ANNUAL REPORT 2011 - specialty oils and bitumen · ANNUAL REPORT 2011 Nynas takes oil further. ... 1,600 tonnes of PMB to the road construction site. ... bitumen components and products

ANNUAL REPORT 2011

Nynas takes oil further.

Let us show you how!

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Our customers’ products create a world full of Nynas.

Nynas is an international company that has a wide-ranging logistic process for crude oil, oil components and finished products. Thanks to a global network with depots, vessels and road tankers, it is possible to meet the market’s stringent requirements of safety, service and cost effectiveness.

FROm RaW maTeRIaL TO cuSTOmeR

FROm SOuRce OF OIL TO cuSTOmeRHere you can follow the steps that must be taken before the finished product reaches the end-customer.

OIL IS exTRacTeDIn the area around Lake Maracaibo in Venezuela, heavy, viscous crude oils are produced. Nynas’ refineries have been adapted to refining these types of crude oils, which are extremely suitable for both bitumen and naphthenic specialty oils.

TaNkeR TO euROpePuerto Miranda is close to the sound that leads out into the Caribbean. It is here that the crude oil is loaded for delivery to Nynas’ refineries in Europe. Each tanker usually carries approximately 65,000 tonnes of crude oil. On an annual basis, approximately 35 tankers transport Venezuelan crude oil to the refineries in Nynäshamn, Dundee, Antwerp and Gothenburg.

cRuDe OIL BecOmeS DISTILLaTe In this case the crude oil arrives in Gothenburg. In the distillation tower the crude oil is divided into various fractions that are suitable for continued processing. At the upper part of the tower, light fractions, called distillates, are extracted to become naphthenic specialty oils.

BY TaNkeR TO NYNäSHamNThe distillate is shipped to Nynäshamn where it is hydrotreated in order to eliminate non-required molecules. A chemical transformation also takes place which means that the oils meet very stringent demands in terms of function and health properties. One of the results of this process is a component for transformer oil.

ON TO aNTWeRpThe component from Nynäshamn is shipped to Antwerp. The product is prepared there by mixing according to a specific recipe. The resulting trans-former oil, Nytro Libra, is then ready for delivery.

BY TaNkeR TO SINgapOReSome of the transformer oil is shipped to Singapore to be stored in a depot where Nynas is renting storage capacity. The products are then delivered to the customers by road tanker.

DeLIveRY TO THe cuSTOmeRSome deliveries are made to ABB’s facility in the Tuas industrial zone in Singapore where distribution transformers are manufactured. Each completed transformer is filled with 9,000–22,000 litres of oil, depending on its capacity.

TRaNSFORmeR OIL TO SINgapORe.

1 The year in brief2 From the President4 Strategies and objectives6 Global trends8 Our products

10 Research and development12 Production14 Supply chain16 Sustainability18 Environment20 Safety22 Employees24 Risk management29 Corporate governance33 Board of Directors34 Executive Board35 Multi-year overview36 Financial statements46 Accounting policies52 Notes80 Proposed distribution of profit81 Audit report82 Wordlist83 Definitions

Contents

The Board of Directors and CEO of Nynas AB (publ), company reg. no. 556029-2509, hereby submit its Annual Report for the 2011 financial year for the Parent Company and the Group.

The annual accounts and the consolidated financial statements were approved for issuance by the board of directors on 13 April 2012. The consolidated income statement and balance sheet and the parent company income statement and balance sheet will be subject to adoption by the annual general meeting on 20 June 2012.

The annual Report including the audit Report comprises pages 1, 4–81.

Board of Director’s report comprises pages 1, 4–34.

This is a translation of the Swedish annual report. In the event of any differences between the Swedish and English version, the Swedish version prevails.

Illus

trat

ion:

Nils

Jarl

sbo

Polymer-modified bitumen (Pmb) to norway

DeLIveRY TO THe cuSTOmeR On 7 November the new E6 motorway was opened between Dal and Boksrud. Lemminkäinen was respon-sible for laying the asphalt for this approximately 11-kilometre stretch of the motorway. Nynas delivered 1,600 tonnes of PMB to the road construction site.

cRuDe OIL IS exTRacTeD There are a few North Sea crude oils that match Nynas’ production. Most are from an oil field around 150 kilometres north east of the Scottish port of Aberdeen.

BY TaNkeR TO NYNäSHamN The crude oil is collected from the platforms by special vessels, called shuttle tankers. One vessel every three months carries approximately 80,000 tonnes of crude oil from the North Sea fields to the refinery in Nynäshamn.

THe cRuDe OIL IS ReFINeDWhen the North Sea oil arrives at Nynäshamn, it is stored in caverns. From there, it is pumped to tanks that are used for feeding the distillation plant. Distil-lation produces distillate for the manufacture of specialty oils, bitumen components and products for fuel manufacture.

BY TaNkeR aROuND THe SWeDISH cOaSTSome of the heavy bitumen component is shipped to Gothenburg. Nynas has its own vessels to transport bitumen, primarily in Northern Europe.

THe ReFINeRY IN gOTHeNBuRgSeveral types of PMB are manufactured in Gothen burg. Depending on customer require-ments, the necessary components are mixed here with the critical polymers.

BY ROaD TaNkeR TO NORWaYA large proportion of bitumen transport operations take place by sea, but in most cases road tankers are used for the final transport to the customer plants. Road transport must live up to the strictest safety and quality requirements.

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NYNAS ANNUAL REPORT 2011

THe YeaR IN BRIeF

The year in brief

•During2011theoilpricerosegraduallyfromalevelofUSD95/bblatthebeginningoftheyeartoclosetoUSD110/bblattheendoftheyear.

•TheresultafternetfinancialitemswasSEK454million(2010:SEK610million).

•Theequity/assetsratiowas35percent(2010:39percent).

•Anagreementwassignedthat,subjecttoEUCommission,willentailNynas’takeoverofthe Shell refinery outside Hamburg, Germany, during 2012. This will increase the processing capacity for naphthenic specialty oils by 30 per cent.

•Anewfive-yearfinancingagreementtotallingEUR750millionwassignedwithasyndicate of six banks. The agreement provides a stable financial basis for Nynas’ ongoing development.

•Thesalesvolumesfornaphthenicspecialtyoils(NSP)werehigherthanthepreviousyear.The sales increase was braked, however, by the production limitations due to maintenance shutdown during the autumn 2011.

•Demandforbitumenwasweakerthanestimated,mainlyduetothefinancialturbulenceaffecting many European countries that also limited the scope for maintenance and invest-ments in the road sector.

•Aspartofarollingfour-yearprogramme,in2011Nynasundertookitssofarlargestmaintenance shutdown at the refinery in Nynäshamn. In conjunction with re-commissioning a fire broke out, without leading to any personal injury or environmental damage. The material damage was extensive and repair work is ongoing, see note 4.

•AmajorinvestmentinanewsulphurrecoveryunitinNynäshamnisinprogress.Theunitisplanned to be commissioned in the course of 2012.

•Duringtheyearthetransitiontonaturalgasastherawmaterialforhydrogengasproductionin Nynäshamn was completed. Natural gas has replaced the naphtha that was previously used for this purpose and thereby the levels of carbon dioxide emissions are substantially reduced.

keY FIguReS*Group

MSEK 2011 2010

Sales 23,223 20,579

Operating result 586 681

Result after financial items 454 610

Net profit 313 421

Cash flow before financing activities -1,343 -322

Capital expenditure, gross 907 522

Return on equity, % 9 14

Equity/assetsratio,% 35 39

Interest-bearing debt 3,942 2,590

Average number of employees 871 866

0

5 000

10 000

15 000

20 000

25 000,

,

,

,

,

2007

2007-2011, SEK millionNET SALES

2008 2009 2010 2011

0

200

400

600

800

1 000

1 200

2007

2007-2011, SEK million

RESULT AFTER FINANCIAL ITEMS

2008 2009 2010 2011

,

,

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2007

2007-2011, SEK million

CASH FLOW BEFORE FINANCING ACTIVITIES

2008 2009 2010 2011

Bitumen 41% Naphthenic specialty oils 29%Fuel 10%Crude oil/other 19%

NET SALES PER PRODUCT

* For definitions see page 83

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We already knew when planning for 2011 that this would be a year presenting several major challenges. We could foresee a major maintenance shutdown in Nynäshamn, refinancing of the company, and hopefully an agreement on new production capacity for our specialty oils, in parallel with continued sales expansion.

FROm THe pReSIDeNT

What we did not know was that the busi-ness cycle upturn in Europe would be inter-rupted as a consequence of the financial turbulence in several EU member states. For the European refinery industry 2011 was a year with sustained pressure on mar-gins. This now appears to be accelerating a much-needed structural rationalisation of the fuel refineries.

Nynas was affected by the generally weak economic development in 2011, but probably to a lesser degree than the rest of the refinery industry. Sound cost control helped us to limit the negative impact on the result from sales that in volume terms were somewhat lower than forecast. The average oil price was the highest ever, yet we were able to limit the growth in our working capital through reduced inventory volumes, among other things.

Our financial strength and stability ena-bled us to continue our major investments in the Nynäshamn refinery, both in terms of improved infrastructure and ongoing envi-ronmental measures. It is also very satisfac-tory that we achieved an agreement on a new five-year financing agreement. This enables us to continue our development on a stabile financial basis. The agreement with the six banks entails a credit facility of up to EUR 750 million. This transaction is five times larger than any previous financial agreement concluded by Nynas. The achievement of this agreement in today’s financial market is based on the high level of confidence for our company that we have established.

We have also concluded an agreement which entails that, subject to the European Commission’s approval, we will gain access to further production capacity for specialty oils through the takeover of Shell’s refinery outside Hamburg. This gives is what we have been looking for: increased produc-tion capacity, but also opportunities for new products. This investment will enable us to

effectively meet our customers’ demands for higher volumes and additional products.

It is very satisfying to note that we have the strength to achieve organic growth. We can see clearly that we are not significantly affected by random cyclical fluctuations, and that we have an inherent stability. This is a strength that we must exploit to the full.

Rising oil pricesThe rising oil prices contributed negatively, as the average price for 2011 was approxi-mately USD 110/bbl for crude oil, which is around USD 30 higher than in 2010. The high price means that we are now tying up more working capital than before. Today there are no indications of falling oil prices in a more long-term perspective, so we must counter this with even faster turnover of our working capital.

marketThe market development shows that 2011 was a medium year; not outstanding like 2007, but not as weak as the crisis year of 2009 either. Naphthenic specialty oils showed sound development in the first half-year and the markets in both Asia and Europe expanded. Our new office in South Korea presented a strong increase in sales in 2011. In the autumn the financial turbu-lence contributed to a decrease in demand. The fire in our facility in Nynäshamn in the autumn impeded our efforts to deliver products on time. Even though we increased sales of specialty oils compared to 2010, the combination of a weaker market and our own supply chain problems prevented us from meeting our objectives in volume terms.

For our other major product area – Bitu-men – the market picture varied strongly from country to country. The continental market was generally weak in 2011, espe-cially towards the end of the season. The

English market surprised positively, with considerably better sales than estimated. In the Nordic market, sales were positive in both Norway and Finland. but poorer than estimated in Sweden and Denmark, despite the prolonged asphalting season.

Overall, the picture for both specialty oils and bitumen products is that the market developed a little more weakly than esti-mated. Profitability was affected negatively by the shortfall in volume terms, but sound cost control could compensate for part of the lower income.

Investments Effective, reliable, safe and environmentally sound production is vital to our ability to meet the requirements and expectations of our customers and society, as well as our employees and owners, now and in the future.

We have therefore made major invest-ments in our facilities in recent years. In 2010 we commissioned a new hydrogen plant that since 2011 has used natural gas as the raw material in production. In 2010 we initiated a major investment in a new sulphur recovery unit that is now being con-structed. Together with other investments, this means that over a five-year period Nynas will invest more than SEK 2 billion in Nynäshamn alone. Additional to this are the ongoing investments in our refineries in Gothenburg, Dundee and Eastham.

Nynas’ production of specialty oils and bitumen requires us to use oils with special characteristics. They must contain the right types of wax-free naphthenic distillate and they must have a sufficiently high asphal-tene content in the bitumen fraction. During 2011 we continued to evaluate and test dif-ferent types of crude oil in order to assess their ability to meet the aforementioned requirements. We want to have additional approved suppliers. This will reduce our

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vulnerability and help us to achieve a sound balance between the products we deliver and the demand for the different qualities from our customers.

environment and safetyNynas’ products contribute to a better envi-ronment in many ways, for example when they are used in transformers in modern electrical power grids, as effective lubricants in wind turbines, or to reduce the rolling resistance of car tyres. In a large number of cases Nynas’ oils have replaced other products that are hazardous to health and the environment. More stringent environ-mental requirements have therefore in many cases helped Nynas to increase its sales.

At the same time, refining these prod-ucts is energy-intensive and always entails certain emissions of sulphur and carbon dioxide, for example. We nonetheless work continuously to reduce the emissions from our production and transport activities. As an example, wood chips nowadays are used for steam generation in Nynäshamn.

Nynas takes great responsibility for han-dling cases of historic contamination. There has been a refinery in Nynäshamn for more than 80 years. The production methods used at that time took less account of the environ-ment, which has left its mark. Since the late 1990s we have cooperated actively with the environmental authorities on action plans and measures to clean up the areas that were contaminated in previous decades.

On a daily basis Nynas handles large quantities of oil in the form of raw materials and products, and it is important to limit the safety and environment risks. For many years we have therefore taken great care to reduce these risks. In 2011 considerable investments in new equipment, but also extensive training, took place to ensure our compliance with the safety and environ-mental policy introduced in 2010.

On 23 October 2011 a fire broke out in the plant in Nynäshamn. The fire caused exten-sive damage to equipment, but fortunately no-one was injured, and there was no envi-ronmental damage. Thanks to our satisfactory stocks of finished products and restructured production, as well as the outstanding efforts of our employees, our customers were only affected to a limited degree.

Fire is an inherent risk of working with refining and oil. We therefore devote con-siderable effort and time to preventing risks. In this case I can note that our efforts did not succeed, but we will take great care to learn from this event and apply this experi-ence to our ongoing improvement efforts.

Outlook for 2012 and beyondDue to the financial problems in the Euro-zone we expect subdued economic devel-opment in 2012. For Nynas’ specialty oils we see lower growth at the beginning of the year, but expect sales to pick up during the second half-year. We expect stable bitu-men sales during 2012 in the Nordic region and the UK. We assess that the continen-tal market is still weak, unless the ongo-ing structural rationalisations within the industry provide us with an upswing.

It is clear to us that in order to maintain and develop our profitability we must utilise our competence and technical expertise in order to upgrade and add value to the products we deliver. As a leading producer we can develop and deliver more sophis-ticated products. In this respect, we have the advantage of our strong brand as both a supplier and partner to our customers.

Even though we expect a certain weaken-ing within naphthenic specialty oils in the short term, in a more long-term perspective we consider the conditions to be favourable for sustained growth in a number of dif-ferent areas such as transformer oils, tyre oils, base oils for metalworking, lubricants

and applications in the chemical industry.In geographical terms, we see new, rap-

idly emerging markets in Asia and Latin America, where demand is growing in step with, or faster than, the respective countries’ GDP. There is also growth on the markets in Europe and the USA, where stricter new environmental requirements are a strong incentive to upgrade or replace electricity supply systems, for example.

There is no doubt about which path to take. Specialty oils are our growth area. Our goal within the next five years is to command a clear position as the leading global supplier of high-quality specialty oils, with a production volume that is at least 50 per cent higher. Our bitumen activities will also continue to be a major important ele-ment of our activities. In the right balance with our specialty oils, these activities will ensure sound profitability.

Nynas is a successful provider of spe-cialty oils that is driving the development in both technical and environmental aspects. Nynas’ products are used in a number of different contexts in today’s modern society. I am proud to be part of this, by leading a company that works to identify new, effec-tive and sustainable areas of applications for oil, to the benefit of both society and ourselves.

Staffan LennströmCEO

"together with other investments this entails that over a five-year period nynas will invest more than SeK 2 billion in nynäshamn alone."

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By focusing on the production of a symbiosis of specialty oils and bitumen Nynas has become established as a leading supplier on these mutually differing markets. another precondition for this leading position is the ability to create close cooperation with customers, which is built on a deep understanding of the products’ areas of application.

STRaTegY aND OBjecTIveS

Via its knowledge of customers and their requirements, combined with global sales and distribution networks, the nynas Group can provide benefit to customers, while also developing its activities.

In terms of customer relations and growth targets, Nynas has chosen the following strategy: to increase its presence in the market for naphthenic specialty oils and to continue to focus on the bitumen area, while balancing raw materials supplies and improving the utilisation of the manufac-turing facilities.

nynas’ five major strategic approaches:1. growth within naphthenic specialty oilsWithin the area of naphthenic specialty oils, the modernisation of existing electricity grids and expansion with new grids are provid-ing new business opportunities for Nynas’ transformer oils. Increasingly more stringent environmental requirements are also driv-ing the demand for specialty oil products with a high purification level from different areas of the chemical industry. There is also increasing demand for new tyre oils in such regions as Asia and Latin America.

By developing a global market organisation for naphthenic specialty oils Nynas intends to benefit from the significant growth potential in this market. This requires increased pro-duction capacity and stronger supply chain management.

2. Strong position within bitumenThe bitumen business is operating in a mature market. Via improvements of dif-ferent types, Nynas is seeking to increase the products’ value-adding characteristics. The objective is to strengthen the position as the European market’s leading bitumen special-ist and to seize the growth opportunities that

are emerging. The focus is on developing new products with lower energy consump-tion, in order to achieve both financial and environmental gains. Specially developed bitumen products are also important compo-nents in the advanced types of asphalt that can contribute to reducing environmental impacts such as traffic noise.

From a more direct sustainability perspec-tive, bitumen is a well-positioned product as it is suitable for recycling in different forms.

3. Balanced supply of raw materialsHistorically, much of the crude oil used in Nynas’ production has been supplied from Venezuela. Nynas operates on commercial terms with its portfolio of suppliers, which entails that the Company is always looking for suitable new raw materials. The objec-tive is to ensure long-term access to suitable crude oils, and to find crude oils that are the best raw material in the product mix that is required. The production of specialty oils and bitumen in a well-balanced symbiosis contributes to improved profitability.

In recent years the crude oil from a number of different suppliers has been analysed and tested, and refinery invest-ments have been made in order to ensure efficient processing of crude oil from other regions. The objective is to increase flex-ibility so that up to 50 per cent of production uses new, alternative types of crude oil.

4. Improved utilisation of manufacturing assetsThe Group’s customers rely heavily on Nynas’ ability to supply, both locally and globally. Without a steady supply of key components, customers’ production lines would soon come to a standstill. It is there-fore of great importance that Nynas’ pro-duction facilities have high capacity as well as reliability.

To safeguard supply capacity and security, Nynas continues to invest substantial amounts in new plants, improved technical equipment, training and maintenance. This also helps to ensure even higher quality, increased safety, and a reduced environmental impact, while also making production more cost-effective.

5. customer focus and efficiencyNynas’ strong customer focus is a major asset that is continously developed and strengthened. A customer-driven sales and market organisation, central support func-tions and extensive business development ensure that an effective customer supply can be maintained. Overall, the strategy is designed to ensure a stable, customer-oriented, competitive and profitable Group.

Nynas’ objectives and governanceNynas’ overall financial objective is to ensure long-term profitability and increased asset value. Based on the overall strategy, financial and operational targets have been formulated as the basis for planning and control.

The underlying objectives are structured to correspond to the requirements made by Nynas’ different stakeholders. The Board of Directors has thereafter drawn up guidelines for the work of developing the business activities within the strategic framework.

During the financial year Nynas regu-larly conducts a Group process to ensure optimum operational use of the Group’s production, distribution and sales resources. Inventory volumes, expected production capacity, current market forecasts and prices are reported on a monthly basis and pro-vide an important operational manage-ment basis.

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Financial and operational objectives:The objectives are linked to one or several strategies. The objectives are once a year reviewed and then updated for the coming financial year. In addition to these Group performance indicators and objectives, the respective business areas and production organisation have their own objectives that are linked to the local operations.

at group level Nynas’ objectives for 2011 included the following:• Reduced frequency of personal injuries

(Total Recordable Injuries, TRI) • High level of employee satisfaction (ESI,

Employee Satisfaction Index)• Increased reliability of the specialty oil

production in Nynäshamn (Reliability Nynäshamn NSP Plant)

• Increased sales volume for specialty oils• Greater use of alternative raw materials • Increased earnings before interest and

tax (EBIT)

The objectives to reduce the frequency of personal injuries and increase employee job satisfaction are both linked to the vision’s focus on the importance of employees to the company. They are also a precondition for achieving the other objectives related to efficiency and reliability, since competent, dedicated employees are fundamental to achieving these objectives.

In turn, reliability is linked to increased production capacity, which is a prerequisite for growth and an improved EBIT level.

The objective to increase the use of alter-native raw materials corresponds to Nynas’ declared strategy to achieve greater supply flexibility and avoid reliance on individual suppliers.

OBJECTIVE 2011 RESULT 2011 OBJECTIVE 2012

SaLeS vOLume, SpecIaLTY OILS

756 ktonnes 700 ktonnes

The sales volume in 2011 exceeded the previous year’s result, but did not fully meet the objective for the year.

850 ktonnes

pROFIT/LOSS BeFORe INTeReST aND Tax (EBIT ADJUSTED FOR NON-OPERATIVE EVENTS)

SEK820million SEK717million

Towards the end of the year the result was affected by the general cyclical down-turn.

EBITDASEK1,206 million

OBJECTIVE 2011 RESULT 2011 OBJECTIVE 2012

INjuRY FRequeNcY (TRI = TOTAL RECORDABLE INJURIES PERMIllIoNwoRKINgHOURS)

6.0 9.2

Expanded programme of measures initiated to reduce the number of personal injuries among employees and contractors

6.0

empLOYee SaTISFacTION (ESI = EMPLOyEE SATISFACTION INDEx, EMPLOyEE SURVEy)

80 per cent 88 per cent

The result exceeded the objective for the year. A continued programme in the HR area is planned with the objective of maintaining the good result.

80 per cent

ReLIaBILITY OF NYNäSHamN’S SpecIaLTY OIL pRO-DucTION(RATIO OF TIME WITH APPROVED CAPACITy AND qUALITy)

93 per cent 87 per cent

The result up to and including September was in line with the objective. The repair work after the fire temporarily affected the result negatively during the final months of the year.

95 per cent

vOLume OF aLTeRNa-TIve RaW maTeRIaLS

600 ktonnes 386 ktonnes

The programme for increased raw materials flexibility did not achieve the objective for the year. The activities will continue during 2012.

600 ktonnes

FINaNcIaL OBjecTIveS

OpeRaTIONaL OBjecTIveS

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Strong economic development creates opportunities for infrastructure investments, and new business opportunities. Increasingly more stringent environmental requirements drive the development of new products with improved environmental performance. Oil prices are pushed up by the growing demand from emerging economies and political instability. as a global company in a worldwide market Nynas must continuously handle the trends and drivers that determine development.

gLOBaL TReNDS

Oil as a raw materialCrude oil is an extremely useful raw mate-rial that is an important component in many products, from automotive fuel to advanced polymers and life-sustaining medical equip-ment. We meet such products in our every-day lives and in many ways they help our world to function and create value for both society and individuals.

Even though fossil fuels, created millions of years ago, are a finite product they are still predominantly used to run cars, heat homes and generate electricity. Of the 85 million barrels of oil* produced per day, approximately 60 million barrels still liter-ally go up in smoke.

Unlike many oil companies Nynas is not focused on fuel production, but focuses on products that, in a number of different applications, exploit oil’s unique ability to lubricate, bind and protect. The segment of the market that uses oil for purposes of this type is small, accounting for 3 per cent of the total oil consumption.

Oil priceThe price of crude oil is determined by a number of factors, based primarily on the global cyclical development and growth levels, but also the costs of exploring new reserves, and the political developments in the oil-producing countries. After plum-meting in the 2008 recession, when the oil price was at times as low as USD 40/bbl, the price at the end of 2011 had risen to a level of around USD110/bbl.

There is a continuous increase in demand from such countries as China and India, which are now increasing their consumption by 10 and 7 per cent per annum, respec-tively. There is also a clear trend for the manufacturing industry to outsource its production to densely-populated Southeast Asia. Combined with the demand from

other emerging markets and the chronically unstable political situation in the Middle East and North Africa, this contributes to continuously driving up crude oil prices. For Nynas, sustained high, or increasing, crude oil prices entail a requirement to increase the inventory turnover rate in order to retain profitability.

The raw material’s impact on cost develop ment also affects market prices in the markets in which Nynas is active. The sales price for Nynas’ various products therefore follows the world market oil price trend, but with a certain time lag, which affects profitability.

Restructuring presents opportunitiesDemand in the markets in which Nynas operates is driven by several factors. Today there are substantial regional imbalances, with strong growth in parts of Asia and South America, and in India, for example. The positive economic development in turn drives the restructuring, expansion and modernisation of the shared infrastruc-ture in terms of roads, airports, electricity grids and other functions. This presents opportunities for Nynas in several differ-ent areas. In particular, the expansion of modern electricity grids, and the increased load on existing grids, make high demands of the transformer oil that is used.

The financial turbulence in recent years has contributed to generally weak develop-ment in publicly financed road maintenance. It has also limited the number of invest-ment projects in Europe, which at times has led to a bitumen surplus and exerted pressure on sales prices, despite the high crude oil price. As a consequence, several European bitumen producers have closed down or reduced their production, and this consolidation is likely to continue for as long as public investments are in short

* EIA, US Energy Information Administration

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supply. In the slightly longer term this can mean that bitumen will be in short supply when the economy recovers.

expansion In the same way, Nynas’ activities within naphthenic specialty oils benefit from a strong economic cycle, for example when the increased demand for electricity requires new and expanded electricity grids both in emerging markets and on established markets in the USA and Europe. This is because the access to specialty oils for cool-ing and electrical insulation of transformers is fundamental to the functionality of the electricity grid. This applies to both existing grids and the new high-tech electricity grids that are now being established. Sound eco-nomic development also entails increased private consumption, which contributes to higher demand for other products based on naphthenic specialty oils.

environmental requirementsAnother important market driver is the combined pressure from the ever more stringent environmental requirements and the demands for reduced energy consump-tion to which companies and their products are subject. These requirements also drive modern technological development.

The succession process currently taking place in refineries all over the world, whereby existing techniques and processes are increasingly being replaced by more effective and modern versions, facilitates the development of new types of naphthenic specialty oils. Due to their composition, naphthenic specialty oils are often a very good replacement for other, less refined, oils because naphthenic products have superior health and environmental properties, and thereby contribute to sustainable develop-ment. One example is the naphthenic spe-

cialty oils that on environmental grounds are now replacing the highly-aromatic oils that were used in car tyres up to 2010. New alternative oils are now used as plasticis-ers, since naphthenic specialty oils among other things ensure reduced rolling resist-ance of car tyres and thereby reduced fuel consumption.

The requirements for environmental adjustments and energy-efficient solutions are opening up new market opportunities where Nynas’ various naphthenic specialty oils can fulfil key functions and also comply with or exceed the requirements in modern environmental legislation. From a customer perspective, this means that customers can also often find better, more effective oils that, besides the environmental aspects, add extra value to the final product.

Bitumen and the environmentBitumen is a unique material from an envi-ronmental aspect, due to its high degree of recyclability. Today, Nynas has developed bitumen types for cold or semi-warm surfac-ing. This means that asphalt can be laid at considerably lower working temperatures than are used traditionally. This conserves large amounts of energy and also contrib-utes to a better working environment for paving crews.

When worn road surfaces are re-laid it is often possible to re-use the old asphalt directly on site, with addition of new bitu-men. This reduces the transport require-ment and also the need of new materials, which also helps to protect the environment and reduce the consumption of resources.

In overall terms, Nynas’ products, which often have a lifespan of 40-50 years, have a minor environmental impact. In its ongoing development work Nynas seeks to mini-mise the environmental impacts of new and existing products as far as possible.

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PRODUCT USE SHARE OF TURNOVER* gEogRAPhICAlMARKET

Electrical insulation and cooling of electrical transformers

18 %Global customers

Oils for the chemical and technical manufacturing industry. Are included in industrial rubber, printing ink, adhesives and thermoplastics, for example. 7 %

Global customersSales mainly in Europe

Cutting fluids for metalworking, industrial lubricants, hydraulic oils

12 %Global customers

Used as plasticisers in the rubber compounds used to make car tyres

5 %Global customers, USA, Europe,

Asia

Binder for aggregates, making up asphalt for road surfacing

55 %NorthernEurope,UK,Nordic

region

Roofing felt and special appli-cations such as anti-corrosion protection

4 %NorthernEurope,UK,Nordic

region

Nynas’ products are all based on crude oil, but have very different characteristics. The crude oil is processed into the naphthenic specialty oils that are used to insulate trans-formers, lubricate wind turbines or give car tyres a reduced rolling resistance and into bitumen, which is the binder in the asphalt used to surface our roads. The key to success is knowledge of customers’ activities and requirements.

OuR pRODucTS

TRaNSFORmeR OILS

pROceSS OILS

BaSe OILS

TYRe OILS

BITumeN: BINDeR

BITumeN: INDuSTRIaL appLIcaTIONS

ReguLaR, exTRa aND pRemIum

* The respective products’ share of the part of turnover that includes bitumen and naphthenic specialty oils.

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BUSINESS DRIVERS CUSTOMERS READ MORE

Expansion of electricity grids in developing countries

New investments and upgrading of electricity grids in Europe and in the US

Transition to new energy sources

Transformer manufacturersElectricity companies Electricity producers

nynas.com/transformeroils

The demand for advanced customised products is opening new markets where the levels of service and expertise are the key to success.

In particular the chemical and process industries

nynas.com/adhesivesnynas.com/rubbernynas.com/tpenynas.com/printinginksnynas.com/otherprocessoils

Global changes in the technology to produce paraffinic base oils are opening up new opportunities for naphthenic specialty oils.

Industrial manufacturers of lubri-cants, cutting fluids and hydraulic oils

nynas.com/baseoils

Environmental legislationMore stringent performance require-

ments of the end-product

Polymer manufacturers with tyre manufacturers as end-customers; tyre manufacturers directly

nynas.com/tyreoils

Publicly financed expansion and up grading of road networks and infra-structure

Technology development in the road construction industry

More stringent requirements of the per-formance and technology development of asphalt surfacing

Building and construction com-panies

nynas.com/bitumenforpaving

Building and maintenance trends, competitive position in relation to alternative technical solutions

Manufacturers of roofing felt, pipes, etc.

nynas.com/bitumenfor- industrialapplications

process oils

Base oils

Tyre oilsBitumenTransformer oils

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The ability to continuously develop existing products to add extra value for the customer, together with the expertise to develop new products, is vital to Nynas’ long-term competitiveness and profitability. Building up this ability takes time and requires major investments and strong dedication to the customer’s activities.

ReSeaRcH aND DeveLOpmeNT

nynas has a longstanding research tradition and besides its own laboratories and r&d units also cooperates with different universities and research institutions in europe and the uSa, in order to drive development.

practical testsNynas’ research and development activities are closely related to the Group’s overall sustainability strategy and are also focused on concrete results. Research must ensure expertise in several areas. This can be knowledge of new types of crude oil, and their characteristics and how they can best be used, as well as key expertise within specific areas that are necessary to provide competent technical support to custom-ers, and to maintain active, future-oriented product development.

Specific resources are therefore applied to maintaining and testing different crude oils’ suitability for existing production. Practical testing takes place mainly in Nynäshamn, where new pilot plants and a new laboratory are used for this purpose, among others. The focus on a new process technology labora-tory has proved to be valuable and success-ful, and Nynas’ ability to utilise alternative types of crude oil is now increasing steadily.

New applicationsThe development side is mainly working to increase the range of applications for Nynas’ naphthenic specialty oils and bitumen prod-ucts. This takes place in close cooperation with customers requiring specific product characteristics in different areas. Nynas’ tech-nical and chemical expertise, together with its deep understanding of customers’ activi-ties and requirements, is of vital significance.

In its development work Nynas devel-ops products for new applications, and

also optimises existing products. This can, for example, be the creation of greases that can withstand extreme conditions in wind turbines; more effective and durable transformer oils that can handle the severe strains in the new HVDC (High Voltage Direct Current) transmissions that transfer electricity over long distances; or tyre oils that contribute to low fuel consumption by reduced rolling resistance.

New and more effective refining tech-niques provide opportunities to develop new products. Via the planned takeover of the new refinery in Hamburg, Nynas will gain more capacity to process existing products, as well as access to new products such as the medical white oil used in the chemical and pharmaceutical industry. The process technology centre in Nynäshamn is used for pilot-scale development before full-scale production is possible.

energy efficiencyWith regard to bitumen, the intention is to create solutions that contribute to making the various bitumen products more valuable to customers, and thereby also more profitable for Nynas. This can be a question of higher durability to reduce the road maintenance requirement, better sound-absorbing proper-ties, or greater recyclability. One of the key focus areas is to create products that use energy more efficiently, so that road paving operations can take place at lower working temperatures than were previously possible. The aim is to optimally maintain and develop Nynas’ position as a leading specialist in the manufacture and development of different types of bitumen. In order to stay updated on future requirements from legislators and authorities, Nynas participates actively in various industry-related working groups and conferences.

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In addition to active research of crude oil and its properties, Nynas also monitors the development of products based on other types of raw materials besides crude oil, for example different types of plant and vegetable oils. This is intended to investigate what these oils can offer customers in the future, as a complement to today’s products.

products, health and environmentNynas’ research and development work focuses on such issues as health, safety and the environment (HSE) in relation to the products that are developed, manu-factured and delivered to customers. The products’ impact on the environment and on people is studied with extra care, and Nynas attaches great weight to its participa-tion in the trade organisation CONCAWE in order to document how the products can be used without risk, in accordance with the EU’s REACH regulation.

In most cases, the naphthenic specialty oils that Nynas develops, and can soon produce on a larger scale than before, have superior product characteristics and, above all, better health and environmental proper-ties than the oils that are now increasingly being replaced by alternative products. One example is the specialty oils from Nynas that are now used in the manufacture of car tyres, replacing the now prohibited highly aromatic oils.

Similar examples of new products that replace or complement existing products can also be found in the bitumen area. Nynas has developed new types of bitu-men that can be used at lower working temperatures. This not only helps to reduce energy consumption, but also improves the working environment and reduces the risks to road-paving crews.

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The heart of Nynas’ production is the four refineries operated by Nynas in Nynäshamn and gothenburg in Sweden, Dundee in Scotland, and eastham in england, the latter via a joint venture with Shell. Subject to the approval of the relevant authorities, the number of refineries will increase to five during 2012 when Nynas takes over responsibility for a refinery outside Hamburg in germany.

pRODucTION

nynas also has partnerships with other refineries, including Curacao in the west indies, texas, uSa and antwerp, belgium. Production of naphthenic specialty oils mainly takes place in nynäshamn, but also in Curacao and at three rivers in texas. bitumen is produced in dundee and eastham, but also in nynäshamn, Gothenburg and antwerp, and at neste oil’s refinery in naantali, finland.

In recent years, as part of its overall Group strategy, Nynas has undertaken extensive investments to increase reliability, produc-tivity and flexibility, and to improve the environmental performance of the produc-tion units. As a leading supplier of both bitumen and naphthenic specialty oils it is vital to Nynas’ customers that the Group always has the competence and capacity to deliver, since interrupted deliveries can lead to production stoppages as well as delays in the customers’ business activities.

A large proportion of these investments have taken place in Nynäshamn, which is subject to ongoing modernisation and development. During 2010 a new unit was constructed for the production of the hydro-gen used in the hydrotreating process. Since 2011 it has run on natural gas, instead of petroleum naphtha, as before. The process steam required in production comes from a biofuel-based power station, and the surplus heat is led to the municipal district heating network. In 2010 the construction com-menced of a new sulphur recovery unit that will be commissioned during 2012 and will further reduce emission levels. Continued improvements and rationalisation measures are taking place in Nynäshamn, as at the Group’s other facilities.

In autumn 2011 Nynas implemented a very extensive maintenance shutdown (TA 2011) of the Nynäshamn site in order to improve reliability and productivity. A fire broke out in connection with re-commissioning in October, which brought production to a standstill during the late autumn and winter.

A key task for Nynas is to make its own refineries more flexible in terms of the uti-lisation of different types of raw materials. The crude oil from Brazil or Colombia, for example, differs in composition to the Ven-ezuelan crude oil that Nynas has used most, in historical terms. The same applies to the crude oil from the North Sea.

Different types of crude oil are tested in production, in order to determine the oil’s characteristics and product suitability, and so that Nynas can investigate how the pro-duction processes should be developed in order to reduce dependence on individual crude oil suppliers.

Even though bitumen and naphthenic specialty oils may be different products, they originate from the same naphthenic crude oil, and are chemically linked in the production process.

On production of naphthenic specialty oils, a bitumen product is also produced from many naphthenic crude oils. In the same way, on production of bitumen from naphthenic crude oils the raw materials for specialty oils are also obtained as part of the process. To ensure profitability, exper-tise in several areas is required - where to find crude oil with the characteristics that give the right product mix, how to balance production based on market demand, and how to build up an effective, reliable and flexible production apparatus.

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Nynas’ own refineries and their activi-ties are measured on a monthly basis by a number of KPIs (Key Performance Indi-cators). These apply to all refineries and include production volumes, reliability and cost levels, as well as safety and environ-mental aspects. For the Nynäshamn facility, the availability target was 93 per cent in most of 2011, but due to the fire 87 per cent availability was actually achieved.

In recent years Nynas has devoted con-siderable effort to improving its refineries. Step by step, this work is now bearing fruit, in the form of increased productivity, qual-ity and process safety, which is helping to position the Group as a world leader for naphthenic specialty oils and one of the largest European suppliers of bitumen.

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as global leader in NSp production and as a european leader in bitumen production, Nynas must demonstrate the highest standards in delivering the right products and volumes at the right time. a high service level to customers is a key competitive parameter.

SuppLY cHaIN

for nynas the task is therefore to optimise the entire chain, from supply of suitable crude oils for its own production, via pro-duction itself to, finally, ensuring that there is a network of depots with the service and logistics required to deliver the products quickly, reliably and cost effectively to the customers.

global delivery systemThe naphthenic specialty oils that are part of Nynas’ strategic focus area are produced in Nynäshamn, in Curacao in the West Indies, and at Three Rivers in Texas, USA. They will also be produced at the refinery in Hamburg that Nynas expects to take over in 2012, subject to the relevant authori-ties’ approval. The use of several different production facilities will ensure that Nynas has better capacity to ensure delivery to its customers, as the facilities can cooperate and thereby compensate for any produc-tion disruptions.

The finished naphthenic specialty oils are shipped via the global depot network to various storage points, the main hubs being Antwerp, Houston and Singapore. From these hubs the products can be fed to smaller depots, or directly to customers via road tankers, tanker vessels, or even aircraft. Nynas’ extended global delivery system and high customer service level are strong competitive factors and are gaining in importance as product demand increases.

Bitumen production is based on the same crude oils, but in this case Nynas’ market is mainly the Northern Europe, the UK, the Nordic and the Baltic states. As bitu-men must be kept hot during transport and storage, a finely meshed network of production facilities and depots in close proximity to customers is required, as well as very well-functioning logistics. Long-

range bitumen transports normally take the sea route, as this is both more cost efficient and environmentally sound. Nynas has access to specially built, modern vessels for this purpose, since environmental and safety requirements are very high, just as for the transport of bitumen by road.

Reduced inventory volumesIn recent years Nynas has devoted a lot of effort to developing, streamlining and strengthening its supply flow all the way from the oil field to the customer. In order to boost its competitiveness, great weight has been given to cost efficiency throughout the supply chain. As part of this work, Nynas seeks constantly to reduce its inventory volumes of crude oil and finished products, and to increase turnover rates in refineries and depots, without this affecting its supply capability.

The key to successful business also lies in the ability to make well-informed, correct needs forecasts in terms of both products and geography. Nynas’ long-established, close cooperation with customers within both naphthenic specialty oils and bitumen makes this possible. The Group is therefore able to plan and balance its production and distribution to ensure stability, flexibility and cost efficiency for both the customer and Nynas itself.

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Nynas is developing and creating new products that are more effective application areas for crude oil, a natural resource that today is used mainly as a source of fuel. By finding and devel-oping products with new and superior characteristics – both functional and environmental – Nynas is taking crude oil a step further and contributing to more intelligent use of this finite natural resource. adding new product characteristics that add value for customers, besides contributing to sustainable development, are therefore strong drivers for Nynas in its day-to-day activities.

SuSTaINaBILITY

cooperation with the Swedish Sea Rescue Society

environmental rescue services from Swedish Sea rescue Society and nynas

• during 2011 the Sea rescue Society’s rescue stations in oskarshamn, Sundsvall, Skellefteå and norrköping were supplied with environmental rescue booms via nynas. in total 26 rescue stations from north to south have access to equipment of this type.

• the booms can be attached to the long sides of the rescue services’ speed boats, which can reach an oil spill at a speed of 25 knots. the 200–400 metre boom can be set out quickly, either to enclose a spill, or to drive it in a particular direction. the big advantage of the equipment is speed, which increases opportunities to limit any damage quickly.

• nynas has considerable experience with equipment and methods to protect marine environments from oil spills. Since 2006, around 200 sea rescue volunteers have been trained at the environmental rescue School that nynas has set up in nynäshamn together with the Swedish Sea rescue Society.

nynas’ sustainability work is practically ori-ented in terms of both own production and existing or new products. in any situation, any health or environmental risks must be prevented and avoided as far as possible. by offering improved environmental and product characteristics, nynas’ products can also contribute to the phasing-out of products with inferior environmental characteristics.

One example is the naphthenic specialty oils that have now replaced the highly-aromatic oils in car tyres, or that are a component in the battery separators used in modern battery systems. In time, naph-thenic oils can also to some extent replace the phthalates that today are used as plasti-cisers in PVC. Certain phthalates are feared to affect human fertility and their use is therefore restricted via EU legislation.

In the same methodical way, Nynas also strives to reduce energy consumption not only in its own processes, but also in its products’ applications. On the bitumen side, Nynas has products that can be used at lower temperatures than before, called semi-warm mix and cold mix, and which thereby, in overall terms, reduce energy consumption.

Nynas also takes great responsibility to restore the sites that are subject to the nega-tive environmental impacts of the Group’s earlier activities. This is a prerequisite for retaining and nurturing the confidence shown in us by both customers and other stakeholders.

HSSe & q (Health, Safety, Security, environmental & quality)

Nynas’ sustainability work is ultimately governed by a policy at Group level. In organisational terms, the work takes place directly in the operative line activities, but is coordinated within the Nynas Group’s

nynas develops products with new and better functional and environmental characteristics

research and development (R&D) activities.Nynas gives priority to active participa-

tion in CONCAWE (Conservation of Clean Air and Water in Europe), the European oil companies’ organisation for health, environ-ment and safety, and in Responsible Care, a global initiative in the chemical industry to improve the industry’s working environ-ment, health and environmental standards. Via this involvement, and in other contexts, Nynas can contribute to driving these issues in a broader European perspective. Nynas is governed by REACH, the EU regulation on the registration of chemical substances. This formalises Nynas’ responsibility to the indi-viduals that work with its products and who should not therefore be exposed to risks.

Balanced picture

During 2011 Nynas performed a survey and gap analysis related to sustainable develop-ment to identify gaps and improvements potentials. The review was among other things based on the generic life cycle inven-tory (LCI) studies undertaken by the Euro-pean cooperation body Eurobitume. This work will continue in 2012, as the intention is to make this material more accessible both internally and externally. One major chal-lenge has been to gain a balanced picture of the products compared to alternative materials.

Nynas’ refineries

Nynas works consistently to reduce the environmental impacts of its refineries as far as possible. Emissions of nitrogen and sulphur dioxides and particles are all consid-erably below permitted values. The Group is making ongoing investments to improve its processes. One example is how in 2011 Nynas converted its hydrogen production to natural gas as the raw material used.

17


Focus on collaborationNynas is a participant in Responsible Care, the chemical industry’s work programme for continuous improvement in health and safety, environment and quality. Nynas has also endorsed the programme for sustainable development drawn up by the International Chamber of Commerce (ICC). A large part of the development work takes place in different industry organisations that seek to develop better products, for example within CONCAWE, the European oil companies’ organisation for issues related to the environment, health and safety.

Although natural gas is a finite resource, it replaces the petroleum naphtha previously used, reducing the carbon dioxide emis-sions from this process by a substantial decrease.

In 2010 Nynas switched to using biofuel in the production of process steam for the Nynäshamn site. This virtually eliminated fossil carbon dioxide emissions from the process. In 2012 a new sulphur recovery unit will be commissioned that will significantly reduce the emissions of sulphur oxides to the atmosphere. Similar environmental investments are being made in Nynas’ other facilities in Sweden and the UK.

Transport

As a market leader in its industry, Nynas has a large number of customers all over the world, which requires a global trans-port and depot network. For all transports, Nynas seeks to balance environmental con-siderations with cost effectiveness. This among other things entails that long-haul transport of both naphthenic specialty oils and bitumen normally takes place by sea, instead of by road, as this mode of trans-port is more environmentally sound and cost effective in terms of tonne-kilometre. Both land- and sea-based transport, like storage in depots, are subject to stringent safety requirements. As a consequence, Nynas transports bitumen to the various depots that are equipped with modern safety systems. Nynas has also set an age limit of 25 years for the vessels used. Depots are quality assured in accordance with the European CDI-T initiative. For land-based transport Nynas uses its own tankers, but also procures a large number of services in this area. In connection with procure-ment the haulage contractor is subject to both safety and environmental assessment.

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Nynas conducts extensive environmental work in a number of different areas, from the transport of raw materials and refinery production to delivery and intermediate storage of the finished products. The objective is to minimise the environmental impacts of both activities and products by making continuous improvements to processes and safety environmental work is conducted in close cooperation with the relevant authorities.

eNvIRONmeNT

nynas also takes great responsibility for restoring the sites that historically have been affected by its activities. in this respect there is special focus on the refinery in nynäshamn.

In Sweden, Nynas operates two refineries: one in Nynäshamn and one in Gothen-burg. Both of these facilities are required to hold permits and are subject to Swed-ish environmental legislation. The permits covers production of bitumen, distillate and naphthenic specialty oils, of which the latter only takes place in Nynäshamn.

The refinery in NynäshamnIn 2009 the refinery in Nynäshamn received a partial ruling in the process to apply for a new environmental permit for the company. The permit was activated in 2010 when the new hydrogen plant was commissioned. The partial ruling in total contained 18 conditions and 12 trial periods, of which three were reported on during 2010, and five at the beginning of 2012. An additional four are to be reported on by 2014 at the latest. The investigations include land-based electricity for ships in port, energy management, handling of fire, water, sulphur dioxide emissions and emissions of VOC (Volatile Organic Compounds).

As from 2011, natural gas has replaced the naphtha previously used as the raw material in hydrogen production in Nynäshamn. This reduces carbon dioxide emissions. A new energy management system was introduced in 2011, which among other things has led to more efficient utilisation of the natural gas.

Samples taken after the fire in the refinery in autumn 2011 did not show any environ-mental impacts, either on land or at sea. Cal-culation of emissions into the air shows that the fire led to the emission of 1.5–3 tonnes of sulphur. This in turn shows that Nynas is well prepared for accidents from both a safety and an environmental perspective.

During 2012 a new sulphur recovery unit, including a tailgas facility, will be commis-

sioned. Together these two new units will further minimise sulphur emissions. The planned expansion and conversion of the refinery’s waste water treatment plant will continue in 2012.

New environmental permit for gothenburgNynas has previously applied for a new environmental permit for the refinery in Gothenburg, and in March 2010 a partial ruling on this application was made. Three of the conditions in the partial ruling were appealed in May 2010. A final ruling on these conditions was received in Novem-ber 2011, and the ruling came into force on 20 December 2011. As from this date, new and considerably more stringent interim conditions apply, in particular concerning contamination of wastewater.

In total the partial ruling contains eight investigation provisions, of which six were investigated during 2011 and the beginning of 2012. These will be submitted to the Swed-ish Environmental Court in spring 2012. The investigations among other things concern a reduction of the environmental impact from VOC to air from caverns, the characteristics of the wastewater, improvements to the process water treatment plant, handling of product leakage and fire water in the event of a fire in individual tanks, tank farms or in connection with product movements to vessels. Further investigation orders are issued, related to possible energy efficiency improvements.

British legislationThe refinery activities in the UK are subject to British environmental legislation. The refineries in Dundee and Eastham, of which the later is operated as a joint venture with Shell, are also conducting ongoing projects to improve environmental performance. As in Gothenburg and Nynäshamn, remedia-tion work has taken place in areas subject to historic contamination, even though in

19


Thisworkhas,sofar,beensuccessfulintheJ3/J4 area, particularly with regard to resolving the technical problems of ensuring a good work environment during removal of the acid sludge. In addition, the pilot tests on the bio-degradation of sludge and oil contaminated sediments have beensuccessfulinboththeJ3/J4andPareas.The method involves decomposing organic contaminants into carbon dioxide and water using a combination of archaea and bacteria, which occur naturally in the environment. The tests have

achieved degradation of over 90 percent in some cases. Nynas is now awaiting clearance from the Land and Environment Court to continue the work.

During 2012, Nynas will report to the Land and Environment Court on its examination of the oleaginous sediments on the seabed outside the refinery.

Further information can be found in note 23 on page 64.

Nynas has been operating its refinery in Nynäshamn since 1928.

for 15 years, nynas has worked actively to restore the land within the refinery area, which was previously affected by historic contamination. in november 2011, nynas submitted a final draft action plan for two areas, J3/J4 (acid sludge depot) and P (sediment in interception dam).

many cases they took place long before Nynas took over the activities.

DepotsNynas operates bitumen depots and emulsion plants at different locations in Sweden. Even though processing usually takes place in closed systems, these activities can result in air- and water-based emissions. High requirements are made on safety and action plans in the event of any emission. Based on the product volumes that are handled, most of the facilities have been assessed as B facilities, which require permits under the Swedish environmental code, in contrast to C facilities, which are only subject to a notification requirement.

Nynas is the operator of the depots in Holmsund, Västerås and Kalmar, which are B facilities, and of the C facility in Söder-hamn. The depots in Södertälje and Malmö are leased from a third party that is respon-sible for any permits required. The depot in Norrköping is leased out. For the Rya depot adjacent to the refinery in Gothenburg Nynas is currently applying for a new permit. In 2011 the hot-oil systems used since the 1960s to heat the bitumen tanks in Holmsund and Söderhamn were replaced with new electrical heating, which reduces the risk of leaks and also reduces energy consumption.

emulsion factory in västeråsIn 2010 Nynas applied for a permit for a new emulsion plant in Västerås. The envi-ronmental authorities classed the facility as a B facility, in contrast to the plant that Nynas runs in Piteå, which today is a C facility. The new emulsion plant will be commissioned in spring 2012 and is opti-mised in both environmental and working environment terms, among other things with sealed surfaces, and complies with the high requirements made. In connection with the relocation of previous emulsion plants in Borås and Södertälje the affected sites have been remediated and restored.

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On a daily basis, Nynas handles large volumes of crude oil, bitumen and specialty oils. This takes place as road, rail and sea transport, and in the processes at Nynas’ refineries and in its deliveries to depots and customers all over the world. The products handled can be poisonous and flammable and could affect both health and safety, and the environment. Nynas’ activities are therefore subject to the extensive european legislation that lays down safety require-ments for the chemical industry, including the Seveso Directive.

SaFeTY

nynas considers extensive preventive safety work in all risk areas to be very important. the HSSe & Q-policy (Health, Safety, Security, environment & Quality) introduced during 2010 was the basis for the ongoing work in 2011. the observe-think-act internal safety programme was one of the initiatives launched. Via this policy and programme nynas seeks to involve all employees and thereby create a strong internal health and safety, environment and quality culture.

The focus in 2010 and 2011 was on increas-ing and improving process safety. The objec-tive is to reduce the number of personal injuries, but also to improve the facilities’ operational safety and availability. As a result of this work, there is now a Group-wide framework stating the minimum levels of information and instructions for the differ-ent activities. This applies to such areas as operating instructions, changes, permits and risk analyses. In addition there is information of a more local nature for the different busi-ness units. In conjunction with the regular safety reviews at the different facilities the

management groups now play a clear role in the practical implementation activities.

The number of process-safety related inci-dents decreased from 3.9 incidents per mil-lion working hours in 2010 to 1.6 incidents in 2011. The number of personal injuries, i.e. accidents leading to absence and accidents not leading to absence, but requiring medi-cal treatment, was 9.2 per million work-ing hours (2010: 4.9). The result has been analysed closely and measures have been taken. Safety management of contractors has been identified as an area for improve-ment. As an element of the implementation of Observe-Think-Act, Nynas gives internal lead investigators special training on an annual basis.

Safety work also applies to transport of hazardous goods. In order to support the exchange of experience, Nynas has gath-ered its staff responsible for transport of hazardous goods in a joint Group structure.

During the year Nynas joined SQAS, a database of European transport companies that facilitates consideration of the trans-porter’s safety management on selecting transport provider.

• we want to be the best long-term sup-plier of high-performance specialty oil products and services that meet and, if possible, exceed our customers’ expec-tations.

• we assess the health, safety and envi-ronmental impacts of our products and do our utmost to minimise these impacts. we provide guidance on the safe use of our products.

• we comply with both relevant legisla-tion and internal requirements that are documented in our management system. we strive constantly to improve our HSSe&Q results by minimising the risk of major and minor accidents, and the risk to people’s health and to the environment. we also seek to optimise the efficiency of our operations and the utilisation of resources.

• we strive to achieve a strong and posi-tive HSSe&Q culture, in which responsi-bility rests with the line organisation’s management.

• all employees are individually aware of and responsible for their work tasks.

• we have a fully integrated, certified management system that satisfies the requirements of iSo 9001 and that for our technical and operational sites also satisfies the requirements of iSo 14001 and oHSaS 18001. our system provides a structure for the creation and review of objectives and targets for HSSe&Q, and for continuously evaluating and improving the efficiency of the manage-ment system.

Nynas HSSe policy:

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Nynas works systematically to identify and control risks in the areas of safety, health and environment. Nynas constant improve-ments in different parts of the operations are often the result of detailed reviews of Nynas working methods and approach. The refinery in Nynäshamn has its own industrial fire

Fire safety

brigade, which responds to every type of emergency and is well equipped and trained to deal with the specific hazards at the refinery. If a fire occurs, this can pose danger to Nynas’s personnel and cause damage to its plant, pipes and other equipment. As residential housing is situated some distance

away, there is not considered to be any risk that the public outside the Nynas area will be affected by radiant heat from fire. However, in unfavourable wind conditions, the public may be adversely affected by combustion gases being blown in the direction of the wind.

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Factors important to Nynas’ success are a strong market focus, deep knowledge of customers’ requirements and the ability to find solutions. These are also reflected in the group’s three values: Dedication, which stands for the passion to always do our best and take responsibility for our actions towards customers, colleagues and society; cooperation, which stands for the will to find solutions together; and proactivity, as the ability to take the initiative and seek out and find new solutions that create value for our customers.

empLOYeeS

the Group’s support functions serve as strategic business partners to the business operations and contribute to strengthening synergies within the Group. nynas focuses on the long-term development of shared processes and routines for recruitment, salary review, competence and manage-ment development, as well as succession planning.

An important tool in retaining and develop-ing competence is the ”People day concept” that is based on meetings a couple of times a year between the Company’s management and the business area in order to iden-tify managers, specialists and employees, and support their development in the best possible way. Each business area moni-tors which employees should proceed to new tasks, and identifies any gaps between requirements and competence. Competence development initiatives take place on a regular basis. During 2011, management development work focused on the Group’s sales functions, to which new employees, as well as first-line managers, were added in order to strengthen international sales work.

In order to recruit and retain employees in the prioritised areas, a specialist career system has been set up. The system cor-responds to the development path for line managers. In addition to the ordinary role, a specialist has the opportunity to attend conferences, and can also pursue a doc-torate, for example, on a part-time basis.

Another important element of the ongoing competence development is that Nynas works actively to give employees the oppor-tunity to rotate between work tasks, com-panies and geographical locations. This philosophy supports competence sharing and creates important internal networks. The Group also works systematically to create a working environment that is char-acterised by workforce diversity.

During 2011 a salary review model was implemented as part of the Group’s overall business system. During the coming years the system will be developed with addi-tional HR modules, including competence development.

The recruitment rate continued to be high and in 2011 just over 100 new employees joined the Group, to replace employees leaving the Group, as well as in new posi-tions. The staff turnover rate was 4 per cent. At the close of the financial year Nynas had 886 employees, of whom 29 per cent were women.

For the HR function, the biggest chal-lenge in the next financial year will be the integration of the staff at the refinery in Hamburg-Harburg. Provided that the take-over is approved by the relevant authori-ties, Nynas will grow by approximately 220 employees on a gradual basis during the next few years.

Men 71% Women 29 %

RATIO MEN/WOMEN

NYNaS’ empLOYeeS

Number of employees at year-end within the respective work areas 2011 2010

Bitumen 249 252

Naphthenics 159 156

Manufacturing 268 254

Support functions 210 198

Total 886 860

23


DeDIcaTIONMeans that everyone does their best in every situation. This entails taking responsibility towards customers, colleagues and society in general, and that we never compromise in terms of safety, health, the environment or quality.

nynas’ values

cOOpeRaTION Concerns our passion to cooperate and to perform tasks together. This is based on everyone trusting and supporting each other. This creates a corporate culture that encourages cross-border meetings, job rotation and training.

pROacTIvITYMeans thinking ahead and being open to creativity and new ideas. By continuously seeking new solutions and opportunities for our customers, and becoming involved in their needs, we can continue to be at the forefront of developments.

24


as a consequence of the major and international operations of Nynas, the group is also exposed to financial risks. The Board of Directors is responsible for determining the group’s finance policy that includes guidelines, objectives and frameworks for Treasury and Risk management, within the group.

RISk maNagemeNT

nynas treasury and risk management has been established as the functional organi-sation in the parent company where most of the Group’s financial risks are handled. the function’s primary task is to contribute to value creation by managing the financial risks to which the company is exposed as part of its normal business activities, and to optimise the Group’s net financials.

Nynas Treasury and Risk Management sup-ports the subsidiaries with loans, placement opportunities and currency transactions. It also acts as adviser on financial issues. The function conducts internal banking activities and is located at the head office in Sweden. The internal bank also operates the company’s netting system and handles the Group’s cash management.

Nynas Treasury and Risk Management also conducts payment advisory services and handles the Group’s global credit insurance.

Nynas has the customary insurance pro-gramme for the Group’s property and liabil-ity risks. As a natural element of the Group’s different activities, continuous damage-limitation measures are conducted. This work sets the standards for the required levels of protection, in order to limit the probability of major claims.

To support the management of risk expo-sure from volatility of oil prices, exchange and interest rates, the CEO has appointed a Hedging Committee.

The Group’s CFO chairs the committee, which also includes four other members with a good understanding of Nynas’ busi-ness model. The committee meets on a monthly basis, reviews and approves the measures proposed by Nynas Treasury and Risk Management.

The Hedging Committee’s responsibilities and authority are as follows:• To analyse and protect against interest-

rate and currency risks, as well as com-modity price risks, in accordance with the Group’s financial policy as defined by the Board of Directors.

• To stay informed about and manage Nynas’ exposure to the financial risks, first and foremost oil price fluctuations and currency exposure, in particular USD, GBP and EUR.

The reports on the following pages adhere to the reporting requirements laid down in IFRS (IFRS 7 and IAS 39).

25


RISk expOSuRe cOmmeNT

Liquidity and refinancing risk

Liquidity and refinancing risk is the risk of difficulty in refinanc-ing mature loans, and the risk that payment obligations cannot be fulfilled as a consequence of insufficient liquidity.

average terms to maturity of outstanding loans, size of programme and remaining maturity, nominal Sek million

At the turn of the year approximately 37 per cent (approximately 29 per cent) of the Group’s assets were financed with external loans, wherefore great importance is attached to minimising the financing risk associated with the Group’s borrowing. It is furthermore also sought to avoid depend-ence on individual financing sources, and to adopt a conservative approach in the choice of counterparties on the placement of any surplus liquidity. To reduce this financing risk, most of Nynas’ known credit requirement is covered by long-term credit facilities and loans. In November a new syndicated stand-by credit line for EUR 750 million was agreed. The term of the credit facility is five years. In this connection the syndi-cated stand-by credit line for EUR 150 million maturing in 2012 was redeemed. Other committed credit facilities were also redeemed in connection with the new syndicated stand-by credit line. The management closely monitors the forecasts for the Group’s net liabilities in order to monitor the liquidity risk and covenants, since Nynas’ bitumen activities are highly subject to seasonal fluctuations and the working capital increases signifi-cantly during the summer months. The loan agreement includes financial terms, called Financial Covenants. The terms include the following key ratios, cash flow/interestpayments,netdebt/equity,netdebt/workingcapitalandadjustedequity. At the turn of the year all covenants were fulfilled with good margins.At the turn of the year the international credit rating agency Soliditet granted Nynas a Triple A rating for the years 2007–2011 for the highest credit standing.

currency risk

Currency risk concerns the fluctu-ations in exchange rates that, in different ways, affect the result for the year, other comprehen-sive income, and the company’s competitiveness:•Theresultfortheyearisaffected when sales and purchas-ing are denominated in different currencies (transaction risk).•Theresultfortheyearisaffected when assets and liabili-ties are denominated in different currencies (conversion risk).•Theresultfortheyearisaffected when subsidiaries’ results denominated in differ-ent currencies are converted to Swedish kronor (conversion risk).•othercomprehensiveincomeisaffected when subsidiaries’ net assets denominated in differ-ent currencies are converted to Swedish kronor (conversion risk).

Nynas handles the currency risks occurring in accordance with the descriptions given in the follow-ing sections. There have been no changes in the handling of the currency risk compared to previous years.

2011 currency

Recog-nised

liabilities

pro-gramme

size

average remaining

credit term (years)

Bond issue USD 719 719 2,9

Bond issue USD 399 399 4,9Syndicated stand-by credit line EUR 2673 6 709 5.0

Other bank loansMiscel-laneous 103 - -

Total borrowing 3 894 7 827 4,8

2010 currency

Recog-nised

liabilities

pro-gramme

size

average remaining

credit term (years)

Bond issue USD 716 716 3.9

Bond issue USD 398 398 5.9Syndicated stand-by credit line EUR 1,185 1,350 1.5

Other bank loansMiscel-laneous 256 - 0.9

Total borrowing 2,554 2,464 2.9

26



Transaction risk

Nynas’ transaction exposure, i.e. the Group’s net currency flows, amountedtoSEK2,914millionin2011(SEK2,892million).

Net flows in foreign currency, mSek Nynas has significant foreign currency flows,primarilyinUSD,EURandNoK.For example, the Group buys crude oil in USD and sells products in other local currencies, and is thereby exposed to fluctuations in exchange rates. It is in the nature of the oil industry that changes in exchange rates are passed on in the prices charged to customers. This reduces the currency risk, albeit with a certain time lag. This also applies to Nynas.

conversion risk

The equity of Nynas’ foreign subsidiaries must not normally entail any significant conversion risk as the objective is to bal-ance the subsidiary’s assets and liabilities in foreign currencies. The result of a foreign sub-sidiary is converted to Swed-ish kronor on the basis of the average exchange rate for the period in which the result was achieved, which means that the Group’s result is exposed to conversion risk. The net assets, i.e. usually the subsidiary’s own capital, are converted to Swedish kronor at the exchange rate on the bal-ance sheet date. On 31 December the Group’s net assets in subsidiaries denominated in foreign currency totalledSEK1,185million(SEK1,002 million).

Net assets in foreign currency, mSek

The group’s borrowing by currency, mSek

In order to avoid conversion risk in the subsidiaries’ balance sheets they are financed in the local currency via the internal bank. The currency risk incurred by the internal bank as a consequence is handled with the help of various deriva-tives, in order to minimise the conver-sion risk. Nynas’ policy is in significant respects to hedge net assets in foreign subsidiaries, excluding the tax effect. Forward foreign exchange contracts are predominantly used to hedge net assets. Any impairment is recognised in the result for the year.

AUD

152133

303291

962962

103111

607912

313370

-5,504-5,819

150148

DKK EUR GBP NOK PLN USD other

20102011

SEK

-660

-1,569

-1,216

-1,322

0 -679

-640

-298

-37

-26

EUR GBPUSD other

20102011

2011 2010

GBP 417 308

CHF 181 161

USD 135 141

SGD 85 24

BRL 64 79

PLN 64 42

DKK 32 27

NoK 30 8

EEK 28 22

Other 149 190

Total 1,185 1,002

27



currency risk

In order to gain the full picture of how currency fluctuations af-fect the Group’s operating result account should be taken of both the transaction risk and the subsidiaries’ operating results in the respective currencies, and the actual hedging. The Group’s other compre-hensive income has a currency exposure that relates to the size of the net assets. In addition to the net assets, other comprehen-sive income is affected by cur-rency risk since certain derivative contracts are subject to hedge accounting, which entails that the changes in the market value of these contracts are carried directly to other comprehensive income, instead of to the result for the year.

The most obvious exposure is the Nordic bitumen winter-fill programme in order to cover the following year’s sales that mainly take place in the summer months. The value of the specific inventory varies with the oil price and this winter totalled approximatelySEK550million.AcurrencyfluctuationintheSEK/USDratebySEK0.10wouldthereforeaffecttheresultbyapproximately+/-SEK5–6million.

Forward foreign exchange contracts are used to hedge obvious currency exposure.

Interest rate risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the Group’s net interest income. How quickly an interest rate change affects net interest depends on the liabilities’ fixed interest period. Nynas measures the interest rate risk as the change in the next 12 months on a 1 per cent change in interest rates.

TheaverageborrowingduringtheyearwasapproximatelySEK3,931million(SEK3,623million).A1percentchangeininterestrateswouldthereforechangethepre-taxprofit /lossby+/-SEK39million(SEK36million).AtthecloseofthefinancialyearborrowingtotalledSEK3,894.4(SEK2,554.3million).A1percent change in interest rates would therefore change the pre-tax profit /lossby+/-SEK39million(SEK26million).

Fixed interest rates and fixed interest periods for outstanding loans, Sek million

The Group’s interest rate risk arises mainly via borrowing. Interest rate swap agree-ments are used to achieve the required fixed interest periods. Nynas’ average fixed interest period for the Group’s debt portfolio must lie between 6 and 36 months. As the table shows, the average fixed interest period for Nynas borrowing’ was 18 months (15) at the close of the financial year, taking due account of the derivatives used. The Group’s average interest rate, including other loans and the effects of interest rate swap agree-ments, was 3.8 per cent (2.2 per cent). Hedge accounting is applied when there is an effective link between hedged loans and interest rate swaps. Changes in market interest rates can therefore also affect other comprehensive income. Bond issues are hedged with currency interest rate swaps, which are classified as fair value and cash flow hedges. This entails that changes in the fair value of the derivative are recognised in the result for the year, and that the loan is recognised at fair value, while any changes in the fair value of the loan are also recognised in the result for the year. The derivatives that are cash flow hedges are subject to terms that exactly match those of the loans, so that the cash flow effects of the loans and derivatives occur in the same period and cancel each other out. Changes in the fair value of cash flow hedges are recognised directly in other comprehensive income. Any impairment is recognised in the result for the year.

2011

excluding effects of

deriva-tives

effective interest rate, %

Fixed interest period, months

Including effects of

deriva-tives



Recog-nised

liabilities

Bond issue 6.1 31 3.3 1 719

Bond issue 6.2 31 4 53 399Syndicated stand-by credit line 4.1 3 4.1 3 2,673

Other bank loans 2.5 - 2.5 - 103

Interest rate swaps - - 2.5 16 -

Total borrowing 4.6 12 3.8 18 3,894

2010

excluding effects of

deriva-tives



Including effects of

deriva-tives

effective interest

rate %


Recog-nised

liabilities

Bond issue 6.1 41 2,1 1 716

Bond issue 6.2 60 4 62 398Syndicated stand-by credit line 1.4 2 1.4 2 1,185

Other bank loans 2 2 2 2 256

Interest rate swaps - - - - -

Total borrowing 3.4 21 2.2 15 2,554

28



credit risk

The Group’s commercial and financial transactions entail credit risks in relation to Nynas’ counterparties. Credit risk or counterparty risk is the risk of losses if the counterparty defaults on its obligations.

The credit risk to which Nynas is exposed can be divided into two categories:•Financialcreditrisk•Creditriskinaccountsreceivable

Total credit risk – Financial instruments With regard to the financial credit risk, Nynas has concluded an agreement with the Company’s most important banks concerning, among other things, the right to set off assets and liabilities arising as a consequence of financial transactions, called an ISDA agreement. This entails that the Company’s counterparty expo-sure to the financial sector is limited to the non-realised positive result occurring in derivative contracts. At the close of the financial year the value of these contracts totalledSEK89million(SEK146million). Via its ongoing sales Nynas is exposed to credit risk in outstanding accounts receivable. This risk is reduced with the help of credit insurance. The terms of the credit insurance require well-established routines to determine credit limits, follow-up and reporting of late payments. There are established internal routines to determine limits that are not granted by the insurance company. No deliveries take place before a limit has been approved. On average, approximately 90 per cent of outstanding accounts receivable are covered by credit insurance. Historically, losses on accounts receivable have never exceededSEK10millionperyearonanoverall basis. The total gross value of outstanding accounts receivable as of 31DecemberwasSEK1,721.6million(1,185.4). These were written down by a totalofSEK-8million(-7).Ageanalysesof accounts receivable as of 31 December are presented in note 18.

commodity price risk

Nynas’ financial and opera-tive risks on commodities are mainly concentrated on crude oil delivery, crude oil price, fixed-price agreements and electricity. The price risk on these is partly hedged by taking out financial contracts. The oil price fluctu-ated during the year from an initialBrentpriceofUSD94/bbl,its highest listing in April at USD 126/bbl,andaclosingpriceofUSD110/bblatyear-end.

The commodity’s price risk is set off by the impact on the result of any change in commodity prices. The Group purchases crude oil at current market price. It is in the nature of the oil industry that changes in world market prices for oil are passed on in the prices charged to customers, which reduces the oil price risk, albeit with a certain time lag. This also applies to Nynas.

Inventory volume, ktonnes per month

Around 70 per cent of the Group’s commodity and product requirement is imported from the Venezuelan state oil company Petroleos de Venezuela (PDVSA). PDVSA has been a half-owner of Nynas since1986, although the business relationship between the companies dates back to the late1920s. The crude oil agreement was renegotiated during 2011 and runs for five years. The cooperation is assessed to be stable, but work is ongoing to increase the flexibility of supply of raw material. Other important suppliers of raw material and products are Chevron, Valero and Neste Oil. Inventory of oil products totalled 719 ktonnes at the close of the financial year (858ktonnes).AUSD20/tonnepricechangewouldthusaffecttheprofit /lossbyapproximately+/-SEK100million.Inorder to reduce obvious price exposure, for example crude oil purchased during the winter with a long stock turnover rate, oil price swaps are used, which are not classified as hedge accounting and totalled 140 ktonnes at the close of the year, with a marketvalueofSEK580million. Nynas also concludes fixed price contracts with customers. These fixed price contracts are hedged with oil price swaps and are classified as a non hedging relationship, which means that any changes in the value of the derivative are recognised in the result for the year. At the turn of the year the hedging totalled 29 ktonnes and the market value of the derivativecontractswasSEK39million.

1 2 3 4 5 6 7 8 9 10 11 120

500

1,000

1,500

1 2 3 4 5 6 7 8 9 10 11 120

1,000

2,000

3,000

4,000

5,000

mSek 2011 2010

Accounts receivable 1,721.6 1,185.4

Cash and cash equivalents 249.6 225.1

Non-realised gains on derivatives 89.4 146.1

Total 2,060.6 1,556.6

Inventory value, MSEKpermonth

29


cORpORaTe gOveRNaNce

BUSINESS AREAS/FUNCTIONS

SHAREHOLDERSvia the

ANNUAL GENERAL MEETINGThe Company’s supreme decision-

making authority. Adopts the approval of the Annual Report,

discharge of responsibility, distribution of profit, changes to Articles of Association and elects Board of Directors and Auditors.

AUDIT COMMITTEEMonitors the

Company’s financial accounting and

reporting. Reviews the internal control system.

BOARD OF DIRECTORSConsiders and adopts decisions

on overall issues concerning the Group and oversees the

work of the CEO.

CEOManages the Company on

the basis of the internal and external corporate

governance instruments.

Important external instruments

• Swedish Companies Act• Swedish Book-keeping Act• Swedish Annual Accounts Act• IFRS• Environmental permits

Important internal instruments

• Articles of Association• Working procedures for the Board of Directors• Internal management system

Policies adopted by the Board of Directors

• Finance policy• HSSE&Q policy

AUDITORAudits the Company’s Annual Report, book-keeping, management and internal controls.

INCENTIVE COMPENSATION COMMITTEE

Monitors the terms of compensation and employ-ment of the CEO and senior

executives. Reviews proposed major personnel and

organisational changes.

PROJECT REVIEW COMMITTEE

Prepares decisions of the Board of Directors concerning major strategic and structural

projects and thereafter monitors the implementation

and achieved results of the projects.

governance structure of Nynas aB:

30


ShareholdersNynas AB, company reg. no. 556029-2509, domiciled in Stockholm, is owned 49.999 per cent by Neste Oil AB, company reg. no. 556232-3906, domiciled in Stockholm, Sweden, and 50.001 per cent by PDV Europa B.V., company reg. no. 27133447 domiciled in The Hague, the Netherlands. Neste Oil AB is part of a Group in which Neste Oil Oyj, company reg. no. FI 18523029, Espoo, Finland, is the parent company. PDV Europa B.V. is part of a Group in which Petróleos de Venezuela S.A., company reg. no. 73023, Caracas, Venezuela, is the parent company.

The total number of shares issued is 67,532, of which 33,765 are Class A shares and 33,767 are Class B shares. The share capital is SEK 67.5 million and the listed value is SEK 1,000 per share. One share gives entitlement to one vote at annual and extraordinary generel meetings. There are no restrictions to the number of votes that each shareholder may cast at General meetings. No share may be transferred to any entity that is not already a shareholder in the company. The share must immediately be offered to shareholders for redemption by written notice to the Company’s Board of Direc-tors. In the same way, the shareholders’ agreement stipulates that each shareholder may as a maximum exercise the voting rights for 33,765 shares.

The shareholders’ right to adopt decisions concerning Nynas’ affairs is exercised at the Annual General Meeting, which is the Company’s highest decision-making authority. The Annual General Meeting is usually held in the second quarter of the financial year. If necessary, extraordinary general meetings may be convened.

The Annual General Meeting adopts the Articles of Association and the shareholders elect the chairman and members of the Board of Directors at the Annual General Meeting. The Annual General Meeting also elects the auditors and decides their remuneration. The Annual General Meeting also adopts the resolutions to approve the Income Statement and Statement of Financial Position, the distribu-tion of the Company’s profits, and the discharge of the members of the Board of Directors and the CEO of their responsibilities.

Board of Directors The composition of the Board of DirectorsThe Board of Directors of Nynas AB consists of three representatives for each shareholder (Neste Oil AB and PDV Europa B.V., respec-tively), and two employee representatives. Each party also has the right to nominate the same number of deputy members of the Board of Directors. The CEO is not a member of the Board of Directors.

The work and responsibility of the Board of DirectorsThe Board of Directors is responsible for the management of the activities in the interests of the Company and all shareholders, in accordance with the external and internal corporate governance instruments. The framework is the documented working procedures of the Board wich are adopted annually by the Board of Directors.

Working procedures govern the work of the Board of Directors, as well as the division of responsibility between the Board of Direc-tors and the CEO.

The Board of Directors monitors the work of the CEO via ongoing follow-up of the activities during the year. It is the responsibility of the Board of Directors to ensure that effective systems are in place for follow-up and control of the Company’s activities, that there are satisfactory internal control procedures, and that internal corporate governance instruments have been determined. The responsibility also includes determining the objectives and strategy, deciding on major acquisitions and divestments of companies, or other major investments, deciding placements and loans, and to adopt the Company’s finance policy.

In addition to the constituent meeting the Board of Directors holds at least three ordinary meetings per year. In 2011, six Board meetings were held, of which two were extraordinary meetings. In addition to approval of budgets and major investments, the work in 2011 focused on structure and financing issues. The CEO presents issues to the Board of Directors and states the grounds for the proposed decisions. Other Group officers attend meetings of the Board of Directors as required in order to present particular issues.

In order to fulfil its obligations more effectively the Board of Directors has established three committees from among its mem-bers: the Audit Committee, the Project Review Committee and the Incentive Compensation Committee.

• The objective of the Audit Committee is to represent the Board of Directors and to monitor the Company’s financial reporting, and to monitor the effectiveness of the Company’s internal con-trols, internal audit and risk management. The Committee must keep itself informed of the audit of the Annual Report and the Consolidated Annual Report, review and monitor the impartiality and independence of the auditors, and assist in the preparation of proposals for the Annual General Meeting’s decision on the election of auditors. The Audit Committee must also represent the Board of Directors by supporting and monitoring the Group’s work on the overall coordination of the Group’s risk management. The results of the Audit Committee’s work in the form of observa-tions, recommendations and proposed decisions and measures must be reported to the Board of Directors on an ongoing basis.

• The objective of the Incentive Compensation Committee is to represent the Board of Directors in matters concerning the terms of compensation and employment of the CEO, and the executives reporting directly to the CEO, on the basis of the principles adopted by the Annual General Meeting and the policies adopted. The Committee also reviews proposed major personnel or organisational changes. The Incentive Compensa-tion Committee must report on its work to the Board of Directors on an ongoing basis.

31


• The objective of the Project Review Committee is to review pro-posals from the Company’s management concerning major stra-tegic and structural projects. The Committee also follows up and approves the implementation of specific projects as determined by the Board of Directors. The Project Review Committee must report on its work to the Board of Directors on an ongoing basis.

auditorsExternal auditorAt the 2008 Annual General Meeting the authorised public account-ing firm Ernst & Young AB was elected as the Company’s external auditor up to and including the 2012 Annual General Meeting. The auditor in charge is Authorised Public Accountant Jan Birgerson.

The audit is reported to the shareholders as an Auditors’ Report. This constitutes a recommendation to the shareholders for their approval at the Annual General Meeting to adopt the Income State-ments and Statements of Financial Position of the Parent Company and the Group, the distribution of the profit of the Parent Company, and the discharge of the members of the Board of Directors and the CEO from their responsibilities.

The audit is conducted in accordance with the Swedish Compa-nies Act and good auditing practice, which means that the audit is planned and performed on the basis of knowledge of the activities, current development and strategies of the Nynas Group. The audit services among other things include inspection of compliance with the Articles of Association, the Companies Act and the Annual Accounts Act, as well as the International Financial Reporting Standards (IFRS).

The audit is furthermore reported on an ongoing basis in the course of the year to the Board of respective company and to the CEO and Executive Committe of the Group. See note 7 concerning the remuneration paid to the auditors.

ceO and group executive committeeThe Managing Director of Nynas AB, who is also the Group President and CEO, manages Nynas’ activities in accordance with the external and internal corporate governance instruments. The framework consists of the annually stated Working procedures for the Board of Directors, which also define how responsibilities are divided between the Board and the Chief Executive Officer. The CEO is responsible for and reports on the development in the Company to the Board of Directors on an ongoing basis.

The CEO is assisted by a Group Executive Committee that consists of the executives responsible for the business areas and staff functions.

Nynas’ activities are structured as four business areas. Nynas has a structure with strong focus on business responsibility, combined with support from clear shared Group functions and processes.

The CEO leads the work of the Group Executive Committe and adopts decisions in consultation with the other executives. At the close of 2011 there were nine members of the Group Executive

Committe. The Group Executive Committe meets on a monthly basis to consider the Group’s financial development, joint Group development projects, management and competence provision, and other strategic issues.

Risk managementRisk Management is established as the functional organisation in the Parent Company where most of the Group’s financial risks are handled. The function’s primary task is to contribute to value creation by managing the financial risks to which the Company is exposed in its normal business activities. To support the work of handling risk exposure the CEO has appointed a Hedging Com-mittee. The Committee is chaired by Nynas’ CFO and also includes four other members with a sound knowledge and understanding of Nynas’ business model.

external corporate governance instrumentsThe external corporate governance instruments that determine the framework for Nynas’ corporate governance consist of the Swedish Companies Act, Annual Accounts Act and other relevant acts. The Swedish Code of Corporate Governance must be applied by Swedish limited liability companies whose shares are listed in a regulated market. Nynas’ ownership structure therefore does not require the Company to observe the Code. Sound corporate governance is fundamental to Nynas, and the objective is to ensure sound and adequate corporate governance of the Company.

Internal corporate governance instrumentsThe binding internal corporate governance instruments are the Articles of Association adopted by the Annual General Meeting and the Working procedures for Nynas’ Board of Directors adopted by the Board of Directors, the instructions for the CEO of Nynas, instructions for the financial reporting to the Board of Directors, the instructions for the committees nominated by Nynas’ Board of Directors, as well as the finance policy.

In addition to these corporate governance instruments there is also an internal management system that includes a number of policies and binding rules stating guidelines and instructions for the Group’s activities and employees.

These include regulations for compliance with competition legislation, policies that prohibit bribery and other corruption, and operative manuals that lay down accounting and reporting regulations.

In addition to the overall policies, key working processes and instructions are also defined.

32


PRODUCT AREAS

BUSINESS AREAS

FUNCTIONS

BITUMENSUPPORTFUNCTIONS

Bitumen Continental

Manufacturing

Finance

Bitumen Marketing

Business Development

Total QualityManagement

Human Resources

Communication

Bitumen Business Development

SupplyChain

Bitumen

Bitumen Nordic

Bitumen UK Naphthenics

Naphthenics

Reporting structureNynas’ financial reporting system provides information for both the external and internal reporting of results. Reporting adheres to Swedish accounting legislation and the recommendations con-cerning IFRS, the International Financial Reporting Standards.

The financial results are followed up on a monthly basis and the accumulated result is compared to the budget and the result for the previous year. There is follow-up at Group as well as busi-ness area and function level. On an ongoing basis throughout the year updated forecasts of the result for the full year are prepared. The reporting includes Income Statements and Statements of Financial Position, cash flow reports, sales statistics, key ratios and appropriate KPIs.

The Group publishes an Annual Report in accordance with both Swedish legislation and the IFRS standards.

33


BOaRD OF DIRecTORS

Matti Lievonen, born 1958Group CEO, Neste OilElected in 2009, Chairman of the Board of Directors since 2009Nationality: Finnish

Ilkka Salonen, born 1965CFO, Neste OilElected in 2009Nationality: Finnish

Roland Bergvik, born 1967Industrial technician, employee representative Elected in 2010Nationality: Swedish

Jesus Luongo, born 1960CEO, Paraguana Refining Center (CRP)Elected in 2010, Vice Chairman of the Board of Directors since 2010Nationality: Venezuelan

Jorge Tejada, born 1952Elected in 2009Nationality: Venezuelan

Erik Josephsson, born 1968Clerk, employee representative Elected in 2010Nationality: Swedish

John Launiainen, born 1954Senior Vice President, Neste OilElected in 2011Nationality: Finnish

Henry Valecillos, born 1952Elected in 2010Nationality: Venezuelan

auditor Jan Birgersson, born 1954Authorised Public Accountant Auditor in charge of the Nynas Group since 2008CEO, Ernst & young AB since 2008Present and previous customer assignments include Svensk Exportkredit, ABB, Investor, Siemens, Adecco group(Switzerland),Kinnevik,Nynas,Scania,TetraLaval and Trygg-Hansa

34


gROup execuTIve cOmmITTee

Rolf Allgulander, born 1962Vice President, ManufacturingEducation: MSc, Chemistry, MBAPrevious experience: Site Manager Borealis Kallo.CrackerManagerBorealisPortugal.Production Manager Borealis Stenungsund.Employed since: 2007In current position: 2007Nationality: Swedish

Staffan Lennström, born 1950President and CEOEducation: MSc, Applied Physics, MBAPrevious experience: Executive Vice President Borealis. Managing Director North Sea Petrochemicals. Marketing Director Statoil Petrokemi. Production Manager Esso Petrochemicals.Employed since: 2005In current position: 2005Nationality: Swedish

Martin Carlson, born 1950Director, Business DevelopmentEducation: MSc, Chemistry,Previous experience: Process Engineer, Laboratory Manager. Project Director Nynashamn NSP2. Technical Director and Refining. Director, Bitumen Supply and Technical.Employed since 1975In current position: 2007Nationality: Swedish

Simon Day, born 1967Director, Supply ChainEducation: MSc, Chemistry, MBAPrevious experience: International experience from Shell and Nynas. CEO, Nynas US.Employed since: 1996 In current position: 2006Nationality: British

Ewa Beskow, born 1957Director, Human ResourcesEducation: MSc, metallurgyPrevious experience: Director Human Resources, SVP World wide. Director Human Resources VSM Group. Vice President Human Resources, Volvo Car Corporation, Engine Division. Director Human Resources Uddeholm Tooling.Employed since: 2006In current position: 2006Nationality: Swedish

Hans Östlin, born 1961Director, Communication Education: Berghs School of Communication IHM Business School.Previous experience: Extensive international business experience, most recently as senior consultant at Rita Platzer PR.Employed since: 2006In current position: 2006Nationality: Swedish

Per Dahlstedt, born 1959Vice President, NaphthenicsEducation: MSc Industrial Engineering and ManagementPrevious experience: Supply Chain Director Naphthenics. Business Development Director Naphthenics. Sales Director Naphthenics, outside Europe.Employed since: 1985In current position: 2006Nationality: Swedish

Russell Childs, born 1954Vice President, BitumenEducation: University studies, FinancePrevious experience: Vice president Bitumen Continental&UK.CEoNynasUKAB.VicePresident Supply Chain and Planning. CFO NynasUKAB.FinancialAccountant,TarmacRoadstone Holdings.Employed since: 1992In current position: 2008Nationality: British

Dan Daggenfelt, born 1956CFOEducation: MSc, Industrial Engineering and ManagementPrevious experience: Vice President Bitumen Nordic. Various positions in Nynas within Controlling, Supply Chain and Sales.Employed since: 1983In current position: 2008Nationality: Swedish

35


MULTI-YEAR OVERVIEW

(SEK millions) 2011 2010 2009 2008 2007

INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

Net sales 23,223 20,579 20,150 23,307 18,644

Operating expenses -22,354 -19,602 -19,159 -22,354 -17,193

Depreciation -309 -306 -271 -271 -294

Share of profit/loss of joint ventures 26 10 91 -21 117

OPERATING RESULT 586 681 811 661 1,275

Net financial items -132 -71 -158 -185 -127

PROFIT BEFORE TAX 454 610 653 477 1,148

Tax -141 -189 -178 -122 -368

PROFIT FOR THE YEAR 313 421 474 355 780

STATEMENT OF FINANCIAL POSITION

Fixed assets 3,899 3,297 3,167 2,820 2,418

Inventories 4,060 3,622 3,330 3,173 2,542

Current receivables 2,507 1,751 1,858 2,761 2,423

Cash & cash equivalents and short-term investments 250 243 269 323 244

ASSETS 10,716 8,913 8,625 9,077 7,627

Equity 3,724 3,438 3,042 2,907 2,966

Long-term interest-bearing liabilities 3,840 2,335 2,232 2,310 1,445

Long-term non-interest-bearing liabilities 735 801 767 613 573

Current interest-bearing liabilities 102 256 106 1,412 323

Current non-interest-bearing liabilities 2,315 2,084 2,479 1,835 2,321

EQUITY AND LIABILITIES 10,716 8,913 8,625 9,077 7,627

STATEMENT OF CASH FLOWS

Cash flow from operating activities 535 708 954 627 1,106

Changes in working capital -989 -490 1,454 -1,575 -644

CASH FLOW FROM OPERATING ACTIVITIES -454 218 2,408 -948 462

Cash flow from investing activities -889 -540 -724 -488 -389

CASH FLOW AFTER INVESTING ACTIVITIES -1,343 -322 1,684 -1,436 73

Proceeds from borrowings, repayment of borrowings 1,368 278 -1,375 1,886 256

Dividend 0 0 -363 -371 -308

CHANGE IN CASH & CASH EQUIVALENTS 25 -44 -54 79 21

CASH & CASH EQUIVALENTS AT END OF YEAR 250 225 269 323 244

KEY FINANCIAL RATIOS

NET SALES 23,223 20,579 20,150 23,307 18,644

of which outside Sweden, % 90 89 91 89 90

RETURN ON CAPITAL EMPLOYED, % 8 11 12 12 26

RETURN ON EQUITY, % 9 14 14 12 31

EQUITY/ASSETS RATIO, % 35 39 35 32 39

INTEREST COVERAGE RATIO, times 3.6 6.1 6.1 2.8 9.1

INVESTMENTS 907 522 727 493 392

CURRENT RATIO 2.8 2.4 2.1 2.0 2.0

DEBT/EQUITY RATIO, times 1.0 0.7 0.7 1.2 0.5

36


GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

GROUP

(SEK millions) Note 2011 2010

INCOME STATEMENT

Net sales 2 23,222.7 20,579.1

Cost of sales 3 -20,109.5 -17,424.1

GROSS RESULT 3,113.3 3,155.0

Other income and value changes 3 14.5 -15.8

Distribution costs 3 -2,385.4 -2,319.5

Administrative expenses 3 -261.5 -261.0

Share of profit/loss of joint ventures 15 26.1 10.4

Other operating income 4 503.1 508.9

Other operating expenses 4 -424.3 -396.7

OPERATING RESULT 2, 3, 4, 5, 6, 7, 8 585.8 681.3

Finance income 9 44.0 49.6

Finance costs 9 -176.5 -120.6

NET FINANCIAL ITEMS -132.5 -71.0

PROFIT BEFORE TAX 453.3 610.3

Tax 10 -140.8 -188.9

PROFIT FOR THE YEAR 312.5 421.4

STATEMENT OF COMPREHENSIVE INCOME

Profit for the year 312.5 421.4

Other comprehensive income:

Translation differences -7.6 -52.6

Currency hedges -1.5 20.8

Income tax associated with currency hedges 0.4 -5.5

Cash flow hedges -11.5 15.9

Income tax associated with cash flow hedges -6.3 -4.2

Other Comprehensive Income for the year, net after tax -26.5 -25.5

COMPREHENSIVE INCOME 286.0 395.9

Attributable to owners of the Parent 286.0 395.9

EARNINGS PER SHAREThe calculation of earnings per share is based on profit attributable to equity-holders of the Parent Company. The average number of shares in 2011 and 2010 was 67.532.

2011 2010

Profit for the year

Number of shares Per share

Profit for the year


Earnings per share 312.5 67,532 4,628 421.4 67,532 6,240

As Nynas does not have, and did not have during the year, any outstanding convertible and subscription warrant programmes, no dilution effects arose during calculation of earnings per share.

37



GROUP

(SEK millions) Note 2011-12-31 2010-12-31

ASSETS

FIXED ASSETS

INTANGIBLE ASSETS

Goodwill 12 8.1 8.1

Supply contracts/customer lists 12 9.3 14.7

Computer software 12 106.2 102.6

TOTAL INTANGIBLE ASSETS 123.7 125.4

TANGIBLE ASSETS

Land and buildings 13 257.0 305.8

Plant and machinery 13 2,093.8 1,922.6

Equipment 13 132.5 124.1

Construction in progress 13 865.4 397.9

TOTAL TANGIBLE ASSETS 3,348.7 2,750.4

FINANCIAL ASSETS

Investments in associates 15 224.3 200.3

Other securities held as fixed assets 26 - 1.7

Derivative instruments 26, 27 61.3 70.2

Other long-term receivables 16 36.4 47.2

Deferred tax assets 10 104.6 102.1

TOTAL FINANCIAL ASSETS 426.6 421.5

TOTAL FIXED ASSETS 3,898.9 3,297.4

CURRENT ASSETS

Inventories 17 4,059.7 3,621.6

Accounts receivable 18, 26 1,721.6 1,185.4

Receivables from joint ventures 29 - 6.5


Tax receivables 159.4 152.8

Other current receivables 26 332.7 260.5

Prepaid expenses and accrued income 19, 26 265.5 69.6

Short-term investments 26 - 17.9

Cash and cash equivalents 20, 26 249.6 225.1

TOTAL CURRENT ASSETS 6,816.6 5,615.2

TOTAL ASSETS 10,715.5 8,912.6

38



GROUP

(SEK millions) Note 31/12/2011 31/12/2010

EQUITY AND LIABILITIES

EQUITY, GROUP

Share capital 67.5 67.5

Reserves -52.8 -26.4

Retained earnings, incl. profit for the year 3,709.1 3,396.5

TOTAL EQUITY 21 3,723.7 3,437.7

LONG-TERM LIABILITIES

INTErEST-BEArING LIABILITIES

Liabilities to credit institutions 24, 26 3,792.0 2,298.7

Provisions for pensions 22 47.9 35.8

TOTAL LONG-TERM INTEREST-BEARING LIABILITIES 3,839.9 2,334.5

NON-INTErEST-BEArING LIABILITIES

Other long-term liabilities 19.1 18.1


Deferred tax liability 10 450.9 459.8


Other provisions 23 241.1 315.5

TOTAL LONG-TERM NON-INTEREST-BEARING LIABILITIES 734.9 800.8

TOTAL LONG-TERM LIABILITIES 4,574.8 3,135.2

CURRENT LIABILITIES


Liabilities to credit institutions 24, 26 102.4 255.6

TOTAL CURRENT INTEREST-BEARING LIABILITIES 102.4 255.6


Accounts payable 26 666.2 764.1

Liabilities to joint ventures 29 119.5 100.4


Tax liabilities 85.5 59.0

Other current liabilities 26 105.0 83.2

Accrued liabilities and deferred income 25, 26 1,275.8 994.3


TOTAL CURRENT NON-INTEREST-BEARING LIABILITIES 2,314.6 2,084.1

TOTAL CURRENT LIABILITIES 2,416.9 2,339.7

TOTAL EQUITY AND LIABILITIES 10,715.5 8,912.6

For information on the Group’s pledged assets and contingent liabilities, see Note 28.

39


STATEMENT OF CHANGES IN EQUITY

GROUP

Sharecapital

Cash flowhedges

Currencyhedges

Translation reserve

Retained earnings

TotalEquity

EQUITY AT 01.01.10 67.5 -21.8 -8.2 29.2 2,975.2 3,041.9

Profit for the year - - - - 421.4 421.4

Other comprehensive income - 11.7 15.4 -52.6 - -25.5

COMPREHENSIVE INCOME 11.7 15.4 -52.6 421.4 395.9

CLOSING EQUITY AT 31.12.11 67.5 -10.1 7.2 -23.4 3,396.6 3,437.7

Profit for the year - - - - 312.5 312.5

Other comprehensive income - -17.8 -1.1 -7.6 - -26.5

COMPREHENSIVE INCOME - -17.8 -1.1 -7.6 312.5 286.0

Dividend paid - - - - - -

CLOSING EQUITY AT 31.12.11 67.5 -27.9 6.1 -31.0 3,709.1 3,723.7

40


STATEMENT OF CASH FLOWS

GROUP


OPERATING ACTIVITIES

Profit after financial items 453.3 610.3

Reversal of non-cash items 30 263.5 297.7

Taxes paid -182.1 -200.3

CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 534.7 707.7

WORKING CAPITAL

Operating receivables (increase -) -746.7 170.1

Inventories (increase -) -443.2 -371.6

Operating liabilities (increase +) 200.8 -288.4

CHANGES IN WORKING CAPITAL -989.1 -489.9

CASH FLOW FROM OPERATING ACTIVITIES -454.4 217.8

INVESTING ACTIVITIES

Acquisition of intangible assets -39.3 -49.8

Acquisition of tangible fixed assets -867.6 -472.2

Investment in financial assets -0.5 -18.4

Disposal/reduction of financial assets 18.8 0.3

CASH FLOW FROM INVESTING ACTIVITIES -888.7 -540.1

FINANCING ACTIVITIES

Proceeds from borrowings 1,361.5 312.7

Repayment of borrowings - -

Dividend paid - -

CASH FLOW FROM FINANCING ACTIVITIES 1,361.5 312.7

CASH FLOW FOR THE YEAR 18.5 -9.6

CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 225.1 269.3

Exchange differences 6.0 -34.6

CASH & CASH EQUIVALENTS AT END OF YEAR 20 249.6 225.1

NOTES TO THE CASH FLOW STATEMENTThe Group received interest of SEK 44.0 (65.1) million and paid interest of SEK 168.0 (115.2) million during the year.

41


INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

PARENT COMPANY


INCOME STATEMENT

Net sales 32 17,132.9 14,285.0

Cost of sales 33 -15,856.0 -12,768.0

GROSS RESULT 1,277.0 1,517.0

Other income and value changes 33 14.5 -15.8

Distribution costs 33 -1,230.6 -1,132.6

Administrative expenses 33 -169.4 -189.4

Other operating income 34 436.2 321.7

Other operating expenses 34 -353.2 -277.2

OPERATING RESULT 32,33,34,35,36,37,38 -25.6 223.6

Finance income 39 194.9 178.2

Finance costs 39 -174.0 -71.1

NET FINANCIAL ITEMS 20.9 107.2

PROFIT/LOSS AFTER FINANCIAL ITEMS -4.7 330.8

Appropriations 40 83.1 -138.3

PROFIT BEFORE TAX 78.4 192.5

Tax 41 9.5 -29.8

PROFIT FOR THE YEAR 87.9 162.7

STATEMENT OF COMPREHENSIVE INCOME


Other comprehensive income:

Cash flow hedges -11.5 15.9

Income tax associated with cash flow hedges -6.4 -4.2

Other Comprehensive Income for the year, net after tax -17.8 11.7

COMPREHENSIVE INCOME 70.1 174.4

42


BALANCE SHEET

PARENT COMPANY


ASSETS

FIXED ASSETS

INTANGIBLE ASSETS

Computer software 42 105.7 101.8

TOTAL INTANGIBLE ASSETS 105.7 101.8

TANGIBLE ASSETS

Land and buildings 43 182.2 233.4

Plant and machinery 43 1,959.7 1,783.0

Equipment 43 91.2 82.9

Construction in progress 43 856.0 379.3

TOTAL TANGIBLE ASSETS 3,089.1 2,478.6

FINANCIAL ASSETS

Investments in Group companies 44 920.0 919.9


Other long-term receivables 45 0.0 1.4

Deferred tax assets 41 45.5 37.5

TOTAL FINANCIAL ASSETS 1,026.8 1,029.0

TOTAL FIXED ASSETS 4,221.6 3,609.4

CURRENT ASSETS

INVENTOrIES 46 2,538.6 2,540.2

CUrrENT rECEIVABLES

Accounts receivable 47, 55 586.5 470.0

Receivables from Group companies 55 1,523.8 1,105.9


Tax receivables 106.9 57.7

Other current receivables 55 178.9 145.6

Prepaid expense and accrued income 48, 55 122.7 29.7

TOTAL CURRENT RECEIVABLES 2,547.0 1,884.8

CASH & CASH EQUIVALENTS 49, 55 510.4 454.0

TOTAL CURRENT ASSETS 5,596.0 4,879.0

TOTAL ASSETS 9,817.6 8,488.4

43


PARENT COMPANY


EQUITY AND LIABILITIES

EQUITY

Share capital 67.5 67.5

Statutory reserve 96.0 96.0

TOTAL RESTRICTED EQUITY 163.6 163.6

Retained earnings 1,181.6 1,036.7


TOTAL UNRESTRICTED EQUITY 1,269.5 1,199.4

TOTAL EQUITY 50 1,433.1 1,363.0

UNTAXED RESERVES 40 1,571.8 1,655.0



Liabilities to credit institutions 53, 55 3,791.5 2,298.7

Liabilities to Group companies 0.2 0.2



Other long-term liabilities 18.8 18.0


Provisions for deferred taxes 41 0.7 10.3


TOTAL LONG-TERM NON-INTEREST-BEARING LIABILITIES 268.7 327.5

TOTAL LONG-TERM LIABILITIES 4,189.5 2,740.4

CURRENT LIABILITIES


Liabilities to credit institutions 53, 55 79.8 228.3

Liabilities to Group companies 732.1 876.6

TOTAL CURRENT INTEREST-BEARING LIABILITIES 811.9 1,104.9


Accounts payable 55 396.7 489.8

Liabilities to joint ventures 29 3.3 -

Liabilities to Group companies 55 214.3 167.9


Tax liabilities 15.1 -

Other current liabilities 55 13.1 38.3

Accrued liabilities and deferred income 54, 55 1,106.5 846.1


TOTAL CURRENT NON-INTEREST-BEARING LIABILITIES 1,811.4 1,625.1

TOTAL CURRENT LIABILITIES 2,623.2 2,730.0

TOTAL EQUITY AND LIABILITIES 9,817.6 8,488.4

MEMORANDUM ITEMS

Pledged assets 56 75.0 75.0

Contingent liabilities 56 157.9 152.2

44


STATEMENT OF CHANGES IN EQUITY

PARENT COMPANY

Sharecapital

Cash flowhedges

Retained earnings

TotalEquity

EQUITY AT 01.01.10 67.5 17.4 1,103.8 1,188.8

Profit for the year - - 162.7 162.7

Other comprehensive income - 11.7 - 11.7

COMPREHENSIVE INCOME 11.7 162.7 174.4

Group contribution -0.2 -0.2

CLOSING EQUITY AT 31.12.10 67.5 29.1 1,266.5 1,363.0

Profit for the year - - 87.9 87.9

Other comprehensive income - -17.8 - -17.8

COMPREHENSIVE INCOME - -17.8 87.9 70.1

CLOSING EQUITY AT 31.12.11 67.5 11.3 1,354.4 1,433.3

Share capital at 31/11/2011 consisted of 67.532 shares – 33.765 A shares and 33.767 class B shares. This is unchanged from the previous year.The Board proposes a dividend of SEK 0 (0) per share for the year 2011.

45


CASH FLOW STATEMENT

PARENT COMPANY


OPERATING ACTIVITIES

Profit after financial items -4.7 330.8

Reversal of non-cash items 58 220.0 188.9

Taxes paid -50.9 -111.8

CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 164.3 407.8

WORKING CAPITAL

Operating receivables (decrease +) -641.7 177.8

Inventories (increase -) 1.6 -91.5

Operating liabilities (increase +) 148.6 -377.4

CHANGES IN WORKING CAPITAL -491.6 -291.1

CASH FLOW FROM OPERATING ACTIVITIES -327.3 116.7

INVESTING ACTIVITIES

Acquisition of intangible assets -39.3 -49.7

Acquisition of tangible fixed assets -844.0 -443.4

Investment in financial assets -0.1 -

Disposal/reduction of financial assets 1.3 0.4

CASH FLOW FROM INVESTING ACTIVITIES -882.0 -492.7

FINANCING ACTIVITIES

Proceeds from borrowings 1,253.3 326.2

Repayment of borrowings - -

Dividend paid - -

CASH FLOW FROM FINANCING ACTIVITIES 1,253.3 326.2

CASH FLOW FOR THE YEAR 44.0 -49.8

CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 454.0 530.1


CASH & CASH EQUIVALENTS AT END OF YEAR 49 510.4 454.0

NOTES TO THE CASH FLOW STATEMENTThe Parent Company received dividends of SEK 135.2 million and interest income of SEK 60.0 (65.0) million, while interest expenses amounted to SEK (164.8) (115.2) million.

46


SIGNIFICANT ACCOUNTING POLICIES General informationNynas Group comprises the Parent Company Nynas AB (publ), its subsidiaries and holdings in joint ventures. The Parent Company is incorporated in Sweden and its registered office is in Stockholm. The address of the Head Office is Lindetorpsvägen 7, Box 10700, SE-121 29 Johanneshov.

Nynas AB is 49.999 per cent owned by Neste Oil AB, reg. no. 556232-3906, registered office Stockholm, Sweden, and 50.001 per cent by PDV Europa B.V., reg. no. 27133447. registered office The Hague, Netherlands. Neste Oil AB is part of a group in which Neste Oil Oyj, reg. no. FI 18523029. registered office Espoo, Finland, is the ultimate parent. PDV Europa B.V. is part of a group in which Petróleos de Venezuela S.A., reg. no. 73023, registered office Caracas, Venezuela, is the ultimate parent.

The annual accounts and consolidated annual financial statements were ap-proved for issue by the Board on 13 April 2012. The consolidated income statement and statement of financial position and the Parent Company’s income statement and balance sheet will be presented for adoption at the annual general meeting to be held on 13 April 2012.

Basis of preparationThe financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the Interna-tional Financial Reporting Interpretations Committee (IFRIC) as adopted by the EU. In addition, RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board, have been applied.

The Parent Company applies the same accounting policies as the Group, except in the cases described below in the section entitled "The Parent Company’s Ac-counting Policies".

The Parent Company’s functional currency is SEK, which is also the reporting currency for the Parent Company and the Group. Consequently, the financial statements are presented in Swedish kronor. All amounts are stated in SEK mil-lions unless otherwise indicated.

Assets and liabilities are measured at historical cost, apart from certain financial assets and liabilities, which are measured at fair value. Financial assets and liabili-ties measured at fair value consist of derivative instruments classified as financial assets at fair value through profit or loss and available-for-sale financial assets.

Preparation of financial statements in compliance with IFRS requires manage-ment to make critical judgements, accounting estimates and assumptions which affect the application of the accounting policies and the carrying amounts of assets, liabilities, income and expense. The actual outcome may differ from these estimates and assumptions.

Estimates made by management during the application of IFRS which have a significant effect on the financial statements, and assumptions that may result in material adjustments to the following year’s financial statements are described in more detail in Note 1 Significant accounting estimates.

The accounting estimates and assumptions are reviewed regularly. Changes in accounting estimates are recognised in the period of the change if the change only affects that period. Changes are recognised in the period of the change and future periods if the change affects both.

The policies below have been applied consistently for all presented years unless otherwise stated.

New or amended IASB standards and IFRIC interpretations which came into effect in 2011 are presented below. IAS 24 Related Party Disclosures – Revised. The revised standard simplifies the definition of a related party and provides a partial exemption from the disclo-sure requirements for government-related entities. The application of the revised standard has not had any effect on the Group’s financial statements.

IFRIC 14 Prepayments of a Minimum Funding Requirement – Amendment. The amendment provides guidelines for determining the recoverable amount of a net pension asset. The amendment allows entities subject to a minimum funding

ACCOUNTING POLICIES

requirement that make an early payment of contributions to recognise the pay-ment as an asset. The application of this amendment has not had any effect on the Group’s financial statements.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments – Interpreta-tion. The interpretation provides guidance on the renegotiation of loans, where the creditor accepts an entity’s shares or other equity instruments to settle the financial liability fully or partially. The application of this interpretation has not had any effect on the Group’s financial statements.

The accounting policies and calculation methods are therefore unchanged from those applied in the preparation of the 2010 financial statements, except where described below.

New and amended standards and interpretations that are expected to have an effect on the Group’s financial statements but are not yet effectiveNo new or interpretations have been applied early.

IFRS 7 Financial Instruments: Disclosures – Amendment. IFRS 7 is effective for annual periods commencing on or after 1 July 2011. The amendment will require additional quantitative and qualitative disclosures when derecognising financial instruments in the balance sheet. The Group will apply the amendment for the financial year beginning on 1 January 2013.

IFRS 9 Financial Instruments: Recognition and Measurement (not yet adopted by the EU and timetable for adoption not currently available) IFRS 9 is probably effec-tive for annual periods commencing on or after 1 January 2015. The standard will reduce the number of measurement categories and divide financial assets into two classifications – those measured at amortised cost and those measured at fair value. The Group is waiting for all parts of the standard to be adopted before assessing the effects of implementation.

IAS 12 Income Taxes – Amendment. IAS 12 is effective for annual periods com-mencing on or after 1 January 2013. If a deferred tax liability or asset arises from investment property measured at fair value, the calculation of the deferred tax liability or asset shall be based on the property’s sale value, unless it is held within a business model whose objective is to consume substantially all of the economic benefits (rental income) embodied in the investment property over time, rather than through sale. Retrospective application is required in accordance with IAS 8. The Group will apply the amendment from 1 January 2013. but it is not expected to affect the Group’s or the Parent Company’s financial statements.

IFRS 10 Consolidated Financial Statements and IAS 27 Consolidated and Separate Financial Statements. IFRS 10 is effective for annual periods commencing on or after 1 January 2013. IFRS 10 replaces the section of IAS 27 relating to the presentation of consolidated financial statements. IFRS 10 has also superseded SIC 12 Special Purpose Entities. The rules on presentation of consolidated financial statements have not changed. The amendment concerns how to determine whether control exists and whether an entity should be consolidated. IFRS 10 also includes a num-ber of clarifications on application of the new definition of control. Retrospective application is required in accordance with IAS 8 with certain modifications. The Group will apply the standard from 1 January 2013, but it is not expected to affect the Group’s or the Parent Company’s financial statements.

IFRS 11 Joint Arrangements. IAS 28 Investments in Associates and Joint Ventures. IFRS 11 is effective for annual periods commencing on or after 1 January 2013. IFRS 11 deals with the accounting for joint arrangements, defined as a contractual arrangement whereby two or more parties have joint control. The standard is to be applied with a modified retrospective approach. The Group will apply the standard from 1 January 2013 but it is not expected to affect the Group’s or the Parent Company’s financial statements.

IFRS 12 Disclosure of Interests in Other Entities. IFRS 12 is effective for annual periods commencing on or after 1 January 2013. Companies with holdings in subsidiaries, associates, joint arrangements and unconsolidated structured enti-ties shall disclose such interests in accordance with IFRS12. The purpose of this information is to enable users of financial statements to evaluate the effects of these interests on the company’s financial statements and the risks associated with

47


these interests. The purpose of the information is also to increase understanding of what impact it would have on the financial statements if management were to change their opinion regarding consolidation of the entities in question. Retro-spective application is required in accordance with IAS 8. The Group will apply this standard from 1 January 2013.

IFRS 13 Fair Value Measurement. IFRS 13 is effective for annual periods com-mencing on or after 1 January 2012. IFRS 13 does not describe when fair value should be calculated, but provides information about how to measure fair value according to IFRS. IFRS 13 requires disclosure of information of used measure-ments model including used data and effects on the income statements. The standard also contains clarification of how to measure fair value on different areas. Retrospective application is required in accordance with IAS 8. The Group will apply this standard from 1 January 2013.

IAS 1 Presentation of Items of Other Comprehensive Income – Amendment. The amendments to IAS 1 are effective for annual periods commencing on or after 1 July 2012. The amended standard changes the grouping disclosure of items of other comprehensive income into those that will and will not subsequently be reclassified into profit and loss. The proposal only affects the presentation, not the content of OCI. Retrospective application is required in accordance with IAS 8. The Group will apply the amendment from 1 January 2013.

IAS 19 Employee Benefits. The amendments to IAS 19 are effective for annual periods commencing on or after 1 January 2013. The proposal involves significant changes to the reporting of defined benefit pension plans. One of the changes is the discontinuation of the approach that allowed actuarial gains and losses exceeding the corridor to be deferred. These will be required to be recognised immediately as income or expense in Other Compehensive Income. Disclosure requirements include the results of a sensitivity analysis that indicates the influence of certain assumptions on the outcome of the pension valuation. Retrospective application is required in accordance with IAS 8. The Group will apply the amendment from 1 January 2013. The amendment will affect the Nynas Group, as the corridor approach was previously applied. Nynas is assessing what impact this will have on the financial statements, but is unable to specify the effects with reasonable accuracy at present. At the reporting date, 31 December 2011, total unrecognised actuarial losses on pension liabilities amounted to SEK 87 million.

SIGNIFICANT ACCOUNTING POLICIES APPLIEDBasis of consolidationThe consolidated financial statements cover the Parent Company and all subsidi-aries. Subsidiaries are entities in which the Parent Company directly or indirectly owns more than 50 percent of the voting power or has some other form of control.

The consolidated financial statements are prepared using the acquisition method, which means the acquisition of a subsidiary is treated as a transaction through which the Group indirectly acquires the subsidiary’s assets and assumes its liabili-ties. Identifiable acquired assets and assumed liabilities in a business acquisition are measured initially at their fair value on the acquisition date. Transaction costs attributable to the acquisition are recognised as incurred.

With effect from the acquisition date, the acquiree’s income and expenses, identifiable assets and liabilities, and any intangible assets, such as supply contracts, customerlists and goodwill, are included in the consolidated accounts. Subsidiaries are deconsolidated from the date on which control ceases.

The accounting policies for subsidiaries have been adapted where necessary, in order to ensure consistent application of the Group’s policies.

JoiNT vENTuRESHoldings in joint ventures, in which the Group has joint control, are accounted for using the equity method.

This means that the carrying amount of the investment in a joint venture cor-responds to the Group’s share of the joint venture’s equity, and any residual value

of fair value adjustments. The Group’s share of the joint venture’s profit after financial items, adjusted for any amortisation or reversals of fair value adjustments, is reported under Share of profit/loss of joint ventures in the consolidated income statement. Dividends from joint ventures are not included in the Group’s profit for the year. The Group’s share of joint ventures’ taxes is included in tax expenses.

FoREigN bRaNChESThe functional currency is the local currency of the country in which the branch operates. Translation into Swedish kronor takes place in accordance with IAS 21. Balance sheet items are translated using the closing rate, while income statement items are translated using the average rate for the period in which the item occurred.

Foreign currencyFuNCTioNal CuRRENCy aNd REPoRTiNg CuRRENCyItems included in the financial statements of the various entities in the Group are reported in the currency used in the economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in Swedish kronor, which is the Group’s reporting currency.

TRaNSaCTioNS aNd balaNCE ShEET iTEmSForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction date. Foreign currency monetary assets and liabilities are translated at the closing rate. Exchange gains and losses on translation of these transactions are recognised in profit or loss. Exchange gains and losses on operating receivables and liabilities are reported under operating result, while gains and losses on financial receivables and liabilities are reported under financial items.

gRouP ComPaNiESThe financial results of Group companies whose functional currency is not Swedish kronor are translated as follows:

Assets and liabilities, including goodwill and other fair value adjustments, are translated using the exchange rate prevailing at the reporting date.

Income and expenses are translated into SEK using the average rate.Exchange differences arising on translation are recognised in other compre-

hensive income.The Parent Company has taken positions in foreign currencies in order to hedge

the majority of its net investments in foreign subsidiaries against exchange rate changes. Exchange differences on these positions have been recognised directly in the Group’s other comprehensive income for the year, taking into account the tax effect, to the extent that they correspond to translation differences recognised during the year

Segment reportingAs Nynas AB’s shares and debt instruments are not subject to public trading, there is no formal requirement to disclose segment information. Accordingly, Nynas AB has elected not to apply IFRS 8 Operating Segments.

Accounting Policies – Income statementREvENuE RECogNiTioNRecognised revenue is the fair value of the consideration received or receivable from goods sold or services rendered in the course of the Group’s ordinary activi-ties, excluding VAT, discounts and returns, and after elimination of intra-group transactions. Revenue is classified as follows:

Sale of goodsRevenue from the sale of goods is recognised when the goods are supplied to the customer under the terms of sales, and therefore in the period in which the signifi-cant risks and rewards of ownership of the product have transferred to the buyer.

48


interest incomeInterest income is recognised over the relevant period using the effective inter-est method.

dividendDividend income is recognised when the right to receive payment is established.

TaXESIncome tax consists of current tax and deferred tax. Current tax and deferred tax for Swedish and foreign Group companies are reported in the income state-ment. Taxes are recognised in the income statement except when the underlying transaction is recognised directly in OCI for the year, in which case the related tax effect is also recognised in OCI. Group entities are liable to pay taxes under current legislation in their own countries.

The balance sheet liability method is used to report income taxes. This means that deferred tax liabilities and assets are reported for all temporary differences, i.e. the difference between the carrying amounts and tax bases of assetsand liabilities, and of tax loss carryforwards. Deferred tax assets on temporary differ-ences and deferred tax assets arising from the carryforward of unused tax losses are only recognised to the extent that it is probable that they will be recoverable in future periods. The assessment of such probability is based on Nynas’s business plans. Deferred tax assets and receivables are calculated on the basis of the tax rates enacted or substantively enacted by the reporting date. Effects of changes to applicable tax rates are recognised in the period in which the change is enacted.

Accounting Policies – Statement of financial positionFixed assets, liabilities and provisions are essentially amounts that are expected to be used, recovered or paid more than twelve months after the reporting date. Current assets and liabilities consist essentially of amounts that are expected to be used, recovered or paid within twelve months of the balance sheet date.

Tangible fixed assetsTangible fixed assets are recognised as an asset in the balance sheet when it is probable that future economic benefits associated with the asset will flow to the Company and the cost can be measured reliably.

Tangible fixed assets are recognised at cost less accumulated depreciation and impairment losses. Cost comprises the purchase price and any costs directly at-tributable to the asset.

Parts of tangible fixed assets with different useful lives are treated as separate components of tangible fixed assets.

The carrying amount of a tangible fixed asset is derecognised on its disposal, or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the disposal of a tangible fixed asset is the difference between the selling price and the asset’s carrying amount less direct costs to sell.

baSiS oF dEPRECiaTioN FoR TaNgiblE FiXEd aSSETSDepreciation of tangible fixed assets is based on original cost less any residual value. Depreciation takes place on a straight-line basis over the useful life of the asset. The Group applies component depreciation, which means depreciation is based on the estimated useful lives of components. The residual values and useful lives of assets are reviewed annually.

Buildings 2–5 %

Land improvements 3.75–5 %

Plant & machinery and equipment

- Processing facilities 5–10 %

- Tanks 2.5–10 %

- Plant & machinery and equipment 5–20 %

Equipment

- Office equipment and computers 10–33 %

- Other equipment 10–20 %

LeasesThe Group applies IAS 17 when classifying leases as finance leases or operating leases. A lease is classified as an operating lease when it does not transfer substantially all the risks and rewards incidental to ownership. Payments made under operating leases are recognised as an expense on a straight-line basis over the lease term.

The Group does not have any significant finance leases.

Intangible assetsgoodwillGoodwill arises when the cost of a business combination exceeds the fair value of the acquired identifiable assets and liabilities according to the acquisition analysis. Goodwill has arisen from business combinations, resulting in increased profitability on integration into the Nynas Group. Goodwill has an indefinite useful life and is tested for impairment annually and when required.

For impairment testing, goodwill is allocated to the cash generating units ex-pected to benefit from the business combination in which the goodwill item arose.

SuPPly CoNTRaCTS/CuSTomER liSTSSupply contracts and customer relationships acquired in a business combination are recognised at the acquisition date fair value. Supply contracts and customer relationships have a finite useful life and are recognised at cost less accumulated amortisation and impairment. Amortisation takes place on a straight-line basis over the life of the supply contract or customer relationship.

ComPuTER SoFTwaREA number of production and information systems have been capitalised. Direct external and internal expenditure on the development of software for internal use is capitalised. Expenditure on pilot studies, training and regular maintenance is recognised as an expense as it is incurred. The value of intangible assets is reviewed at least once a year. If an asset’s carrying amount exceeds its recoverable amount, it is written down to the recoverable amount immediately.

The useful life of information systems developed internally is between five and ten years. Software relating to production planning and logistics optimisation has an estimated useful life of ten years.

Basis of amortisation for intangible assetsAmortisation of intangible assets is based on original cost less any residual value. Amortisation takes place on a straight-line basis over the useful life of the asset.

Goodwill -

Supply contracts/customer lists 10–14 %

Trademarks 20 %

Computer software 10–33 %

Impairment of tangible fixed assets and intangible assetsThe carrying amounts of the Group’s goodwill and depreciable assets are tested for impairment annually or whenever there is an indication that a particular asset may be impaired. The Group’s depreciable assets are reviewed at each report-ing date to establish whether there is any indication of impairment. If any such indication exists, the asset is tested for impairment.

An impairment loss is recognised if the asset’s recoverable amount, i.e. the higher of value in use and net realisable value, is lower than the carrying amount.

When calculating value in use, future cash flows are discounted using a pre-tax discount rate that reflects the current market view of risk-free interest and risk specific to the asset.

Reversal of impairment lossesImpairment losses recognised for assets are reversed if there is no longer an indi-cationof impairment and there has been a change in the assumptions on which the estimate of recoverable amount was based. However, goodwill impairment is never reversed.

49


An impairment loss is only reversed to the extent that the asset’s carrying amountafter the reversal does not exceed the carrying amount that would have beendetermined (net of depreciation) had no impairment loss been recognised for the asset.

Financial instrumentsFinancial instruments reported under assets in the statement of financial position include cash & cash equivalents, accounts receivable, shares, loan receivables and derivative instruments. Financial instruments reported under liabilities and equity include accounts payable, loan liabilities and derivative instruments.

Recognition of financial assets and liabilitiesA financial asset or liability is recognised in the statement of financial position when the Company becomes a party to the instrument’s contractual terms. Accounts receivable are recognised when an invoice has been sent. A liability is recognised when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not yet been received. Accounts payable are recognised when invoices are received.

A financial asset is derecognised when the rights to receive benefits have been realised, expired or the Company loses control over them. The same applies to a component of a financial asset. A financial liability is derecognised when the contractual obligation has been settled or extinguished in some other way. The same applies to a component of a financial liability.

A financial asset and a financial liability may be offset and the net amount presented in the statement of financial position when, and only when, the Com-pany has a legally enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Purchases and sales of financial assets are recognised on the trade date (the commitment date).

Classification and measurement Financial instruments are initially recognised at cost, namely the instrument’s fair value plus transaction costs, apart from derivatives for which transaction costs are recognised immediately. A financial instrument is classified according to the purpose for which it was acquired. The categories determine how a financial instrument is measured subsequent to initial recognition, as described below.

Financial assets at fair value through profit or lossThis category consists of two sub-categories: financial assets held for trading and other financial assets the Company designated in this category on initial recognition. Nynas only has holdings in the first sub-category and these are derivatives with a positive value that are not used for hedge accounting under IFRS. Derivatives in this category are measured at fair value, with any changes in fair value recognised in profit or loss.

These include derivatives used in financial hedging, but which do not qualify for hedge accounting under IFRS, and consist of foreign exchange forward contracts, oil forward contracts and interest rate swaps.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are measured at amortised cost. Amortised cost is calculated based on the effective interest method used at initial recognition.

At each reporting date, Nynas assesses whether there is any objective indica-tion that a loan is impaired. Loans are assessed individually. Objective evidence may include significant financial difficulties experienced by the issuer or debtor, a breach of contract, such as a default or delayed payment of interest or principal, and/or the probability that the borrower will enter into bankruptcy or some other financial reconstruction. Impairment losses on loans are recognised in operating expenses under distribution costs.

Receivables are recognised at original invoice amount less an allowance for uncol-lectible amounts. A provision for impairment of accounts receivable is recognised

when there is objective evidence that the Group will not be able to collect all amounts due under the original terms and conditions of the receivables.The provision for doubtful debts is based on an individual assessment of each customer, taking into consideration the customer’s ability to pay, expected fu-ture risk and the value of security received. As accounts receivable have short expected settlement terms, the value is recognised at a nominal amount without discounting. When a receivable cannot be collected, it is written off against the impairment account for accounts receivable. Impairment of accounts receivable is reported under distribution costs.

For loans and receivables, impairment is calculated as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not arisen), discounted at the financial asset’s original effective interest rate.

If, in a subsequent period, there is an indication that an impairment loss may have decreased and this can be objectively related to an event occurring after the impairment loss was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed and credited to Distribution costs.

Cash and cash equivalentsCash & cash equivalents consist of cash, demand deposits with banks and similar institutions and short-term deposits with an original maturity of 3 months or less, which are subject to an insignificant risk of changes in value.

Available-for-sale financial assetsAvailable-for-sale financial assets are financial assets that are either designated in this category or not classified in any of the other categories. Holdings of shares and participating interests are reported here.

Financial assets in this category are measured at fair value, with any fair value changes recognised in other comprehensive income. Accumulated fair value changes are recognised in a separate component of equity. However, changes relating to impairment, interest on debt instruments, dividend income and exchange gains or losses on monetary items are recognised in profit or loss. On disposal of an asset, accumulated profit/loss is, as previously, recognised in the statement of comprehensive income under profit/loss for the year. If a reliable estimation of fair value is not possible, the holding is measured at cost less any impairment.

Financial liabilities at fair value through profit or lossThis category consists of two sub-categories: financial liabilities held for trading and other financial liabilities the Company designated in this category on initial recognition. Nynas only has holdings in the first sub-category and these are derivatives with a negative value that are not used for hedge accounting under IFRS. Derivatives in this category are measured at fair value, with any changes in fair value recognised in profit or loss.

These include derivatives not used in financial hedging, but which do not qualify for hedge accounting under IFRS, and consist of foreign exchange forward con-tracts, oil forward contracts and interest rate swaps.

Other financial liabilitiesAccounts payable and loan liabilities are classified as other financial liabilities. Accounts payable have short expected settlement terms and are measured at nominal amounts with no discounting. Loan liabilities are classified as other fi-nancial liabilities, which means they are recognised at amortised cost using the effective interest method.

Derivatives and hedge accountingDerivatives include forward contracts (oil and foreign exchange forward contracts) and swaps (currency and interest rate swaps) to hedge the risks associated with interest rate and foreign currency fluctuations and changing oil prices. Changes in the value of derivative financial instruments are recognised in profit or loss based on the purpose for which the instruments were acquired. If hedge accounting is not applied, changes in the fair value of derivatives are recognised as income or expense in operating profit or loss or in net financial items based on the purpose

50


for which the derivative instrument was acquired and whether its use relates to an operating item or a financial item.

If hedge accounting is not applied when using interest rate and currency swaps, the interest coupon is recognised as interest expense, while other value changes are recognised as other finance income or other finance costs.

To qualify for hedge accounting under IFRS, Nynas is required is to formally designate the hedge at its inception, document the hedging relationship, the Company’s risk management objective and its strategy for undertaking the hedge. Nynas also documents how it plans to assess, at the inception of the hedge and on an ongoing basis, the hedging instrument’s effectiveness in offsetting fair value or cash flow changes in the hedged item. Gains and losses attributable to hedges are recognised in profit or loss at the same time as gains or losses attributable to the hedged items.

Recognition of derivative instruments and hedging measureshedging of net investmentsInvestments in foreign subsidiaries (net assets including goodwill) have been partially hedged by means of foreign exchange forward contracts. The effective portion of changes in the fair value of derivative instruments designated as hedges of a net investment is recognised in other comprehensive income and accumulated in a separate component of equity. The ineffective portion is recognised directly in profit or loss. Cumulative gains and losses in equity are recycled into profit or loss through other comprehensive income on disposal of the foreign operation.

CaSh Flow hEdgESCash flow hedges are used to hedge fixed-price transactions, for which oil forward contracts are used, and to hedge financial loan liabilities with variable interest rates, for which interest rate swaps are used.The effective portion of changes in the fair value of derivative instruments des-ignated as cash flow hedges is recognised in other comprehensive income and accumulated in a separate component of equity.

The gain or loss attributable to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are recycled into profit or loss through other comprehensive income in the periods when the hedged item affects profit or loss (e.g., when the forecast sale that is hedged takes place).

When a hedging instrument expires or is sold, or when a hedge no longer meets the hedge accounting criteria, amounts accumulated in equity are retained in equity and not taken to profit or loss until the forecast transaction occurs and is recognised. If the forecast transaction is no longer expected to occur, gains and losses deferred in other comprehensive income must be taken to profit or loss immediately.

FaiR valuE hEdgESInterest rate swaps are used to hedge the exposure to changes in the fair value of the Company’s fixed-interest liabilities. With hedge accounting, the hedged risk in the hedged item is also remeasured at fair value. Gains or losses from remeasuring the hedging instrument, the derivative and the change in value of the hedged risk are recognised under net financial items.

If the hedge no longer qualifies for hedge accounting, any adjustment to the carrying amount of a hedged item for which the effective interest method is used shall be amortised to profit or loss over the remaining maturity.

InventoriesInventories are measured at the lower of cost, using the first-in/first-out method, and net realisable value. For self-constructed goods, cost comprises direct manu-facturing costs and a reasonable proportion of indirect manufacturing costs.

Employee benefitsPost-employment benefitsNynas reports employee benefits in accordance with IAS 19 Employee Benefits.

The Group has defined contribution and defined benefit pension plans. Pension costs for defined contribution plans are recognised in the income statement as employees render service. Pension obligations are measured on an undiscounted basis, as all these plans fall due within twelve months.

The Group’s net defined benefit obligation is determined separately for each plan, based on based on company-specific actuarial assumptions. These include assessments of future salary increases, rate of inflation, mortality, attrition rate and changes in the income base amount. Pension obligations are discounted to their present value. The discount rate used is the reporting date interest rate for corporate bonds of a term consistent with the Group’s pension obligations.

Actuarial gains and losses arise when an assumption is changed or the actual outcome differs from the assumed outcome. Net actuarial gains and losses are recognised in profit or loss to the extent that they exceed the 10 per cent corridor. The corridor’s ceiling is the higher of the present value of the defined benefit obligation and the fair value of plan assets. The portion of the actuarial gains or losses that exceeds the corridor’s ceiling by more than 10 per cent is recognised in profit or loss.

The net portion of the calculated gains and losses exceeding the corridor’s ceil-ing is recognised over the average expected remaining period of employment of the employees, with effect from the year following the present financial year. Defined benefit pension plans are calculated by an independent external actuary.

Defined benefit pension liabilities recognised in the statement of financial posi-tion are the present value of the defined benefit obligation at the reporting date minus the value of the plan assets, with adjustments for unrecognised actuarial gains and losses and unrecognised past service costs.

When there is a difference between how pension expense is determined in a legal entity and the Group, a provision or receivable for payroll tax based on this difference is recognised. The provision or receivable is not discounted to the present value.

alectaThe obligation for retirement pension and family pension for employees in Sweden is covered partly by insurance with Alecta. In accordance with the statement of the Swedish Financial Accounting Standards Council’s Emerging Issues Task Force, UFR 6. this is a multi-employer defined benefit plan. For the 2011 financial year, the Company did not have access to sufficient information to enable it to report this plan as a defined benefit plan. Consequently, the ITP pension plan insured through Alecta is reported as a defined contribution plan.

ProvisionsA provision is recognised in the statement of financial position when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount. Where the effect of the time value of money is material, the amount of a provision shall be calculated as the present value of the expenditures required to settle the obligation.

Contingent liabilitiesA contingent liability is recognised when a possible obligation arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events or when it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

No material liabilities are expected to arise from these contingent liabilities, over and above the amounts set aside.

Items affecting comparabilityThe effect of special events and significant transactions on each income state-mentheading is specified. Examples of such special events and transactions are gains and losses on the disposal of significant fixed assets, impairment losses and restructuring costs.

Accounting policies – Parent CompanyThe Parent Company prepares its financial statements in accordance with the Swedish Annual Accounts Act and the Swedish Financial Accounting Standards Council’s recommendation RFR 2 Accounting for Legal Entities. RFR 2 requires the Parent Company, as a legal entity, to prepare its annual financial statements in compliance with all the IFRS and IFRIC interpretations adopted by the EU, to

51


the extent possible within the framework of the Swedish Annual Accounts Act and the Swedish Pension Obligations Vesting Act, and taking into account the relationship between tax income/expense and accounting profit.

Nynas AB applies the same recognition criteria and accounting policies as the Group. apart from the exceptions described below.

Employee benefits/defined benefit plansWhen calculating the defined benefit pension plans, the Parent Company applies the rules contained in the Swedish Pension Obligations Vesting Act and the Swedish Financial Supervisory Authority’s regulations to the extent that they are required for tax deductibility The main differences from IAS 19 relate to determination of the discount rate and the fact that the defined benefit obligation is based on the present salary level, without taking into account future salary increases, and that allactuarial gains and losses are recognised immediately in profit or loss.

TaxesUntaxed reserves are recognised inclusive of deferred tax liability in the Parent Company. In the consolidated financial statements, untaxed reserves are divided into deferred tax liability and equity.

Group contributions and shareholder contributionsThe Company reports Group contributions and shareholder contributions in ac-cordance with RFR 2.

Shareholder contributions are recognised directly in the recipient’s equity and capitalised in the contributor’s shares and participating interests, to the extent that no impairment has been identified.

Group contributions received from subsidiaries are recognised under finance income in the income statement.

Group contributions paid to subsidiaries are recognised as an investment or, depending on the relationship between tax expense (income) and accounting profit, in the income statement.

Investments in Group companiesInvestments in Group companies are recognised at cost less any impairment losses. Dividends received are recognised as income, while repayments of contributed capital reduce the carrying amount.

GoodwillGoodwill in the Parent Company arose from the acquisition of the net assets of a business and was to be amortised on a straight-line basis over a maximum of 5 years. The asset was fully amortised in 2011 and 2010.

Financial guaranteesThe Parent Company’s financial guarantees consist mainly of sureties in favour of subsidiaries.

Financial guarantees mean that the Company has an obligation to reimburse the holder of a debt instrument for losses it incurs because a specified debtor fails to make payment when due under the contractual terms. When reporting financial guarantees, the Parent Company applies an exemption from the provisions of IAS 39 permitted by the Swedish Financial Accounting Standards Council.

The exemption relates to financial guarantees issued in favour of subsidiaries, associates and joint ventures. The Parent Company reports financial guarantees as a provision in the balance sheet when the Company has an obligation, and an outflow of resources is likely to be required to settle the obligation.

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NOTES CONTENTS

GrOUPNote 1 Significant accounting policies and accounting estimates

Note 2 Information by geographical market and sales revenues by category

Note 3 Costs itemised by nature of expense

Note 4 Other operating income/expenses

Note 5 Employees, personnel expenses and remuneration of senior executives

Note 6 Depreciation/amortisation of tangible and intangible assets

Note 7 Auditors’ fees and other remuneration

Note 8 Operating leases

Note 9 Net financial items

Note 10 Taxes

Note 11 Earnings per share

Note 12 Intangible assets

Note 13 Tangible assets

Note 14 Investments in Group companies

Note 15 Investments in associates and joint ventures

Note 16 Other long-term receivables

Note 17 Inventories

Note 18 Accounts receivable

Note 19 Prepayments and accrued income

Note 20 Cash and cash equivalents

Note 21 Equity

Note 22 Provisions for pensions

Note 23 Other provisions

Note 24 Liabilities to credit institutions

Note 25 Accruals and deferred income

Note 26 Financial assets and liabilities measured at fair value

Note 27 Financial risk management, supplementary information

Note 28 Pledged assets and contingencies

Note 29 Related party disclosures

Note 30 Adjustments for non-cash items

Note 31 Events after the reporting date

PArENT COmPANyNote 32 Information by geographical market and sales revenues by

category

Note 33 Costs itemised by nature of expense

Note 34 Other operating income/expenses

Note 35 Employees, personnel expenses and remuneration of senior executives

Note 36 Depreciation/amortisation of tangible and intangible assets

Note 37 Auditors’ fees and other remuneration

Note 38 Operating leases

Note 39 Net financial items

Note 40 Appropriations

Note 41 Taxes

Note 42 Intangible assets

Note 43 Tangible assets

Note 44 Investments in Group companies

Note 45 Other long-term receivables

Note 46 Inventories

Note 47 Accounts receivable

Note 48 Prepayments and accrued income

Note 49 Cash and cash equivalents

Note 50 Equity

Note 51 Provisions for pensions

Note 52 Other provisions

Note 53 Liabilities to credit institutions

Note 54 Accruals and deferred income

Note 55 Financial assets and liabilities measured at fair value

Note 56 Pledged assets and contingencies

Note 57 Related party disclosures

Note 58 Adjustments for non-cash items

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NOTE 1. Significant accounting policies and accounting estimates

Provision for future environmental programmes Nynas has two refineries and a number of bitumen terminals requiring operating permits under Swedish environmental law. The refineries in Dundee and Eastham – the latter jointly owned with another party – are operated under the United Kingdom’s national environmental laws.

Future restoration costs associated with the operations’ environmental impacts may be difficult to establish, both in terms of size and timing. Changes in environ-mental legislation and the emergence of new cleaning up technology are factors that may affect the size of the provision. Consequently, the provision may need to be adjusted in the future, which may have a material effect on future financial results. See also note 23. Measurement of tax loss carryforwardsThe measurement of tax loss carryforwards in an entity is based on an assessment of whether they can be utilised in the foreseeable future. In particular, tax loss carryforwards have been measured in Belgium and Switzerland. See the values reported in note 10.

Impairment of intangible assets When Nynas calculates a cash generating unit’s recoverable amount when test-ing goodwill and supply contracts/customer lists for impairment, a number of assumptions regarding future conditions and estimates of parameters are made. These are described in note 12.

Assumptions in the calculation of pension provisionsThe actuarial assessment of pension obligations and pension costs is based on the actuarial assumptions which are specified in note 22. A change to any of these assumptions may have a considerable effect on the estimated retirement benefit obligation and pension costs. The discount rate is determined by reference to the return on a mortgage bond of a term consistent with the Group’s average remaining term of the obligation, which for Nynas is 30 years. The assumptions described in note 22 do not deviate significantly from what is perceived as normal practice in the Swedish market.

NOTE 2. Information by geographical market and sales revenues by category

Nynas specialises in the production and marketing of specialty oil products. The Group’s production is largely based on upgrading heavy crude oil to produce bitumen and naphthenic specialty oils. Bitumen is mainly used as a binding agent in asphalt road construction, but is also used in various industrial applications. Naphthenic specialty products are highly refined products with unique physical and chemical properties, and are used in a number of fields. They function as insulating and cooling elements in electric transformers; they are also an impor-tant component in rubber manufacture and a raw material in the production of a number of industrial products such as lubricants and printing inks.

SALES REVENUES BY GEOGRAPHICAL MARKET

2011 2010

Nordic Region 5,423.4 4,814.9

United Kingdom 5,862.6 5,013.7

Rest of Europe 7,912.3 7,409.3

North America 411.9 396.9

Other 3,612.6 2,944.4

TOTAL 23,222.7 20,579.1

NOTES TO THE FINANCIAL STATEMENTS – GROUP(Amounts in SEK million unless otherwise stated)

TOTAL ASSETS BY GEOGRAPHICAL MARKET

2011 2010


United Kingdom 1,098.2 493.8

Rest of Europe 1,102.5 533.8


Other 751.1 709.1

TOTAL 10,715.5 8,912.6

INVESTMENTS BY GEOGRAPHICAL MARKET

2011 2010

Nordic Region 884.0 496.6

United Kingdom 16.8 21.8

Rest of Europe 2.0 2.2


Other 3.4 1.2

TOTAL 906.6 522.0

SALES REVENUES BY CATEGORY

2011 2010

Sale of goods, external 23,170.2 20,516.4

Revenue from services 52.5 62.7

TOTAL 23,222.7 20,579.1

NOTE 3. Costs itemised by nature of expense

2011 2010

Raw materials 17,965.3 15,687.2

Transport and distribution costs 1,718.8 1,675.3

Manufacturing expenses 1,382.8 1,194.4

Costs for employee benefits (note 5) 720.8 687.4

Depreciation, amortisation, impairment (notes 12, 13, 14, 17) 294.4 290.6

Other expenses 659.7 485.5

TOTAL 22,741.8 20,020.4

Gains and losses on realised cash flow hedges (oil) are transferred from equity to the income statement and classified as raw materials.

The total amount relating to cash flow hedges before tax in comprehensive in-come is SEK -11.5 (16) million. SEK 7.2 (3.5) million of this amount was transferred to raw materials in the income statement.

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NOTE 4. Other operating income/expenses

OTHER OPERATING INCOME

2011 2010

Exchange gains on operating receivables/liabilities 359.8 409.5

Insurance compensation 100,2 -

Other service revenue 43,1 99.4

TOTAL 503.1 508.9

OTHER OPERATING EXPENSES

2011 2010

Costs related to fire in Nynashamn 64.8 -

Exchange losses on operating receivables/liabilities 359.5 396.7

TOTAL 424.3 396.7

Nynas implemented its largest maintenance shut-down to date at the refinery in Nynäshamn during the year. On resumption of operations, a fire broke out but did not cause any environmental damage or personal injury. However, there was extensive material damage, and repair costs are estimated to be at least SEK 190 million. The Company was also affected by a loss of revenue and additional costs incurred as a direct result of the fire. Nynas has insurance cover in place for both types of damage, and insurance revenue of SEK 100.2 million was recognised at the end of December. The compensation corresponds to the additional repair costs and expenditure Nynas had at the reporting date.See also note 19.

NOTE 5. Employees, personnel expenses and remuneration of senior executives

The average number of employees, with wages, salaries, other remuneration, social security contributions and pension costs, is shown in the tables below.

AVERAGE NUMBER OF EMPLOYEES2011 2010

PARENT men women Total men women Total

Sweden 321 129 450 316 132 447

TOTAL PARENT 321 129 450 316 132 447

2011 2010

INCOME men women Total men women Total

Sweden 321 129 450 316 132 447

TOTAL SWEDEN 321 129 450 316 132 447

United Kingdom 163 23 186 163 24 187

Belgium 26 34 60 24 34 58

Poland 14 4 18 14 4 18

Estonia 17 3 20 17 3 20

Spain 3 3 6 3 3 6

Germany 5 7 12 6 6 12

France 7 3 10 9 5 14

Denmark 7 1 8 7 1 8

Finland 4 1 5 4 1 5

USA 9 10 19 8 11 19

Other countries 39 38 77 41 31 72

TOTAL OUTSIDE SWEDEN 294 127 421 296 123 419

TOTAL GROUP 615 256 871 612 255 866

EMPLOYEE BENEFIT COSTS, GROUP

2011 2010

Wages, salaries and other benefits 505.3 488.0

Pension costs, defined benefit (see also note 22) 40.5 28.8

Pension costs, defined contribution (see also note 22) 40.9 45.0

Other post-employment benefits 1.9 -

Social security contributions 132.1 125.6

TOTAL GROUP 720.8 687.4

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REMUNERATION AND OTHER BENEFITS SENIOR EXECUTIVES

2011 2010 2010

INCOMEPresident/

CEoother Senior

executivesTotal President/

CEoother Senior

executives Total

Basic salary 5.7 11.1 16.7 5.7 10.6 16.3

Variable pay 1.4 1.8 3.2 1.8 2.6 4.4

Other benefits 0.2 0.5 0.7 0.2 0.4 0.6

Social security contributions 2.3 3.6 5.8 2.4 3.6 6.0

Pension costs 5.1 3.6 8.7 5.6 3.9 9.5

TOTAL 14.7 20.5 35.2 15.7 21.1 36.8

1) Nynas Group Management 2011 (not including CEO), Rolf Allgulander, Martin Carlson, Simon Day, Dan Daggenfelt, Per Dahlstedt Ewa Beskow, Russell Childs, Hans Östlin1) Nynas Group Management 2010 (not including CEO), Rolf Allgulander, Martin Carlson, Simon Day, Dan Daggenfelt, Per Dahlstedt Ewa Beskow, Russell Childs, Hans ÖstlinNo Board fees or other Board remuneration were paid.

GrOUP PrESIDENT & CEOThe President’s employment contract may be terminated on either side. The Presi-dent’s period of notice is 6 months. In the event of involuntary termination of employment, the President is entitled to termination benefits corresponding to 24 months’ salary.

GENDER DISTRIBUTION IN MANAGEMENT

Female representation 2011 2010

Board 17.5% 12.1%

Group executive 11.1% 11.1%

NOTE 6. Depreciation/amortisation of tangible and intangible assets

DEPRECIATION/AMORTISATION BY FUNCTION

Intangible Tangible

2011 2010 2011 2010

Cost of sales 6.6 4.8 222.9 219.9

Distribution costs 7.3 12.2 20.6 19.4

Administrative expenses 23.5 22.1 13.4 12.2

TOTAL 37.5 39.1 256.9 251.5

DEPRECIATION/AMORTISATION BY TYPE OF ASSET

2011 2010

Supply contracts/customer lists 5.5 5.5

Computer software 32.0 33.7

Buildings 8.6 9.3

Land improvements 4.9 5.5

Plant and machinery 212.9 207.2

Equipment 30.6 29.4

TOTAL 294.4 290.6

NOTE 7. Auditors’ fees and other remuneration

AUDIT FEES2011 2010

Ernst & Young

Annual audit 6.0 6.2

Other audit services 0.1 0.8

Tax advisory services 1.3 0.6

Other services 12.1 0.2

Other auditors



NOTE 8. Operating leases

PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES

2011 2010

Payments during the financial year 295.1 283.0

Agreed future payments

Within one year 257.0 229.1

2 - 5 years 548.2 616.5

6 years and thereafter 180.2 208.7

In 2011 Nynas AB had two bitumen carriers on bareboat charters, two special oil carriers on time charters and another bitumen carrier during the bitumen season. The Company intends to have another two newly built bitumen carriers on bareboat charters in 2012 with delivery scheduled for spring 2012.

The leases have different conditions and include a right of extension. Tanker trucks are leased in the UK. Other operating leases relate mainly to tanks and leased premises. The Group does not have any material agreements classified as finance leases.

56


NOTE 9. Net financial items

2011 2010

Interest income, bank deposits 11.4 12.8

Interest income, associates 1.0 0.5

Interest income, derivative instruments (actual interest rates and changes in value) 31.5 36.3

TOTAL FINANCE INCOME 44.0 49.6

Of which total interest income attributable to items carried at amortised cost 12.5 13.3

Interest expense, loans and bank overdrafts -132.2 -107.9

Interest expense, derivative instruments (actual interest rates and changes in value) -32.4 -7.1

Interest expense, PRI pension obligations -5.5 -5.5

Net exchange differences 14.0 16.9

Other finance costs -20.4 -17.1

TOTAL FINANCE COSTS -176.5 -120.6

Of which total interest expense attributable to items carried at amortised cost -137.7 -113.4

TOTAL NET FINANCIAL ITEMS -132.5 -71.0

NOTE 10. Taxes

2011 2010

Current tax -133.7 -133.9

Current tax, prior years -11.7 -6.3

Deferred tax 4.7 -48.7

TOTAL -140.8 -188.9

Tax on the Group’s profit before tax differs from the theoretical figure that would have resulted from a weighted average rate for the results in the consolidated companies as follows:

2011 2010

Result before tax 453.3 610.3

Tax according to Parent Company’s applicable tax rate -119.2 -160.5

Effect of different tax rates for foreign subsidiaries 5.5 -6.6

Tax effect of:

Other non-deductible expenses -12.3 -18.4

Other non-taxable income 6.7 1.5

Adjustment of current tax in respect of prior years -11.7 -6.3

Increase in loss carry-forwards without corresponding capitalisation of deferred tax -7.8 -0.2

Other -2.0 1.6

Recognised tax expense -140.8 -188.9

Standard rate of income tax, % 26% 26%

Effective tax rate, % 31% 31%

DEFERRED TAX ASSETS AND LIABILITIES

Assets Liabilities Net

2011 2010 2011 2010 2011 2010

Land and buildings - - 2.0 2.3 -2.0 -2.3

Machinery and equipment 14.5 15.0 337.0 304.4 -322.5 -289.4

Inventories 0.5 13.3 43.2 22.8 -42.7 -9.5

Other operating receivables/liabilities 59.0 48.9 0.6 10.8 58.4 38.1

Untaxed reserves (excluding excess depreciation) - - 60.9 117.1 -60.9 -117.1

Pension liabilities - - 6.8 3.1 -6.8 -3.1

Tax loss carryforwards 30.2 25.5 - - 30.2 25.5

TOTAL 104.2 102.7 450.5 460.5 -346.3 -357.8

Offsets 0.4 -0.6 0.4 -0.6 - -

TOTAL 104.6 102.1 450.9 459.9 -346.3 -357.8

CHANGE IN DEFERRED TAX ON TEMPORARY DIFFERENCES DURING YEAR

Opening balance

Recognised inincome statement

Recognised directly in equity

Exchangedifferences

Closingbalance

Land and buildings -2.3 0.3 - - -2.0

Machinery and equipment -289.4 -33.1 - - -322.5

Inventories -9.5 -33.2 - - -42.7

Other operating receivables/liabilities 38.1 13.9 6.4 - 58.4

Untaxed reserves (excluding excess depreciation) -117.1 56.2 - - -60.9

Pension liabilities -3.1 -4.1 - 0.4 -6.8

Tax loss carryforwards 25.5 4.7 - - 30.2

TOTAL -357.8 4.7 6.4 0.4 -346.3

57


Deferred tax assets are recognised for the carryforward of unused tax losses to the extent that it is probable that future taxable profit will be available against which they can be utilised. The Group did not recognise deferred tax assets of SEK 50.0 (60.4) million in respect of losses amounting to SEK 179 (135) million, which can be utilised against future taxable profit. SEK 10.9 million of the SEK 50.0 million must be used before 2013, while the remaining amount will be available indefinitely.

SEK 50.0 million of the non-recognised deferred tax assets relates to subsidiaries/joint ventures.

NOTE 11. Earnings per share

The calculation of earnings per share is based on profit attributable to equity-holders of the Parent Company. The average number of shares in 2011 and 2010 was 67.532.

2011 2010

Profit for the year


Profit for the year


Earnings per share 312.5 67,532 4,628 421.4 67,532 6,240

As Nynas does not have, and did not have during the year, any outstanding convertible and subscription warrant programmes, no dilution effects arose during calcula-tion of earnings per share.

NOTE 12. Intangible assets

2011 GoodwillSupply contracts/

Customer lists Computer softwareOther intang. assets/

trademarks Total intangible assets

Opening cost 275.4 334.6 323.5 1.6 935.1

Acquisitions - - 39.3 - 39.3

Reclassifications - - -2.1 - -2.1

Translation differences - 1.5 -0.3 - 1.2

Closing cost 275.4 336.1 360.4 1.6 973.5

Opening regular amortisation -264.0 -191.6 -194.2 -1.6 -651.4

Amortisation reclassifications - - -1.6 - 1.6

Translation differences - -1.0 0.2 - -0.8

Amortisation for the year - -5.5 -32.0 - -37.5

Closing regular amortisation -264.0 -198.1 -227.5 -1.6 -691.2

Opening impairment -3.3 -128.3 -26.7 - -158.3

Translation differences - -0.4 - - -0.4

Closing impairment -3.3 -128.7 -26.7 - -158.7

Closing residual value 8.1 9.3 106.2 0.0 123.7

2010 GoodwillSupply contracts/

Customer lists Computer softwareOther intang. assets/

trademarks Total intangible assets

Opening cost 275.4 337.0 288.5 1.6 902.5

Acquisitions - - 49.8 - 49.8

Reclassifications - - -12.8 - -12.8

Translation differences - -2.4 -1.9 - -4.3

Closing cost 275.4 334.6 323.5 1.6 935.1

Opening regular amortisation -264.0 -196.9 -162.4 -1.6 -624.9

Translation differences - 10.8 1.9 - 12.7

Amortisation for the year - -5.5 -33.7 - -39.1

Closing regular amortisation -264.0 -191.6 -194.2 -1.6 -651.4

Opening impairment -3.3 -119.4 -26.7 - -149.4

Translation differences - -8.9 - - -8.9

Closing impairment -3.3 -128.3 -26.7 - -158.3

Closing residual value 8.1 14.7 102.6 0.0 125.4

58


IMPAIRMENT TESTING OF GOODWILL AND CUSTOMER LISTS/SUPPLY CONTRACTSGoodwill, customer lists and supply contracts are allocated to the Group’s cash generating units (CGUs) identified for each country in which the Group operates.

Goodwill, customer lists/supply contracts are allocated as follows:

2011 2010

Switzerland 3.5 6.8

United Kingdom 5.9 7.9

Austria 3.7 3.7

Estonia 4.4 4.4

TOTAL 17.4 22.8

The recoverable amount for cash-generating units is determined by calculating the value in use. These calculations use estimated from future cash flows, which are based on financial budgets/long-term plans that have been approved by management and which cover a five-year period.

The cash-flows after this five-year period are extrapolated using an estimated growth rate. Beyond the forecast period, Nynas estimates a residual value: Gor-don’s formula is used for projects over SEK 10 million, while for smaller projects a standard factor of six times the unrestricted cash flow for the final year of the forecast period is used.

Significant assumptions used to calculate the value in use:

2011 2010

Gross margin* 2.5 % 2.5 %

Rate of growth** 2.0 % 2.0 %

Discount rate*** 9.4 % 9.4 %

* Budgeted gross margin.** Weighted average rate of growth used to extrapolate cash flows outside budget period.*** Pre-tax discount rate used in present value calculation of projected future cash flows.

These assumptions have been used to analyse each CGU. Management have deter-mined the budgeted gross margin based on previous results and their expectations of market development. The weighted average rate of growth used corresponds to the forecasts in sectoral reports. The discount rates used are pre-tax rates and reflect business-specific risks.

NOTE 13. Tangible assets

2011 Buildings Plant & machinery EquipmentConstructionin

progress Total tangible assets

Opening cost 435.8 4,511.5 449.2 420.6 5,817.1

Adjusted cost - -0.6 -1.4 - -2.0

Acquisitions 11.3 208.6 20.8 626.5 867.2

Disposals 0.0 -6.1 -7.1 - -13.3

Reclassifications -39.4 169.1 18.2 -145.7 2.1

Translation differences -0.9 3.0 0.1 0.0 2.2

Closing cost 406.7 4,885.5 479.8 901.4 6,673.5

Opening regular depreciation -129.9 -2,566.6 -326.0 - -3,022.5

Depreciation adjustment 0.0 0.8 1.9 - 2.7

Disposals - 3.9 6.2 - 10.1

Depreciation reclassifications -7.0 8.1 0.5 - 1.6

Translation differences 0.7 -2.8 -0.2 - -2.3

Depreciation for the year -13.5 -212.9 -30.6 - -256.9

Closing regular depreciation -149.7 -2,769.5 -348.2 0.0 -3,267.4

Closing residual value 257.0 2,116.0 131.6 901.4 3,406.1

Opening impairment - -22.4 0.9 -22.7 -44.2

Impairment for the year - 0.1 - -13.3 -13.2

Closing impairment - -22.3 0.9 -36.0 -57.4


Of which carrying amount, Sweden 182.2

59


2010 BuildingsPlant &

machinery EquipmentConstruction

in progressTotal tangible

assets

Opening cost 370.7 4,056.2 384.6 635.0 5,446.5

Adjusted cost - -43.8 43.8 - 0.0

Acquisitions 13.1 110.6 22.7 325.8 472.2

Disposals -0.2 -21.3 -2.0 -1.9 -25.4

Reclassifications 70.2 465.3 13.9 -536.6 12.8

Translation differences -18.1 -55.4 -13.8 -1.7 -89.0

Closing cost 435.8 4,511.5 449.2 420.6 5,817.1


Depreciation adjustment - 21.9 -21.9 - 0.0

Disposals 0.2 21.0 1.8 - 23.0

Translation differences 9.9 40.7 9.9 - 60.6


Closing regular depreciation -129.9 -2,566.6 -326.0 0.0 -3,022.5


Opening impairment - -22.4 0.9 -22.7 -44.2

Closing impairment - -22.4 0.9 -22.7 -44.2



NOTE 14. Investments in Group companies

2011 2010

Opening cost 920.0 920.0

Purchases 0.1 -

Closing cost 920.1 920.0

Nynas has three foreign branches: a branch of Nynas UK AB in the UK, and branches of Nynas NV (Belgium) in Germany and France.

60


GROUP COMPANIES:

(SEK thousands) Reg. no. Reg’d office Number of shares % Holding Currency Carrying amount

Nynas UK AB, Sweden 556431-5314 Stockholm 1,000 100 SEK 625,176

Nynas Oil Import AB 556726-8841 Stockholm 1,000 100 SEK 100

Nynäs AB 1) 556366-1957 Stockholm 1,000 100 SEK 100

Nynas Ltd, UK 02359113 London 7,647,888 100 GBP 92,305

Nynas Insurance Company Ltd, Bermuda #11005 Hamilton 91,800 100 SEK 8,349

Nynas A/S, Denmark A/S 66679 Copenhagen 1,000 100 DKK 36,461

Nynas A/S, Norway 962022316 Drammen 5,400 100 NOK 9,397

AS Nynas, Estonia 10028991 Tallinn 13,600 100 EEK 5,891

Nynas SA, France 328o31232ooo49 Bobigny 10,994 99.95 EUR 2,872

Nynas Petroleo SA, Spain esa78474475 Madrid 49,916 100 EUR 4,534

Nynas Srl, Italy 1249541 Milan 50,000 100 EUR 1,850

Nynas GmbH, Germany DE121304433 Düsseldorf 1 100 EUR 2,105

Nynas (Hong Kong) Ltd, Hong Kong 473858 Hong Kong 5,000 100 HKD 44

Nynas (Australia) Pty Ltd, Australia ACN076.139.029 Brisbane 10,000 100 AUD 54

Nynas Sp. z o.o., Poland KRS:0000106219 Szczecin 430 100 PLN 1,614

Nynas (South Africa) (Pty) Ltd, South Africa 97/13041-07 Johannesburg 100 100 ZAR 0

Nynas do Brasil Ltda, Brazil 02331563/0001 Sao Paolo 10,000 100 BRL 584

Nynas Canada Inc, Canada 870209335 Toronto 10,000 100 CAD 1,001

Nynas Naphthenics Yaglari Ticaret Ltd Sti, Turkey 632 011 3964 Istanbul 38,489 99.99 TRL 4,808

Nynas Bitumes SA, France 1) B 349837419 Bobigny 2,494 99.76 EUR 303

Nynas Mexico SA, Mexico NME010316RF1 Mexico City 50,000 100 MXN 2,968

Nynas Servicios SA, Mexico NSE010316NM1 Mexico City 50,000 100 MXN 57

Nynas Argentina SA, Argentina 30707778209 Buenos Aires 15,000 100 ARS 191

Nynas Technol Handels GmbH, Austria FN219950 Graz 1 100 EUR 323

Nynas Petroleum Shanghai Co., Ltd., China 315137 Shanghai 1 100 CNY 2,071

Nynas Naphthenics (M) SDN BHD, Malaysia 581235-V Malaysia 100,000 100 MYR 245

Nynas Baltic Sweden AB, Sweden 556625-4511 Stockholm 1,000 100 SEK 265

Nynas Belgium AB, Sweden 556613-4473 Stockholm 1,000 100 SEK 0

Nynas NV 893.286.262 Zaventem 1 0.01 EUR 0

Nynas PTE. Ltd, Singapore 200723567N Singapore 36,720 100 SEK 217

Nynas AG, Switzerland CH-170.3.025.994-5 Zug 79,998 99.99 CHF 77,003

Nynas USA, Inc, USA 800197875 Delaware 100 100 USD 36,693

Nynas OY, Finland 1834987-6 Vantaa 100 100 EUR 125

PT Nynas Indonesia, Indonesia 21.069.383.4-417.000 Jakarta 150,000 100 IDR 1,258

Nynas Naphthenics Private Ltd, India US1109MH2009FTLI95149 Mumbai 1,000,000 100 INR 753

Nynas Co. Ltd, Korea 110111-4222173 Seoul 10,000 100 KRW 314

Svensk Petroleum Förvaltnings AB 556067-8459 Stockholm 109 10.9 SEK 0

Nynas Germany AB 556858-4170 Stockholm 500 100 SEK 50

TOTALINVESTMENTS IN GROUP COMPANIES 920,082

OPERATING GROUP COMPANIES OVER AND ABOVE THOSE DIRECTLY OWNED BY PARENT COMPANY:

(SEK thousands) Reg. no. Reg’d office Number of shares % Holding Currency Carrying amount

Nynas Naphthenics Ltd, UK 2450786 Guildford 10,000 100 GBP 105

Nynas Limited Liability Company 1087746838464 Moscow 10,000 100 SEK 6,439

Nynas NV 893.286.262 Zaventem 11,090 99.99 EUR 0

Nynas Bitumen Limited 982640 Cheshire 1,000,000 100 GBP 0

Highway Emulsions Limited 2643238 Cheshire 2 100 GBP 0

1) Dormant

61


NOTE 15. Investments in associates and joint ventures

INCOME Reg. no. Reg’d office Number of shares % Holding Currency Carrying amount

Eastham Refinery Ltd, UK 2205902 London 5,000,000 50 GBP 200.3

Share in equity of Eastham Refinery Ltd accounted for using equity method 23.9

TOTAL INVESTMENTS IN ASSOCIATES 224.3

GROUP’S INTEREST IN THE ASSOCIATE ERL Assets Liabilities Income Profit

Eastham Refinery Ltd, UK 472.1 247.8 1,693.8 19.9

2011 2010

Opening balance 200.3 211.2


Dividend - -

Translation differences 4.1 -17.2

Closing balance 224.3 200.3

NOTE 16. Other long-term receivables

2011 2010


Amounts advanced 3.2 1.3

Amounts received -13.9 -15.3

Translation differences -0.2 -2.7


Other long-term receivables consist primarily of a partnership with Valero in the USA, in which Nynas participated in the rebuilding of the naphthenics operations at Valero’s Three Rivers refinery. In return, Nynas is entitled to purchase products from the units concerned at a reduced price. The amounts advanced are reported as a long-term receivable which will be reduced as products are purchased from Valero.

NOTE 17. Inventories

2011 2010

Raw materials 1,307.8 1,381.6

Semi-finished products 413.6 408.6

Finished products 2,338.3 1,831.4

TOTAL 4,059.7 3,621.6

Inventories are measured at the lower of cost, using the first-in/first-out method, and net realisable value.

NOTE 18. Accounts receivable

2011 2010

Accounts receivable, not due 1,177.5 920.8

Provision for impairment of accounts receivable -7.9 -7.0

NOT DUE ACCOUNTS RECEIVABLE, NET 1,169.6 913.8

Age analysis of past due accounts receivable

0–90 days 527.0 241.1

91–180 days 11.6 11.6

Over 180 days 13.4 18.9

TOTAL OVERDUE ACCOUNTS RECEIVABLES 552.0 271.6

The Group has recognised a loss of SEK 7.9 (7.0) million for impairment of ac-counts receivable. The change relates mainly to a reduction in doubtful debts in the UK (SEK 2.7 million) and Sweden (SEK 1.9 million). The loss is reported under distribution costs in the income statement.

NOTE 19. Prepaid expenses and accrued income

2011 2010

Rent 4.4 6.0

Charter hire 4.1 6.9

Pension premiums 1.9 1.8

Purchases of raw materials, semi-finished and finished goods 109.5 -

Forward contracts, currency 2.1 3.1

Software licences 7.2 5.3

Insurance compensation 95.0 -

Prepaid reinsurance 15.0 12.3

Distribution costs - 6.2

Import duties - 9.4

Other prepayments 26.3 18.6

TOTAL 265.5 69.6

Insurance compensation, see note 4.

62


NOTE 20. Cash and cash equivalents

2011 2010

Cash and bank balances 249.6 225.1

Cash & cash equivalents recognised 249.6 225.1

The above items have been classified as cash & cash equivalents on the follow-ing basis:* they are subject to an insignificant risk of changes in value* they can readily be converted into cash* they have a maturity of no more than three months from the date of acquisition

The Group’s cash & cash equivalents comprise its deposits in the Group’s com-mon bank accounts and other bank accounts, including currency accounts and funds in transit.

NOTE 21. Equity

2011 2010

SPECIFICATION OF EQUITY ITEM ’RESERVES’TRANSLATION RESERVE AND CURRENCY HEDGES

Opening translation reserve and currency hedges -16.3 20.9

Translation reserve and currency hedges for the year -8.7 -37.2

Closing translation reserve and currency hedges -24.9 -16.3

HEDGING RESERVE

Opening hedging reserve -10.1 -21.8

Cash flow hedges recognised in income statement, cost of sales 10.1 21.8

Cash flow hedges recognised in OCI -27.9 -10.1

Closing hedging reserve -27.9 -10.1

TOTAL RESERVES

Opening reserves -26.3 -0.8

Changes in reserves during the year -26.5 -25.5

Closing reserves -52.8 -26.3

RESERvESTranslation reserveThe translation reserve covers all exchange differences arising on the translation of the financial statements of foreign entities which are presented in a currency other than the Group’s presentation currency.

The Parent Company and Group present their financial statements in Swedish kronor.

hedging reserveThe hedging reserve comprises the effective portion of the cumulative net change in the fair value of a cash flow hedging instrument attributable to hedged transac-tions that have not yet occurred.

RETaiNEd EaRNiNgSRetained earnings and net profit for the year include accumulated net profits of the Parent Company and its subsidiaries and associates.

ShaRE CaPiTalIn accordance with Nynas AB’s articles of association, share capital shall amount to a minimum of SEK 52,000,000 and a maximum of SEK 208,000,000. All shares are fully paid and carry equal voting power and an equal share in the Company’s assets.

Two classes of share are issued - A shares, maximum SEK 103,999,000. and B shares, maximum SEK 104,001,000. Share capital comprises SEK 33,765,000 in A shares and SEK 33,767,000 in B shares.

The par value per share is SEK 1.000.

DISTRIBUTION OF SHARE CAPITAL

Change in total number of shares 2011 2010

Opening number 67,532 67,532

Change during the year 0 0

CLOSING NUMBER 67,532 67,532

Class of share2011 2010

Number of shares Per cent


Class A 33,765 50% 33,765 50%

Class B 33,767 50% 33,767 50%

TOTAL 67,532 100% 67,532 100%

A dividend is proposed by the Board in accordance with the Swedish Companies Act and is adopted by the annual general meeting. The proposed, but not yet adopted, dividend for 2011 is SEK 0 (0) per share. Based on the number of shares at 31/12/2011. this represents a total dividend of SEK 0 million.

CaPiTal maNagEmENTThe Group’s equity, which is defined as total recognised equity, amounted to SEK 3,724 (3,438) million at the end of the year.

The return on equity was 9 (14) per cent.Nynas has defined a financial goal of securing long-term growth and maximis-

ing the value of its assets. The Board has given the Nynas management group scope for growth and development according to Nynas’s strategy by means of self-financing and payment of dividends to shareholders as adopted by the an-nual general meeting.

NOTE 22. Provisions for pensions

The Group’s employees, former employees and their survivors may be covered by defined contribution and defined benefit plans relating to post-employment benefits. The defined benefit plans cover retirement pension and survivors’ pension.

The obligation reported in the balance sheet is derived from the defined benefit plans. The largest plans are in Sweden, the United Kingdom and Belgium. The plans are covered by a re-insured provision in the balance sheet and by pension benefit plans and funds. The calculations are based on the projected unit credit method using the assumptions shown in the table below. Net actuarial gains and losses are recognised in profit or loss to the extent that they exceed the 10 per cent corridor. The corridor’s ceiling is 10 per cent of the higher of the present value of the defined benefit obligation and the fair value of plan assets. The net portion of the calculated gains and losses exceeding the corridor’s ceiling is recognised over the employees’ average remaining period of service with effect from the year following the present financial year. In accordance with IAS 19, the discount rate is determined by refer-ence to market yields on high quality corporate bonds that are traded in a deep market and by reference to the Swedish mortgage bond market. Consequently, it is management’s view that the discount rate applied reflects the time value of money and provides a fair present value with regard to the Group’s pension obligations. Defined benefit pension plans are calculated by an independent external actuary.

63


In the case of a multi-employer defined benefit plan, sufficient information cannot be obtained to calculate Nynas’s share in this plan, and the plan has been reported as a defined contribution plan. In Nynas’s case, this relates to the ITP pension plan which is administered via Alecta. However, the majority of the Swedish plan for salaried employees (ITP ) is funded by pension provisions, which are covered by credit insurance with Försäkringsbolaget Pensionsgaranti (FPG) and managed by a Swedish multi-employer institution, Pensionsregistreringsinstitutet (PRI ).

Premiums to Alecta amounted to SEK 6.2 (7.0) million. A surplus or deficit at Alecta may result in a refund to the Group or lower or higher future premiums. At the end of the year, Alecta’s surplus, in the form of a collective consolidation level, was 113 (146) percent. The consolidation level is the market value of Alecta’s assets as a percentage of its insurance obligations, calculated in accordance with Alecta’s actuarial assumptions.

Nynas’s forecast payment of pensions in relation to defined benefit plans, both funded and unfunded, amounts to SEK 30.0 (20.2) million for 2012.

REPORTED AS PROVISIONS FOR PENSIONS IN THE STATEMENT OF FINANCIAL POSITION

2011 2010

Present value of funded obligations 624.2 572.4

Present value of unfunded obligations 201.4 185.2

Total present value of obligations 825.6 757.7

Fair value of plan assets -710.4 -697.7

Limits on access 23.5 27.4

Unrecognised actuarial losses -87.4 -46.5

NET LIABILITY RECOGNISED 51.3 40.8

Portion of pension liability recognised as provisions for pensions 51.3 40.8

CHANGE IN PRESENT VALUE OF DEFINED BENEFIT OBLIG ATION

2011 2010

Present value of defined benefit obligation at beginning of year 757.7 769.3

Benefits paid -29.2 -28.5

Current service cost 25.3 27.4

Past service cost - -22.3

Interest expense 36.5 37.6

Net actuarial losses during year 26.7 19.3


Curtailments 3.0 2.5

PRESENT VALUE OF DEFINED BENEFIT OBLIGATION AT END OF YEAR 825.6 757.7

COSTS RECOGNISED IN INCOME STATEMENT2011 2010

Defined benefit pension plans:

Benefits earned (paid in by employer) 25.3 27.4

Interest expense 36.5 37.5

Expected return on plan assets -42.9 -40.3

Net actuarial losses during year 25.8 1.3

Past service cost 0.0 -22.3

Curtailments and settlements -4.3 27.4

Limits on access - -2.2

TOTAL COST OF DEFINED BENEFIT BENEFIT PAYMENTS RECOGNISED IN INCOME STATEMENT 40.5 28.8

Defined contribution pension plans:

Costs for defined contribution plans 40.9 45.0

TOTAL PENSION EXPENSE 81.4 73.9

CHANGE IN NET DEBT DURING THE YEAR2011 2010


Exchange differences -2.5 7.1

Net expense in income statement 40.5 28.8

Return on plan assets -4.9 -48.0

Reimbursement from retirement benefit plan 2.3 9.5

Employee contributions 4.3 3.3

Pension payments -29.2 -28.5

TOTAL 51.3 40.8

Pension expenses and other defined benefit payments are reported in the income statement under cost of sales (SEK 23.9 million), distribution costs (SEK 17.4 mil-lion) and administrative expenses (SEK 40.1 million).

The interest portion of pension costs and the return on plan assets are reported under finance income and finance costs.

The main actuarial assumptions used (in %) are as follows: 2011 2010

Sweden uK belgium Sweden uK belgium

Discount rate 3.5 5.1 4.8 3.7 5.5 4.5

Expected return on plan assets 3.5 6.0 3.8 3.7 6.5 3.8

Future salary increases 2.5 N/A 4.0 2.5 N/A 4.0

Future pension increases 2.0 3.0 2.0 2.0 3.3 2.0

Expected remaining service period 13.0 N/A 20.0 13.0 N/A 20.0

The expected return on plan assets in each country is calculated by reference to the historical return and on the basis of management’s assessment of future development.

64


CHANGE IN FAIR VALUE OF PLAN ASSETS DURING THE YEAR

2011 2010

Fair value of plan assets at beginning of year 697.7 632.3

Expected return on plan assets 42.9 40.3

Actuarial gains and losses for the year, net -40.2 39.2


Employer contributions 25.7 60.8

Other 0.0 0.0

Payment of pension benefits -22.6 -21.7

FAIR VALUE AT END OF YEAR 710.4 697.7

PLAN ASSETS

2011 2010

Shares and participating interests 352.9 387.7

Other interest-bearing securities 200.0 207.0

Bank deposits 49.3 3.0

FAIR VALUE OF PLAN ASSETS 602.3 597.7

Plan assets do not include any securities issued by Nynas AB or assets used by Nynas AB.

2011 2010

Actual return on plan assets 2.7 79.5

MULTI-YEAR SUMMARY RECOGNISED IN STATEMENT OF FINANCIAL POSITION

2011 2010 2009 2008 2007

Present value of defined benefit obligation 825.6 757.7 769.3 621.6 679.9

Fair value of plan assets -710.4 -697.7 -632.3 -485.4 -573.3

DEFICIT IN PLAN 115.2 60.0 137.0 136.2 106.6

NOTE 23. Other provisions

2011 2010


Provisions for the year 1.8 -3.1

Change of remediation principle -28.5 -


Amounts utilised during year -44.7 -62.2

TOTAL 265.1 336.5

Provisions expected to be utilised after more than 12 months 241.1 315.5

These provisions relate to estimated environmental liabilities in Sweden (Nynäshamn, Gothenburg), Wandre in Belgium, Köge in Denmark and Dundee in Scotland.

The provision for Sweden is a contingent liability as defined in Chapter 10 of the Swedish Environmental Code, and relates to after-treatment costs for pollution resulting from refining and depot operations.

The provision in Nynäshamn consists of three parts – the Land Farm (SEK 8 million), Lagoon/Interception dams (SEK 19 million) and J3/J4 (SEK 241 million), which are not present value calculations.

The Land Farm Remediation of the Land Farm area was completed at 31 December 2010. Final covering of the permanent land fill is dependent on subsidence in the area, but is expected to take place around 2015.

The total cost of the Land Farm project has considerably exceeded the estima-tion made during preparation of the 2008 annual financial statements. This is partly because the extent of contamination was previously under-estimated and partly because the geological conditions at the site were more complex than initial ground surveys had indicated.

The final cost of remediation was approx. SEK 151 million at 31 December 2010. The remaining cost for covering the land fill has been estimated at SEK 8 million by an external party.

Lagoon/Interception Dams A definitive action plan has been submitted to the Land and Environment Court. The plan proposes that both the lagoon and interception dams be treated in the same way, with suction dredging followed by purification at a treatment plant at the refinery using a combination of micro-organisms (archaea and bacteria).

Remediation costs were calculated at SEK 19 million by an external party, excluding costs for the construction of the treatment plant. A decision on the remediation was not expected before 2012.

J3/J4The J3 and J4 areas contain acid tar. Similar materials are also found at a number of old refineries in Europe and around the world. They are difficult to deal with due to their high acid content. The established method involves collection, neutralisation and transportation for disposal. The method is not problem-free, as, even after processing, the materials are unlikely to be released from regulatory control. As an alternative, a method involving final incineration of the materials has also been studied.

A definitive action plan has been submitted to the Land and Environment Court. To ensure a good working environment during removal of the materials, they are stabilised using a limestone vibration technique. They are then dug up using conventional methods and processed by adding water to form a liquid mixture. The mixture is then treated biologically with archaea and bacteria. Over 90 percent of the organic contaminants are decomposed into carbon dioxide and water. The cost of remediation has been calculated by an external party at approx. SEK 241 million. A decision on the remediation was not expected before 2012.

Other environment-related activities at NynäshamnNynäshamn received a partial ruling in December 2009 in the case relating to a new environmental permit for its entire operations. This partial ruling means no substantial effects of Nynas operation. In 2011 Nynas submitted a report to the Land and Environment Court, in accordance with the examination condi-tions in its temporary permit, regarding the feasibility of supplying electricity to ships in port, the potential for further energy conservation and examination of the oily sediment on the seabed outside the refinery (Area E2). The hearing at the Land and Environment Court regarding the provision of electricity to ships in port and the potential for further energy conservation takes place on 29 March 2012 and a decision is expected during 2012. An additional examina-tion report on the E2 region, including a risk assessment of the oily sediment, was sent to the Land and Environment Court in February 2012.

As a result of the fire which caused a stoppage in production in October 2011. the temporary permit’s examination period regarding VOC and sulphur emissions to air was extended until 29 February 2012.

In 2012 a new biological step will be put into operation in the treatment plant and the investigation of quench water management will begin.

All costs associated with the remediation project have been calculated using the present value method.

65


NOTE 24. Liabilities to credit institutions

In November, a new syndicated stand-by credit line of EUR 750 million was ar-ranged. The term of the credit facility is five years. At the same time, the syndicated stand-by credit line of EUR 150 million, maturing in 2012 was terminated. The other committed credit facilities were also concluded in connection with the new syndicated credit facility.

A private placement loan from US investors was issued in September 2006. The loan total is USD 140 million and the fixed-rate periods are 8 and 10 years. USD 90 million has been swapped to a variable SEK interest rate and USD 50 million to a fixed SEK interest rate.

Currency interest rate swaps have terms that exactly match the bonds’ maturities.

2011 2010


Loans from credit institutions 3,792.0 2,298.7

TOTAL 3,792.0 2,298.7

CURRENT LIABILITIES

Loans from credit institutions 8.2 220.2

Overdraft facilities 94.2 35.4

TOTAL 102.4 255.6

GRAND TOTAL 3,894.4 2,554.3

2011

Year issued/maturity Description of loan

Interest, %

Cur-rency

Nominal amount

(local cur-rency)

Amounts in SEK

millions

LONG-TErM LIABILITIES Variable-rate loans

2006/2014 Bond issue 3.28 USD 90.0 718.6

2006/2016 Bond issue 3.29 USD 50.0 399.1

2011/2016 Stand-by credit line (€750) 2.55 USD 25.0 161.0

2011/2016 Stand-by credit line (€750) 3.06 GBP 30.0 297.9

2011/2016 Stand-by credit line (€750) 3.43 EUR 30.0 249.5


2011/2016 Stand-by credit line (€750) 4.57 SEK 300.0 300.0



TOTAL 3,792.0

2011


Interest, %

Cur-rency

Nominal amount

(local cur-rency)

Amounts in SEK

millions

CUrrENT LIABILITIES Variable-rate loans

2011/2012 Bank loans 5.80 RUB 14.0 3.0

2011/2012 Bank loans 6.05 RUB 8.0 1.8

2011/2012 Bank loans 6.40 RUB 16.0 3.4

2011/2012 Factoring 0.0

2011/2012 Overdraft 94.2

2011/2012 Other bank facilities 0.0

TOTAL 102.4

2010


Interest, %

Cur-rency

Nominal amount

(local cur-rency)

Amounts in SEK

millions


2006/2014 Bond issue 2.08 USD 90.0 716.0

2006/2016 Bond issue 2.09 USD 50.0 397.8





TOTAL 2,298.7

2010


Interest, %

Cur-rency

Nominal amount

(local cur-rency)

Amounts in SEK

millions


2003/2011 Bond issue 2.02 SEK 210.0 210.0

2010/2011 Bank loans 6.35 RUB 16.0 3.6

2010/2011 Bank loans 5.60 RUB 17.4 3.9

2010/2011 Bank loans 5.10 RUB 8.0 1.8

2010/2011 Factoring 1.0

2010/2011 Overdraft 35.4


TOTAL 255.6

66


MATURITY OF EXTERNAL INTEREST-BEARING LIABILITIES AT 31 DEC 2011

2012 102.4

2013 and thereafter 3,792.0

TOTAL 3,894.4

MATURITY OF EXTERNAL INTEREST-BEARING LIABILITIES AT 31 DEC 2011

2011 255.6

2012 and thereafter 2,298.7

TOTAL 2,554.3

THE GROUP HAS THE FOLLOWING UNUSED CREDIT FACILITIES:

2011 2010

Variable interest

Uncommitted 427.9 3,863.3

Committed

- expires within one year - 1,071.3

- expires after one year 3,573.8 165.4

TOTAL 4,001.7 5,100.0

NOTE 25. Accrued liabilities and deferred income

2011 2010

Purchases of raw materials, semi-finished and finished goods 782.1 669.7

Accrued salaries/holiday pay 99.3 75.2

Accrued interest 17.2 15.7

Shipping costs 25.1 24.7

Discounts 25.7 26.5

Import duty 3.2 2.5

Accrued investment costs 83.8 -

Deferred income – bitumen 46.0 -

Other 193.4 180.0

TOTAL 1,275.8 994.3

NOTE 26. Financial assets and liabilities measured at fair value

Financial assets and liabilities in the statement of financial position are measured at fairvalue, apart from loans and receivables and other financial liabilities not designated as hedged items. which are measured at amortised cost.

Fair value disclosures are not required when the carrying amount is an accept-able approximation of the fair value. This applies to other items in the categories loans and receivables and other financial liabilities.

The Group’s long-term bond issues, nominal value USD 140 million, carry fixed USD interest rates. However, these loans have been hedged with currency interest rate swaps. USD 90 million has been swapped to a variable SEK interest rate and USD 50 million to a fixed SEK interest rate. Both are included in hedge accounting, with USD 90 million representing fair value hedging and USD 50 million cashflow hedging. The carrying amount and fair value amount to SEK 1,117.7 (1,113.8) million. The Group’s other long-term credit liabilities carry variable interest rates. Accordingly, the fair value corresponds to the carrying amount.

In the autumn of 2010 a payment was made in connection with a contractual dispute with Lyondell Chemical Company. Part of the payment was settled in equities. The total number of shares was 76,312 with a total value of SEK 17.9 million. The shares were sold in early 2011.

Fair value measurementFair value is determined based on a three-level hierarchy. Level 1 is based on quoted prices in active markets for identical assets or liabilities. Level 2 is based on inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 is based on inputs for the asset or liability that are not based on observable market data. For Nynas, all financial instruments are measured according to Level 2.

Measurement of fair valuelisted holdingsThe fair value of instruments quoted in an active market is measured on the basis of the price of the holdings at the reporting date.

derivative instrumentsThe fair value of foreign exchange contracts is measured on the basis of quoted prices where available. If quoted prices are not available, the fair value is measured by discounting the difference between the contracted forward rate and the forward rate that can be subscribed for on the reporting date for the remaining contract period. This is done using the risk-free rate of interest based on government bonds.

The fair value of interest rate swaps is measured by discounting the estimated future cash flows according to the contract’s conditions and due dates based on the market rate.

interest-bearing liabilitiesThe fair value is measured by discounting future cash flows of principal and interest using the current market interest rate for the remaining term.

Current receivables and liabilitiesFor current receivables and liabilities with a remaining term of less than 12 months, the carrying amount is considered to represent a reasonable approximation of the fair value. Current receivables and liabilities with a term of more than 12 months are discounted when the fair value is measured.

67


The fair values and carrying amounts of financial assets and liabilities are shown in the table:

2011

Derivatives used in hedge

accounting

Derivatives held for trading

Available for sale assets

Loans and receivables

Other financial liabilities

Total carrying amount

Non-financial assets

and liabilities

Total balance

sheetFair

value

Other securities held as fixed assets - - - - - - - - -

Long-term derivatives 61.3 - - - - 61.3 - 61.3 61.3

Accounts receivable - - - 1,721.6 - 1,721.6 - 1,721.6 1,721.6

Short-term derivatives 16.8 11.3 - - - 28.1 - 28.1 28.1

Other current receivables - - - - - - 332.7 332.7 332.7

Prepaid expenses and accrued income - - - - - - 265.5 265.5 265.5

Cash and cash equivalents - - - 249.6 - 249.6 - 249.6 249.6

FINANCIAL ASSETS 78.1 11.3 0.0 1,971.2 0.0 2,060.5 598.2 2,658.8 2,658.8

Long-term liabilities to credit institutions - - - - 3,792.0 3,792.0 - 3,792.0 3,792.0

Short-term liabilities to credit institutions - - - - 102.4 102.4 - 102.4 102.4

Accounts payable - - - - 666.2 666.2 - 666.2 666.2

Long-term derivatives 20.4 - - - 20.4 - 20.4 20.4


Other current liabilities - - - - 0.0 105.0 105.0 105.0

Accrued liabilities and deferred income - - - 46.0 - 46.0 1,229.8 1,275.8 1,275.8

FINANCIAL LIABILITIES 35.6 23.2 0.0 46.0 4,560.6 4,665.5 1,334.8 6,000.3 6,000.3

2010


accounting

Derivatives held for trading



Other financial liabilities



and liabilities

Total balance

sheetFair

value

Other securities held as fixed assets - - 1.7 - - 1.7 - 1.7 1.7

Long-term derivatives 70.2 - - - - 70.2 - 70.2 70.2

Accounts receivable - - - 1,185.4 - 1,185.4 - 1,185.4 1,185.4

Receivables from associates - - - 6.5 - 6.5 - 6.5 6.5


Other current receivables - - - - - 0.0 260.5 260.5 260.5

Prepaid expenses and accrued income - - - 0.4 - 0.4 69.2 69.6 69.6

Short-term investments - - 17.9 - - 17.9 - 17.9 17.9

Cash and cash equivalents - - - 225.1 - 225.1 - 225.1 225.1

FINANCIAL ASSETS 91.1 55.0 19.6 1,417.4 0.0 1,583.1 329.7 1,912.8 1,912.8

Long-term liabilities to credit institutions - - - - 2,298.7 2,298.7 - 2,298.7 2,298.7

Short-term liabilities to credit institutions - - - - 255.6 255.6 - 255.6 255.6

Accounts payable - - - - 764.1 764.1 - 764.1 764.1

Long-term derivatives 2.2 - - - 2.2 - 2.2 2.2


Other current liabilities - - - - 0.0 83.2 83.2 83.2

Accrued liabilities and deferred income - - - 23.3 - 23.3 971.0 994.3 994.3

FINANCIAL LIABILITIES 15.6 48.6 0.0 23.3 3,318.4 3,405.9 1,054.2 4,460.1 4,460.1

68


NOTE 27. Financial risk management, supplementary information

MARKET VALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS

2011 2010

Interest rate swaps 42.4 65.2

Currency swaps -14.2 26.3

Oil price swaps 2.3 -9.7

TOTAL DERIVATIVE ASSETS AND LIABILITIES 30.5 81.9

NOMINAL VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

iNTEREST RaTE iNSTRumENTS 2011 2010

Interest rate swaps

Maturity of less than 1 year 655.8 1,256.2

Maturity of 2-4 years 1,764.4 300.0

Maturity of 5 or more years 200.0 364.4

TOTAL 2,620.2 1,920.5

Currency instruments

Forward exchange contracts -1,716.5 -1,538.0

TOTAL -1,716.5 -1,538.0

Commodity instruments

Oil price swaps -836.7 -340.3

TOTAL -836.7 -340.3

NOTE 28. Pledged assets and contingencies

2011 2010

FLOATING CHARGES

Security for liabilities to credit institutions 75.0 75.0

TOTAL 75.0 75.0

Guarantees 116.7 113.8

Other guarantees and contingent liabilities 2.6 2.3

TOTAL 119.3 116.1

A future closure of operations within the Group may involve a requirement for decontamination and restoration works. This is, however, considered to be well into the future and the future expenses cannot be calculated reliably.

NOTE 29. Related party disclosures

Information on remuneration of the Board and key management personnel can be found in note 5.

Petroleos de Venezuela S.A. (PDVSA) is the ultimate owner of 50 per cent of the shares in Nynas AB. The Nynas Group purchases approx. 85 per cent of its crude oil from PDVSA. Crude oil and base oil prices are governed by formula based multi-year supply contracts. Prices reflect the prices that would be charged under a contract with a non-related party.

2011 2010

Purchases, crude 9,046.2 6,836.8

Purchases, base oils 703.4 266.5

Purchases, leasing/services 0.6 -

Sales revenue 1.6 9.8

Accounts receivable 6.8 11.3

Accounts payable 348.5 459.4

69


Neste Oil Oyj (Neste Oil) is the ultimate owner of 50 per cent of the shares in Nynas AB. The Nynas Group purchases bitumen and other oil products from Neste Oil and also leases two bitumen barges. Nynas sells fuel and services to Neste. All transactions are conducted at current market prices.

2011 2010

Purchases, bitumen 987.2 817.2


Purchases, fuel 14.8 13.7

Purchases, leasing/services 26.6 57.9




Nynas owns 50 per cent of the shares in Eastham Refinery Ltd (ERL); the other 50 per cent is owned by Shell. ERL purchases the majority of its crude oil from Nynas AB, according to the contractual price formula.

NyNaS ab: 2011 2010

Sales revenue – Nynas AB from ERL 2,192.8 1,550.9


Accounts payable 3.3 -

Nynas UK AB purchases bitumen and distillates from ERL (50 per cent of ERL’s total production). The purchase price for bitumen reflects the price that would be charged under a term contract with an established bitumen refiner in North West Europe; prices for distillate products reflect the FOB prices for similar products delivered in bulk to non-related customers in North West Europe (ARA area).

Nynas UK AB also provides administration and weighbridge operation services to ERL, which are charged at cost.

NyNaS uK ab: 2011 2010

Purchases, bitumen 1,286.9 1,046.3

Purchases, distillates 539.7 493.2


Service revenue 3.1 3.2



NOTE 30. Adjustments for non-cash items

2011 2010

Share of profit/loss of associates -24.6 -9.3

Depreciation and impairment of assets 321.9 306.1

Unrealised exchange differences and oil forward contracts 23.7 96.1

Disposals of fixed assets 2.8 2.3

Provisions for pensions 11.1 -32.1

Other provisions -71.4 -65.3

TOTAL 263.5 297.7

NOTE 31. Events after the reporting date

In December 2011 Nynas entered into an agreement with Shell to take over full control and responsibility for a base oil refinery and associated facilities in Harburg, Germany. The agreement is a 25-year lease contract.

The agreement is subject to EU Commission approval with respect to applicable competition legislation.

When approval is obtained, Nynas will take over the southern part of the refinery and associated equipment for specialty oil production at the earliest opportunity. Renovation of the northern part of the refinery will be initiated concurrently.

Under the agreement with Shell, the entire plant will be converted into a complete specialty oil refinery within a period of two years, after which Nynas will assume responsibility for the entire facility.

70


NOTES TO THE FINANCIAL STATEMENTS – PARENT COMPANY (Amounts in SEK million unless otherwise stated)

NOTE 32. Information by geographical market and sales revenues by category

Nynas specialises in the production and marketing of specialty oil products. The Group’s production is largely based on upgrading heavy crude oil to produce bitumen and naphthenic specialty oils. Bitumen is mainly used as a binding agent in asphalt road construction, but is also used in various industrial applications. Naphthenic specialty products are highly refined products with unique physical and chemical properties, and are used in a number of fields. They function as insulating and cooling elements in electric transformers; they are also an impor-tant component in rubber manufacture and a raw material in the production of a number of industrial products such as lubricants and printing inks.

SALES REVENUES BY GEOGRAPHICAL MARKET

2011 2010


United Kingdom 3,785.3 3,094.9

Rest of Europe 5,848.3 4,652.4


Other 2,764.6 2,486.5

TOTAL 17,132.9 14,285.0

PURCHASES AND SALES GROUP COMPANIES

2011 2010

Purchases 14% 15%

Sales 48% 46%

NOTE 33. Costs itemised by nature of expense

2011 2010

Raw materials 14,238.3 11,562.2

Transport and distribution costs 680.0 984.4

Manufacturing expenses 977.9 791.5

Costs for employee benefits (note 35) 424.7 384.1

Depreciation, amortisation, impairment (notes 42,43,44,46) -254.0 249.4

Other expenses 1,174.5 134.2

TOTAL 17,241.5 14,105.9

Gains and losses on realised cash flow hedges (oil) are transferred from equity to the income statement and classified as raw materials.

NOTE 34. Other operating income/expenses

OTHER OPERATING INCOME

2011 2010

Exchange gains on operating receivables/liabilities 299.6 271.4


Other service revenue 36.4 50.3

TOTAL 436.2 321.7

OTHER OPERATING EXPENSES

2011 2010

Costs related to fire in Nynashamn 64.8 -

Exchange losses on operating receivables/liabilities 288.4 277.2

TOTAL 353.2 277.2

NOTE 35. Employees, personnel expenses and remuneration of senior executives

The average number of employees, with wages, salaries, other remuneration, social security contributions and pension costs, is shown in the tables below.

AVERAGE NUMBER OF EMPLOYEES2011 2010

PARENT men women Total men women Total

Sweden 321 129 450 316 132 447

TOTAL PARENT 321 129 450 316 132 447

WAGES, SALARIES AND SOCIAL SECURITY CONTRIBUTIONS2011 2010

PARENT

Senior execu-tives

(7 individuals)other

Employees Total

Senior execu-tives

(7 individuals)other

Employees Total

Sweden

Salaries and other benefits 17.2 257.5 274.7 17.6 232.8 250.4

(of which bonuses) 2.7 4.1 6.8 3.6 6.4 10.0

Social security contributions 13.5 136.5 150.0 16.7 116.9 133.6

(of which pension costs) 8.1 47.1 55.2 8.9 37.4 46.3

TOTAL PARENT 30.8 394.1 424.7 34.4 349.7 384.1

71


GENDER DISTRIBUTION IN MANAGEMENTPARENT

Female representation 2011 2010

Board 0.0% 0.0%

Group executive 14.3% 14.3%

NOTE 36. Depreciation/amortisation of tangible and intangible assets

DEPRECIATION/AMORTISATION BY FUNCTION

Intangible Tangible

2011 2010 2011 2010

Cost of sales 6.6 4.8 197.5 194.2

Distribution costs 1.4 6.2 15.6 14.3

Administrative expenses 23.6 22.1 9.3 7.8

TOTAL 31.6 33.1 222.4 216.3

DEPRECIATION/AMORTISATION BY TYPE OF ASSET

2011 2010

Computer software 31.6 33.1

Buildings 6.3 7.6

Land improvements 2.0 1.7

Plant and machinery 194.7 189.4

Equipment 19.4 17.6

TOTAL 254.0 249.4

Difference between recognised depreciationand regular depreciation: 130.4 109.9

TOTAL RECOGNISED DEPRECIATION 384.4 359.4

NOTE 37. Auditors’ fees and other remuneration

AUDIT FEES2011 2010

Ernst & Young



Tax advisory services 0.8 -

Other services - -

Other auditors

Annual audit 0.0 -


NOTE 38. Operating leases

PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES

2011 2010

Payments during the financial year 212.6 196.2

Agreed future payments

Within one year 178.0 163.8

2 – 5 years 359.7 369.5

6 years and thereafter 133.8 154.7

In 2011 Nynas AB had two bitumen carriers on bareboat charters, two special oil carriers on time charters and another bitumen carrier during the bitumen season. The Company intends to have another two newly built bitumen carriers on bareboat charters in 2012, with delivery scheduled for spring 2012. The Parent Company does not have any material agreements classified as finance leases.

NOTE 39. Net financial items

2011 2010

Interest income, bank deposits (1) 28.1 27.8

Interest income, derivative instruments (actual interest rates and changes in value) 31.5 36.3

Dividends from Group companies 135.2 114.2

TOTAL FINANCE INCOME 194.9 178.2

Of which total interest income attributable to items car-ried at amortised cost 28.1 27.8

Interest expense, loans and bank overdrafts (2) -128.9 -101.9

Interest expense, derivative instruments (actual interest rates and changes in value) -32.4 -7.1

Interest expense, PRI pension obligations -5.5 -5.5

Net exchange differences 4.7 53.1

Other finance costs -12.0 -9.8

TOTAL FINANCE COSTS -174.0 -71.1

Of which total interest expense attributable to items carried at amortised cost -134.3 -107.4

TOTAL NET FINANCIAL ITEMS 20.9 107.2

(1) Parent’s interest income from Group companies is 19.0 (16.2)(2) Parent’s interest expense from Group companies is -4.6 (-0.8)

72


NOTE 40. Appropriations

APPROPRIATIONS 2011 2010

Change in obsolescence reserve 0.0 -2.7

Difference between recognised depreciation and regular depreciation -130.4 -109.9

Change in tax allocation reserve 213.5 -25.6

TOTAL 83.1 -138.3

UNTAXED RESERVES 2011 2010

Accumulated accelerated depreciation 1,264.0 1,133.6

Inventory obsolescence reserve 76.2 76.2

Tax allocation reserve, income year 2007 - 35.7

Tax allocation reserve, income year 2008 25.2 202.3

Tax allocation reserve, income year 2009 - -



TOTAL 1,571.8 1,655.0

NOTE 41. Taxes

2011 2010

Current tax - -20.2

Current tax, prior years -1.7 0.2

Deferred tax 11.2 -9.8

TOTAL 9.5 -29.8

Tax on the Group’s profit before tax differs from the theoretical figure that would have resulted from a weighted average rate for the results in the consolidated companiesas follows:

2011 2010

Result before tax 78.4 192.2

Tax according to Parent Company’s applicable tax rate -20.6 -50.5

Tax effect of:

Dividends from subsidiaries 35.6 30.0

Other non-deductible expenses -3.8 -7.6

Adjustment of current tax in respect of prior years -1.7 0.2

Other 0.0 -1.9

Recognised tax expense 9.5 -29.8

Standard rate of income tax, % 26% 26%

Effective tax rate, % -12% 16%

DEFERRED TAX ASSETS AND LIABILITIES

Assets Liabilities Net

2011 2010 2011 2010 2011 2010

Other operating receivables/liabilities 45.5 37.5 0.7 10.3 44.8 27.2

TOTAL 45.5 37.5 0.7 10.3 44.8 27.2

CHANGE IN DEFERRED TAX ON TEMPORARY DIFFERENCES DURING YEAR

Opening balance

Recognised inincome statement

Recognised directly in equity

Exchangedifferences

Closingbalance

Other operating receivables/liabilities 27.2 11.2 6.4 - 44.8

TOTAL 27.2 11.2 6.4 - 44.8

No tax losses have arisen in the parent company since the previous year.

73


NOTE 42. Intangible assets

2011 Goodwill Computer softwareOther intang.

assets/trademarksTotal

intangible assets

Opening cost 14.2 306.7 1.5 322.4

Acquisitions - 39.3 - 39.3

Reclassifications - -3.7 - -3.7

Closing cost 14.2 342.3 1.5 358.0

Opening regular amortisation -10.9 -178.2 -1.5 -190.6

Amortisation for the year - -31.6 - -31.6

Closing regular amortisation -10.9 -209.9 -1.5 -222.3

Opening impairment -3.3 -26.7 - -30.0

Closing impairment -3.3 -26.7 - -30.0

Closing residual value 0.0 105.7 0.0 105.7

2010 Goodwill Computer softwareOther intang.

assets/trademarksTotal

intangible assets

Opening cost 14.2 270.5 1.5 286.2

Acquisitions - 49.8 - 49.8

Reclassifications - -13.5 - -13.5

Closing cost 14.2 306.7 1.5 322.4

Opening regular amortisation -10.9 -145.1 -1.5 -157.5

Amortisation for the year - -33.1 - -33.1

Closing regular amortisation -10.9 -178.2 -1.5 -190.6

Opening impairment -3.3 -26.7 - -30.0

Closing impairment -3.3 -26.7 - -30.0

Closing residual value 0.0 101.8 0.0 101.8

NOTE 43. Tangible assets


machinery EquipmentConstructionin


Opening cost 318.9 3,911.0 303.4 379.3 4,912.6

Acquisitions 11.3 208.4 15.7 608.5 844.0

Disposals 0.0 -5.6 -2.2 - -7.9

Reclassifications -54.2 164.3 12.2 -118.6 3.7

Closing cost 275.9 4,278.1 329.2 869.3 5,752.4



Disposals - 4.4 2.0 - 6.3

Closing regular depreciation -93.7 -2,293.4 -238.0 - -2,625.1


Opening impairment - -24.9 - - -24.9

Impairment for the year - -13.3 -13.3

Closing impairment - -24.9 - -13.3 -38.2



74



machinery EquipmentConstructionin


Opening cost 236.2 3,357.9 271.6 593.3 4,459.0

Acquisitions 12.4 108.4 20.0 302.6 443.4

Disposals - -1.3 -0.1 -1.9 -3.3

Reclassifications 70.2 446.0 12.0 -514.8 13.5

Closing cost 318.9 3,911.0 303.4 379.3 4,912.6



Disposals - 0.9 0.1 - 0.9

Closing regular depreciation -85.4 -2,103.1 -220.6 - -2,409.1


Opening impairment - -24.9 - - -24.9

Impairment for the year - -

Closing impairment - -24.9 - - -24.9



Accumulated accelerated depreciation is accounted for under untaxed reserves in the Parent Company.

NOTE 44. Investments in Group companies

2011 2010

Opening cost 919.9 919.9

Purchases 0.1 -

Closing cost 920.0 919.9

List of Group Companies, see note 14.

NOTE 45. Other long-term receivables

2011 2010


Amounts advanced - 0.0

Amounts received -1.4 -0.3

Translation differences - -


NOTE 46. Inventories

2011 2010

Raw materials 728.0 997.5

Semi-finished products 413.6 408.6

Finished products 1,397.0 1,134.2

TOTAL 2,538.6 2,540.2

Inventories are measured at the lower of cost, using the first-in/first-out method, and net realisable value.

75


NOTE 47. Accounts receivable

2011 2010

Accounts receivable, not due 485.3 379.9

Provision for impairment of accounts receivable -1.9 -1.6

NOT DUE ACCOUNTS RECEIVABLE, NET 483.3 378.3

Age analysis of past due accounts receivable

0–90 days 95.1 77.0

91–180 days 0.0 3.9

Over 180 days 8.2 10.8

TOTAL OVERDUE ACCOUNTS RECEIVABLES 103.2 91.7

The Parent Company has recognised an impairment loss of SEK 1.9 (1.6) million on accounts receivable. The loss is included in distribution costs in the income statement.

NOTE 48. Prepaid expenses and accrued income

2011 2010

Rent 2.2 4.5

Charter hire 4.1 6.9

Pension premiums 1.9 1.8


Software licences 7.2 5.3

Other prepayments 12.3 11.2

TOTAL 122.7 29.7

NOTE 49. Cash and cash equivalents

2011 2010

Cash and bank balances 510.4 454.0

Cash & cash equivalents recognised 510.4 454.0

The above items have been classified as cash & cash equivalents on the follow-ing basis:* they are subject to an insignificant risk of changes in value* they can readily be converted into cash* they have a maturity of no more than three months from the date of acquisition

The Parent Company’s cash & cash equivalents comprise its deposits in the Group’s common bank accounts and its own bank accounts.

NOTE 50. Equity

DISTRIBUTION OF SHARE CAPITAL

Change in total number of shares 2011 2010

Opening number 67,532 67,532

Change during the year 0 0

CLOSING NUMBER 67,532 67,532

Class of share2011 2010



Class A 33,765 50% 33,765 50%

Class B 33,767 50% 33,767 50%

TOTAL 67,532 100% 67,532 100%

RESTRiCTEd RESERvESRestricted reserves may not be reduced by distribution of dividends.

uNRESTRiCTEd EQuiTyRetained earningsRetained earnings comprises the previous year’s unrestricted equity after transfers to the statutory reserve and dividend payments. Retained earnings, net profit for the year and the fair value reserve (if applicable) constitute total unrestricted equity, in other words the amount available for distribution to shareholders.

NOTE 51. Provisions for pensions

The Parent Company’s employees, former employees and their survivors may be covered by defined contribution and defined benefit plans relating to post-employment benefits. The defined benefit plans cover retirement pension, survivor’s pension and healthcare.

The obligation reported in the balance sheet is derived from the defined benefit plans. The plans are covered by a re-insured provision in the balance sheet and by pension benefit plans and funds. The calculations are based on the projected unit credit method using the assumptions shown in the table below. Net actuarial gains and losses are recognised in profit or loss to the extent that they exceed the 10 per cent corridor. The corridor’s ceiling is 10 per cent of the higher of the present value of the defined benefit obligation and the fair value of plan assets. The net portion of the calculated gains and losses exceeding the corridor’s ceiling is recognised over the employees’ average remaining period of service with effect from the year following the present financial year. Defined benefit pension plans are calculated by an independent external actuary.

In the case of a multi-employer defined benefit plan, sufficient information cannot be obtained to calculate the Parent Company’s share in this plan, and the plan has been reported as a defined contribution plan. In the Parent Company’s case, this relates to the ITP pension plan which is administered via Alecta. However, the majority of the Swedish plan for salaried employees (ITP ) is funded by pen-sion provisions, which are covered by credit insurance with Försäkringsbolaget Pensionsgaranti (FPG) and managed by a Swedish multi-employer institution, Pensionsregistreringsinstitutet (PRI ).

Nynas’s forecast payment of pensions in relation to defined benefit plans, both funded and unfunded, amounts to SEK 10.5 (8.3) million for 2012.

The Parent Company’S provisions for pensions mainly consist of ITP, and are cov-ered via Försäkringsbolaget Pensionsgaranti (FPG) or other insurance institutions. Payments have also been made to endowment insurance policies. The value of these insurance policies at the end of the year was SEK 77.7 (74.0) million, which corresponds to the value of the obligations.

76


RECONCILIATION OF REVISED PENSION LIABILITY2011 2010

Present value of pension obligations, wholly or partly funded 4.3 5.2

Fair value of pension benefit plan assets -16.0 -16.5

Surplus in pension benefit plan -11.6 -11.4

Present value of obligations relating to unfunded pension plans 129.1 114.0

Unrecognised surplus in pension benefit plan 11.6 11.4

NET LIABILITY RECOGNISED 129.1 114.0

The amount allocated to the pension provision is calculated in accordance with the Swedish Pension Obligations Vesting Act. This method differs from the IFRS project unit credit method, mainly in that it does not take into account expected salary or pension increases; instead, the calculation is based on the salary or pension level on the reporting date. The discount rate according to PRI is 4.5 (5.0) per cent.

CHANGE IN NET DEBT DURING THE YEAR2011 2010

Net debt at beginning of year 114.0 106.2

Cost recognised in income statement 20.6 13.2

Pension payments -5.5 -5.4

NET DEBT AT END OF YEAR 129.1 114.0

Payments relating to defined benefit plans are expected to amount to SEK 5.8 million in 2012.

PENSION EXPENSE FOR THE PERIOD2011 2010

Book reserve pensions 9.6 2.3

Interest expense (calc. discount effect) 5.5 5.5

COST OF BOOK RESERVE PENSIONS 15.1 7.8

Pensions through insurance:

Insurance premiums 31.0 26.9

Recognised net cost arising from pensions excl. tax 46.1 34.8

Dividend tax on pension funds 0.5 0.5

Payroll tax on pension costs 8.7 11.0

PENSION EXPENSE FOR THE YEAR 55.3 46.2

Percentage return on pension benefit plan assets 2.4% 1.2%

Interest income is reported under net financial items, while other costs are reported under operating expenses.

FAIR VALUE OF PENSION BENEFIT PLAN ASSETS BY CLASS OF ASSET

2011 2010

Shares and participating interests 6.4 9.9

Other interest-bearing securities 5.9 3.6

Bank deposits 3.6 3.0

TOTAL 15.9 16.5

Pension benefit plan assets do not include any securities issued by Nynas AB or assets used by Nynas AB.

NOTE 52. Other provisions

2011 2010


Provisions for the year - 8.0

Amounts utilised during year -36.9 -71.0

Change of remediation principle -28.5 -

TOTAL 252.7 318.1

Provisions expected to be utilised after more than 12 months 228.7 297.0

The provision for Sweden is a contingent liability as defined in Chapter 10 of the Swedish Environmental Code, and relates to after-treatment costs for pollution resulting from refining and depot operations.

The provision in Nynäshamn consists of three parts – the Land Farm (SEK 8 million), Lagoon/interception dams (SEK 19 million) and J3/J4 (SEK 241 million). See note 23 for description.

All costs associated with the remediation project have been calculated using the present value method.

NOTE 53. Liabilities to credit institutions

In November, a new syndicated stand-by credit line of EUR 750 million was ar-ranged. The term of the credit facility is five years. At the same time, the syndicated stand-by credit line of EUR 150 million, maturing in 2012 was terminated. The other committed credit facilities were also concluded in connection with the new syndicated credit facility.

A private placement loan from US investors was issued in September 2006. The loan total is USD 140 million and the fixed-rate periods are 8 and 10 years. USD 90 million has been swapped to a variable SEK interest rate and USD 50 million to a fixed SEK interest rate. Currency interest rate swaps have terms that exactly match the bonds’ maturities.

2011 2010


Loans from credit institutions 3,791.5 2,298.7

TOTAL 3,791.5 2,298.7

CURRENT LIABILITIES

Loans from credit institutions 8.2 219.2

Overdraft facilities 71.6 9.1

TOTAL 79.8 228.3

TOTAL 3,871.3 2,527.0

77


2011


Interest, %

Cur-rency

Nominal amount

(local currency)

Amounts in SEK

millions


2006/2014 Bond issue 3.28 USD 90.0 718.6

2006/2016 Bond issue 3.29 USD 50.0 399.1








TOTAL 3,791.5

2011


Interest, %

Cur-rency

Nominal amount

(local currency)

Amounts in SEK

millions

CUrrENT LIABILITIES Variable-rate loans

2011/2012 Bank loans 5.80 RUB 14.0 3.0

2011/2012 Bank loans 6.05 RUB 8.0 1.8

2011/2012 Bank loans 6.40 RUB 16.0 3.4

2011/2012 Factoring 0.0

2011/2012 Overdraft 71.6


TOTAL 79.8

2010


Interest, %

Cur-rency

Nominal amount

(local currency)

Amounts in SEK

millions


2006/2014 Bond issue 2.08 USD 90.0 716.0

2006/2016 Bond issue 2.09 USD 50.0 397.8



2002/2012 Stand-by credit line €150) 1.94 SEK 150.0 150.0


TOTAL 2,298.7

2010


Interest, %

Cur-rency

Nominal amount

(local currency)

Amounts in SEK

millions


2003/2011 Bond issue 2.02 SEK 210.0 210.0

2010/2011 Bank loans 6.35 RUB 16.0 3.6

2010/2011 Bank loans 5.60 RUB 17.4 3.9

2010/2011 Bank loans 5.10 RUB 8.0 1.8

2010/2011 Factoring 0.0

2010/2011 Overdraft 9.1


TOTAL 228.3

NOTE 54. Accrued liabilities and deferred income

2011 2010

Purchases of raw materials, semi-finished and finished goods 757.8 631.8

Accrued salaries/holiday pay 81.5 69.2

Accrued interest 17.2 15.3

Shipping costs 15.4 18.7

Accrued investment costs 83.8 -

Accrued customer receipts 46.0 -

Other 104.8 111.2

TOTAL 1,106.5 846.1

78


NOTE 55. Financial assets and liabilities measured at fair value

See note 26 for a description of the measurement and calculation of fair value.

2011


accountingDerivatives held

for trading



Other financial li-

abilities



and liabilities

Total balance

sheet

Long-term derivatives 61.3 - - - - 61.3 - 61.3

Accounts receivable - - - 586.5 - 586.5 - 586.5

Receivables from Group companies - - - 1,523.8 - 1,523.8 - 1,523.8

Short-term derivatives 16.8 11.3 - - - 28.1 - 28.1

Other current receivables - - - - - 0.0 178.9 178.9

Prepaid expenses and accrued income - - - 0.1 - 0.1 122.6 122.7

Cash and cash equivalents - - - 510.4 - 510.4 - 510.4

FINANCIAL ASSETS 78.1 11.3 0.0 2,620.8 0.0 2,710.2 301.5 3,011.7

Long-term liabilities to credit institutions - - - - 3,791.5 3,791.5 - 3,791.5

Short-term liabilities to credit institutions - - - - 79.8 79.8 - 79.8

Long-term liabilities to Group companies - - - - 0.2 0.2 - 0.2

Current i-b liabilities to Group companies - - - - 732.1 732.1 - 732.1

Current non-i-b liabilities to Group companies - - - - 214.3 214.3 - 214.3

Accounts payable - - - - 396.7 396.7 - 396.7



Other current liabilities - - - - 0.0 13.1 13.1

Accrued liabilities and deferred income - - - 46.0 - 46.0 1,060.5 1,106.5

FINANCIAL LIABILITIES 35.6 23.2 0.0 46.0 5,214.6 5,319.4 1,073.6 6,393.0

2010


accountingDerivatives held

for trading



Other financial li-

abilities



and liabilities

Total balance

sheet


Accounts receivable - - - 470.0 - 470.0 - 470.0

Receivables from Group companies - - - 1,105.9 - 1,105.9 - 1,105.9


Other current receivables - - - - - 0.0 145.6 145.6

Prepaid expenses and accrued income - - - 0.4 - 0.4 29.3 29.7

Cash and cash equivalents - - - 454.0 - 454.0 - 454.0

FINANCIAL ASSETS 91.1 55.0 0.0 2 030.3 0.0 2 176.4 174.9 2 351.3

Long-term liabilities to credit institutions - - - - 2 298.7 2 298.7 - 2 298.7

Short-term liabilities to credit institutions - - - - 228.3 228.3 - 228.3

Long-term liabilities to Group companies - - - - 0.2 0.2 - 0.2

Current i-b liabilities to Group companies - - - - 876.6 876.6 - 876.6

Current non-i-b liabilities to Group companies - - - - 167.9 167.9 - 167.9

Accounts payable - - - - 489.8 489.8 - 489.8



Other current liabilities - - - - 0.0 38.3 38.3

Accrued liabilities and deferred income - - - 22.9 - 22.9 823.2 846.1

FINANCIAL LIABILITIES 15.6 48.6 0.0 22.9 4 061.5 4 148.6 861.5 5 010.1

79


NOTE 56. Pledged assets and contingencies

2011 2010

FLOATING CHARGES

Security for liabilities to credit institutions 75.0 75.0

TOTAL 75.0 75.0

Sureties for Group companies 105.1 38.4

Guarantees 50.2 111.5

Other guarantees and contingent liabilities 2.6 2.3

TOTAL 157.9 152.2

A future closure of operations within the Group may involve a requirement for decontamination and restoration works. This is, however, considered to be well into the future and the future expenses cannot be calculated reliably.

NOTE 57. Related party disclosures

Information on remuneration of the Board and key management personnel can be found in note 5.

Petroleos de Venezuela S.A. (PDVSA) is the ultimate owner of 50 per cent of the shares in Nynas AB. The Nynas Group purchases approx. 85 per cent of its crude oil from PDVSA. Crude oil and base oil prices are governed by formula based multi-year supply contracts. Prices reflect the prices that would be charged under a contract with a non-related party.

2011 2010

Purchases, crude 9,046.2 6 836.8






Neste Oil Oyj (Neste Oil) is the ultimate owner of 50 per cent of the shares in Nynas AB. The Nynas Group purchases bitumen and other oil products from Neste Oil and also leases two bitumen barges. Nynas sells fuel and services to Neste. All transactions are conducted at current market prices.

2011 2010

Purchases, bitumen 271.5 214.7


Purchases, fuel 14.8 13.7

Purchases, leasing/services 6.9 40.1




Nynas owns 50 per cent of the shares in Eastham Refinery Ltd (ERL); the other 50 per cent is owned by Shell. ERL purchases the majority of its crude oil from Nynas AB, according to the contractual price formula.

NyNaS ab: 2011 2010

Sales revenue – Nynas AB from ERL 2,192.8 1,550.9


Accounts payable 3.3 -

NOTE 58. Adjustments for non-cash items

2011 2010

Depreciation and impairment of assets 267.3 249.4

Unrealised exchange differences and oil forward contracts 1.4 -7.8

Disposals of fixed assets 1.5 2.4

Provisions for pensions 15.1 7.8

Other provisions -65.4 -63.0

TOTAL 220.0 188.9

80


The Group’s equity at the end of the financial year amounts to SEK 3,724 million.The Board proposes that the available profits of SEK 1,269,538,304 in the Parent

Company be distributed as follows:

DIVIDEND TO SHAREHOLDERS:

Total dividend 0

Carried forward 1,269,538,304

SEK 1,269,538,304

PROPOSED DISTRIBUTION OF PROFIT

Stockholm, 13 April 2012

matti lievonenChairman of the Board

ilkka Salonen John launiainen

Jesus luongo henry valecillos Jorge Tejada

Roland bergvik Staffan lennströmPresident & CEO

Erik Josephsson

Our Audit Report was submitted on 13 April 2012.

Ernst & Young AB

Jan birgersonAuthorised Public Accountant

81


To the annual general meeting of Nynas AB (publ) Reg. no. 556029-2509

Report on annual accounts and consolidated accountsWe have audited the annual accounts and consolidated accounts of Nynas AB (Publ) for the year 2011. The annual accounts and consolidated accounts are included in the printed version of this publication on pages 1, 4–81.

responsibilities of the board of directors and managing director for the annual accounts and consolidated accountsThe board of directors and the managing director are responsible for the prepara-tion and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the board of directors and the managing director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these annual accounts and consoli-dated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors and the managing director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropri-ate to provide a basis for our opinion.

OpinionsIn our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial posi-tion of the parent company at 31 December 2011 and its financial performance and cash flows for the year then ended in accordance with the Annual Accounts Act. In our opinion, the consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the fi-nancial position of the group at 31 December 2011 and its financial performance and cash flows in accordance with International Financial Reporting Standards,

AUDIT REPORT

as adopted by the EU, and the Annual Accounts Act. The administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.

Report on other legal and regulatory requirementsIn addition to our audit of the annual accounts and consolidated accounts, we have examined the proposed appropriations of the company’s profit or loss and the administration of the board of directors and managing director of Nynas AB (Publ) for the year 2011.

responsibility of board of directors and managing directorThe board of directors is responsible for the proposal for appropriations of the company’s profit or loss, and the board of directors and the managing director are responsible for administration under the Companies Act.

Auditor’s responsibilityOur responsibility is express an opinion with reasonable assurance on the proposed appropriations of the company’s profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the board of directors’ proposed appropriations of the company’s profit or loss, we examined whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the board of directors or the managing director is liable to the Company. We also examined whether any member of the board of direc-tors or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and appropri-ate to provide a basis for our opinion.

OpinionsWe recommend to the annual general meeting of shareholders that the profit be appropriated in accordance with the proposal in the administration report and that the members of the board and the managing director be discharged from liability for the financial year.

Stockholm, 13 April 2012Ernst & Young AB

Jan BirgersonAuthorised Public Accountant

82


aSPhalTAsphalt is a mixture of aggregates (stone), sand, filler and bitumen, which is an oil-based binder. Traditionally asphalt is produced in specialist production units at elevated temperatures and is commonly referred to as hot mix asphalt. Asphalt is a versatile material and can be used for all paving applications. However, the recipe of the asphalt mixture needs to be designed according to the type of application.

bENCh SCalE uNiTNynas bench scale unit is a copy of a hydrogenation plant. Using a miniature unit it is possible to test and develop new products, and also to evaluate new crude oils and catalysts before starting up full scale production.

biTumENBitumen is a dark brown or black viscous mixture of various hydrocarbons derived from the distillation of oil; it also occurs naturally in geological deposits. Bitumen forms the asphalt ’glue’ or binder and influences the performance of the asphalt.

biTumEN EmulSioNBitumen is not soluble in water. Bitumen emulsion is a fine dispersion of very small bitumen droplets in water. The dispersion is created using reagents and special-ist production equipment. Compared with normal bitumen, bitumen emulsion has a low viscosity at ambient temperature and can be applied warm or cold. The bitumen and water separate during application and this allows the bitumen properties to develop.

CaTalyST aNd hydRoTREaTmENT TEChNologyNaphthenic specialty oils are made in a hydrotreatment facility. Hydrotreatment gives the oil the various qualities demanded by customers, including different levels of viscosity at various temperatures, the ease with which it mixes with other products and its environmental characteristics.

Cold miX TEChNologyAsphalt is traditionally mixed at elevated temperatures. This softens the bitu-men (reduces its viscosity) sufficiently to allow mixing, coating of aggregate and placing of the material. Bituminous emulsions reduce the viscosity of the binder without the need for elevated temperatures. Techniques using these processes are commonly referred to as ’cold mix’. These types of asphalt mixtures can have many benefits including lower energy use/ CO 2 emissions, greater opportunity to include recycled materials etc.

CRudE oilUnprocessed oil is called crude oil. It is a mixture of thousands of hydrocarbonsand its chemical composition alters depending on the origin of the oil. Consequently, the qualities of crude oil may vary, which in turn determines the products that can be produced from it.

CuRRENT RaTioCurrent assets divided by current liabilities.

dEbT/EQuiTy RaTioInterest-bearing liabilities including interest-bearing pension liabilities, less cash& cash equivalents divided by equity.

dowNSTREamThe downstream oil sector refers to the refining of crude oil, and the sale and-distribution of natural gas and products derived from crude oil.

EQuiTy/aSSETS RaTioEquity as a percentage of total assets at year-end.

WORDLIST

hydRogEN gaS FaCiliTyA lot of hydrogen gas is required to manufacture naphthenic specialty oils. The hydrogen needed for hydrotreatment is produced in special hydrogen produc-tion facilities.

iNTEREST CovERagE RaTioProfit after net financial items plus interest expenses divided by interest expenses.

lNgIf the temperature is lowered to minus 162 degrees Celsius, natural gas is con-densed into liquid and its volume reduced 600 times. Condensed natural gas is called liquefied natural gas (LNG) and accounts for some 20 per cent of world trade in natural gas.

lubRiCaNTA substance used in machinery for lubrication between movable parts to reduce friction and wear. Lubricants also contribute to cooling, sealing, protection against corrosion and noise reduction.

maNagEmENT SySTEmA management system helps to guide the business towards preset targets. The most common international standard is ISO, e.g., the ISO 9000 series for quality management. This includes processes, guidelines and job descriptions to ensure there is clear information about what has to be done, when,how and by whom.

NaPhThENiC SPECialTy oilSProducts that are highly refined from heavy naphthenic crude oil, through hy-drotreatmentor solvent extraction They offer good characteristics with regard to high solvency and excellent low temperature properties. They are mainly used by electrical, lubricant and chemical industries.

oilThe oil used at the world’s refineries was formed between 50 and 500 million years ago when sediments of dead plants and animals were exposed to high pressure and heat deep in the earth.

PERFoRmaNCE PRogRammERe-alignment of bitumen product portfolio into categories Regular, Extra and Premium. The result of close cooperation with our customers and re-aligning to meet the customers’ needs for long-term, cost effective solutions with value added.

PolymER modiFiEd biTumENBitumen softens as it is heated or when placed under slow/heavy loading stresses. At high ambient temperatures it can flow and deform; under freezing conditions it can be brittle and crack. The addition of selected polymers to bitumen can reduce these effects, which will increase the life expectancy of the asphalt.

REaChThe new European chemicals legislation, which stipulates that all chemical sub-stances manufactured and imported by companies in the EU must be registered.

REFiNERyIndustrial facility where crude oil is divided into different parts (fractions) through distillation and then further processed into finished products. A refinery consists of a certain range of process units depending on what type of products are intended to be produced.

RETuRN oN CaPiTal EmPloyEdProfit after net financial items plus interest expense as a percentage of total assets less non-interest-bearing current liabilities.

83


DEFINITIONS

SEmi-hoT aSPhalT PRoduCTioNWhen semi-hot asphalt mixes are produced a soft binder is used, which makes it possible for paving to be undertaken at a significantly lower temperature than with hot mix asphalt. This produces environmental benefits and also means that the surface has better flexibility and healing capacity.

TRaNSFoRmERThe task of transformers is to handle the transformation from one voltage to-another. Most transformers are oil cooled. In addition to transferring heat from the transformer coil, transformer oil act as an insulating liquid, thereby stopping electrical discharges.

TyRE oilSHighly aromatic oils (HA oils) have traditionally been used for processing rubber compounds when manufacturing tyres. However, these contain carcinogenic hydrocarbons. The EU has banned all use of HA oils in car tyres as from 2010. The transition to environmentally sound tyre oils represents a total market of around 1.2 million tonnes. viSCoSiTyViscosity is a property of liquids that denotes their “thickness” or internal resist-ance to flowing and can be viewed as a measure of friction. Syrup, for example, has higher internal friction than water, i.e. it has higher viscosity.

voCVolatile Organic Compounds (VOC) is a collective term for a large number of organic compounds that under ambient conditions can be present in gaseous form and may pose health or environmental risks. Emissions arise from many sources includ-ing factories, animals, industrial processes and storage of organic compounds.

RETuRN oN CaPiTal EmPloyEdProfit after net financial items plus interest expense as a percentage of total assets less non-interest-bearing current liabilities

RETuRN oN EQuiTyProfit after net financial items less current tax as percentage of average equity

EQuiTy/aSSETS RaTioEquity as a percentage of total assets at year-end

iNTEREST CovERagE RaTioProfit after net financial items plus interest expenses divided by interest expenses

CuRRENT RaTioCurrent assets divided by current liabilities

dEbT/EQuiTy RaTioInterest-bearing liabilities, including interest-bearing pension liabilities, less cash & cash equivalents divided by equity

Oxenstierna & PartnersPrint: Elanders

Nynas ABBox 10700

(Visiting address: Lindetorpsvägen 7)SE-121 29 Stockholm

Sverige

www.nynas.com

Phone: +46 8 602 12 00

Nynas takes oil further.

Do you know how?

G0

491204

ENG

Documents

ANNUAL REPORT 2011 - specialty oils and bitumen · ANNUAL REPORT 2011 Nynas takes oil further. ... 1,600 tonnes of PMB to the road construction site. ... bitumen components and products