Group review

2200 0 5 – 2 0000 6
 T H E J O T U N G R O U P

13 JO TUN DEKO RATI V

PRESIDENT & CEO
Morten Fon

FINANCE, IT, LEGAL

Audun Røneid

JOTUN DEKORATIV
Bjørn Naglestad
JOTUN PAINTS
Erik R. Aaberg
JOTUN COATINGS
Esben Hersve
JOTUN POWDER COATINGS
Knut Øivind Malmin
17 JO TUN PAI NTS

HUMAN RESOURCES
Merete Aspaas*
4
contents
Jotun protects property

COMMUNICATION
5 Group key figures
Elisabeth M. Støle* 6 A global leader
21 JO TUN CO ATI NGS 8 Milestones
BUSINESS DEVELOPMENT 9 80 years of growth
Tor Hatlo-Johansen*
13 Jotun Dekorativ
17 Jotun Paints
21 Jotun Coatings
BOARD OF DIRECTORS CORPORATE ASSEMBLY
25 Jotun Powder Coatings
Odd Gleditsch d.y., Chairman Olav Christensen, Chairman
Einar Abrahamsen Birger Amundsen 28 Focus elements (PPPI)
Richard Arnesen Fredrikke Eger 25 JO TUN PO WDER CO ATI NGS 30 People
Terje V. Arnesen Bjørn Ole Gleditsch
31 Position
Nicolai A. Eger Thomas Gleditsch
Thore Kristiansen Odd Inge Høyland 32 Profitability
Torkild Nordberg John Jørgensen 33 Innovation
Dag J. Opedal Rune Molteberg
34 Improved performance
Britt Paulsen
Halvor Stenstadvold 36 Directors’ report
Erling Fredrik Sørhaug
41 Profit and loss account
Egil M. Ullebø
*Member of extended group management 36 DI RECTO RS’ REPO RT 42 Balance sheet

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 G R O U P K E Y F I G U R E S

Jotun protects Respect is a key value for Jotun’s

continuing global success. Jotun build diverse
teams with respect for cultural and gender
differences, we are honest and fair, and we
developing markets. Through the success of
these endeavours we provide a solid bedrock
for the company’s future.
Position – because we are committed to
being a leading player in the markets we
select.
Profitability – because profit is proof that
respect laws and regulations. Supporting these values, we have four focus we create value.

property Boldness is the foundation on which

Jotun’s success has been built and this value
is just as important today. We are proactive,
we initiate and nurture change and we are
elements – PPPI – which serve as the
benchmark in our day-to-day operations:
People – because our staff contribute to
Jotun becoming the best company in the
Innovation – because innovative concepts
ensure growth and continued market
leadership.

enthusiastic in seeking new opportunities in industry.

2005 was Jotun’s best year yet. Major investments
provided a sound foundation ensuring we can uphold
our values with regard to owners, customers Group key figures
and employees in the years to come. (Figures include shares in joint ventures and are in USD million) 2005 2004 2003 2002 2001
SALES
Sales and other operating income 1 042 901 817 705 645
80 years ago Jotun was founded by Odd Export ratio (%) 74 73 73 69 71
Gleditsch sr. From the very beginning this
PROFIT
kind, charismatic gentleman inspired a unique
Operating profit 83 73 64 58 23
corporate culture that is maintained to this
Profit on ordinary activities before taxation 79 70 62 58 17
day. It is characterised by a sense of close-
Net cash flow from operating activities 29 71 47 111 31
knit family, an enterprising spirit, a desire to
work together and shared success. It is called PROFITABILITY
Jotun’s penguin spirit. Return on assets (%) 1) 12.0 12.5 12.0 13.2 5.7
It ties Jotun’s global activities together Return on capital employed (%) 2) 16.9 17.1 17.3 18.7 7.8
and is reflected in our basic values: Loyalty, Operating margin (%) 3) 8.0 8.1 7.7 8.3 3.5
Care, Respect and Boldness. Return on equity (%) 4) 12.6 12.9 9.6 11.9 5.2
Loyalty is an important value for Jotun.
YEAR-END FINANCIAL POSITION
The long-term relationship between Jotun,
Total assets 760 747 610 570 507
our colleagues and customers underlines the
Capital expenditure 64 31 29 37 34
trust placed in our products and our people.
Equity (incl. minority interests) 417 424 374 324 254
Care is a value cherished by Jotun,
Equity/assets ratio (%) 54.9 56.8 61.4 56.9 50.2
signalling a willingness to help and support
others and the fact that we protect our internal Average number of employees in group,
and external environment. including share in joint ventures 4 437 4 080 3 934 3 913 3 832

Number of employees in group,

including 100 per cent in joint ventures per 31.12. 5 009 4 738 4 481 4 363 4 339

DEFINITIONS OF KEY FIGURES

Profit on ordinary activities before taxation + financial costs

1) Return of assets % = x 100
Average total assets

Profit on ordinary activities before taxation + financial costs

2) Return on capital employed % = x 100
Average total assets - non-interest-bearing liabilities
Jotun’s Mammut, a lead-free coating
Operating profit
designed specially for steel structures, 3) Operating margin % = x 100
Sales and other operating income
is used on the Eiffel Tower.
Profit on ordinary activities
4) Return on equity % = x 100
Average equity

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 J O T U N W O R L D W I D E

Ribbon cutting during the Grand

Opening in January 2006 declared the
Jotun Coatings factory in Zhangjiagang,
China, officially opened.

A global leader AFRICA

Libya A
L = Legal

Singapore
South Korea
A = Agent / branch / distributor / licensee

L
L
Montenegro
Netherlands
Production units

A
L
Eighty years after being established in Norway, Jotun is today a global leader in paints and coatings. Mauritius A Thailand L L Norway L L L
Morocco A Vietnam L L Poland L A
We have 67 companies and 39 production facilities on all continents. In addition Jotun has agents, Namibia A Portugal A
South Africa L A AUSTRALIA Romania A
branch offices and distributors in more than 70 countries. Australia L L Russia L A
AMERICAS Slovak Republic A
The Jotun group consists of four business Jotun Paints has segment responsibility decorative paints in local markets in Europe
Argentina A A EUROPE Spain L
units, each with specific products and for decorative paints in all markets outside and selected markets in Asia.
Brazil L Bulgaria A L Sweden L L A
segments. Scandinavia. This responsibility includes Jotun Powder Coatings has global
Chile A Croatia A Switzerland A
Jotun Dekorativ has segment marine and protective coatings for markets in segment responsibility for powder coatings.
Curacao A Cyprus A Turkey L L
responsibility for Jotun’s decorative paints, the Middle East and Southeast Asia. The product portfolio caters to the architectu-
Panama A Czech Republic A L Ukraine A
stains and varnish deliveries to the trade Jotun Coatings has global segment ral, functional and industrial market segments
Peru A Denmark L L A U.K. L L
and Do It Yourself (DIY) markets in responsibility for marine and protective to protect metal surfaces from corrosion and
Trinidad A Estonia A
Scandinavia. coatings. This responsibility includes add style to their aesthetic appearance.
Uruguay A Finland L A MIDDLE EAST
USA L A France L Bahrain A
JOTUN PAINTS JOTUN COATINGS JOTUN DEKORATIV JOTUN POWDER COATINGS Germany L Egypt L A
Marine coatings • • ASIA Greece L A Iran A
Azerbaijan A Hungary A A Jordan A
Protective coatings • • China L Iceland A A Kuwait A A
Decorative paints • • • India A L Ireland L Oman L
Powder coatings • Indonesia L L Italy L Qatar A
Japan A Latvia A Saudi Arabia L L
Middle East North East Asia Scandinavia Global
Southeast Asia Americas Malaysia L L Lithuania A Syria A
(ex. Singapore) Europe Pakistan L Malta A UAE L L
South Africa Philippines A A Monaco A Yemen L
Australia
Singapore JOTUN COATINGS / JOTUN PAINTS JOTUN DEKORATIV JOTUN POWDER COATINGS

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M I L E S T O N E S J O T U N G R O U P

1926 19 51 1972 197 8 19 9 0 ’s 2004

Odd Gleditsch sr. A new factory with Merger of Norway’s New warehousing Major international New paint factory
founds Jotun a large laboratory is four largest coatings and distribution growth. is opened in Dubai
Kemiske Fabrik A/S completed at Gimle producers: Alf centre opens in with an annual
in Sandefjord, in Sandefjord, Bjercke, Fleischers Sandefjord. The 19 91 capacity of 70
Norway. Norway. Kjemiske Fabrikker, most modern New high-tech million litres.
Denofa Lilleborg’s computer-controlled environmental
19 53 paint and synthetic high-bay warehouse friendly paint 2004
Fenom, a major resin business in Europe at that factory opens at HM King Harald V
technological and Jotun Odd time. Vindal, Sandefjord. and HM Queen
advance in decora- Gleditsch. Sonja of Norway
tive paints, helps 19 8 0 ’s open Jotun’s
Jotun break into the Further expansion in expanded paint
retail market. the Middle East. production facility
1931 in Vietnam.
Commercial 19 8 3
breakthrough with Lord & Lady are
Arcanol, a rust- presented in the
inhibiting coating for Whiteline pastelles 2000
ships. 1975 that were stylish at Third generation,
19 6 2 First factory in the the time. Odd Gleditsch d.y.,
First factory outside Middle East is takes over as Chair- Morten Fon, President & CEO
2005
Norway is opened in opened in Dubai. man of the Board.
New paint factory is
Libya.
opened in Indonesia.

19 6 8
2005
First factory in the
New powder
Far East is opened in 19 8 5

80 years of growth
coatings factory is
193 9 Thailand. Formation Jotashield is
opened in India.
Pension fund of Corro-Coat A/S to launched in
established for all produce powder Southeast Asia in
2005
employees. coatings, a new 1976 1985 and in the 2000
Durable, flexible
concept at the time. The factory fire in Middle East in 1998. SeaQuantum, the
and heat resistant
19 4 8 Sandefjord on 15 Jotashield is Jotun’s world’s most
coatings are
Drygolin, Norway’s 1970 September 1976 is most extensive range advanced TBT-free, After 80 years of organic growth Jotun is well established as a global player. Success is
launched as new,
most frequently Odd Gleditsch jr. the most dramatic of decorative paints. self-polishing anti-
successful brand
purchased exterior replaces his father episode in Jotun’s fouling is introduced not only in products and profit; it is in Jotun’s history, people, culture and attitudes.
extensions of the
paint from Fleischers as Chairman of the history. The explo- 19 8 7 to the market.
Jotashield exterior
Kjemiske Fabrikker Board. He had taken sion kills six people. Jotamastic 87 is
product family.
A/S, is launched. over as managing launched as a leap
director in 1968. 1976 forward in Epoxy Odd Gleditsch sr. founded Jotun Kemiske and, in turn, an increased requirement for I N T E R N AT I O N A L I S AT I O N
2006
Multicolor tinting technology, 2004 Fabrik A/S in 1926. From its beginning Jotun paints and coatings. It was the initiative of Odd Gleditsch jr. that
New paint factory is
machines are beginning the future Two of the had connections with the wider world as The process of establishing the company established Jotun in Libya. He was both the
opened in China with
launched, and Jotun’s leadership in company’s four a supplier to the Norwegian merchant fleet. in a new culture was not without its problems. driving force and the architect behind Jotun’s
an annual capacity of
first Multicolor centre maintenance divisional manage- In 1962 Jotun established its first production Jotun quickly learned the importance of strategy of international expansion through
70 million litres.
opens in Sandefjord. coatings. ment teams transfer plant outside Norway and its international understanding and respecting the culture of organic growth. For Jotun ‘internationalisa-
to Dubai. activities took on a new dimension. another country. This lesson learned became tion’ became, and remains, both a goal and
an important factor when establishing a part of a clear strategy.
P OT EN T I A L F O R G RO W T H operations elsewhere, thus contributing to After Libya, Jotun developed rapidly
Libya was chosen. It was a peaceful but Jotun’s position today as one of the major and was soon active in markets all over the
relatively poor kingdom. However, oil had paint and coating companies in Europe, world. As business increased, Jotun’s own
been discovered in 1959, which would clearly the Middle East and Southeast Asia. production facilities were established. Now
lead to rapid growth in the country’s economy throughout the world, customers of Jotun

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 J O T U N G R O U P

SALES
MILL NOK
7000

6000

5000

4000

3000

2000

1000

0
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Nominal
The new factory in Zhangjiagang has an annual output capacity of 70 million litres. The factory, which has been built to handle the high level of growth in China,
represents one of the largest single investments made by Jotun ever.

reap the benefits of the highest standards of innovation and quality, and in service and BUSINESS UNITS BUSINESS SEGMENTS REGIONS
service and a group committed to excellence technical support for our customers. HIGHLIGHTS
in the research, development and production
• Best result in Jotun’s history Rest
of high quality products which offer value A S O L I D BA S E Jotun of the
• New factories in India, Indonesia
and performance. For the past eight years, the Jotun group has Powder Powder world
and China Coatings coatings
achieved an average annual sales growth rate Jotun
• A record number of people Paints
BU I L D I N G A BE T T ER FU T U R E of ten per cent. Results for 2005 confirm that Marine
attended the paint school in coatings Far East
Consistent international growth means this growth is continuing. To further strengt-
Norway (Jotun Fagskole) Jotun
meeting the challenge of ever changing hen and develop the strategy behind this Dekorativ Europe
• Successful launch of Jotashield
markets. Jotun is structured to meet these success a new department for Business
exterior decorative products in Decorative
challenges through products, people, Development has been established. Its paints
Middle East and Asia Jotun Protective Middle East
resources and the right business processes. responsibilities will include supporting the Coatings coatings
• New products, such as Lady
Jotun continues to expand in developing divisions in the development of new markets
interior wood stain, Benar varnish
markets. We remain committed to being the and all of the group’s training activities. This
and Visir Extra, launched in
leader in the markets we select. Combining organisational change will equip Jotun with
Scandinavia
the strengths of state-of-the-art technology, improved resources to further organic growth.
• SeaLion fouling release system
innovative thinking, practical knowledge and
launched in the marine market
experience, Jotun will deliver innovative 13% Jotun Powder Coatings 13% Powder coatings 56% Europe
• Established joint venture with
products and market concepts. We invest in 24% Jotun Dekorativ 17% Protective coatings 16% Middle East
COSCO in China
people, plants, systems and solutions and 22% Jotun Paints 41% Decorative paints 22% Far East
constantly strive to exceed the accepted Morten Fon 41% Jotun Coatings 29% Marine coatings 6% Rest of the world
standards of performance in product President & CEO

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J O T U N B A S I C V A L U E S J O T U N D E K O R A T I V

Loyalty
Loyalty is an important value for Jotun. The long-term relationship

between Jotun, our colleagues and customers underlines the trust placed

in our products and our people.

Bjørn Naglestad
Group Executive Vice President, Jotun Dekorativ

Strengthening
customer relations
Jotun Dekorativ meets the needs of increasingly professional customers

through innovation, added value and mutual profitability.

2005 was a good year for Jotun Dekorativ, marketing and customer relation activities
which is responsible for decorative paints in are paying off.
Scandinavia. The division recorded an Despite tough competition in Norway, we
operating income of NOK 1,610 million in have seen increased sales in the professional
2005, compared with NOK 1,499 million in market and strong sales growth in the DIY
2004. market. Norwegians love home improve-
This healthy financial result was due to a ments! The per capita consumption of paint
continued growth in the interior paint market in Norway is one of the highest in the world
combined with a good season for outdoor reflecting a combination of the harsh climate,
paints. a keen interest in decoration and home
ownership and a high standard of living.
G O O D R EL AT I O N S Sales in Denmark and Sweden continue to
Customer relations with the trade and rise, and in Denmark the number of professio-
Do It Yourself (DIY) sectors, together with nal decorators using our products continues
good consumer understanding, are important to grow. In Sweden we are now suppliers to
factors in upholding our position in the Färgtema paint retail chain and we look
Scandinavia. The results confirm that Jotun’s forward to attracting new customers as

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 J O T U N D E K O R A T I V

approved supplier to the nationwide Spektrum partner, offering new and innovative organisation and enhance the skills of its
chain. products, staying one step ahead of the employees. This carefully devised and
competition, providing excellent marketing effective programme can be a major influence
K E Y ACCO U N T C U S TO M E R S and information activities and added value on a customer’s choice of Jotun as a supplier.
Through these chains our customers are opportunities. We are humbled by our customers’ loyalty.
becoming bigger, fewer and more professio- Jotun’s key account programme for the The long-term relationship between the
nal. They know their market well, and they professional market is one example of this. company, its customers and employees
know what appeals to their customers. Jotun’s It is designed to help improve the efficiency, underlines the trust placed in our products
success is due, in part, to being a good and hence the profitability, of the customer’s and our people.

HIGHLIGHTS
• A record number of people
attended the paint school in
Norway (Jotun Fagskole)
• Jotun awarded 2005 Byggevare-
prisen as best supplier in the
building sector
• Launch of Lady interior wood stain
• Launch of Benar furniture varnish
and Visir Extra
• Development of new packaging for
Demidekk Optimal
• Implementation of a new Enterprise
Resource Planning (ERP) system
• A key account programme
strengthening customer relation-
ships
• Meeting customers at different
arenas such as Folkefesten,
involving concerts across Norway

A new white base, with a 30–40 per cent increased covering ability, was launched by Jotun Dekorativ The 2006 colour palettes Spring, Summer, Fall and Winter are specially designed for the exterior brands Demidekk, Drygolin and Trebitt.
during the spring 2006. The launch strengthens Jotun’s position and competitiveness.
NEWS

I N T ER N E T SU CC ES S N E W CO N C EP T S J OT U N D EKO R AT I V
The number of customers surfing the Internet A number of new Jotun Dekorativ concepts 696 employees per 31.12.05 MILL NOK PRODUC TION UNITS
in search for information continues to grow at will be introduced in 2006, including the Norway
3000
a remarkable rate. Jotun aims to meet introduction of Demidekk Optimal (exterior
consumers’ needs by offering the best website wood stain) in new packaging with an 2500
in its category. In 2005 www.jotun.no integral lid opener and a new Lady concept
received 400,000 hits. The website has (interior paint) with more and clearer benefits 2000
quickly been identified as an extremely useful for consumers. 5% Miscellaneous
1 610
1 499
resource in helping the consumer decide on The customer is always at the heart of 1500 1 327
1 409
1 323
48% Interior
colours, products and type of applications that the Jotun Dekorativ innovation process.
most suits their needs. On-going develop- We believe and insist that any additions and 47% Exterior 1000
ment, refinement and updating of the website improvements to our products and services
continues in order to satisfy customer must offer more value to our customers – 500
requirements and to provide information on innovation is at the heart of Jotun’s growth.
new products, innovations and opportunities 0
Demidekk Optimal launched in new packaging and 2001 2002 2003 2004 2005
to add colour and style to their lives. with separate lid opener.
S EG M E N T S SALES

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J O T U N B A S I C V A L U E S J O T U N P A I N T S

Respect
Jotun has 5 000 employees with a variety of cultural backgrounds. We build diverse

teams with respect for cultural and gender differences; we are honest and fair, and respect
The colour of success
laws and regulations. This is absolutely vital to ensure continued growth and development. Jotun Paints continued to achieve good results and sales growth. Jotun is

Our common basis is the penguin spirit. It makes us strong – together. the market leader in the Middle East, and has strengthened its position in the

market for decorative paints in particular. There has been a major focus

on innovation and development of the Multicolor concept.

Jotun Paints comprises all paint activities in The marketing strategies and product in our efforts and implementing sound pro-
the Middle East and Southeast Asia. Jotun is development of the marine and protective active marketing and organisational plans,
market leader in decorative paints in the coatings segments are co-ordinated with experience has proved that we can achieve a
Middle East, with these paints accounting the Jotun Coatings division. Both business leading position. For example Jotun was the
for around 70 per cent of the division’s segments have achieved healthy growth in first international paint company to establish
business. most of the Middle East and Southeast Asian production units in Libya, Thailand and the
Overall results were good and on target. markets. Marine clients include local and United Arab Emirates, and now in Yemen.
The Middle East achieved better than regional companies as well as a number As the company in a new market
expected growth, whilst some Southeast Asia of major international customers in Egypt, progresses, the care and development of its
results were poorer than anticipated. United Arab Emirates, Malaysia and employees becomes of great importance.
Increased raw material prices in particular Thailand. Jotun allows its employees a great degree
had a negative effect. The division’s operating Over the years Jotun has achieved a of freedom of action within established
revenues were NOK 2,122, compared with strong position with architects, consultants,
NOK 1,959 in 2004 (including 100 per cent contractors and developers. As a conse-
share of JV). quence, Jotun Paints has a large market share
in the constructions market in several regions
S T RO N G G RO W T H in Southeast Asia and the Middle East, and is
Increased distribution of decorative products involved in supplies to several landmark
in all markets has been achieved by creating a projects.
growing number of Multicolor retailers, many
of which sell exclusively Jotun products. E X PA N S I O N
Multicolor, Jotun’s well-known ‘shop-in- To meet the increased demand for our
shop’ colour tinting system, including products a new factory opened in Indonesia
machines, software and shop material, is a in late 2005. A new factory was completed in
very effective sales tool for retailers. The Yemen at the beginning of 2006 and further
Multicolor system, together with marketing, investment programmes are underway in
sales and service at local level, are under Saudi Arabia and Egypt.
constant development to ensure that we stay Jotun’s expansion strategy is to enter
ahead of our competitors and meet the markets with a potential for strong growth. Erik R. Aaberg
demands of the market. By entering these markets early, persevering Group Executive Vice President, Jotun Paints

16 w w w. j o t u n . c o m w w w. j o t u n . c o m 17
 J O T U N P A I N T S

© Nakheel Co LLC
BU I L D I N G R EL AT I O N S H I P S
Jotun places great emphasis on building
relationships through expertise. Training
for all our sales staff is primarily
provided at Jotun’s Commercial Paint
School, and we are currently developing
a training programme to further
strengthen our relationships with our
distributors and assist them in improving
their sales.

HIGHLIGHTS
• Position as leading paint
manufacturer in the Middle East
strengthened
• New factory in Indonesia
• Upgrading of factories in Saudi
Arabia, Egypt and Malaysia
• New factory in Yemen
The Palm Jumeirah, United Arab Emirates: A 5 km long man-made island has been built off the coastline of Dubai. 2,000 villas are nowadays being protected The Kinda showroom is one of the most exclusive Jotun Paints showrooms in Saudi Arabia.
• New successful brand extensions
with Jotashield. of the Jotashield exterior product
family with durable, flexible and
heat resistant coatings
strategies and guidelines. We believe it is many examples of successful relationships inspection during application, whether the 2,000 villas on the famous Palm Jumeirah in to strengthen and improve the innovation
• Strengthened distribution chain in
important for our employees to have a clear where customers have grown hand in hand surface being decorated or protected is wood, the United Arab Emirates. process. They maintain close contact with
the Middle East and Southeast Asia
understanding of the overall situation and with Jotun. concrete or steel. Establishing and building the customer’s all segments of their markets to both initiate
• Major contracts secured and
appreciate what factors lead to growth and Jotun’s Single Source Solution ensures that trust, whether contractor, building owner or and identify new trends and needs.
effected
profitability. In return our employees are A DVA N C E D P ROJ EC T S most of a customer’s paint and coating needs painting contractor, requires continuous Trust requires respect, and respect is an
• Skills upgrading of the sales force
reliable, competent and loyal. Complex projects require holistic solutions. are covered by a single supplier, simplifying innovation, development and improvement in absolute necessity for Jotun’s continuing
through the Commercial Paint
Jotun also attaches great importance To ensure optimum results for the customer, the supply chain and avoiding duplication of all areas of Jotun’s business. We have a policy global success. Jotun builds diverse teams
School
to building long-term relationships with Jotun increasingly not only delivers paint to effort. Examples include the supply of paint to of constant investment and upgrading of with respect for cultural and gender differen-
• Further improvements within Health,
customers, and to ensuring that both parties the agreed specification, but also provides 37 tower blocks at Jumeirah Beach Residence regional marketing departments and laborato- ces, believes in honesty and fairness, and
Safety and Environment (HSE)
benefit from the collaboration. We have technical consultancy services and undertakes in Dubai – more than 1.5 million m2 – and ries in the Middle East and Southeast Asia respects laws and regulations.
NEWS

I N S P I R AT I O N C EN T R E J OT U N PA I N T S
For many years Jotun’s Multicolor Centre has 1 884 employees per 31.12.05 MILL NOK PRODUC TION UNITS
provided a unique method of selling paint, 3000 Egypt
making available an advanced colour mixing Indonesia
system and a multitude of paint systems and 2500 Malaysia
painting techniques. 2 122 Oman
Jotun has now taken the Multicolor Centre 2000 1 959
1 851 Saudi Arabia
9% Marine coatings 1 723 1 776
concept one step further. Jotun Inspiration Thailand
Centres provide expertise within decoration, 1500 United Arab Emirates
22% Protective
interior and painting techniques and the coatings Vietnam
consumer is able to stroll around displays of 1000
Yemen
kitchens, bathrooms, bedrooms and living 69% Decorative
rooms, gaining inspiration for painting paints 500
systems and interior solutions in general.
Inspiration Centres have already been built in 0
2001 2002 2003 2004 2005
Oman, Dubai, Saudi Arabia and Kuwait.
S EG M E N T S SALES

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J O T U N B A S I C V A L U E S J O T U N C O A T I N G S

Care
Care is at the heart of Jotun’s corporate culture in terms of willingness to help and support

others, to display trust and empathy and to protect our internal and external environment.

We do this by working as a team, by creating innovative, environmentally friendly products,

Profitable growth
and by always doing our utmost to accommodate our customers’ requirements. Favourable market conditions and a growth strategy in selected

markets have contributed to increased volumes and many new projects.

Jotun Coatings plans to consolidate its position further by focusing

more on markets offering high levels of potential.

Jotun Coatings has global responsibility for opened on 12 January 2006, represents one of
coating systems designed for the shipping, the largest single investments ever made by
industrial and offshore sectors. In 2005 the Jotun. Also in China, we have strengthened
division strengthened its position and our co-operation with COSCO during the
increased volumes both within the marine year and our mutual ambition is to be the
and the protective segments. Jotun Coatings country’s number one marine coatings
posted an operating income of NOK 2,945 supplier.
million, compared with NOK 2,506 million Profitability in Europe is too low, and we
in 2004 (including 100 per cent share of JV). have responded to this challenge by selecting
Despite the increase in profits, this result is
not yet on a par with the group’s long-term
requirements in terms of margins and
profitability.
As in most markets high raw material
Esben Hersve costs were a factor, which, together with
Group Executive Vice President, Jotun Coatings stiffer competition in both the marine and
protective segments, put pressure on margins.
Conversely higher oil prices and general
global growth helped boost activity in the
form of new investments and increased
maintenance for both ships and industrial
plants. The rise in global trade and the
resulting increased transportation require-
ments benefited both segments.
Jotun Coatings has been been chosen as coating
P O S I T I O N I N G F O R T H E FU T U R E supplier for corrosion protection of SSP Piranema,
Volumes and sales are growing rapidly, the world’s first cylinder shaped unit for production,
particularly in Asia. A new factory has been storage and offloading of crude oil (FPSO). The
built in China to handle the high level of platform is designed by the Norwegian offshore
growth. The factory, which was officially technology company Sevan Marine.

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 J O T U N C O A T I N G S

specific markets for particular attention. customer, irrespective of national borders.

Protective coatings represent a good It will increase our understanding of each of
opportunity in several of these markets, and our customers’ requirements and enable us to
we have concentrated on improving sales provide them with better and more efficient
capacity and competence. Together with a service.
considerable improvement during the year in Major customers are getting bigger
the delivery service from our U.K. factory, we and are making decisions at a global level,
expect these changes will help increase which makes it all the more important for us
profitability in the long term. to consolidate Jotun’s position as a global
player. Jotun is committed to act as a
S T RO N G B R A N D S responsible corporate citizen. This includes
Jotun Coatings has a clear growth strategy, protecting the internal and external
and has defined several areas in which we environment.
wish further expansion. Brazil, India, Turkey
and the Black Sea region, Russia, South
Africa and China represent major opportuni-
ties.
Our growth strategy also involves further HIGHLIGHTS
consolidation of our position with the largest
• 20 per cent growth
and most complex customers. During 2006
• Joint venture with COSCO in China
we will be focusing on improving internal
• New, modern factory opened in
cross-border cooperation. Our ability to
Zhangjiagang, China
cooperate internally and learn from each other
• Record high on new marine and
has placed us in an even better position to
protective contracts
handle major projects.
• SeaLion launched
We will concentrate operations and future
• Strengthened cooperation on
innovation on fewer, but stronger, brands.
cross-border projects
• High activity in the Oil & Gas
K E Y ACCO U N T P RO G R A M M E
sector, in particular in Middle East
At the same time, we have established a key
• Large projects secured for
account programme. This programme
Kashagan by Jotun in Turkey,
provides us with more focused communica-
Norway and Italy
tion with our major customers and allows us
a clearer overview of sales and profit for each
The semi-submersible drilling rig Leiv Eiriksson is used for exploration and development drilling in ultra SeaLion fouling release coating was Jotun Coatings’ most important 2005 global launch.
deep water. The rig is protected against its harsh environments by coating systems manufactured by Jotun.
NEWS

M A X I M U M S P EED A C ROSS - BO R D ER SU CC ESS J OT U N COAT I N G S

WITH SEALION Over the next two years Jotun Coatings will 1 707 employees per 31.12.05 MILL NOK PRODUC TION UNITS
SeaLion fouling release coating was Jotun be supplying coating systems to the world’s 2 945 Australia
3000
Coatings’ most important 2005 global launch. largest offshore oil field, Kashagan, located 2 774
China
The product is ideally suited for fast and high in the remote shallows of the Caspian Sea. 2 457 2 506
2500 2 292 Finland
activity vessels, keeping hulls, propellers and Securing such a project enhances and Italy
rudders free from fouling without releasing strengthens Jotun’s strong position in the 6% Decorative 2000 Singapore
any biocides. SeaLion creates a very smooth Oil & Gas sector. paints
South Africa
surface enabling higher vessel speed and/or The contracts were secured thanks to 1500 South Korea
26% Protective
reduced consumption of heavy fuel oil. cooperation between Jotun Coatings coatings Spain
SeaLion fouling release coating creates less companies in Norway, Italy, U.K. and Turkey. 1000 Turkey
dry spray (loss) during application than other Jotun’s part of the project includes supply 68% Marine
U.K.
coatings of this type. This results in less paint vessels, offshore barges, tanks, pipe racks coatings 500
USA
wastage, reduced volume and reduced and industrial buildings.
application costs – all of which benefit the 0
2001 2002 2003 2004 2005
customer.
S EG M E N T S SALES

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J O T U N B A S I C V A L U E S J O T U N P O W D E R C O A T I N G S

Boldness
Boldness is the foundation on which Jotun’s success has been built, and this value is

just as important today. We are proactive, we initiate and nurture change, and we

are enthusiastic in seeking new opportunities in developing markets. Through the

success of these endeavours we provide a solid bedrock for the group’s future.
Local approach
In 2005 Jotun Powder Coatings established a new organisational structure.

The division aims to be in an even better position to satisfy the market’s

requirements in terms of innovative quality products and market segments.

Jotun Powder Coatings is the world’s fourth Jotun’s response to the increased
largest supplier of powder coatings for the competition is the development of new
industrial surface treatment of metal. With products and concepts, and investment
more than 35 years of solid experience in the in boosting production efficiency and
powder industry, 11 manufacturing facilities production capacity, demonstrated by the
and an extensive network covering 75 recent inauguration of its new factory in
countries, Jotun Powder Coatings is a India.
solution provider dedicated to meeting the
need for corrosion resistance and solvent-free S EG M EN T S I N T H E S P OT L I G H T
powder coatings. The headquarters is in The magnitude and pace of today’s environ-
Dubai, U.A.E., and the division’s operations mental changes have highlighted the need
are split into three market segments: for a more flexible structure, which is why
Architectural, functional and industrial and a new organisational structure has been
specialties. introduced, delegating responsibility from
Knut Øivind Malmin regional to local level in order to increase
Group Executive Vice President, CO N T I N U E D G RO W T H market proximity. General managers in 11
Jotun Powder Coatings In 2005 Jotun Powder Coatings continued countries, spread across Europe, Southeast
to grow in terms of volume and operating Asia and the Middle East, now report directly
income, but higher raw material prices and to the CEO, with support and follow-up from
fierce competition in existing markets led to divisional managers. The new organisation
lower margins for the division. Maintaining will provide us with a better platform for
costs at an acceptable level continues to be an developing new, innovative products and
important task. The division posted an concepts, based on market requirements
operating income of NOK 979 million, and needs.
compared with NOK 898 million in 2004 A newly formed Innovation Board will
(including 100 per cent share of JV). now monitor the innovation process and

24 w w w. j o t u n . c o m w w w. j o t u n . c o m 25
 J O T U N P O W D E R C O A T I N G S

the R&D efforts, ensuring greater internal

cooperation whilst also placing Jotun Powder
HIGHLIGHTS
Coatings in an even better position to launch
new products ahead of our competitors. • New organisation with stronger
local focus and divisional support
CO M M O N A P P ROAC H • Jotun Powder Coatings in India
In recent years the Jotun brand has been started up production
strengthened very successfully. 2006 will see • Jotun Toz Boya in Turkey attained
our segments consolidated further with the all-time-high production and sales
appointment of category managers, who will record in the Powder Division’s
coordinate our sales and marketing activities. history
This will ensure a common approach ensuring • Innovation Process strengthened
that all companies project the same image and • Strengthening the cooperation
meet our customers’ needs. with all other divisions in marke-
ting, communication, sales and
R I S I N G S K I L L L E V EL S R&D
In 2005 we increased our activities to raise
the skill levels within sales and R&D. The
effort directed to developing the Jotun
Powder School was a milestone in 2005 and
the school will be an extremely important tool
in consolidating Jotun’s position in the The Fairmont Dubai hotel is decorated and
market. protected by powder coatings manufactured by
Improving the sales force’s technical Jotun.
knowledge and competence will enable us to
provide even better technical service and
customer support. Added value will provide cost efficiency. Not least, the training will
Jotun Powder Coatings with a key advantage assure them that Jotun provides quality.
in the market. Their improved knowledge gained through
Training at the Jotun Powder School Jotun Powder School will lay the foundation
will also be offered to our customers with a for long-term customer relations.
view to increasing their interest in selecting By rising our own and our customers’ skill
powder coatings and improve their ability levels, Jotun nurtures change. Together we
to apply the technology correctly and with shall create the future.
Fusion Bond Epoxy (FBE) coatings provide excellent protection against corrosion and can meet all pipeline specifications for the transportation of hot or Innovation is critical to safeguard our position and
cold material. profitability.
NEWS

H I G H T EM P ER AT U R E , O U T S TA N D I N G SU P P L I ER 2 0 0 5 J OT U N P OW D E R COAT I N G S
LOW CO R RO S I O N Out of 186 suppliers, Mitsubishi Heavy 665 employees per 31.12.05 MILL NOK PRODUC TION UNITS
H.O.T. 150 is a new line of Fusion Bond Industries-Mahajak Air Conditioners Czech Republic
3000
Epoxy (FBE) coatings specifically designed (MACO) selected Jotun Powder Coatings India
to meet the demands for corrosion resistance Thailand as their Outstanding Supplier of the 2500 Indonesia
at elevated operating temperatures for Year 2005. Malaysia
pipelines. This is a niche market in which The award was given in the High Quality 2000 Norway
Jotun Powder Coatings has a first entrant’s Product category, Grade A, with a total 14% Architectural
Pakistan
edge over its competitors. performance score of 99 per cent. 1500 Saudi Arabia
15% Functional
The launch campaign in 2005 included MACO is amongst the top ten manufactu- Thailand
979
a direct mail campaign to the target group in rers of air-conditioners in Thailand and has 71% Industrial 1000 832 898
Turkey
797 756
25 countries, followed up by customer visits been Jotun Powder Coatings’ largest customer and specialties
United Arab Emirates
and conference participation reinforced for over 15 years. 500
Vietnam
through trade media advertising and
advertorials. 0
2001 2002 2003 2004 2005
S EG M E N T S SALES

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 F O C U S E L E M E N T S

PPPI
We use four focus elements, PPPI, as a guide in

our day-to-day operations. These are used as a

benchmark for all decisions we make.

PEOPLE POSITION PROFI TABILI T Y INNOVAT ION

To meet customer needs we must have the A strong position gives us the opportunity All actions should either bring value to To grow we must develop new products
right business processes. It is essential to to influence and drive the markets. We are the customers or reduce costs for Jotun. and marketing concepts and improve our
develop and recruit the necessary compe- committed to being a leading player in the Profitability is proof that we are creating work processes. Our customers should feel
tence and skills to perform these processes. markets we select. value. that we drive the markets and innovate.

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 F O C U S E L E M E N T S

People Position
Regional networks, training programmes, common values and business guidelines ensure Jotun’s aim is to be a leading player in defined market segments worldwide.

that Jotun projects a uniform image across the world. This helps us to consolidate our We achieve this by building long-term relationships with customers, suppliers

position as a global player. and employees.

At Jotun we pay great attention to the CO M M O N P L AT F O R M Jotun is a group driven by organic growth. products we supply comply with, or even
development of our employees. We have Building networks and cross-cultural teams We have established our position through exceed, international environmental require-
now taken this one step further by setting up is of great importance for Jotun’s success. patience and by implementing a long-term ments.
a new department for Competence Manage- Jotun’s corporate culture has developed strategy devised by the company. Our business involves resources, which
ment. Its responsibilities will include all of gradually from when Jotun was founded 80 result in emissions being discharged into the
Jotun’s corporate training programmes, years ago and has been introduced to every S U CC E S S FU L G RO W T H ground, sea and air. We are conscious of our
e.g. management, technical, sales, HSE and country in which we have established Jotun Egypt is a typical example of Jotun’s increasing production volumes and are
purchasing training, and a new trainee operations. We have integrated our corporate growth strategy. We started by exporting from actively implementing efficiency improve-
programme for younger employees showing culture, core values and general business Jotun’s plant in Dubai. In 1986, when the ments that can provide both environmental
management potential. principles into a formal framework. This business in Egypt had reached a certain level, and financial benefits.
enables us to ensure that our employees and a factory was opened. Today Jotun Egypt is Jotun has also made great strides in
R EG I O N A L N E T W O R K companies have a uniform basis for behaviour market leader in the protective and marine developing innovative waterborne industrial
Our internal training programmes bring and business activities right across the world. segments and number three in the decorative and alkyd paints for the residential market,
together people from every part of our Thanks to our strong corporate values Jotun is segment. It has taken many years to achieve and our new silicone-based fouling release
organisation. This helps to improve skills, seen as a dependable, responsible player. this position but as the market shares have coatings are less harmful for the environment
reinforces the team spirit and increases We will continue to secure and develop the increased the company has also become very than conventional products on the market.
mutual respect. corporate culture which has laid the founda- profitable. To continue our success we must develop
To share best practice Jotun is building tion for Jotun’s growth to date, and to which highly skilled staff, innovative products and
regional networks across divisions and we will remain committed in the future. ENVIRONMENTAL RESP ONSIBILIT Y market concepts and expand into new
business areas. This contributes to develop- As a global leader in paints and coatings markets. This will provide us with a sound
ment and improvement, which in turn Jotun recognises its particular responsibilities basis for future organic growth.
strengthens the organisation. for the environment and for ensuring that the

Photo courtesy of Conny Wickberg.

Our employees and companies have a uniform basis for behaviour and business activities right across 21st Century Tower in Dubai is one of the tallest Stena Arctica is the world’s largest 1A Super ice classed oil tanker in service.
the world. residential buildings in the world.

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 F O C U S E L E M E N T S

Profitability Innovation
During the last eight years Jotun has had an average annual sales growth rate In a market where competition is getting fiercer, and margins are decreasing,

of ten per cent and an even higher growth in profitability. innovation is critical to safeguard our position and profitability.

To continue our growth in selected markets Customer training is an important investment Products don’t just happen, they are the the US, and regional laboratories for powder introduced Jotun Innovation Process,
we need to direct our attention at profitability. for Jotun. result of dedicated research and development coatings in the Czech republic, the UAE and managing innovations as cross-disciplinary
We have a number of resources to help us in (R&D) geared to legislation and market Thailand. Our innovation potential increased cooperation, involving marketing, R&D,
this task. S E RV I C E A N D F O L LOW - U P needs. even more with the opening of a new regional production, purchasing, sales and divisional
The level of service delivered by our paint laboratory in China in December. management, making sure that new products
A D D E D VA LU E dedicated and competent employees is UNIQUE INSIGHT are launched in a targeted, strategic manner.
Sales training enhances expertise and helps second to none. In the marine segment our All of our products have been developed I N N OVAT I V E CO O P E R AT I O N This will enable us to create innovative
our companies develop employees who can technical service staff ensure the owners’ using extensive knowledge of local markets Innovation is one of Jotun’s most important quality products that are appropriate to
contribute to growth. In parallel we develop confidence when maintaining ships and and our selected segments. We acquire this tools for winning market shares. To be even selected markets and segments because they
products closely related to the needs of our building new ones. They take responsibility background knowledge through having more efficient in our innovations we have meet customers’ requirements.
markets. This results in locally adapted for the entire process, from before delivery representatives in all our markets and by
products, which help to boost sales and of the paint until the application process is communicating with our customers. Products
strengthen Jotun’s position. complete. adapted to particular regions are created in
Training provides our customers with Jotun has a comprehensive key account our regional laboratories across the world.
added value whilst also building loyalty. system for managing our main customers. In 2005 the Jotun group spent NOK 125
The paint school in Norway (Jotun Fagskole) This system enables us to coordinate all the million on R&D. Around the world 200
offers training for staff working in retail resources we employ for our customers and people work continuously to meet our
shops. Over 5,000 people from more than equips us to provide optimum follow-up and customers’ needs and to keep Jotun one step
1,000 companies have to date used this service. The benefits are combined with our ahead of our competitors. Our R&D centre
opportunity to gain competence. This has constant efforts to deliver a more efficient use in Sandefjord, Norway, is the largest in its
equipped them to provide their customers of our own resources. Overall, this produces kind in the Nordic countries. In addition we
Jotun’s Multicolor Centre provides a unique with an even better service, as they are now greater profitability in the long term, both for have regional paint laboratories in the United
method of selling paint. more competent to sell Jotun products. Jotun and our customers. Arab Emirates, Malaysia, South Korea and

Jotamastic Smart Pack. Jotun’s comprehensive key account system enables us to provide optimum follow-up and service. Jotashield Flex. Products adapted to particular regions are created in our regional laboratories across the world.

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 B O A R D O F D I R E C T O R S

BOARD OF DIRECTORS

Improved performance
2005 was a good year for Jotun despite many years of rising raw material prices. “We are now starting

to reap the rewards of several years of constant improvements, much to the delight of the Board of
Odd Gleditsch d.y. Einar Abrahamsen Thore Kristiansen Nicolai A. Eger
Directors,” says Chairman of the Board, Odd Gleditsch d.y. Chairman of the Board

Odd Gleditsch d.y. took up the post of growth in both volume and sales. The Board an extremely strong corporate culture, which
Chairman of the Board in 2000. Five years on also anticipates even better results in 2006. is known as Jotun’s penguin spirit.
he can confirm that the group is financially “We are confident that the new CEO will ”It includes entrepreneurship, loyalty, the
strong and has consolidated its position in help Jotun to reach new heights.” ability to delegate authority, a willingness to
a number of markets. take responsibility and making our customers’
“Jotun has always developed one step at a W I L L I N G N E S S TO C H A N G E needs a top priority. The synergy that this
time within a long-term perspective. One of The Chairman of the Board believes that produces helps Jotun to exceed customers’
our strengths is in creating the right conditions the group is faced with a number of expectations. This is what will help us
for organic growth, which has produced challenges. conquer future challenges”
positive results. Not least, Jotun has good “Our greatest challenge is perhaps to
products and concepts and a large number of drive the innovation process forward with D I V I D EN D P O L I C Y
competent and devoted employees.” sufficient force. We need to continue to be After Odd Gleditsch d.y. took over as Terje V. Arnesen Torkild Nordberg Dag J. Opedal Richard Arnesen
willing to make changes, and not rest on our Chairman of the Board in 2000, the dividend
LO N G -T E R M O W N E R S H I P laurels due to the positive results we have policy changed somewhat.
Jotun was founded by Odd Gleditsch d.y.’s achieved. Now that we have a sound financial “We have had a deliberate policy of
grandfather, and the ownership structure of platform, we need to prepare ourselves increasing dividends in order to give the
the company has remained stable ever since. against even stiffer competition. In order to shareholders an ongoing return that better
“The family has been involved in the maintain the profitability of our operations reflects the assets that Jotun is managing for
company’s ownership for 80 years, and Orkla we must constantly evaluate how we organise its shareholders. At the same time, we must
– one of Norway’s largest companies – for 30 and run our business. This will also require maintain Jotun’s ability to finance expansion.
years. This proves that the company has long- a great deal of effort from our employees,” Our ownership structure dictates that all
term owners,” he confirms. he states. investments must be covered by Jotun’s
According to Mr Gleditsch d.y., the Board income. This will continue to be the case in
of Directors is pleased with the financial U N I Q U E P EN G U I N S P I R I T the foreseeable future.”
results for 2005, and envisages continued Odd Gleditsch d.y. points out that Jotun has

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 D I R E C T O R S ’ R E P O R T

DIRECTORS’ REPORT
1. P R I N C I PA L AC T I V I T I E S Results On behalf of the group, Jotun A/S had The marine and protective business The Multicolor concept (Jotun’s colour- positions in markets such as Saudi Arabia,
At the end of 2005, the Jotun group was Group operating income totalled NOK 6,710 overdraft facilities and other committed short- segments improved their positions and mixing system) provides Jotun with one of its the United Arab Emirates and Malaysia. Jotun
engaged in the development, manufacture, million, against NOK 6,075 million in 2004. term and long-term lines of credit amounting increased sales in 2005. The business has competitive advantages. Further development Paints is continually assessing potential new
marketing and sale of paint/coating systems The group recorded pre-tax profits of to NOK 1,275 million at year-end, none of benefited from the upturn in global trade and of the concept and its applications has helped markets in the light of this strategy.
and surface treatment products through four NOK 490 million, against NOK 471 million which had been utilised. At the same time, the resulting increase in demand for transport to boost distribution and establish a strong Strong growth has led to the need for
divisions: in 2004. The overall tax charge for the year Jotun A/S had liquid reserves (committed and a generally higher level of investment and position. Steps are also being taken to increased production capacity. In November
Jotun Coatings: Marine and protective was NOK 151 million, against NOK 142 lines of credit, cash, bank deposits, etc.) maintenance activity linked to vessels and strengthen sales and marketing expertise 2005 Jotun opened a modern new factory in
coatings for industrial and offshore use million in 2004. The group profit after tax totalling NOK 1,407 million. industrial plant. Systematic steps taken to within the local companies. Jakarta, Indonesia, and a new manufacturing
in Europe, the USA, South Africa, Australia but before minority interests was NOK 339 The group’s net cash flow in 2005 was implement improvements are also being facility in Yemen was completed at the end of
and North East Asia, and decorative million, against NOK 329 million in 2004. NOK -183 million, against NOK 187 million reflected in higher profitability. the year. Investments are also being made to
products for local customers in the same The parent company – Jotun A/S – posted in 2004. The cash flow from operations was Effective innovations developed specifi- expand the group’s plants in Saudi Arabia and
regions. pre-tax profits of NOK 451 million, against NOK 188 million. cally to meet customer needs have contributed Egypt.
Jotun Paints: Decorative products in the NOK 372 million in 2004. After tax totalling The group’s equity ratio stood at 54.9 per to the improved performance. Enhanced
Middle East and South East Asia, and marine NOK 102 million, the parent company cent at year-end, against 56.8 per cent a year expertise in sales and a greater focus on large Jotun Dekorativ
and protective coatings for local customers accounts show a profit of NOK 349 million, earlier. and complex clients within selected core areas The division’s sales was again at a record
in the same regions. compared with NOK 299 million in 2004. Liquid reserves and the capital base are resulted in many new projects in 2005. Some level in 2005. Higher sales of interior paints
Jotun Dekorativ: Decorative paints, considered to be satisfactory, for both the increase in the pace of growth is expected combined with a good season for outdoor
stains and varnishes for the trade and DIY Financial position and capital structure group and the parent company. over the next few years as a result of new and paints contributed to a satisfactory result for
markets in Norway, Sweden, Denmark and The group is exposed to credit, interest further developments in rapidly expanding 2005.
Iceland, and the manufacture of binders. rate and exchange rate risks in its ordinary Allocation of profit markets such as Russia, Brazil, India, Turkey, The year was marked by the introduction
Jotun Powder Coatings: Powder coatings business operations, and active steps are Jotun A/S recorded a net profit of the Black Sea region, South Africa and China. of a new ERP system, which affected
for industrial and decorative purposes, and taken to keep these risks at acceptable NOK 349,009,000 for 2005, with the Jotun Coatings opened a new factory in deliveries to some extent during the high
corrosion protection systems for steel levels. proposed allocation for approval by the AGM China in January 2006. This factory season. This situation was however rectified,
reinforcing rods and oil and gas pipelines. In addition to credit insurance, procedures as follows: represents a major single investment and is and the division is again able to deliver
Jotun has a global network and is have been established to assess customer designed to meet growth in China in particular reliably and meet customer requirements.
represented on every continent through its creditworthiness in order to reduce the credit Provision for dividends and in North Asia in general. Jotun has Jotun has a strong position in Norway,
various subsidiaries and joint ventures. risk. (NOK 450 per share) NOK 153,900,000 strengthened its collaboration with the reflecting its good customer relations. The
The group comprises 54 active legal entities Net interest-bearing debt increased by Allocation to other equity NOK 195,109,000 Chinese company COSCO, which has one of progress being made in sales is evident within
spread across 35 countries, including 39 NOK 328 million from net deposits of Total allocation NOK 349,009,000 the world’s largest fleets. This venture in the the professional trade and in the building
manufacturing plants. The parent company NOK 77 million to interest-bearing debt marine segment will increase sales and enable commodities market. Jotun has also retained
Jotun A/S has its head office in Sandefjord, of NOK 251 million at the end of 2005. On this basis, free equity at year-end 2005 a good foothold to be established locally. its strong position within the trade market.
Norway. The group’s interest rate exposure therefore totalled NOK 2,075 million, against The division is also very active in the The number of chains selling the division’s
remains limited. NOK 1,903 million a year earlier. Jotun Paints project market throughout the Middle East products has fallen, but at the same time they
2 . T H E ACCO U N T S The primary exchange rate exposure Jotun Paints has three business segments; and Southeast Asia and has established a have become bigger and more professional.
The 2005 accounts have been prepared on relates to the USD and USD-related curren- 3. THE MARKET decorative, marine and protective, of which good position amongst architects and Jotun seeks to be an attractive partner, not
a going concern basis. cies, the EUR and the TAB. Exchange rate Jotun Coatings decorative is the most important in terms of contractors who have won many large only by offering a sound profit on sales of its
The consolidated accounts comprise the exposure in the group’s balance sheet and net The division is expanding and both sales sales and profit. All three segments have good prestige projects. products, but also by providing better
results posted by subsidiaries and all joint cash flows is hedged through currency loans, and net profits have increased since 2004. profitability, especially decorative in the Jotun has achieved success by establishing products, services and total solutions.
ventures in which Jotun A/S directly or forward contracts, foreign exchange swaps Nevertheless, profits remain unsatisfactory, Middle East. an early presence in markets with growth In Denmark, Jotun made excellent
indirectly owns a stake of 20 per cent or and options. given the group’s long-term margin and The division is expanding and continues potential. A strategic focus on marketing and progress in sales to professional users. The
more, with consolidation based on the gross Group investments totalled NOK 431 profitability requirements. to be the market leader in the central Middle organisational development has led to the progress made in Sweden was largely due to
method. million in 2005. East. establishment and reinforcement of strong an increase in distribution to Färgtema.

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D I R E C T O R S ’ R E P O R T D I R E C T O R S ’ R E P O R T

Jotun is now also an approved supplier to the importance that is attached to the develop- to safeguard health, safety and the environ- Group Environment Through a deliberate strategy, Jotun has
Swedish Spektrum chain, which will broaden ment of professional skills. Among the ment (HSE). In its approach to HSE, Jotun The overall incidence of sick leave within the Emissions to the air consist of dust from developed strong management teams
the customer base. group’s initiatives in this area is the Jotun seeks to ensure that its activities satisfy both group stood at 1.8 per cent in 2005. This the production of powder coatings and with a varied cultural background in the
Innovation is the key to Jotun’s growth. Powder School which provides technical and internal and external parties. represents an increase from approximately solvents from paint production. A total of global network. A number of women hold
In 2006, Demidekk Optimal will be launched sales training. This facility will also be Jotun aims to become more competitive 1.5 per cent in 2004. There is some uncer- 54,100 tonnes of solvents were used in 2005, important managerial positions within the
in new and practical packaging with a offered to our customers to increase their through an active and responsible approach to tainty attached to these figures due to against 49,000 tonnes in 2004. The increase group.
separate lid-opener. The Lady concept is also understanding of powders and help them to HSE. Priority shall be given to ensuring that differing sick pay schemes, employment was mainly due to a higher production At Jotun A/S, two of the nine group
set for further development, with further and select the most appropriate products and use initiatives aimed at improving group conditions and the recording of absence due volume. directors are women, and women hold
more obvious consumer benefits. Customer profitability are not at the expense of HSE. to illness at the various plants. The real figure The group generated 12,400 tonnes of 25 per cent of the positions with personnel
requirements are always central to the Jotun The ten audits conducted by HSE for sick leave is probably higher. waste in 2005, of which 4,200 tonnes were responsibility (unchanged since 2004).
Dekorativ innovation process. personnel in 2005 revealed that most of the A total of 872 working days were lost as classified as hazardous waste. The total 7.5 per cent of blue-collar staff and 29 per
group’s factories, laboratories and ware- a result of injuries, equivalent to 0.1 per cent waste volume represent 2.9 per cent of the cent of white-collar staff are women (against
Jotun Powder Coatings houses meet acceptable HSE standards. of total working hours. There were 11 production volume, compared with 3.6 per 8 per cent and 30 per cent, respectively, in
Jotun Powder Coatings is the world’s fourth However, some facilities require upgrading accidents involving damage to property in cent in 2004. 2004).
largest supplier of powder coatings for the and action plans have been prepared for 2005. A total of 64,300 tonnes of water-based
industrial surface treatment of metal. In 2005, improvements. The group experienced two tragic deaths emissions were released from production 6 . G RO W T H A N D O U T LO O K
Jotun Powder Coatings continued to grow in in 2005 in connection with a hotel fire. Two (against 83,100 tonnes in 2004). Of this, Jotun has a sound market position in
terms of volume and operating income, but Costs employees in Korea died in the fire while on 47,300 tonnes were treated (against 63,400 Scandinavia, the Middle East and Asia.
higher raw material prices and fierce competi- The overall cost of HSE measures and a business trip. tonnes in 2004). The authorities regard The group’s strategy is to achieve organic
tion in existing markets led to lower margins. initiatives shows a slight downward trend A total of NOK 11.8 million was invested discharges into public sewerage systems growth within existing and new markets.
Jotun is responding to the increased over the past five years, most of the decrease in improvements to the working environment to be a local problem at six of the group’s The focus is on more and improved innova-
competition by developing new products and being due to lower operating costs related to in 2005. This included the installation of dust factories. tion of concepts and products, as well as
concepts, while production capacity is being the external environment. filters, ventilation systems, first aid stations A total of NOK 2.9 million was invested market investments. Jotun is selective in its
increased to enable existing plants to meet HSE-related operating costs were 38.7 per and air conditioning. in measures to prevent or reduce adverse choice of markets, and special emphasis is
higher demand for products. Jotun Powder cent up at NOK 24 million. The increase was The total number of lost-time injuries due environmental effects (unchanged from given to investment in developing markets
Coatings has recently started production in partly due to the costs relating to purchase of to accidents was 53. The frequency of injuries 2004). These measures included equipment with good growth potential. Volume growth
India. workware with antistatic and anti flame resulting in absence of at least one day was to reduce waste volumes and treat process in 2005 was in line with the levels achieved
It is important to adapt the structure to properties and higher waste management 7.19 per million working hours. This is higher water. in recent years and is expected to be main-
altered markets. In 2005, the division’s costs arising from increased production. than is desirable and slightly above the tained.
regional organisation was replaced by a HSE-related operating costs totalled statistical value set by the Federation of Future challenges Jotun is investing for the future. This
segment-based structure with a stronger local NOK 19.5 million, against NOK 16.5 million Norwegian Process Industries (PIL) for the The recruitment, training and the expertise means investment in manufacturing facilities,
focus. This will establish closer proximity to in 2004. chemical sector. The accidents related mainly of employees are of crucial importance research and development and the expertise
the markets and enable the division to be to crushing injuries, cuts and burns. Initiatives for realisation of the group’s goals and and skills of the employees. Investments
more responsive to different customers and them correctly. This gives added value for the Working environment aimed at reducing injuries are under continu- visions. Particular attention will be given to in 2005 were at a record level, partly due to
product requirements across national customer and is part of the process of Safety has always been a priority at Jotun, ous assessment. preventive maintenance of manufacturing the construction of new factories in China,
boundaries. strengthening long-term relationships. and the group’s aim is to work continuously equipment and buildings over the next few Indonesia and Yemen. Further major
The division’s competitive position is to safeguard the lives and health of Jotun A/S years. investment is anticipated in 2006, with
being strengthened by targeting on research 4 . H E A LT H , S A FE T Y A N D employees. Jotun considers preventive work The incidence of sick leave Jotun A/S stood the upgrading and expansion of Jotun’s
and development, improved innovation T H E EN V I RO N M EN T (H S E ) to be the most important tool as regards the at 4 per cent in 2005, against 5.1 per cent in 5. DIVERSIT Y manufacturing facilities in Saudi Arabia,
processes and brand building. Objectives and activities working environment and health. 2004. Jotun’s success is due in no small measure Egypt and Turkey. The planning of new
Expertise provides an important competi- The world around us demands continuous The Board and management consider the to respect, understanding and adaptation manufacturing units in Brazil and India is
tive advantage and this is reflected in work on technical and operational initiatives working environment to be satisfactory. to local conditions and cultural differences. also under way.

38 w w w. j o t u n . c o m w w w. j o t u n . c o m 39
D I R E C T O R S ’ R E P O R T P R O F I T A N D L O S S A C C O U N T

Jotun A/S Group

(NOK thousand) Note 2005 2004 2005 2004

Sales and other operating income 1,2 2 052 541 1 828 671 6 710 212 6 075 394
Cost of goods sold 4 1 027 121 894 086 3 563 835 3 121 784
Staff costs 5,7 464 160 439 186 1 178 163 1 071 838
Depreciation and amortisation 8 62 948 57 395 205 579 203 667
Bad debts 3 765 153 23 444 19 865
Other operating costs 6 329 630 368 241 1 204 544 1 165 489
At the beginning of 2006, the world and profits. However, it is difficult to measure makes it less vulnerable to fluctuations in Operating profit 167 917 69 610 534 647 492 751
economy is experiencing strong underlying the net effect of such external factors. individual markets. Based on experience,
growth. The Chinese economy is still A weakening of the USD would have an there is likely to be consolidation within some
growing strongly, with good growth in the adverse impact on Jotun’s profits in the short of our business areas. Jotun has the financial Dividends etc. from subsidiaries 6 168 716 195 086 - -
Middle East and an increasing rate of growth term. On the other hand, further volume strength needed to adapt to changing market Dividends from joint ventures 6 128 727 69 400 - -
in Southeast Asia. The American economy is growth is expected, which would boost conditions and to expand further. Interest receivable 31 117 21 188 17 424 15 968
also performing well, and activity in Western profits and further strengthen Jotun’s market In view of ongoing steps being taken to Other financial income 2 197 44 549 28 124 31 850
Europe is increasing. Interest rates are at a positions. improve efficiency and given Jotun’s strong Interest payable -18 516 -14 227 -41 860 -26 905
record low and the price of oil is high. Jotun has both a reputation and a tradition market positions, the Board believes that the Other financial costs -28 714 -13 724 -48 320 -42 923
The USD has strengthened slightly, and the for operating in an ethically sound manner group can look forward to a satisfactory level Profit on ordinary activities before taxation 451 444 371 882 490 015 470 741
prices of most raw materials have stabilised and for its healthy attitudes in all cultures. of development in the coming years. At the
following the sharp increase in prices during A common framework for ethical attitudes same time, it should be stressed that there is
2004 and the first six months of 2005. The and group values is being systematically com- scope for improvement in a number of areas Tax payable on profit on ordinary activities 14 -102 435 -72 508 -150 879 -141 960
prices of some metal-based raw materials municated throughout the organisation. and that this must be addressed as a matter of Profit on ordinary activities 349 009 299 374 339 136 328 781
have risen significantly in recent months. The Jotun group’s breadth in terms of importance.
All these elements impact on Jotun’s business business areas and geographical regions
Minority interests 15 - - -34 387 -34 041
Net profit for the year 349 009 299 374 304 749 294 740

Sandefjord, 16 February 2006

The Board of Directors Distribution of profit
Jotun A/S Allocated to dividends 15 153 900 136 800 - -
Other equity 15 195 109 162 574 - -
Total 349 009 299 374 - -

Odd Gleditsch d.y.

Chairman

Einar Abrahamsen Richard Arnesen Nicolai A. Eger Thore Kristiansen

Terje V. Arnesen Torkild Nordberg Dag J. Opedal

Morten Fon
President & CEO

40 w w w. j o t u n . c o m w w w. j o t u n . c o m 41
B A L A N C E S H E E T B A L A N C E S H E E T

Jotun A/S Group Jotun A/S Group

(NOK thousand) Note 31.12.05 31.12.04 31.12.05 31.12.04 (NOK thousand) Note 31.12.05 31.12.04 31.12.05 31.12.04

ASSETS EQUITY AND LIABILITIES

FIXED ASSETS EQUITY
Intangible assets Injected equity
Deferred tax assets 14 26 686 19 290 68 603 40 269 Share capital 15,16 102 600 102 600 102 600 102 600
Intangible assets 8 63 289 52 602 147 422 153 358 Total injected equity 102 600 102 600 102 600 102 600
Total intangible assets 89 975 71 892 216 025 193 627
Earned equity
Other equity 15 2 313 041 2 117 930 2 592 288 2 368 636
Tangible fixed assets Total earned equity 2 313 041 2 117 930 2 592 288 2 368 636
Land 8 14 469 14 469 92 003 80 852
Buildings and plant 8 157 231 165 877 692 606 516 599 Minority interests 15 - - 116 054 107 104
Machinery, vehicles and equipment 8 138 823 163 925 601 312 545 669 Total equity 2 415 641 2 220 530 2 810 942 2 578 340
Plant under construction 8 27 776 - 53 911 37 378
Total tangible fixed assets 338 299 344 271 1 439 833 1 180 498 LIABILITIES
Provisions for liabilities
Pension liabilities 7 75 726 74 174 118 325 107 448
Financial fixed assets Other provisions for liabilities 7 662 14 817 7 960 18 067
Investments in subsidiaries 9 990 746 912 661 - - Total provisions for liabilities 83 388 88 991 126 284 125 515
Amounts owed by subsidiaries 18 796 663 598 527 - -
Investments in joint ventures 10 180 137 180 137 - - Other long-term liabilities
Investments in shares and other interests 11 8 442 8 192 8 442 8 192 Amounts owed to credit institutions 12,17 96 787 109 721 144 086 131 828
Pension assets 7 56 974 53 534 77 311 74 403 Other long-term liabilities - - 38 309 28 957
Other long-term debtors 18 2 555 2 575 40 727 17 674 Total long-term liabilities 96 787 109 721 182 395 160 785
Total financial fixed assets 2 035 517 1 755 626 126 480 100 269
Current liabilities
Total fixed assets 2 463 791 2 171 789 1 782 337 1 474 394 Short-term loans - - 301 993 178 856
Short-term loans to subsidiaries 18 124 900 126 500 - -
Bank overdrafts 21 - - 206 713 196 818
CURRENT ASSETS Trade creditors 206 531 242 365 704 478 633 742
Stocks 4 358 968 312 236 1 209 961 1 085 779 Tax payable 14 78 640 52 585 99 364 74 416
Public duties payable 82 834 79 600 104 309 102 753
Debtors Allocated to dividends 15 153 900 136 800 153 900 136 800
Trade debtors 3,18 190 218 187 305 1 496 293 1 220 959 Other current liabilities 13,18 168 238 122 114 430 700 352 339
Amounts owed by subsidiaries 18 68 800 8 600 - - Total current liabilities 815 043 759 964 2 001 457 1 675 725
Other current debtors 18 196 629 142 801 230 442 174 253
Total debtors 455 647 338 706 1 726 735 1 395 212 Total liabilities 995 218 958 676 2 310 136 1 962 025

Cash, bank deposits, etc. 132 453 356 475 402 044 584 980 Total equity and liabilities 3 410 859 3 179 206 5 121 078 4 540 365

Total current assets 947 068 1 007 417 3 338 740 3 065 971
Sandefjord, 16 February 2006
Total assets 3 410 859 3 179 206 5 121 078 4 540 365 The Board of Jotun A/S
Odd Gleditsch d.y.
Chairman

Einar Abrahamsen Richard Arnesen Nicolai A. Eger Thore Kristiansen

Terje V. Arnesen Torkild Nordberg Dag J. Opedal

Morten Fon
President & CEO

42 w w w. j o t u n . c o m w w w. j o t u n . c o m 43
w w w. j o t u n . c o m
JOTUN A/S

www.jotun.com
Tel. +47 33 45 70 00 • Fax +47 33 45 72 42
P.O.Box 2021 • N-3248 Sandefjord, Norway
Text, graphic design and production: Metro Merkevarehuset AS Print: LOS Grafisk AS Photo: Art Wolfe and Johnny Johnson/Getty Images, ZEFA/Scanpix Creative, ©DigitalVision, Metro Merkevarehuset AS, Morten Rakke/www.rakke.no, Jotun AS Translation: Lionbridge