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ANNUAL REPORT 2016 OF THE VIPAP GROUP · PDF file 2019. 12. 13. · Dušan Van ěk, Franc Kukovi čič and Zoran Župevc Employees 450 (31 December 2016) Sales in 2016 193,147 tonnes

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Text of ANNUAL REPORT 2016 OF THE VIPAP GROUP · PDF file 2019. 12. 13. · Dušan Van...

  • 25 MARCH 2017

    ANNUAL REPORT 2016

    OF THE VIPAP GROUP

  • Annual Report of Vipap Videm Krško d.d. for 2016

    TABLE OF CONTENTS

    I. INTRODUCTION ..................................................................................................................... 3 1. EXPLANATION BY THE MANAGEMENT BOARD ABOUT THE OPERATONS OF THE VIPAP GROUP ........................................................................................................................................................................ 4 2. PRESENTATION OF THE VIPAP GROUP ....................................................................................................... 5 3. KEY ACHIEVEMENTS OF THE VIPAP GROUP ............................................................................................ 9 4. SIGNIFICANT EVENTS IN 2016 ....................................................................................................................... 10 5. RISK MANAGEMENT........................................................................................................................................ 13 6. VISION AND MISSION ...................................................................................................................................... 15 7. CORPORATE GOVERNANCE STATEMENT OF THE VIPAP GROUP ................................................... 16

    II. BUSINESS REPORT ............................................................................................................. 21 1. PERFORMANCE ANALYSIS OF THE VIPAP GROUP................................................................................ 22 2. PRODUCTION ..................................................................................................................................................... 29 3. SALES .................................................................................................................................................................... 41 4. PURCHASING...................................................................................................................................................... 45 5. RESEARCH & DEVELOPMENT ...................................................................................................................... 47 6. INVESTMENT ACTIVITIES ............................................................................................................................. 48 7. EMPLOYEES ....................................................................................................................................................... 50 8. EXPECTATIONS FOR 2017 ............................................................................................................................... 54

    III. SUSTAINABLE DEVELOPMENT REPORT .................................................................. 55 1. INTRODUCTION ................................................................................................................................................ 56 2. ENVIRONMENTAL POLICY - BUSINESS EXCELLENCE ......................................................................... 56 3. RESPONSIBILITY TOWARDS THE NATURAL ENVIRONMENT ........................................................... 64 4. RESPONSIBILITY TOWARDS THE INTERNAL AND BROADER SOCIAL COMMUNITY ................ 68

    IV. FINANCIAL REPORT OF THE VIPAP GROUP ........................................................... 70 1. FINANCIAL STATEMENTS .............................................................................................................................. 71

    1.1. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 ................. 71 1.2. CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 JANUARY 2016 TO 31 DECEMBER 2016 ...................................................................................................... 73 1.3. CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD FROM 1 January 2016 TO 31 DECEMBER 2016 ................................................................................................................................................. 74 1.4. CONCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2016 ......................................... 75 1.5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2015 ................................................. 76

    2. APPENDIX H TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................... 77 2.1. REPORTING ENTITY ................................................................................................................................... 77 2.2. BASIS OF PREPARATION ........................................................................................................................... 77 2.3. BASIS OF MEASUREMENT ........................................................................................................................ 80 2.4. FUNCTIONAL AND PRESENTATION CURRENCY ................................................................................. 80 2.5. USE OF ESTIMATES AND JUDGEMENTS ................................................................................................ 80 2.6. FINANCIAL YEAR ....................................................................................................................................... 81 2.7. CONSOLIDATION BASIS ............................................................................................................................ 81 2.7.1. Scope and procedures regarding consolidation of financial statements ....................................................... 81 2.7.2. The summary of eliminations and adjustments in the consolidation process for 2016 ................................ 83 2.8. FOREIGN CURRENCY ................................................................................................................................. 83 2.9. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES....................................................................... 84 2.10. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .......................................................... 88

    3. INDEPENDENT AUDITOR'S REPORT ......................................................................................................... 108

  • Annual Report of the VIPAP GROUP for 2016

    3

    I. INTRODUCTION

  • Annual Report of the VIPAP GROUP for 2016

    4

    1. EXPLANATION BY THE MANAGEMENT BOARD ABOUT THE OPERATONS

    OF THE VIPAP GROUP

    The year 2016 was again a demanding one for the Company as regards adjusting to the market situation in the area of graphic and publication papers, which have a negative growth trend. The Company faced the challenge of increasing its competitiveness and improving its operating results by increasing the production of wrapping packaging papers. However, their share is too small to compensate for poorer profitability of graphic papers. The volume of operations and revenues dropped by 2%, mostly due to decreased production efficiency. Urgent investments that would substantially improve the volume of operations and production efficiency were again postponed this year due to the lack of financial resources. The Company could thus only improve its profitability by restructuring production and sales and implementing measures relating to organisation of work and streamlining of operations. As concerns marketing, the Company mostly focused on nearby markets, which are the most profitable ones for us. We increased significantly the volume of sales in Italy, Hungary, Austria, Germany and Romania and decreased sales in overseas countries and Turkey. We also built a new network of customers for wrapping packaging papers, with whom we are enhancing cooperation also for the development of new paper types for other purposes. Particularly in the last quarter, joint activities of the production and sales departments increased with the purpose of adjusting our product range to the present and future requirements of customers. Besides consumer papers, which includes newsprint, the future market strategy anticipates a higher volume of niche and special types of papers, also for use in other industries (e.g. in construction). Operating results for 2016 were from the viewpoint of production costs significantly affected by the increase in prices of waste paper, which accounts for the biggest share in the structure. The 7- percent growth in prices, i.e. EUR 10 per tonne, increased production costs by EUR 2.1 million. The trends for waste paper are increasingly influenced by the changing demand of packaging manufacturers, which is growing rapidly. The Company cannot influence this aspect. However, through increased working capital we could influence lower prices by restructuring purchasing markets. Nevertheless, the Company managed to achieve savings of EUR 1.4 million in the area of fibres and chemicals and EUR 773 thousand of fixed costs by implementing the measures of the programme for improving operations. As investments were limited to the most urgent interventions for continuing production at the demand of creditor banks, the amount of EUR 1.1 million was mostly allocated to major maintenance and repairs. Despite the numerous limitations imposed by the banks and other creditors, to which the Company was adjusting for most of the year, the highest priority of business objectives was to motivate, nurture and develop employees, mostly through education and trainings (Paper Industry Academy). At the end of the year, we reached an agreement with banks an