Statement by Management on the annual report
Identifikation af den godkendte årsrapport:*Today, the Board of Directors and the Executive Board have discussed and approved the annual report of Schur International Holding a/s for 1 November 2021 - 31 October 2022.
Management's review
Beskrivelse af virksomhedens væsentligste aktiviteter:Company presentationSchur’s activitiesSchur is the world’s oldest family-owned packaging group with more than 176 years of experience. Our goal has always been, to develop the packaging solutions of the future, together with our customers. We operate globally, and our main activities are carton packaging, flexible packaging, packaging technology, and marking & labels. In all our activities, we aim to set the bar for packaging innovation and creativity, and we push ourselves to be ‘Leader Of The Pack’. We are an end-to-end supplier in packaging solutions with all of our subsidiaries collaborating using their competences across our production sites. The products of the folding carton companies are mainly sold in Northern Europe and the USA, whereas the flexible packaging companies and machinery company sell their products all over the world. ESG reportingSchur contributes to socially, environmentally and economically sustainable development. Our commitment is based on internationally approved principles on human rights, the environment and anti-corruption. The principles are all referenced by the UN's Global Compact, OECD Guidelines for Multinational Enterprises and UN’s 17 Sustainable Development Goals for global development. Schur will primarily focus on goals #7 Affordable and clean energy, #8 Decent work and economic growth and #12 Responsible consumption and production. For information about Schur's ESG activities, in accordance with § 99a and §99 b in the Danish FSA, reference is made to our Sustainability Report on our homepage: https://www. schur. com/sustainability/sustainability-reports/Founded in 1846Operating since 1846, Schur is the oldest family-run packaging business in the world. Tradition and innovation have been integrated parts of our DNA, and the combination of the two has been crucial in our journey towards being ‘Leader Of The Pack’. 900+ employeesWe are 900+ employees across our group companies who are dedicated to service our customers and stakeholders in the best way possible. It is due to our loyal and hardworking employees, both past and present, that we proudly celebrated our 175th anniversary in June 2021. 14 companiesKey events in 2021/22This financial year has not offered any acquisitions or significant changes in our activities. The year has been marked by the outbreak of the war in Ukraine, raw material shortages, inflation and price increases. The focus has been on handling these challenges and securing the demand for raw materials for our customers. The merger of the label businessAs described in last year’s annual report, we acquired Interket a/s in March 2021. In September 2021, Interket a/s was merged with our existing label business. The merged label business moved into a brand-new production site in Horsens. The merger of the two businesses together with the move to new premises and the purchase of completely new production equipment, turned out to be a greater challenge than expected. In addition, we faced difficulties with the supply of raw materials as in the rest of the group. However, we have seen the worst part of the challenges and our processes are aligned with those of the rest of the group. We are therefore looking ahead in our label business with great optimism with a completely new and updated production setup. Schur Star Systems Australia LtdIn 2016 we acquired Burgess Printing and Packaging in Melbourne Australia with the aim of introducing our Schur Star concept to the Australian market. We have recently experienced a post covid demand for roll stock/printed film and loose bags in connection with a shift in sourcing towards more local supply in Australia rather than sourcing from Asia. This shift has resulted in increased sales and a decision to expand the production capacity with a new 10 color flexo press, which will be installed in 2023. Sale of propertiesThis financial year we have sold the properties that has been rented out and not used by the group - Halsskovvej in Korsør and Norgesvej in Horsens. Furthermore, we have terminated a lease in Vejle and a lease in Horsens. After this, the group no longer has properties or leases that are not used for our primary activities. Digitalization strategySchur’s digitalization strategy based on Microsoft Dynamics 365 platform is now successfully implemented in phase 1 in 2022. This includes Microsoft CE (CRM system), which is up and running in 3 companies now and Microsoft Finance and Operation (ERP system) was activated in the parent company from May. We will continue the rollout and increased focus on digitalization in order to optimize efficiencies and improved internal and external cooperation. Financial performance 2021/222,054 DKK million net revenue171 DKK million profit before taxIn the most recent published annual report, we expressed expectations for a revenue between DKK 1. 8 and 2. 0 billion and a profit before tax arround DKK 125 million. Despite a raw material shortage and heavy price increases on almost everything we use in our production, these expectations have been met. Revenue increased by DKK 284 million (16. 0% growth) and profit before tax was slightly higher than last year. We have a responsibilty towards our employees and customers to run a sustainable and stable business, therefore this years result is considered satisfactory. 310 DKK million net interest bearing debt1. 03 leverage ratioWith investments of DKK 137 million in intangible and tangible fixed asset and a positive cash flow from operating activities, the net interest-bearing debt decreased by 11 DKK million. We have increased our inventory to secure the supply chain and make sure we can fullfill our customers demand in time of uncertainty. This increase have affected our cash flow with DKK 185 million. Leverage ratio (net interest-bearing debt/adjusted EBITDA) has decreased from 1. 29 to 1. 03, mainly driven by a higher EBITDA. Outlook 2022/23Packaging is very much in focus these days. Many initiatives have been started in order to change consumer behaviour (sorting at source) and new products are being introduced with the goal to increase recycling and reduce environmental impact. We constantly aim to develop new solutions, which can help reduce food waste and increase the extent of recycling and reuse, and thus make our contribution to a circular economy. The market situation for the West European carton market is estimated to show an increase in demand, primarily due to the environmental drive towards recyclability and reusability. Schur is committed to setting the stage for the most modern production and logistics technology on the market and has in recent years invested heavily in product development and state-of-the-art production technology. We will continue to invest in new production equipment with expected investments between DKK 2-300 million in 2022/23 alone. As a sub-supplier, we depend on our customers’ sales and product development, and we are pleased to be able to contribute with an innovative approach while creating new sustainable solutions with our customers. With the EU's upcoming packaging directive, there will be new challanges, but also opportunities for the packaging industry. We look forward to working with the new opportunities this will give us as an innovative total soloution supplier of packaging. We expect that the inflation, in particular the higher energy prices will affect the entire financial year 2022/23. In 2022/23, we expect a revenue between DKK 2. 0 - 2. 2 billion and a profit before tax between DKK 160 million and DKK 180 million.
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