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Annual Report 2004
Sapa A
nnual Report 2
00
4
Ehrenstråhle &
Co
2
1 The year in brief 2 Message from the CEO 4 The Sapa share 6 This is Sapa 8 Sapa’s business model
10 Sapa’s products, markets and competitors 14 The explanation is cutting-edge expertise16 Our employees18 Focus on the environment, health and safety 20 The past year 22 Board of Directors’ Report 25 Definitions26 Consolidated income statements 27 Comments on the income statements 28 Consolidated balance sheets 29 Comments on the balance sheets 30 Consolidated cash flow statements 31 Comments on the cash flow statements 32 Parent Company 34 Supplementary disclosures 48 Proposed disposition of earnings 49 Audit Report 50 Board of Directors 52 Board work during 200453 Articles of Association 54 Senior Executives 56 Seven-year summary
Sapa develops, manufactures and marketsvalue-added profiles, profile-based buildingsystems and heat-exchange strip in the light-weight material aluminium. The business concept is based on close co-operation with thecustomers, who are primarily located in Europe,North America and Asia. The largest customersegments are the construction, transport andengineering industries and the domestic andoffice sectors. Sapa is organised into three core areas: Profiles, Building System and Heat Transfer.Sales: 14 billion SEKNumber of employees: 7,900
Annual General Meeting, April 19, 2005
The Annual General Meeting of Sapa AB will be held on Tuesday,
April 19, 2005, at 4 p.m., at Nalen, Regeringsgatan 74, Stockholm,
Sweden. The venue will open for registration at 3 p.m.
Financial reporting dates in 2005
Interim report, January-March, 2005 April 19, 2005
Interim report, January-June, 2005 July 19, 2005
Interim report, January-September, 2005 October 18, 2005
Year-end report for 2005 February 2005
2005 Annual Report March 2006
Shape
Shape is the Sapa Group’s magazine and is published twice a year in
eight languages for, among others, customers, shareholders, analysts,
journalists, and employees.
www.sapagroup.com
The website contains information about the Group, its operations and
markets, as well as financial information and press releases.
Sapa AB
Humlegårdsgatan 17, Box 5505, 114 85 Stockholm, Sweden
Phone: +46 8-459 59 00. Fax: +46 8-459 59 50
[email protected] www.sapagroup.com
This Annual Report is also available in Swedish.
Denna årsredovisning finns även i en svensk version.
Earnings per share amounted to SEK 10.41 (10.48)
Profit after tax declined by 1 per cent to MSEK 380 (383)
Net sales rose by 19 per cent to MSEK 13,990 (11,803)
Operating margin amounted to 4.4 per cent (5.4)1
The Board proposes a dividend of SEK 5.50 (6.25)
Sapa in brief 2004 1 2003
Net sales, MSEK 13,990 11,803
Operating profit, MSEK 616 641
Profit before tax, MSEK 532 559
Net profit for the year, MSEK 356 383
Operating margin, % 4.4 5.4
Earnings per share, SEK 9.76 10.48
Cash flow after investments, MSEK2 311 4751 Excluding capital gain of MSEK 242 Excluding acquisitions/divestments of subsidiaries
The year in brief
2
The Western European aluminium profile
market developed strongly during the first
half of the year, although subsequently,
growth slowed somewhat. Overall, Sapa
Profiles maintained its market share in
Europe. During the year, a particularly
favourable development was noted in
Poland, France, the Netherlands, and
Germany. Sapa established operations in
the US in 2001 and today, we have consi-
derable operations on the west coast of
North America. To meet increasing custo-
mer demand and to develop a market
presence in the Mid-West, we acquired a
press in Parsons, Kansas, in 2004. During
the year, we had the pleasure of obser-
ving a highly favourable development for
aluminium profiles in the US and Sapa
grew more than the underlying market.
For Sapa Building System, 2004
was its first year as an independent
core area within Sapa. The process of
developing operations is progressing as
planned. During the year, the European
construction market varied substantially
between markets. Sapa enjoyed strong
development in France and Belgium while
in Portugal, in particular, there was weaker
development.
Demand for heat-exchange strip for
the automotive industry during the year
was favourable in both Europe and Asia.
Sapa Heat Transfer was able to streng-
then its positions resulting in our captu-
ring market shares. Despite the cooling of
the Chinese economy, growth in China
remained at a relatively high level.
Continued growth
In recent years, Sapa has grown by an
average of 10 per cent annually. This, with
a mix of organic growth and acquisitions.
Our objective is to be able to continue to
show strong growth.
Following the acquisition of Remi
Claeys Aluminium in 2003, the largest
acquisition in Sapa’s history, decisions to
make further future oriented investments
were made in 2004.
China and Eastern Europe are impor-
tant potential markets for us. As early as
in 1997, Sapa began to produce heat-
exchange strip in Shanghai and during
2004, we established a new plant in
China for the fabrication of aluminium
profiles. The completed components are
both exported and sold locally. The new
operations have developed well and cur-
rently employ about 50 people.
During the year, we established a
plant for the fabrication of aluminium
profiles in Lithuania, which we also view
as an attractive growth market and an
advantageous production location.
In addition, during 2004, we took a
decision to further broaden our operations
in Poland. In total, MSEK 40 is to be
invested in a third profile press. A deci-
sion has also been made to extend our
capacity for surface treatment in Poland.
Today, we have a strong position in the
Polish market and growing exports to
Central Europe.
In 2004, the process of investing
MSEK 195 in a new anodising plant in
Vetlanda, Sweden, was initiated. This
investment entails both increased effici-
ency and an improved working environ-
ment. It is expected that the plant will be
completed during the first half of 2006.
At Sapa Heat Transfer in China,
efforts are under way to double capacity
to 44,000 tonnes. This investment, total-
ling MSEK 132, is expected to become
fully operational during the first half of
2006. The investment is a natural step in
further strengthening our position in the
highly expansive Asian market.
Development in 2004
During the first half of 2004, consolidated
earnings developed well. During the late
summer and autumn, the development in
some areas of operations was unsatisfactory.
Deliveries for the year rose by a total
of 19 per cent to 390,000 tonnes and net
sales rose to MSEK 13,990, compared
with MSEK 11,803 in 2003. Operating
profit declined to MSEK 616, a reduction
of 4 per cent compared with 2003. The
operating margin amounted to 4.4 per
cent (5.4). The Group’s financial position
In 2004, economic conditions improved and industry in general developedfavourably. With our broad customer base, we were able to increase ourdeliveries of aluminium products by 19 per cent to 390,000 tonnes. Mostof Sapa’s subsidiaries performed well during the year, strengthening ourposition in several segments and in a number of geographic markets.
Message from the CEO
was strengthened during the year. At the
end of the year, the debt/equity ratio was
0.48 (0.54) and net debt decreased to
MSEK 1,904 (2,100).
The weak result was primarily due to
problems in the Swedish and UK profile
operations and in Portugal. A positive
development in profiles could be seen
during the year mainly in the US, Poland and
France. Sapa Heat Transfer’s operations in
both Sweden and China performed strongly
in 2004, with increased volumes and a
favourable earnings development.
The Sapa share
For Sapa’s shareholders, 2004 entailed
a share price development below that of
the general index. During the year, the
share price rose by 7 per cent. This gave
a total growth in value of 9 per cent,
including reinvested dividends, which
amounted to SEK 6.25 for 2004. Since its
listing in May 1997, the share price has
risen by 92 per cent, while the All Share
Index of the Stockholm Exchange has
risen by 38 per cent during the same
period. Sapa’s growth in value since its
listing, including reinvested dividends,
amounts to 135 per cent.
Outlook for 2005
For Profiles in Europe, we forecast that
markets for 2005 will remain similar to
those of 2004. In the US we believe that
the market situation will continue to be
good. The global market for Heat Transfer
we expect to remain good.
Looking ahead
We are now looking ahead and are
entirely focused on improving earnings.
Several programmes of measures have
been initiated to restore and improve on
profitability levels, mainly in those compa-
nies that showed weak earnings in 2004.
This requires efforts from all employees.
During 2005, we will raise our level
of service to customers and grow even
better at meeting their needs. Our pro-
ducts offer characteristics that make it
possible to create the design solutions
that customers want. The objective is for
Sapa to be the natural first choice when
purchasing profiles, building systems or
heat-exchange strip in aluminium.
Finally, I would like to extend my
thanks to our skilled employees, who
make it possible for us to continue sha-
ping Sapa as a company of the future.
Stockholm, March 2005
Kåre WetterbergPresident and [email protected]
3
4
The Sapa share
Share price development
The Sapa share price rose by 7 per cent
during 2004 from SEK 176.50 to SEK
188. At the same time, the All Share
Index of the Stockholm Exchange rose by
18 per cent. Since its listing in May 1997,
the Sapa share has risen by 92 per cent,
compared to a 38-per cent increase in the
All Share Index during the same period.
The highest closing price during the
year was SEK 194, and the lowest closing
price was SEK 171.50. The final price paid
during 2003 was SEK 188, corresponding
to a market value of SEK 7 billion, com-
pared with a market value of SEK 6.5 bil-
lion at year-end 2003.
Dividend policy
Sapa AB has the following dividend policy,
which was adopted on February 6, 2004.
“The Board’s long-term dividend policy
is based on the Company’s strategy of
continued value-generating investments
and company acquisitions and on the
relevant capital structure, given the risk
profile of the investments.
The dividend policy applicable up to
now was primarily based on the net profit
for the year. Future dividend proposals will
pay greater consideration to balance
sheet strength and forecasted cash flows,
allowing the Company to maintain an
optimum capital structure with regard to
the aforementioned factors.”
Dividend
The Board of Directors propose a dividend
of SEK 5.50 per share (6.25) for the fiscal
year 2004. This corresponds to a yield of
2.9 per cent on the share’s closing price
of SEK 188 on December 30, 2004.
Owners
Sapa had 15,627 shareholders at year-
end 2004.
Of the total number of shares, 24.7
per cent are held by Swedish shareholders
and 75.3 per cent by foreign shareholders.
The company’s largest shareholder at
year-end was Elkem ASA of Norway, with
72.4 per cent of total number of shares
registered and 74.0 per cent of shares
outstanding. The second-largest owner was
AMF Pension with 5.5 per cent, followed
by Investment AB Öresund with 3.5 per cent
and AMF Pension Fonder with 3.0 per cent.
Significant events after
the end of the year
On February 10, 2005, Orkla ASA of Norway
(the majority shareholder in Elkem ASA)
made a public offer, a mandatory offer, to
shareholders in Sapa for the transfer of
their shares to Orkla. A prospectus regar-
ding the offer was distributed to Sapa
shareholders around March 2, 2005. The
application period is March 2, 2005 to
March 22, 2005.
On February 11, 2005, Elkem ASA
announced that it had acquired 3,243,000
shares in Sapa, with the result that Elkem’s
total holding in Sapa represents 81.09 per
cent of capital and votes.
Consequently, shares in Sapa have
been traded in the observation section of
the Stockholm Exchange’s O-list as of
Monday, February 14, 2005. The continuous
listing requirement regarding ownership
concentration states that at least 25 per
cent of shares in a company be in public
ownership. Following Elkem’s acquisition,
Sapa no longer meets this requirement
on distribution of ownership.
In a press release on February 24,
the Board of Sapa recommended that
shareholders accept Orkla’s offer.
The Sapa share was listed on the Stockholmsbörsen (Stockholm Exchange)on May 21, 1997, when the company was distributed to the shareholders ofElectrolux. At December 31, 2004, share capital amounted to MSEK 930,distributed among 37.3 million shares. Each share has one vote.
Ownership structure, % shares outstanding, Dec 30, 2004
■ Foreign shareholders 75.3▼ Swedish institutions 13.5● Swedish mutual funds 6.5� Swedish private individuals 4.7
Ownership per country, %, Dec 30, 2004
■ Norway 74.0 ● Others 1.3
■
▼
� ●
■
▼
●
▼ Sweden 24.7
Share trading
The average number of shares traded per
trading day in 2004 was 2,830, compared
to 9,459 in 2003. During the year, 716,086
shares were traded, corresponding to
1.9 per cent of the total number of shares.
Share repurchase
During 2004, Sapa has exercised the
mandate from the Annual General
Meeting to repurchase up to 10 per cent
of outstanding shares. During the first
quarter of 2004, 92,800 shares were
repurchased, corresponding to 0.2 per
cent. After that time, no further shares
were repurchased. Consequently, at year-
end, the Company’s own holding totalled
798,830 shares or 2.1 per cent.
Part-ownership programme
A five-year options programme for senior
executives was introduced in 1997, provi-
ding a free annual allocation of call options
and opportunities to acquire call options
at market price. The options provide rights
to acquire existing shares and, accordingly,
no dilution effect is created for existing
shareholders. The following options have
been allocated:
Year Number Exercise Exerciseallocated of options price, SEK year
2000 173,000 225 20052001 178,881 185 2006
Sapa implemented a part-ownership
programme in 1998 for Group employees,
divided between 619,450 convertible
debentures and 84,100 warrants. The pro-
gramme extended through July 30, 2004.
The conversion price and subscription
price were both SEK 136. During 2004,
57,585 convertible debentures and 79,950
warrants were converted into newly issued
shares. This increased the number of
shares by 137,535. At year-end 2003,
there were no convertible debentures or
warrants outstanding.
The personnel options programme
for some 60 Senior Executives that was
approved by a Special General Meeting
on February 6, 2002 resulted in the issue
of 700,000 options with an exercise price
of SEK 188. The options were allocated
free of charge and extend through March
2005.
3 000
6 000
9 000
12 000
75
100
150
200
250
97 98 99 00 01 02 03 04
Sapa shareSapa share (incl. div.)
SX All-Share Index
Number of shares traded, 000s (incl. after-hours trading)
Sou
rce:
SIX
5
Number of sharesNumber of Debentures Number of Change in Total Totalregistered converted, registered holdings of holdings of shares
shares exercised shares shares during own shares outstandingon Jan 1 warrants on Dec 31 the year on Dec 31 on Dec 31
2003 37,167,658 14,500 37,182,158 203,700 706,030 36,476,1282004 37,182,158 137,535 37,319,693 92,800 798,830 36,520,863
At year-end 2004, there were 700,000 outstanding personnel options. At full exercise, they would increase the number of shares outstanding to 37,220,863. However, based on the principles of RR 18,the dilution effect would be nil.
Per-share data 2004 2003
Earnings per share, SEK 10.41 10.48Earnings per share after dilution 10.41 10.46Share price at year-end, SEK 188 176Highest share price, SEK 194 178Lowest share price, SEK 171.5 139Change in share price during the year, % 7 10Dividend, SEK1 5.50 6.25Yield, % 2.9 3.5Dividend/profit, % 53 60P/E ratio, multiple 18.1 16.8Shareholders’ equity per share (net worth), SEK 107.96 106.36Share price/shareholders’ equity per share, % 174 165Registered shares, millions 37.3 37.2Number of shares outstanding, millions 36.5 36.5
1 Board of Directors’ proposal
Financial analystsAnalysts monitoring Sapa during 2004 included
Enskilda Securities Anders Trapp +46 8 522 297 57 [email protected] Swedbank Markets Mats Larsson +46 8 585 925 42 [email protected]
Owners Dec 30, 2004 Number % of shares % of shares of shares registered outstanding
Elkem ASA 27,019,502 72.4 74.0AMF Pension 1,999,000 5.4 5.5Investment AB Öresund 1,291,500 3.5 3.5AMF Pension Fonder 1,081,200 2.9 3.0HQ Fonder 848,639 2.3 2.3Repurchases of own shares 798,830 2.1 0.0Andra AP-fonden 620,178 1.7 1.7AFA Försäkring 575,686 1.5 1.6SEB fonder 345,450 0.9 0.9Hadari David och bolag 127,145 0.3 0.3
6
This is Sapa
Sapa’s three core areas – Profiles, Building System and Heat Transfer– share a common foundation. This involves developing, manufacturingand marketing solutions based on aluminium.
Aluminium has a number of characteristics
of value to a broad range of customer
groups. Central among these are low
weight combined with high strength and
resistance to corrosion. The fact that
aluminium can be recycled with very limi-
ted impact on the environment and con-
suming little energy means that the metal
contributes to a sustainable development.
As a subcontractor, Sapa provides
various markets with systems, compo-
nents and products with a high degree of
value-added fabrication, often developed
in close collaboration with customers and
always adapted to the customer’s needs.
Profiles
Sapa is one of the world’s leading produ-
cers of extruded aluminium profiles and
maintains extensive operations in the value-
added fabrication of profiles. Cutting,
bending, CNC processing, hydroforming,
melt welding, friction-stir welding, anodi-
sing and powder coating are examples of
such processes. Production, extrusion
and/or fabrication take place in Belgium,
China, Denmark, France, Germany,
Lithuania, the Netherlands, Poland,
Portugal, Sweden, the UK and the US.
Design solutions employing aluminium
profiles are used in a number of industries.
To support the development of important
customer segments, the strategic busi-
ness segments Sapa Automotive and
Sapa Mass Transportation have been
established. Special efforts are also being
made focused on the telecom industry,
among other, through the Cooling
Competence Centre, Sapa’s centre of
expertise for cooling solutions based on
aluminium profiles.
Building System
Sapa is one of the three largest suppliers
of building systems based on aluminium
profiles in Europe.
Today, markets for building systems
are largely local since they are subject to
local regulations and building standards.
Consequently, proximity is important.
Building System companies are located
in Belgium, France, Portugal, Sweden and
the UK, with sales offices in a further
13 countries.
Development is progressing towards
growing European regulations on building
products, with the European Union as one
of the driving forces. Through Building
System, Sapa has a coordinated organi-
sation that improves the opportunities to
develop the required technical solutions.
The organisation also generates synergies
in purchasing, marketing, sales and IT.
Heat Transfer
Sapa is one of the world’s leading com-
panies in the production of aluminium heat-
exchange strip for the automotive industry.
Products are adapted for different types of
heat exchangers: water-cooling radiators,
oil coolers, air-charge coolers, air-condi-
tioning plants and heaters. Production
takes place at facilities in Sweden and
China.
The entire organisation of Heat
Transfer, its management, production,
research and development, technical
support, marketing and logistics, all focus
on a single area – heat-exchange strip.
Three core areas, one profile
Sapa is not only the name of the Group –
it also represents a common brand for all
companies within the Group.
We strive to build our brand through
consistency and care. For us, having a
clear and uniform profile is one of our
cornerstones. This helps shape our future.
One Group – one common brand.
ProfilesOperations
Sapa is one of the world’s leading
producers of extruded aluminium
profiles and maintains extensive
operations in the value-added
fabrication of profiles.
Building SystemOperations
Sapa is one of the three largest
suppliers of building systems based
on aluminium profiles in Europe.
Heat TransferOperations
Sapa is one of the world’s leading
companies in the production of
aluminium heat-exchange strip
for the automotive industry.
7
Net sales9 287 MSEK
64%
Employees5 111
65%
Share of Sapa:
Net sales2 842 MSEK
20%
Employees1 646
21%
Share of Sapa:
Net sales2 383 MSEK
16%
Employees724
9%
Share of Sapa:
Construction industry
41%Transport industry
26%
Other end products
8%
Engineering industry
9%
Domestic and office appliances
11%
Retailers5%
5%
1% 15%1% 19%9%11% 6%
11%
22%
Building System20% of sales
Heat Transfer16% of sales
Profiles64% of sales
Sapa is subcontractor to a large number of customer groups whose activities follow different business cycles. This contributes to a favourable spread ofrisk. The diagram shows sales of profiles, profile-based building systems and heat-exchange strip of aluminium per industrial segment.
Sapa has an organisation with short
decision-making paths, ensuring that the
managers of the operating units receive
support in the business process and effi-
cient access to the Group’s combined
resources.
In addition to the CEO, Group
Management includes representatives for
the three core areas and for the Group
functions Economy and Finance, Business
and Management Development, Legal
Affairs, Communications and IT. The ope-
rating units report directly to Group
Management.
Responsibility for Sapa Profiles is
divided between four members of Group
Management. In this way, we handle the
geographic spread and utilise the Group’s
management resources optimally. Profiles
also includes the strategic business seg-
ments Sapa Automotive and Sapa Mass
Transportation. Resources are coordinated
here to provide Group-wide support for
the development of important customer
segments.
Through the acquisition of four alumi-
nium-profile companies during the past
five years, Sapa has more than doubled
its construction-related operations. With
the establishment of Building System as a
separate core area in 2004, a coordinated
organisation was created with headquar-
ters in Lichtervelde, Belgium.
In recent years, we have witnessed a development towards an increasinglyglobal business, a shift that places greater demands on coordination ofmarketing and sales, development efforts and production resources. Tomeet these challenges, initiatives are made centrally and coordinated withsubsidiary managers. However, the realisation that local conditions varyand change quickly has built up a firm conviction that a large part of deci-sion-making should be conducted locally. Consequently, responsibility forongoing business operations and the detailed strategy lies with the localcompany managers.
Sapa’s business model
8
Presidentand CEO
ProfilesStrategic Business Segments
Building System Heat Transfer
Group Management Group Functions
Operating companiesOperating companiesOperating companies
A large amount of decision-making in Sapa takes place within the local companies. The pictureshows Sapa’s plant in Puget, in southern France.
Goals
To offer an attractive investment for
existing and potential shareholders
by offering favourable value growth
and increased dividends. Sapa shall
be an attractive, environmentally con-
scious, ethical and equal-opportunity
employer. This is a prerequisite for
our ability to create added value for
our customers and owners.
Sapa’s goals over a business cycle
– Annual growth of 10% (of which
6% organic growth and 4% via
acquisitions)
– Operating margin (EBIT) of 8%
– Return on capital employed
(ROCE) of 18%
– Return on equity (ROE) of 18%
– Net margin of 5%
Business concept
To offer the market innovative,
value-enhancing solutions based on
profiles and strip in the lightweight
material aluminium.
Strategy
Sapa shall be perceived as the most
attractive partner through a combina-
tion of innovation, business know-
how and cost effectiveness.
Profitable growth shall be achieved
by co-operating closely with custo-
mers to develop new applications
and create added value. Cost and
capital efficiency in all aspects of
operations will secure Sapa’s compe-
titiveness. Good organic growth is
complemented by strategic acquisi-
tions of companies that further
strengthen our market positions.
Core values
Entrepreneurial spirit
To recognise the opportunities in a
business venture and have the ability
to make it profitable, while recogni-
sing the risk. Sapa supports and
encourages the entrepreneurial spirit
of its employees.
Innovative focus
To identify intelligent solutions to
problems and opportunities. This
innovative focus must be based on
an innovative and creative work
environment.
Commitment
To provide all Sapa employees
support and tools to ensure their
constant commitment and willing-
ness to always be there.
Customer-orientation
To realise that everything we do must
be based on the needs of the custo-
mer and the market. Only by being
customer-oriented will we obtain true
commercial value in our operations.
9
Goals over a 5-year Outcome
Financial goals business cycle average 1 2004 1
Growth, % 10 9 2 13,4
Operating margin, % 8 5 2 4,4
Return on capital employed (ROCE), % 18 10 2 10,2
Return on equity (ROE), % 18 13 9,7
Net margin, % 5 3 2,7
1 Excluding non-recurring items.2 Sapa Group’s present structure.
Growth is measured based on value-added in order to minimise the effects of fluctuating raw-material prices.
10
Sapa Profiles is a subcontractor to a large
number of customers, who follow diffe-
rent business cycles – from small local
companies to large global corporations in
numerous sectors and in diverse geograp-
hic markets.
Sapa Building System is active in a
number of geographic markets, which is a
strength, since the construction market and
its business cycles remain largely local.
Sapa Heat Transfer has relatively few
customers, who are primarily suppliers to
the automotive industry. Most sales are
made in Europe although Asia and North
America are both increasing in importance.
Aluminium profiles and building systems
In 2004, consuption of aluminium profiles,
including building systems in Europe,
amounted to 2.7 million tonnes, an incre-
ase of about 5 per cent compared with
2003. The increase in consumption
exceeded growth in GDP, which was
slightly more than 2 per cent in Western
Europe. The greatest increase in con-
sumption was noted in France,
primarily thanks to the strong construction
market.
In North America, where GDP grew
by 4.5 per cent, demand rose by 11 per
cent to 1.9 million tonnes. Here, the trans-
port sector, primarily truck production, was
responsible for a large portion of the
increase.
In the ten new EU member countries,
the consumption of profiles is estimated to
amount to 145,000 tonnes, representing
an increase of slightly more than 5 per cent.
The connection between consump-
tion and the degree of industrial develop-
ment is quite clear. There is extensive
potential for growth in Eastern Europe
and Asia, which are important future
growth markets for Sapa.
Sapa Profiles’ European market shares
vary from slightly more than 40 per cent
in Sweden to about 5 per cent in Germany.
In North America, Sapa’s market share is
approximately 3 per cent.
The European construction market
In Europe, the business cycle in the
construction industry varies substantially
between markets. In 2004, the industry
Sapa’s products,markets and competitors
Asia and rest of the world 4%
Scandinavia 19%
Western Europe 46%
Eastern Europe 7%
North America 11%
UK 13%
Sapa is a subcontractor to a large number of customer groups whose operations follow different business cycles. Customers are also dispersedover a large number of geographical markets, which contributes to afavourable spread of risk.
The diagram shows the distribution of Sapa’s sales between geographic markets.
Building systems from Sapa at HullCollege in the UK.
was strongest in France, Belgium and the
UK. In France, growth in 2004 was largely
due to a strong housing market. Public
investment in education and health, as well
as low interest rates for mortgages during
the first half of the year, strengthened the
UK construction market. However, rising
interest rates during the second half of
the year resulted in a decline in demand.
In Scandinavia, Sapa Building System
increased its market share in a declining
construction market for commercial and
public buildings. In Portugal, an increasing
number of unsold homes and vacant flats
resulted in a decline. In Germany, con-
struction activity remained low with nega-
tive growth.
The year 2004 was Building System’s
first as one of the Sapa Group’s core
areas, and all units, with the exception
of Portugal, strengthened their positions.
European market shares vary from 45 per
cent in Sweden to slightly more than
1 per cent in Germany.
Consumption of heat-exchange strip
During the year, the global market increa-
sed by 5-6 per cent and is estimated to
total approximately 490,000 tonnes. Of
this, Heat Transfer produces about 76,000
tonnes. Positions were strengthened and
market share rose from 14 per cent to
about 16 per cent.
Sapa’s development
Sapa’s growth significantly exceeds that
of the underlying market. The graph
shows the average growth for aluminium
products in Europe in the past five-year
period and Sapa’s average rate of growth
during the same period. Sapa’s stated
objective is to expand through a combi-
nation of organic growth and acquisitions.
Products:
Sapa’s sales by customer segment
Of Sapa’s total sales, 26 per cent are made
to the transport industry. Here, pas-
senger cars, trucks and buses correspond
to about 90 per cent. The remainder com-
prises deliveries to the boat- and train-
building industries.
The transport industry is, since a long
time, one of Sapa’s largest customer
groups and the proportion of aluminium in
transport vehicles continues to increase at
the expense of heavier materials. Reducing
weight is a priority, providing both financial
and environmental benefits.
Consequently, demand for aluminium
products will increase more rapidly than
the transport sector as a whole. A greater
number of cooling components per vehicle,
among other things, for air conditioners, is
contributing to this development. In addi-
tion to this, extensive growth is expected
in Asia.
Sapa supplies both profile-based
components and heat-exchange strip to
the transport industry. Examples of pro-
ducts from Sapa Profiles are components
for engines and airbags, roof racks, seat
rails, train-side panels and boat decks, as
well as a number of fittings for both trains
and boats. Sapa Heat Transfer supplies
heat-exchange strip for radiators, oil coo-
lers, air-charge coolers, air-conditioning
units and heaters.
The construction industry accountsfor 41 per cent of Sapa’s total sales.
The construction industry is the single
largest user of aluminium profiles and
accounts for about half of consumption in
Europe. Of decisive importance for the
strong position of aluminium are its cha-
racteristics, primarily its high strength
combined with low weight and its
resistance to corrosion, providing low
maintenance costs.
Profiles are produced using extrusion
technology. This facilitates interesting
architectural solutions. Building systems
from Sapa are developed in close co-
operation with architects and are adapted
to current construction technology. This
makes construction efficient and ensures
a high level of quality, also helping reduce
operating costs for buildings. Systems are
supplied for among others, windows,
doors, facades, and glass roofs, solutions
Roof-rack tubes Roof beam Roof rail
Hatchback frame
Wheel-suspension link
Impact beam
Side beam
Frame
Dashboard beam
Reinforcement beam
Radiator beam
Engine cowling
Fuel-distribution pipe
Air-charge pipeEngine bearing
Airbag deflector
Running board
Seat rails
Seat-back frame
11
Volume growth aluminium products,Index tonnes 1994=100
0
50
100
150
200
250
300
040302010099
Sapa European market
10,4%
3,4%
Building systems for the BallingsnäsSchool, outside Stockholm, Sweden.
The amount of aluminium inpassenger cars continues toincrease. The picture showsaluminium profiles from Sapain a car.
for both homes, offices and industrial
buildings, as well as other commercial
properties.
Sapa’s own building systems repre-
sent about half of Sapa’s total sales to
the construction industry.
The engineering industry is a rapidly
expanding market for aluminium profiles
and represents 9 per cent of Sapa’s
sales. Profiles, which are often delivered
as components ready for assembly in the
customer’s manufacturing processes, are
used for a wide range of design solutions.
Examples include machine parts for
robots and transport systems. Solutions
for the electronics industry include coo-
ling fins, electronics casings and applica-
tions to manage current flow in transfor-
mers and switchgear.
Home and office designers have
discovered the possibilities of aluminium
profiles. Aluminium is considered a
modern material, which, besides offering
design advantages, contributes aesthetic
values to the final product. This segment
is becoming an increasingly important
market for Sapa, corresponding to about
11 per cent of sales. Examples of pro-
ducts include furnishings, light fittings,
kitchen and bathroom cabinet doors,
shower cabins, appliance stands, loud-
speakers and sun beds.
Other end products, which corres-
pond to 8 per cent of sales, involve niche
markets such as ladders, boat masts,
canoes, soccer goal-posts and bicycle
frames. Here, Sapa’s skills are often put
to the test when creating new, improved
and more efficient solutions in close col-
laboration with customers. An odd, but
nonetheless typical example is a self-
cleaning puppy pen with a moving floor.
Of Sapa’s total sales, 5 per cent,
comprising primarily standardised alumi-
nium profiles, are made to retailers.
Increased fabrication
Sapa makes continual efforts to deepen
its collaboration with an increasing number
of customers by increasing the degree of
fabrication. The proportion of value-added
fabricated aluminium profiles is growing
continuously and Sapa continues to
increase its capacity in anodising, powder
coating, bending, joining, CNC processing
and assembly. We strive to utilise the
Group’s technical resources and to
optimise costs in production resources.
Sapa in Asia
Sapa views Asia, and China in particular,
as a highly attractive future growth mar-
ket. The extension of the rolling plant in
Shanghai is proceeding according to
plan, doubling capacity by 2006. A plant
for the fabrication of profiles was opened
in Shanghai in 2004. Many indications
suggest an interesting market for the pro-
duction of aluminium profiles in China.
High growth rate in Eastern Europe
In Eastern Europe, where many markets
will have a far higher rate of industrial
12
With Sapa’s help, Svedbergs has developed an easy-to-assemble bathroom sauna with a framework of aluminium profiles.
Aluminium profiles in aself-cleaning puppy pen.
Sapa supplies profiles for ABB’s thyristorvalves. The valves are used in converterstations that convert alternating currentto direct current.
growth than in the West, we foresee
expanding markets, primarily for alumi-
nium profiles. Particularly attractive seg-
ments include the construction and eng-
ineering industries, and, in the long-term,
the automotive and mass-transportation
sectors. During 2004, Sapa established a
fabrication plant in Lithuania and invested
further in fabrication operations in Poland.
Aluminium profiles: Sapa world No. 3
Despite several structural transactions
during recent years, the aluminium profile
industry is fragmented, with a few major
suppliers and a large number of small
and midsize players. There is significant
potential for further structural transactions,
both in Europe and the US.
Profile operations have become
increasingly global as customers have
grown and expanded geographically. The
complexity of the products has also incre-
ased, and customers are now wishing
that suppliers take part in the develop-
ment process. These changes are driving
structural change in the industry with the
goal of achieving synergy effects focused
mainly on production, Research and
Development and marketing.
Producers of aluminium profiles are
either integrated in large industrial groups,
which often have their own production of
aluminium metal or, as in the case of
Sapa, independent companies that buy
aluminium metal.
Sapa is the world’s third-largest
manufacturer of aluminium profiles. Alcoa
of the US is the largest manufacturer fol-
lowed by Norsk Hydro. The total produc-
tion of the five largest manufacturers cor-
responds to about 45 per cent of con-
sumption in Europe and North America.
Construction industry: largest market
The construction industry is by far the lar-
gest consumer of aluminium profiles in
Europe. Today, the market for building
systems is largely local/regional and
faces extensive structural changes. With
the harmonisation of building regulations
within the EU, players will obtain the
opportunity to create systems not limited
by national borders and coordinate deve-
lopment, production, purchasing, logistics
and marketing. This process is already
being conducted intensively within Sapa
Building System.
Today, Sapa Building System is the
third-largest player in the European mar-
ket, which remains highly fragmented.
Sapa Heat Transfer: a global player
The market for rolled products is charac-
terised by significant overcapacity and
ongoing structural changes. In 2003, for
example, Canadian company Alcan’s
acquisition of a majority holding in
Pechiney of France resulted in large parts
of rolling operations being hived-off as a
new company, Novelis.
However, there is a more favourable
balance between supply and demand in
the niche market for heat-exchange strip.
Today, Sapa Heat Transfer is the
world’s second-largest player in the heat-
exchange strip sector. Its main competi-
tors are Corus, Alcan, Hydro and Alcoa.
The five largest manufacturers account
for approximately 75 per cent of global
production.
Sapa Heat Transfer’s decision to con-
centrate entirely on heat-exchange strip
means that it is perceived as a stable
player in the market.
13
Sapa Heat Transfer is a world leader in the production of aluminium strip for heat exchangers in vehicles.
Mavic of France produces bicycle wheels for the European cycling elite.Sapa supplies the aluminium profilesused to make the rims.
Air-charge cooler with aluminium stripfrom Sapa.
14
Sapa Heat Transfer is an example of how
Sapa thinks and operates. As late as in
the 1980s, the rolling plant in Finspång
was just another rolling plant and, in fact,
smaller than many others. Plate and strip
were produced here for all imaginable
purposes. That is still the case for Heat
Transfer’s competitors. At those companies,
a number of different rolled products share
resources and management capacity.
Today, Sapa Heat Transfer, which has
production units in Finspång, Sweden and
Shanghai, China, has developed products
that make the company the world’s second
largest producer of aluminium heat-
exchange strip. Resources are focused on
an expansive and stable market – the glo-
bal automotive market. Development has
largely been a matter of meeting custo-
mer demand. The key was Sapa’s focus.
Today, Heat Transfer is responsible
for 16 per cent of Sapa’s sales, but when
it comes to research and development,
Heat Transfer utilises half of the Group’s
resources.
Sapa Technology, the Group’s com-
mon unit for research and development,
employs 45 specialists with backgrounds
primarily in materials technology, technical
physics and chemistry. Sapa Technology
conducts research, literally down to the
level of the atom, resulting in new alloys
and products that compete successfully
in the global market.
Through its collaboration with Sapa
Technology, Sapa Heat Transfer is able to
meet customer requirements for increa-
singly thin products and to meet the ever
more rigorous demands imposed for cor-
rosion resistance and durability. At the
same time, the mouldable characteristics
must be maintained and the material is
required to cope with increasing working
temperatures.
A strip from Sapa Heat Transfer can
be as thin as 0.05 mm (compared with a
human hair at 0.04). Other, somewhat
thicker, strips may consist of as many as
five alloys, which are rolled together to
create the optimal end product.
Let us present a few more examples
of spearhead expertise.
Cooling Competence Centre
In collaboration with Sapa Technology,
Sapa Profiles has established a compe-
tence centre that works on a broad front
with the telecom and automotive industri-
es and other sectors where there is a
need to divert heat. The centre provides
Sapa is one of few companies established in Sweden after World War IIto have had the inherent strength to grow into a global enterprise. Our7,900 employees in 26 countries have the skills and know-how that haveenabled us to attain this position.
The explanation is cutting-edge expertise
Belgium China Denmark France Germany Lithuania Netherlands Poland Portugal Sweden UK US
Profile extrusion • • • • • • • • •Rolling • • •Tube welding • •Anodising • • • • • • • • •Powder coating • • • • • • • •Fabrication • • • • • • • • • • • •Remelting • • • • • •Building systems • • • • •Sales • • • • • • • • • • • •Sales offices Austria Canada Czech Republic Estonia Finland Italy Latvia Lebanon Norway Slovakia South Korea Spain Switzerland Turkey
advanced equipment and expertise in
simulation, measurement and technical
analyses for cooling solutions based on
aluminium profiles.
Hydroforming
Sapa began serial deliveries of
hydroformed components to Volvo as
early as in the autumn of 2001. Today,
Sapa has knowledge and experience that
is unique in the world when it comes to
the hydroforming of long aluminium profiles.
The principle entails placing an extru-
ded tube in a die. The profile is subjected
to hydrostatic pressure from within, pres-
sing it out into the form of the die.
Hydroforming can be used to achieve
complicated components and to make
local changes such as protrusions or
indentations. Hydroforming simplifies
fabrication thus shortening lead times.
Friction Stir Welding
Friction Stir Welding (FSW) is another
example of an area where Sapa is a
world leader. The technique entails joining
flush metal surfaces through the mecha-
nical action of a rotating tool. With the
effects of pressure and heat, a new,
homogenous structure is achieved.
Compared with melt welding, FSW
provides greater strength and less heat
deformation. This means that Sapa is able
to deliver panels of up to three metres in
width, consisting of profiles joined, lengths
in accordance with the customer’s
requirements. One area of use is in
side panels for trains.
Corporate culture
These represent examples of Sapa’s cor-
porate culture. The spirit embodied in this
culture has been there from the very start
in 1963. Employees were involved in a
way that was unique at that time, and,
from a very early stage, the company wor-
ked very closely with customers. There
is no doubt that Sapa’s success is
largely due to its corporate culture.
Our continued success
depends on the extent to which
we are able to combine this
corporate culture with the
combined strength of an
international group.
15
Friction Stir Welding provides a homo-genous and non-porous join with noocclusions.
Using hydroforming, a profile is sha-ped three-dimensionally in a singleoperation. The cross section of all orpart of the profile can be changed.
Sapa’s recommendation: a profile withconsiderably greater density of fins (seecross section). Result: an improvement incooling capacity of approximately 40-percent with a reduction in weight of about 30 per cent.
The customer’s existing profile: a “CFD”(Computational Fluid Dynamics) / FEManalysis shows clearly that the profile’scooling capacity is inadequate.
Sapa is able to deliver panels of up to three metres in width, consisting of aluminium profiles joined by Friction Stir Welding.
The recruitment process is continuous
and an important part of this is to market
and create the knowledge that Sapa is an
interesting employer with good develop-
ment opportunities. We participate active-
ly in labour market days at colleges and
universities. During 2004, Sapa was
represented in Linköping, Uppsala and
Stockholm, in Sweden. By sponsoring
secondary schools and university colleges
as well as doctoral projects, we establish
Sapa’s name and increase knowledge
about the opportunities offered by alumi-
nium.
Employees of Sapa shall be stimula-
ted and afforded personal development
opportunities through Group-wide and local
programmes for employee development.
Sapa Academy
In 2004, 23 employees graduated from
Sapa Academy, the Sapa Group’s internal
training and career-development pro-
gramme for current and future managers.
Through this programme, Sapa secures
the development and recruitment of
managers by nurturing a culture of deve-
lopment and growth. The programme is
conducted once a year and comprises
project work in areas of importance for
Sapa from a development perspective.
Since the start of the Sapa Academy in
2000, 147 Sapa employees have comple-
ted the programme. Training programmes
are also continually in progress within
several subsidiaries.
Genesis
At Sapa Heat Transfer and Sapa Profiles
in Sweden, a new step was taken during
the year regarding the change process.
The companies operate in accordance
with the Toyota Production System.
Adapted to conditions at Sapa, the
system has been renamed Genesis.
Genesis is based on the system that
Toyota has been developing since the
1940s and that has been adopted by a
number of manufacturing companies
around the world. The system is based on
four rules: Each task is standardised.
Internally, there shall be a customer-sup-
plier relationship between different units.
Everyone shall focus on the flow of
production. Finally, once these three
components are working, efforts shall
be continually undertaken to improve
the production system.
Previously, time and money were pri-
marily invested in machinery. Genesis
Our employees
16
Sapa strives to be an attractive company to work in. To achieve ourgoals, we must succeed in our efforts to recruit, retain and develop highly qualified employees.
With Genesis, focus is moved from machines to people and the requirements for each individual,in terms of knowledge and training increase.
17
requires increased investment in employ-
ees. One of the seven principles suppor-
ting Genesis’ four rules is: People are the
most important asset – change is 70 per
cent about people and 30 per cent about
technology.
Although Sapa already employs
some of the rules and methods on which
Genesis is based, the current drive entails
a fundamental shift. It takes time to chan-
ge people’s attitudes and behaviour.
Sapa has taken a long-term strategic
decision and will show all the necessary
stamina that this paradigm shift requires.
Gradually, more and more units will con-
duct their change processes in accordan-
ce with Genesis. Efforts have already
begun at Sapa RC Profiles in Belgium.
Common intranet
During the year, Sapa’s Group-wide intranet
was established and developed as a tool
to enhance employees’ understanding of
Sapa’s operations, core values and objec-
tives, to create a sense of belonging and
to contribute to the transfer of knowledge.
Sapa works actively to provide
employees with possibilities for alternative
jobs within the Group. The exchange of
personnel between operating units provi-
des favourable opportunities for individual
development and also contributes to the
transfer of knowledge. Vacant positions are
advertised continuously on the intranet.
Proportion of women in Sapa
During 2004, Sapa continued to support
the Centre for Business and Policy
Studies’ project for promoting women in
business. The ambition is for the number
of women managers in Sapa to increase.
In 2004, the proportion of women mana-
gers in Swedish operations was 13 per
cent (26 out of a total of 193). In 2003,
the corresponding figure was 9 per cent,
(16 out of a total of 182). In terms of all
employees in Sweden in 2004, 21 per
cent were women, the same figure as in
2003. In 2004, the total proportion of
women in Sapa was 17 per cent.
Sapa strives to be an attractive company in which to work. It is important to disseminate an awareness of Sapa as an attractive employer, offering favourable opportunities for development.
Sapa supports the Centre for Businessand Policy Studies’ project for promotingwomen in business.
Sapa employees shall have opportunities for personal development through Group-wide development efforts and local training programs.
We view sustainable development as a
basic condition for future growth, which
guides all efforts affecting environmental
impact. This applies to the surrounding
environment as well as working environ-
ment inside our plants. For Sapa, the
environment, health, safety and profitabili-
ty are part of the same whole and are
accorded the same high level of priority.
Sapa’s Environment, Health and
Safety Policy has been adopted by Senior
Management. In 2004, it was assigned
additional priority through the establish-
ment of a new Group function for the
development of this work. The assign-
ment entails coordinating, advancing,
supporting and inspiring efforts, imposing
demands, gathering information and dis-
seminating this among the companies.
With the support of this central func-
tion, the local companies are provided
back-up in their efforts to advance Sapa’s
environmental, health and safety efforts.
Sapa’s Environmental Health
and Safety Council
Sapa’s Environmental Council has been
active since 1999, and in 2002 its scope
of operation was extended to include
health and safety. The Council deals with
Group-wide environmental, health and
safety efforts and acts as a platform for
the coordination and communication of
efforts internally and with investors and
the media. Within the framework of the
Council, knowledge and experience are
exchanged on advancing efficient deve-
lopment.
It is Sapa’s conviction that successful
health and safety efforts result in decrea-
sed costs and increased competitive
advantages. Since 2003, health and
safety form a fixed item on the agenda of
Sapa AB’s Board of Directors. In November
2004, Sapa organised a conference on
the theme of health and safety, which
was attended by some 35 specialists
from Sapa companies.
The objective is to become “best in
class”. The conference showed that the
gap between best and worst in the Group
is wide and that there is still extensive
scope to improve health and safety
efforts. In connection with the conference,
a network of specialists was established
and continued efforts will be conducted
with increased expertise and a broad
base of support within the Group.
By studying accident statistics, we
obtain an overview of how safety efforts
have developed. In 2002, there were 30
accidents per million working hours. In
two years, accidents have decreased by
27 per cent. Accidents that result in
absence from the workplace are registe-
red in the statistics.
The development is positive, although
the objective of “best in class” remains
distant. With improved coordination, incre-
ased co-operation and deep commitment
from all involved, it is realistic to set a tar-
get of 10 accidents per million working
hours by 2008.
Continuous process of improvement
One of the Council’s tools is the
Environmental Platform, an internal report
on each company’s processes, operations
requiring permits and action programmes.
The report comprises statistics of actual
emissions to the atmosphere, soil and
water. Calculations are also made of the
total carbon-dioxide effect of operations.
The report, which is updated annually,
was first produced in 2001 and makes it
possible to quantify and review concrete
targets. Here, it is possible to follow the
The environment, health and safety are issues where the interests of thecompany, its personnel and society in general coincide. Sapa’s policy isvery clear: our operations shall be conducted in a safe manner with respectfor the environment and assuming responsibility for people’s health.
18
Accidents per million working hours
0
5
10
15
20
25
30
200420032002
Focus on the environment, health and safety
continuous process of improvement that
each company is required to conduct. The
Environmental Platform is also a tool,
which is used to compare operations, set
targets and spread best practice.
In systematic environmental efforts,
all of the Swedish units and several
foreign units have chosen to work in
accordance with the ISO 14001 environ-
mental management system.
Each year, insurance company
Folksam publishes a comprehensive climate
evaluation of a number of companies. In
the latest report, Sapa’s result improved
from three to four out of five possible stars.
The international non-profit founda-
tion The Natural Step evaluates the com-
panies on the O and A Lists of the
Stockholm Exchange. The purpose of the
evaluation is to identify companies that
may become winners in developments
towards a sustainable society and that
may also inspire other companies to
become involved in sustainability issues.
The top list contains 41 companies, of
which Sapa is one.
Aluminium – the green metal
Common to all three of Sapa’s core areas
– Profiles, Building System and Heat
Transfer – is the fact that operations are
based on aluminium. Approximately 8 per
cent of the Earth’s crust consists of alumi-
nium in the form of different minerals.
Consequently, aluminium is one of the
few metals where the availability of raw
material may be regarded as unlimited.
The characteristics of the material
contribute to a low environmental impact
in Sapa’s production, in the customers’
production and by end users. When, for
example, the automotive industry introdu-
ces lifecycle analyses, the amount of alu-
minium in vehicles will increase. Some of
the most important reasons include low
weight in combination with high strength,
corrosion resistance and mouldability.
An additional aspect is recycling. Of
the aluminium used in passenger cars,
95 per cent is separated and recycled
when cars are scrapped. After remelting,
most of the metal is reused in new appli-
cations for the automotive industry.
Consequently, aluminium can be recycled
for the same purpose time and again.
Unlike many other materials, aluminium
does not lose its unique characteristics.
Only 5 per cent of the original energy
input is required in remelting.
19
Excerpt from the Environmental, Health and Safety Policy
All of our industrial operations shall be characterised by a long-term responsibi-
lity for people and the environment, with an economic utilisation of resources.
The goal is to utilise the best technologies available.
We shall capitalise on our entrepreneurial spirit and creativity to find alternative
solutions that lead to fewer work-related injuries, reduced effects on the envi-
ronment and lower consumption of raw materials and energy.
Naturally, we shall adhere to existing legislation and regulations, although our
targets extend beyond the legal requirements.
As a fundamental part of Sapa’s environment, health and safety efforts, a num-
ber of key figures are measured and evaluated continuously and treated with
the same importance and attention as financial key figures.
We shall train and educate our employees so that all personnel can contribute
actively to environment, health and safety work, which is a basic requirement for
continued development and improvement.
The internal and external information that we produce for employees, customers,
shareholders and other stake-holders shall be characterised by openness and
accuracy.
Sapa remelts process waste as new raw material at its own facilities in Belgium, the UK, France, China, Portugal and Sweden.
Aluminium – the green metal.
20
Consolidated net sales for 2004 amounted
to MSEK 13,990, compared with MSEK
11,803 in 2003, an increase of 19 per
cent, with RCA, acquired in June 2003,
contributing 11 percentage points.
Currency effects from the translation of
foreign subsidiaries to SEK affected net
sales negatively by MSEK 178, slightly
less than 2 per cent.
Delivered volumes of aluminium pro-
ducts rose by 19 per cent during 2004.
Of these, RCA units contributed 9 per cent.
Compared with the first half of 2004,
operating profit during the second half
was considerably lower. A lower growth
rate in Profiles in Western Europe had a
negative impact on earnings.
Operating profit for the full year
(excluding a capital gain of MSEK 24 from
the sale of Boal shares) declined to
MSEK 616 (641), a decline of 4 per cent
compared with 2003. This resulted in an
operating margin of 4.4 per cent (5.4) and
return on capital employed amounted to
10 per cent (12).
The Sapa Group’s financial position
was strengthened during the year. At year-
end, the Group’s debt/equity ratio was 0.48
(0.54) and net debt amounted to MSEK
1,904 (2,100). Compared with 2003, the
Group’s net debt fell by MSEK 196. The
financial net for the year amounted to an
expense of MSEK 84 (expense: 81).
Profit before tax amounted to MSEK
556 (559). Earnings per share were SEK
10.41 (10.48). Excluding capital gains,
earnings per share amounted to SEK
9.76. The return on shareholders’ equity
was 9.7 per cent (10.0).
Divestment of Boal shares
The acquisition of Remi Claeys Aluminium
in June 2003 included a minority share of
25 per cent in the aluminium-profiles
group Boal International BV. This holding
was sold in April 2004 to Boal’s majority
owner. The price for the shares was
MEUR 10.3. This gave a capital gain of
MEUR 2.6 (MSEK 24), corresponding to
SEK 0.65 per share.
Development of core areas
Profiles in the US experienced a record
year in 2004, in terms of both volumes
and profit, with an increase in volumes of
16 per cent. In Poland, profile operations
continued to show favourable profit during
the year, although with slightly lower mar-
gins. France also had a favourable deve-
lopment with volumes increasing by 8 per
cent. Profile operations in the UK experi-
enced an unfavourable profit development
as a result of production disturbances and
During the first half of 2004, Sapa was able to show a good developmentin both volumes and earnings. During the second half of the year, volumescontinued to grow, although at a slower pace and the earnings develop-ment was weaker than during the corresponding period in 2003.
The past year
Operating profit, MSEK1, 2
0
200
400
600
800
04030201009998
Net sales, MSEK1
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
04030201009998
Return on capital employed, %1, 2
0
5
10
15
20
25
040302010099981 Sapa, present structure2 Excluding non-recurring items, see page 56
21
declining sales volumes. Consequently,
Sapa’s market share in the UK declined
in 2004. Despite favourable growth in
volumes, Swedish profile operations showed
no improvement in profit. In Sapa in Portugal,
restructuring costs and adjustments from
prior years resulted in the Portuguese
company reporting a substantial loss.
Sapa Building System’s earnings
were affected negatively by the above-
mentioned loss by Sapa in Portugal. The
other units within Building System showed
improvement or continued strong profita-
bility during the year.
Both Heat Transfer’s Swedish and
Chinese operations had a strong year, with
a total volume increase of 14 per cent
and a favourable earnings development.
Market position
During the year, most of Sapa’s markets
have been relatively strong. The Western
European aluminium-profiles market was
strong during the first half of the year,
although growth slowed during the latter
half of the year. Overall, Sapa retained its
market shares in Europe during the year.
In the US, where Sapa first established
operations in 2001, the aluminium-profiles
market developed highly favourably
during the year and Sapa increased more
than the underlying market. In general,
margins in the Western European and
North American profile markets were lower
than in 2003. This is partly attributable to
increased competition and partly to the
rise in prices for aluminium metal which
began during the latter half of 2003. The
high volatility in metal prices has also led
to greater uncertainty in the market.
For Sapa Building System, 2004 was
its first year as an independent core area
within Sapa, and all units, with the excep-
tion of Portugal, strengthened their posi-
tions. The construction market in Europe
varies considerably between geographic
areas. Strongest during the year were
France, Belgium and the UK.
Within Sapa Heat Transfer, demand
for heat-exchange strip for the automotive
industry was favourable both in Europe
and Asia. This has resulted in Sapa being
able to capture market shares. The coo-
ling of the Chinese economy brought a
certain decline in the pace of growth in
the automotive industry. Nonetheless, it is
estimated to have grown by approximate-
ly 16 per cent during the year. For Heat
Transfer’s operations in China, the slow-
down resulted in somewhat lower order
bookings during the latter part of 2004,
although the level remained substantially
higher than in the preceding year.
Active efforts
Investments for the year amounted to
MSEK 512 (352), compared with depreci-
ation (excluding amortisation of goodwill)
amounting to MSEK 450 (420).
Major ongoing investment projects
include the upgrading of Sapa RC
Profiles’ large press, which was begun
towards the end of 2003 and was com-
pleted in December 2004.
During the year, Sapa expanded its
production of components. This streng-
thens our position as one of the leading
companies in our industry. During the
year, Sapa established a fabrication plant
in Lithuania and the first components
were delivered in April.
China and Eastern Europe are also
important future growth markets. Since
1997, Sapa has had an established pre-
sence in China with the production of
heat-exchange strip for the automotive
industry. During 2004, a new plant was
inaugurated in Shanghai for the fabrica-
tion of aluminium profiles.
In the third quarter of 2004, a deci-
sion was made to invest MSEK 40 in a
third extrusion press in Poland. The
investment is scheduled to be taken into
operation in the autumn of 2005. Poland
is a market where Sapa has experienced
rapid growth in recent years. The Polish
profiles market grew by approximately
10 per cent and is expected to maintain
a high level of growth.
Increased activities in the US, Poland
and France, as well as in the new value-
added fabrication plants in Lithuania
and China resulted in an increase in the
number of employees by about 300
during the year.
During the fourth quarter of 2004,
work commenced on expanding produc-
tion capacity at Sapa Heat Transfer in
Shanghai. The investment of MSEK 132
will more than double capacity to 44,000
tonnes and the plant is expected to be in
full operation during the first half of 2006.
The investment is a natural step in contin-
ued co-operation with manufacturers of
heat exchangers for the global automotive
industry.
In 2004, work commenced on an
investment of MSEK 195 in a vertical ano-
dising plant at Sapa Profiler in Vetlanda,
Sweden. The investment in new and
modern surface treatment technique
increases efficiency and helps improve
the working environment through automa-
ted production. Customer demands for
quality and service are constantly increa-
sing and with innovative technology, their
needs can be met. The facility is expec-
ted to be completed during the first half
of 2006.
Cash flow after investments, excl. acquisitions/divestments, MSEK
-400
-200
0
200
400
600
04030201009998
Earnings per share, SEK 2
0
2
4
6
8
10
12
14
04030201009998
Return on shareholders’ equity, %2
0
4
8
12
16
20
04030201009998
22
Board of Directors’ Report
Sapa AB Board of Directors’ Report
Registered company number
556001-6122
Sapa is an international industrial group
that develops, manufactures and markets
highly processed aluminium profiles and
heat-exchange strip made of aluminium.
Operations are focused on industrial sectors
that have good growth potential and a high
degree of technology and knowledge.
In 2004, Sapa has been organised
into the core areas Profiles, Building System
and Heat Transfer. To support the deve-
lopment of important customer segments,
Profiles includes the Strategic Business
Segments Sapa Automotive and Sapa
Mass Transportation. The managers of the
companies in the areas of responsibility
report directly to the Group Management.
The Parent Company, Sapa AB, com-
prises Group Management and Group
functions that support the areas of
responsibility with centralised services in
financing, control, accounting, taxation,
legal matters, communications and IT.
The Parent Company provides tools and
services for various forms of benchmar-
king to support the business and con-
ducts Group-wide research and develop-
ment through Sapa Technology.
On commission from Sapa AB, Sapa
Industriservice AB provides transport and
logistics services, mechanical design and
maintenance work and construction on
contract. The company also handles
common infrastructure matters for the
industrial sites in Finspång and Skultuna,
in Sweden. More than half of the compa-
ny’s net sales originate from customers
outside the Sapa Group.
Sapa AB is a part-owned subsidiary
of Elkem Sweden AB, which is part of the
Elkem Group of Norway. The parent com-
pany of that group is Elkem ASA, which
has its registered offices in Oslo.
Acquisitions/divestments
Included in Sapa’s acquisition of Remi
Claeys Aluminium in June 2003 was a
minority holding of 25 per cent in the alu-
minium-profiles group Boal International
BV (Boal). In April, this holding was sold
to Boal’s majority owner. The price for
the shares was MEUR 10.3, providing a
capital gain of MEUR 2.6 (MSEK 24), or
SEK 0.65 per share. The gain from this
divestment was reported in the second
quarter of 2004.
Investments
Total new and replacement investments
amounted to MSEK 512 (352). For the
corresponding period, depreciation (exclu-
ding goodwill amortisation) amounted to
MSEK 450 (420). During the year, the
upgrading of Sapa RC Profiles’ large press,
which began in 2003, was concluded.
Work was conducted in connection with
planned production halts during the
summer and Christmas vacations. During
the first half of the year, the process of
establishing a unit for profiles fabrication
in Lithuania was completed and deliveries
began in April. In November 2003, a deci-
sion was made to invest MSEK 195 in a
vertical anodising facility at Sapa Profiles
in Vetlanda, Sweden. During 2004, MSEK
48 was invested. The investment is
expected to be taken into operation during
the first half of 2006. In early 2004, a
decision was made to invest MSEK 132
in the expansion of Sapa Heat Transfer in
Shanghai. The investment, which will more
than double capacity to 44,000 tonnes, is
expected to be fully operational by the
end of the first six months of 2006. Work
on the investment commenced during the
fourth quarter and affected investments
for the year by MSEK 21. In the third
quarter, a decision was made to invest
MSEK 40 in a third extrusion press in
Poland. MSEK 8 was invested in 2004.
The press is expected to be brought into
operation in the autumn of 2005.
Repurchase of shares
Within the structure of the repurchase
programme, 92,800 shares were repur-
chased during the first quarter of the year.
After that time, no further repurchases
took place. Consequently, at the end of
the year, the number of repurchased
shares totalled 798,830. The average
repurchase price was approximately SEK
162 and the repurchased shares corres-
pond to 2.1 per cent of the total number
of shares. The conversion of debentures
and exercise of warrants within the fram-
ework of the part-ownership programme
for employees ended in July increased
the number of shares by 137,535. At the
end of the year, the number of shares
outstanding was 36,520,863.
Research and development
Research and development efforts at
Sapa are normally conducted as projects
whereby the Group’s collective know-how
is utilised through collaboration between
specialists with differing expertise and
experience. These projects are planned
and organised in close co-operation with
the local subsidiaries. For problems requi-
ring greater specialisation and resources
than the local companies are able to
offer, the Group maintains a central rese-
arch and development unit, Sapa
Technology, in Finspång. This is a depart-
ment within Sapa AB, where 45 specialists
conduct research and development rela-
ted to material processes and product
properties. These individuals have a uni-
que know-how in advanced metallurgy,
physics and chemistry and about ten of
them have post-graduate research
degrees. Research work, which is, among
other formats, conducted in co-operation
with universities, university colleges and
research institutions, helps to advance our
positions within significant areas of deve-
lopment. The collaboration between the
local Sapa companies and Sapa
Technology contributes to the develop-
ment of new products and manufacturing
processes, and to the improvement of
existing solutions and applications. Sapa
Technology also plays an important role in
the technical sales process. For further
information on Sapa’s research and deve-
lopment work, see pages 14-15.
23
Environment
During the year, the Parent Company,
Sapa AB, conducted operations subject to
permits through Sapa Industriservice AB.
Permits are held for oil flotation (purifica-
tion of oil-polluted water), and the evapo-
ration and ultra-filtration of oil and water
emulsions. The purified aqueous phase is
drained off into the watercourse. The
necessary permits exist. During the year,
operations were conducted within the
framework for applicable permit decisions.
No major environmental investments are
expected to be necessary in 2005.
Sapa’s active environmental work is
described on pages 18-19.
Changed accounting principles
- application of IFRS effective 2005
Effective 2005, the Sapa Group’s reporting
will be conducted in accordance with the
International Financial Reporting Standards
(IFRS – formerly IAS). Although the
Swedish Financial Accounting Standards
Council’s recommendations have gradu-
ally been adapted to IFRS, a number of
differences remain. Consequently, the first
report in accordance with IFRS will be the
first quarter report for 2005. Comparative
figures for 2004 will be adjusted in accor-
dance with IFRS 1. The process of compi-
ling opening balances for January 1, 2004
is largely complete. However, work to eva-
luate goodwill in Portuguese operations
remains. A study is currently being con-
ducted to ascertain the underlying
reasons for the earnings trend in the
Portuguese operations where goodwill
amounted to MSEK 70 at January 1,
2004. This work is expected to be com-
pleted in time for the first quarter report
for 2005.
Current regulations may be changed
and, combined with the fact that a certain
amount of work remains, this means that
the data presented are preliminary. In line
with the transitional rules in IFRS 1, no
adjustments will be made for fiscal years
preceding 2004.
Employee benefits
For 2003 and earlier periods, the accoun-
ting of defined-benefit pension plans for
employees was conducted in accordance
with local regulations. The new recomm-
mendation, RR29 Employee Benefits,
which in all significant respects corres-
ponds to IAS 19, entered force on January
1, 2004. This means that defined-benefit
plans shall now be reported in a con-
sistent manner throughout the Group. The
opening balance was adjusted at January
1, 2004, without the comparative figures
being adjusted, which is in line with the
transitional rules in RR29. The transition to
RR29 has been reported, in accordance
with RR5 as a change of accounting prin-
ciple. This resulted in an increase in debt
by MSEK 91.2 and a decrease in the ope-
ning balance of shareholders’ equity by
MSEK 58.8, after tax effects of MSEK
26.3 and special payroll taxes in Sweden
were taken into account.
Company acquisitions and mergers
IFRS 3 Business Combinations was adopted
on March 31, 2004. Sapa has not made
adjustments for any acquisitions made
prior to the date on which IFRS 3 began
to be applied. No acquisitions took place
in 2004. Under IFRS 3, goodwill amortisa-
tion will cease and will be replaced by
annual impairment testing, regardless of
whether there is any indication that good-
will values need to be written-down or
not. This differs from earlier Swedish
regulations, where write-down evaluations
were conducted when the need was per-
ceived. For Sapa, this entails an improve-
ment in earnings of MSEK 64 compared
with former standards.
Financial instruments
Part of IFRS, IAS 39, covers the reporting
and assessment of financial instruments.
This requires that all financial derivatives
be measured at market value. These new
accounting principles will be introduced
by the Group effective January 1, 2005
with no adjustment of comparative figu-
res. In connection with preparations for
the introduction of the new principles, the
Group has conducted an inventory of
financial derivatives within the Group. This
review has indicated, with reservation for
final implementation, that considerable
hedging activities will qualify for hedge
accounting in accordance with IAS 39.
The Group currently uses only currency
and raw-materials derivatives for hedging
purposes. The introduction of IAS 39 may
be expected to cause increased volatility
in both income statements and balance
sheets, albeit on a limited scale for Sapa.
However, such increased volatility will not
affect the Group’s cash flow. An evalua-
tion of all financial derivatives not repor-
ted in the balance sheets was conducted
on the closing date, at which unrealised
gains amounted to MSEK 63 and unreali-
sed losses to MSEK 47, resulting in a net
effect of approximately MSEK 16 before
the calculation of deferred taxes.
Share-based payment
IFRS 2 Share-based payment was adop-
ted on November 7, 2002 and shall be
applied to plans allocated on that date or
later and with an accrual date on January
1, 2005, or later. Sapa has a plan that
matures in March 2005, which is not
assessed in accordance with this
recommendation.
Other transitional effects
Sapa applies RR6 Leasing agreements
for such agreements entered into after
1996. Financial leasing agreements ente-
red into prior to 1997 could, according to
this recommendation, be reported as
operational leasing. Sapa has leasing
agreements for buildings signed prior to
1997 that are reported as operational lea-
sing but which will be reported as financi-
al leasing on transition to IFRS. This chan-
ge has increased the opening balance of
shareholders’ equity at January 1, 2004
by MSEK 7 after tax.
24
Board of Directors’ Report
Effect of transition to IFRS on Sapa’s
financial key figures (2004)
• Net sales will not be affected by the
transition to IFRS.
• Operating profit will be affected by IFRS
3 and other changes in an amount of
MSEK 66, primarily due to the reversal
of goodwill amortisation.
• Profit before tax has been affected by
IFRS in an amount of MSEK 66.
• Profit for the year has been affected by
IFRS in an amount of MSEK 65.
• The operating margin improved from 4.6
per cent to 5.0 per cent with the transi-
tion to IFRS, mainly because goodwill
amortisation ceased.
• Earnings per share increased from
SEK 10.41 to SEK 12.17 with the transi-
tion to IFRS.
• Cash flow after investments is not
affected by the transition to IFRS.
Dividend and new dividend policy
The Board of Directors proposes that a
dividend of SEK 5.50 per share (6.25)
be paid for the 2004 fiscal year.
Sapa AB has the following dividend
policy, which was adopted on February 6,
2004:
“The Board’s long-term dividend policy
is based on the Company’s strategy of
continued value-generating investments
and company acquisitions and on the
relevant capital structure, given the risk
profile of the investments.
The dividend policy applicable up to
now was primarily based on the net profit
for the year. Future dividend proposals will
pay greater consideration to balance
sheet strength and forecasted cash flows,
allowing the Company to maintain an
optimum capital structure with regard to
the aforementioned factors.”
Financial objectives and conditions
Sapa has established long-term, financial
objectives for both growth and profitability.
The ambition is that these objectives
should be achieved as averages over a
business cycle. In addition, a number of
financial conditions have been defined.
Objective over a Outcomebusiness cycle 2004 1
Growth, % 10 13,4Operating margin, % 8 4,4Net margin, % 5 2,7Return on capital employed (ROCE), % 18 10,2Return on shareholders’ equity (ROE), % 18 9,7
1 Excluding capital gain of MSEK 24.Conditions Outcome
2004
Interest-coverage ratio, multiple Min 3.0 7,2Debt/equity ratio, multiple Max 1.0 0.48EBITDA/interest net, multiple Min 6.5 15.2Net debt/EBITDA, multiple Max 3.0 1.65Equity/assets ratio, % Min 30 42
Growth is measured on value added
Financial risk management is described
under Supplementary disclosures, Note 2.
Outlook for 2005
For Profiles in Europe, we forecast that
markets for 2005 will remain similar to
those of 2004. In the US we believe that
the market situation will continue to be
good. The global market for Heat Transfer
we expect to remain good.
Significant events after
the end of the year
On February 10, 2005, Orkla ASA of Norway
(the majority shareholder in Elkem ASA)
made a public offer, a mandatory offer, to
shareholders in Sapa for the transfer of
their shares to Orkla. A prospectus regar-
ding the offer was distributed to Sapa
shareholders around March 2, 2005. The
application period is March 2, 2005 to
March 22, 2005.
On February 11, 2005, Elkem ASA
announced that it had acquired 3,243,000
shares in Sapa, with the result that Elkem’s
total holding in Sapa represents 81.09 per
cent of capital and votes.
Consequently, shares in Sapa have
been traded in the observation section of
the Stockholm Exchange’s O-list as of
Monday, February 14, 2005. The continuous
listing requirement regarding ownership
concentration states that at least 25 per
cent of shares in a company be in public
ownership. Following Elkem’s acquisition,
Sapa no longer meets this requirement
on distribution of ownership.
In a press release on February 24,
the Board of Sapa recommended that
shareholders accept Orkla’s offer.
25
Definitions
Capital employedTotal assets, reduced by liquid funds, operatingliabilities and other interest-free liabilities (inclu-ding net of deferred tax).
Capital turnover rateNet sales relative to average capital employed.
Debt/equity ratioNet debt relative to shareholders’ equity.
Earnings per shareNet profit for the year divided by a weighted average of outstanding shares during the year.
EBITDAOperating profit (EBIT) increased with depreciation and amortisation.
Equity/assets ratioShareholders’ equity as a percentage of totalassets.
Financial netNet of interest income and interest expense,financial cost of pension liability and currency-exchange differences on interest-bearing receivables/liabilities.
Interest-coverage ratioProfit after financial items, increased by interestexpense, relative to interest expense.
Interest netNet of interest income and interest expense,including financial cost of pension liability.
Net debtInterest-bearing liabilities, including pension provisions, reduced by liquid funds.
Net marginNet profit for the year as a percentage of net sales.
Operating marginOperating profit (EBIT) as a percentage of net sales.
Price/earnings ratio (P/E)Share price at year-end divided by earnings per share.
Return on capital employed (ROCE)Operating profit as a percentage of average capital employed.
Return on equity (ROE)Net profit for the year as a percentage of averageshareholders’ equity.
Shareholders’ equity per shareShareholders’ equity relative to the number ofshares outstanding at year-end.
Value-added marginNet sales less costs for materials in relation to net sales.
YieldDividend proposed for the fiscal year in relation to the share price at year-end.
(MSEK) Note 2004 2003
Net sales 3 13 990.2 11 802.8Cost of goods sold 15, 16, 17 -11 140.5 -9 299.1
Gross profit 2 849.7 2 503.7
Selling expenses 15, 16, 17 -1 287.3 -1 075.3Administrative expenses 15, 16, 17 -947.2 -781.4Other operating revenue 8 35.3 7.3Other operating expenses 8 -10.4 -13.8
Operating profit 640.1 640.5
Result from financial investments: 10Interest income and similar items 8.2 35.7Interest expense and similar items -92.1 -117.0
Profit after financial items 556.2 559.2
Tax on profit for the year 12 -175.2 -174.8Minority share of profit for the year -1.2 -1.0
Net profit for the year 13 379.8 383.4
Earnings per share 14 10.41 10.48Earnings per share after dilution 14 10.41 10.46
Consolidated income statements
26
Net sales
Net sales rose by slightly more than 19per cent to MSEK 13,990 (11,803), withthe RCA units acquired in 2003 contribu-ting 11 percentage points to the increase.The sales increase in comparable unitswas 10 per cent. The rise in net sales wasprimarily driven by a substantial volumeincrease totalling 19 per cent, of whichabout 9 per cent was attributable to theRCA units being included for the whole of2004 compared with only six months in2003. Translation effects resulting fromthe stronger SEK affected net sales nega-tively by slightly less than 2 per cent. Thelargest exchange rate movements wereagainst the USD and the CNY (China),which were slightly more than 9 per centdown on the SEK in 2004. The GBPstrengthened by 1 per cent, while theEUR remained largely unchanged. Netsales were also affected by increasedaluminium prices, which rose by 21 percent in USD compared with 2003 and byabout 10 per cent in EUR and SEK.
Operating profit
Operating profit for 2004 amounted toMSEK 640 (641). The profit included acapital gain of MSEK 24 from the sale ofthe 25 per cent interest in Boal. Excludingthis capital gain, operating profit amoun-ted to MSEK 616, down 4 per cent, givingan operating margin of 4.4 per cent (5.4).Currency effects arising from translationto SEK affected earnings negatively byMSEK 15. Operating profit was chargedwith depreciation of MSEK 450 (420) andgoodwill amortisation of MSEK 64 (63).Despite the significant increase in volume,operating profit was largely unchanged.This was caused by several factors. Totaloperating profit for the Group was char-ged with approximately MSEK 40 inrestructuring costs, mainly relating to attri-tion, and with slightly less than MSEK 40in adjustments attributable to prior years.Production disturbances in Sapa RC Profilesin Belgium and Sapa Profiles in the UKled to reduced volumes during the summerseason. A very weak performance for building system operations in Portugal,combined with costs for personnel cut-backs, meant that Sapa in Portugal made
a substantial loss. The Swedish profileoperations did not manage to turn astrong volume increase into improved ear-nings. In general, margins for profiles inWestern Europe were lower in 2004 thanin the preceding year due to rising metalprices and stiffening competition. SapaHeat Transfer enjoyed strong demand inall markets, although the cooling of theChinese economy resulted in a slightlyslower growth rate for the automotiveindustry. Both the Swedish and Chineseunits had a good year, with a total volumeincrease of 14 per cent and a strong ear-nings development.
The return on capital employed declined slightly to 10.2 per cent (11.5).
Profit after financial items
Profit after financial items declined slightlycompared with the preceding year andamounted to MSEK 556 (559). The netfinancial expense was MSEK 84 (expen-se: 81). Higher interest rates in the USwere partly offset by a lower dollarexchange rate and falling interest rates inSweden. Interest rates in the euro areahave remained relatively unchanged, witha slight decline. The net financial expenseincludes exchange rate losses of aboutMSEK 2 on financial debts. The net debtin 2004 averaged MSEK 2,100, comparedwith MSEK 1,800 in 2003. At December31, 2004, the net debt amounted toMSEK 1,904, distributed among differentcurrencies as follows; 55 per cent in EUR,28 per cent in dollar-related currenciesand 17 per cent in other currencies. TheGroup’s net financial expense was alsoaffected by currency swaps undertaken tohedge foreign net assets. Currency swapsundertaken for this purpose during theyear amounted to about MEUR 95 andMUSD 33. The consequence of suchswaps is that the Group’s interest will bebased on these currencies to a corres-ponding extent.
Net profit and tax expense
Net profit declined by slightly less than 1 per cent to MSEK 380 (383). The taxexpense amounted to MSEK 175 (175),corresponding to a tax rate of slightly lessthan 32 per cent (31). The Group’s tax
rate was impacted negatively by 5 per-centage points as a result of permanentnon-deductible expenses, mostly goodwillamortisation. Tax-exempt gains and per-manent non-taxable income had a positi-ve effect of 4 percentage points. TheGroup’s theoretical tax rate, obtained byapplying the nominal tax rate in eachcountry to the local units’ profit before tax,amounts to 32 per cent (30). Earningsper share declined by SEK 0.07 to SEK10.41 (10.48) including capital gains andto SEK 9.75 excluding capital gains.Earnings per share are calculated basedon the average number of shares out-standing during the year, which amountedto 36.5 million shares (36.6). The returnon equity declined to 9.7 per cent (10.0).
Comments on the income statements
27
Profit after financial items, MSEK
0
200
400
600
800
1 000
1 200
04030201009998
Non-recurring items
Net margin, %
0
1
2
3
4
04030201009998
Excluding non-recurring items
28
Consolidated balance sheets
ASSETS (MSEK) Note 2004 2003
Fixed assetsIntangible fixed assets 15 908.4 1 017.6
Tangible fixed assets 16, 17Land and buildings 1 105.3 1 153.4Machinery and equipment 1 637.5 1 712.3 Construction in progress and advances to suppliers 197.3 76.5
2 940.1 2 942.2
Financial fixed assets 12, 20, 21 129.1 187.2
Total fixed assets 3 977.6 4 147.0
Current assetsInventories, etc.Inventories 22 1 959.2 1 793.6Advances to suppliers 28.5 46.2
1 987.7 1 839.8
Current receivablesAccounts receivable, trade 23 2 557.7 2 395.0Other receivables 24 241.1 244.3
2 798.8 2 639.3
Cash and bank balances 590.6 594.0
Total current assets 5 377.1 5 073.1
Total assets 9 354.7 9 220.1
SHAREHOLDERS’ EQUITY AND LIABILITIES (MSEK) Note 2004 2003
Shareholders’ equity 6, 25Share capital 933.0 929.6Restricted reserves 1 156.2 899.2Unrestricted reserves 1 473.8 1 667.5Net profit for the year 379.8 383.4
Total shareholders’ equity 3 942.8 3 879.7
Minority interest 5.1 3.8
ProvisionsProvisions for pensions and similar obligations 26 492.7 402.6Provisions for taxes 12 348.1 345.0Other provisions 27 51.4 80.3
Total provisions 892.2 827.9
Long-term liabilities 28Liabilities to credit institutions 882.2 1 058.2Bonds and debenture loans 28 693.5 513.4Interest-free liabilities 0.2 0.2
Total long-term liabilities 1 575.9 1 571.8
Current liabilitiesLiabilities to credit institutions 29 425.9 719.8Accounts payable, trade 30 1 826.1 1 537.8Other interest-free liabilities 31 686.7 679.3
Total current liabilities 2 938.7 2 936.9
Total shareholders’ equity and liabilities 9 354.7 9 220.1
Assets pledged 32 142.5 126.6Contingent liabilities 33 72.6 49.5
Assets and capital employed
Total assets increased by MSEK 135during the year and amounted at year-end to MSEK 9,355 (9,220). Currencyeffects arising from translation to SEKresulted in a reduction of about MSEK285. Capital employed amounted toMSEK 5,852 (5,983) and was affectednegatively in an amount of MSEK 246due to currency effects. Depreciation(excluding goodwill) reduced capitalemployed by MSEK 450 (420). Theinvestment rate increased during the yearto MSEK 512 (352), largely due to a num-ber of large projects; the upgrade of SapaRC Profiles’ large press completed duringthe year, the initial investment in a verticalanodising plant at Sapa Profiler inVetlanda, Sweden scheduled to becomeoperational in 2006, and the investmentin Sapa Heat Transfer (Shanghai) that willmore than double capacity to 44,000tonnes when it becomes fully operationalin 2006. At year-end, working capitalamounted to MSEK 2,225 (2,192).However, working capital declined as apercentage of net sales. Goodwill at year-end amounted to MSEK 802 (910). Inaddition to goodwill amortisation of MSEK64, currency effects resulted in a reduc-tion of MSEK 49 in goodwill.
Financing
Despite a higher investment level duringthe year, the Group improved its financialposition compared with the preceding
year. The Group’s total interest-bearingdebt, including MSEK 493 (403) in pen-sion liability, amounted to MSEK 2,495(2,694). Cash flow for the year reducedthe debt by MSEK 401 and lowerexchange rates, mainly in USD, reducedthe debt by a further MSEK 106. MSEK423 (559) of the Group’s confirmed loanlimit of MSEK 1,407 (1,423) was utilisedat year-end. Approved overdraft facilitiesamounted to MSEK 334 (289), of whichMSEK 48 (20) was utilised. At the closingdate, the average maturity for long-terminterest-bearing loans, including loanlimits but excluding pension liabilities,was 3.1 years. The Group’s interest-bea-ring net debt, including pension liabilities,amounted to MSEK 1,904 (2,100) at year-end, a reduction of MSEK 196.
Distribution of net debt (MSEK) 2004 2003
Liquid funds -591 -594Current liabilities 426 720Pension provisions 493 403Other long-term liabilities 1 576 1 572
Net debt 1 904 2 100
As a consequence of the reduced net debt,the consolidated debt/equity ratio declinedto 0.48 per cent (0.54), which can be com-pared with the Group’s long-term restrictionof its debt/equity ratio to 1.0.
Shareholders’ equity
At year-end, shareholders’ equity amoun-ted to MSEK 3,943 (3,880). The net profit
for the year increased shareholders’ equi-ty by MSEK 380 (383). During the year, adividend of MSEK 227 (201) was paid toshareholders, corresponding to SEK 6.25per share (5.50). Translation differenceshad a negative effect of MSEK 33 (150).Hedge accounting of foreign net assetsoffset translation effects by MSEK 192(329). During the year, shares were repur-chased in an amount corresponding toMSEK 16 (33), resulting in a reduction ofthe Group’s non-restricted equity.Conversion of convertible debentures andexercise of call options increased theGroup’s shareholders’ equity by MSEK 19(2). The equity/assets ratio amounted to42 per cent (42).
29
Comments on the balance sheets
Change in net debt, MSEK
1 600
1 800
2 000
2 200
2 400
2 600
Dec
embe
r 31,
200
3
IAS
19
Div
iden
d
Cas
h flo
w fo
r the
yea
r
Exch
ange
rate
mov
emen
ts
Dec
embe
r 31,
200
4
Changes in Group shareholders’ Share Restricted Unrestricted Total share- equity (MSEK) Note capital reserves reserves holders’ equity
Shareholders’ equity, January 1, 2003 929.2 600.5 2 349.0 3 878.7Translation differences - -129.0 -20.6 -149.6Net profit for the year - - 383.4 383.4Transfers between restricted and non-restricted reserves - 426.1 -426.1 -Dividend - - -201.5 -201.5Repurchase of own shares - - -33.3 -33.3Conversion of debentures 0.4 1.6 - 2.0
Shareholders’ equity, December 31, 2003 25 929.6 899.2 2 050.9 3 879.7
Effect of change in accounting principle -58.8 -58.8
Adjusted opening balance, January 1, 2004 929.6 899.2 1 992.1 3 820.9
Translation differences - -42.5 9.7 -32.8Net profit for the year - - 379.8 379.8Transfers between restricted and non-restricted reserves - 284.2 -284.2 -Dividend 13 - - -227.4 -227.4Repurchase of own shares 25 - - -16.4 -16.4Conversion of debentures 25 3.4 15.3 - 18.7
Shareholders’ equity, December 31, 2004 25 933.0 1 156.2 1 853.6 3 942.8
Debt/equity ratio, %
0
20
40
60
80
100
120
04030201009998
(MSEK) Note 2004 2003
Operating activitiesOperating profit 640.1 640.5Depreciation 514.5 483.4Other items not affecting cash flow -68.9 -7.5
1 085.7 1 116.4
Interest received 11.6 27.7Interest paid -77.9 -100.8Tax paid -175.5 -130.7
-241.8 -203.8
Change in working capitalInventories -185.1 59.5Accounts receivable, trade -160.8 14.7Other current receivables -39.6 -11.4Accounts payable, trade 309.7 -194.8Other current operating liabilities 22.0 31.7
-53.8 -100.3
Cash flow from operating activities 790.1 812.3
Investing activitiesInvestments in intangible fixed assets 15 -28.2 -32.3Investments in tangible fixed assets 16 -483.6 -319.6Sale of fixed assets 15, 16 25.1 19.5Acquisition/divestment of subsidiaries -5.1 -649.1Divestment of associated companies 18 95.2 -Financial fixed assets 20 7.4 -4.5
-389.2 -986.0
Cash flow after investments 400.9 -173.7
Financing activitiesExercise of options 25 10.9 -Repurchase of own shares 25 -16.4 -33.3New loans 374.8 773.9Amortisation of loans -584.6 -12.9Increase/decrease in current financial liabilities 44.5 -470.2Dividend payments 13 -227.4 -201.5
-398.2 56.0
Cash flow for the year 2.7 -117.7Liquid funds, January 1 594.0 747.2Translation difference -6.1 -35.5Liquid funds, December 31 590.6 594.0
Consolidated cash flow statements
30
Comments on the cash flow statements
31
Operating cash flow
The Group’s operating cash flow (see
table below) amounted to MSEK 545
(684). The reduction was mainly due to
a higher level of investment. The contribu-
tion from operations declined by MSEK 30,
despite higher earnings before deprecia-
tion. This was because items not affecting
cash flow, such as the adjusted contribu-
tion from operations, increased to a total
expense of MSEK 69 (expense: 8). As
shown in the table below, the capital gain
from the sale of the Boal holding is inclu-
ded in items not affecting cash flow. Cash
flow from this transaction is included in
“Acquisitions/divestments.” An increased
need for working capital had a negative
effect of MSEK 54 (negative: 100). This
increased need for working capital is a
direct result of the strong growth of 19
per cent during the year. As a percentage
of net sales, however, working capital
declined by 2 percentage points to 16 per
cent. There was a considerable increase
in investment activity since several major
investment projects were commenced
during the year and the upgrade of the
large press at Sapa RC Profiles was com-
pleted. New and replacement investments
amounted to MSEK 512 (352), correspon-
ding to approximately 114 per cent (84)
of depreciation, excluding goodwill amor-
tisation.
Divestments/acquisitions
During the year, the 25-per cent holding
in Boal, a Dutch aluminium profile compa-
ny, was divested. The sale affected the
year’s cash flow by MSEK 95 and gene-
rated a capital gain of MSEK 24. An addi-
tional purchase consideration of MSEK 5
was paid for RCA.
Operating cash flow, MSEK
0
200
400
600
800
1 000
04030201009998
Investments, MSEK
0
200
400
600
800
1 000
04030201009998
Operating cash flow analysis (MSEK) 2004 2003
Operating revenues 13 990 11 803Operating expenses -12 835 -10 679Profit before depreciation and amortisation 1 155 1 124Items not affecting cash flow -69 -8Operating surplus 1 086 1 116Change in working capital -54 -100New and replacement investments -512 -352Sale of fixed assets 25 20Operating cash flow 545 684Financial fixed assets 7 -5Interest paid/received -66 -73Income tax paid -175 -131Cash flow after investments, excluding acquisitions/divestments 311 475Acquisition/divestment of subsidiaries/associated companies 90 -649Cash flow after investments 401 -174
Other items not affecting cash flow (MSEK) 2004 2003
Profit share in associated companies -7.8 -6.1Profit from divestment of associated companies -23.9 -Profit/loss from divestment and scrapping of plants -3.0 17.5Profit from divestment of other shares -2.1 -Change in provisions -19.6 -1.1Calculated financial cost of pension liability -12.5 -17.8
Total -68.9 -7.5
Parent Company
Net sales
(MSEK) Note 2004 2003
Net sales 3 562.8 534.4Cost of goods sold 15, 16 -397.2 -393.8
Gross profit 165.6 140.6
Selling expenses 15, 16 -1.1 -2.5Administrative expenses 15, 16 -175.1 -161.8Other operating revenue 8 0.3 8.7Other operating expenses 8 -25.7 -
Operating loss -36.0 -15.0
Result from financial investments: 10Interest income and similar items 280.7 267.9Interest expense and similar items -157.0 -101.4
Profit after financial items 87.7 151.5
Appropriations 11 -54.4 -85.9Tax on profit for the year 12 -17.5 -20.7
Net profit for the year 15.8 44.9
Balance sheet
ASSETS (MSEK) Note 2004 2003
Fixed assetsIntangible fixed assets 15 0.3 0.4
Tangible fixed assets 16Land and buildings 116.3 120.0Machinery and equipment 53.9 62.6Construction in progress and advances to suppliers 9.2 1.3
179.4 183.9Financial fixed assetsParticipations in subsidiaries 19, 20 3 472.8 3 252.9Interest-bearing receivables from subsidiaries 1 790.2 1 999.8Interest-free receivables from subsidiaries 963.6 780.6Deferred tax assets 12 12.1 11.4
6 238.7 6 044.7
Total fixed assets 6 418.4 6 229.0
Current assetsInventories, etc.Raw materials and consumables 13.5 13.3Work in progress on contract 26.0 16.6
39.5 29.9Current receivablesAccounts receivable, trade 51.1 47.6Interest-bearing receivables from subsidiaries 743.2 1 933.3Interest-free receivables from subsidiaries 438.9 286.1Other receivables 24 25.1 42.1
1 258.3 2 309.1
Cash and bank balances 206.9 180.7
Total current assets 1 504.7 2 519.7
Total assets 7 923.1 8 748.7
32
Share Un- Total share-Changes in Parent Company shareholders’ Share premium Statutory restricted holders ’equity equity (MSEK) Note capital reserve reserve equity at Jan. 1
Shareholders’ equity, January 1, 2003 929.2 62.4 183.1 1 859.3 3 034.0Group contribution, net after tax effect - - - 48.5 48.5Net profit for the year - - - 44.9 44.9Dividend 13 - - - -201.5 -201.5Repurchase of own shares 25 - - - -33.3 -33.3Conversion of debentures 0.4 1.6 - - 2.0
Shareholders’ equity, December 31, 2003 25 929.6 64.0 183.1 1 717.9 2 894.6
Group contribution, net after tax effect - - - 82.6 82.6Net profit for the year - - - 15.8 15.8Dividend 13 - - - -227.4 -227.4Repurchase of own shares 25 - - - -16.4 -16.4Conversion of debentures 25 3.4 15.3 - - 18.7
Shareholders’ equity, December 31, 2004 25 933.0 1 79.3 183.1 1 572.5 2 767.91 Share capital: 37,319,693 shares at a par value of SEK 25 per share.
Balance sheet
SHAREHOLDERS’ EQUITY AND LIABILITIES (MSEK) Note 2004 2003
Shareholders’ equity 6, 25Share capital 933.0 929.6Share premium reserve 79.3 64.0Statutory reserve 183.1 183.1Profit brought forward 1 556.7 1 673.0Net profit for the year 15.8 44.9
Total shareholders’ equity 2 767.9 2 894.6
Untaxed reserves 12 181.4 127.0
ProvisionsProvisions for pensions and similar obligations 26 182.9 184.2
Long-term liabilities 28Liabilities to credit institutions 608.7 717.2Bond and convertible loans 28 693.5 514.5Interest-bearing liabilities to subsidiaries 1 807.2 2 000.6Interest-free liabilities to subsidiaries 594.4 488.1
Total long-term liabilities 3 703.8 3 720.4
Current liabilitiesLiabilities to credit institutions 29 149.6 378.4Accounts payable, trade 40.5 33.3Interest-bearing liabilities to subsidiaries 543.6 424.8Interest-free liabilities to subsidiaries 272.1 905.4Other interest-free liabilities 31 81.3 80.6
Total current liabilities 1 087.1 1 822.5
Total shareholders’ equity and liabilities 7 923.1 8 748.7
Assets pledged 32 15.0 15.0Contingent liabilities 33 488.3 492.6
Cash flow statement
(MSEK) Note 2004 2003
Operating activitiesOperating loss -36.0 -14.9Depreciation 22.0 23.8Other items not affecting cash flow -9.8 -13.1
-23.8 -4.2
Interest received 53.2 91.3Interest paid -123.8 -84.2Income tax paid -42.6 -17.7
-113.2 -10.6
Change in working capitalInventories -9.6 2.2Accounts receivable, trade -3.4 -12.9Other current receivables 10.6 -21.3Accounts payable, trade 7.1 -9.1Other current operating liabilities -3.6 1.7
1.1 -39.4
Cash flow from operating activities -135.9 -54.2
Investing activitiesInvestments in intangible fixed assets 15 -0.3 -Investments in tangible fixed assets 16 -16.9 -15.8Sale of fixed assets 16 - 0.3Acquisition of/capital contribution to subsidiaries 18, 20 -219.9 -709.7Divestment of subsidiaries - -Change in financing of subsidiaries 1 391.2 -274.7Financial fixed assets -0.8 -2.4
1 153.3 -1 002.3
Cash flow after investments 1 017.4 -1 056.5
Financing activitiesExercise of options 25 10.9 -Repurchase of own shares 25 -16.4 -33.3New loans 565.9 611.3Amortisation of loans -197.8 -6.4Increase/decrease in current financial liabilities -1 126.3 426.9Dividend paid 13 -227.4 -201.5
-991.1 797.0
Cash flow for the year 26.3 -259.5
Liquid funds, January 1 180.7 440.2Liquid funds, December 31 207.0 180.7
33
34
Supplementary disclosures
Note 1 Accounting and valuation principles
The Sapa Group applies the Annual Accounts Act and the recommendationsand statements of the Swedish Financial Accounting Standards Council andits Emerging Issues Task Force.
Consolidated accountsThe consolidated accounts comprise Sapa AB and all companies in whichthe Parent Company directly or indirectly holds more than 50 per cent of thevoting rights or otherwise has a controlling influence. The consolidatedaccounts have been prepared in accordance with the acquisition methodwhereby a market evaluation is made of assets and liabilities in the acquiredcompany. The difference between the acquisition value of shares and themarket value of assets and liabilities constitutes consolidated goodwill.Goodwill is amortised based on individual assessments, but not over morethan 20 years. In cases where the amortisation period exceeds five years,this is because acquisitions have created a strong market position in themarkets involved. Companies acquired during the year are included in theconsolidated income statement as of the date of acquisition. Companiesdivested during the year are included in the consolidated income statementup to and including the date of divestment.
Foreign subsidiaries are classified as independent, meaning that theirbalance sheets are translated into SEK at the exchange rate on the closingdate and that their income statements are translated at the averageexchange rate for the year. Translation differences are booked directlyagainst shareholders’ equity.
Associated companies are reported in the consolidated accounts inaccordance with the equity method. Associated companies are companiesin which Sapa AB directly or indirectly holds at least 20 per cent of thevoting rights or in which Sapa otherwise exerts a significant influence.Sapa’s share of each associated company’s earnings after financial items isincluded in Group operating profit, and Sapa’s share of tax expense is inclu-ded in Group tax expense. The value of the participations in the balancesheet changes with Sapa’s share of the associated companies’ earningsafter tax reduced by dividends received. Undistributed earnings are reportedamong restricted reserves in the Group shareholders’ equity.
Accounting for revenueSales revenues for products and services are recognised at the date of deli-very, in accordance with delivery terms and conditions. Net sales refers tothe sales value reduced by special taxes on goods, returns and discounts.Profits and losses on metal and currency forward contracts —entered into forthe purpose of hedging — are recognised together with the transaction towhich the hedge pertains. Dividends are accounted for when the rights tothe dividends are deemed certain.
Other operating revenue and other operating expensesGains and losses that have arisen in connection with the divestment of realestate, shares and businesses are reported under these headings. Profitshare in associated companies, as well as exchange gains and losses onnoninterest-bearing receivables and liabilities, are also included.
Financial instruments and derivative instrumentsThe Group’s financial assets and liabilities are normally reported at acquisi-tion value. Liabilities for which the acquisition value deviates from the nomi-nal value are reported at accrued acquisition value, with discounts or premi-ums allocated over the duration of the liability. Currency swaps and loans inforeign currency are valued and reported at closing day exchange rates.
The Group uses currency forward contracts and commodity derivatives tohedge its exposure to fluctuations in exchange rates and the price of alumi-nium. These are reported off balance sheet using deferred hedge accounting.These accounting principles will be changed from January 1, 2005 and adap-ted to the new IFRS principles.
Intangible fixed assetsGoodwill is amortised based on individual assessments, but not over morethan 20 years. The acquisition cost of licenses and costs of developinglarge IT systems for internal use are capitalised if they are judged to be ofvalue to the company for many years. The amortisation period is a maximumof five years. Customer-specific development costs are capitalised, but onlywhen the cost is covered by the price for the product. Products are depreci-ated over the life of the product, but not more than three years. Expenditurefor general research and development is expensed continuously and is
included in the income statements under administrative expenses. Straight-line depreciation is applied.
Tangible fixed assetsTangible assets are reported at acquisition cost reduced by accumulateddepreciation. Capitalisation of interest occurs only in connection with majorinvestment projects, extending over a period of at least two years.Depreciation is based on the asset’s acquisition value and estimated usefullife, which is 5-15 years for machinery and equipment, 3-10 years for equip-ment, tools, and fixtures and fittings, 20-40 years for buildings, and 15-20years for land improvements. Straight-line depreciation is applied.
LeasingIn the consolidated accounts, leasing is classified as either financial or ope-rational leasing. Financial leasing applies when the economic risks andbenefits associated with ownership are essentially transferred to the lessee.If this is not the case, then the leasing is classified as operational.
Recommendation RR6 of the Swedish Financial Accounting StandardsCouncil is applied in the consolidated accounts for agreements entered intoafter the end of 1996. However, this does not apply to leasing of cars oroffice machines of limited value.
Assets leased under financial leasing agreements are taken up asassets in the consolidated balance sheet. Obligations to pay future leasingfees are reported as long-term and current liabilities. The leased assets aredepreciated according to plan, while lease payments are reported as interestand repayment of debt.
In the Parent Company, all leasing agreements are reported according tothe rules for operational leasing.
Government grantsGovernment grants for the procurement of tangible fixed assets reduce thereported value of the asset. Government grants relating to costs are takenup as revenue in the same period as the costs they are intended to com-pensate.
Financial fixed assetsFinancial assets are normally reported at acquisition cost less any depreciation.
Write-downsWhen there is an indication of a decline in value of an asset other thaninventories (see section on “Inventories” below), accounts receivable (see“Receivables” below) or deferred tax assets (see “Taxes” below), the asset’srecoverable amount is calculated as the higher of its value in use and its netselling price. A write-down is made if the recoverable value is lower than thereported value.
InventoriesInventories are valued at the lower of acquisition or net realisable value. Theacquisition value is calculated based on the first-in/first-out (FIFO) principleand includes share of indirect manufacturing costs of products in progressand of finished inventory.
ReceivablesReceivables have, after individual valuation, been recognised at the amountsexpected to be received.
Receivables and liabilities in foreign currencyAll receivables and liabilities in foreign currency are valued at closing dayexchange rates, or at the forward contract rate if they have been hedged.Forward contracts that hedge flows in which the receivable or payable hasnot yet arisen are not accounted for until the hedged receivable or payableis accounted for. Exchange-rate differences on operating receivables and lia-bilities are included in “other operating revenue/expenses,” while changes inexchange rates relating to interest-bearing receivables and liabilities areincluded in “net financial income/expense.” Exchange-rate differences onloans raised to hedge foreign net assets are reported directly against share-holders’ equity after taking tax effects into consideration.
35
TaxesCurrent and deferred taxes are accounted for. Current taxes are based oneach company’s income tax return while deferred taxes reflect the tax effectof the difference between values stated in the accounts and values for pur-poses of taxation. The tax benefit of a loss carryforward is recognised only ifit is likely that the carryforward can be offset against future taxable surplu-ses. Otherwise, the tax benefit of a loss carryforward is recognised only byoffsetting it against deferred tax liability in the same company. In the ParentCompany, deferred tax liabilities relating to untaxed reserves are reportedamong reported untaxed reserves.
Employee benefitsEmployee benefits are reported in the consolidated accounts in accordancewith the Swedish Financial Accounting Standards Council’s RR29,“Employee benefits,” effective January 1, 2004.
Pension obligationsIn the consolidated accounts, defined-benefit pension plans up until the endof 2003 have been reported in accordance with local rules and regulationsand have not been restated to reflect common principles. Through the appli-cation of RR29, effective January 1, 2004, defined-benefit pension plans arenow reported in the consolidated accounts in accordance with commonprinciples and methods of computation. Pension obligations have been cal-culated in accordance with RR29 since January 1, 2004. The differencecompared with pension provisions reported at December 31, 2003 affectedshareholders’ equity at January 1, 2004 by MSEK 58.8.
Defined-benefit pension plans exist in Sweden, the UK, Germany,Belgium and France. In other countries, all employees are covered by defi-ned-contribution plans.
In the case of defined-contribution plans, the company pays set contri-butions to a separate legal unit and has no obligation to pay any additionalcharges. The Group’s earnings are charged with costs as the benefitsaccrue.
In the case of defined-benefit plans, benefits are paid to employees andformer employees based on their final salary at retirement and on their num-ber of years of service. The Group bears the risk of ensuring that the promi-sed benefits are paid out.
Defined-benefit plans can either be funded or unfunded. In the case offunded plans, the assets are allocated mainly in pension funds. These planassets can only be used for paying out benefits in accordance with the pen-sion agreements.
Pension costs and obligations for defined-benefit pension plans are cal-culated using the Projected Unit Credit Method. The method allocates thepension cost as the employees perform services for the company that incre-ase their right to future benefits. The company’s pension commitment is cal-culated annually by independent actuaries. The pension commitment is cal-culated as the present value of anticipated future payments. The discountrate used corresponds to the interest rate on first-class corporate bonds orgovernment bonds with a remaining term corresponding to the average termand currency of the pension obligations. The main actuarial assumptions arestated in Note 21.
Actuarial gains and losses can arise when establishing the present valueof the pension obligations and the fair value of plan assets. Such gains orlosses arise either because the actual outcome deviates from the previouslymade assumption or because the assumptions are changed. The portion ofaccumulated actuarial gains and losses that, at the end of the precedingyear, exceeds 10 per cent of whichever is higher of the obligations’ presentvalue and the plan assets’ fair value, is allocated over the anticipated avera-ge remaining length of service for employees covered by the plan.
Retirement pension and family pension obligations for salaried employ-ees in Sweden are secured through pension insurance with Alecta.According to a statement issued by the Emerging Issues Task Force of theSwedish Financial Accounting Standards Council (URA 42), this constitutesa defined-benefit plan covering several employers. For the 2004 financialyear, the company did not have access to such information to enable it toreport this plan as a defined-benefit plan. Consequently, the ITP pensionplan secured through insurance with Alecta is reported as a defined-contri-bution plan. Alecta’s surplus can be distributed to the policyholders and/orthe insured. At December 31, 2004, Alecta’s surplus in the form of the coll-lective funding ratio amounted to 128 per cent. The collective funding ratioequals the market value of Alecta’s assets as a percentage of the insuranceobligations, calculated in accordance with Alecta’s actuarial assumptions,which do not correspond with RR29.
The accounting principle described above is only applied in the consolida-ted accounts. The Parent Company and subsidiaries reported defined-bene-fit pension plans in accordance with local rules and regulations in eachcountry.
ProvisionsProvisions are reported in the balance sheet when the company has a for-mal or informal commitment resulting from an event that has occurred andwhen it is probable that an outflow of resources will be required to settle theobligation and a reliable estimate can be made of the amount. If the effectis significant, the provision is computed at present value.
Guarantee commitmentsA provision is reported when the underlying product has been sold. The cal-culation is based on expenditure for similar commitments during the financi-al year or computed costs.
RestructuringA provision is reported once a detailed restructuring plan has been approvedand restructuring has either commenced or has been publicly announced.
Contingent liabilitiesContingent liabilities pertain to commitments that are not reported as liabiliti-es/provisions because it is unlikely that an outflow of resources will berequired to settle the obligation or it is not possible to make a sufficientlyreliable estimate of the amount.
Cash flow statementThe cash flow statement is prepared in accordance with the indirect method.Liquid funds refer to cash and bank balances.
Note 2 Financial risk management
Sapa is exposed to financial risks. These primarily comprise currency risks inconnection with export sales (transaction exposure) and the translation offoreign net assets and earnings (translation exposure). In addition, Sapa isexposed to interest-rate risks in connection with the management of liquidityand debt, and metal risks regarding certain types of orders and unsoldmetal in inventories. Financial risks are handled in accordance with guideli-nes established by Sapa’s Board of Directors.
Organisation and operationsThe Group’s financial operations are coordinated through the ParentCompany, Sapa AB. The Finance Department in Sapa AB serves as an inter-nal bank for the Group’s subsidiaries, which insure their financial risk in theDepartment. Virtually all financing of subsidiaries also takes place throughSapa AB. A large part of the Group’s payment flows and liquid funds areheld in local and European group accounts, which are administered by theFinance Department.
Market valuation of financial instrumentsFor disclosure purposes, financial instruments have been valued using spotor forward rates on the closing date and have been calculated as follows:The market value of currency forward contracts has been calculated on thebasis of the forward rate corresponding to the average duration. The marketvalue of commodity hedges has been determined in accordance with theofficial closing rate at the second bell on the London Metal Exchange (LME)for the relevant duration. Currency swaps and loans have been valued atclosing day exchange rates.
36
Supplementary disclosures
Transaction exposure and currency riskSapa operates in Europe, the US and China. Production, primarily for localmarkets, takes place in 12 countries. In varying degrees, exports are under-taken from all countries in which the Group has production. However, exportsfrom euro countries go mainly to other countries within the EMU, reducingthe Group’s overall exchange-rate exposure. During 2004, sales within theEMU countries corresponded to 36 per cent (33) of the Group’s net sales.Sales to EMU countries from Sapa companies outside the EMU amountedto 9 per cent (10) of net sales, giving total sales in the EMU market of 45per cent (43). As a whole, the European market accounts for 85 per cent(84) of the Group’s net sales. The commercial net flow in currency after eli-minating flows in the same currencies (transaction exposure) amounted toMSEK 2,190 in 2004. The table below shows the distribution of currencies.
Transaction exposure, net per currencyCurrency MSEK % of total
DKK 210 9.6EUR 1 104 50.4GBP 14 0.7NOK 125 5.7USD -674 30.8Other 62 2.8
Total flow 2 190 100Negative amount denotes net purchase.
The currency relationships that have the greatest impact on earnings pertainto EUR against USD, and EUR and USD against SEK. Transaction exposureis minimised in accordance with the Group’s financial policy by hedging allcontractual set-price flows for the next 12 months through forward contracts,with longer order times evaluated individually. Forecasted flows are not hed-ged. The Group’s actual dollar exposure is much smaller than shown in theabove table, which is based on the company’s accounting of invoicing curr-rency. Group companies can compensate for a metal price change denomi-nated in USD (based on the world price on the London Metal Exchange) bycharging the customer a comparable price for metal. This occurs becausethe sales price to the customer is denominated in the customer’s currencyvia a translation of the price of metal in USD as of the date of the order. Theaccounts then show an imbalance, with the purchase of metal denominatedin USD but customer invoicing in local currency. The pricing currency andthe currency used when invoicing the customer thus differ, but the actualexposure is eliminated. At year-end, a net sales value equivalent to MSEK1,105 was hedged, compared with a market value equivalent to MSEK 1,101.At December 31, 2004, the average duration for currency forward contractsregarding commercial flows was 3.1 months.
Outstanding currency forward contracts, net per currency, MSEK
AverageNet sales Unrealised duration
value gain/loss Market value (months)
EUR 1 080.1 1.6 1 078.4 5.4USD 1 -113.8 3.9 -117.7 3.5DKK 39.1 0.0 39.1 1.2NOK 10.8 0.1 10.7 2.9GBP 43.7 0.4 43.3 4.0Other 45.3 -1.7 47.1 3.7
Total 1 105.2 4.3 1 100.9 3.1
1 Negative amounts denote net purchases.
Translation exposureTranslation exposure relates partly to earnings in foreign units and partly tonet assets in foreign currency. Based on earnings in 2004, a change of oneper cent in the value of a currency relative to SEK is estimated to entail thefollowing risk calculated on a full-year basis:
Operating profit, MSEK 2004
Euro 1.5USD, CNY 1.2Other 0.6
Total 3.3
During 2004, exchange-rate effects from the translation of foreign subsidiari-es affected operating profit negatively by about MSEK 15 compared withexchange rates in 2003.
To the extent possible given the capital structure, the translation risk forforeign net assets is limited through financing in the same currency usingeither loans or currency swaps. Currency options are not used. At year-end2004, the Group’s total foreign net assets amounted to MSEK 4,779. Of thisamount, MSEK 2,911 was hedged through loans and currency swaps, mea-ning that MSEK 1,868 of the Group’s total shareholders’ equity was subjectto translation exposure. During 2004, translation differences affected theGroup’s shareholders’ equity negatively in an amount of MSEK 33.
Net assets, MSEK 2004
Euro 988GBP 347Other 533
Total 1 868
Refinancing riskRefinancing risk refers to the risk that refinancing of maturing loans will provedifficult or costly. The objective is therefore that the proportion of long-termloans (including total confirmed loan limits) as a percentage of total interest-bearing liabilities, should exceed 60 per cent. At the end of 2004, this figurewas 128 per cent. Long-term loans are defined as interest-bearing loanswith a maturity of more than one year, and the objective is that these, withthe exception of interest-bearing pension liabilities, should have an averagematurity of between four and six years. At year-end, the average duration was3.1 years (excluding liabilities pertaining to financial leasing). At December31, 2004, unutilised confirmed loan limits amounted to MSEK 984 and utili-sed confirmed loan limits amounted to MSEK 423. During the year, theGroup renewed three maturing bond loans, corresponding to MSEK 345.
Maturity structure, interest-bearing long-term loans(excluding utilised confirmed loan limits)Year MSEK
2006 2752007 1662008 572009 2902010 45> 5 years 283
Total 1 117
37
Currency swapsAs an alternative to loans in foreign currencies, the Group has used currencyswaps. These are used to manage translation exposure in situations wherethere is no credit requirement. At the end of 2004, the market value of outstan-ding currency swaps amounted to MSEK 2,071, compared with the nominalvalue of MSEK 2,083.
Outstanding currency swaps, MSEK
Currency Nominal Market value Unrealisedamount (Dec. 31, 2004) gain/loss
DKK -24.9 -24.7 +0.2EUR -1 167.7 -1 166.9 +0.8GBP -90 -88.8 +1.2PLN -34.6 -36.0 -1.4USD -750.2 -739.6 +10.6Other currencies -15.3 -14.8 +0.5
Total -2 082.7 -2 070.8 +11.9
Negative amounts in the first two columns indicate that the Group has a soldposition in the relevant currency.
Liquidity riskLiquidity risk is defined as the risk that the Group will be affected by increa-sed costs due to lack of liquidity. The objective is that the Group’s liquidityreserve1 should amount to at least 80 per cent of outstanding unconfirmedshort-term loans. At year-end, this figure was 290 per cent.
1 The Group’s liquidity reserve equals cash balance, plus short-term invest-ments, minus short-term borrowing, plus total confirmed unutilised loanagreements.
Interest-rate riskSapa’s financing sources primarily comprise shareholders’ equity, cash flowfrom operating activities and borrowing. Interest-bearing loans entail theGroup being exposed to interest-rate risk. Interest-rate risk pertains to therisk that changes in interest rates may affect the Group’s financial net. TheGroup has a six-month fixed-interest-rate period as a target. At the end ofthe year, the average fixed-interest-rate period in the loan portfolio was 5.4months. The table below shows Sapa’s interest-rate risk, that is, how theinterest expense in each currency, translated into SEK, would change withan instantaneous shift of 1 percentage point in the yield curve for the remai-ning fixed-interest period.
Net debt, average interest rate and interest-rate risk per currency atyear-end, MSEK
Weighted average Interest-2004 % of total interest rate, % rate risk
EUR 1 052 55 2.9 3.9USD, CNY 534 28 3.2 3.8GBP 168 9 5.3 0.1Other currencies 150 8 4.0 3.1
Total net debt 1 904 100
Credit risk in financial instrumentsFinancial risk management involves exposure to credit risks, which occurpartly in connection with lending within the framework of liquidity manage-ment, and partly through receivables from banks. Liquid funds are investedonly in government securities and in banks that are approved in accordancewith the Financial Policy. The maximum possible credit risk for various coun-terparties is set in a special “counterparty” regulatory document. At year-end, the Group had no fixed-term investments outstanding. No losses arosein 2004 and no reservations were made at year-end. Credit risks are alsopresent in accounts receivable that are not covered under financial riskmanagement but that are dealt with in the course of operations.
Metal price exposureSapa’s operations are affected by fluctuations in market prices on theLondon Metal Exchange (LME) and by the premiums for aluminium ingots.The Group acts to minimise exposure to these fluctuations through an esta
blished purchasing policy. The average price for aluminium metal in USDwas 21 per cent higher in 2004 than in 2003. However, the weakening ofthe USD against the EUR and the SEK meant that the average metal pricein EUR and SEK was only 10 per cent higher for both currencies during thesame period. Within Profiles, the metal price risk is hedged primarily bymaking purchases of aluminium in close conjunction with the setting of thecustomer price of products. As a result, profile operations have a relativelylow exposure to price fluctuations. In Heat Transfer, sales contracts are hed-ged directly through “physical” purchases of metal or with the aid of forwardcontracts on the LME, which offset the effects of fluctuations in the price ofaluminium. Unsold metal in stock is also hedged through forward contractson the LME. At year-end, the net of these hedges entailed the Group havinga sold position of 1,725 tonnes of aluminium on the LME with a marketvalue of MUSD 3.6. The unrealised gain amounted to MUSD +0.01.
Note 3 Segment reporting
Business segments are reported as primary segments and geographic areasas secondary segments. The business segments Profiles, Building Systemand Heat Transfer are reported combined.
2004 2003Profiles/Building Others Others System/ and Profiles/ and
Heat elimi- Heat elimi-(MSEK) Transfer nations Group Transfer nations Group
Net sales 13 745 245 13 990 11 549 254 11 803Depreciation 493 22 515 460 24 483Operating profit 649 -9 640 665 -24 641Investments 494 18 512 337 15 352Operating assets 8 410 226 8 636 8 271 223 8 495Operating liabilities 2 445 77 2 522 2 145 95 2 241
Operating assets diverge from total assets in that they exclude liquid funds and tax assets.Liabilities in operations exclude financial liabilities and tax liabilities.
Net sales, assets and investments distributed by geographic marketAssets utilised
Group Net sales in operations Investments(MSEK) 2004 2003 2004 2003 2004 2003
Scandinavia 2 604 2 520 2 699 2 394 242 117UK 1 852 1 682 757 831 24 22Rest of Western Europe 6 364 5 017 3 779 3 887 155 144Eastern Europe 990 734 308 224 34 20North America 1 554 1 358 746 825 18 23Asia 491 379 347 334 39 26Rest of world 135 113 - - - -
Total 13 990 11 803 8 636 8 495 512 352
Net sales distributed by geographic market
Parent Company (MSEK) 2004 2003
Scandinavia 492 485UK 8 12Rest of Western Europe 47 25Rest of world 16 12
Total 563 534
Parent Company sales to subsidiaries amounted to MSEK 236.7 (201.1).Parent Company purchases from subsidiaries amounted to MSEK 5.4 (2.9).The Group’s purchases from other Group companies amounted to MSEK241.3 (155.1).The Group’s sales to associated companies amounted to MSEK 227.1 (180.5).The Group’s purchases from associated companies amounted to MSEK 44.2(20.1).
38
Supplementary disclosures
Note 4 Wages, salaries, other remuneration and socialsecurity expenses
2004 2003Social Social
Wages, security Wages, security salaries expenses salaries expenses
and other (of which, and other (of which(MSEK) remuneration pension costs) remuneration pension costs)
Parent company 145.4 64.7 136.1 61.1(25.0) 1 (18.1) 1
Subsidiaries 1 990.8 669.7 1 702.1 594.0(84.8) (68.9)
Group total 2 136.2 734.4 1 838.2 655.1(109.8) 2 (87.0) 2
1 Of the Parent Company’s pension costs, MSEK 3.8 (6.7) relates to theBoard, President and Executive Vice President. The company’s outstandingpension commitments to these persons amount to MSEK 8.4 (8.6).2 Of the Group’s pension costs, MSEK 7.7 (11.0) relates to the Boards,Presidents and Executive Vice Presidents. The Group’s outstanding pensioncommitments to these persons amount to MSEK 27.5 (27.7).
Wages, salaries and other remuneration distributed by country and byBoard members, Presidents, Executive Vice Presidents and otheremployees
2004 2003Board members, Board members,
President and President and Executive Vice Executive Vice Presidents (of Other Presidents (of Other
(MSEK) which, bonuses) employees which, bonuses) employees
Sweden 10.3 (0.6) 720.2 16.4 (2.4) 657.7Belgium 3.5 (0.1) 260.0 0.9 (0.1) 119.0Denmark 1.3 ( -) 72.5 1.8 (0.2) 54.7Estonia 0.2 ( -) 0.5 - ( -) -Finland 0.8 ( -) 3.8 0.7 ( -) 3.7France 6.5 (1.4) 240.5 7.1 (1.5) 216.5Lithuania - ( -) 2.7 - ( -) 0.9China 2.1 ( -) 15.7 1.1 ( -) 14.8Czech Republic 0.2 ( -) 0.7 - ( -) 0.4Switzerland 0.8 ( -) 3.6 - ( -) 3.1Lebanon 0.5 ( -) 0.7 - ( -) 0.7Netherlands 2.3 (0.4) 76.6 2.6 (0.7) 73.3Norway 1.3 ( -) 6.2 1.2 ( -) 7.0Poland 3.3 ( -) 34.4 2.7 ( -) 31.7Portugal 0.6 (0.5) 118.5 1.5 ( -) 94.2Spain 1.2 (0.1) 1.0 1.4 (0.1) 0.3UK 2.2 (0.1) 225.9 6.8 (0.3) 214.3Turkey 0.8 (0.2) 1.1 - ( -) 0.6Germany 5.2 (0.7) 100.3 5.4 (0.1) 79.7US 3.9 ( -) 197.6 6.6 ( -) 207.9Austria - ( -) 2.4 - ( -) 1.1Others 1 0.1 ( -) 0.1 - ( -) 0.4
Group total 47.1 (4.1) 2 085.0 56.2 (5.4) 1 782.0
Parent Company 6.2 ( -) 139.2 11.4 (1.7) 124.7
1 Sales companies with five employees or less.
Note 5 Terms of employment for senior executives
Remuneration to Board membersIn accordance with the decision of the Annual General Meeting, the Boardfee shall amount to a fixed fee of SEK 1,760,000, to be distributed as deci-ded by the Board. Ole Enger, Chairman of the Board of Directors, received a fee amounting to SEK 440,000. The remainder of the fee was dividedequally between the external Board members. Board members employed bythe Sapa Group are not paid a fee.
President’s compensationKåre Wetterberg took up the position of President on June 1, 2004. KåreWetterberg received fixed salary of SEK 2,041,667 for the period June 1,2004 through December 31, 2004.
Kåre Wetterberg is entitled to performance-based pay. However, thismust not exceed 50 per cent of his fixed salary. For 2004, variable compen-sation was tied to earnings per share. No performance-based remunerationwas paid out for 2004.
Kåre Wetterberg’s retirement age is 62. His retirement benefits are pre-mium-based, with the cost of premiums amounting to 35 per cent of pen-sionable salary, which is equivalent to fixed salary.
If termination of Kåre Wetterberg’s employment is initiated by Sapa, a24-month period of notice shall apply. If termination is initiated by KåreWetterberg, the period of notice is six months. During the period of notice,unchanged terms of employment shall apply. However, if Kåre Wetterbergtakes up employment with a new employer during this period, his salaryfrom Sapa will be reduced by the amount received from the new employerduring the period of notice.
Staffan Bohman resigned as President on May 31, 2004. During hiscontractual period of notice of 24 months, commencing from the AnnualGeneral Meeting held on April 15, 2004, Staffan Bohman receives fixed sala-ry at the 2004 level. His retirement benefits remain unchanged. StaffanBohman’s fixed annual salary for 2004 was SEK 3,900,000. No bonus waspaid for 2004. Other benefits amounted to SEK 75,000.
Staffan Bohman’s ordinary retirement age is 65, but he is entitled toearly retirement with pension benefits from age 60. Pension benefits areaccrued successively and are fully accrued at age 60 and 65 respectively.Pensionable salary comprises basic salary plus the average variable salaryduring the past three years. In the event of early retirement between age 60and 65, the pension benefit is equal to 70 per cent of pensionable salarycorresponding to 100 price base amounts plus 35 per cent of salary excee-ding this level. From age 65, pension benefits are paid in accordance withthe ITP pension plan, with a supplement for the portion of salary exceeding20 price base amounts. This supplement comprises 32.5 per cent of pen-sionable salary between 20 and 30 price base amounts, 50 per cent bet-ween 30 and 100 price base amounts, and 32.5 per cent on any portion inexcess thereof. The ITP plan is also reinforced with a disability and familypension for the portion of salary exceeding 20 price base amounts.Survivors’ pension amounts to approximately 74 per cent of retirement pen-sion. The premiums for policies undertaken to secure the pension commit-ments amounted in 2004 to SEK 4,085,486. The policies are irrevocable.
Remuneration to other senior executivesFixed salaries for the other seven members of the Executive GroupManagement in 2004 totalled SEK 11,042,135. The performance-based sala-ry components were mainly based on the trend of earnings per share andprofit after capital costs and estimated tax. The overall bonus outcome wasSEK 617,500.
The retirement age for this group is 65, with three exceptions (age 60and 62, respectively). For the Swedish executives, the company pays pen-sion premiums corresponding to the ITP level, or in accordance with themain provision of the Income Tax Act. For the foreign-based executives inthis group, the pension solutions consist of a combination of defined-contri-bution and defined-benefit pensions. Pension premiums in 2004 amountedto SEK 4,880,075. The pension benefits are irrevocable.
The notice-of-termination period varies between 12 and 24 monthswhen notice is given by the company.
39
Note 6 Share-related compensation for employees
In February 2002, Sapa AB issued share options, “personnel options,” tosenior executives and managers within the Group, a total of some 60 per-sons. The terms of the options extend through March 2005, with an exerciseprice of SEK 188. The options programme comprises 700,000 options.Exercise of the options is conditional on employment within the Sapa Groupat the time of exercise. The issue of the options has no direct effect in thefinancial accounts. The exercise of the options may entail social securityexpenses for the Group. The social security expenses that may fall due onexercise are reported as provisions based on the share price on the closingdate in relation to the exercise price of the options. The cost is accrued overthe term of the options. In cases where the share price on the closing dateis lower than the exercise price, no provision for social security expenses isreported. In 2004, these options did not affect either the balance sheet orthe income statement. Sapa AB has a mandate from the Annual GeneralMeeting to repurchase shares for the purpose of hedging the personneloptions issued.
Effective 2003, share-related compensation programmes were replacedby a long-term bonus programme based on the Sapa Group’s averagereturn on capital employed over rolling three-year periods. The programmeaffects some 20 managers who have a direct impact on the Group’s ear-nings. The first payment can be made in 2006 and is conditional onemployment in the Sapa Group at the time of payment.
Note 7 Compensation paid to Group auditors
Group Parent Company(MSEK) 2004 2003 2004 2003
PricewaterhouseCoopersAudit assignments 6.0 5.9 0.8 0.7Other assignments 4.7 5.5 2.2 3.3
10.7 11.4 3.0 4.0
Other auditorsAudit assignments 1.1 0.6 - -Other assignments 0.4 - - -
1.5 0.6 - -
Audit assignments pertain to the audit of the annual accounts and accoun-ting records and the administration of the company by the Board ofDirectors and President, as well as other duties performed by the company’sauditors, and advice or other assistance deemed necessary from the fin-dings of such audits or other duties. All other work performed on behalf ofthe company is classified as other assignments, primarily due-diligencework and tax consulting services.
Note 8 Other operating revenue and expenses
Group Parent Company(MSEK) 2004 2003 2004 2003
Other operating revenueProfit share in associated companies 7.8 6.1 - -Royalties - - - 7.7Capital gains from sale of associated companies 23.9 - - -Capital gains from sale of other shares 2.1 - - -Capital gains from sale of real estate - - - -Insurance compensation - - 0.3 0.4Exchange-rate gains 1.5 1.2 - 0.6
Other operating expensesExchange-rate losses -10.4 -13.8 -0.5 -Payment relating to earlier divestment of operations - - -25.2 -
Note 9 Operational leasing agreements
Pertaining to Pertaining to machinery and land and
Group 2004 (MSEK) equipment buildings
Leasing charges paid in 2004 48.6 30.2Contractual leasing charges due in:2005 37.2 22.92006 21.6 17.42007 10.1 13.32008 4.8 9.22009 2.1 3.72010 and later 1.3 0.3
The tables cover charges for agreements which, for purposes of accounting,are treated as operational leasing.
Pertaining to Pertaining tomachinery and land and
Parent Company 2004 (MSEK) equipment buildings
Leasing charges paid in 2004 4.9 3.0Contractual leasing charges due in:2005 4.9 2.82006 1.4 3.22007 - 3.32008 - 3.32009 - -2010 and later - -
Note 10 Result from financial investments
Group Parent Company(MSEK) 2004 2003 2004 2003
Result from participations in subsidiaries
Write-downs - - - -Other interest income and similar items
Dividends from external securities - 0.1 - -Interest income 8.2 35.6 184.8 1 97.3 1
Exchange-rate gains - - 95.8 170.6Interest expense and similar items
Interest expense -77.8 -98.0 -145.2 2 -86.7 2
Calculated financial costs of pension liabilities -12.5 -17.8 -8.5 -8.9Other financial expenses - - -3.2 -5.8Exchange-rate losses -1.8 -1.2 - -
Total -83.9 -81.3 123.7 166.5
1 Including MSEK 161.9 (51.8) in interest income from subsidiaries.2 Including MSEK 59.5 (23.5) in interest expense to subsidiaries.
Note 11 Appropriations
Parent Company (MSEK) 2004 2003
Depreciation in excess of/less than plan 4.6 -37.6Allocation to/reversal of tax allocation reserve -59.0 -48.3
Total -54.4 -85.9
Group contributions received and paid are reported net after tax effects,directly against unrestricted equity.
40
Supplementary disclosures
Note 12 Income tax
Group Parent CompanyTax expense for the year (MSEK) 2004 2003 2004 2003
Current tax -155.7 -98.6 -18.3 -23.2Deferred tax attributable to:Change in temporary differences for the year -19.5 -76.2 0.8 2.5
-175.2 -174.8 -17.5 -20.7
Taxes reported directly against consolidated shareholders’ equity, attributa-ble to the hedging of foreign net assets, amounted to MSEK 29.8 (51.7). Inthe Parent Company, tax effects of MSEK 32.1 (18.9) resulting from Groupcontributions were reported directly against shareholders’ equity. TheGroup’s tax expense for 2004 amounted to 31.8 per cent (31.3).
Relationship between tax expense for the year and reported pre-tax profit:
Group Parent Company2004 2003 2004 2003
Applicable tax rate 32% 30% 28% 28%Non-deductible costs including goodwill 5% 7% - 1%Tax-exempt gains and non-taxable revenue -4% -3% - -Losses where deferred tax has not been taken into consideration 1% - - -Other -2% -3% 1% 2%Reported tax rate 32% 31% 29% 31%
The applicable tax rate is calculated on the basis of the nominal tax rates ineach country applied to the pre-tax profits of the local units.
Group Parent CompanyDeferred tax assets (MSEK) 2004 2003 2004 2003
Attributable to:Provisions 32.3 10.0 - -Difference between reported tax values for other assets/liabilities 0.4 15.3 12.1 11.4Loss carryforwards 76.7 71.1 - -
109.4 96.4 12.1 11.4
Group Parent CompanyDeferred tax liability (MSEK) 2004 2003 2004 2003
Attributable to:Difference between reported and tax values for fixed assets 227.9 256.6 - -Tax allocation reserve 49.8 30.9 - -Provisions -7.9 -9.4 - -Difference between reported and tax values for otherassets/liabilities 78.3 66.9 - -
348.1 345.0 - -
The deferred tax liability pertaining to the Parent Company’s untaxed reservesamounts to MSEK 50.8 (35.6). Of the Parent Company’s untaxed reservestotalling MSEK 181.4 (127.0), MSEK 50.8 (55.3) relates to surplus deprecia-tion and MSEK 130.7 (71.7) to the tax allocation reserve.
At year-end 2004, the Group had unutilised tax loss carryforwardsamounting to MSEK 381 (378). Of these, MSEK 246 (210) was taken intoconsideration, corresponding to MSEK 76 (71). In accordance with theGroup’s accounting principles, the tax benefit of a loss carryforward isrecognised only if it is likely that it can be utilised in connection with futuretaxation.
Note 13 Dividend per share
At the Annual General Meeting on April 19, 2005, a dividend for the 2004fiscal year of SEK 5.50 (6.25) per share will be proposed, corresponding toa total dividend of MSEK 200.9 (227.9).
Note 14 Earnings per share
During the year, the average number of shares outstanding was 36,478,124.Earnings per share are calculated on a profit of MSEK 379.8 (383.4) and36,478,124 shares (36,591,467). Earnings per share after dilution are calcula-ted on a profit of MSEK 379.8 (383.4) and 36,478,124 shares (36,664,049).The calculation follows the principles contained in RR18.
41
Note 15 Intangible fixed assetsGroup Parent Company
2004 2003IT- Total Total IT- IT-
(MSEK) Goodwill systems Other 2004 2003 systems systems
Acquisition value, January 1 1 182.3 209.3 103.5 1 495.1 1 304.5 6.0 6.0Acquisitions 5.0 - - 5.0 316.0 - -Investments - 28.1 0.1 28.2 32.3 0.4 -Sales/scrapping - -1.5 -0.2 -1.7 -4.8 - -Reclassifications - 4.1 - 4.1 2.5 - -Translation differences -65.5 -2.4 1.3 -66.6 -155.4 - -
Accumulated acquisition value, December 31 1 121.8 237.6 104.7 1 464.1 1 495.1 6.4 6.0
Depreciation, January 1 272.4 124.5 80.6 477.5 303.3 5.6 4.4Acquisitions - - - - 106.3 - -Depreciation during the year 64.0 31.3 2.2 97.5 103.6 0.5 1.2Sales/scrapping - -1.4 -0.1 -1.5 -4.8 - -Reclassifications - - - - - - -Translation differences -16.4 2.3 -3.7 -17.8 -30.9 - -
Accumulated depreciation, December 31 320.0 156.7 79.0 555.7 477.5 6.1 5.6
Planned residual value, January 1 909.9 84.8 22.9 1 017.6 1 001.2 0.4 1.6Planned residual value, December 31 801.8 80.9 25.7 908.4 1 017.6 0.3 0.4
Since goodwill is normally attributable to the establishment of strong market positions, goodwill amortisation is included in selling expenses. Goodwill amortisationvaries between 5 and 20 years. The Group’s amortisation of intangible fixed assets is distributed by function as follows: cost of goods sold MSEK 12.1 (12.6),selling expenses MSEK 70.2 (72.4) and administrative expenses MSEK 15.2 (18.6). The Parent Company’s amortisation is attributable to administration.
Note 16 Tangible fixed assets
Land and Equipment,Group 2004 land Plant and tools, fixtures Construction Advances to Total Total(MSEK) improvements Buildings machinery and fittings in progress suppliers 2004 2003
Acquisition value, January 1 288.4 1 563.9 4 999.5 524.0 76.0 0.5 7 452.3 5 983.5Acquisitions - - - - - - - 1 521.2Investments 4.6 22.5 165.3 43.2 244.8 3.1 483.5 319.6Sales/scrapping -1.5 -23.7 -111.8 -34.5 -1.7 - -173.2 -148.1Reclassifications 1.7 7.6 83.9 23.1 -119.9 -0.5 -4.1 -2.5Translation differences -5.0 -23.7 -61.1 1.6 -4.9 -0.1 -93.2 -221.4
Accumulated acquisition value, December 31 288.2 1 546.6 5 075.8 557.4 194.3 3.0 7 665.3 7 452.3
Depreciation, January 1 39.4 659.5 3 409.6 401.6 - - 4 510.1 3 357.8Acquisitions - - - - - - - 1 008.0Sales/scraping -0.2 -14.1 -103.4 -33.7 - - -151.4 -111.1Reclassifications - 0.9 3.7 -4.6 - - - -Depreciation during the year 2.7 49.6 311.7 53.0 - - 417.0 379.7Translation differences -0.2 -8.1 -42.4 0.2 - - -50.5 -124.3
Accumulated depreciation, December 31 41.7 687.8 3 579.2 416.5 - - 4 725.2 4 510.1
Planned residual value, January 1 249.0 904.4 1 589.9 122.4 76.0 0.5 2 942.2 2 625.7Planned residual value, December 31 246.5 858.8 1 496.6 140.9 194.3 3.0 2 940.1 2 942.2
Depreciation of tangible fixed assets is distributed by function as follows: cost of goods sold MSEK 357.5 (322.7), selling expenses MSEK 17.5 (17.6) and administrative expenses MSEK 42.0 (39.4).No interest expense has been capitalised.
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Supplementary disclosures
Land and Equipment,Parent Company 2004 land Revaluation Plant and tools, fixtures Construction Total Totalt(MSEK) improvements of land Buildings machinery and fittings in progress 2004 2003
Acquisition value, January 1 16.4 13.3 257.1 298.4 62.2 1.3 648.7 636.5Investments 0.4 - 1.7 2.3 3.3 9.2 16.9 15.8Sales/scrapping - - - -0.2 -1.9 - -2.1 -3.6Reclassifications - - 0.6 0.5 0.2 -1.3 - -Accumulated acquisition value, December 31 16.8 13.3 259.4 301.0 63.8 9.2 663.5 648.7
Depreciation, January 1 14.9 - 151.9 249.8 48.2 - 464.8 445.6Sales/scraping - - - -0.2 -1.9 - -2.1 -3.4Depreciation during the year 0.1 - 6.3 11.2 3.8 - 21.4 22.6Accumulated depreciation, December 31 15.0 - 158.2 260.8 50.1 - 484.1 464.8Planned residual value, January 1 1.5 13.3 105.2 48.6 14.0 1.3 183.9 190.9Planned residual value, December 31 1.8 13.3 101.2 40.2 13.7 9.2 179.4 183.9
Depreciation of tangible fixed assets is distributed by function as follows: cost of goods sold MSEK 16.9 (17.9), selling expenses MSEK 0.0 (0.0) and administrative expenses MSEK 4.5 (4.7).The tax assessment value of buildings is MSEK 129.6 (130.4) and of land, MSEK 33.8 (33.5). Tax assessment values include values of machinery in some cases.
Tax assessment values and residual values of Swedish properties
2004 2003Tax Tax
assessment Residual assessment Residual(MSEK) value value value value
Buildings 201.1 216.3 207.6 214.7Land 44.3 26.6 44.0 26.8
Total 245.4 242.9 251.6 241.5
Tax assessment values include values of machinery in some cases.
Note 17 Financial leasing agreements
The Group’s tangible fixed assets include the following leasing objects heldin accordance with financial leasing agreements:
Accumulated Acquisition values depreciation
(MSEK) 2004 2003 2004 2003
Land and buildings 84.7 95.0 33.4 31.7 Plant and machinery 211.3 216.4 132.6 121.6Equipment, tools, fixtures and fittings 12.9 14.5 9.7 9.4
Total 308.9 325.9 175.7 162.7
Future leasing charges have the following due dates:
Nominal Present values values
(MSEK) 2004 2003 2004 2003
Within one year 32.2 38.0 27.9 32.4Later than one year but within five years 61.8 106.4 54.7 93.9Later than five years 3.0 3.1 2.0 2.0
Total 97.0 147.5 84.6 128.3
The present value of future leasing charges is reported as a liability to creditinstitutions – partly as a current liability and partly as a long-term liability.
Note 18 Acquisitions and divestments of subsidiaries andassociated companies
Group 2004
DivestmentSapa’s acquisition of Remi Claeys Aluminium in June 2003 included a 25-per cent minority holding in the aluminium profile Group, Boal InternationalBV (Boal). In April, this holding was sold to Boal’s principal owner. The priceof the shares was MEUR 10.3, giving a capital gain of MEUR 2.6 (MSEK23.9), corresponding to SEK 0.66 per share. The results of the sale werereported in the second quarter of 2004.
43
Note 19 Participations in Group companies
Parent Company 2004 Corporate Registered No. of Capital and BookSwedish Group companies reg. no. office shares voting rights, % value, MSEK
Finspongs Metallverks AB 556038-6293 Stockholm 72 000 100 / 100 8.6Feridale Ltd - Dublin, Ireland - 100 / 100 -
Sapa Holdings AB 556101-1668 Västerås - 100 / 100 -Sapa North America Inc. - Delaware, US - 100 / 100 -
Sapa Inc. - Oregon, Portland, US - 100 / 100 -Fintuna AB 556581-8860 Stockholm 1 000 100 / 100 0.1
Gränges Holding (Nederland) B.V. - Amsterdam, Netherlands - 100 / 100 -Gränges AB 556084-9191 Vetlanda 500 000 100 / 100 90.0
Sapa Aluminium Sp.z o.o. - Trzciance, Poland - 100 / 100 -Sapa Building System AB 556114-5698 Vetlanda 30 750 100 / 100 1.5Sapa Heat Transfer AB 556002-6113 Finspång 300 000 100 / 100 163.0Sapa Industriservice AB 556392-7564 Finspång 8 000 100 / 100 -Sapa Lackering AB 556145-0536 Vetlanda 60 000 100 / 100 16.8Sapa Profiler AB 556366-7483 Vetlanda 500 000 100 / 100 200.0
Sapa Profilbockning AB 556241-9134 Vetlanda - 100 / 100 -Sapa Eesti AS - Tallinn, Estonia - 100 / 100 -UAB Sapa Profiliai - Vilnius, Lithuania - 100 / 100 -
Sapa Profili SIA - Riga, Latvia 100 100 / 100 0.0Sapa Recycling AB 556000-7881 Finspång 7 000 100 / 100 4.2Dormant companies - - - 100 / 100 0.2
484.4Foreign Group companiesCuprocimique NV - Gent, Belgium 560 100 / 100 35.6Greyflag Ltd - Dublin, Irland 110 000 002 100 / 100 1 069.7Sapa Building System GmbH - Velbert, Germany 1 100 / 100 55.4Sapa Building System Vertriebs GmbH - Gleisdorf, Austria 1 100 / 100 1.5Sapa France S.A. - Puget sur Argens, France 410 492 100 / 100 118.2
Sapa Building System SNC - Puget sur Argens, France - 100 / 100 -SARL P.A.O.I. - Saint Paul, Réunion Island - 65 / 65 -Compex E.U.R.L. - Pégomas, France - 100 / 100 -
Sapa Profilés Puget S.A. - Puget sur Argens, France - 100 / 100 -Sapa Albi SNC - Le Garric, France - 100 / 100 -Sapa Profiles Albi SNC - Le Garric, France - 100 / 100 -Sapa Lacal SNC - Le Garric, France - 100 / 100 -
Sapa Heat Transfer (Shanghai) Ltd - Shanghai, China - 100 / 100 159.3Lords Agriculture Machinery Ltd - Cheltenham, UK 500 000 50 / 50 6.6Sapa Portugal S.A. - Lissabon, Portugal 5 000 000 100 / 100 263.6
Novas Tecnologias em Alumino SA - Queluz, Portugal - 100 / 100 -Dialma Ltd - Maputo, Mozambique - 100 / 100 -
RC System Sp zoo - Wroclaw, Poland 71 000 100 / 100 4.5RC System CZ Sro - Kladno-Sitna, Czech Republic 1 100 / 100 6.2RC System SK Sro - Ivanka Pri Dunaji, Slovakia 1 100 / 100 0.1Remi Claeys Aluminium NV - Lichtervelde, Belgium 2 761 508 100 / 100 698.9
RC System SAL - Ashrafieh, Lebanon - 60 / 60 -RC Automotive GmbH - Remscheid, Germany - 80 / 80 -Sapa RC Profiles SA - Angers, France - 100 / 100 -Sapa RC Profiles NV - Mons-Ghlin, Belgium - 100 / 100 -Allease Ghlin SA - Mons-Ghlin, Belgium - 100 / 100 -Aleurope Holding NV - Lichtervelde. Belgium - 100 / 100 -Remi Claeys International Service NV - Lichtervelde, Belgium - 100 / 100 -
Sapa Building System Beheer BV - Breda, Netherlands 510 100 / 100 0.0Sapa RC System BV - Breda, Netherlands - 100 / 100 -Alupartners BV - Breda, Netherlands - 100 / 100 -
Sapa GmbH - Offenburg, Germany 5 100 / 100 83.5Sapa Aluminum Profile GmbH - Offenburg, Germany - 100 / 100 -Sapa Vertrieb GmbH - Düsseldorf, Germany - 100 / 100 -SARL Sapa Aluminium Profiles - Reichstett, France - 100 / 100 -Sapa Aluminium Profile AG - Zürich, Switzerland - 100 / 100 -
Sapa Holdings (Nederland) B.V. - Amsterdam, Netherlands 18 100 / 100 0.2Sapa Nederland B. V. - Hoogezand, Netherlands 6 700 100 / 100 76.6
Sapa Aluminium B.V. - Hoogezand, Netherlands - 100 / 100 -Sapa Coating B.V. - Hoogezand, Netherlands - 100 / 100 -
Lichtgroep Beheer B.V. - Etten-Leur, Netherlands - 100 / 100 -Sapa Plus B.V. - Etten-Leur, Netherlands - 100 / 100 -Vormlicht B.V. - Etten-Leur, Netherlands - 100 / 100 -SARL Apollo France Diffusion - St Sebastien sur Loire, France - 100 / 100 -
44
Supplementary disclosures
Corporate Registered No. of Capital and BookNote 19 (cont.) Participations in Group companies reg. no. office shares voting rights, % value, MSEK
Sapa Perfiles S.L. - Madrid, Spain 9 999 100 / 100 1.4Sapa Profiler A/S - Grenå, Denmark 100 000 100 / 100 58.8Sapa Profiler AS - Lilleström, Norway 2 000 100 / 100 2.2Sapa Profiilit Oy - Esbo, Finland 500 100 / 100 3.0Sapa Profiles (Shanghai) Ltd - Shanghai, China - 100 / 100 7.3Sapa Profily SRO - Ostrava, Czech Republic - 100 / 100 1.9Sapa RC System Alum. San. VE Tic AS - Istanbul, Turkey 2 499 993 100 / 100 0.0Sapa RC System NV - Landen, Belgium 1 464 544 100 / 100 79.2Sapa RC System SAS - La Chapelle D’Armentieres, France 300 100 / 100 12.3Sapa RC System Sarl - Sevaz, Switzerland 1 100 / 100 3.8Sapa System Sp.z o.o. - Warszawa, Poland 2 000 100 / 100 2.0Sapa UK Ltd - Cheltenham, UK 19 137 046 100 / 100 235.4
Gränges Products Ltd - Cheltenham, UK - 100 / 100 -Sapa Building System Ltd - Tewkesbury, UK - 100 / 100 -
Plan-it Tewkesbury Ltd - Cheltenham, UK - 100 / 100 -Pressweld Ltd - Gloucester, UK - 100 / 100 -Sapa Profiles Ltd - Cheltenham, UK - 100 / 100 -Lords Agriculture Machinery Ltd - Cheltenham, UK - 50 / 50 -
SI La Guérite SA - Sevaz, Switzerland 197 100 / 100 1.2
2 988.4
Total, Group companies 3 472.8
Note 20 Financial fixed assets
Other Parent CompanyParticipations investments Other Participations
Deferred tax in associated held as long-term Group in Group (MSEK) assets companies fixed assets receivables total companies
Acquisition value, January 1 96.4 80.2 8.5 5.0 190.1 3 262.0Participation in net profit for the year - 5.2 - - 5.2 -Change of accounting principle relating to pensions 29.5 - - - 29.5 -Acquisitions - - - - - 205.0Purchases/capital contribution - - - - - 14.9Divestments/instalments received - -71.3 -2.7 -2.7 -76.7 -Transfer between tax liability/asset -12.2 - - - -12.2 -Income statement -3.2 - - - -3.2 -Translation differences -1.1 0.5 -0.1 - -0.7 -
Accumulated acquisition value, December 31 109.4 14.6 5.7 2.3 132.0 3 481.9
Depreciation, January 1 - - 2.9 - 2.9 9.1Write-downs for the year - - - - - -Translation differences - - - - - -
Accumulated write-downs, December 31 - - 2.9 - - 9.1
Net value, January 1 96.4 80.2 5.6 5.0 187.2 3 252.9Net value, December 31 109.4 14.6 2.8 2.3 129.1 3 472.8
Note 21 Participations in associated companies
Registered No. of Capital and BookGroup 2004 office shares voting rights, % value, MSEK
Alural Ghlin SA Mons-Ghlin, Belgium 32 500 50 / 50 7.3Ekonal Italia Srl Bolzano, Italy 1 40 / 40 6.9Norca Heat Transfer New York, US - 50 / 50 0.0
14.2Undistributed share of profit/loss in associated companies 0.4
Value calculated in accordance with equity method 14.6
45
Note 22 Inventories
Group(MSEK) 2004 2003
Raw materials and consumables 382.1 278.6Work in progress 815.2 621.1Finished goods 761.9 893.9
Total 1 959.2 1 793.6
Approximately 3 per cent of inventories are reported at net selling price.
Note 23 Accounts receivable
Group(MSEK) 2004 2003
Of whichReceivables from associated companies 57.9 25.0
Note 24 Other receivables
Group Parent Company(MSEK) 2004 2003 2004 2003
Prepaid expenses 62.5 75.1 7.4 14.4Accrued interest income 1.5 10.6 1.2 3.7Other accrued income 11.3 8.0 0.7 2.8Tax assets 18.6 35.1 7.2 13.0Other receivables 147.2 115.5 8.6 8.2
Total 241.1 244.3 25.1 42.1
Note 25 Shareholders’ equity
The cumulative translation difference was negative in an amount of MSEK130.6 at January 1 and was a negative MSEK 163.4 at year-end. These figu-res have been calculated since January 1, 1999, when RR8 took effect.Hedging of foreign net assets had a positive effect on translation differencesin an amount of MSEK 192.2 (328.7). The Group’s restricted equity includesan equity method reserve of MSEK 0.4 (negative: 5.1). The number ofregistered shares at January 1, 2004 was 37,182,158. During the year, 57,585convertible debentures were converted into shares and 79,950 warrants wereexercised. At December 31, 2004, the number of shares thus amounted to37,319,693. At year-end 2004, the Parent Company’s holdings of repurchasedcompany shares amounted to 798,830, of which 92,800 were repurchasedduring 2004. The purchase value was MSEK 129.9 of which MSEK 16.4 redu-ced non-restricted equity during 2004. Costs arising in connection withrepurchases were reported directly against shareholders’ equity. The converti-ble and warrants programmes expired on July 30, 2004.
Note 26 Provision for pensions and similar obligations
Defined-benefit pension plansSeveral defined-benefit pension plans are applied within the Group, some ofwhich have assets allocated in special pension funds or similar. Most of theGroup’s defined-benefit commitments are in Sweden, the UK, France andBelgium. These plans cover virtually all employees and provide benefitsbased on the average salary and length of service for employees at or nea-ring retirement.
GroupDefined-benefit obligations and value of plan assetsFully or partly funded obligations
December 31 January 1 2004 2004
Present value of funded obligations 536.1 506.3Fair value of plan assets -435.1 -393.0
Net of funded obligations 101.0 113.3Present value of unfunded defined-benefit obligations 394.5 361.4
Net obligations before adjustments 495.5 474.7
Adjustments:Unrecognised actuarial gains (+) / losses (-) -19.8 -Unrecognised past service costs - -
Pension liability for plans reported in accordance with RR29 475.7 474.7Pension liability for plans reported in accordance with local rules 17.0 19.0
Provision for pension plans, net 492.7 493.7
2004-12-31 2004-01-01
The net liability is distributed across plans in the following countries:Sweden 334.9 333.6UK 107.7 113.3Belgium 24.4 25.8France 17.9 13.6Germany 7.8 7.4
Net liability in the balance sheet 492.7 493.7
The following amounts for defined-benefit pension plans are recognised in the income statement:
2004
Current service cost 16.2Interest expense 45.7Expected return on plan assets -33.1Net actuarial gains (-) and losses (+) recognised during the year -Losses (+) or gains (-) on curtailments and settlements -Contributions from employees 2.0
Total cost for defined-benefit plans 30.8
The cost is reported on the following lines in the income statement: 2004
Cost of goods sold 3.7Selling expenses 1.3Administrative expenses 13.3Financial expenses 12.5
Total cost of post-employment remuneration 30.8
Since Sapa started applying RR29 from 2004, there are no comparison figures available for the preceding year. Amortisation of actuarial gains andlosses is not recognised until 2005. Interest expense with deduction madefor expected return on plan assets is classified as a financial expense.
The total pension cost for defined-benefit and local pension plansamounted to MSEK 79.0.
46
Supplementary disclosures
Reconciliation of net amounts for pensions in the balance sheetNet amount recorded in the balance sheet at December 31, 2003 402.5Effect of change in accounting principle to RR29, effective January 1, 2004 91.2
Net amount at January 1, 2004 493.7
Cost of defined-benefit plans 30.8Payment of contributions -27.1Exchange-rate differences -2.7
Change in net liability for defined-benefit plans reported in accordance with RR29 1.0
Reduction of pension plans reported in accordance with local rules -2.0
Net amount recorded in the balance sheet at December 31, 2004 492.7
Actuarial assumptionsThe following material actuarial assumptions were applied when calculatingthe pension obligations (weighted averages): 2004-12-31 2004-01-01
Discount rate 5.16% 5.25%Expected return on plan assets 7.00% 8.00%Expected future salary increase 3.05% 3.04%Expected inflation 2.48% 2.47%
Parent CompanyThe Parent Company’s reported pension liability amounted to MSEK 182.9(184.2).
Note 27 Other provisions
Group Restructuring Guarantee Total Total (MSEK) reserve reserve Other 2004 2003
Balance, January 1 27.8 11.3 41.2 80.3 62.5Provisions made during the year 0.5 - 9.3 9.8 12.4Acquisitions - - - - 38.5Provisions utilised during the year -7.2 - -31.2 -38.4 -32.9Exchange-rate difference -0.2 - -0.1 -0.3 -0.2Balance, December 31 20.9 11.3 19.2 51.4 80.3
The restructuring reserve at December 31 pertained, in part, to the divestmentof operations expected to be completed during 2005 and, in part, to remai-ning rental commitments from operations divested in prior years, where thecommitment extends for a maximum of three years. Other provisions relate toguarantees and disputes where it is not possible to determine the point intime for any outflow of resources.
Note 28 Long-term liabilities
Of the Group's long-term liabilities totalling MSEK 1,576 at year-end 2004,loans amounting to MSEK 283 fall due for payment more than five yearsafter the balance sheet date. Of the Parent Company’s long-term liabilitiestotalling MSEK 1,303 at year-end 2004, loans amounting to MSEK 230 falldue for payment more than five years after the balance sheet date. TheParent Company renewed three expiring bond loans in 2004, totalling MSEK345, and also renewed and extended a credit facility of MSEK 250, whichfalls due in five years.
The Parent Company’s convertible loan of MSEK 7.9 matured during theyear. The Parent Company has a total of MUSD 175 and MSEK 250 in over-draft facilities, which have a remaining duration of 3.2 years. At year-end,MSEK 423 of these facilities had been utilised. The total long-term liabilitiesof the Group and the Parent Company had a remaining term of 3.1 years at December 31, 2004. The loans have fixed-interest periods of one to 12 months.
Note 29 Liabilities to credit institutions
The Group’s total confirmed overdraft facilities amounted to MSEK 334 atyear-end 2004. The Parent Company’s total confirmed overdraft facilities atyear-end 2004 amounted to MSEK 138.
Note 30 Accounts payable
Group(MSEK) 2004 2003
Of whichLiabilities to Group companies 20.2 20.0Liabilities to associated companies 0.0 0.0
Note 31 Other interest-free liabilities
Group Parent Company(Mkr) 2004 2003 2004 2003
Advance payments from customers 24.2 23.3 8.4 4.6Tax liability 42.6 57.1 0.5 -Accrued expenses and prepaid income1 1 504.1 474.4 64.4 66.2Other liabilities 115.8 124.5 8.0 9.8Total 686.7 679.3 81.3 80.6
1of which Salaries and social security contributions 373.0 358.3 37.2 38.2Accrued interest expense 9.3 9.4 8.8 12.9Other accrued expenses 121.8 106.7 18.4 15.1
Note 32 Assets pledged
Group Parent Company(MSEK) 2004 2003 2004 2003
Assets pledged for own liabilities and provisionsPertaining to provisions for pensions and similar commitments
Real-estate mortgages 15.0 15.0 15.0 15.0Chattel mortgages 21.8 13.6 - -Pledged inventory 14.0 - - -
Pertaining to long-term liabilities to credit institutions
Real-estate mortgages - - - -Chattel mortgages 11.1 88.4 - -
Pertaining to current liabilities to credit institutions
Real-estate mortgages 80.6 91.3 - -
Total assets pledged 142.5 208.3 15.0 15.0
Note 33 Contingent liabilities
Group Parent Company(MSEK) 2004 2003 2004 2003
Other contingent liabilities 72.6 49.5 488.3 492.6Of which, for subsidiaries - - (462.5) (471.0)
Total contingent liabilities 72.6 49.5 488.3 492.6
47
Note 34 Average number of employees, etc.
Average number of employees2004 2003
Of Of No. of which, No. of which,
employees women employees women
Sweden 2 327 21% 2 287 21%Belgium 804 11% 444 11%Denmark 181 25% 182 27%Estonia 6 33% 5 40%Finland 10 40% 11 45%France 927 13% 856 13%Czech Republic 12 17% 7 14%China 308 14% 244 11%Switzerland 9 11% 6 17%Netherlands 219 8% 217 8%Norway 13 23% 15 27%Poland 520 10% 460 9%Portugal 735 27% 717 27%Spain 8 13% 8 -UK 693 20% 748 17%Turkey 10 50% 5 60%Germany 263 19% 226 17%US 818 11% 774 11%Lithuania 22 36% 6 33%Lebanon 8 25% 6 33%Austria 8 25% 5 40%Others 1 3 33% - -
Group total 7 904 17% 7 229 17%
Parent CompanySweden 406 20% 403 20%
Parent Company total 406 20% 403 20%
1Sales companies with five employees or less.
Board members and senior executives2004 2003
Proportion Proportion of men of men
GroupBoard members 100% 100%President and other senior executives 86% 93%
Parent CompanyBoard members 92% 100%President and other senior executives 82% 91%
Parent Company Parent Company2004 2003
Absence due to sickness July 1 – Dec. 31
Total absence due to sickness 4.5% 4.5%- long-term sick leave as %
of total absence due to sickness 56.1% 62.4%- absence due to sickness, men 4.5% 4.4%- absence due to sickness, women 4.4% 4.8%- employees up to 29 years of age 2.7% 3.9%- employees between 30
and 49 years of age 2.8% 3.2%- employees older than 50 years of age 6.6% 6.0%
48
Proposed disposition of earnings
According to the approved consolidated balance sheet, Group non-restricted equity
amounts to MSEK 1,853.6.
Non-restricted equity in the Parent Company amounts to:
profit brought forward 1 556 732 463
profit for the year 15 811 108
SEK 1 572 543 571
The Board of Directors proposes:that shareholders be paid a dividend of SEK 5.50 per share 200 864 746
and that the remainder be carried forward 1 371 678 825
SEK 1 572 543 571
The dividend is calculated on the basis of the number of outstanding shares at the
signing of the Annual Report. The Parent Company’s holding of own shares amounted
on that occasion to 798,830.
The income statement and balance sheet are to be adopted by the Annual General
Meeting on April 19, 2005.
Stockholm, March 7, 2005
Ole EngerChairman
Karin Aslaksen Lars Axelhed Staffan Bohman
Anders Carlberg Lennart Evrell Leif Gustafsson
Baard Haugen Kenneth Hertz Mats Qviberg
Kåre WetterbergPresident and CEO
Our audit report was submitted on March 7, 2005.
Åke Danielsson Björn IrleAuthorised Public Accountant Authorised Public Accountant
49
Audit report
We have audited the annual accounts, the consolidated accounts, the accounting
records and the administration of the Board of Directors and the President of Sapa AB
(publ) for 2004. These accounts and the administration of the company and the applica-
tion of the Annual Accounts Act when preparing the annual accounts and the consolida-
ted accounts are the responsibility of the Board of Directors and the President. Our
responsibility is to express an opinion on the annual accounts, the consolidated
accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Sweden. Those standards require that we plan and perform the audit to obtain reaso-
nable assurance that the annual accounts and the consolidated accounts are free of
material misstatement. An audit includes examining, on a test basis, evidence suppor-
ting the amounts and disclosures in the accounts. An audit also includes assessing the
accounting principles used and their application by the Board of Directors and the
President and significant estimates made by the Board of Directors and the President
when preparing the annual accounts and consolidated accounts as well as evaluating
the overall presentation of information in the annual accounts and the consolidated
accounts. As a basis for our opinion concerning discharge from liability, we examined
significant decisions, actions taken and circumstances of the company in order to be
able to determine the liability, if any, to the company of any Board member or the
President. We also examined whether any Board member or the President has, in any
other way, acted in contravention of the Companies Act, the Annual Accounts Act or the
Articles of Association. We believe that our audit provides a reasonable basis for our
opinion set out below.
The annual accounts and the consolidated accounts have been prepared in accor-
dance with the Annual Accounts Act and thereby give a true and fair view of the com-
pany's and the Group's financial position and results of operations in accordance with
generally accepted accounting principles in Sweden. The statutory administration report
is consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the general meeting of shareholders that the income statements
and balance sheets of the Parent Company and the Group be adopted, that the profit of
the Parent Company be dealt with in accordance with the proposal in the administration
report and that the members of the Board of Directors and the President be discharged
from liability for the financial year.
Stockholm, March 7, 2005
Åke Danielsson Björn Irle
Authorised Public Accountant Authorised Public Accountant
50
Sapa’s Board of Directors
Ole Enger (Born 1948)President and CEO of Elkem ASA.Elected to Board in 2001.Board member of RepresentantskapetStorebrand and Renewable Energy Corporation.Holding in Sapa: -
Karin Aslaksen (Born 1959)Senior Vice President, Human Resources, Elkem ASA.Elected to Board in 2004.Board member of SINTEF, Teknologi og Samfunn,and Oslo Sporveier.Holding in Sapa: -
Lars Axelhed (Born 1941)Employee representative since 1995.Appointed by the Union of Salaried Employees inPrivate Sector.Holding in Sapa: 1 732 shares.
Lennart Evrell (Born 1954)President and CEO of Munters AB.Elected to Board in 2001.Board member of Munters AB.Holding in Sapa: 1 000 shares.
Leif Gustafsson (Born 1940)Director. Elected to Board in 1997.Board member of Elektrokoppar Svenska AB.Holding in Sapa: 1 000 shares.
Baard Haugen (Born 1955)Senior Vice President, Corporate Development,Elkem ASA.Elected to Board in 2003.Holding in Sapa: -
51
Staffan Bohman (Born 1949)Director. Elected to Board in 1999.Board member of Atlas Copco AB, Trelleborg ABand Dynapac AB, among others.Holding in Sapa: -
Kenneth Hertz (Born 1965)Employee representative since 1999.Appointed by the Swedish Trade UnionConfederation.Holding in Sapa: -
Anders Carlberg (Born 1943)CEO of Axel Johnson International AB.Elected to Board in 2001.Board member of Axel Johnson AB, Elkem ASA,SSAB, Beijer-Alma and Säki, among others.Holding in Sapa: -
Åke Davidsson (Born 1959)Employee representative since 1999.Appointed by the Union of Salaried Employees inPrivate Sector. Deputy member.Holding in Sapa: 200 shares.
Hans Norén (Born 1946)Employee representative since 1999.Appointed by the Swedish Trade UnionConfederation. Deputy member.Holding in Sapa: 10 shares.
Mats Qviberg (Born 1953)President of Investment AB Öresund.Elected to Board in 1998.Chairman of the Boards of Hagströmer & Qviberg AB, Wihlborgs Fastigheter AB and Bilia AB. Board member of SkiStar AB and HQ Fonder.Holding in Sapa: -
Board work during 2004
Composition of the Board
Sapa’s Board of Directors consists of
eight members elected by the Annual
General Meeting, plus two members and
two deputy members appointed by the
employees. The members elected by the
Annual General Meeting include four per-
sons who represent or have connections
to Sapa’s majority shareholder Elkem
ASA, and consequently four persons who
are independent of this owner. The
President is not a member of the Board.
Nominations for election to the Board
The company does not have a nomina-
ting committee appointed by the Annual
General Meeting. Nominations ahead of
the 2005 Annual General Meeting are
managed by Anders Carlberg in consulta-
tion with representatives of the company’s
major shareholders, which currently repre-
sent more than 80 per cent of the shares.
Board work during 2004
The Board held six scheduled meetings
during 2004. The meetings were attended
by all Board members and deputy mem-
bers, except for on one occasion respec-
tively, when a member and a deputy were
prevented from attending. Each year, one
Board meeting is held at a subsidiary in
connection with a major review of local
operations. In 2004, this involved a two-
day visit to the Group’s operations in
Lichtervelde in Belgium.
During the year, the Board dealt with
auditing matters, as well as issues invol-
ving the strategy and direction of the
Group’s business areas, corporate acqui-
sitions, issues regarding remuneration to
Group employees, profit-sharing systems,
management and organisational changes
and the work environment. Several other
issues were also dealt with by the Board,
and the above list is therefore not
exhaustive. Nor does it include a qualitati-
ve evaluation of the importance of the
issues.
Board meetings follow an agenda,
established in the Board’s work procedu-
res, prepared in advance to ensure that
the Board receives the financial and other
information necessary for the performan-
ce of its task. The Board’s work procedu-
res include guidelines for work performed
by the Board and instructions governing
the distribution of work between the
Board and the President.
During the year, all Board members
and deputy Board members received trai-
ning, organised by the Stockholm Stock
Exchange, in relevant corporate law, stock
market law and insider regulations.
Remuneration issues and incentive
programmes
The Board set up a remuneration com-
mittee in 2001. In 2004, this committee
comprised the Chairman of the Board,
the President and Anders Carlberg. The
committee formulates general guidelines
related to remuneration issues (salary,
bonus, benefits) for the Group’s senior
executives and incentive programmes
both for the Group’s senior executives
and other employees. With regard to
members of Group management, the
remuneration committee annually con-
ducts individual reviews of the current
situation and makes adjustments as
deemed motivated.
The President does not participate in
discussions of questions that concern his
own terms of employment. The Board is
continuously informed of the remunera-
tion committee’s work and resolves all
issues that are presented to the Board.
Minutes are kept of the remuneration
committee’s meetings. The Group applies
the “grandfather principle,” whereby deci-
sions regarding an employee’s terms of
employment and remuneration are made
in consultation between supervisors at
the employee’s two closest superior-
management levels.
With regard to the Group’s pension
commitments, the committee has deci-
ded that defined-contribution pension
solutions shall be applied for all new
employment contracts.
The President’s salary is determined
by the full Board in the absence of the
President. In connection with this, the
work of the President during the past year
is discussed and evaluated.
Audit and reporting issues
The Board has decided not to appoint an
audit committee among its own members
since the Board considers that matters
related to audits and the auditors are of
such importance that they should be
handled and decided by the Board as a
whole. This is facilitated by the relative
ease with which the Group’s structure can
be overviewed and the similarity of its
various operations. This favours opportuni-
ties to form views regarding the auditing
issues arising within the Group and to
penetrate these in depth. The Board also
considers that its numbers, previous
experiences and competencies permit
concentrated and insightful discussions
on auditing matters that arise.
Questions related to audit fees are
addressed by the Board prior to final
decisions by the Annual General Meeting.
At the Board meeting in conjunction with
the annual audit, the auditors submit in
person a report of their audit work, obser-
vations based on their audit of the Parent
Company and the Group and their evalu-
ation of the company’s internal controls.
The auditors also participate in a Board
meeting during the autumn for detailed
discussions with the Board regarding
audit issues of a principal nature as well
as possible problems and risks that may
arise during their examinations of the
accounts during the year.
Auditors
The appointed auditors are Åke Danielsson
and Björn Irle and deputy auditor
Agneta Brevenhag, all of whom work
for PricewaterhouseCoopers AB. Jörgen
Lindqvist retired in 2004 and was
replaced by Björn Irle.
52
53
Articles of Association
Sapa Aktiebolag (publ)
Registered company number
556001-6122
§1 The name of the company is
Sapa Aktiebolag (publ).
§2 The Board of Directors of the company
shall have its registered office in the
municipality of Stockholm.
§3 The objects of the company are –
directly or indirectly through subsidiaries
– to produce, process and sell metals,
mainly aluminium, as well as products in
plastic, to conduct trade with and recovery
of scrap, to acquire and administer real
and moveable estate, and to carry on
other activities that are compatible with
the operations listed above.
§4 The share capital of the company shall
be not less than SEK eight hundred million
(800,000,000) and not more than SEK
three billion two hundred million
(3,200,000,000).
§5 The shares shall have a nominal value
of SEK twenty five (25) each.
§6 The Board of Directors shall, in addi-
tion to those members who pursuant to
Swedish law may be appointed by a body
other than the General Meeting of share-
holders, consist of not less than four and
not more than eight directors with not
more than three deputy directors. The
directors, and deputy directors, shall be
elected at the Annual General Meeting of
shareholders for the period up to and
including the next Annual General
Meeting of shareholders.
§7 Two auditors and two deputy auditors
or one firm of chartered public accoun-
tants, shall be appointed to examine the
company’s annual accounts, financial
statements and the administration of the
company by the Board of Directors and
the President.
§8 Notice of General Meeting of share-
holders shall be given through advertising
in the Post- & Inrikes Tidningar (Official
Swedish Gazette) and in Svenska
Dagbladet.
§9 In order to be entitled to participate in
a General Meeting of shareholders,
Shareholders must be registered in a
transcript of the share register relating to
the facts which were recorded ten days
before the General Meeting of sharehol-
ders and must give notice to the company
not later than the day mentioned in the
notice convening the General Meeting of
shareholders, before 4 p.m. This day must
not be a Sunday, any other public holiday,
a Saturday, Midsummer Eve, Christmas
Eve or New Year’s Eve and must not fall
earlier than the fifth weekday prior to the
General Meeting of shareholders.
§10 The Chairman of the Board of
Directors, or the person appointed by the
Board of Directors, shall open and preside
over the General Meeting of shareholders
until such time as a chairman is elected
for the General Meeting of shareholders.
§11 The General Meeting of shareholders
shall be held in Stockholm or in Vetlanda.
The Annual General Meeting shall be held
not later than six months after the expira-
tion of each financial year.
At the Annual General Meeting of
shareholders the following matters shall
be dealt with:
1. Election of chairman to preside over
the Meeting.
2. Preparation and approval of a
voting list.
3. Election of two persons to check the
minutes.
4. Approval of the agenda.
5. Examination of whether the Meeting
has been properly convened.
6. Presentation of the annual report and
the auditor’s report of the company,
as well as the consolidated accounts
and the auditor’s report of the group.
7. Resolutions with respect to
a) adoption of the income statement and
the balance sheet of the company
and the consolidated income state-
ment and the consolidated balance
sheet,
b) appropriation of the company’s profit
or loss according to the balance
sheet adopted,
c) discharging of the members of the
Board of Directors and the managing
director from liability.
8. Determination of the number of
members of the Board of Directors
and deputy members to be appointed
by the Meeting.
9. Determination of fees for the Board of
Directors and the auditors.
10. Election of directors and deputy
directors of the Board of Directors.
11. Election, as applicable, of auditors
and deputy auditors.
12. Any other matter to be dealt with by
the Meeting according to the Swedish
Companies Act.
§12 At the General Meeting of sharehol-
ders, each person entitled to vote may
vote for the full number of shares owned
or represented by him.
§13 The company’s financial year shall be
the calendar year.
§14 Those shareholders who on the
established record day are entered in
the shareholders’ register or in a register
complying with the Swedish Companies
Act, chapter 3 § 12, are considered
authorised to receive dividends, and in
case a bonus issue is made, to receive
new shares as well as to exercise
preferential right to participate in
share issues.
Senior executives
Kåre Wetterberg (Born 1949)President and CEOEmployed since 1974.Holding in Sapa: 25,000 options.
Francois Coëffic (Born 1951)Group Vice President, BuildingSystem and Profiles in France,Portugal and Spain.Employed since 1990.Holding in Sapa: 1,060 sharesand 25,000 options.
Robin Greenslade (Born 1946)Group Vice President, Profiles in theUK, the Benelux countries, Germanyand the US.Employed since 1977.Holding in Sapa: 25,000 options.
54
Derek Phillips (Born 1944)Group Vice President, Business and Management Development.Employed since 1996.Holding in Sapa: 5,000 shares and 20,000 options.
Arne Rengstedt (Born 1951)Group Vice President, Profiles inthe Nordic countries, the BalticStates and Eastern Europe.Employed since 2002.Holding in Sapa: 20,000 options.
55
Magnus Wittbom (Born 1958)Group Vice President, Legal Affairsand Insurance.Employed since 1995.Holding in Sapa: 20,000 options.
Stefan Thorheim (Born 1957)Chief Financial Officer.Employed since 1986.Holding in Sapa: 2,100 sharesand 10,000 options.
Michael Mononen (Born 1958)Group Vice President, Heat Transferand Profiles in China.Employed since 1983.Holding in Sapa: 20,000 options.
Gabriella Ekelund (Born 1975)Communications Manager.Employed since 1999.Holding in Sapa: -
Percy Ekström (Born 1963)Manager Strategic Business Segments.Employed since 1984.Holding in Sapa: -
Antje Goldinger (Born 1964)Group IT ManagerEmployed since 1990.Holding in Sapa: -
56
Seven-year summary
Seven–year summary
MSEK 2004 2003 2002 2001 2000 1999 1998
Income statements, excluding non-recurring itemsNet sales 13 990 11 803 11 090 15 168 15 395 12 220 10 249Operating profit 616 641 483 531 893 789 589Financial items -84 -81 -56 -219 -188 -89 -63Profit after financial items 532 559 427 312 705 700 526Taxes -175 -175 -142 -129 -239 -237 -169Minority interests -1 -1 0 0 1 15 2
Net profit for the year 356 383 285 183 467 478 359
Balance sheetsFixed assets 3 978 4 147 3 654 4 111 5 732 3 721 2 757Other current assets 4 786 4 479 3 646 3 942 6 096 4 564 3 370Liquid funds 591 594 747 1 027 572 518 448
Total assets 9 355 9 220 8 047 9 080 12 400 8 803 6 575
Shareholders’ equity 3 943 3 880 3 879 3 976 3 467 2 754 2 510Interest-bearing liabilities and provisions 2 494 2 694 1 835 2 760 4 709 2 334 1 519Interest-free liabilities and provisions 2 918 2 646 2 333 2 344 4 225 3 715 2 546
Total shareholders’ equity and liabilities 9 355 9 220 8 047 9 080 12 400 8 803 6 575
Key ratios, excluding non-recurring itemsOperating margin, % 4,4 5,4 4,4 3,5 5,8 6,5 5,7Capital turnover rate, multiple 2,3 2,1 2,1 2,1 2,4 2,8 3,0Return on capital employed, % 10,2 11,5 9,0 7,5 14,1 18,1 17,0Return on shareholders equity, % 9,0 10,0 7,5 4,8 15,2 18,6 16,0Net margin, % 2,5 3,2 2,6 1,2 3,0 3,9 3,5Equity/assets ratio, % 42 42 48 44 28 31 38Debt/equity ratio, multiple 0,48 0,54 0,28 0,44 1,19 0,66 0,43Interest-coverage ratio, multiple 6,9 5,8 4,7 2,2 4,1 7,2 7,1Net debt, MSEK 1 904 2 100 1 088 1 733 4 137 1 817 1 071Capital employed, MSEK 5 852 5 983 4 970 5 714 7 609 4 885 3 614New and replacement investments, MSEK 512 352 303 595 829 877 661Average number of employees 7 904 7 229 6 526 8 888 9 118 7 611 6 520
Average number of shares, 000s 36 478 36 591 36 339 36 617 36 617 36 617 36 617Earnings per share, SEK 9,76 10,48 7,85 5,00 12,75 13,00 9,80Earnings per share after dilution, SEK 9,76 10,46 7,80 4,95 12,50 12,80 9,60Shareholders’ equity per share, SEK 107,96 106,36 105,80 108,75 94,70 75,20 68,50Cash flow per share, SEK 1 8,52 12,97 16,30 8,70 -7,20 -3,30 -0,50Proposed dividend per share, SEK 5,50 6,25 5,50 5,00 5,00 4,75 3,75Closing share price, December 31, SEK 188,00 176,50 160,00 144,00 138,00 177,50 117,001 After investments, excluding acquisitions/divestments.
Key ratios, including non-recurring itemsOperating margin, % 4,6 5,4 4,4 5,5 8,0 6,5 6,4Return on capital employed, % 10,6 11,5 9,0 11,7 19,3 18,1 19,0Return on equity, % 9,7 10,0 7,5 12,3 25,0 18,6 17,7Net margin, % 2,7 3,2 2,6 3,1 5,0 3,9 3,9Interest-coverage ratio, multiple 7,2 5,8 4,7 3,4 5,6 7,2 7,9
Earnings per share, SEK 10,41 10,48 7,85 12,75 21,05 13,00 10,90Earnings per share after dilution, SEK 10,41 10,46 7,80 12,60 20,70 12,80 10,70
Non-recurring items2004: Capital gain from sale of Boal shares, totalling MSEK 24 before and after tax.2001: Capital gains from sales of Eurofoil and Autoplastics, write-down of goodwill for Autoplastics and provisions for closures and restructuring measures
totalling MSEK 301 before tax and MSEK 284 after tax.2000: Capital gain and surplus funds from SPP totalling approximately MSEK 330 before tax and MSEK 302 after tax.1998: Non-recurring gain of MSEK 69 before tax and MSEK 40 after tax from sale of Gränges Metall.
Quarterly data during most recent three years The Sapa Group present structure
04:4 04:3 04:2 04:1 2004 03:4 03:3 03:2 03:1 2003 02:4 02:3 02:2 02:1 2002
Net sales, MSEK 3 359 3 427 3 729 3 475 13 990 3 176 3 034 2 834 2 758 11 803 2 689 2 642 2 937 2 821 11 090Operating profit, MSEK 31 142 243 200 616 169 151 169 151 641 132 114 136 101 483Operating margin, % 0,9 4,1 6,5 5,8 4,4 5,3 5,0 6,0 5,5 5,4 4,9 4,3 4,6 3,6 4,4Deliveries, tonnes 91 210 93 160 105 260 99 540 389 170 86 060 84 560 79 050 76 790 326 460 69 870 69 190 75 300 70 660 285 020
2
1 The year in brief 2 Message from the CEO 4 The Sapa share 6 This is Sapa 8 Sapa’s business model
10 Sapa’s products, markets and competitors 14 The explanation is cutting-edge expertise16 Our employees18 Focus on the environment, health and safety 20 The past year 22 Board of Directors’ Report 25 Definitions26 Consolidated income statements 27 Comments on the income statements 28 Consolidated balance sheets 29 Comments on the balance sheets 30 Consolidated cash flow statements 31 Comments on the cash flow statements 32 Parent Company 34 Supplementary disclosures 48 Proposed disposition of earnings 49 Audit Report 50 Board of Directors 52 Board work during 200453 Articles of Association 54 Senior Executives 56 Seven-year summary
Sapa develops, manufactures and marketsvalue-added profiles, profile-based buildingsystems and heat-exchange strip in the light-weight material aluminium. The business concept is based on close co-operation with thecustomers, who are primarily located in Europe,North America and Asia. The largest customersegments are the construction, transport andengineering industries and the domestic andoffice sectors. Sapa is organised into three core areas: Profiles, Building System and Heat Transfer.Sales: 14 billion SEKNumber of employees: 7,900
Annual General Meeting, April 19, 2005
The Annual General Meeting of Sapa AB will be held on Tuesday,
April 19, 2005, at 4 p.m., at Nalen, Regeringsgatan 74, Stockholm,
Sweden. The venue will open for registration at 3 p.m.
Financial reporting dates in 2005
Interim report, January-March, 2005 April 19, 2005
Interim report, January-June, 2005 July 19, 2005
Interim report, January-September, 2005 October 18, 2005
Year-end report for 2005 February 2005
2005 Annual Report March 2006
Shape
Shape is the Sapa Group’s magazine and is published twice a year in
eight languages for, among others, customers, shareholders, analysts,
journalists, and employees.
www.sapagroup.com
The website contains information about the Group, its operations and
markets, as well as financial information and press releases.
Sapa AB
Humlegårdsgatan 17, Box 5505, 114 85 Stockholm, Sweden
Phone: +46 8-459 59 00. Fax: +46 8-459 59 50
[email protected] www.sapagroup.com
This Annual Report is also available in Swedish.
Denna årsredovisning finns även i en svensk version.
Annual Report 2004
Sapa A
nnual Report 2
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