortisation at 31 December 2021 – – 42 – 101 57 200
Carrying amount at 31 December 2021 530 145 8 18 38 27 766
* Comparative figures for goodwill have been restated to reflect the increase in goodwill of EUR 2 million resulting from an adjustment to the preliminary purchase price allocation related to the acquisition of Wattyl in 2021, as detailed in note 4.6 Acquisition of enterprises.
Further, comparative figures have been adjusted to reflect the change in accounting policies described in note 1.1 General accounting policies.
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3.2
Property, plant
and equipment
Property, plant and equipment are measured
at cost less accumulated depreciation and
impairment losses.
Costs comprise the purchase price, including
import duties and non-refundable taxes, and
expenses directly related to the acquisition up
until the time when the asset is ready for
intended use. In the case of assets of own
construction, costs comprise direct expenses for
labour, materials, components and suppliers.
Material general and specific borrowing costs
that are directly attributable to the construction
or production of a qualifying asset are capital-
ised during the period of time that is required to
complete and prepare the asset for its intended
use. Qualifying assets are assets that neces-
sarily take a substantial period of time to get
ready for their intended use or sale.
Subsequent costs, such as partial replacement
of property, plant and equipment, are included
in the carrying amount of the asset in question
when it is probable that such costs will result in
future economic benefits. The carrying amount
of the replaced parts is derecognised from the
balance sheet and recognised in the statement
of profit and loss. All other repairs and mainte-
nance are charged to profit or loss during the
reporting period in which they are incurred.
Depreciation is based on the costs of an asset
less its residual value. Depreciation is
calculated on a straight-line basis over the
expected useful lives of the assets, which are:
Buildings (max.) ................................. 50 years
Laboratory equipment ....................... 10 years
Plant and machinery ......................... 10 years
Other fixtures and fittings,
tools and equipment ......................3-10 years
If the individual material components of an
asset have different useful lives, each compo-
nent will be depreciated separately. Gains and
losses on disposals are determined by
comparing proceeds with the carrying amount.
These gains and losses are included in other
operating income and expenses (refer to note
2.3 Other operating income and expenses). The
assets’ residual values and useful lives are
reviewed, and adjusted if necessary, at the end
of each reporting period.
Information about commitments for acquisition
of property, plant and equipment is provided in
note 5.3 Contingent liabilities and other
commitments.
Impairment
The carrying amounts of property, plant and
equipment are reviewed on an annual basis to
determine whether there is any indication of
impairment. If an asset’s carrying amount
exceeds its recoverable amount, an impair-
ment loss is recognised in the statement of
profit and loss.
In EUR million
Land and
buildings
Plant and
machinery
Other
fixtures and
fittings,
tools and
equipment
Assets
under
construction Total
Property, plant and equipment
Costs at 1 January 2022 321 277 113 111 822
Effect of exchange rate adjustment 6 1 -1 -3 3
Acquisition of enterprises – 1 – – 1
Additions for the year 1 2 5 83 91
Transfer and reclassifications 10 28 18 -56 –
Disposals for the year -2 -7 -4 – -13
Reclassification to assets held for sale -13 -10 -2 – -25
Costs at 31 December 2022 323 292 129 135 879
Accumulated depreciations at 1
January 2022 89 183 73 – 345
Effect of exchange rate adjustment 4 2 -1 – 5
Depreciation for the year 10 19 11 – 40
Transfer and reclassifications -1 – 1 – –
Reversal of depreciations of assets
disposed – -7 -4 – -11
Reclassification to assets held for sale -2 -8 -1 – -11
Accumulated depreciation at 31
December 2022 100 189 79 – 368
Carrying amount at 31 December
2022 223 103 50 135 511
Capitalised interest expenses in 2022 amounted to EUR 1 million.
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In EUR million
Land and
buildings
Plant and
machinery
Other
fixtures and
fittings,
tools and
equipment
Assets
under
construction Total
Property, plant and equipment
Costs at 1 January 2021 241 251 98 74 664
Effect of exchange rate adjustment 13 21 6 5 45
Acquisition of enterprises 30 8 10 2 50
Additions for the year – 4 3 106 113
Transfer and reclassifications 49 21 6 -76 –
Disposals for the year -12 -28 -10 – -50
Costs at 31 December 2021 321 277 113 111 822
Accumulated depreciations at 1
January 2021 83 170 69 – 322
Effect of exchange rate adjustment 6 17 5 – 28
Depreciation for the year 9 18 9 – 36
Reversal of depreciations of assets
disposed -9 -22 -10 – -41
Accumulated depreciation at 31
December 2021 89 183 73 – 345
Carrying amount at 31 December
2021 232 94 40 111 477
Capitalised interest expenses in 2021 amounted to EUR 1 million.
3.3
Leases
Accounting policies
Lease liabilities
At the commencement date of leases, the
Group recognises lease liabilities measured
at the present value of the lease payments to
be made over the lease term. The lease
payments include fixed payments less any
lease incentive receivables, variable lease
payments that depend on an index or rate,
e.g. when a minimum indexation is applied,
and amounts expected to be paid under
residual value guarantees. The lease
payments also include the exercise price of a
purchase option reasonably certain to be
exercised by the Group and payment of
penalties for terminating a lease, if the lease
term reflects the Group exercising the option
to terminate. The present value is calculated
using the Group’s incremental borrowing rate
if the interest rate implicit in the lease is not
readily determinable.
Contracts may contain both lease and non-
lease components. The Group has elected to
separate lease and non-lease components. For
these contracts, the consideration promised in
the contract is allocated based on the relative
stand-alone prices between the lease and
non-lease component. Non-lease components
are accounted for in accordance with the
accounting policy applicable to such items.
Some lease contracts include extension and
termination options. Management exercises
judgement in determining whether these
options are reasonably certain to be exercised.
Management considers all relevant facts and
circumstances that create an economic
incentive to exercise the extension option.
After initial recognition, the lease liability is
measured at amortised cost using the
effective interest method. The lease liability
is increased to reflect the accretion of
interest and reduced for lease payments
made. The lease liability is remeasured when
there is a change in the lease term or a
change in the assessment to purchase the
underlying asset. In addition, the lease
liability is remeasured if there is a change in
future lease payments arising from a change
in an index or rate, including revised lease
payments that reflect a change in market
rental rates, or if there is a change in the
Group’s estimate of the amount expected to
be payable under a residual value guarantee.
When lease liabilities are remeasured, a
corresponding adjustment is made to the
carrying amount of the right-of-use asset. If the
carrying amount of the right-of-use asset is
reduced to zero, any further reduction is
recognised in the statement of profit and loss.
Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease. Right-of-use
assets are initially measured at cost comprising
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the amount of the initial measurement of the
lease liability, adjusted for any lease payments
made at or before the commencement date and
any initial direct costs incurred, as well as an
estimate of dismantling and restoration costs to
be incurred.
After initial recognition, right-of-use assets are
measured at cost less accumulated deprecia-
tion and impairment losses and adjusted for
any remeasurement of the lease liability.
Depreciation is calculated on a straight-line
basis over the shorter of the useful life of the
asset and the lease term.
Right-of-use assets mainly comprise office and
warehouse buildings, stores, warehouses and
vehicles, such as cars, trucks and vans. Lease
terms of buildings are usually 5-10 years
whereas vehicles typically have a lease term of
3-5 years.
COVID-19 rent concessions
The Group elected to apply the practical
expedient for COVID-19 rent concessions
applicable for payments due on or before 30
June 2022. Under the practical expedient, rent
concessions arising as a direct consequence
of the COVID-19 pandemic are not accounted
for as a lease modification. Instead, the
amount forgiven is recognised directly within
the income statement.
Short-term and low-value leases
Short-term and low-value leases are expensed
directly as operating costs in the statement of
profit and loss, usually on a straight-line basis
over the lease term.
The Group has recognised the following
amounts relating to leases:
The statement of profit and loss shows the
following expenses relating to leases:
In EUR million
Land and
buildings Vehicles
Other fixed
assets Total
Leases
Costs at 1 January 2022 196 26 1 223
Effect of exchange rate adjustment -1 – – -1
Acquisition of enterprises 3 – – 3
Additions for the year 7 8 – 15
Remeasurement 16 -1 – 15
Disposals -11 -6 – -17
Reclassification to assets held for sale -1 – – -1
Cost at 31 December 2022 209 27 1 237
Accumulated depreciations at 1 January 2022 40 11 – 51
Effect of exchange rate adjustment -1 – – -1
Depreciation for the year 35 9 – 44
Disposals -11 -6 – -17
Reclassification to assets held for sale -1 – – -1
Accumulated depreciations at 31 December 2022 62 14 – 76
Carrying amount at 31 December 2022 147 13 1 161
Leases
Costs at 1 January 2021 100 19 1 120
Effect of exchange rate adjustments 4 1 – 5
Acquisition of enterprises 58 3 – 61
Additions for the year 37 7 – 44
Remeasurement 5 – – 5
Disposals -8 -4 – -12
Cost at 31 December 2021 196 26 1 223
Accumulated depreciations at 1 January 2021 16 6 – 22
Effect of exchange rate adjustments 2 – – 2
Depreciation for the year 30 8 – 38
Disposals -8 -3 – -11
Accumulated depreciation at 31 December 2021 40 11 – 51
Carrying amount at 31 December 2021 156 15 1 172
Lease liabilities
In EUR million
2022 2021
Current 36 38
Non-current 129 138
Total 165 176
In EUR million
2022 2021
Depreciation expense of
right-of-use assets 44 38
Interest expense on lease
liabilities 3 3
Expense relating to short-
term leases, excluding
short-term leases of low-
value assets 1 2
Total amount recognised
in profit and loss 48 43
Total cash outflows from leases amounted to EUR 46
million, including cash outflows from short-term and low-
value leases (2021: EUR 42 million).
The maturity analysis of undiscounted cash flows related to
lease liabilities is disclosed in note 4.3.
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3.4
Inventories
Accounting policies
Inventories are measured at cost, determined
using the FIFO-method, or net realisable value,
if the net realisable value is lower. Costs of
inventories comprise purchase costs of raw
materials, including import duties and
transportation costs directly attributable to the
acquisition of raw materials, costs of conver-
sion and other costs incurred in bringing the
inventories to the present location and
condition.
The costs of finished goods and work in
progress also include indirect production
costs, which comprise the cost of indirect
materials and labour as well as maintenance
and depreciation of the machinery, factory
buildings and equipment used in the manufac-
turing process and costs of factory administra-
tion and management.
The net realisable value is calculated as the
selling price less costs of completion and
costs necessary to make the sale and is
determined based on the most reliable
evidence available at the time the estimates
are made, taking into account obsolescence
and development in expected selling prices.
In EUR million
2022 2021
Raw materials and
consumables 109 127
Work in progress 7 6
Finished goods 227 201
Total inventories 343 334
Cost of inventories, included
under production costs 1,283 1,037
Write-downs to net
realisable value during the
year 11 8
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Credit risk
The Group is exposed to financial and commer-
cial counterparties but has no particular
concentration of customers. To minimise the
credit risk related to trade receivables, financial
vetting is undertaken for all major customers
and credit limits are assigned for major
customers based on the Group’s credit risk
assessment.
The Group applies the simplified approach to
providing the expected credit losses, which
permits the use of the lifetime expected loss
provision for all trade receivables. To measure
the expected credit losses, trade receivables
are grouped based on shared credit risk
characteristics and the days past due. Trade
receivables not due are also included when
assessing the expected lifetime loss provision.
The Group’s maximum exposure to credit risk
at the end of the reporting period related to
trade receivables is the carrying amount of
trade receivables mentioned above. The Group
does not hold collateral as security.
Loss allowance provision
In EUR million
2022 2021
Provision at 1 January 29 29
Additions for the year 2 –
Losses recognised -2 -2
Currency translation 2 2
Total 31 29
3.5
Trade
receivables
Accounting policies
Trade receivables are recognised initially at
their transaction price. The Group holds trade
receivables with the objective of collecting the
contractual cash flows and therefore measures
them subsequently at amortised cost using
the effective interest method, less loss
allowance. Due to the short-term nature of
trade receivables, amortised cost will equal
the invoiced amount less loss allowance for
expected credit losses.
Expected credit loss 2022
In EUR million
Carrying
amount gross
Expected loss
rate (%)
Loss
allowance
Current 352 0.7% 2.3
Overdue 1-30 days 61 0.9% 0.6
Overdue 31-60 days 27 1.5% 0.4
Overdue 61-120 days 19 1.7% 0.3
Overdue 121-240 days 12 6.8% 0.8
Overdue 241-360 days 6 26.1% 1.5
Overdue > 360 days 31 82.7% 25.7
Total 508 31.6
Expected credit loss 2021
In EUR million
Carrying
amount gross
Expected loss
rate (%)
Loss allowance
Current 294 0.7% 2.1
Overdue 1-30 days 46 1.6% 0.7
Overdue 31-60 days 21 3.3% 0.7
Overdue 61-120 days 18 5.6% 1.0
Overdue 121-240 days 11 11.9% 1.3
Overdue 241-360 days 4 31.8% 1.2
Overdue > 360 days 32 69.6% 22.4
Total 426 29.4
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3.6
Pensions and
similar obligations
Accounting policies
The Group operates various post-employment
schemes, including defined benefit and
defined contribution pension plans.
Defined contribution plans
Hempel operates a number of defined
contribution plans which receive fixed
contribution from Group companies. The
Group’s contributions to the defined contribu-
tion plans are recognised in the statement of
profit and loss in the year to which they relate.
The Group’s obligation is limited to the
amount that it agrees to contribute to the
pension funds. Contributions payable are
recognised in the statement of financial
position under other current liabilities. The
Group has no further obligations once the
contributions have been paid.
Defined benefit plans
In regards to defined benefit plans, the liability
or asset recognised in the balance sheet is the
present value of the defined benefit obligation
at the end of the reporting period less the fair
value of plan assets. The net defined benefit
obligation is calculated annually by independ-
ent actuaries using the projected unit credit
method. This is done separately for each major
plan by estimating an amount of future
benefits that employees have earned in return
for their service in the current and prior
periods. The present value of the defined
benefit obligation is determined by discounting
the estimated future cash outflows using
interest rates of high-quality corporate bonds
that are denominated in the currency in which
the benefits will be paid, and that have terms
approximating to the terms of the related
obligation. In countries where there is no deep
market in such bonds, the market rates on
government bonds are used.
The net obligation is recognised in Pensions
and similar obligations where service costs are
recognised as employee benefit expenses.
Service costs comprise current service costs
and past service costs. Current service cost is
the increase in the present value of the defined
benefit obligation resulting from employee
services in the current period. Changes in the
present value of the defined benefit obligation
resulting from plan amendments or curtail-
ments are recognised immediately in profit and
loss as past service costs.
The net interest cost is calculated by applying
the discount rate to the net balance of the
defined benefit obligation and the fair value of
plan assets. This cost is included in financial
expenses in the consolidated statement of
profit and loss.
Remeasurement gains and losses arising from
experience adjustments and changes in
actuarial assumptions are recognised in the
period in which they occur, directly in other
comprehensive income. They are included in
retained earnings in the statement of changes
in equity and the balance sheet.
Pension costs
In 2022, net costs of EUR 24 million relating
to Hempel’s pension plans were recognised in
the statement of profit and loss (2021: EUR
20 million) and the figures break down as
follows:
Hempel’s defined benefit plans
The Group operates defined benefit plans in a
range of countries with the major plans being
in Ireland and the UK. None of the plans are
individually significant at Group level.
The plans are generally final salary pension
plans, which provide benefits to the employ-
ees in the form of a guaranteed level of
pension payable for life. The level of benefits
provided depends on the employees’ length
of service and their salary in the final years
leading up to retirement. The majority of
benefit plans are funded. However, there are
also a number of unfunded plans in which the
Group meets the benefit payment obligation
as it falls due. Plan assets held in trusts are
governed by local regulations and practice in
each country, as is the nature of the relation-
ship between the Group and the trustees and
their composition.
The development in the present value of
defined benefit pension obligations breaks
down as follows:
In EUR million
2022 2021
Costs for defined
contribution plans:
Employee costs 21 18
Costs for defined benefit
plans:
Employee costs 2 1
Interest expense 1 1
Total costs recognised in
the profit and loss 24 20
Present value of obligation at 31 December
In EUR million
2022 2021
Present value of defined
benefit plans 51 64
Fair value of assets
related to the plans 35 43
Pension obligations
recognised in the
balance sheet, net 16 21
Of these obligations, EUR 19 million relates to unfunded
pension obligations (2021: EUR 20 million) and EUR 32
million relates to partly funded obligations (2021: EUR 44
million). Of the total gross obligation, 51% (2021: 58%)
relates collectively to Ireland and the UK.
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Sensitivity analysis
The following table illustrates the change in the
gross obligation relating to defined benefit
plans from a change in the key actuarial
assumptions. The analysis is based on fairly
probable changes, provided that the other
parameters remain unchanged.
In EUR million
2022 2021
Discount rate:
Increase of 0.5 p.p. -3 -4
Decrease of 0.5 p.p. 3 4
Future wage/salary
increase:
Increase of 0.5 p.p. 1 1
Decrease of 0.5 p.p. -1 -1
Mortality
Increase of +1 year 1 1
Decrease of -1 year -1 -1
The following table summarises the key
assumptions of the defined benefit plans:
The composition of the plan assets are as
follows:
The expected average duration of the
obligations is 12 years and the expected
contributions to post-employment benefit
plans for the year ending 31 December 2023
are EUR 1 million.
The development in the fair value of pension
plan assets breaks down as follows:
In EUR million
2022 2021
Present value of
obligation at 1 January 64 58
Current service cost 2 1
Interest expense 1 1
Actuarial gains/losses
arising from changes in
financial assumptions -13 -3
Actuarial gains/losses
arising from experience
adjustments 1 1
Exchange differences -1 3
Acquired in business
combinations 1 5
Payments from the plans -4 -2
Present value of
obligation at 31
December 51 64
In EUR million
2022 2021
Fair value of pension
plan assets at 1 January 43 35
Return on plan assets
excluding calculated
interest -7 1
Exchange differences -1 2
Acquired in business
combinations – 6
Contributions and
payments:
Employers 1 1
Payments from the plans -1 -2
Fair value of pension
plan assets at 31
December 35 43
2022 2021
Defined benefit plans
Specification of plan
assets:
Shares and properties 26% 23%
Fixed interest current
asset investments 73% 75%
Cash at bank and in hand 1% 2%
Total 100% 100%
2022 2021
Weighted average
discount rate 4.24% 2.34%
Weighted average future
wage/salary increase 3.86% 3.34%
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3.7
Provisions
Accounting policies
Provisions are recognised when the Group has
a present legal or constructive obligation as a
result of past events, it is probable that an
outflow of resources will be required to settle
the obligation, and the amount can be reliably
estimated.
Provisions for environmental, warranty and
restructuring obligations, as well as other
obligations, are measured at the present value
of management’s best estimate of the
expenditure required to settle the present
obligation at the end of the reporting period.
The costs required to settle the liability are
discounted if the effect is material to the
measurement of the provision. The discount
rate used to determine the present value is a
pre-tax rate that reflects current market
assessments of the time value of money and
the risks specific to the liability. The increase
in the provision due to the passage of time is
recognised as interest expense.
Decommission and restoration obligations are
measured at the present value of the future
liability in respect of decommissioning as
expected at the balance sheet date. The
present value of the provision and changes in
estimate are recognised as part of the cost of
property, plant and equipment and depreci-
ated together with the associated asset.
Interest on provisions is recognised in the
statement of profit and loss under financial
expenses.
3.8
Other
liabilities
Accounting policies
Other liabilities mainly comprise accrued
employee costs, including bonuses,
with holding tax and VAT, customer bonuses,
commission payables, accrued interests and
prepaid rent.
Other financial liabilities are measured at
initial recognition at fair value. Subsequently,
other financial liabilities are measured at
amortised cost using the effective interest
method, which usually corresponds to the
nominal value. Other non-liabilities arising
from e.g., taxation or employer benefits, are
measured in accordance with the appropri-
ate standards.
Environmental provisions
Environmental obligations relate to restoration
of various sites and to remedying established
In EUR million
Environmental
obligations Warranties
Other
provisions Total
Total provisions, beginning of year 20 20 12 52
Effect of exchange rate adjustment – – 1 1
Additions for the year – 7 1 8
Reversed for the year – -5 -2 -7
Consumed for the year -1 -7 0 -8
Unwind of discount 1 – – 1
Total provisions, end of year 20 15 12 47
Current liabilities 3 7 1 11
Non-current liabilities 17 8 11 36
Total provisions, end of year 20 15 12 47
Comparative figures for environmental provisions have been restated to reflect the increase in provisions of EUR 3 million
resulting from an adjustment to the preliminary purchase price allocation related to the acquisition of Wattyl in 2021, as
detailed in note 4.6 Acquisition of enterprises.
environmental damages that occurred in
connection with the production of coatings and
disposal or release of certain wastes.
Management anticipates that the resolution of
the Group’s environmental obligations will occur
over an extended period.
Warranties
Provision is made for estimated warranty claims
in respect of products sold that are still under
warranty at the end of the reporting period.
In line with accounting policies, potential
product warranties are recognised as warranty
provisions when revenue from the related sale
is recognised.
Other provisions
The Group is involved in a number of legal
cases, tax cases and other disputes. Some
of these involve significant amounts and are
subject to some uncertainty. Management
continuously assesses the risks associated
with the cases and disputes, and their likely
outcome. It is the opinion of management
that, apart from items recognised in the
financial statements, the outcomes of these
cases and disputes are not probable or
cannot be reliably estimated in terms of
amount or timing. The Group does not expect
these to have a material impact on the
consolidated financial statements.
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payable to class B shareholders. Then an
annual dividend of 5% of the nominal capital is
distributed to class A shareholders. Additional
dividends are distributed evenly among class
B and A shares. However, the maximum
dividend on class B shares amounts to 12% of
the nominal capital annually, DKK 492
thousand (EUR 66 thousand), whereas no
maximum limit applies for dividend on class A
shares.
The shares are non-negotiable securities, and
no special restrictions apply to the transfera-
bility of the shares.
Dividends
The Group proposes a dividend of EUR 0 per A
share and EUR 0 per B share (2021: EUR 297
thousand per A share and EUR 8 thousand per
B share) amounting to EUR 0 million per A
share and EUR 0 million per B share (2021:
EUR 32.9 million per A share and EUR 0.1
million per B share).
During 2022, dividends related to the year
2021 of EUR 297 thousand per A share and
EUR 8 thousand per B share were paid out
(2021: EUR 225 thousand per A share and
EUR 8 thousand per B share) equal to a total
dividend payment of EUR 33 million (2021:
EUR 25 million).
Capital structure
The capital structure of the Group is intended
to ensure sufficient financial flexibility and
stability for the Group to reach its strategic
goals. The Group aims to maintain an optimal
capital structure, and to use the free operating
cash flow after financial items and tax for debt
servicing and business development. At the
end of 2022, the net interest-bearing debt to
EBITDA ratio was 4.8 (2021: 4.6) on a
reported basis. The increase is primarily a
result of increased net working capital items
driven by organic growth, investment in
factories and business acquisitions.
The Group’s dividend policy is to distribute
50% of net profit for the year, with a lower limit
of EUR 25 million. The Group has for 2022
decided to adjust the amounts of dividend
paid to EUR 0 million to accommodate its
policies and strategic goals.
The Group strives to ensure adequate credit
resources at all times, which includes securing
access to committed bank financing and
refinancing maturing debt in a timely manner.
The Group aims to have minimum EUR 225
million of free committed credit resources
available for the next 12 months.
In order to achieve this overall objective, the
Group’s capital management aims to ensure
that it meets its financial covenants attached
to the interest-bearing loans and borrowings
that define capital structure requirements. The
covenants’ terms relate to the Group’s
leverage ratio. At the end of 2022 the leverage
ratio was 4.2 (2021: 3.7). The Group aims to
maintain a leverage ratio below 2.5x in the
long term while a higher leverage ratio is
accepted when acquiring strategic
businesses.
Breaches in meeting the financial covenants
would permit the bank to immediately call
loans and borrowings. There have been no
breaches, nor otherwise close to default, of
the financial covenants of any interest- bearing
loans or borrowings in the current period or in
the previous period.
No changes were made in the objectives,
policies or processes for managing capital
during 2022 and 2021.
4.1
Share capital,
distribution to shareholder
Accounting policies
Dividends proposed by management for the
year are presented separately within equity.
The translation reserve comprises foreign
exchange differences arising from the
translation to EUR of financial statements of
the parent company and its subsidiaries. Also,
the effect of the inflation adjustment from
hyperinflationary economies is recognised
within the translation reserve.
Share capital
The share capital has been fully paid and
amounts to DKK 115 million (EUR 15 million)
comprising 110 A shares of DKK 1 million
each, one A share of DKK 900,000, four B
shares of DKK 1 million each and four B
shares of DKK 25,000 each. The B shares
have special dividend rights.
If dividends are declared, an annual dividend
of 5% of the nominal capital of shares is first
Section 4
Capital structure and financing items
31 December 2022 31 December 2021
Number of
shares
Nominal value
(DKK)
Number of
shares
Nominal value
(DKK)
The share capital comprises:
A shares 111 110,900,000 111 110,900,000
B shares 8 4,100,000 8 4,100,000
Share capital (fully paid) 119 115,000,000 119 115,000,000
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4.2
Borrowings
Accounting policies
Long-term loans, such as loans from credit
institutions, are recognised initially at fair
value net of directly attributable transaction
costs. Subsequently, the loans are measured
at amortised cost using the effective interests
method. The difference between the proceeds
initially received and the nominal value is
recognised as financial expenses in the
statement of profit and loss over the loan term.
The bank loans are floating interest loans based
on mainly EURIBOR. Further, the interest rate is
linked to the Group’s leverage ratio and from
2022 also linked to achievement of the Group’s
sustainability targets aimed at reducing CO2
emissions, landfill waste and use of hazardous
materials in the production.
A negative pledge clause is attached to the
Group’s long-term loan arrangements that
prevents Hempel A/S from pledging certain
assets as security.
Secured loans
Lease liabilities are effectively secured as the
rights to the leased assets recognised in the
financial statements revert back to the lessor
in the event of default.
4.3
Financial
risks
This note describes the exposure to financial
risks and how these risks could affect the
Group’s future financial performance.
The Group’s activities expose Hempel to a
variety of risks related to the Group’s financial
assets and liabilities. The Group’s financial
liabilities comprise primarily borrowings, trade
and other payables and lease liabilities,
whereas the financial assets primarily comprise
trade receivables and cash deposits.
Management has assessed the following key
financial risks and their significance to the Group:
The above financial risks are inherent to the
way Hempel operates as a global company
with a large number of operating units across
the world. The Group’s overall risk manage-
ment programme seeks to identify, assess,
and mitigate these financial risks in order to
reduce the effects on the Group’s financial
performance. The risks are managed in
accordance with the policies and guidelines
laid out by the Board of Directors. Hempel has
centralised handling of these risks, except for
commercial credit risk, which is managed
locally. There are no changes in the Group’s
financial risk management policies compared
to the previous year.
It is the Group’s policy not to speculate actively
in financial risks.
To some extent, the Group’s income and
expenses in foreign currencies net out and
create a natural hedge of the Group’s profit-
ability margin. Hempel hedges intercompany
loans in the major currencies using financial
instruments. FX hedges are entered into in
order to mitigate FX risks related to internal
balances between Group entities. See further
description under market risk.
Market risk
The Group’s exposure to market risks is
related to foreign exchange risks and interest
rate risk. All market risks are managed in
accordance with the Group’s Treasury Policy.
Foreign exchange risk
Foreign exchange risk is the risk that the fair
value or future cash flows of a balance sheet
exposure will fluctuate because of changes in
foreign exchange rates.
Hempel’s exposure to the risk of changes in
foreign exchange rates relates primarily to the
Group’s trade receivables or trade payables,
respectively arising from revenue and
The Group’s borrowings consist of the following:
In EUR million
2022
Interest
rate Maturity
Carrying
amount
Bank loans 3.78%
2024-
2026 901
Overdraft
facilities
2.8 -
7.9% 2023 100
Lease
liabilities
0.16 -
12.00%
2022-
2045 165
Loan from parent
company 4.43% 2023 66
Total borrowings 1,232
Current 202
Non-current 1,030
Total borrowings 1,232
In EUR million
2021
Interest
rate Maturity
Carrying
amount
Bank loans 1.55%
2024-
2026 772
Overdraft
facilities
0.94 -
3% 2022 65
Lease
liabilities
0.29 -
12%
2022-
2045 176
Loan from parent
company 1% 2022 70
Total borrowings 1,083
Current 175
Non-current 908
Total borrowings 1,083
Financial risk type Significance
Foreign exchange risk Low
Interest rate risk Medium
Credit risk Low
Liquidity risk Low
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purchase transactions denominated in a
foreign currency and intercompany loans and
deposits. The currency exposure in these
balances may affect Hempel’s result.
The overall objective of foreign exchange risk
management is to reduce the short-term
negative impact of exchange rate fluctuations
on net financials and cash flows, thereby
contributing to the predictability of the financial
results.
To manage exposure to foreign exchange risk, it
is Hempel’s policy to pool funding activities
centrally through intercompany loans and
deposits. In each subsidiary, foreign exchange
risk derived from trade receivables or payables
is mitigated by Hempel A/S establishing an
intercompany loan/receivable towards the local
entity in the same foreign currency, thereby
creating a natural hedge.
Currency risk is, as a main policy, hedged
against DKK or EUR when exposure exceeds
EUR 0.5 million (higher thresholds are applied
for US, SGD, HKD and PLN). Some currencies
cannot be hedged within a reasonable price
range, in which case correlation to a proxy
currency is considered and, if deemed
appropriate, proxy hedging is applied.
FX forward contracts are used to hedge the
exposure to currency risk. As the vast majority
of intercompany accounts are hedged, and
because changes in the fair value of both the
hedged item and the FX forward is recognised
in profit and loss under financial items, the
net exposure to foreign currency risk is
deemed low.
Foreign currency sensitivity
The table below demonstrate the sensitivity to
a reasonably possible change in USD and GBP
exchange rates against EUR, with all other
variables held constant. The Group’s exposure
to foreign currency changes for all other
currencies is not material.
The impact on the Group’s profit before tax is
due to changes in the fair value of monetary
assets and liabilities denominated in foreign
currencies and non-designated FX deriva-
tives. Although the derivatives have not been
designated in a hedge relationship, they act
as an economic hedge and will offset the
underlying transactions when they occur.
The movement in pre-tax equity equals the
effect on profit before tax as all FX deriva-
tives are measured at fair value through
profit and loss.
Interest rate risk
Interest-bearing debt increased due to
additional acquisitions in 2022 and increased
net working capital driven by organic growth.
Change in rate Nominal value
Effect on profit
before tax Effect on equity
2022
USD/EUR 5% -45.5 -2.3 -1.8
USD/EUR -5% -45.5 2.3 1.8
2022
GBP/EUR 5% 2.3 0.1 0.1
GBP/EUR -5% 2.3 -0.1 -0.1
2021
USD/EUR 5% -36.4 -1.8 -1.4
USD/EUR -5% -36.4 1.8 1.4
2021
GBP/EUR 5% 3.8 0.2 0.2
GBP/EUR -5% 3.8 -0.2 -0.2
The Group's exposure to changes in interest
rates primarily relates to long-term loans and
borrowings with floating interest rates. The
Group's policy is to hedge its interest rate risk
depending on the Group's interest coverage
level (EBITDA/interest). When the Group’s
interest coverage level (EBITDA/interest) falls
below 10, the Group assesses whether it is
necessary to mitigate the interest rate risk by
entering into hedging instruments. In December
2022, Hempel fixed the interest rate on EUR
700 million of debt by entering into varia-
ble-to-fixed interest rate swaps that commence
in March 2023 and mature in December 2024,
which reduces the exposure to changes in
interest rates in 2023 and 2024.
There is an economic relationship between the
loans and the hedging instruments as both the
nominel amount and terms of the interest rate
swaps mirror the hedged exposure, creating an
equal opposite interest receipt and a fixed
interest payment. The Group has established a
hedge ratio of 1:1 for the hedging relationships
as the underlying risk of the interest rate
swaps are identical to the hedged risk.
The table on the next page demonstrates
sensitivity to reasonable possible changes in
interest rates. With all other variables held
constant, the Group's profit and loss before tax
is affected through the impact of floating
interest rates as follows:
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Credit risk
Credit risk arises from the possibility that
trading partners and customers may default on
their obligations, causing financial losses for the
Group. The Group is exposed to credit risk on
cash, trade and other receivables. Please refer
to note 3.6 for a description of the Group’s
credit risk in relation to trade receivables.
The carrying amount of EUR 253 million
(2021: EUR 224 million) represents the
maximum credit exposure related to cash and
other receivables.
Hempel’s main banks are all financial
institutions with a high credit rating and,
therefore, financial assets such as cash are
considered to be of low risk.
Other financial assets measured at amortised
cost comprise other receivables. These
financial assets are considered to have a low
In EUR million
Increase/
decrease
in bps
Effect
on profit
before tax
Effect on
equity
2022
Euro +100 bps -9 -7
Euro -100 bps 9 7
2021
Euro +100 bps -4 -3
Euro -100 bps 1 1
In EUR million
Contractual undiscounted cash flows Less than
1 year
Between 1
and 5 years
More than
5 years
2022
Non-derivatives:
Borrowings, current and non-current 136 953 –
Loans from parent company 69 – –
Trade payables 355 – –
Lease liabilities 39 95 42
Total contractual undiscounted cash flows end
of year 599 1,048 42
Non-current liabilities 1,090
Current liabilities 599
2021
Non-derivatives:
Borrowings, current and non-current 75 808 –
Loans from parent company 71 – –
Trade payables 344 – –
Lease liabilities 39 93 51
Total contractual undiscounted cash flows end
of year 529 901 51
Non-current liabilities 952
Current liabilities 529
For borrowings, the contractual payments are based on the variable interest rates at December 2022, except for in total
EUR 700 million loans where the fixed interest swap rates are applied until maturing of the swaps in December 2024, thus
reflecting the Group’s expected net cash outflow until maturity of the loan and the interest rate swaps.
credit risk, and thus the impairment provision
calculated based on 12 months of expected
losses is considered immaterial. The financial
assets are considered to be low risk when they
have a low risk of default, and the issuer has a
strong capacity to meet its contractual cash
flow obligations in the near term.
The Group has no material risks relating to a
single customer or business partner. It is the
Group’s credit policy to rate major customers
and other business partners on a current
basis. Bank Acceptance Bills are used as a
financial instrument to further limit the risk of
credit losses.
The Group considers a financial asset in
default when the Group is unlikely to recover
the outstanding contractual amount in full. A
financial asset is written off when there is no
reasonable expectation of recovering the
contractual cash flows.
Liquidity risk
The liquidity risk is assessed to be low.
Hempel ensures the availability of the required
liquidity through a combination of cash
management and both uncommitted and
committed credit facilities. Hempel applies
cash pool arrangements for optimisation and
centralisation of cash management.
Hempel has an undrawn credit facility of
EUR 565 million (2021: EUR 709 million).
Maturities of financial liabilities
The table to the right provides an analysis of
Hempel’s financial liabilities divided into
relevant maturity groupings based on their
contractual maturities for non-derivative
financial liabilities.
The amounts disclosed in the table are the
contractual undiscounted cash flows.
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4.4
Financial
instruments
Accounting policies
Derivative financial instruments, FX forwards,
currency swaps and interest rate swaps are
initially recognised in the balance sheet at fair
value and subsequently remeasured at their
fair value. For FX forwards and currency
swaps, positive and negative fair values of
these derivative financial instruments are
recognised as Other receivables and Other
payables, respectively. Changes in the fair
values of FX forwards and currency swaps are
recognised in the statement of profit and loss
under financial income and expenses.
For interest rate swaps, cash flow hedge
accounting is applied. Positive and negative fair
values are recognised as Other receivables and
Other payables, respectively. Changes in the fair
values are recognised directly within Other
comprehensive income. The amount accumu-
lated in Other comprehensive income is
reclassified to Profit and loss as a reclassifica-
tion adjustment in the same periods during
which the hedged cash flows affect profit and
loss. Fair value of the interest rate swaps is
negative EUR 53 thousand per 31 December
2022.
Fair values of derivate financial instruments
are calculated on the basis of market data and
generally accepted valuation methods.
Financial instruments measured at fair value
Financial instruments measured at fair value
can be divided into three levels:
Level 1 — Quoted prices (unadjusted) in active
markets for identical assets or liabilities
Level 2 — Inputs other than quoted prices
included within level 1 that are observable for
the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
Level 3 — Inputs for the asset or liability that
are not based on observable market data
Derivatives are within level 2 of the fair value
hierarchy and are calculated based on
observable market data as of the end of the
reporting period.
Financial instruments carried
at amortised cost
Fair value of the short-term financial assets
and other financial liabilities carried at
amortised cost is not materially different from
the carrying amount. In general, fair value is
determined primarily based on the present
value of expected future cash flows. However,
where a market price is available, this is
deemed to be the fair value.
Fair value of the borrowing items is within level
2 of the fair value hierarchy and is calculated
based on discounted future cash flows.
Financial instruments by category Carrying amount Fair value
2022 2021 2022 2021
Carried at amortised cost:
Other interest-bearing receivables and
deposits 13 11 13 11
Trade receivables 476 397 476 397
Other receivables (non-interest-bearing) 63 48 63 48
Cash and bank balances 180 176 180 176
Financial assets at amortised cost 732 632 732 632
Carried at fair value through profit and
loss:
Derivatives 7 1 7 1
Financial assets at fair value through
profit or loss 7 1 7 1
Total financial assets 739 633 739 633
Carried at amortised cost:
Bank and other credit institutions 1,001 837 1,004 842
Loan from parent company 66 70 66 70
Lease liabilities 165 176 165 176
Trade payables 355 344 355 344
Other liabilities 317 283 317 283
Financial liabilities at amortised cost 1,904 1,710 1,907 1,715
Carried at fair value through profit and
loss:
Derivatives 3 1 3 1
Financial liabilities at fair value
through profit or loss 3 1 3 1
Total financial liabilities 1,907 1,711 1,910 1,716
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4.5
Financial income
and expenses
Accounting policies
Financial income and expenses comprise
interest income and expenses, gains and
losses on receivables, payables, realised and
unrealised exchange gains and losses and
transactions denominated in foreign currencies.
Reconciliation of liabilities
arising from financing activities
In EUR million Non-cash movements
Beginning
of year
Cash
flows Additions Disposals
Acquisi-
tions
Exchange
rates
End of
year
2022
Lease liabilities 176 -42 30 – 3 -2 165
Borrowings 907 159 – – – 1 1,067
Liabilities
arising from
financing
activities 1,083 117 30 – 3 -1 1,232
2021
Lease liabilities 98 -37 49 -1 63 4 176
Borrowings 287 502 – – 117 1 907
Liabilities
arising from
financing
activities 385 465 49 -1 180 5 1,083
Financial income
In EUR million
2022 2021
Interest income 5 1
Foreign exchange gain (net) – 3
Total financial income 5 4
Financial expenses
In EUR million
2022 2021
Interest expense on
borrowings 23 6
Interest expense on lease
liabilities 3 3
Interest expenses to parent
company 2 1
Interest expenses on
financial liabilities measured
at amortised cost 28 10
Foreign exchange loss (net) 12 –
Net monetary loss 3 1
Other financial expenses 20 10
Total financial expenses 63 21
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to be obtained during normal business
operations less expected completion costs
and costs incurred to execute the sale, and
less a reasonable profit on the sales effort
and a reasonable profit on the completion.
The fair value of acquired raw materials and
goods for sale is determined at replacement
cost. Receivables are measured at fair value
of the amounts that are expected to be
received less expected costs for collection.
Liabilities are measured at the present value
of the amounts that are required for settling
the liabilities. The Group’s loan interest rate
before tax is used for discounting purposes.
Acquisition-related costs are expensed as
incurred as administration costs.
The excess of the total consideration trans-
ferred, value of non-controlling interests and
the fair value of any equity investments
previously held in the acquiree over the total
identifiable net assets measured at fair value
are recognised as goodwill.
Goodwill is not amortised but is subject to
annual impairment tests. The initial impair-
ment test is carried out before the end of the
acquisition year. Upon acquisition, goodwill is
allocated to the CGUs that form the basis for
subsequent impairment tests.
Where settlement of any part of cash
consideration is deferred, the amounts
payable in the future are discounted to their
present value as at the date of exchange.
Contingent consideration is classified either
as equity or a financial liability. Amounts
classified as a financial liability are subse-
quently remeasured to fair value, with changes
in fair value recognised in profit and loss.
Acquisitions made during the year
On 10 February 2022, Hempel acquired via
the existing company in Oman, 99% of the
share capital of Khimji Paints LLC, a
Decorative-based company with its own
production located in Oman that employs
more than 70 people and has a strong
distribution network. The acquisition is aligned
with the Double Impact strategy and strength-
ens our presence in the Middle East and the
Decorative customer segment.
On 1 August 2022, Hempel acquired 6 stores
in Australia that provide customers with coating
and different coating accessories. The
acquisition is a good strategic match with a
pre-existing Wattyl customer base and
supports Hempel’s growth ambitions within the
decorative business by giving access to
desirable locations, distribution channels and
customers in Sydney. In addition, a few minor
acquisitions were completed in Australia for a
total consideration of EUR 2 million.
On 1 September 2022, one of Hempel’s
subsidiaries acquired Cap Couleurs, a store
network in France consisting of 5 stores and
Acquired receivables
The fair value of acquired trade receivables is
EUR 2.0 million. The gross contractual amount
for trade receivables due is EUR 2.1 million
4.6
Acquisition
of enterprises
Accounting policies
When accounting for business combinations,
the acquisition method is applied in accord-
ance with IFRS 3. Acquirees are recognised in
the consolidated financial statements from the
date of acquisition. The date of acquisition is
the date on which Hempel obtains control of
the company.
The consideration transferred for the acquisi-
tion of a subsidiary comprises the fair values
of the assets transferred, liabilities incurred to
the former owners of the acquired business,
fair value of any asset or liability resulting from
a contingent consideration arrangement, and
fair value of any pre-existing equity interest in
the subsidiary.
Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are, with limited exceptions,
measured initially at their fair values at the
acquisition date. The Group recognises any
non-controlling interest in the acquired entity
on an acquisition-by-acquisition basis, either
at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s
net identifiable assets.
The fair value of acquired technical plants is
estimated based on the depreciated replace-
ment cost.
The fair value of acquired finished goods is
determined based on expected selling prices
over 30 employees. The acquisition will help
expanding the Renaulac brand and strengthen
the Group’s presence in the French decorative
market and support our growth strategy
towards doubling Hempel in 2025.
The total consideration of EUR 26 million for the
three acquisitions was paid entirely in cash. The
assets and liabilities as a result of the acquisi-
tions are shown in the table on the next page.
The goodwill is attributable to the workforce,
synergies and access to new markets and
strategic important locations. It will not be
deductible for tax purposes.
Pro-forma revenue and profit contribution
If the acquisitions had occurred on 1 January
2022, consolidated pro-forma revenue and
profit for the year ending 31 December 2022
would have been EUR 2,174 million and EUR
37 million respectively. These amounts were
calculated using the subsidiary’s and store’s
results, adjusted for differences in the account-
ing policies between the Group and the
subsidiary and stores, and additional COGS
charged, assuming the fair value adjustment of
inventories had been applied from 1 January
2022, together with the consequential tax
effects.
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In EUR million
Fair value
Right-of-use assets 3
Property, plant and equipment 1
Inventories 4
Trade and other receivables 2
Cash and cash equivalents 4
Lease liabilities -3
Pensions -1
Trade payables -1
Other payables -1
Net identifiable assets acquired 8
Goodwill 22
Net assets acquired 30
Outflow of cash to acquire
subsidiary, net of cash acquired 30
Less: Cash acquired -4
Net outflow of cash
– investing activities 26
Acquisition of Wattyl made in 2021
The provision for environmental obligations
recognised in the 2021 financial statements
related to the acquisition were based on a
provisional assessment of the fair value,
pending further investigations. In 2022, the
valuation was completed and the acquisition
date fair value of the provision was assessed
to EUR 4 million, an increase of EUR 3 million
compared to the provisional value. The 2021
comparative information has been restated to
reflect the adjustment to the provisional
amounts. As a result, there was a decrease in
the deferred tax liability of EUR 1 million and
an increase in goodwill of EUR 2 million.
with a loss allowance of EUR 0.1 million
recognised on acquisition.
Revenue and profit contribution
The acquired businesses contributed revenues
of EUR 11 million and a net profit of EUR 0.1
million to the Hempel Group for the period
from the dates of acquisitions to 31 December
2022.
Acquisition-related costs
EUR 0.3 million acquisition-related costs
are included in administration costs in the
statement of profit and loss and in
operating cash flows in the statement of
cash flows in 2022.
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4.7
Discontinued operations & assets
and liabilities held for sale
Hempel has been established in Russia since
1996 and employed 124 employees at the
beginning of 2022. Following a strategic review
of its presence in Russia, Hempel decided to
leave Russia permanently as a result of the
Russian invasion of Ukraine.
Hempel suspended all production in Russia in
April 2022 after having completed prepaid
orders, and subsequently a controlled
divestment process was initiated. Hempel
intends to sell-off all activities in Russia,
including a sales office and production
facilities such as production buildings,
machinery and equipment.
As of 31 December 2022, management has
assessed it as highly probable that Hempel will
dispose of its legal entity in 2023, and as
such, Hempel's operations in Russia have
been classified as assets held for sale and
discontinued operations.
No impairment was identified at 31 December
2022.
The total impact on the profit and loss
statement in 2022 amounts to a loss of
EUR 2 million. The loss is attributable to the
Shareholder of Hempel A/S.
Net profit / (loss) from discontinued operations
In EUR million
2022 2021
Revenue 10 30
Expenses -15 -27
Net profit / (loss) before tax -5 3
Income tax 3 2
Net profit / (loss) from discontinued operations -2 5
Cash flow from discontinued operations
In EUR million
2022 2021
Cash flow from operating activities -6 7
Cash flow from financing activities – -13
Total cash flow from discontinued operations -6 -6
Statement of financial position classified as held for sale
In EUR million
2022
Fixed assets 14
Deferred tax assets 3
Cash 3
Other current assets 1
Assets held for sale 21
Deferred tax liabilities 4
Current liabilities 2
Liabilities held for sale 6
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5.1 5.2 5.3
Fee to the auditors appointed
at the General Meeting
Adjustment for
non-cash items
Contingent liabilities and
other commitments
Fees for other services than statutory audit
of the financial statements provided by
PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab to the Hempel
Group mainly consist of financial due
diligence and transaction advice, accounting
advisory services, and other advisory and tax
services.
For the purpose of presenting the statement
of cash flows, non-cash items with effect on
the statement of profit and loss must be
reversed to identify the actual cash flow
effect from the statement of profit and loss.
The adjustments are specified as follows:
Bid and performance bonds
Performance bonds are issued to guarantee
specific customers satisfactory completion of
work according to contracts. Bid and perfor-
mance bond guarantees amounted to EUR
8million (2021: EUR 8 million).
Other contingent liabilities
The Group is, through its ongoing business,
involved in product liability claims and
disputes in connection with the Group’s
operational activities. The Group does not
expect the pending litigations, claims and
investigations, individually or in aggregate, to
have a material impact on the Group’s
financial position, operating profit or cash flows
in addition to the amounts accrued as
provision for legal disputes.
Hempel A/S and its Danish subsidiaries are
jointly taxed with several Danish companies in
the Hempel Foundation Group. The Group’s
Danish enterprises are jointly and severally
liable for Danish taxes at source and income
taxes. Refer to the tax administration company
Hempel Invest A/S for the total amount of
corporate tax payable for the Group of jointly
taxed companies.
Section 5
Other disclosures
Commitments
Contruction of a factory in China is ongoing.
The total capital expenditure contracted for at
the end of the reporting period related to the
construction of the factory, but not recognised
as liabilities, amounted to EUR 6 million.
In EUR million
2022 2021
Audit fee 2 2
Tax advice 1 1
Other fees 1 1
Total auditor’s fee 4 4
In EUR million
2022 2021
Amortisation, depreciation
and impairment 107 91
Provisions -7 -6
Gains and losses on the sale
of fixed assets -3 -3
Hyperinflation adjustment 8 –
Total adjustments 105 82
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5.4 5.5
Events after the
reporting period
Related parties
and ownership
No events occurred after the balance sheet
date that could have a material impact on the
company’s financial results, assets, liabilities
or equity.
Related parties and ownership Basis
Controlling influence:
Hempel Foundation, Amaliegade 8, 1256
Copenhagen K, Denmark
Ultimate parent company
(holds 100% of issued ordinary
shares in Hempel Invest A/S)
Hempel Invest A/S, Amaliegade 8, 1256
Copenhagen K, Denmark Majority shareholder (100%)
Other related parties:
Members of the Executive Board and Board
of Directors of Hempel A/S as well as the
Executive Director and Board of Directors of
the Hempel Foundation and Hempel Invest
A/S are also regarded as related parties.
The Executive Director and the members
of the Boards of Directors of the Hempel
Foundation and Hempel Invest A/S coincide.
Hempel’s Employee Foundation, Amaliegade
8, 1256 Copenhagen K, Denmark Related party
Hempel’s Cultural Foundation, Amaliegade 8,
1256 Copenhagen K, Denmark Related party
Brænderupvænge ApS, Amaliegade 8, 1256
Copenhagen K, Denmark Related party
Keldskov ApS, Amaliegade 8, 1256
Copenhagen K, Denmark Related party
Hempel Employee Foundation from 2017,
2800 Kongens Lyngby, Denmark Related party
Frontier Innovation ApS, Amaliegade 8, 1256
Copenhagen K, Denmark Related party
Hempel Administration ApS, Amaliegade 8,
1256 Copenhagen K, Denmark Related party
Hempel Invest II ApS, Amaliegade 8, 1256
Copenhagen K, Denmark Related party
Parent companies
Hempel Invest A/S
Hempel A/S paid EUR 2 million in rent expenses to Hempel Invest A/S (2021:
EUR 2 million). Interest expenses during the year amount to EUR 2 million
(2021: EUR 1 million).
At 31 December 2022, Hempel A/S had EUR 1 million deposit receivables
from Hempel Invest related to office leases (2021: EUR 0 million).
As of 31 December 2022, loan payables to Hempel Invest A/S amount to EUR
66 million (2021: EUR 70 million).
A dividend of EUR 33 million was paid to Hempel Invest A/S during 2022
(2021: EUR 25 million).
Hempel Foundation
Hempel A/S paid EUR 3 million rent expenses to the Hempel Foundation
(2021: EUR 3 million).
At 31 December 2022, Hempel A/S had EUR 1 million deposit receivables
from Hempel Foundation related to office leases (2021: EUR 1 million).
Other related parties
In addition, Hempel A/S paid on behalf of Brænderupvænge ApS, Keldskov
ApS, Innovation S E ApS and Frontier Innovation ApS minor amounts related
to administrative service totalling EUR 0 million, that on an ongoing basis are
reimbursed to Hempel A/S (2021: EUR 1 million). No material outstanding
balances exist at the end of the year.
Key management personnel of the entity or its parent
For information on remuneration of key management personnel of Hempel,
please refer to note 2.2 Employee costs. There were no loans to the Board of
Directors or Executive Management in 2022 or 2021.
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5.6
The Hempel
Group
Location Name Currency Ownership
Denmark Hempel A/S DKK 100%
Argentina Hempel Argentina S.R.L. ARS 100%
Australia Hempel (Australia) Pty. Ltd. AUD 100%
Australia Hempel NewCo (Australia) Pty. Ltd. AUD 100%
Australia Hempel (Wattyl) Australia Pty. Ltd. AUD 100%
Australia Hempel (Wattyl) New Zealand Ltd. AUD 100%
Austria Ostendorf GmbH EUR 65%
Bahrain Dahna Paint Middle East Holding B.S.C. BHD 51%
Bahrain Hempel Paints (Bahrain) S.P.C. BHD 51%
Brazil Hempel Tintas do Brasil Ltda BRL 100%
Canada Farrow & Ball Canada Limited CAD 100%
Canada Hempel (Canada) Inc. CAD 100%
Chile Pinturas Hempel Chile SpA CLP 100%
China Hempel North Asia Holding Co., Ltd CNY 100%
China Hempel (Hong Kong) Limited HKD 100%
China Hempel (China) Limited HKD 100%
China Hempel (Kunshan) Coatings Ltd. CNY 100%
China Hempel (Yantai) Coatings Ltd. CNY 100%
China Hempel (Guangzhou) Coatings Ltd. CNY 100%
China Hempel (Zhangjiagang) Coatings Ltd. CNY 100%
Croatia Hempel Coatings (Croatia) Ltd. HRK 100%
Cyprus Hempel Coatings (Cyprus) Limited EUR 100%
Czech Republic Hempel (Czech Republic) s.r.o. CZK 100%
Denmark HSA (Danmark) A/S DKK 100%
Denmark Hempel Decorative Paints A/S DKK 100%
Denmark Brifa Maling A/S DKK 65%
Denmark HF (Denmark) A/S DKK 100%
Ecuador Hempel Ecuador S.A. USD 100%
Egypt Hempel Coatings (Egypt) LLC EGP 100%
Egypt Hempel Egypt L.L.C. EGP 100%
Egypt Hempel Paints Egypt LLC EGP 99%
Finland OY Hempel (Finland) AB EUR 100%
France Hempel (France) SAS EUR 100%
France BB Participations SAS EUR 65%
France B.B Fabrications SAS EUR 65%
France Bontemps-Bonnarme SAS EUR 65%
France Capcouleurs SAS EUR 65%
France Cap Couleurs Brignoles SAS EUR 65%
France Cap Couleurs Distribution SAS EUR 65%
France Cap Couleurs Est SAS EUR 65%
France Cap Couleurs Gestion SAS EUR 65%
Germany Farrow & Ball DE GmbH EUR 100%
Germany Hempel (Germany) GmbH EUR 100%
Germany Hempel Beteiligungsgesellschaft GmbH EUR 100%
Germany J.W. Ostendorf GmbH & Co. KG* EUR 65%
Germany Ostendorf-Beteiligungs-GmbH EUR 65%
Germany FLT Handel & Service GmbH EUR 65%
Germany Brand.IQ GmbH EUR 65%
Germany Rottkamp Immoblilien GmbH & Co. KG* EUR 65%
Germany Rottkamp Immobilien Verwaltung GmbH EUR 65%
Greece Hempel Coatings (Hellas) Single Member S.A. EUR 100%
India Hempel Paints (India) Private Limited INR 100%
Indonesia P.T. Hempel Indonesia IDR 100%
Ireland Crown Paints Ireland Limited EUR 100%
Italy Hempel (Italy) S.r.l. EUR 100%
Kenya Hempel Paints Kenya Company Limited KES 100%
Location Name Currency Ownership
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Korea Hempel Korea Co. Ltd. KRW 100%
Kuwait Hempel Paints (Kuwait) K.S.C.C. KWD 51%
Malaysia Hempel (Malaysia) Sdn. Bhd MYR 100%
Malaysia Hempel Manufacturing (Malaysia) Sdn. Bhd. MYR 100%
Mexico Pinturas Hempel de Mexico S.A. de C.V. MXN 100%
Morocco Hempel Maroc SARL MAD 100%
Norway Hempel Norway AS NOK 100%
Oman Hempel (Oman) L.L.C OMR 25%
Oman Hempel Manufacturing LLC OMR 25%
Peru Hempel Pinturas Del Perú S.A.C. PEN 100%
Poland Hempel Paints (Poland) S.p. z o.o. PLN 100%
Portugal Hempel (Portugal) Lda EUR 100%
Qatar Hempel Paints (Qatar) W.L.L. QAR 28%
Russia Joint Stock Company Hempel RUB 100%
Saudi Arabia Hempel Paints (Saudi Arabia) W.L.L. SAR 51%
Saudi Arabia Painting Materials and Equipment Centre Co. LTD SAR 26%
Singapore Hempel (Singapore) Pte. Ltd. SGD 100%
South Africa Hempel Paints South Africa (Pty) Ltd. ZAR 100%
Spain Pinturas Hempel SAU EUR 100%
Sweden Hempel (Sweden) AB SEK 100%
Switzerland Hempel Schweiz AG CHF 100%
Switzerland J.W. Ostendorf (Schweiz) AG CHF 65%
Syria Hempel Paints (Syria) W.L.L. SYP 43%
Taiwan Hempel (Taiwan) Co., Ltd. TWD 100%
Thailand Hempel (Thailand) Ltd. THB 100%
The Netherlands Hempel (The Netherlands) B.V. EUR 100%
The Netherlands Hempel Industrial B.V. EUR 100%
Turkey Hempel Coatings San. ve Tic. Ltd. Sti. TRY 100%
UK Crown Brands Limited GBP 100%
UK Crown Paints Limited GBP 100%
UK Crown Paints Group Limited GBP 100%
UK Crown Paints Holdings Limited GBP 100%
UK FB Ammonite Limited GBP 100%
UK FB Brassica Limited GBP 100%
UK FB Brinjal Limited GBP 100%
UK FB Calluna Limited GBP 100%
UK Farrow & Ball Holding Limited GBP 100%
UK Farrow & Ball Limited GBP 100%
UK Hempel Decorative Paints Limited GBP 100%
UK Hempel UK Ltd. GBP 100%
UK Reebor Limited GBP 1%
UK Ostendorf U.K. Ltd. GBP 65%
Ukraine Hempel Ukraine LLC UAH 100%
United Arab Emirates Hempel Paints Company Abu Dhabi L.L.C. AED 24%
United Arab Emirates Hempel Paints Emirates L.L.C. AED 49%
USA Farrow & Ball Inc. USD 100%
USA Hempel (USA), Inc. USD 100%
USA Jones-Blair Company, LLC USD 100%
Vietnam Hempel Vietnam Company Limited VND 100%
J.W. Ostendorf GmbH & Co. KG and Rottkamp Immobilien GmbH & Co. KG are exempt from their obligation to prepare, have
audited and disclose annual financial statements and a management report in accordance with the regulations applicable to
partnerships pursuant to Section 264b of the German Commercial Code (HGB).
Location Name Currency Ownership Location Name Currency Ownership
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5.7
Financial
definitions
Financial ratios for the continuing business are calculated as follows:
Organic growth =
Organic revenue
Revenue in comparative period
Organic growth is defined as growth from one year to the next,
based on values in fixed currencies for both years excluding
mergers, acquisitions and divestments, etc.
Gross margin =
Gross profit
Revenue
EBITDA margin =
EBITDA
Revenue
EBITDA margin, adjusted =
EBITDA, adjusted
Revenue
EBITDA =
Operating profit (and loss) before impairment, amortisations and
depreciations
EBITDA, adjusted =
EBITDA before special items and before adjustment for
hyperinflation according to IAS 29
Operating profit margin =
Operating profit (loss)
Revenue
Return on invested capital =
Operating profit (loss)
Average invested capital
Invested capital =
Intangibles + property, plant and equipment + inventories +
receivables - other provisions - trade payables - other payables
Equity ratio =
Shareholders’ equity
Total assets
Leverage ratio
Net interest-bearing debt
Pro-forma EBITDA before special items (incl. full-year figures from
acquisitions)
Net interest-bearing debt =
Overdraft facilities + bank loans, etc. + interest-bearing payables
to Group enterprises + lease liabilities - cash at bank and in hand
Free cash flow =
Total net cash generated from operating activities less net cash
used in investing activities
Cash conversion =
Total net cash flows from operating activities
before financial items and tax
Total EBITDA
Accounts receivable days =
Accounts receivable x 90
Revenue (last 3 months)
Accounts payable days =
Accounts payable x 90
Cost of goods sold + change in inventory (last 3 months)
Inventory days =
Inventory x 90
Cost of goods sold (last 3 months)
Average net working capital days =
Accounts receivable days + inventory days - accounts payable days
(12 months average)
Financial ratios for the continuing business are calculated as follows:
The following key figures are
calculated as follows: 2022
Operating profit 114
Amortisation and depreciation 105
EBITDA = 219
Special items 30
Adjustment for hyperinflation
according to IAS 29 8
EBITDA, adjusted = 257
The following key figures are
calculated as follows: 2022
Borrowings 1,001
Payables to parent company 66
Lease liabilities 165
Cash -180
Net interest bearing debt = 1,052
EBITDA, adjusted 257
Adjustment for hyperinflation
according to IAS 29 -8
EBITDA from 1 January to date
of acquisition for acquired
companies 1
Pro forma EBITDA before special
items = 250
Levarage ratio = 4.2
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Parent company
financial statements
102 1.1 General accounting policies
Primary
statements
Section 1
Basis of preparation
Section 2
Results for the year
99 102 103
99 Statement of profit and loss
100 Statement of financial position
101 Statement of changes in equity
103 2.1 Revenue
103
2.2 Employee costs
103
2.3 Income tax, tax assets
and liabilities
105 4.1 Share capital, distribution
to shareholder
105
4.2 Borrowings
105
4.3 Net financials
Section 3
Operating assets
and liabilities
Section 4
Capital structure
and financing items
Section 5
Other disclosures
104 105 106
104 3.1 Intangible assets
104 3.2 Property, plant and equipment
104 3.3 Inventories
106
5.1 Fee to the auditors appointed
at the General Meeting
106
5.2 Contingent liabilities and other
commitments
106
5.3 Events after the reporting period
106
5.4 Related parties
106
5.5 Investments in subsidiaries
98
|
Statement of
profit and loss
|
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
In EUR million
Note 2022 2021
2.1 Revenue 220 170
2.2 Production costs -119 -107
Gross profit 101 63
2.2 Sales and distribution costs -28 -22
2.2 Administrative costs -73 -54
Operating profit 0 -13
5.5 Income from investments in subsidiaries -2 49
Profit before financial income and expenses -2 36
4.3 Net financial income/expenses -8 5
Profit before tax -10 41
2.3 Income tax -2 -3
Net profit / (loss) for the year -12 38
Statement of
financial position
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In EUR million
Note 2022 2021
Software 6 4
Software under development 29 15
Other intangible assets 7 7
3.1 Intangible assets 42 26
Plant and machinery 7 7
Leasehold improvements 21 21
Other fixed assets 1 -
Assets under construction 8 7
3.2 Property, plant and equipment 37 35
5.5 Investments in subsidiaries 891 427
Loans to Group enterprises 136 176
2.3 Deferred tax assets 13 6
Deposits 2 1
Other non-current assets 1,042 610
Total non-current assets 1,121 671
3.3 Inventories 7 9
Trade receivables 17 4
Receivables from Group enterprises 643 859
Tax receivables – 3
Other receivables 25 17
Prepayments 14 6
Cash 35 11
Current assets 741 909
Total assets 1,862 1,580
In EUR million
Note 2022 2021
4.1 Share capital 15 15
Reserve for development costs 30 16
Retained earnings 372 431
Proposed dividend for the year – 33
4.1 Total equity 417 495
4.2 Borrowings 900 760
Provisions 6 9
Total non-current liabilities 906 769
4.2 Overdraft facilities 10 7
Trade payables 12 12
4.2 Payables to parent company 66 70
Payables to Group enterprises 401 196
Other liabilities 50 31
Total current liabilities 539 316
Total liabilities 1,445 1,085
Total equity and liabilities 1,862 1,580
Statement of
changes in equity
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In EUR million
Note Share capital
Reserve for
development costs Retained earnings Proposed dividend Total equity
Equity at 1 January 2021 15 8 404 25 452
Net profit for the year – – 38 – 38
Exchange adjustment – – 31 – 31
Remeasurements of defined benefit plans – – 3 – 3
Tax on equity transactions – – -4 – -4
Dividend distributed – – – -25 -25
Proposed dividend – – -33 33 –
Development projects reserve, additions – 9 -9 – –
Development projects reserve, amortisation – -1 1 – –
4.1 Equity at 31 December 2021 15 16 431 33 495
Equity at 1 January 2022 15 16 431 33 495
Net profit / (loss) for the year – – -12 – -12
Exchange adjustment – – -39 – -39
Remeasurements of defined benefit plans – – 5 – 5
Tax on equity transactions – – 1 – 1
Dividend distributed – – – -33 -33
Development projects reserve, additions – 16 -16 – –
Development projects reserve, amortisation – -2 2 – –
4.1 Equity at 31 December 2022 15 30 372 – 417
Section 1
Basis of preparation
1.1
General accounting
policies
The financial statements of Hempel A/S have
been prepared in accordance with the Danish
Financial Statements Act (Årsregnskabsloven)
applying to large enterprises of reporting
class C.
The financial statements for 2022 are
presented in EUR million.
Because a statement of cash flows is
prepared for the Group in the consolidated
financial statements, no separate statement
of cash flows has been prepared for the
parent company (as permitted under the
Danish Financial Statements Act). Please
refer to the consolidated statement of cash
flows for the Group.
The accounting policies and presentation for
the parent company are the same as for the
consolidated financial statements with the
exceptions described in the following sections.
For a description of the accounting policies of
the Group, please refer to the consolidated
financial statements.
Revenue
Revenue is generated mainly from the sale of
goods for resale and finished goods. Revenue
is recognised in the income statement when
all significant risk and rewards have been
transferred to the customer and when the
income can be reliably measured and is
expected to be received. Revenue is measured
at the fair value of the consideration expected
to be received. Revenue is recognised
exclusive of VAT and net of discounts relating
to sales.
Receivables
Receivables are measured in the balance
sheet at the lower of amortised costs and the
net realisable value, which normally corre-
sponds to the nominal value.
Leases
A finance lease is a lease that transfers
substantially all the risk and rewards incidental
to ownership of an asset. The parent company
does not have any finance lease agreements.
An operating lease is a lease other than a
finance lease. Operating lease commitments
mainly relate to office buildings, leased cars
and, to some extent, office equipment.
Payments made under operating leases are
recognised in the income statement over the
lease term.
Hyperinflationary economies
The results and financial position in Argentina
and Turkey are translated into the presenta-
tional currency EUR following the principles
described in section 1.1 Translation of Group
companies in the consolidated financial
statements. The results and financial position
are therefore not restated taking into account
inflation adjustments in hyperinflationary
economies.
Assets held for sale and
discontinued operations
Activities in Russia are not presented as
assets held for sale and discontinued
operations. Assets in Russia are depreciated
until the assets are derecognised at disposal.
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2.3
Income tax, tax assets
and liabilities
2.2
Employee
costs
For remuneration of the Board of Directors and
the Executive Board, please refer to note 2.2
in the consolidated financial statements.
In EUR million
2022 2021
Staff costs:
Wages and salaries 52 51
Pension costs 3 3
Other social security
contributions 1 –
Other employee costs 2 1
58 55
Average number of
employees 347 351
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Highlights 2022 Letter to stakeholders Hempel at a glance 2022 in review Strategy Corporate governance Risks Sustainability Financial statements
Section 2
Results for the year
2.1
Revenue
All revenue is derived from activities within
the EMEA region. The following table displays
revenue disaggregated into the sale of goods
per customer category.
In EUR million
2022 2021
Marine 46 19
Infrastructure 4 3
Energy 6 6
Other 164 142
Total revenue 220 170
Income tax
Tax for the year
In EUR million
2022 2021
Tax for the year is
specified as follows:
Tax on profit for the year -2 -29
Tax in respect of
subsidiaries – 26
Total tax for the year -2 -3
Tax on profit for the year is
calculated as follows:
Current tax for the year -5 1
Deferred tax for the year 2 -4
Adjustment in respect of
previous years 1 –
Total tax on profit for the
year -2 -3
Deferred tax
Deferred tax recognised in the balance sheet
In EUR million
2022 2021
Deferred tax (net):
Deferred tax, beginning
of year 6 10
Recognised in profit and
loss 2 -3
Adjustment in respect of
previous years 5 -1
Deferred tax (net),
end of year 13 6
The Danish corporate tax rate was 22% in 2022 (22% in
2021). At 31 December 2022, the company had recognised
a deferred tax asset of EUR 13 million (2021: EUR 6 million)
which relates to temporary differences.
Disaggregation of revenue is based on the
internal management reporting. The other
category primarily consists of intercompany
sales.
Section 3
Operating assets and liabilities
3.1 3.2 3.3
Intangible
assets
Property, plant
and equipment
Inventories
In EUR million
Software
Software
under de-
velopment
Other in-
tangible
assets Total
Intangible assets
Costs at 1 January 2022 13 15 31 59
Additions for the year – 22 – 22
Transfer between categories 4 -8 4 –
Costs at 31 December 2022 17 29 35 81
Accumulated amortisation
and impairment at 1 January
2022 9 – 24 33
Amortisation for the year 2 – 4 6
Accumulated amortisation
and impairment at 31
December 2022 11 – 28 39
Carrying amount at 31
December 2022 6 29 7 42
Other intangible assets comprise mainly brands and formulas.
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In EUR million
Plant
and ma-
chinery
Lease-
hold im-
prove-
ments
Other
fixed
assets
Assets
under
construc-
tion Total
Property, plant and
equipment
Costs at 1 January 2022 10 23 2 7 42
Additions for the year – – – 6 6
Transfer and
reclassifications 1 3 1 -5 –
Disposals for the year – – – – –
Costs at 31 December
2022 11 26 3 8 48
Accumulated
depreciation and
impairment at 1 January
2022 3 2 2 – 7
Depreciation for the year 1 3 – – 4
Accumulated
depreciation and
impairment at 31
December 2022 4 5 2 – 11
Carrying amount at 31
December 2022 7 21 1 8 37
In EUR million
2022 2021
Raw materials and
consumables 7 8
Finished goods – 1
Inventories 7 9
4.3
Net
financials
4.2
Borrowings
As of 31 December, loans from Hempel Invest
A/S amounted to EUR 66 million (2021: EUR
70 million). Overdraft facilities amounted to
EUR 10 million (2021: EUR 7 million).
In EUR million
2022 2021
Long-term borrowings etc.
including short-term part:
Due within 1 year 76 77
Due within 1 to 5 years 900 760
Total borrowings 976 837
In EUR million
2022 2021
Interest income from
subsidiaries 27 15
External interest
expenses -20 -1
Other financial expenses -6 -5
Interest paid to Group
enterprises -6 -1
Realised and unrealised
exchange gains/losses,
net -3 -3
Net financial income/
expenses -8 5
In EUR million
2022 2021
Distribution of profit:
Proposed dividends – 33
Retained earnings -12 8
Total -12 41
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Section 4
Capital structure and financing items
4.1
Share capital,
distribution to shareholder
Refer to note 4.1 in the consolidated financial
statements for an overview of the changes in
share capital.
An amount equal to capitalised development
costs, net of tax is reserved in the Reserve for
development costs within equity. The reserve
is reduced with amortisation and write-downs
of development projects. The reserve cannot
be used for payments of dividends.
Hempel A/S is jointly taxed with a number of
Danish companies in the Hempel Foundation
Group. The Group’s Danish enterprises are
jointly and severally liable for Danish taxes at
source and income taxes.
Refer to note 5.3 in the consolidated financial
statements for more information.
In EUR million
2022 2021
Rental and lease
obligations:
Due within 1 year from
the balance sheet date 6 5
Due within 1 to 5 years
from the balance sheet
date 22 20
Due more than 5 years
from the balance sheet
date 16 21
Total rental and lease
obligations 44 46
Guarantees:
For local loans and bank
credits to subsidiaries 49 52
Total guarantees 49 52
Parent company guarantees for unutilised local loans and
bank credits to subsidiaries amounted to EUR 66 million
(2021: EUR 33 million).
5.5
Investments
in subsidiaries
Accounting policies
Investments in subsidiaries are recognised
and measured under the equity method. This
implies that the proportionate share of the net
result, less amortisation of goodwill and other
fair value adjustments from business acquisi-
tions, is recognised in income from invest-
ments in subsidiaries in the statement of profit
and loss. Goodwill and brands are amortised
over 10 years. Goodwill is amortised over the
period the company is expected to derive
benefits from the goodwill, which is based on
the acquisition business case.
The investments are measured in the balance
sheet at the proportionate ownership share of
the net asset value of the enterprises with
deduction or addition of shares of unrealised
intercompany profits and losses.
The total net revaluation of investments in
subsidiaries is transferred upon distribution of
profit to ‘Reserve for net revaluation under the
equity method’ under equity. The reserve is
reduced by dividends distributed to the parent
company and adjusted for other equity
movements in subsidiaries.
Subsidiaries with a negative net asset value
are recognised at EUR 0. Any legal or construc-
tive obligation of the parent company to cover
the negative balance of the subsidiary is
recognised in receivables from subsidiaries or
as a provision.
Section 5
Other disclosures
5.1
Fee to the auditors appointed
a
t the General Meeting
The audit fee is disclosed in the consolidated
financial statements note 5.1.
5.2
Contingent liabilities
and other commitments
The operating lease commitments are related
to non-cancellable operating leases primarily
related to buildings, company cars and office
equipment.
Payments made under operating leases are
recognised in the income statement on a
straight-line basis over the lease term. The
parent company guarantees unutilised local
loans and bank credits to subsidiaries.
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5.3
Events after the
r
eporting period
Refer to note 5.4 in the consolidated financial
statements for more information.
5.4
Related
parties
The parent company has chosen only to
disclose transactions that have not been
made on an arm’s length basis in accordance
with section 98c (7) of the Danish Financial
Statements Act.
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Please refer to note 5.6 in the consolidated financial statements for an overview of the
Hempel Group.
In EUR million
2022 2021
Investments in subsidiaries
Costs at 1 January 2022 521 384
Additions for the year 528 137
Costs at 31 December 2022 1,049 521
Net revaluations at 1 January 2022 -114 -105
Exchange rate adjustments -44 16
Remeasurements of defined benefit plans 4 3
Net profit for the year 69 77
Amortisation of goodwill and brands -71 -28
Dividend received -39 -77
Net revaluations at 31 December 2022 -195 -114
Carrying amount at 31 December 2022 854 407
Recognised in the balance sheet as follows:
Subsidiaries with negative equity -37 -20
Investments in subsidiaries 891 427
854 407
Subsidiaries with negative equity are recognised in
the balance sheet as follows:
Recognised as provisions -6 -9
Recognised in receivables from subsidiaries -31 -11
Net value at 31 December 2022 -37 -20
hempel.com
Hempel A/S
Lundtoftegårdsvej 91
2800 Kgs. Lyngby
Denmark
Tel: +45 4593 3800
Email: hempel@hempel.com