As at 1 January 2013 - · PDF fileUpstream TenCate Grass Americas TenCate Grass EMEA TenCate Grass Asia ... Advanced composites for the aircraft industry and antiballistic applications

ADVANCED

TEXTILES & COMPOSITES

SECTOR

PROTECTIVE FABRICSProtective and safety fabrics and multi-risk solutions

for industry, services, fi refi ghting and defence

■ TenCate Protective Fabrics Americas

■ TenCate Protective Fabrics EMEA

■ TenCate Protective Fabrics Asia

OUTDOOR FABRICS Protective fabrics for outdoor applications,

such as the camping and sun awning market

■ TenCate Outdoor Fabrics Europe

SPACE & AEROSPACE COMPOSITES Advanced composites, compounds and systems

for the aerospace industry

■ TenCate Advanced Composites Americas

■ TenCate Advanced Composites EMEA

INDUSTRIAL COMPOSITES Advanced composites, compounds and systems

for industrial applications, including automotive,

industrial components and energy extraction



ADVANCED ARMOUR Advanced composites, ceramics and integrated

systems for the active and passive protection

of police, army, air force, navy and civilian service

personnel, vehicles and vessels

■ TenCate Advanced Armour Americas

■ TenCate Advanced Armour EMEA

■ TenCate Advanced Armour Asia

GEOSYNTHETICS

& GRASS SECTOR

GEOSYNTHETICS Synthetic fabrics, non-wovens and grids for solutions

and applications in infrastructure, civil engineering,

water management, the environmental sector,

agriculture and horticulture

■ TenCate Geosynthetics Americas

■ TenCate Geosynthetics EMEA

■ TenCate Geosynthetics Asia

GRASS Synthetic turf components and integrated synthetic

turf systems for top-fl ight sports, recreation and

landscaping

Upstream

■ TenCate Grass Americas

■ TenCate Grass EMEA

■ TenCate Grass Asia

Downstream

■ Edel Grass (50%)

■ GreenFields (90%)

■ TigerTurf (80%)

■ Hellas Construction (30%)

OTHER ACTIVITIES

SECTOR

INKJET TECHNOLOGY Digital inkjet technology for industrial production

processes

■ Xennia Technology

TECHNICAL COMPONENTS Technical rollers and components, particularly

for printers, copiers, fax machines, postal sorting

machines and ATMs

■ TenCate Enbi North America

■ TenCate Enbi EMEA

■ TenCate Enbi Asia

HOLDING & SERVICES Holding company activities

■ Koninklijke Ten Cate nv

Commercial overviewAs at 1 January 2013

The TenCate sectors are subdivided into market groups. Each market group is a cluster of subsidiaries (operating

companies) which co-operate in research & development, production, end-user marketing and sales.

A detailed list of all subsidiaries, associated companies and other interests (legal entities) can be found on the

inside back cover.

Royal Ten Cate Stationsstraat 11P.O. Box 587600 GD Almelo, The Netherlands

Telephone +31 (0)546 544 911Fax +31 (0)546 814 145www.tencate.com

business development & investor relationsF.R. Spaan, director

TenCate would like to hear from you. Please let us know your views by e-mailing [email protected], stating the market group or offi cer you wish to contact.You can also contact us using the details shown left.

Contact

Text

Royal Ten Cate

Translation

VVH business translations,

Maartensdijk

Design

Frontwise, Utrecht

Realisation

C&F Report Amsterdam B.V.,

Amsterdam

Printing

Lulof Druktechniek B.V.,

Almelo

Photography

Freek van Arkel

Joost van Baars

Marjo Baas

Stephen Barnett

Doug Bergen

Dennis de Beurs

Andreas Burmann

Frans Dekker

Paul Haverkort

Norbert Hekkink

Joel van Houdt

Cpl Ian Houlding

Vincent Jannink

Ton Kuper

Jonathan P. Larsen

Truls J. Lotvebt

Rens van Mierlo

Roelof Pot

Sylvain Ramadier

David Rozing

Robert Schlesinger

Frank Uijlenbroek

Courtesy © Airbus

Courtesy © BAM

Courtesy © Brand X Pictures

Courtesy © KNHB

Courtesy © NASA

Courtesy © Staff Sgt. Marcus J.

Quarterman, U.S. Army

Colophon Royal Ten Cate Annual Report 2012

PROTECTING PEOPLE

Royal Ten C

ate A

nnual Report 2012

ADVANCED


SECTOR

























GEOSYNTHETICS

& GRASS SECTOR










landscaping

Upstream




Downstream



■ TigerTurf (80%)


OTHER ACTIVITIES

SECTOR


processes




machines and ATMs










inside back cover.





Contact

Text

Royal Ten Cate

Translation


Maartensdijk

Design

Frontwise, Utrecht

Realisation


Amsterdam

Printing


Almelo

Photography

Freek van Arkel

Joost van Baars

Marjo Baas

Stephen Barnett

Doug Bergen

Dennis de Beurs

Andreas Burmann

Frans Dekker

Paul Haverkort

Norbert Hekkink

Joel van Houdt

Cpl Ian Houlding

Vincent Jannink

Ton Kuper

Jonathan P. Larsen

Truls J. Lotvebt

Rens van Mierlo

Roelof Pot

Sylvain Ramadier

David Rozing

Robert Schlesinger

Frank Uijlenbroek

Courtesy © Airbus

Courtesy © BAM


Courtesy © KNHB

Courtesy © NASA




PROTECTING PEOPLE

Royal Ten C

ate A

nnual Report 2012

Profi leSubsidiaries, associated companies and other interests

ADVANCED TEXTILES & COMPOSITES SECTOR

Ten Cate Advanced Textiles bv Nijverdal, NetherlandsGroup activities of the TenCate Advanced Textiles group in the Netherlands

Ten Cate Protect bv Nijverdal, NetherlandsTen Cate Protective Fabrics USA inc Union City (Georgia), USATen Cate Protective Fabrics Canada inc Montreal (Quebec), CanadaFabrics for professional wear and safety clothing as well as outdoor applications

Ten Cate - Union Protective Fabrics Asia ltd (50.65%) Bangkok, ThailandFabrics for protective clothing

Ten Cate Advanced Composites bv Nijverdal, NetherlandsAdvanced composites for the aircraft industry and antiballistic applications

Ten Cate Advanced Composites USA inc Morgan Hill (California), USAPhoenixx TPC inc Taunton (Massachusetts), USAYLA inc Benicia (California), USACCS Composites inc Benicia (California), USAAdvanced composites for aerospace and industrial applications

Performance Materials Corporation Camarillo (California), USAPMC Holding Corporation Camarillo (California), USABaycomp Company Burlington (Ontario), CanadaPMC Guangzhou Guangzhou, ChinaTC3 (51%) Taichung, TaiwanThermoplastic composites and components for the automotive industry,

oil & gas extraction and consumer electronics

TenCate Advanced Armour UK (AML) Swindon, UKDesign and production of vehicle armour materials

Ten Cate Advanced Armour sas Primarette, FranceTen Cate Advanced Armour Danmark a/s Vissenbjerg, DenmarkAdvanced ceramics and composites for antiballistic applications

Ten Cate Advanced Armor USA inc Newark (Ohio), USAAdvanced composites for vehicle armour

Ten Cate Active Protection ApS (ABDS) Vissenbjerg, DenmarkActive protection systems for army vehicles

AML India Private ltd (90%) Noida, IndiaDesign and production of vehicle armour materials

GEOSYNTHETICS & GRASS SECTOR

Ten Cate Geosynthetics North America inc Atlanta (Georgia), USATen Cate Geosynthetics Austria GmbH Linz, AustriaTen Cate Geosynthetics France sas Bezons, FranceTen Cate Geosynthetics Netherlands bv Nijverdal, NetherlandsTen Cate Geosynthetics Asia sdn bhd Kuala Lumpur, MalaysiaTenCate Industrial Zhuhai co ltd Zhuhai, ChinaGeosynthetics and industrial fabrics

Ten Cate Geosynthetics sdn bhd (Malaysia) Kuala Lumpur, MalaysiaTen Cate Geosynthetics (Thailand) ltd Bangkok, ThailandTen Cate Geosynthetics pte ltd SingaporeTen Cate Geosynthetics Italia srl Lazzata, ItalyTen Cate Geosynthetics (UK) ltd Telford, UKTen Cate Geosynthetics sl Madrid, SpainTen Cate Geosynthetics Schweiz AG Zurich, SwitzerlandTen Cate Deutschland GmbH Dietzenbach, GermanyTen Cate Geosynthetics Polska Spzoo Kraków, PolandTen Cate Geosynthetics CZ sro Prague, Czech RepublicTen Cate Geosynthetics Rumania Bucharest, RomaniaSales offi ces

Ten Cate Thiolon bv Nijverdal, NetherlandsTen Cate Thiolon USA inc Dayton (Tennessee), USATen Cate Thiolon Middle East (49%) 1 Dubai, UAESynthetic turf components and systems

Ten Cate Thiobac bv Nijverdal, NetherlandsBacking for synthetic turf systems

GreenFields Holding BV (90%) Genemuiden, NetherlandsGreenFields BV Genemuiden, Netherlands(subsidiary of GreenFields Holding BV)

Xtra Grass BV * Kampen, Netherlands

ProCourt Int BV * Zederik, Netherlands

GreenFields Eastern Europe BV * Genemuiden, Netherlands

GreenFields Noo (Bresco) AS * Molde, Norway

GreenFields Swiss AG * Schaffhausen, Switzerland

GreenFields Sports Turf Systems (ME) Ltd (80%) * Nicosia, Cyprus

GreenFields West Africa SARL (65%) * Cotonou, Benin

GreenFields UK Sports Surfaces Ltd * Bolton, UK

GreenFields India FZC (51%) * Sharjah, UAE GreenFields Golf & Leisure BV Genemuiden, NetherlandsMarketing and installation of synthetic turf systems

TigerTurf NZ, ltd (80%) Auckland, New ZealandTigerTurf Australia pty ltd (80%) Campbellfi eld, AustraliaTigerTurf (UK) ltd (80%) Hartlebury, UKTiger Sports Americas inc (80%) Austin (Texas), USA Marketing and production organisations for synthetic turf systems

Edel Grass bv (50%) Genemuiden, NetherlandsMarketing and installation of synthetic turf systems

* Subsidiary of GreenFields BV1 Due to legislation in Dubai, 51% is held by a local partner. Royal Ten Cate has

100% economic ownership.

The operating companies listed here are consolidated in the fi nancial statements, with the exception of the companies shown as non-consolidated. Some interests of minor relevance to the overall picture have been omitted from the list, in accordance with article 379, paragraph 3, Book 2 of the Netherlands Civil Code. The companies are wholly owned unless stated otherwise.

OTHER ACTIVITIES SECTOR

Xennia Technology ltd (78.95%) Letchworth, UK Xennia Holland bv Nijverdal, NetherlandsSpecialist inkjet technology for industrial applications

Ten Cate Enbi International bv Brunssum, NetherlandsTenCate Enbi group holding company

Ten Cate Enbi GmbH Leverkusen, GermanyTen Cate Enbi kft Rétság, HungaryTen Cate Enbi inc Shelbyville (Indiana), USATen Cate Enbi inc Rochester (New York), USATen Cate Enbi pte ltd Singapore Ten Cate Enbi Zhuhai co ltd Zhuhai, ChinaTechnical rollers and components for printers, copiers, fax machines, postal sorting

machines, ATMs, insulation and heating systems

Ten Cate Assurantiën bv Almelo, NetherlandsInsurance

Ten Cate Nederland bv Almelo, NetherlandsRoyal Ten Cate USA inc Atlanta (Georgia), USATen Cate USA inc Washington D.C., USATen Cate UK ltd London, UKTen Cate France sas Paris, FranceTen Cate Deutschland GmbH Opladen, GermanyTen Cate Danmark a/s Copenhagen, DenmarkRoyal Ten Cate Pacifi c ltd Hong Kong, ChinaRoyal Ten Cate China Holding ltd Hong Kong, ChinaCountry holding companies

Ten Cate Finance AG Schaffhausen, SwitzerlandFinancing company

NON-CONSOLIDATED COMPANIES

Landscape Solutions bv (25%) Goirle, NetherlandsMarketing and production organisation for synthetic turf for landscaping use

Hellas Construction Inc (30%) Austin (Texas), USAProduction and construction of sports pitches

GreenFields (All Sports) UK Ltd (49%) Stepps, UKMarketing and installation of synthetic turf systems

as at 31 December 2012

Worldwide trends

Safety Sustainability

Market themes

Personal protection Defence Mobility Infrastructure Water managementSport and recreation

Materials for protection of persons in their working and living

environments

Materials for protection of military personnel; vehicle, vessel and

aircraft armour

Composites for vehicles, vessels, aircraft and

mobility concepts

Geotextiles for infrastructure works;

synthetic turf for landscaping

Geotextiles and systems (TenCate Geotube®) for maritime projects and

dewatering

Synthetic turf for sport; outdoor fabrics

PROTECTING PEOPLE

TenCate focuses on the growing demand for protection of people and their working and living environments. TenCate occupies a unique technology position at the interface of chemicals and textile technology, enabling the company to develop materials, modules and systems that are an optimum match for specifi c market demands, usually involving strict functional requirements.

VISION TenCate is a company specialising in materials engineering. By combining technologies it is possible to produce new materials, and these developments also generate new markets and growth for the company. TenCate increasingly offers total solutions, independently or in co-operation with partners.

MATERIAL TECHNOLOGY AND

INNOVATION

Professionals across a wide range of fi elds deserve the best protection in their specifi c working environment. New demands are also being made on protection solutions to meet sustainability requirements. TenCate constantly develops materials, modules and systems which do precisely what is required of them. It is also increasingly important to reduce the ancillary costs of the chosen solution, since materials and modules form part of a total system.

MISSION One of TenCate’s main driving forces is the achievement of progress through innovative material solutions. TenCate aims to maintain a leading position in the provision of sustainable solutions for personal protection and protection of working and living environments.

TECHNICAL

TEXTILES

TenCate is the world market leader in technical textiles. These materials have specifi c characteristics which are usually defi ned and qualifi ed on the basis of functional specifi cations. TenCate maintains an active portfolio policy and with its advanced technological base – partly resulting from acquisitions – is able to offer the widest range of functionalities in materials. It does this independently or in co-operation with third parties.

TenCate’s materials are used in particular for: ■ Personal safety and protection of working

and living environments ■ Modernisation of army, fi refi ghting

and police equipment ■ Aerospace ■ Water management, infrastructure

and environmental solutions ■ Industrial applications

STRATEGY The strategy over the past decade has been based on value-chain management. The cornerstones of this policy are

■ end-user marketing ■ technological innovation ■ cost leadership and ■ product differentiation

The use of network structures with partners in the value chain adds a new dimension to this business model. The aim of this is to increase access to markets and strengthen the competitive position.

The result of the buy & build strategy is that existing market positions are strengthened and new market positions (product-market-technology combinations) are gradually built up, particularly through technology-oriented acquisitions.

The fi x it / exit strategy remains in place, although in the past most non- textile-oriented businesses were divested. TenCate maintains an active portfolio policy, as part of which it continuously assesses whether business units still fi t in with its value-chain model.

TenCate

Royal Ten Cate (TenCate) is a multinational company which combines

textile technology with chemical process technology in the development

and production of functional materials (technical textiles). The Group’s

technological base determines the high-grade applications (product-

market-technology combinations) which TenCate supplies in selected

niche markets.

Value-chain management

TenCate’s business model is based on the pursuit of optimum positioning

in the value chain by means of value-chain management. To that end,

actions and objectives are defi ned in four areas: end-user marketing,

technology-driven innovation and cost leadership combined with active

portfolio management (product differentiation).

Worldwide trends

The connecting factor within TenCate is the development and production

of materials, modules and systems which usually meet demands arising

from safety or protection requirements or positively impact environmental

requirements or standards. Such requirements are usually prescribed by

governments and enacted in legislation. Standards are often laid down at

product level which materials must fulfi l in terms of their function,

composition and/or quality characteristics.

Risks of accidents, injury, damage and environmental disasters must be

prevented to the maximum extent possible. Safety and protection of

persons and their working and living environments are worldwide growth

markets.

Market themes

TenCate operates principally within six market themes which have been

derived from the worldwide trends of safety and sustainability identifi ed

for the company. The materials developed on the basis of these themes

meet specifi c requirements that arise within these niche markets.

Organisational structure

TenCate’s organisational structure is based on the various production

technologies developed within the company. The organisation is divided

into two sectors: Advanced Textiles & Composites (spinning, weaving,

coating, fabric impregnation and laminate pressing) and Geosynthetics

& Grass (extrusion of synthetic fi bres such as PP and PE, weaving and

non-woven technology).

Main products of the Advanced Textiles

& Composites sector

■ Flame- and heat-resistant materials for army uniforms

(Ten Cate Defender™ M)

■ Safety materials for professional wear

■ Prepregs for the production of thermohardened and thermoplastic

composites

■ Composite laminates

■ Armour materials and systems for army and other vehicles

Main products of the Geosynthetics & Grass sector

■ Woven materials and non-wovens for infrastructure works,

construction and civil engineering

■ TenCate Geotube® systems for the dewatering of industrial and

other sludge, environmental projects, dyke construction and other

civil engineering works

■ Synthetic turf yarns

■ Synthetic turf systems

Royal Ten Cate
















































Worldwide trends


Market themes



environments


aircraft armour


mobility concepts




dewatering


PROTECTING PEOPLE




INNOVATION



TECHNICAL

TEXTILES











TenCate






niche markets.







Worldwide trends











markets.

Market themes













& Composites sector





composites











Royal Ten Cate

Commercial overview Inside cover

Profi le Inside cover

Key developments and assessment of action plans in 2012 2

Key fi gures 2012 3

The TenCate share 6

Foreword by the Chairman of the Executive Board 10

Business overview 13 Business overview 14 Vision, mission and strategy 15 Strategic goals 17 Indicators 18 Business model and value creation 25 Sectors 29 Corporate information 39

Business context 45 Business environment 46 Overview of stakeholders 47 Materiality matrix 48 SWOT analysis 50 Risk management 52

Governance 55 Executive Board 56 Supervisory Board 57 Report of the Supervisory Board 58 Corporate governance 60

Performance 61 Report of the Executive Board 62 Sector Advanced Textiles & Composites 66 Sector Geosynthetics & Grass 75 Sector Other 82

Outlook 83 Outlook for 2013 84 Action plans for 2013 86 Corporate initiatives 87

Statement by the Executive Board 88

Financial statements 89 2012 fi nancial statements 90 Other information 142 Ten-year summary 144

Glossary 146 Contact 148 List of subsidiaries, associated companies

and other interests Inside cover Colophon Inside cover

Royal Ten Cate

Annual report 2012

An interactive version of this report is available on www.tencateannualreports.com

2 | Royal Ten Cate Annual Report 2012 |

Key developments and assessment of action plans in 2012

Revenues decline by 8% to € 1,049 million

■ The decline in revenues was concentrated particularly in the

US defence market.

■ There was positive revenue growth at TenCate Advanced

Composites (aerospace market), TenCate Grass (downstream)

and TenCate Enbi.

Net profi t of € 22.3 million (2011: € 58.7 million)

■ The decrease in net profi t was due partly to the loss of high-calibre

defence revenues.

■ The normalised net profi t amounted to € 27.6 million.

■ Net total of € 8 million of non-recurring expenses, mainly in the

fourth quarter.

■ The Geosynthetics & Grass sector showed a 20% rise in earnings

(EBITA).

■ The Other Activities sector showed a negative result (EBITA)

of € 3.0 million, due particularly to the loss-making activities

of Xennia Technology.

■ Cash fl ow from operating and investing activities up from

– € 9 million to € 68 million.

■ Interest-bearing debt down by around € 60 million to € 230 million;

debt ratio 2.55 (2011: 2.12).

Sharp decline in revenues in the US defence market

■ Sales to the US Army fell sharply at TenCate Protective Fabrics

and TenCate Advanced Armour.

■ The loss of defence revenues totalled US$130 million.

■ The US Army placed no large orders in the personal and vehicle

armour market.

Decreasing revenue contribution from the Geosynthetics

& Grass sector

■ The geosynthetics activities showed a strong performance in

the fi rst six months of 2012.

■ Pressure on government budgets had an increasingly strong impact

in 2012, particularly on infrastructure projects and the sports market

(particularly in Southern Europe).

Sharper strategic focus and cost savings

■ Decrease of around 350 FTEs since May 2012.

■ In the second half of the year the positive effect of the wage cost

savings amounted to approximately € 7 million.

■ The intensifi cation of the buy & build strategy involved a sharper

focus on composites, particularly for the automotive and other

industrial markets. PMC Baycomp (USA) was acquired in 2012.

Amber Composites (UK) was acquired at the beginning of 2013.

■ The pursuit of greater cooperation with partners in the value chain

led among other things to the signing of partnerships with BASF

(automotive composites) and 3M (tooling).

Growth in revenues from composites outside the aerospace

market

■ Major advances were made in the development of markets outside

the aerospace sector. The revenues generated in this area in 2012

remained limited for the moment. The automotive, tooling

composites and other industrial markets offer TenCate good growth

opportunities.

■ In addition to acquisitions and partnerships, internal developments

helped open up access to new markets.

■ TenCate took the initiative of forming the European Thermoplastic

Automotive Composites consortium (eTAC), which positions itself

as a solutions provider in the automotive market.

Development of the TenCate ABDS™ active blast countermeasure

system

■ A separate project organisation was formed in 2012 for the further

development and market launch.

■ The fi rst revenues are expected in 2013.

Positive results of downstream reorganisations at TenCate Grass

■ The measures taken had a positive impact on the performance

of the downstream organisation.

Embedding of inkjet technology in the TenCate Protective Fabrics

production process

■ A sample printer was installed in the second half of 2012.

■ TenCate took part in the European Eco Innovation project in 2012,

for which it received a grant of approximately € 1.0 million.

The partial switch to clean inkjet technology is starting in early 2013.

CSR agenda

■ TenCate made good progress in visibly demonstrating the

sustainability aspects of its business operations.

0

300

600

900

1,200

20122011201020092008

– 8% € 1,049.0 mln 49%

7%

– 14% € 460.6 mln

Advanced Textiles & Composites

– 1%€ 518.7 mln

Geosynthetics & Grass

– 6%€ 69.7 mln

Other Activities44%

0

30

60

90

120

20122011201020092008

– 49% € 52.0 mln 61%

– 6%

45% + 20%€ 31.5 mln

Geosynthetics & Grass

– 151%– € 3.0 mln

Other Activities

– 67% € 23.5 mln

Advanced Textiles & Composites

0

15

30

45

60

20122011201020092008

– 62% € 22.3 mln

0

1,125

2,250

3,375

4,500

20122011201020092008

+ 2% 4,454

76%

24%

3,385

Male

1,069

Female

0

0.30

0.60

0.90

1.20

20122011201020092008

– 47% 0.50

0

0.60

1.20

1.80

2.40

20122011201020092008

– 63% 0.86

Royal Ten Cate Annual Report 2012 | KEY FIGURES 2012 | 3

(in millions of euros, unless stated otherwise)

Key fi gures 2012

Revenue Revenue by sector

EBITA EBITA by sector

Net result

Employees Staff split-up

Net result per share (in €) Dividend per share (in €)

Geographic breakdown of sales and number of employees at the end 2012

NORTH AMERICA EMEA ASIA

PACIFIC

By destination

By origin

Employees

SOUTH AMERICA

83

1,1281,6961,547

0

3%

13%39%42%

3%2%

10%43%45%

0%

TenCate has its own production site (■) and sales offi ces (■) in the following countries:

Americas

North AmericaUnited States

Canada

South AmericaBrazil

EMEAEuropeCyprus Netherlands

Denmark Austria

Germany Poland

United Kingdom Romania

France Spain

Hungary Czech Republic

Ireland Switzerland

Italy

AfricaBenin

Middle EastDubai

United Arab Emirates

AsiaPacifi c

AsiaChina India

Malaysia Singapore

Thailand South Korea

OceaniaAustralia

New Zealand

4 | Royal Ten Cate Annual Report 2012 | KEY FIGURES 2012

>Key fi gures 2012

Royal Ten Cate Annual Report 2012 | KEY FIGURES 2012 | 5

PROFIT AND LOSS ACCOUNT 2011 2012

Revenues 1,138.8 1,049.0

Operating result before depreciation and amortisation (EBITDA) 137.5 89.1

Operating result before amortisation (EBITA) 102.5 52.0

Normalised operating result before amortisation (EBITA) 102.5 60.0

Operating result before amortisation as % of revenues (EBITA margin) 9.0% 5.0%

Operating result (EBIT) 89.6 37.5

Net result 58.7 22.3

Normalised net result 58.7 27.6

CONSOLIDATED BALANCE SHEET AND RETURN

Net capital employed (year-end) 808.8 750.5

Return (EBITA) on average net capital employed 13.1% 6.4%

Net interest-bearing debt (year-end) 288.7 229.9

CONSOLIDATED CASH FLOW

Cash fl ow from operating activities 49.3 101.8

Cash fl ow from investing activities -57.8 -33.4

Cash fl ow from operating and investing activities -8.5 68.4

DEBT RATIO

Net debt / EBITDA ratio 2.12 2.55

OUTSTANDING SHARES (X 1,000)

Number of outstanding shares at year-end 25,929 26,498

Weighted average number of shares (before dilution) 25,452 25,895

Weighted average number of shares (after dilution) 25,736 26,040

PER-SHARE DATA


Diluted net result 2.28 0.86

Dividend 0.95 0.50

Equity 17.96 17.25

EMPLOYEES

Number of staff years at year-end* 4,353 4,454

– of which in the Netherlands 819 795

* Excluding hired personnel.

6 | Royal Ten Cate Annual Report 2012 | THE TENCATE SHARE

The TenCate share is listed on NYSE Euronext Amsterdam and

forms part of the AMX index. The share is actively followed by

the leading banks and securities houses operating in Dutch /

European small- and mid-cap stocks.

GENERAL INFORMATION

The share price fell in 2012. This was due to the unexpectedly steep

fall in demand from the US defence market and the downgrading of

the outlook for 2012 due to the US presidential elections and uncertain

political and economic prospects. The declining interest in defence-

related stocks in the United States had a particularly negative impact

on US investor sentiment.

Selling pressure was particularly evident in the United States, partly

due to lower interest in euro-related stocks. TenCate was able to absorb

this pressure by organising various roadshows in Europe.

In the light of the current challenging market conditions, an intensive

dialogue is being conducted with shareholders to give them a clear

insight into the risks and opportunities. The annual general meeting

of shareholders also provides a good platform for this purpose.

TenCate’s new txtures magazine and the company’s updated website

provide background information and show the connections between

the various strategic themes.

DIVIDEND POLICY AND PROPOSED DIVIDEND

TenCate pursues a balanced dividend policy in which a decrease in

profi t, such as that which occurred in 2012, is refl ected to a somewhat

muted extent in the change in dividend. This situation occurred

previously in the dividend for the 2009 fi nancial year, where a higher

distribution rate was applied on that specifi c occasion. The dividend

policy is based on a distribution rate of 40%. An optional dividend is

usually offered.

Having regard to the current results, it is proposed to distribute a

dividend of 58% on this occasion. The dividend would therefore amount

to € 0.50 per € 2.50 par value share, payable at shareholders’ discretion

in shares as a charge to the share premium reserve or in cash.

The TenCate share

15

17

19

21

23

25

27

January

The TenCate share

Source: NYSE EURONEXT ISIN code: NL0000375731 Reuters code: NTCN.AS Bloomberg code: KTC.NA

IN E

UR

OS

February March April May June July August September October November December

2012

AScX

AMX

AEX

KTC

Royal Ten Cate Annual Report 2012 | THE TENCATE SHARE | 7

NUMBER OF SHARES IN ISSUE

Number of shares in issue on 31 December 2011 25,928,914

Increase in share capital as a result

of stock dividend 568,752

Number of shares in issue on 31 December 2012 26,497,666

CHANGES IN THE NUMBER

OF SHARES IN ISSUE 2011 2012

Par value € 2.50 € 2.50

Lowest price € 18.75 € 16.66

Highest price € 32.02 € 26.30

Closing price € 21.26 € 19.87

Earnings per share € 2.31 € 0.86

Dividend per share € 0.95 € 0.50

DISCLOSURE OF MAJOR HOLDINGS IN LISTED

COMPANIES ACT

The register maintained by the Netherlands Authority for the Financial

Markets (AFM) in connection with the disclosure of major holdings in

listed companies contains details of the following investors with

interests of over 5% (source: AFM).

NAME

Date of

disclosure Percentage

Delta Lloyd N.V. 6 May 2011 5.67%

Kempen Oranje Participaties N.V. 1 January 2010 6.34%

Schroders plc 27 October 2009 8.25%

Delta Lloyd Deelnemingen

Fonds N.V. 22 June 2010 10.16%

OPTION PLAN, SHAREHOLDINGS OF PERSONNEL

AND EXECUTIVE BOARD

Details of the option plan and the shareholdings of managers and

members of the Executive Board can be found on page 137 of this

report. The shares repurchased by the company relate to the hedging

of granted options.

GEOGRAPHIC SPREAD OF SHAREHOLDINGS

Netherlands 47%

United States of America 20%

United Kingdom 20%

Scandinavia 5%

Belgium 4%

France 1%

Other countries 3%

IMPORTANT DATES IN 2013

Publication of 2012 full-year fi gures 1 March

Publication of 2012 annual report 7 March

Annual General Meeting of shareholders 18 April

Ex-dividend date 22 April

Record date: determination of dividend entitlements 24 April

Option period for cash or stock dividend 25 April

to 13 May

Publication of trading update for fi rst quarter

of 2013 26 April

Payment of dividend / delivery of shares (stock) 15 May

Publication of 2013 half-year fi gures 26 July

Publication of trading update for third quarter

of 2013 25 October

8 | Royal Ten Cate Annual Report 2012 | PEOPLE PLANET PROFIT

TenCate focuses on the sustainable protection of people and their working and living

environments.

People Planet Profi t

32 million metres of TenCate Defender™ M

since 2007 for US Army and Marine Corps

-8 kilos (-22%) weight of aircraft trolleys thanks to TenCate Cetex® technology

-8°Celsius solar heat on synthetic turf

pitches thanks toTenCate XP Blade™ technology

Royal Ten Cate Annual Report 2012 | PEOPLE PLANET PROFIT | 9

24%of TenCate employees

are female

6 Awards for Highly Protected Risks from FM Global for TenCate

50 yearsTenCate Geotube®

technology for sustainable water management

10 | Royal Ten Cate Annual Report 2012 | FOREWORD BY THE CHAIRMAN OF THE EXECUTIVE BOARD

A new arrangement has been introduced for the content of

TenCate’s 2012 annual report. Aside from the reporting on the

annual fi gures, the principal aim of the new arrangement is to

convey clearly and concisely what the company stands for,

what the connecting factors are and how the Group’s strategy

is implemented. Value creation – the value proposition in key

markets – is a guiding theme.

STAYING STRONG TOGETHER

Two developments have been instigated to secure continued growth

over the longer term, even amid diffi cult market conditions.

First, there is increasing cohesion between the various business units

focusing on TenCate’s worldwide key markets: safety fabrics,

composites, geotextiles and synthetic turf. TenCate’s business model

is based on value chain management. All Group units apply this concept

in their strategic planning. This Group-wide approach, which has now

become a characteristic feature of TenCate, has enabled the company

to secure a number of leading positions in the value chain. This is

refl ected in the relationships with commercial operators, end-users and

suppliers. The company also has a competitive cost base and a planned

approach to innovation and product development (active portfolio

management).

TenCate’s increasing internal coherence as a ‘materials company’, with

the resulting theme of ‘TenCate – Protecting People’, is also having

a positive impact on the company’s positioning in the market.

The growing focus on personal safety and protection and rising

environmental demands, particularly in project tenders, are having

an infl uence on the specifi cations of functional materials and creating

growth opportunities for innovative material solutions.

Second, increasing cooperation is taking place within value chains.

Network structures are giving a new dimension to the concept of value

chain management. Following the earlier chain integration in the

synthetic turf market, TenCate is now also pursuing closer cooperation

with international market operators in other areas to accelerate market

launch times. This also increases problem-solving capabilities by

combining the partners’ complementary knowledge and skills.

The alliances with BASF (automotive composites) and 3M (tooling

composites) are examples of this.

The markets in which TenCate operates are looking for solutions

particularly in the fi eld of safety and protection. The value proposition

can therefore be presented from the perspective of both internal

coherence (combining competences) and cooperation with business

partners. This raises the added value for end-users and will increasingly

lead to the delivery of system solutions.

PERFORMANCE

The overall performance was marked by developments particularly in

the US defence market (protective fabrics and armour materials).

Market conditions were challenging worldwide, but the decrease in

TenCate’s revenues and profi t was concentrated in the US defence

markets. The anticipated decline in demand from the US Army for

TenCate Defender™ M proved to be unexpectedly sharp in the second

quarter of 2012. The US market for vehicle armour and personal ballistic

protection also experienced a substantial decline in demand. Key

reasons were shrinking government budgets and political uncertainty

due to the presidential elections and the ‘fi scal cliff’. Later in the year

the US geosynthetics market also showed a decline in revenues. This

was primarily due to a wait-and-see attitude among local and central

government organisations and is not expected to be permanent.

The forecasts issued for 2012 were largely based on US Army forecasts

of deliveries of TenCate Defender™ M products. The adjustment to the

profi t forecast in mid-2012 was due in particular to the consequences

of the sudden adoption of a wait-and-see stance in the US defence

market. These developments led to larger-than-expected falls in

revenues and profi t in the Advanced Textiles & Composites sector.

The defence market remains important to TenCate in the longer term.

The emphasis will be on the continued development of the defence

market on a more international basis. The US defence market

nevertheless remains dominant in the geographic spread of revenues.

The safety and protection of military personnel and the respective

budget will remain a relatively major focus of attention in the future.

The United States is leading this development.

Partly as a result of restrained government spending, limited progress

was made in the synthetic turf market with the intended improvement

in results in the Grass group. Despite a rise in revenues in the

downstream activities, insuffi cient volume growth was achieved in the

production of synthetic turf yarns. The result was further

Foreword by the Chairman of the Executive Board

Royal Ten Cate Annual Report 2012 | FOREWORD BY THE CHAIRMAN OF THE EXECUTIVE BOARD | 11

underutilisation of production capacity. In 2012 there was a good

performance by geotextile activities, particularly in the fi rst half of the

year. The operating income (EBIT) of the Geosynthetics & Grass sector

as a whole rose by approximately 20%.

GROWTH MARKETS

Despite the lower profi t, TenCate continued to focus on innovation and

market development. More than half of the investments in 2012 were

related to innovations. TenCate is concentrating on a number of

submarkets with a view to achieving above-average growth.

The Group’s growth potential will consequently increase and broaden

in the years ahead. Good progress was made in this regard in 2012:

■ It was reported during the year that the fi rst revenues from the

TenCate ABDS™ active blast countermeasure system were expected

in 2013. The development work has reached an important phase,

involving close co-operation with the US defence authorities and

testing centres.

■ The aerospace composites businesses developed positively.

■ Work began on the development of activities in the fi eld of

automotive composites (acquisition of PMC Baycomp, qualifi cation

of thermoplastic composites for a world-leading OEM,

announcement of the acquisition of Amber Composites at the

beginning of 2013).

■ Favourable developments in the fi eld of safety fabrics for oil and

gas extraction and processing industries. TenCate has a promising

product portfolio, which resulted in attractive orders from

customers, including leading oil companies.

■ Environmental market, water management and infrastructure

projects: TenCate Geosynthetics demonstrated the benefi ts of

TenCate Geotube® systems worldwide.

SUSTAINABILITY

Major advances were made in the fi eld of sustainability in 2012.

The operating companies’ management teams have been receiving

support from the corporate CSR team since 2011. In 2012, the Dutch

TenCate businesses implemented the CSR Performance Ladder, which

enables clearer and more extensive reporting on social, ecological and

economic performance. Good progress was also made with determining

the CO2 footprint. TenCate will fi nally be able to give a quantitative

assessment of the worldwide results of its sustainability policy.

EMPLOYEES

The pressure on government expenditure led to postponements and

delays in projects, resulting in potentially major swings in revenues.

This demands a fl exible organisation and fl exibility among employees.

It was not possible to avoid a reduction of 350 FTEs in the worldwide

workforce. Cost reduction and increased effi ciency were high priorities

in 2012. The Group’s marketing and sales have been strengthened and

this process is continuing in 2013, partly having regard to future growth

ambitions.

I would like to thank all employees for their commitment during the past

year.

L. de Vries, President and CEO

12 | Royal Ten Cate Annual Report 2012 | FOREWORD BY THE CHAIRMAN OF THE EXECUTIVE BOARD

>‘TenCate has been a tremendous asset for Lockheed

Martin Composites in Denver, Colorado. We are grateful

for their effort and involvement in qualifying new lower

cost prepregs and fi lm adhesives to maintain a competitive

edge in the aerospace industry.’

- Nick Courtney, Production Engineer, Composites

Development Shop, Lockheed Martin

Royal Ten Cate Annual Report 2012 | BUSINESS OVERVIEW | 13

Business overview 14

Vision, mission and strategy 15

Strategic objectives 17

Indicators 18

Business model and value creation 25

Sectors 29

Corporate information 39

BUSINESS OVERVIEWBusiness Overview contains a more detailed account of why TenCate does what it does (Why), how it does it (How) and what it does (What)

14 | Royal Ten Cate Annual Report 2012 | BUSINESS OVERVIEW

The theme of ‘Protecting People’ fl ows from the motives that drive the

organisation in connection with the worldwide trends of safety and

sustainability. TenCate’s business model, based on value chain

management, provides the strategic framework.

In view of the economic and fi nancial situation in many core markets,

greater priority is being attributed to certain cornerstones (see page 25)

of TenCate’s business model. In 2012 the particular emphasis was on

cost control and greater focus was applied across the entire product

portfolio. The cost savings announced in 2012 were aimed at generating

a profi t recovery of approximately € 25 million on unchanged revenues

on an annual basis.

Greater attention was devoted to expanding the (geographic) market

for the products developed in the recent past. These measures will be

continued in 2013. In the niche markets in which TenCate is as yet

unrepresented or relatively underrepresented, work began on allocating

more personnel capacity, in both the quantitative and qualitative

senses, to the objective of growth. Examples of these niche markets

are automotive composites, tooling composites, infrastructure and the

environment (geosystems), niche markets for safety fabrics (TenCate

Defender™ M, TenCate Tecasafe™ Plus), the interior market with

aerospace composites and the synthetic turf project market.

Competition in the synthetic turf market is shifting towards systems,

and developments within TenCate are increasingly at the level of

end-solutions.

In an increasing number of markets TenCate witnessed the growing

importance of communication with end-users on the value proposition.

Although TenCate is not a business-to-consumer company, new media

have an increasingly important role in informing end-consumers.

End-user marketing is making heavier demands on the marketing

capacities of the entire company.

Business overview

Protecting people

Nowadays it is increasingly true that prevention is better than cure.

We live in a risk society. The risks relate in particular to safety and

sustainability. But that does not mean the potential consequences

of these often inherent risks must be accepted as simply inevitable.

TenCate’s mission is to provide ever-better protection for people

and their working and living environments. TenCate’s researchers

and developers therefore work continuously to optimise the

characteristics and properties of the supplied materials, modules

and systems, such as wearing comfort, an appropriate price-quality

ratio and combinations with other risk factors (multi-risk exposure).

There is a focus on large, often institutional customers which

usually need to equip a large organisation with TenCate materials.

In addition to the required core functionalities, aspects such as

delivery reliability, total cost of ownership, life-cycle costs,

environmental effects and customisation are also important factors.

TenCate materials have delivered on their promise under extreme

conditions in a wide range of uses, from Mars landings to fi re

extinguishing. Unexpected events sometimes turn into life-saving

experiences thanks to TenCate materials: materials that make a

difference.

SAFETY SUSTAINABILITY

HIGH END SPECIFICATIONS

TEXTILE TECHNOLOGYBASED MATERIALS


VISION

TenCate’s vision is based on the development (‘buy & build’) of an

extensive and progressive technological base. As a company in the

technical textile sector, TenCate’s worldwide technology position

(including patents) has unparalleled breadth and innovative capacity.

That enables the company to develop materials that optimally cater to

the individual market requirements in the chosen market themes of

safety and protection of man and the environment.

DEVELOPED MARKETS VERSUS EMERGING MARKETS

The market vision is based an ever-increasing focus on control of safety

risks, leading to ever-higher specifi cations and standards for materials.

It is also increasingly important to offer sustainable solutions providing

a wide range of benefi ts for both end-users and institutional customers.

The control of safety risks is a current focus of attention in the

American and European markets. An illustrative recent example is

Hurricane Sandy, which struck the east coast of the United States in

2012. This coast was already partly protected by TenCate Geotube®

containers (‘dune dikes’).

In emerging markets there is a clear trend towards the development of

protection and environmental management standards involving the

latest technologies.

MISSION

TenCate strives for leadership in growing market niches for specialist,

functional materials. To this end the company uses its broad

technological basis, internal specialist skills and strong position in the

value chain. In markets that make high demands in terms of

functionality, TenCate offers high-grade solutions. The aim is to

contribute to progress in the sectors in which TenCate operates.

The added value for its customers leads to a higher rating of the

materials and profi table growth for the company. This also creates value

for shareholders. TenCate aims to create value for its stakeholders in a

sustainable and cyclical way. The company’s corporate values provide

comprehensive support in the pursuit of this objective (see page 28).

Developing the right product portfolio (product differentiation) tailored

to specifi c market requirements, drawing attention to solutions in an

effective way and incorporating the control of safety risks in

specifi cations are key parts of the way in which TenCate fulfi ls its

mission.

The quest for solutions to protect people in their living and working

environments is the connecting factor within TenCate’s mission.

TenCate employees endeavour to make a difference every day with

TenCate materials, materials that can turn unintended events into a

life-saving experience. ‘Protecting people’ with ‘materials that make a

difference’.

Vision, mission and strategy

DURING LEISURE IN TRANSIT

AT WORK

IN HABITATS

PROTECTING PEOPLE


>Vision, mission and strategy

STRATEGY

GENERAL INFORMATION

TenCate’s strategy is based on the concept of value chain management,

as set out on page 26. TenCate works intensively to safeguard its

position as a developer and producer of materials within the chain.

Forward or backward integration has a direct impact on the company's

positioning and immediately infl uences the competitive position and

relationships with direct customers.

TenCate focuses primarily on markets which make high functional

demands on products. To this end the company applies a market focus

based on leading themes which infl uence demand from niche markets.

These are markets in which the company can build up a certain lead on

the basis of its strong technological orientation and the material used

can deliver added value for the system of which it forms part.

SHARPER STRATEGIC FOCUS

TenCate is engaged in attractive developments for the future.

The strategic focus has nevertheless been enhanced, partly as a result

of the new challenges offered by the markets. Although TenCate’s

market expectations are positive for the longer term, priority has been

given to growth in the short and medium term.

Traditional markets appear to remain under pressure in 2013. For that

reason greater effort is being directed towards growth in new markets

on the basis of existing products and technologies. Alliances have been

entered into with international partners in order to accelerate access

to markets. Internal measures have also been taken to achieve

revenue growth in new and existing niche markets. A number of these

developments are expected to bear fruit from 2014.

A strict fi nancial policy was again prioritised in 2012. Despite the

decrease in profi tability, the debt ratio (net debt / EBITDA) was close

to TenCate’s target. The debt ratio at the end of 2012 was 2.55.

Investments were made and expenditure was incurred in new

technologies, such as digital inkjet technology, in 2012 and the

preceding years. There was a greater focus on sales and results in

2012. Certain developments with uncertain and/or long payback

times were discontinued or postponed.

Market implementation and the development of a sustainably profi table

business model also have priority with regard to the TenCate ABDS™

active blast countermeasure system, the fi rst results of which are

expected in 2013.


QUALITATIVE STRATEGIC GOALS

■ Creation of shareholder value through profi table growth based on

knowledge, skills and internal synergy. This takes account of social

responsibilities, from an economic, ecological and social

perspective.

■ Achievement of critical mass in product-market-technology

combinations by occupying leading positions in worldwide market

niches.

■ Achievement of a healthy fi nancial position with suffi cient strength

for acquisitions.

■ Management of a balanced portfolio of activities, in which product-

market-technology combinations differ in terms of growth

opportunities and risk profi le.

■ Stimulation of an open, creative and enterprising culture for change,

renewal and progress.

■ Management of a global commercial organisation which thinks in

terms of (system) solutions within the overall value chain.

FINANCIAL STRATEGIC OBJECTIVES

■ The net capital employed must generate a suffi cient return.

The operating result before amortisation as a percentage of average

net capital employed must be at least 15%.

■ The fi nancial position must be suffi ciently solid. The ratio of net

interest-bearing debt to the operating result before depreciation and

amortisation (EBITDA) must be structurally lower than 2.5.

■ The target of 10% annual profi t growth is based on EBITA (operating

result before amortisation). To this end, the buy & build strategy will

be pursued. Higher added value and effi ciency are also necessary,

since the organic growth of the core activities is expected to

average less than 10%.

■ An appropriate profi t margin must be achieved. The consolidated

EBITA margin must rise to at least 10%.

Strategic goals


Indicators are the factors and aspects of operational management

which affect the performance and hence the value of the company.

TenCate draws a distinction between general and specifi c indicators.

These are summarised as key performance indicators (KPIs).

TenCate does not communicate externally on all KPIs. The KPI approach

is nevertheless used for internal testing of the value proposition in the

value chain management business model. Brief details of a number of

key indicators are provided below.

GENERAL INDICATORS

A number of indicators are periodically tested on the basis of the

cornerstones of TenCate’s business model, including:

END-USER MARKETING

Every new product which TenCate develops must be linked to prevailing

customer demand or new national or international standards, laws and

regulations. The specifi cations are agreed or developed at an early

stage with the customer and / or end-user. Customer demand can be

met on a targeted basis thanks to the acquired expertise and

technological base. The ability to anticipate changing specifi cations is

an important competitive advantage. Ever-higher standards can be

attained by exerting wide-ranging infl uence on decision-making units in

end-markets with regard to standardisation. This also has the positive

effect that customers and prospects look to TenCate to fulfi l new

demands and requirements. Market potential is key to the solutions

which TenCate supplies.

The following are important indicators:

■ Customer satisfaction

■ Market share

■ Sale volume

■ Customer retention (share of wallet)

■ Number of complaints and complaint handling

■ Brand recognition and image

In a number of cases, TenCate operates through its customers, such as

tenders. The image, reputation et cetera can therefore sometimes only

be measured indirectly in the end markets. End-user marketing has

among other the objective to make the contribution of TenCate and its

value for end customers more visible.

TECHNOLOGICAL INNOVATION

TenCate is a technology-driven company. Innovation also includes

development costs associated with the entire approval process

(specifi cations and qualifi cations of materials). These costs are not

usually reported separately. Acquisitions with a technological

background also form part of the innovation process. TenCate

conducts an active intellectual property policy and now has more

than 650 patents. The main indicators are the following:

■ Number of patents

■ Number of trademark registrations and countries of registration

■ Completion of process innovation projects

■ Creation of new standards in niche markets

COST LEADERSHIP

The materials which TenCate develops are usually produced internally.

The company focuses its production resources on both specialties and

volume products. That compels the company to remain very alert to

costs, but also to cost-effi cient production, margin policy, process

optimisation, organisation of logistics fl ows, reduced environmental

costs, etc. At the same time it requires the maintenance of a balanced

product portfolio with expansion products, exploitation products and

elimination products.

The main indicators are the following:

■ Production

■ Costs per unit/hour

■ Turnaround time in days

■ First-time-right (FTR) percentage

■ Use of resources (raw materials, water, energy)

■ Number of defects

■ Downtime

■ Rejects and waste

■ CO2 emissions

■ Storage-inventory-delivery

■ Inventory level

■ Inventory turnover rate

■ Percentage of products delivered on time

■ Percentage of products delivered correctly

■ Human resources

■ Personnel costs

■ Turnover

■ Absenteeism

Indicators


PRODUCT DIFFERENTIATION

Because product life cycles are becoming ever shorter, TenCate has to

bring a steady fl ow of new products and solutions to the market. In

practice, an expansion product ultimately becomes a commodity.

Aspects such as high quality, unique characteristics, distinctive

capability, low price and a large market share will sooner or later fade.

TenCate is guided by evolving markets in which demands are ever

higher, laws change and standards become more exacting. TenCate

adapts characteristics or incorporates them in materials in order to

create customer-specifi c products and specialties.

The main indicators are the following:

■ Number of new product-market-technology combinations

■ Quantitative and qualitative portfolio growth

■ Net present value (NPV) of the product portfolio

SPECIFIC INDICATORS (CSR)

Key performance indicators (KPIs) were determined at a corporate level

at the beginning of 2012. These KPIs clearly state what TenCate stands

for worldwide with regard to the social, ecological and economic

aspects of corporate social responsibility.

With the aid of these indicators, a worldwide trial measurement was

conducted across all market groups in mid-2012 concerning the position

in 2011. The data for 2011 and 2012 were then gathered, analysed,

aggregated and validated at corporate level using a data management

system. This section gives an account of the KPIs values particularly

with regard to the 2012 reporting year, because these comply with

TenCate’s accuracy criteria. Data for 2011 have been included where

possible. In the forthcoming year, the quality of the data and the

relevant processes will be improved. The business units in the

downstream activities and the activities of TenCate Enbi and Xennia

Technology are not included in the trial measurement. Figures 1 and 2

relate to data for the TenCate group as a whole.

TenCate sees 2011 and 2012 as base years, the data for which will

be used to defi ne the detailed ambitions and objectives and establish

programmes. Subsequent reports will include a further analysis of

the performance.

1 BREAKDOWN OF EMPLOYEES BY REGION END 2012

Asia Pacific

North and South America

EMEA

24%

38%

38%

2 BREAKDOWN OF EMPLOYEES BY TYPE OF CONTRACT END 2012

Agency contract

Permanent contract

Temporary contract

9%

89%

2%

3 BREAKDOWN OF EMPLOYEES BY GENDER END 2012

Male

Female

24%

76%

4 BREAKDOWN OF MANAGEMENT BY GENDER END 2012

Male

Female

20%

80%


>Indicators

SOCIAL ASPECTS

The key performance indicators on social aspects of TenCate’s corporate

social responsibility concern employment, welfare and safety, education

and training, diversity and equal opportunities. These are refl ected in

TenCate’s sustainable personnel policy.

SUSTAINABLE PERSONNEL POLICY

As a technology group, TenCate is a knowledge-intensive company.

The health, safety and knowledge of the employees are paramount.

Investments in this human capital benefi t the company. Appropriate

safety policies are implemented at production and operating sites

worldwide to promote optimum health and safety and keep industrial

accidents to an absolute minimum.

PERSONNEL DISTRIBUTION

As a multinational company, TenCate operates worldwide. Production

sites have been established on various continents. Figure 1 shows the

geographic distribution of TenCate employees (head count) across

continents at the end of 2012. Figure 2 shows the breakdown of

employees by contract type at the end of 2012, detailing the numbers

hired under permanent, temporary and agency contracts.

The breakdown of employees by region has remained almost unchanged

compared to 2011. The proportion of employees with a temporary or

agency contract has decreased by approximately 5% compared to 2011.

Despite the technical nature of the company, TenCate aims expressly

to be a company that provides suffi cient scope for diversity among

employees. Figure 3 shows the composition of the workforce by gender.

Over three-quarters of the total number of employees are male and

almost one-quarter female. Figure 4 shows the composition of the

entire management of TenCate. Eight out of ten management

employees are male and two out of ten are female. The percentages in

both charts have remained almost unchanged compared to 2011.

OCCUPATIONAL SAFETY AND WELFARE

The safety and protection of employees and their working environment

are a key focus of TenCate’s production sites. Table 5 provides an

overview of occupational safety and welfare, expressed in ratios of

industrial accidents, fatal industrial accidents, absence in days/working

days, occupational diseases and sickness absence. In 2012 the ratio of

industrial accidents was negatively impacted by the introduction of a

number of new production processes in the TenCate Advanced Armour

market group, which led to an unexpected number of minor incidents.

Effective corrective safety measures have now been implemented.

5 OCCUPATIONAL SAFETY AND WELFARE 2011 2012

Industrial accidents* 1.8 2.4

Fatal industrial accidents* 0 0

Absence due to industrial accidents

in days/working days* 22.1 48.9

Industrial diseases* 0.03 0.00

Sickness absence* 2.1% 2.7%* Ratio per 100 FTEs.

EDUCATION AND TRAINING

TenCate invests in the quality and competences of its employees.

Education and training are crucial for the optimum development and

maintenance of the company’s knowledge resources. The company uses

both external and internal on-the-job training. In 2012, 906 employees

took part in technical training courses, while 105 attended management

training. Figure 6 shows the breakdown between internal and external

training hours. The number of internal training hours has increased

compared to 2011.

6 INTERNAL AND EXTERNAL TRAINING HOURS

Internal training hoursExternal training hours

30%

70%

19%

81%

2011 2012


ECOLOGICAL ASPECTS

The key performance indicators relating to individual ecological aspects

of TenCate’s corporate social responsibility concern energy, CO2

emissions, water and sewage and waste materials. The performances

in these areas are a result of TenCate’s comprehensive sustainability

policy.

SUSTAINABLE ENERGY POLICY

Energy consumption is an issue that demands attention worldwide.

TenCate is mindful of this and contributes through its actions,

investments and technological innovations to the reduction and

maximum effi ciency of energy consumption. An increase in the share

of ‘green energy’ forms part of the prevailing energy policy.

ENERGY CONSUMPTION

Total energy consumption in 2012 amounted to approximately

1,966 terajoules. This represents a marginal increase of 0.3% compared

to 2011. Among TenCate’s production processes, it is particularly fabric

production and the extrusion of synthetic fi bres that are the most

energy-intensive. Approximately 5% of the electricity consumed comes

from sustainable sources, such as green power. Biogas is used for

steam production. As a result of targeted measures, greater energy

savings were achieved in 2012 than in the previous year. Figure 7 shows

the percentage breakdown of energy consumption by energy source for

both 2011 and 2012.

7 ENERGY CONSUMPTION BY ENERGY SOURCE 2011 2012

Renewable electricity 2.7% 2.6%

Non-renewable electricity 51.0% 51.1%

Biogas 0.0% 0.1%

Natural gas 33.0% 33.3%

Propane gas 0.3% 0.4%

Diesel 0.0% 0.0%

Steam 12.6% 12.1%

Compressed air 0.3% 0.3%

Groundwater 0.1% 0.1%

CO2 FOOTPRINT POLICY

CO2 emissions go hand in hand with energy consumption. The increase

in CO2 in the atmosphere increases the greenhouse effect on earth and

contributes to climate change. TenCate is mindful of this and directs its

policy towards reducing CO2 emissions. By determining its level of CO

2

emissions, TenCate gains an insight into the total greenhouse gas

emissions caused by its operations. A better understanding of CO2

footprints and how to reduce them can be obtained by identifying and

then categorising emissions. At the same time energy conservation

helps to increase energy effi ciency and reduce both fossil fuel

consumption and CO2 footprints in order to cut process costs. TenCate’s

CO2 footprint is made up of the various emission sources, such as

electricity, natural gas and steam.

CO2 EMISSIONS

In 2012 TenCate’s total CO2 emissions worldwide amounted to

approximately 195 kilotons. That represents an increase of 2.9%

compared to 2011. Figure 8 shows a comparison of CO2 emissions by

energy source in 2011 and 2012. The data show that approximately

70% of TenCate’s CO2 footprint policy is due to electricity consumption.

Sustainable sources, such as wind power, hydroelectricity or solar

energy now account for 5%. This portion is therefore CO2-neutral.

The bulk of CO2 emissions are attributable to the energy-intensive

market groups, namely TenCate Protective & Outdoor Fabrics, TenCate

Geosynthetics and TenCate Grass.

8 CO2 EMISSIONS BY ENERGY SOURCE 2011 2012

Electricity 70.3% 71.0%

Natural gas 19.1% 18.4%

Propane gas 0.2% 0.2%

Diesel 0.0% 0.0%

Steam 8.4% 7.9%

Compressed air 0.3% 0.3%

Groundwater 0.1% 0.1%

Flights 0.4% 0.6%

Road transport 0.7% 0.8%

Other sources 0.5% 0.7%

SUSTAINABLE WATER AND SEWAGE POLICY

Water consumption is a growing issue worldwide. TenCate is mindful of

this and contributes to the reduction and maximum effi ciency of water

consumption by means of its actions, investments and technological

innovations. Water consumption is broken down by source. Waste

water treatment is broken down by use. TenCate’s water treatment

plants form an integral part of the water and sewerage policy at the

respective sites worldwide.


>Indicators

WATER CONSUMPTION

Total water consumption in 2012 amounted to approximately 3.5 million

cubic metres of water. This represents an increase of 6.9% compared to

2011, even though consumption of drinking water decreased in 2012.

The increase was largely due to an increase in groundwater use in

Nijverdal. Figure 9 sets out water consumption by water type. The

underlying data show that the main consumer of water is the TenCate

Protective & Outdoor Fabrics market group, with a combined share of

water consumption of over 50 per cent. This percentage can be

explained by the current analogue fi nishing process used for technical

textiles in the water-intensive processes in this market group.

WASTE WATER

The total volume of waste water was 3.1 million cubic metres in 2012.

This represents an increase of 4.5% compared to 2011. Figure 10

provides an overview of total waste water by use. Since part of the

water drawn during production evaporates or is absorbed in part by

products, the volume of discharge water is by defi nition lower than the

volume of water drawn.

SUSTAINABLE WASTE POLICY

TenCate uses raw materials as effi ciently as possible. A lower volume

of waste materials by defi nition means better utilisation of scarce

raw materials. Unavoidable waste materials are separated in an

environmentally conscious way and processed by recognised waste

processing organisations.

WASTE STREAMS

Approximately 14 kilotonnes of waste were released in TenCate’s

production processes in 2012. Ten kilotonnes were recycled during

the reporting year (a reduction of 12.6% compared to 2011) and

3 kilotonnes were processed externally (a reduction of 5.5% compared

to 2011, since somewhat more waste was incinerated by the waste

processing organisation). Plastic waste in particular (including synthetic

fi bres) was recycled more internally in 2012. Figures 11, 12, 13 and

14 provide an overview of waste by waste streams, type of waste

separation, type of recycling and method of waste processing.

11 WASTE STREAMS BY TYPE IN 2011 AND 2012

97.9% 97.5%

2011 2012

2.1% 2.5%

Non-hazardous wasteHazardous waste

12 WASTE SEPARATION BY TYPE IN 2011 AND 2012

10.2%

2011

0

20

40

60

80

13.4%

77.7%

66.5%

8.9%12.4%

3.2%7.7%

Paper Plastic Wood Organic

2012

9 WATER CONSUMPTION BY SOURCE IN 2011 AND 2012

41.2%

24.3%

43.2%

19.7%

2011 2012

34.5% 37.1%

Surface water

Groundwater

Drinking water

10 WASTE WATER BY USE IN 2011 AND 2012

13.7%

36.2%

17.8%

31.8%

2011 2012

50.1% 50.4%

Other water

Surface water

Sewage


ECONOMIC ASPECTS

Economic indicators concerning TenCate’s fi nancial performance can be

found in the later parts of the 2012 annual report. In this section

TenCate reports on the key performance indicators with regard to

sponsorship and donations during the reporting year.

SUSTAINABLE SOCIAL POLICY

TenCate has a strong commitment to society through sponsorship and

donations. The company has a sense of close involvement worldwide in

the local communities in which it operates. Every year, TenCate

sponsors various initiatives, both fi nancially and in kind, with materials

which the company produces. In addition market groups and employees

make time or resources available for local or regional social activities.

The sponsorship policy and activities in 2012 are detailed on the

corporate website: www.tencateannualreports.com.

SPONSORSHIP AND DONATIONS

TenCate has a commitment to society. In 2012 the contribution to social

projects totalled approximately 0.1% of revenues. Figure 15 provides an

overview of the investments in the form of sponsorship or donations in

2011 and 2012. There are only marginal differences between the two

years. The main sponsorship in 2012 once again concerned Heracles

Almelo and the laying of the new, recyclable synthetic turf system in

the stadium of this professional football club.

13 WASTE RECYCLING BY TYPE IN 2011 AND 2012

46.6%64.0%

2011 2012

53.4% 36.0%

Internal recyclingExternal recycling

14 WASTE PROCESSING BY TYPE IN 2011 AND 2012

83.4% 78.0%

2011 2012

16.6% 22.0%

Landfill

Incineration

15 SPONSORSHIP AND DONATIONS IN 2011 AND 2012

8.4%

87.4%

9.8%

85.3%

2011 2012

4.2% 4.9%

Donations

In cash

In kind


OBJECTIVES

Corporate social responsibility is the direct responsibility of the line

management. This is actively supported at corporate level by providing

tools to fulfi l and safeguard this responsibility and present it as

transparently as possible.

During the reporting year TenCate concentrated on gathering reliable

information on numerous aspects of sustainability. The market group

units which have been certifi ed in accordance with the CSR

Performance Ladder (level 3) have already formulated objectives for the

forthcoming reporting year, including for the reported nine KPI’s. During

the forthcoming year, TenCate will also formulate more sustainable

objectives for other market groups. At the same time, the reporting

business units will receive a CSR factsheet giving an insight into

the performance compared to comparable business units. The local

management will be asked to submit a detailed CSR improvement plan.

TRANSPARENCY BENCHMARK

TenCate is assessed annually in the transparency benchmark of the

Netherlands Ministry of Economic Affairs and Innovation. The aim of

this annual examination is to assess and improve the content and

quality of social reporting by Dutch companies. For the present 2012

annual report, TenCate aims to secure a position in the top 100. In past

years the company secured the following scores and positions in the

transparency benchmark:

>Indicators

Year

2012

2011

2010

2009

Position of TenCate

141

150

146

78

Transparency Benchmark of the Netherlands Ministry of Economic Affairs and Innovation

Annual report

2011

2010

2009

2008

Participants

472

468

462

172

TenCate’s points

89

61

41

26


The process of value creation

Business model and value creation

Customer specifi c solutions

Cost-effi c

ient pro

duct

ion

End-

user

experie

nce

Disruptive and sustaining technologies

CORPORATE VALUES

■ Reliable ■ Dedicated ■ Innovative ■ Committed ■ Skilled ■ Entrepreneurial ■ Creative

END-USER MARKETING INNOVATION

COST LEADERDIFFERENTIATION

VALUE DRIVERS END-USER MARKETING

■ Reduction total cost of ownership

of end-users

■ Problem solving ability

■ System approach

■ Best in class: price-performance

■ Co-creation: development with clients

■ Reliability: the TenCate brand stands for

quality

VALUE DRIVERS DIFFERENTIATION

■ Productportfolio: linked to specifi c

customer needs

■ Time-to-market

■ Best in class: price-performance-

quality-service

■ Flexibility: adapt fast to changing needs

VALUE DRIVERS INNOVATION

■ Broad technology base

■ Open innovation networks

■ Knowledge networks

■ Patents & intellectual properties

■ Market driven innovation

& problem solving

VALUE DRIVERS COST LEADER

■ Economies of scale

■ Procurement advantages

■ Availability of raw materials

■ Geographical spread of production

■ Logistic advantages: close to clients

■ Recyclability


>Business model and value creation

VALUE CHAIN MANAGEMENT AND THE VALUE PROPOSITION

TenCate applies the value chain management business model. This

determines how TenCate – based on its position in the value chain –

creates value, establishes value in products and systems and adds

value to customer-focused system solutions. The end-user is central

in this process.

TenCate operates in markets in which it is important to draw attention

to the distinctive features of the product range on the basis of the value

proposition. An important target group comprises institutions such

as purchasing organisations which play a decisive role in drawing up

standards and specifi cations which materials must fulfi l. In addition

to functionality, requirements may be specifi ed in areas such as

sustainability, CO2 footprint, costs during economic service life and

warranties. It is also important to be able to respond rapidly to new

market requirements.

The setting of specifi cations and standards is generally a dynamic

process to which TenCate must respond appropriately. That requires

a fl exible and innovative organisation.

TenCate business model © TenCate

VALUE CHAIN MANAGEMENT LANRETNILANRETXE

portfoliomanagement

processmanagement

marketmanagement

END-USER MARKETING

market

product

technology

process

DIFFERENTIATION

INNOVATION

COST LEADER

businessdevelopment

TenCate devotes increasing attention to communication on the value

proposition. In the company’s txtures magazine, this theme is always

described on the basis of the value chain management business model

with the following four pillars:

■ End-user marketing

■ Technological innovation

■ Cost leadership

■ Product differentiation

END-USER MARKETING

TenCate products and solutions deliver functional added value in

practically all cases. End-user marketing is growing increasingly

important due to ever-higher product requirements. Marketing in the

various market groups across a range of activities was designated

as one of the key future strategies in 2012. The organisation will be

further strengthened in this regard in 2013. The accessibility of product

information has also been increased with the launch of the new

TenCate website at the end of 2012 and increasing use of social and

multimedia.

A positive factor for TenCate as an adaptable, innovative organisation is

that market requirements evolve. Demand for safety and protection is

increasing everywhere. Programmes to modernise army equipment and

police and fi re brigade uniforms are examples of this. Climate change

and natural disasters also give rise to demand for new solutions in the

areas of safety and environmental protection. No one is better equipped

than TenCate to respond. The challenge is to fulfi l new demands within

the currently available government budgets. TenCate therefore also has

the task of delivering cost-effective solutions through greater coherence

both internally and externally.

An initiative was launched in 2012 aimed at both internal cost savings

and more intensive cooperation within production chains.

The main value drivers for end-user marketing are:

■ Problem-solving capability: responding to functional requirements

of the end-user

■ System approach: components / materials form part of an integrated

system

■ Differentiation of the product portfolio to fulfi l local needs,

standards and rules

■ Best in class: price-performance ratio

■ Innovative: co-creation; developing specifi cations jointly with

customers

■ Reliable; the TenCate brand stands for top quality

■ Brands such as TenCate Defender™ M and TenCate Tecasafe™ Plus

set the standard


TECHNOLOGICAL INNOVATION

Key pillars of TenCate’s current successful activities have been built on

past Innovations. Innovations at TenCate usually have a technological

background, such as the development of thermoplastic composite

technology (TenCate Cetex®) and surface nanotechnology through

the use of digital inkjet technology. Innovations also result from

combinations of existing technologies, as in the case of TenCate

Defender™ M and TenCate GeoDetect®. In the fi rst case various fi bre

technologies were combined, resulting in new functionalities. The

second resulted from a combination of fi bre-optic technology and data

processing with geosynthetics products in a detection system.

Ground-breaking technological innovations are necessary to secure the

future. It is also essential to develop existing products by incorporating

new technologies. TenCate’s broad technological base enables it to be

an innovative, technology-driven company. Combined with many years

of specialist expertise in niche markets, this has enabled TenCate

to secure a unique global position in the various product-market-

technology combinations. Greater attention needs to be devoted to

the successful marketing of new inventions.

The main value drivers for innovation are:

■ Broad technological basis

■ Links to universities, colleges and knowledge networks

■ Membership of open innovation networks

■ Internal co-operation and exchanges of knowledge between market

groups (social innovation)

■ Knowledge positions and intellectual property

■ Market-driven (applied) innovation aimed at problem-solving

COST LEADERSHIP

Although products must have the right technical and functional

specifi cations, the cost aspect remains very important. In the current

economic climate in particular, with declining government budgets,

there is also a high awareness of costs on the demand side.

By producing globally and accessing commodity markets worldwide,

TenCate in principle has a good cost base and the company operates in

close proximity to most end-markets. The favourable cost structure

results partly from the leading positions which TenCate occupies in its

core markets, enabling it to achieve economies of scale. Standards and

regulations vary around the world, leading to fragmentation in the

product portfolio.

A critical assessment of the entire product portfolio was made during

the reporting year, in view of the risk that the economies of scale could

be negated by the fragmentation of markets and the need to meet

customer-specifi c product requirements. When weighing up the

respective benefi ts of optimisation of working capital control and

delivery reliability, certain business units initially focused on control of

inventory costs in 2012. This generated some revenue losses in 2012.

These can be avoided in future by better logistical planning.

The ‘make or buy’ decision is also increasingly important. For some

years investments in production capacity have been at a low level.

As an initiator of innovative developments, TenCate does not always

have to take on the production itself. The outsourced production of

TenCate Defender™ M is a good example. The same question will arise

in the continued development of the TenCate ABDS™ active blast

countermeasure system and newly developed synthetic turf systems.

This local-for-local approach can create many new jobs in the local

area. Around 10,000 jobs were created in the State of Georgia through

the outsourcing of production of TenCate Defender M.

Technological innovation can have a positive impact on the cost

structure. Considerable cost advantages can be achieved through

pioneering production methods such as digital fi nishing (development

in the fi eld of digital inkjet technology).

>‘Close cooperation and strategic partnerships between

Fokker Aerostructures and TenCate Advanced Composites,

both specialists in the aerospace supply chain, have

resulted in the development of innovative, high-calibre

thermoplastic aircraft components. The increased use of

thermoplastic's in the aviation industry is a trend driven

by the desire for weight reduction and sustainable

development.’

- Toine Verbruggen, Vice-President Procurement

& Supply Chain Management,

Fokker Aerostructures B.V.


>Business model and value creation

The main value drivers for cost leadership are:

■ Market leadership and the associated economies of scale

■ Purchasing advantages due to global coverage of commodity

markets

■ Availability of raw materials (TenCate is a key customer)

■ Geographic spread of production

■ Proximity of end-users; logistical advantages

PRODUCT DIFFERENTIATION

TenCate aims to develop an appropriate product portfolio offering

dependable solutions tailored to specifi c market and/or customer

requirements. The company increasingly cooperates with partners in

the value chain. The announcement of cooperation with 3M and BASF

in 2012 is a good example. The same applies to the alliance entered

into a number of years ago with Lenzing for the TenCate Defender™ M

product portfolio.

The end-markets benefi t from good cooperation within the chain in

terms of faster market launch times for new product requirements

and/or newly developed products, keen prices (economies of scale)

and a more solution-focused approach to customer requirements.

Product differentiation must increasingly be linked to end-user

marketing in order to position the overall value proposition correctly.

Greater signifi cance is therefore being attributed to marketing.

The sustainability aspect is of growing importance, partly because

public-sector bodies, which constitute TenCate’s principal customer

groups, are setting greater store by sustainability.

Value chains will increasingly become cyclical, opening up growing

opportunities for recycling as a source of raw materials. TenCate is

responding to this trend by minimising the use of toxic materials and

using recyclable raw and ancillary materials. Thermoplastic composites

(TenCate Cetex®) and the new TenCate matrix-woven synthetic turf

system are good examples of this.

The main value drivers for product differentiation are:

■ Broad product portfolio: a good fi t for specifi c customer requirements

■ Relatively large number of products developed recently

■ Best in class: price / performance

■ Relatively short time to market: ability to respond rapidly to market

demands

■ Many years of experience: material specifi cations, databases,

qualifi cations, etc.

CORPORATE VALUES

TenCate has a royal hallmark, recognising not only the company’s

exceptional history as one of the oldest enterprises in the Netherlands

but also the way it does business around the world. TenCate is

assiduous in imparting its ten principal corporate values to its

employees:

■ The customer is central: protecting people

■ Effective: doing the right things

■ Effi cient: doing things well

■ Creative: seeking solutions and creating systems

■ Flexible: the ‘living organisation’, adapting to external

developments, new demands and trends

■ Enterprising: identifying and optimising opportunities

■ Innovative: thinking ‘outside the box’

■ Reliable: doing business on the basis of trust; ensuring that TenCate

is seen as a reliable partner

■ Commitment: dedication to the work which the company stands for

■ Cooperation: working with colleagues and in teams.

Employees are TenCate’s human capital and are selected, rewarded and

appraised partly on the basis of the above values. They are expected to

be proactive, dedicated and open to change.


ADVANCED TEXTILES & COMPOSITES

MARKET THEMES

The principal market themes for the Advanced Textiles & Composites

sector are:

■ Personal protection

■ Defence

■ Mobility

■ Leisure

The main areas of application of the products are the protection of

military personnel, police and process workers (heat- and fl ame-

resistant protection and ballistic protection), protection of personnel

in industry (process industry, oil and gas extraction) and protection

of fi re brigades and police forces. TenCate is also the European market

leader in high-quality outdoor fabrics for the outdoor market.

The armouring of army and other land, sea and air vehicles is an

important market. A fast-growing segment is the helicopter armour.

TenCate is less active in the personal protection market, which is

volume-driven and price sensitive.

In the fi eld of mobility, the current areas of application lie particularly

in aerospace, although applications in the automotive sector and other

industrial sectors will emerge over time. In both markets the strong

growth in demand is coming mainly from the need to economise on

fuel costs (lower emissions).

In most of the markets in which Advanced Textiles & Composites

operates, the trends are positive for TenCate because of the growing

focus on safety aspects and environmental impacts. Specifi c demands

are increasingly being made on materials. This is usually a favourable

development for TenCate if markets specify higher requirements for

products, leading to differentiated demand based on specifi c customer

requirements.

TECHNOLOGY

The Advanced Textiles & Composites sector is concentrated around

impregnation and coating technologies for the application and

processing of functional characteristics in and on textiles. The products

in this sector mainly comprise protective fabrics and composites (made

particularly of carbon, glass and aramid fi bres). TenCate is the global

market leader in the fi eld of protective fabrics and one of the

pre-eminent suppliers of composites. TenCate occupies a unique

position in the composites market because it has both thermoset and

thermoplastic composites (TenCate Cetex®) in its portfolio. TenCate

plays a leading role in thermoplastic composites technology in the

aircraft industry.

The raw materials used in the Advanced Textiles & Composites sector

are mainly synthetic fi bres such as para and meta aramids, optical and

carbon fi bres.

MARKET GROUPS

The Advanced Textiles & Composites sector comprises the following

market groups

■ TenCate Protective Fabrics

■ TenCate Outdoor Fabrics

Safety fabrics for a wide range of professional groups and protective

fabrics for outdoor applications.

■ TenCate Space & Aerospace Composites

■ TenCate Industrial Composites

■ TenCate Advanced Armour

Composite (lightweight) materials for aerospace and industrial

applications; antiballistics for personal protection and vehicle armour.

Sectors

>‘We want our innovative ideas and concepts to fi nd their

way into innovative products such as those of TenCate.

That also gives our employees a great deal of satisfaction:

“Look, my knowledge and expertise is in that product”.’’

- Michel Peters, CEO,

National Aerospace Laboratory of the Netherlands

(VALUE ADDED)RESELLERS

PROTECTIVE FABRICS

• R&D• Spinning• Weaving• Knitting• Pre-treatment• Dyeing• Finishing• Laminating• Quality control• Packaging & Logistics• Marketing & Sales

PROTECTIVE FABRICS

• Garment makers• Distributors

PROTECTIVE FABRICS

• Distributors• PPE-dealers• Laundries

PROTECTIVE FABRICS

• Industrial safety• Emergency response• Military & Police• Services & Industries

PROTECTIVE FABRICS

• Chemical suppliers• Polymer suppliers• Fibre suppliers

PROTECTIVE FABRICS

• Chemicals• Polymers

OUTDOOR FABRICS

• R&D• Spinning• Weaving• Pre-treatment• Dyeing• Finishing• Quality control• Packaging & Logistics• Marketing & Sales

OUTDOOR FABRICS

• Confectioners

OUTDOOR FABRICS

• Distributors• Dealers

OUTDOOR FABRICS

• Leisure• Home & Terrace• Emergency response• Refugee response• Military

ISO

900

1

FM H

PR (G

, USA

)

ISO

140

01 (N

L) /

MVO

PL

(NL)

OUTDOOR FABRICS

• Chemical suppliers• Polymer suppliers• Fibre suppliers• Fabric suppliers

OUTDOOR FABRICS


END-USER MARKETS CUSTOMERS SUPPLIERS RAW MATERIALS

ISO

900

1

ISO

140

01 (N

L) /

MVO

PL

(NL)


AEROSPACE COMPOSITES

• R&D• Weaving• Pre-treatment• Chemical finishing• Calandering• Impregnation• Consolidation• Moulding• Quality control• Packaging & Logistics• Marketing & Sales


• Original Equipment Manufacturers (OEM) - Prime contractors• Tier 1 & Tier 2 - Suppliers of integrated structures and assemblies• Tier 3 - Subcontracted part manufacturers


• Aviation - Interior - Exterior• Radomes & Antennas• Space• Military




• Chemicals• Polymers• Glass

ISO

900

1 | A

S / E

N 9

100

INDUSTRIAL COMPOSITES

• R&D• Weaving• Pre-treatment• Chemical finishing• Calandering• Impregnation• Consolidation• Moulding• Quality control• Packaging & Logistics• Marketing & Sales


• Original Equipment Manufacturers (OEM)


• Automotive• Oil & Gas• Commercial & Industrial• Sports & Leisure• Medical




• Chemicals• Polymers• Glass

ISO

900

1

ADVANCED ARMOUR

• R&D• Designing & Testing• Production & Construction - Spall-liners - Add-on-Armour - Structural composites - Body armour inserts - Ready to fit solutions - Survivability packages• Quality control• Packaging & Logistics• Marketing & Sales

ADVANCED ARMOUR

• Original Equipment Manufacturers (OEM) - Vehicle manufacturers - Shipyards - Aircraft manufacturers - Body armour manufacturers - Helmet manufacturers - Cash-in-transit vehicle converters

ADVANCED ARMOUR

• Military - Land forces - Naval forces - Air forces - Special forces• Law enforcement• Personal protection• Cash-in-transit

ADVANCED ARMOUR

• Chemical suppliers• Polymer suppliers• Fibre suppliers• Fabric suppliers• Ceramic suppliers• Ballistic metal supplliers

ADVANCED ARMOUR

• Chemicals• Polymers• Ceramics• Metals• Glass

ISO

900

1 | A

S / E

N /

JISQ

910

0 (F

R)

ISO

140

01 (D

K) /

MVO

PL

(NL)

MVO

PL

(NL)

MVO

PL

(NL)

FM H

PR (C

, USA

)


>Sectors


BUSINESS MODELS OF EACH MARKET GROUP

TENCATE PROTECTIVE & OUTDOOR FABRICS

END-USER MARKETING TECHNOLOGICAL INNOVATION

■ End-user marketing based on value proposition (cost of ownership)

■ Brand policy

■ Risk awareness / safe society

■ Partnerships in emerging markets

■ Digital inkjet technology / ‘sustainable factory of the future’

■ Smart textiles

■ Effective use of internal knowledge (social innovation)

■ Patents

PRODUCT DIFFERENTIATION COST LEADERSHIP

■ Global market position, with local product adaptations for local

specifi cations

■ Fabrics based on fi bre blends and coated / fi nished fabrics (product

champions: distinctive in quality-performance ratio and costs)

■ Co-makership, products tailored to specifi c needs

■ Internal production combined with outsourcing delivers fl exibility


■ Process innovation

■ Cost control

TENCATE SPACE & AEROSPACE COMPOSITES, TENCATE INDUSTRIAL COMPOSITES AND TENCATE ADVANCED ARMOUR


■ Access to market participants and partnerships with OEM

relationships in market phase of the TenCate ABDS™ active blast

countermeasure system

■ Solution-focused approach due to independence from fi bre suppliers

■ Reputation and qualifi cations of renowned market participants

■ TenCate ABDS™ active blast countermeasure system

■ Open and closed open innovation through partnerships (TAPAS,

TPRC, AMRC, eTAC)

■ Qualifi cations for future programmes

■ Process innovations for processing of composites


■ Development of new application areas, particularly for thermoplastic

composites

■ Developments in unidirectional (UD) tape technology

■ Development of the value chain particularly in automotive

applications for thermoplastic composites

■ Increased effi ciency in production


■ Outsourcing and partnerships

■ Development of low-cost solutions (industrial markets)

STRATEGY

The strategy is based essentially on the group strategy resulting from

TenCate’s value chain management business model. In all activities,

growth can be achieved by broadening the geographic spread (new

markets) and further developing the product portfolio (new

applications). This can be implemented in individual areas as follows.

Protective fabrics

TenCate operates particularly in the upper segment of the safety

clothing market. As a global player, TenCate has access to the

worldwide commodity markets. Optimum functional characteristics

can be achieved in materials through intelligent combinations of

characteristics of fi bres from different providers. Over the last few years

TenCate has focused particularly on greater wearing comfort with an

increase in the protective properties of the materials. Attention has also


>Sectors

been devoted to the cost aspect. The result is a very attractive price-

performance ratio. Following the great success of TenCate Defender™ M

in the United States of America, the geographic coverage of the

defence market has been substantially expanded. Other protective

fabrics, particularly for industrial markets, are increasingly being sold

worldwide. Internal knowledge is also being combined and exchanged

among European and American competence centres with a view to

developing a global market for the entire product portfolio. Increased

cooperation is taking place with international partners to accelerate

access to geographic markets.

Composites

After an initial focus on aerospace applications, further growth is being

pursued in industrial markets, such as tooling (die construction),

the automotive industry and oil and gas extraction (transport pipes).

On the basis of the buy & build strategy, new technologies were

acquired in 2012 through the US/Canadian company PMC Baycomp.

This has opened up access to new markets.

The focus of the group-wide growth strategy is on composite activities,

where TenCate currently occupies a unique technology position.

The combination of high-end thermoset technology and innovative

thermoplastic composite technology offers TenCate good growth

opportunities in mobility and other industrial markets.

The strategy is also focused on good collaboration with operators

along the entire value chain. TenCate has close relationships with

fi bre producers, the processing industry and end-customers (OEMs).

Alliances were entered into for certain applications in 2012 with major

international market operators such as 3M and BASF.

In the case of both TenCate Protective Fabrics and the two market

groups in the composites segment, it is essential to maintain good

relationships with raw material suppliers, particularly fi bre producers

and chemical companies. Many orders are project-driven. Delivery

reliability across the entire chain is vital. As a result of its leading

market positions, TenCate is usually one of the largest buyers of fi bres

in the specifi c market segment. Long-term cooperation agreements have

been entered into with a number of fi bre producers.

VALUE PROPOSITION

The Advanced Textiles & Composites sector has a unique combination

of technologies. TenCate Protective Fabrics produces both fi nished

substrates and inherently fl ame-resistant materials, in which the

functionalities result from the fi bre itself or a combination of fi bres.

TenCate Advanced Composites produces both thermosets and

thermoplastics. The company has a strong qualifi cation basis with

its portfolio of composites. For larger customers, TenCate can be a

dependable partner in the chain by providing a one-stop shop service.

TenCate Advanced Armour has built up strong knowledge of the

engineering and design of complete vehicle protection systems.

The aerospace background of the sister company TenCate Advanced

Composites also gives TenCate a strong basis in aerospace armour.

TenCate is known in the market for its positioning in high-performance

composites in the higher price segment. This principally concerns the

aerospace market. Major steps were taken in 2012 to extend the focus

to markets in which there is potential demand for larger volumes

but which also remain critical with regard to functional product

characteristics (engineered materials). It is in these markets that

TenCate can deliver the highest added value.

Thanks to these strong technology positions the company can respond

effectively to specifi c market requirements. These usually result from

laws or regulations, industrial and safety standards etc. which specify

the technical characteristics of materials. In the markets in which

TenCate operates, supplier reliability and commitment with regard to

the performance of materials and operation as a development partner

are essential. The requirements in terms of functional aspects of

materials evolve constantly and TenCate has the necessary knowledge

and fl exibility to respond appropriately.

ORGANISATION

The activities within the TenCate Protective Fabrics market group are

concentrated around the production sites in the Netherlands, the United

States of America and the joint venture in Thailand. In the Netherlands,

safety fabrics are produced using fi nished substrates (cotton blends and

synthetic products). In the United States of America, products are

produced using a combination of inherently protective natural or

synthetic fi bres. TenCate therefore has a wide range of product types

for various applications, each with specifi c product characteristics.


Having regard to the large volumes and possible wide fl uctuations in

order sizes, the production of the entire TenCate Defender™ M product

portfolio was outsourced to third parties. In this case TenCate acts as

overall director of the value chain and maintains direct contact with the

end-user (including US Army authorities and purchasing organisations).

In all end-markets TenCate seeks to maintain direct contact with

end-users and industry organisations so as to respond effectively

to customer requirements and ensure that TenCate products are

well-positioned among end-customers. TenCate applies an own-brand

strategy based on the specifi c functional aspects and qualities which

end-users demand. TenCate works closely with market operators,

suppliers of the complete range of work clothing and professional wear,

which occupy leading positions in certain markets. This collaboration

usually results in co-development, joint branding, marketing support etc.

The TenCate Advanced Composites market group is also concentrated

around production sites in the Netherlands (mainly TenCate Cetex®

production) and the United States (mainly thermoset prepregs). In view

of the specifi c nature of the materials produced (thermoset versus

thermoplastics), the market focus differs somewhat depending on the

continent. In Europe, the focus has been primarily on the commercial

aviation industry. Concrete steps were taken in the automotive industry

in 2012. In the USA, the potential applications of composite products

are wider (military aviation, radomes, industrial applications, the sports

market). PMC Baycomp was acquired in the USA in 2012, strengthening

the thermoplastics portfolio in the USA. Complementary product ranges

wil increasingly be offered in the USA and Europe as a result of close

internal cooperation.

Amber Composites of the United Kingdom was acquired at the

beginning of 2013, with the result that thermoset composites are now

also produced in Europe. Growth can be accelerated through cross-

selling and the development of new markets (including the automotive

industry). Composites also began to be supplied in the Asian market

in 2012. As a result of acquiring PMC Baycomp, TenCate now also

has a small production site in China.

TenCate Advanced Armour is a separate entity within TenCate’s

composites activities. The market group has concentrated particularly

on the global market for vehicle armour. It has European production

sites in France, the United Kingdom and Denmark and operates

as a producer in the United States of America. TenCate has both strong

design capabilities and a wide range of protective (fi bre-reinforced)

composites. The market group supplies complete solutions for vehicle

programmes.

>‘Boeing has a long and rich history of cooperation with

suppliers and customers in the Netherlands. We value

Dutch technical expertise and this initiative. Dutch industry

and academic institutions are helping us to advance with

innovative aerospace technologies that enable us to

improve our global competitive position.’

- Peter Hoffman, Director Global R&D Strategy, Boeing


>Sectors

GEOSYNTHETICS & GRASS

MARKET THEMES

The main market themes in the Geosynthetics & Grass sector are:

■ Infrastructure

■ Water management

■ Sports and recreation

TenCate Geosynthetics is the world’s largest producer of high-strength

geosynthetics (grids, liners, fabrics and non-wovens) for infrastructure,

the construction industry and environmental applications. The portfolio

also comprises materials (industrial fabrics) for the agriculture,

horticulture and leisure sectors. The market group has three distinct

business units: infrastructure, water & environment and industrial

fabrics.

The market is devoting increasing attention to the positive

environmental aspects of geosynthetics. The use of environmental

arguments and the reduction of negative environmental effects are

therefore receiving greater emphasis in promotion, design and

specifi cations.

TenCate Grass has a leading market position worldwide in synthetic turf

systems (fi bres and backing). The company is positioned almost at the

beginning of the value chain. Strategy reinforcement takes place

continuously in all cornerstones of the strategic framework (value chain

management). The industry is in a phase in which the demand and

supply sides of the market are developing strongly. TenCate is pursuing

an active strategic policy to maintain leadership in terms of market

share and technology. With production sites in the United States,

the Netherlands and Dubai, TenCate has set up its production in a

cost-effective way, with an emphasis on volume production in the

Middle East, and the logistical lines to the market are short. Within

this strategic policy, TenCate is also leading the way by entering into

partnerships with key suppliers of synthetic turf systems.

The landscaping market is growing strongly and will ultimately have

similar, if not greater, potential than the sports market. With this in

mind, TenCate also invested substantial sums in texturing capacity

in 2012.

TECHNOLOGY

The Geosynthetics & Grass sector is concentrated around extrusion and

non-woven technologies. Geosynthetics products are mainly used to

stabilise or separate soil layers and to support dyke bodies and dam

walls. Geosynthetics (TenCate Geotube®) are also used in the

environmental market (fi ltration) and for the dewatering of polluted

sludge.

TenCate began extruding synthetic turf fi bres several decades ago and

currently supplies total systems for the global sports market and the

landscaping market, in cooperation with partners. The rise of synthetic

turf is mainly due to its greater playability, water savings and lower

maintenance cost compared to natural grass.

The main raw materials used are polyethylene and polypropylene,

as well as purchased synthetic yarns, such as nylon and polyester.

MARKET GROUPS

The Geosynthetics & Grass sector comprises the following market

groups:

■ TenCate Geosynthetics

Fabrics, grids and non-wovens for solutions and applications for

infrastructure projects and the environmental market, as well as

industrial fabrics for a range of applications, such as agribusiness,

sports and leisure.

■ TenCate Grass

Synthetic turf components and systems for applications such as

football, hockey and other sports pitches, as well as landscaping.

In addition to the companies producing fi bres and carpet backing

(upstream activities), the Grass group includes a growing number of

system development and marketing companies (downstream activities).


GEOSYNTHETICS

• R&D• Weaving• Non-woven• Knitting• Grids• Pre-treatment• Finishing• Quality control• Packaging & Logistics• Marketing & Sales

GEOSYNTHETICS

• Distributors• Contractors• Retailers

GEOSYNTHETICS

• Dealers• Subcontractors

GEOSYNTHETICS

• Civil work• Water & Environment• Industrial• Oil & Gas• Renewable energy

GEOSYNTHETICS

• Chemical suppliers• Polymer suppliers• Fabric suppliers• Yarn suppliers

GEOSYNTHETICS



ISO

900

1

FM H

PR (G

, USA

)

MVO

PL

(NL)


GRASS

• R&D• Spinning yarns• Weaving backing• Finishing yarns• Finishing backing• Quality control• Packaging & Logistics• Marketing & Sales

GRASS

• Tufters• Weavers

GRASS

• Installers• Marketing organisations

GRASS

• Soccer• American Football• Hockey• Tennis• Golf• Padel• Multisport• Landscaping

GRASS

• Chemical suppliers• Polymer suppliers

GRASS



ISO

900

1

ISO

140

01 (N

L) /

MVO

PL

(NL)

FM H

PR (T

, USA

)

Safety assurance refers to:

• Highly Protected Risk (HPR) status determined by FM Global

Sustainability assurance refers to:

• ISO 14001 environmental management systems

• CSR Performance Ladder (CSR PL), CSR management system for corporate social responsibility

Quality assurance refers to:

• ISO 9001 general quality management systems

• AS 9100 (US), EN 9100 (Europe), JISQ (Asia) aerospace quality management systems

SAFETY

SUSTAINABILITY

QUALITY



>Sectors

BUSINESS MODELS OF EACH MARKET GROUP

TENCATE GEOSYNTHETICS


■ Alliances with market participants

■ Local collaboration with partners in emerging markets

■ Geographic spread of distribution

■ Positioning in sustainability (water management, environmental

solutions, low CO2 footprint)

■ Development of relationships in the Chinese market

■ TenCate GeoDetect™ solutions

■ Dewatering and fi ltration technology

■ Biopolymers


■ Continuing development of new products (innovation awards)

■ Focus on water management, environment and infrastructure

■ Economies of scale (volume products)

■ Process optimisation

TENCATE GRASS


■ Alliances with market participants (downstream activities)

■ Geographic spread of distribution

■ Positioning and advantages of the sustainability aspect

(water management, recycling)

■ Increased quality awareness in end-markets

■ Market positioning (GreenFields, Edel Grass, TigerTurf)

■ Relationships with sports federations

■ Reduction of total cost of ownership of sports pitches

■ Product and system warranties

■ Fourth-generation developments

■ Weaving technology

■ Biomechanical characteristics (research project with third parties)


■ System components, ‘Powered by TenCate’

■ Optimum support of downstream activities for development

of new system concepts


■ Process optimisation


STRATEGY

Cost leadership is a key pillar of the business model for the

Geosynthetics & Grass sector. For non-wovens, the geosynthetics

market is mainly volume-driven. The same applies increasingly to the

market for synthetic turf fi bres, although the one-stop-shop aspect is

an important competitive advantage for the project market. TenCate

has cost-effective production sites in Asia (geosynthetics) and Dubai

(synthetic turf yarns).

TenCate has strengthened its position in the synthetic turf market with

regard to end-markets through a process of chain integration. Market

competition is increasingly taking place in the area of end-solutions

(systems). This is necessary on the one hand to gain greater control

of the quality of sport systems in end-markets and on the other hand

to safeguard the sustainability aspect more fully.

The TenCate Geosynthetics market group has developed a specialisation

in water management and the environment. A separate business unit

has been formed for this with a worldwide approach. This also involves

increasingly close cooperation with specialist companies in the chain,

such as consulting fi rms, dredging companies and construction fi rms,

in order to strengthen the focus on end-solutions in this fi eld.

VALUE PROPOSITION

The value proposition for both geosynthetics and synthetic turf

solutions is concentrated largely on the fi eld of sustainability. Water

shortages, or an overabundance of water, are important factors which

determine demand in the global market. In many cases geosynthetics

have a demonstrably lower CO2 footprint than the more traditional

construction materials (concrete, rockfi ll). Governments are focusing

increasing attention on the sustainability aspects of infrastructure, civil

engineering and sports projects. TenCate has production sites in Europe,

North America and Asia, enabling it to respond fl exibly and rapidly to

demand from local markets. For a supplier of a wide portfolio of

materials, the collaboration with TenCate market participants provides

logistical and purchasing advantages. The value proposition is also

associated with extensive technical consulting on the processing of

products in projects and systems. Quality, dependability and delivery

reliability are key elements of the value proposition. TenCate presents

itself as an innovative producer of high-quality materials.

ORGANISATION

TenCate conducts a market policy based partly on the principle of ‘local

for local’. Local standards and local market demand are factors in both

the geosynthetics and synthetic turf markets. The production of

synthetic turf yarns in Dubai involves low-cost production mainly of

standard products. The same is true of geosynthetics in China, although

this site also produces for the local market. TenCate Grass develops

new products mainly in the Netherlands, where the R&D activities are

concentrated. In the geosynthetics activities there is a more continental

approach, based on local market requirements.

Across the whole sector, close relationships are maintained with parties

playing a key role in the defi nition of product specifi cations. TenCate’s

materials play a crucial role in the end product or system. End-user

marketing occupies a central position in the sales organisation.

>‘Both TenCate and Heracles Almelo are progressive

businesses. We both want to operate on the basis of

sustainability and are moving together in that direction.

TenCate is more than just our main sponsor. The company

has been a very committed and reliable partner for

10 years.’

- Nico-Jan Hoogma, CEO, Heracles Almelo


>Sectors

OTHER ACTIVITIES

The Other Activities sector comprises:


Specialist inkjet technology for industrial applications, such as the

printing, coating and fi nishing of materials.

■ TenCate Enbi

Technical rollers and components particularly for printers, copiers,

fax machines, postal sorting machines and ATMs.

■ Holding & Services

Holding company activities.

Xennia Technology ltd (79%) combines technology (hardware solutions)

with operating systems (software) and internally developed ink

formulations to create industrial production systems. The company

focuses particularly on textile printing and fi nishing and on the

decoration and coating of materials.

TenCate Enbi occupies an important position in these markets as a

leading supplier to major European, American and Asian printer and

copier manufacturers. In addition to the offi ce market, TenCate Enbi

serves niche markets, such as postal sorting machines, ATMs, photo

printers and insulation (foam-based products).

STRATEGY

Xennia Technology and TenCate Enbi occupy a separate position within

the TenCate Group.

Xennia Technology was acquired some years ago to facilitate

technological development in the fi eld of inkjet technology.

This initiated key process innovation in the fi eld of textile fi nishing.

The fi rst production based on this technology in TenCate is expected

to start in early 2013.

TenCate Enbi has staged a major turnaround in the last few years.

With production sites in Europe (Germany and Hungary), the United

States of America and China, the company has a unique position in the

supply of components to leading producers (OEMs) of printers and

copiers. TenCate Enbi has also focused successfully on the Asian

market, where signifi cant revenue growth has been achieved in recent

years.


CORPORATE HUMAN RESOURCES

HUMAN RESOURCES POLICY

TenCate’s human resources policy is based on:

■ A safe work environment for employees

■ Qualifi cation, development and promotion of employees

■ Increasing the professional knowledge of employees

■ Promoting internal cooperation

■ Developing leadership and entrepreneurial qualities

■ Retaining talent and guaranteeing knowledge

GENERAL INFORMATION

An important aspect of corporate human resources in 2012 was the

further professionalisation of key positions. This involved in particular

the recruitment of new managers and specialists.

Salaries worldwide were frozen as far as possible in 2012. Increments

agreed under collective labour agreements, government-set minimum

wages and promotions were respected. A critical assessment was also

conducted of both the quality and quantity of the manpower factor.

A number of TenCate business units were restructured, on the one hand

to adapt to worldwide and regional market developments and on the

other hand to make TenCate’s activities even more effi cient. As a result,

the number of employees with employment contracts in the existing

companies in Europe and North America decreased by around 280 FTEs

in 2012. The workforce growth occurred in Asia, mainly at TenCate Enbi,

and through the acquisition of PMC Baycomp in the United States.

TenCate employed 4,454 people worldwide at the end of 2012.

ORGANISATIONAL DEVELOPMENT

Governments worldwide are spending less. A large part of the revenues

from TenCate’s activities depend on government spending and projects.

Industrial power relationships are shifting and emerging markets are

growing.

TenCate’s continued success therefore depends crucially on its ability

to infl uence end-users, deliver innovations and develop and implement

new marketing strategies appropriately.

The absolute priorities are to increase TenCate’s commercial strength

and market the innovations which the company has developed in recent

years. This requires a further strengthening of the sales and marketing

competences within the existing organisation. The organisation will act

as an enabler in this regard. Entrepreneurship remains central at all

levels in the market groups. It is essential to translate and implement

the strategy appropriately.

MANAGEMENT DEVELOPMENT

A TenCate Executive programme was developed jointly with a number

of international business schools in 2012 to promote internal

successions to senior management positions. This programme will

begin in early 2013 for senior managers in North America. It is an

inspiration and development programme to develop and implement the

company’s strategic policy. It also marks the starting point for the

further personal development of the individual managers.

The succession planning at international management level and the

respective key specialists were updated in 2012. TenCate has

appropriate successors for over 50% of vital posts. A number of them

can occupy the vacant positions immediately. Others will require around

two more years to reach the required level. One-third of them have the

potential and need to develop for another fi ve years.

Corporate information

OWN EMPLOYEES

(in number of staff years) Year-end 2007 Year-end 2008 Year-end 2009 Year-end 2010 Year-end 2011 Delta vs 2011 Year-end 2012

Netherlands 975 931 862 785 819 – 24 795

Other Europe 582 612 569 724 672 – 42 630

United States of America 1,527 1,573 1,314 1,542 1,604 – 57 1,547

Asia / Australia 641 936 777 878 1,030 181 1,211

Middle East 295 385 283 342 228 43 271

Total 4,020 4,437 3,805 4,271 4,353 101 4,454


>Corporate information

A trainee programme has also been introduced. Young, academically

trained and recently graduated people will be recruited for two years

over and above the normal complement to carry two or three projects in

the fi eld of business development, sales & marketing, R&D and/or

operations. The aim is to acquire specifi c or updated knowledge, absorb

innovative or refreshing insights and transpose these into TenCate’s

strategy. After two years an assessment will be made as to whether the

former trainees can be deployed within TenCate and, if so, in which

regular posts.

EMPLOYMENT CONDITIONS

TenCate offers its employees a comprehensive and competitive package

of employment conditions. To this end, regular surveys are conducted in

co-operation with Hay Group and local employer organisations.

TenCate operates a uniform remuneration policy for the management of

all businesses. The bonus systems for the senior management are

also determined centrally. That takes place on the basis of the result

of the operating company and in some cases also partly on the basis

of the results of the respective TenCate market group as a whole.

TenCate operates businesses in 25 countries around the world, each

of which has its own employment regulations, laws and culture.

The operating companies therefore conduct their own personnel

policy, which is tailored to the local situation. The general conditions

and principles of the market group also apply.

No TenCate offi cers have an explicit CSR weighting in their

remuneration. This is due to TenCate’s fundamental view that

sustainability forms an integral part of the company’s comprehensive

pursuit of continuity.

A survey of age-aware personnel policy in the Dutch TenCate

businesses was completed in 2012. This was conducted having regard

to the continuing ageing of the Dutch workforce, dejuvenation and the

increase in the retirement age in the Netherlands. A number of pilots

and measures will be implemented in 2013 to ensure that employees

can continue to be employed healthily and appropriately for a longer

period. These pilots will focus on adjustments to shift rosters and

working times, occupational physiotherapy, increased fl exible

employment and health management. The aim is also to increase

the number of training hours per employee.

All employees within TenCate have access to ‘10Cate’, which

represents the identity of the company. These guiding principles of the

TenCate organisation embody the ‘why’ of TenCate (Protecting people).

These ten core values are universal within the worldwide company.

10Cate is centred on the customer and together with the TenCate

business model provides the guiding principles for each employee.

One of TenCate’s core values is reliability. The integrity code applies

to everyone employed by TenCate and forms part of each individual

contract of employment. A corporate compliance offi cer and

a confi dential adviser have been appointed to support the code.

TenCate also has a social media code.

OCCUPATIONAL SAFETY AND WELFARE

TenCate’s policy is focused on implementing and/or establishing all

activities and processes in such a way as to prevent any personal injury

or damage to health. This is the guiding principle for the health and

safety policy which has been or is being implemented in every company.

With annual campaigns focused on promoting safety, sustainability,

quality and welfare, TenCate seeks to offer employees on all continents

a safe and high-quality working environment. The objective is pursued

jointly with the managements of the companies. One of the outcomes

is a relatively low level of sickness absence worldwide.


CORPORATE INFORMATION TECHNOLOGY

The establishment of the data centre in Kuala Lumpur and the

appointment of the IT manager for the IT shared service centre in Asia

mark the fi nal stage of the transformation from a decentralised IT

organisation to a worldwide shared service centre IT organisation.

TenCate now has three regional IT shared service centres (North

America, EMEA and APAC), from which IT services are provided for the

regional TenCate companies.

TenCate’s recent acquisitions in North America and Asia have been

added to TenCate’s secure network.

The IT strategy for applications was adjusted in 2012 with the aim of

faster delivery of clear business information on each product, market

and market group. A special team is being established for this in 2013

to help companies achieve this objective with their business processes

and ERP applications. The number of ERP applications will be further

reduced and data harmonisation will be standardised by means of a

blueprint.

INVESTMENTS

In addition to a number of technology investments in IT systems (data

centre in Kuala Lumpur, storage capacity and telephone exchanges),

both the content management system and the design of various parts

of the TenCate website were completely overhauled jointly with the

Corporate Communication department. Various ERP implementations

were also completed.

GREEN IT

TenCate has devised a Green IT strategy and is engaged with its

implementation. Examples of concrete steps taken by corporate

IT include:

■ Purchasing from ‘green’ certifi ed data centres

■ Reduced use of local printers and consumables and replacement

by network printers (multifunctionals)

■ Digitisation of documents through the use of the intranet (iNetwork)

■ Reduction of energy consumption in data centres by reducing the

number of physical servers (virtualisation) and applying the cooling

strategy of cool aisles and hot aisles

■ Reduction of chemical fi refi ghting systems through the use of

FirePass systems in data centres. This involves reducing the oxygen

content of the data centre to prevent fi res

CORPORATE BUSINESS DEVELOPMENT

Central control and monitoring of business development projects was

initiated in 2011 to guarantee strategic implementation in cooperation

with operational units. The expansion of the activities in China, India

and South America, as well as the development of new composites

activities were key focal points.

The coordination of acquisitions is also controlled centrally. In addition

to acquisitions, cooperation takes place with business partners.

In mid-2012 it was announced that the strategy would be given a

sharper focus, with TenCate seeking to accelerate growth particularly in

new markets through cooperation with strong international partners.

All business development projects take place in close collaboration

with operational teams.

CORPORATE BRANDING

TenCate’s brand policy is focused on further strengthening and

expanding its image in the market with the strong TenCate corporate

brand that forms the basis for corporate communication and market

communication. The brand policy, based on the TenCate brand, is linked

to the end-user marketing strategy pursued by the various market

groups. The corporate brand is communicated in the same way in

the market groups to emphasise the mutual links between them.

TenCate also conducts an active patent policy. That applies both to

the registration of new inventions and to the protection of existing

intellectual property rights.

The existing portfolio is regularly assessed to ensure that the available

intellectual property is being used appropriately. TenCate innovates and

develops constantly. The resulting intellectual property is appropriately

registered and protected. The company also conducts an active policy of

protecting all its intellectual property. Action is taken if any infringements

are detected.



DEVELOPMENTS IN 2012

Further work took place in 2012 on the positioning of the corporate

brand worldwide. The market groups are continuing to apply the

coordinated brand strategy in a consistent manner. It was already clear

in previous years that the strategy was also bearing fruit with regard

to brand value. The market value of the TenCate brand has risen again

relative to the previous year. The ranking of the top 50 Dutch companies

with the most valuable brands puts the value of the TenCate corporate

brand at € 250 million in 2012. In 2011 the fi gure was € 185 million

(Source: BrandFinance Dutch Top 50).

TenCate registered various new patents and thus further expanded its

existing patent portfolio in 2012. This is appropriate for an innovative

organisation that constantly develops new products. The brand portfolio

can be viewed on the website. The patent portfolio is not published,

due to competition considerations.

CORPORATE RISK MANAGEMENT

The aim of TenCate’s corporate risk management is to maintain safe

and secure production sites worldwide, thereby guaranteeing business

continuity and preventing any loss of production capacity. TenCate can

then also safeguard its position as a dependable supplier to its

customers.

Safety aspects concern in particular the risk of fi re, explosion and

natural disaster (fl oods, earthquakes, storms, hurricanes etc.). In

cooperation with the insurer FM Global, the corporate risk manager

conducts annual inspections of production sites of all market groups

worldwide. If a location complies with all FM Global guidelines for

damage prevention, the Highly Protected Risk status is attained and FM

Global presents the Highly Protected Risk Award.

Other initiatives are also deployed to maintain a high level of safety

culture within TenCate. Finally, the corporate risk manager deals with

numerous related matters that affect the liabilities of the company,

including product liabilities and other risks, as well as insurance cover.


In the autumn of 2012, the insurer FM Global granted the Highly

Protected Risk Award to three businesses. These were TenCate

Protective Fabrics in Georgia (USA), for the weaving mill at Zebulon and

the fi nishing plant at Molena, and TenCate Advanced Composites in

Morgan Hill, California (USA). That takes to six the number of TenCate

businesses which have received this distinction.

Fire safety information meetings were organised at Nijverdal again in

the spring and autumn of 2012. Evacuation and fi re drills were also held.

CORPORATE SOCIAL RESPONSIBILITY

TenCate’s sustainability policy forms an integral part of the pursuit of

continuity in the company, which has existed for over 300 years. It is

refl ected in the common denominator and the common goal of the

TenCate organisation: to protect people and their working and living

environments. It is also based on the forward-looking vision, mission

and strategy of the Executive Board.

As a multinational company, TenCate is aware the effect its actions

have on the social environment. By maintaining the company on the

basis of sustainable profi tability, TenCate aims to play a part in making

sure that the social, ecological and economic environment remains

available for future generations. TenCate is increasingly integrating

sustainability into its operating processes, products, joint ventures,

marketing and communication on the basis of corporate social

responsibility (CSR).

This creates shared awareness among both internal and external

stakeholders, which in turn opens the way to constructive initiatives

with buyers, customers, partners and institutions and stakeholders

aimed at the responsible deployment of people in production processes

and responsible use of commodities and materials.

Having regard to the worldwide trends in safety and sustainability on

which TenCate focuses, many underlying themes arise in relation to the

protection that TenCate provides. Such sustainability themes include

weight reduction, limitation of energy consumption, noise reduction,

insulation, water management, reuse, recycling, waste water and

sludge processing, wear and tear, resistance, bullet- and fragment-

proofi ng and heat and fl ame resistance.


Numerous sustainability aspects arise to a greater or lesser extent in

the management of the value chain. This applies to all cornerstones of

TenCate’s business model. The technological innovation cornerstone is

the most obvious. It is only by continuing to deliver (disruptive and

sustaining) innovations in technological and technical fi elds that

TenCate will be able to guarantee its continuity as a technology group

and maintain sustainable development.

CSR is the means by which TenCate integrates sustainability into its

business operations. TenCate uses numerous management systems

particularly to make corporate social responsibility visible, measureable

and controllable. These range from environmental management systems

(ISO certifi cations for quality, the environment and corporate social

responsibility) to fi nancial and non-fi nancial accountability on the

receipt of innovation funds and the awarding of sponsorship and

donations.

In the various value chains, TenCate plays an active part as a customer,

producer, supplier and co-operation partner in delivering sustainable

innovations in numerous fi elds. Open innovation and closed open

innovation are the keywords for the ‘new competition’: sustainable

cooperation. The theme of ‘sustainable procurement’ is also of growing

importance in specifi c market groups. As market leader, TenCate aims

to be among the front runners in industry in terms of both safety and

sustainability.

The future availability of essential natural resources (biodiversity)

remains an ever-growing concern for TenCate. The company aims to

keep control of developments by focusing on individual areas such as

an integrated environmental policy, the prevailing energy policy, the

progressive policy on emission allowances, effi cient and eco-effi cient

production, recycling and developing bio-based initiatives.

This approach is in line with the industry’s sector objectives. According

to the roadmap to 2030, by that time the technical textile industry must

be able to fulfi l the needs of customers and users in a fl exible and

sustainable way. TenCate has a leading position in the pursuit of this

objective. By already working further on groundbreaking technologies

and techniques for the processing of natural, synthetic, bio-based,

biologically degradable, recyclable or secondary raw materials, TenCate

will be increasingly able to manufacture biologically, chemically or

mechanically recyclable products using cleaner and more effi cient

production techniques. TenCate’s technology road maps and product

road maps in particular chart the direction of future sustainable

innovations.

The corporate CSR team – which reports to the Executive Board –

specifi es the corporate objectives and the CSR programme each year.

The objectives and results are assessed with the management and

group managements as far as possible on a quarterly basis. If

necessary, the group managements make adjustments to the

implementation.


TenCate limited the environmental risks to the best of its ability during

the 2012 reporting year. The group managements received worldwide

support from the CSR team with initiatives and projects on corporate

social responsibility. TenCate played an active role worldwide in 2012

by means of sponsorship, donations and participation in activities in

numerous projects related to or aimed at corporate social responsibility.

Full details can be found on the annual report dynamic website (www.

tencateannualreports.com) and a list of activities appears on TenCate’s

corporate website (www.tencate.com) under CSR projects.

TenCate provided sponsorship during the reporting year for a number of

sporting events, around ten student teams by providing composites and

protective materials, dozens of organisations, including veterans’ and

fi refi ghters’ support associations, and a large number of events in local

communities – partly through volunteer work. In September 2012, with

a view to the 2014 Hockey World Cup, TenCate Grass became an offi cial

partner of the Dutch National Hockey Association (KNHB) for at least

four years.

In Europe, TenCate played an active part in around 20 innovation

projects centred on sustainability and safety during the reporting year.

A full list can be found on the TenCate website. TenCate was also

involved in numerous national and international committees during the

year, including the European Technology Platform, Euratex, Modint and

IAFI. In Europe, TenCate has been working with a number of universities

over the past decades, including Delft University of Technology, the

University of Twente and Saxion University of Applied Sciences in

Enschede, the Netherlands.



All TenCate market groups in Nijverdal, the Netherlands, implemented

the CSR Performance Ladder level 3 in 2012. The fi rst three of the four

market groups were certifi ed independently for corporate social

responsibility in the second half of the year: Protective & Outdoor

Fabrics by Bureau Veritas, TenCate Advanced Composites by LRQA and

TenCate Grass by DEKRA. The TenCate Geosynthetics market group in

Nijverdal was certifi ed for CSR 2013 by DEKRA at the beginning of

2013.

The CSR Performance Ladder is built around three core components

based on the international CSR guidelines (ISO 26000). In the fi rst place

the certifi cate imposes requirements on the management system of

each market group with regard to the introduction and development

of corporate social responsibility. Stakeholder management and CSR

indicators are guaranteed by procedures and monitoring of changes.

Stakeholders’ interests are also demonstrably taken into account.

Every market group reports to them regularly on CSR matters. The most

relevant of no fewer than 33 CSR indicators (subdivided into seven core

CSR themes, the same as in ISO 26000) were also incorporated in the

CSR management system for each market group. CSR Performance

Ladder level 3 certifi cation also requires the market group to involve

indirect as well as direct stakeholders in the company’s activities. This

underlines the value chain management which the Group strives for on

the basis of the TenCate business model. The CSR certifi cation is based

on at least one of the ISO 14001 or ISO 9001 certifi cation standards.

Work was carried out in 2012 on the implementation of product

ecotools in the four market groups in Nijverdal. For TenCate Protective

& Outdoor Fabrics, TenCate Geosynthetics and TenCate Grass, the

existing industry tool for consumer textiles was adapted to technical

textiles, i.e. protective fabrics, geotextiles and synthetic turf. In the

case of composites, the adaptation has not yet been completed owing

to the specifi c nature of this material. The product ecotools are used to

determine the CO2 footprint of a growing number of TenCate products.

This had already been done for TenCate Geotube® solutions, partly to

maintain a competitive offering.

>‘A series of wearing trials and tests were conducted

before ThyssenKrupp Steel Europe switched to buying

protective clothing based on TenCate Tecapro®. TenCate

Tecapro® met the requirements in every case. The fabric

provides the right solution for personnel exposed to a

range of risks and deployed at various locations. On the

basis of TenCate Tecapro® fabric we offer our employees

multifunctional work clothing that protects them, for

example, against splashing of molten metal, sparks and

chemicals. The work clothing is also antistatic.’

- Christine Durek, safety expert,

ThyssenKrupp Duisburg

Royal Ten Cate Annual Report 2012 | BUSINESS CONTEXT | 45

Business environment 46

Stakeholders 47

Materiality matrix 48

SWOT analysis 50

Risk management 52

BUSINESS CONTEXTBusiness Context describes and explains the environment in which TenCate operates

46 | Royal Ten Cate Annual Report 2012 | BUSINESS CONTEXT

TenCate operates in growth markets which show growth over the longer

term. Temporary lags in growth may occur as most markets are based

partly on the availability of government budgets. Markets are also

subject to fl uctuation on the demand side due to the concentration

or postponement of projects. TenCate’s main market themes are based

on requirements for safety and protection and on solutions related

to environmental requirements. These themes provide market focus

for the company. They are also high on the political agenda.

GOVERNMENT BUDGETS

Dependence on government budgets has led to increased uncertainty in

recent years with regard to independent market developments and has

made it diffi cult to estimate trends in revenues. The markets in which

TenCate operates are affected by certain long-term trends. These may

be interrupted temporarily. Large projects may also be entered into

which obscure visibility on organic trends. The revenue fl uctuation

which may result from this is inherent in the markets in which TenCate

operates. TenCate endeavours to mitigate these uncertainties by means

of its own fl exible organisation and by outsourcing production.

TenCate has also given greater importance to the development

of industrial markets. Examples are those for protective clothing

(TenCate Tecasafe™ Plus) and composites (including automotive),

as well as new markets for geosynthetics (e.g. mining).

TenCate has also achieved growth in the emerging markets of Asia

and South America in recent years. New industrial partnerships were

entered into in 2012 with a view to accelerating growth and hence

reducing dependence on revenues driven by government budgets.

SUSTAINABILITY

Sustainability is an increasingly important aspect of the markets in

which TenCate operates. Not only are governments increasingly using

the expression ‘sustainable procurement’, but industrial partners too

are making ever greater demands. This is exemplifi ed by the fact that

the automotive composites market, which is new to TenCate, is

increasingly being driven by the need to bring a sustainable mobility

concept to the market. This also makes demands in terms of sustainable

production processes, recycling, sustainable energy consumption and

the CO2 footprint. TenCate has deliberately embraced this trend, since it

will impose higher standards (more sustainability) on the required

materials. New developments will be necessary in the years ahead both

on the demand side and in production processes to address this trend.

However, the development process will be a gradual one requiring a

worldwide approach in all sections of the company. TenCate is keeping

this subject high on the agenda.

Business environment

TenCate welcomes political heavyweights

TenCate welcomed two heavyweights from the Dutch

political scene in July 2012. On Monday 2 July the

outgoing fi nance minister Jan Kees de Jager visited

TenCate Advanced Composites. A week later he was

followed by Diederik Samsom (picture, left),

parliamentary party chairman and political leader of

the Dutch Labour Party. He visited TenCate Advanced

Composites and TenCate Grass. Both showed

particular interest in the production process and the

applications for the materials. The subjects discussed

also included innovation, market developments and

competition with China. Judging by the positive

reactions from Jan Kees de Jager and Diederik

Samsom, the working visits were successful, leading

to greater mutual understanding and knowledge.


Within TenCate the stakeholder management supports the organisation

in achieving its strategic goals. By informing and infl uencing both

external and internal stakeholders, TenCate aims to initiate a dialogue

and create and maintain constructive relationships. The company does

this by effi ciently managing the expectations and experiences of the

stakeholders involved.

DIALOGUE

TenCate again maintained intensive contacts with stakeholders of the

company in 2012. In the United States, contacts with the US

government were concentrated on the ministries of infrastructure and

defence, with the Cohen Group assisting TenCate’s lobbying offi ce in

Washington. In Europe and the United States, presentations were given

at roadshows for fi nancial stakeholders, such as investors, analysts and

banks. The annual general meeting of shareholders was held last

year in the business club of Heracles Almelo. In Asia the business

development department was particularly active in strengthening

relations with both business partners and local authorities. In the

Middle East, the Cohen Group assisted TenCate in pursuing the same

objectives. In the Netherlands in particular, regular contact was

maintained with trade unions and the central works council. TenCate

served on many committees in 2012 aimed at establishing open

innovation and partnerships and enabling them to fl ourish, with

technical innovations once again having a central role. Intensive

contacts were maintained with suppliers and customers in the value

chains of the market groups. Fundamental work was carried out on

image and reputation management by means of end-user marketing

and an active media policy.

Overview of stakeholders

Key stakeholders of TenCate

Employees

and representatives

Universities

and institutes

SuppliersPartnersCustomers

Governments

and departments

Shareholders and

fi nancial relations

Media, policymakers and

industry organizations


Materiality matrix

Important for TenCate

Impo

rtan

t for

sta

keho

lder

s

+ ++

+++

■ Innovation (management)

■

aandeelhouders

■ Critical mass and leading positions in worldwide niche markets

■ Competition advantages

■

■

■

■

■

Financial management

Profit growth

Profit margin

Debt ratio

Working capital

Debtor policy

■Cost control

■Economies of scale

■Risk management

■Brand awareness / image

■Sustainable investments

■Relation management

■ Lobbying

■Governance

■

■Management developmentTalent development

■Well-being and safety personnel

– Sustainability policy

Quantitative data

Code of conduct

Stakeholder dialogue

Sharing of knowledge

Training and education

Production efficiency

■

■

■

■

■

■Sponsoring

■Cooperation with local environment

■ Value chain management

■ Spread distribution / revenu

■ Balanced product portfolio

■ Customer satisfaction

■ Customer intimacy

■ Knowledge positions and intellectual property

■

Value creation for shareholders

■

■


The materiality matrix comprises material (relevant) factors which

affect the performance of the TenCate organisation. It establishes a

connection between TenCate’s strategic goals, value proposition and

governance model and their infl uence on both the business environment

and business operation. The greater the effect the subject has on both

society and business operation, the greater the materiality.

The materiality matrix is produced by plotting internal perceptions

against the external fi ndings of stakeholders.

Material factors are plotted on the horizontal axis in respect of their

importance to the TenCate organisation itself, such as sustainability

policy and innovation management. These factors are plotted on the

vertical axis in respect of their importance to stakeholders, such as

customers, shareholders, suppliers and employees. By associating

a relative value with these factors, it is possible to see which

materialities are most relevant and where TenCate is working to

improve performance and intensify the dialogue with stakeholders.

The matrix is used as a management mechanism in relation to the

chosen critical key performance indicators referred to on page 19.

This approach helps in determining the most relevant focal points for

sustainable business operation.


The SWOT analysis is a permanent part of the strategic planning of

each market group. The SWOT analysis included in the annual report is

a translation of this analysis at group level. The risk policy of each

market group is concentrated primarily on combinations of

organisational weaknesses and external threats (risk box). The Group’s

strengths are concentrated primarily on the unique characteristics

whereby the company can successfully implement its Vision, Mission

and Strategy. These characteristics are summarised below under

‘Strength of TenCate’ and fl ow directly from the key value drivers (see

page 25). The improvement points stated here are a summary of the

observed internal weaker points of the organisation.

THE STRENGTH OF TENCATE

■ Innovation: the ability to use internal synergy by combining

knowledge and skills on an extremely broad technological basis.

TenCate is also well positioned to enter into cooperation with

external partners (co-creation), in order to offer new solutions and

accelerate time to market.

■ Cost leadership: TenCate has leading market positions and is able to

control costs through economies of scale. TenCate also has a fl exible

organisation and increasingly considers the outsourcing of all or part

of production.

■ Product differentiation: TenCate has a strong brand position in

professional markets. Products meet the highest functional

standards. Attractive business cases are used to demonstrate that

TenCate materials genuinely make the difference.

■ End-user marketing: TenCate is one of the few players in the

technical textile industry to cover the entire global market. TenCate

can respond to a wide range of functional requirements of user

groups in local niche markets.

IMPROVEMENT POINTS

■ Strengthening of the marketing and sales organisation, with

a greater focus on markets which can generate new revenues in

the relatively short term.

■ Constant attention to be paid to strengthening the local organisation

in emerging markets.

■ Overall performance of TenCate Grass: increased effectiveness of

marketing and sales, and streamlining of the product offering with

a focus on system characteristics rather than the characteristics of

individual components.

■ Focus on revenues and results at Xennia Technology through the

creation of a sustainable business model.

OPPORTUNITIES

■ Business development is more embedded in the whole organisation.

This leads to the systematic development of new markets, such as

the market for automotive composites, the interior market

(composites) for aircraft, tooling composites, the development of a

business model for the TenCate ABDS™ active blast countermeasure

system and the Water & Environment market (TenCate

Geosynthetics).

■ As a result of the extensive damage caused to local infrastructure

by natural disasters, there is a growing awareness of the need for

better protection, even though the projects may prove costly to

society. There is growing demand for control of safety risks.

■ Emerging markets still lag behind in terms of standards and

specifi cations in some fi elds. However, these markets are largely

prepared to use modern technologies, enabling them to make up

any lost ground.

■ An increasing focus on environmentally friendly solutions offers

opportunities for a number of system solutions and materials,

including lightweight products, supplied by TenCate.

THREATS

■ Continuing tightness of government budgets.

■ The decrease in the operating result in 2012, partly due to

underutilisation of production capacity, has temporarily put pressure

on the debt ratio. TenCate aims to keep its debt ratio well below 2.5.

The debt ratio at the end of 2012 was 2.55.

■ Although the threat from new producers of synthetic turf fi bres has

diminished, partly as a result of the current market conditions, the

current market as a whole is threatened by the readiness of local

authorities to concede on quality in favour of low prices for synthetic

turf systems. The sports market has consequently taken on the

characteristics of an outdoor carpet market. In many cases the

specifi c sporting performance and associated sustainability

requirements are being overlooked.

■ The decrease in the number of projects, combined with low prices in

the project market, is putting the entire synthetic turf sector under

fi nancial pressure. This may lead to a considerable contraction of

the sector.

SWOT analysis


RISK BOX

On the basis of the above SWOT analysis, the risk policy on a strategic

level can be summarised as follows:

■ Government expenditure in existing markets is expected to remain

under pressure in 2013. TenCate will strengthen its organisation in

marketing and sales and shift the focus to new product-market-

technology combinations to prevent further pressure on revenues

and results.

■ Product differentiation is aimed partly at cost advantages for

end-users, as a result of which advantages will arise elsewhere

which will lead to cost savings. These advantages are included in

the overall value proposition.

■ Acquisitions must make an immediate contribution to the result.

■ Tight control of working capital combined with logistics

improvements, in order to maintain and/or increase delivery

reliability.

■ Prudent credit control policy having regard to the fi nancial

weakening of the market.

Prepregs for James Webb

High-quality composites from TenCate Advanced

Composites in Fairfi eld (California, United States) are

being used in the construction of the solar shield of

the James Webb space telescope, the world’s largest

astrophysical observatory.

The high-quality composites used for the tubes or

masts of the solar shield are more than twice as rigid

as advanced composites for commercial aircraft.

TenCate Advanced Composites USA is the leading

supplier of composite prepregs to the North American

satellite industry. TenCate composites are used in

almost all Western satellite programmes.

The materials are non-conductive, light, rigid and

resist extreme temperature differences.


Risk management

TenCate operates worldwide in different markets and therefore has to

contend with a variety of risks. TenCate aims to identify and control

these risks as early as possible. Risk control models have therefore

been developed, which are regularly updated by and discussed with

the group management. The main risks and the applicable risk control

models are described briefl y below.

A full description of the risk management can be found on the

TenCate website (www.tencate.com/nl/corporate-governance).

STRATEGIC RISKS

In order to assess the strategic risks, TenCate uses its own business

model based on four cornerstones. This enables TenCate to clearly

understand the strategic position of a business and adjust its course on

that basis. A second model used is the SWOT analysis. This analysis is

used as a basis for agreements with the management on measures to

reduce risks and identify opportunities in the markets.

MARKET RISKS

The major risk factor in demand for TenCate products is government

expenditure. By building fl exibility into cost structures, it is possible

to a certain extent to offset the consequences of any drop in demand.

In 2012 the degree of fall-off in defence orders, particularly in the

United States of America, was such that it could not be offset to a

suffi cient extent to maintain profi tability.

OPERATIONAL RISKS

TenCate’s organisation strategy is based on a decentralised model.

The managements of market groups and operating companies are

controlled on the basis of a regular planning and control cycle.

Each operating company has its own systems for control and

transaction processing in the main operating processes. Information

security and back-up procedures are followed to minimise the risk of

disruption to these systems.

ENVIRONMENTAL RISKS

TenCate’s environmental policy is based on limiting any impact on

the environment as far as possible. Both the holding company and the

managements of operating companies carry out regular audits and take

measures to avoid environmental risks. Work also started in 2012 on

quantifying the use of fossil raw materials, energy and waste in a

context of corporate social responsibility.

LEGAL AND TAX RISKS

TenCate is involved in various legal proceedings resulting from normal

business operations. The progress of these proceedings is monitored

continuously. A summary is discussed in the fi nance committee of the

Supervisory Board twice a year.

FINANCIAL RISKS

The fi nancing of the company is for the most part centralised through

corporate treasury. The main fi nancing source is the € 450 million

syndicated loan arranged in December 2010. The main covenant

concerns the debt / EBITDA ratio. In view of the specifi c seasonal

pattern in TenCate’s fi nancing requirement, quarterly debt / EBITDA

ratios have been agreed. That substantially reduces the risk of a breach

of covenant.

By actively managing its working capital and cash fl ow, TenCate was

suffi ciently able to absorb a sharp fall in EBITDA in 2012 compared to

2011. The debt / EBITDA ratio over the entire year consequently

remained well above the covenants.

Since a substantial part of TenCate’s assets are intangible (principally

goodwill), an impairment test is carried out on these assets at the time

of the fi rst-half report and at the year-end. This is shared with the

Supervisory Board and the external auditor. The values of the intangible

assets are estimated on this basis. This did not result in any impairment

charge in 2012.

The risk of an interest rate rise in the subsequent years is hedged in

principle to various percentages, taking account of expected interest

rate trends. The effect of changes in the value of fi nancial instruments

on the company’s result is mitigated as far as possible by the use of

hedge accounting.

With regard to currencies, TenCate draws a distinction between

competition, transaction and translation risk. The basic principle is that

competition risk is hedged over the subsequent six months by means of

options. The foreign currency transaction risk is hedged by means of

futures or options. The translation risk on the results of subsidiaries

outside the eurozone is offset where possible internally by

euro-denominated revenues of subsidiaries outside the eurozone.

The principles are regularly assessed and amended where necessary.


TenCate has placed the pension provision for Dutch employees with

Stichting Pensioenfonds Koninklijke Ten Cate nv. The pension fund has

taken measures to reduce the risk profi le as part of its investment

policy. For the valuation of pension liabilities TenCate uses the OCI

method, which provides a clearer view of changes in pension liabilities.

The decrease in the discount rate in 2012 compared to 2011 resulted in

a reduction of € 18 million in TenCate’s shareholders’ equity under the

OCI method.

RISK MANAGEMENT AND CONTROL SYSTEMS

A whistleblowers scheme and a complaint scheme enable employees to

inform the company management of any undesirable situations.

It is important to maintain direct contact between the Executive Board,

group managements and directors of operating companies. Extensive

monthly reports are fi led and the performance, results, outlook and

certain risk management aspects are discussed each quarter. The risk

management also forms part of the consultations with the fi nancial

committee of the Supervisory Board.

All managers and controllers sign a letter of representation twice a year

declaring their compliance with fi nancial reporting / internal control

requirements.

EVALUATION OF RISK MANAGEMENT

AND CONTROL SYSTEMS

The Executive Board is of the opinion that:

■ the risk management and control systems provide reasonable

assurance that the fi nancial reporting is free of material

misstatements

■ the risk management and control systems have operated correctly in

the reporting year

■ there are no indications that the risk management and control

systems will not operate correctly during the current year

However well designed the internal risk management and control

systems are, they can never provide absolute certainty that objectives

in the fi eld of strategy, operation, reporting and compliance with laws

and regulations will always be achieved. When taking decisions,

TenCate is mindful that:

■ human errors of judgement may arise

■ cost-benefi t assessments must constantly be made when assuming

risks and taking control measures

■ human failings and even simple errors or mistakes can have major

consequences

■ conspiracies by offi cials can lead to circumvention of internal control

measures

■ the management of parts of the company can permanently or

temporarily negate agreements made with the Executive Board

Risk

Strategic risks ■ TenCate business model ■ SWOT analyses

Market risks ■ Flexible cost structures

Operational risks ■ Decentralised organisation

(network structure) ■ Planning and control cycles

Environmental risks ■ Regular audits and measures ■ Critical key performance

indicators

Legal and tax risks

■ Legal quality control ■ External advice or support

(including trade mark agency, patent agency)

Financial risks ■ Periodic monitoring and

adjustment based on forecasts

General / other risks

■ Whistleblowers scheme ■ Employee complaint scheme ■ Management compliance

statement

Risk management TenCate

Identifi cation and control


>Risk management

This statement should not be interpreted as being a statement in

accordance with the requirements of section 404 of the Sarbanes Oxley

Act in the United States of America, which does not apply to Royal Ten

Cate.

Energy conservation in Dubai

Energy management and environmental protection are

receiving increasing attention in the Middle East and

particularly the United Arab Emirates. It is clear that

the current production capacity for energy and water

will not be suffi cient to meet future needs. With this in

mind, TenCate Grass in Dubai has launched a range of

green initiatives to make greater use of natural energy

sources, save on electricity and further limit the impact

on the environment. For example, the installation of a

solar panel system to preheat process water provides

a very reliable, free source of green energy. That

means a saving of over $150,000 per year and

eliminates around 150,000 kg of CO2 emissions.

Royal Ten Cate Annual Report 2012 | GOVERNANCE | 55

Executive Board

Supervisory Board

Report of the Supervisory Board

Corporate governance

56

57

58

60

GOVERNANCEIn Governance the company sets out the management and supervision arrangements within TenCate

56 | Royal Ten Cate Annual Report 2012 | GOVERNANCE

Information as at 1 January 2013

L. de Vries (1951), President and Chief Executive Offi cer

Mr De Vries has been a member of the Executive Board since

October 1998 and Chairman of the Executive Board since August 2000.

Previous employers:

■ Wilma Nederland

■ Wilma Vastgoed

■ Holec Nederland

Other activities:

■ Member of the Strategy Board of Innovation Platform Twente,

the Netherlands

B.J.H. Cornelese (1964), Chief Financial Offi cer

Mr Cornelese has been a member of the Executive Board since

April 2011.

Previous employers:

■ Price Waterhouse Nederland

■ Vitatron nv

■ Beiersdorf nv

■ Smiths Food Group bv

■ PepsiCo International

■ Biomet Inc.

Executive Board


Information as at 1 January 2013

Supervisory Board

J.C.M. Hovers (1943) Chairman 1) 2)

Commenced in offi ce 2008

End of current term 2016

Chairman of the Supervisory Board of Plieger NV

Chairman of the Supervisory Board of Smeva B.V.

Non-executive board member of Teleconnect Inc

Member of the Supervisory Board of Randstad Groep Nederland bv

Former Chief Executive Offi cer of Stork NV and OCE NV

P.P.A.I. Deiters (1943) Deputy Chairman 2) *



Member of the Supervisory Board of HVEG-Fashion Linq B.V. Amersfoort

Member of the Supervisory Board of Tootal B.V.

Consultant to the European Bank for Reconstruction and Development (EBRD)

Former director of Berghaus International Fashion

E. ten Cate (1945) 1) *



Director of Bank ten Cate & Cie N.V.

Chairman of the Supervisory Board of Hydratec Industries N.V.

Chairman of the Supervisory Board of Rijksmuseum Twenthe

Member of the Supervisory Board of Medisch Spectrum Twente

R. van Gelder BA (1945) 1) 2)



Chairman of the Supervisory Board of Atlas Services Group NV

Vice-Chairman of the Supervisory Board of SBM Offshore N.V.

Member of the Supervisory Board of Heijmans N.V.

Member of the Advisory Board of Value Enhancement Partners (VEP)

Chairman of the Association of Securities-Issuing Companies

Former Chief Executive Offi cer of Koninklijke Boskalis Westminster N.V.

and Heijmans N.V.

All members of the Supervisory Board are of Dutch nationality.

1) Member of the Financial Committee.2) Member of the combined Remuneration, Selection and Appointments

Committee.* Chairman.

From left to right E. ten Cate, J.C.M. Hovers, P.P.A.I. Deiters and R. van Gelder


ANNUAL REPORT

We hereby present the 2012 annual report as prepared by the Executive

Board, incorporating the fi nancial statements. The fi nancial statements

have been audited by KPMG Accountants NV and were discussed with

the Executive Board on 28 February 2013, in the presence of the auditor.

The unqualifi ed auditor’s report is included in this report in ‘Other

information’.

We are of the opinion that the annual report fulfi ls the transparency

requirements and forms a good basis on which the Supervisory Board

can account for its supervision.

We propose that you adopt the fi nancial statements, approve the

dividend proposal and grant discharge to the Executive Board in respect

of its policy and to the Supervisory Board in respect of its supervision.

COMPOSITION

At the latest annual general meeting of shareholders held in April 2012,

Mr Van Vught retired as a member of the Supervisory Board and

received expressions of sincere gratitude. His successor will be

proposed at the annual general meeting of shareholders of April 2013.

SUPERVISION

The Supervisory Board held plenary meetings with the Executive Board

on seven occasions in 2012. It also met independently on two occasions.

The meetings discussed the composition and performance of both the

Executive Board and the individual directors. This assessment took

place on the basis of a written survey completed by the individual

supervisory directors and discussed by the full Supervisory Board.

The Supervisory Board also assessed its own performance, as well

as that of the committees and the individual supervisory directors.

Particular attention was devoted to subjects such as the method of

compliance with the Corporate Governance Code, risk management,

remuneration policy, integrity and transparency. Mr Van Gelder was

unable to attend two meetings due to illness.

During the joint meetings, the Supervisory Board dealt with subjects

such as the strategy of the sectors within TenCate, the SWOT analyses,

risk management, the valuation of TenCate’s balance sheet and the

developments in the recent acquisitions. TenCate’s fi nancial results

were discussed each quarter. The fi rst-half fi gures for 2012 were

discussed in the presence of the external auditor, KPMG. Particular

attention was devoted each quarter to TenCate’s debt, investments

and working capital. Other subjects included the budgets for 2013 and

developments in government and defence budgets in the United States

of America and developments in the Grass group and at Xennia

Technology.

Supervisory Board representatives also attended all consultative

meetings of the central works council. They participated in the

discussions and took note of the activities and events within the

company.

CORPORATE GOVERNANCE

The Supervisory Board and the Executive Board endorse the principles

of the Corporate Governance Code. The company applies this code

almost in full. The only variations from the code within Royal Ten Cate

concern primarily the size and nature of the company. These variations

and the associated interpretations better refl ect TenCate’s operating

methods. The variations applied by TenCate can be viewed on the

company’s website.

INDEPENDENCE

All members of the Supervisory Board, with the exception of Mr Deiters,

are independent within the meaning of the best-practice provisions

of the Corporate Governance Code. Mr Deiters is deemed to be

non-independent within the meaning of the Corporate Governance

Code, on account of a supervisory directorship which he holds in a

subsidiary.

No TenCate shares or options are held by the members of the

Supervisory Board.

COMMITTEES

The Supervisory Board has two committees: the fi nancial committee

chaired by Mr E. ten Cate and the combined Remuneration, Selection

and Appointments Committee chaired by Mr P. Deiters. Their task is

to analyse subjects within their specifi c focal areas and to prepare

decisions to be taken in the plenary meetings of the Supervisory Board.

In 2012 Mr F. van Vught was succeeded as chairman of the combined

Remuneration Committee by Mr P. Deiters.

Financial Committee

The Financial Committee met in plenary sessions on four occasions in

2012 with the CEO and the CFO of TenCate. As preparation for the

regular meetings of the full Supervisory Board, these meetings

discussed in detail the 2011 annual fi gures, the 2012 fi rst-quarter

fi gures, the 2012 half-yearly fi gures, the 2012 third-quarter fi gures

and the budget for 2013.

Report of the Supervisory Board


Consideration was also given to a number of specifi c subjects during

the meetings. Particular attention was devoted to the risk management

system and risk control, the impairment test calculations and

conclusions, the IT strategy, trends in working capital and debt, the tax

position particularly in the Netherlands, the policy with regard to the

audit service, the management letter from the external auditor and the

follow-up to his recommendations.

Combined remuneration, selection and appointments committee

The Remuneration Committee met on three occasions in 2012,

considering matters such as the assessment of the current

remuneration policy. The aim was to bring the current remuneration

policy for the Executive Board more into line with the remuneration

market for companies of a similar type and size. In the view of the

Supervisory Board, this would take proper account of the quality of

the performance rendered. On this basis it was decided to leave the

Executive Board’s remuneration policy unchanged for the time being.


The Supervisory Board is delighted at the energetic way in which the

Executive Board has developed policy on corporate social responsibility,

as evidenced in this annual report.

REMUNERATION POLICY

PRINCIPLES OF THE REMUNERATION POLICY

The Supervisory Board of Royal Ten Cate applies a remuneration policy

in respect of the company’s management, based on the following

principles:

■ The remuneration of the Executive Board must enable the company

to attract and retain senior managers

■ The remuneration policy must conform to the company´s corporate

governance policy

■ The remuneration must refl ect the strategic and fi nancial objectives

and be to a large extent performance-oriented, with a good balance

between short and long-term results and objectives

■ The remuneration must not include any incentives which give rise to

behaviour directed towards personal interests that confl icts with the

company’s interests

■ A scenario analysis is drawn up each year with regard to the

possible outcomes of the remuneration policy

REMUNERATION REPORT

The 2012 remuneration report, including the plan to draw up a new

remuneration policy, has been posted on the company’s website under

Corporate Governance Documents.

The posts of CEO and CFO of Royal Ten Cate were based on Hay levels

in 2012. In the case of the CEO, Hay level 30 is applied. The variable

remuneration component payable for target-level performance is 50%

of the fi xed salary. This is also the maximum level. In 2012, Mr de Vries

received a variable salary component in respect of 2011 amounting to

50% of his fi xed salary. He was also granted 60,000 options with an

exercise price of € 24.67. The fi xed income received by Mr de Vries

remained unchanged in 2012.

For the CFO, the fi xed annual salary is set at Hay level 26. The variable

remuneration component payable for target-level performance is

40% of the fi xed salary. This is also the maximum level. In 2012,

Mr Cornelese received a variable salary component of 34% in respect

of 2011 (pro rata from April 2011). He was also granted 30,000 options

with an exercise price of € 24.67.

Mr J. Lock, the former CFO, was granted 10,000 options with an

exercise price of € 24.67 in 2012.

The remuneration of the Executive Board is stated in note 55.2 on

page 132 of this report.

COMPOSITION OF THE EXECUTIVE BOARD

The composition of the Executive Board remained unchanged in 2012.

The Supervisory Board would like to express its sincere gratitude to

the board and the employees of TenCate for their commitment and

performance during the particularly challenging 2012 fi nancial year.

Almelo, 28 February 2013

Supervisory Board

J.C.M. Hovers, Chairman

P.P.A.I. Deiters, Vice-Chairman

E. ten Cate

R. van Gelder


The Supervisory Board and the Executive Board endorse the corporate

governance principles, in the form currently applicable to Dutch listed

companies operating internationally.

The corporate governance structure is based on the voluntary

application of the two-tier board structure. The main elements of this

are:

■ The fi nancial statements are adopted by the general meeting of

shareholders

■ Supervisory directors are appointed by the general meeting of

Shareholders on the basis of nominations by the Supervisory Board.

The profi le of the members of the Supervisory Board is fi rst

discussed at the general meeting of shareholders at the time of

adoption and on each subsequent modifi cation

■ The general meeting of shareholders and the works council can

recommend persons to the Supervisory Board for nomination as

supervisory directors

■ With an outright majority of votes, the general meeting of

shareholders representing at least one-third of the issued share

capital may reject the nomination by the Supervisory Board

■ The members of the Executive Board are appointed by the general

meeting of shareholders on the basis of a binding nomination by

the Supervisory Board

Full corporate governance documentation can be found on the TenCate

website, the report of the Supervisory Board appearing on page 58 and

the 2012 remuneration report, which can also be found on the TenCate

website.

ACT ON MANAGEMENT AND SUPERVISION

The Act on Management and Supervision came into force on 1 January

2013. The Act includes a provision on the balanced allocation of seats

among men and women on executive and supervisory boards.

The company’s allocation of seats does not comply with this provision.

The company will assess whether it is possible to achieve a more

balanced allocation in the future.

Corporate governance

Royal Ten Cate Annual Report 2012 | PERFORMANCE | 61

Report of the Executive Board 62

Advanced Textiles & Composites Sector 66

Geosynthetics & Grass Sector 75

Other Activities Sector 82

PERFORMANCEIn Performance the company gives an account of the results achieved during the reporting year

62 | Royal Ten Cate Annual Report 2012 | PERFORMANCE

FINANCIAL PERFORMANCE

Analysis of 2012 results by sector 2011 2012 Difference Organic

Of which

currency

Acquisition /

divestment

in millions of euros

Net revenues

Advanced Textiles & Composites 538.4 460.6 – 14% – 21% 4% 3%

Geosynthetics & Grass 525.9 518.7 – 1% – 8% 5% 2%

Other Activities 74.5 69.7 – 6% – 11% 5% 0%

1,138.8 1,049.0 – 8% – 15% 5% 2%

Operating result before amortisation (EBITA)

Advanced Textiles & Composites 70.3 23.5 – 67% – 70% 2% 1%

Geosynthetics & Grass 26.3 31.5 20% 10% 8% 2%

Other Activities 5.9 – 3.0 – 151% – 148% – 3% 0%

102.5 52.0 – 49% – 53% 3% 1%

Amortisation – 12.9 – 14.5

Operating result (EBIT) 89.6 37.5 – 58%

Net fi nancial expenses – 11.3 – 12.1

Pre-tax result 78.3 25.4 – 68%

Profi t tax – 18.7 – 8.7

Result from ordinary operations after tax 59.6 16.7 – 72%

Net result from associated companies – 1.3 – 0.3

Non-controlling interests 0.4 5.9

Net result 58.7 22.3 – 62%

Report of the Executive Board

EBITA margins 2011 2012

Advanced Textiles & Composites 13.1% 5.1%

Geosynthetics & Grass 5.0% 6.1%

Consolidated 9.0% 5.0%

Revenues declined by 8% to € 1,049 million in 2012. In organic terms,

the decline amounted to 15%. The decline in revenues was

concentrated particularly in the American defence markets.

Guidance had been given at an early stage that revenues from TenCate

Defender™ M products in the fi rst half of 2012 would not be comparable

to those of the previous year, due to the exceptional revenue growth in

the same period of 2011. The anticipated decline in revenues relating

to the US Army proved to be unexpectedly sharp in the second quarter,

making it impossible to meet the initial revenue forecasts, which were

based partly on indications from the US Army purchasing organisation.

This trend continued over the year. It emerged during the year that the

inventories held by the US defence sector were of such a level that

revenues later in the year also remained low.

Revenues from the American vehicle armour market for defence

projects also fell sharply, due to the postponement or cancellation

of new vehicle programmes. The consequences of the above

developments were particularly evident in the Advanced Textiles

& Composites sector.


The market for composites, mainly for aerospace-related applications,

continued to develop. TenCate Advanced Composites is increasingly

developing new markets, such as the automotive market. These offer

excellent prospects for TenCate, particularly due to the technology

positions the company has secured in both thermoset and thermoplastic

composites (TenCate Cetex®). These market positions have been

developed partly through acquisitions, an example being the acquisition

of PMC Baycomp in 2012.

The geosynthetics market group presented a positive picture in the fi rst

half of the year. The positive trend weakened during the year, however,

mainly as a result of political and economic uncertainties in the United

States of America. Severe restraint in government budgets gradually

put pressure on this market. As a result, this market group was less

able to offset sales decreases elsewhere in the company in the second

half of the year.

Revenues in the synthetic turf market showed a mixed picture. On the

one hand, growth was achieved in the company’s own downstream

activities as a result of increased market shares for market operators

related to TenCate. On the other hand, sales of synthetic turf fi bres

(upstream) fell in organic terms, partly due to a sharp contraction of

the synthetic turf market in southern Europe.

In the Other Activities sector, Xennia Technology recorded a

disappointing performance. A number of developments turned out not

to be suffi ciently technologically feasible on an industrial scale. Priority

was given to creating an earnings model providing an economic

foundation. The market focus was rationalised during the year, with

a total of € 2.7 million of non-recurring expenses being recognised.

The technological innovation in textile fi nishing remains a major focal

point. TenCate is expected to begin production using inkjet technology

in mid-2013. This offers new opportunities for the production of

high-grade technical textiles.

TenCate Enbi showed a stable trend, with growth being achieved

particularly in Asia.

NET RESULT

The net result decreased to € 22.3 million in 2012 (2011: € 58.7 million).

The decrease in the net result was due particularly to the unexpectedly

strong fall in defence orders in the United States of America for both

protective fabrics and armour composites, the intended discontinuation

of production in Thailand, reorganisation expenses in 2012 and the

loss-making activities of Xennia Technology.

COMPOSITION OF THE COMPANY

The following companies were acquired in 2012:

■ The interest in ABDS ApS was increased from 51% to 100% in

January 2012

■ PMC Baycomp, a company in thermoplastic composites, was

acquired in May 2012

REVENUES

Net revenues decreased by 8% in 2012. The decrease in organic terms

amounted to 15%. The increase in the strength of the US dollar against

the euro resulted in a positive currency effect of 5%.

The aforementioned acquisitions in 2012 and those completed in 2011

led to an acquisition effect of 2% on revenues.

Revenues in the Advanced Textiles & Composites sector declined by

14%. The decrease in organic terms amounted to 21%. The currency

effect and the effect of acquisitions/divestments amounted to +4% and

+3% respectively. The following activities contributed to this rise:

■ In the United States of America there was an unexpectedly sharp

fall of around US$130 million in defence orders

■ In aerospace the organic growth was 9%, driven by a rise in

revenues in aerospace in the United States of America.

The acquisition of PMC Baycomp contributed 8% to the total growth

of aerospace composites


>Report of the Executive Board

The revenues of the Geosynthetics & Grass sector declined by 1%

to € 519 million. The decrease in organic terms amounted to 8%.

The currency effect and the effect of acquisitions/divestments

amounted to +5% and +2% respectively.

■ The revenues of TenCate Geosynthetics declined in organic terms.

TenCate Geosynthetics USA in particular experienced the weakening

of demand in the second half of 2012

■ The Grass group recorded an organic decrease in revenues, driven

particularly by pressure on prices of yarns in a competitive market.

Downstream revenues in organic terms were comparable to those

of 2011

In the Other Activities sector (revenue decrease of 6%, with an organic

decrease of 11%), TenCate Enbi recorded almost unchanged revenues

compared to 2011. Xennia Technology recorded a decline in revenues

due to the partial fall-off of orders for the Chinese Market.

OPERATING RESULT BEFORE AMORTISATION

The operating result before amortisation (EBITA) declined by 49% to

€ 52.0 million. After adjustment for non-recurring items (€ 8 million),

EBITA declined by 41% to € 60.0 million. The non-recurring items

related to the intended discontinuation of production in Thailand

(– € 3.0 million), a writedown of TenCate Defender™ M inventory

(– € 3.0 million) and adjustments at Xennia Technology (– € 2.7 million).

Reorganisation provisions were also recognised for a total of

€ 2.6 million. The adjustment to the pension scheme had a one-off

positive effect of € 3.3 million.

In the Advanced Textiles & Composites sector, EBITA declined by 67%,

with a 70% organic decrease and a +2% rise due to currency effects.

There was also a small acquisition effect (+1%).

■ TenCate Protective Fabrics USA experienced a sharp decline in profi t

due to the large fall in orders for TenCate Defender™ M and the

one-off writedown of excessively high inventories of TenCate

Defender™ M built up in previous years

■ At TenCate Protective Fabrics Asia (joint venture), measures were

taken in anticipation of the closure of the company in the fi rst

quarter of 2013

■ In Space & Aerospace and Advanced Armour in Europe, the result

was comparable to that of 2011 on unchanged revenues

■ Space & Aerospace and Advanced Armour in the United States

recorded a lower result in 2012 than in 2011, as a result of the loss

of revenues from armour composites

In the Geosynthetics & Grass sector the result increased by 20%,

including a 10% organic rise and an 8% rise due to currency effects.

The acquisition effect was 2%. TenCate Geosynthetics and the Grass

group improved their results.

■ At TenCate Geosynthetics the operating result (EBITA) increased in

2012 despite an organic decrease in revenues. Margin improvement

and cost control contributed to an improvement in the result,

particularly in Europe and Asia

■ TenCate Geosynthetics in the United States of America recorded a

decrease in its result

■ At TenCate Geosynthetics in Europe and Asia, margin improvement

and cost control led to a substantial improvement in the result.

Emas Kiara, which was acquired in the fi rst quarter of 2011, has

been fully integrated into the existing TenCate Asia organisation

■ The result of the Grass group improved, mainly as a result of cost

control in the downstream activities

The Other Activities sector recorded a negative result of € 3.0 million.

The decrease in EBITA was due particularly to the loss-making activities

of Xennia Technology, including the recognition of € 2.7 million of

non-recurring expenses.

PERSONNEL COSTS

Personnel costs in 2012 declined slightly in organic terms compared to

2011. The currency effect on personnel costs represented a rise of 5%;

the acquisition effect represented a rise of 1%.

A personnel reorganisation was begun in May 2012 with the aim of

reducing the number of employees by approximately 450 (both in-house

and external employees). By the end of 2012, the number of employees

had been reduced by approximately 350. Further reductions are

expected in 2013.

TAXES

The tax charge rose from 24% to 34%. The increase in this rate was

due in particular to losses in countries where no deferred tax assets

are formed. After correction for the aforementioned one-off effects

(€ 8 million) on the result, the tax rate is 28%.


WORKING CAPITAL

The working capital decreased in 2012 compared to 2011 as a result of

the decline in inventories and debtors. The number of days of inventory

decreased by 11, while debtors in days remained unchanged on lower

revenues. This positive trend was partly offset by a lower level of

short-term liabilities.

in millions of euros 2011 days 2012 days

Balance at end of

previous year 223.9 80* 277.1 99*

Acquisitions/divestments 2.6 0.4

Organic increase/

decrease 42.1 – 39.3

Exchange rate

differences 8.5 – 0.8

Balance at end of year 277.1 99* 237.4 93

* Adjusted for comparison purposes.

INVESTMENTS

Investments were again restrained in 2012.

in millions of euros 2011 2012

Tangible fi xed assets 21.3 12.0

Development costs and other intangible assets 4.4 4.6

25.7 16.6

The corresponding depreciation amounted to € 37.1 million

(2011: € 35.0 million) and amortisation amounted to € 14.5 million

(2011: – € 12.9 million).

The main investment projects in 2012 were:

■ Development costs of TenCate Advanced Armor USA:

TenCate ABDS™ active blast countermeasure system

■ TenCate Geosynthetics Zhuhai: extruding machine

■ TenCate Protective Fabrics Nederland: digital fi nishing machine

■ TenCate Geosynthetics Asia: upgrade of non-woven line

CASH FLOWS AND FINANCING

In millions of euros 2011 2012

Result after profi t tax and associated companies 58.3 16.4

Depreciation 35.0 37.1

Amortisation 12.9 14.5

Other items 22.2 12.3

Cash fl ow before increase / decrease in

working capital 128.4 80.3

Increase / decrease in working capital – 46.4 38.3

Interest / taxes paid – 32.7 – 16.8

Cash fl ow from operating activities 49.3 101.8

Investments – 25.7 – 16.6

Divestments 3.4 0.3

Acquisitions / participating interests – 34.8 – 15.7

Other items – 0.7 – 1.4

Cash fl ow from operating

and investing activities – 8.5 68.4

Despite lower results in 2012 compared to 2011, the company’s cash

fl ow improved substantially. This was due particularly to a signifi cant

decrease in the working capital and a lower investment level than in

2011.


Market groups and market themes

Advanced Textiles & Composites Sector


KEY FIGURES ADVANCED TEXTILES & COMPOSITES

in millions of euros unless stated otherwise 2008 2009 2010 2011 2012

Revenues 481.0 397.3 448.4 538.4 460.6

Operating result before amortisation (EBITA 61.5 31.7 43.8 70.3 23.5

EBITA margin (%) 12.8 8.0 9.8 13.1 5.1

Operating result (EBIT) 52.9 27.0 38.6 64.7 18.5

Investments 11.7 4.2 4.5 8.3 9.4

Depreciation and amortisation 17.6 14.2 15.2 15.3 15.7

Net capital employed (year-end) 286.4 234.0 281.7 314.3 286.5

Number of staff years (year-end) 1,651 1,340 1,519 1,582 1,697

EBITA as percentage of net average capital employed 22.9 12.0 16.7 23.6 7.5

REVENUES AND RESULTS OF THE ADVANCED TEXTILES

& COMPOSITES SECTOR

The Advanced Textiles & Composites sector recorded a 14% decline in

revenues in 2012 to € 460.6 million (2011: € 538.4 million).

The decline in revenues was due in particular to the sharply lower sales

in the US defence market. This was refl ected in a steep fall in revenues

from protective fabrics (TenCate Defender™ M) and armour materials.

The anticipated decline in revenues related to the US Army proved

to be unexpectedly sharp over the year. There was also a reduction in

inventories held by the USA purchasing organisation.

The armour composites market in the United States of America and

Europe was sluggish, with a slowdown in project orders in the defence

markets. In the American market in particular, there was a substantial

decline in revenues. TenCate has concentrated on the development of

activities in vehicle armour in the past few years. TenCate’s systems are

increasingly integrated in vehicles (‘survivability systems’). The project-

linked nature of revenues is an inherent feature of these markets.

Overall, there were positive developments outside the defence market.

TenCate once again gained market share with products based on fi bre

blends. An optimum functional performance is achieved by combining

fi bres with different characteristics. There was a further increase in

revenues from safety fabrics (TenCate Tecasafe™ Plus) in the industrial

market (particularly oil and gas extraction) and the emergency response

market (fi refi ghting).

The combined revenues of the Space & Aerospace Composites and

Industrial Composites business units in the TenCate Advanced

Composites market group increased, partly through the acquisition of

PMC Baycomp and the continuing growth in aerospace composites.

The operating result of the Advanced Textiles & Composites sector

fell sharply as a result of low revenues in the US defence markets.

The operating result before amortisation of intangible fi xed assets

fell by 67% to € 23.5 million (2011: € 70.3 million). The EBITA margin

decreased to 5.1% (2011: 13.1%).

INDICATIVE BREAKDOWN OF REVENUES IN THE ADVANCED TEXTILES & COMPOSITES SECTOR

18%

17%

61%2011 201267%

15% 22%ProtectiveFabricsArmourCompositesSpace / Aerospace Composites


>Advanced Textiles & Composites Sector

PERFORMANCE OF TENCATE PROTECTIVE FABRICS IN 2012

Spending by the American defence market was very constrained during

the reporting year. The budget discussions (Budget Control Act) and the

presidential elections resulted in lower defence spending and

destocking effects in 2012. Sales of TenCate Defender™ M consequently

remain low. After the excellent revenue growth particularly in the fi rst

half of 2011, guidance had been given at an early stage that the

performance in the fi rst half of 2012 would not be comparable to that of

2011. The downward trend remained unexpectedly strong during 2012.

A positive factor was the increase in the number of applications for the

portfolio of TenCate Defender™ M products among various units of the

US Army. The geographic spread of revenues is also gradually

expanding. More countries started specifying TenCate Defender™ M for

heat- and fl ame-resistant protection of army units and elite troops in

2012. Revenues from TenCate Defender™ M outside the United States

of America consequently group positively. The countries which have

placed orders for TenCate Defender™ M now include Australia, Canada,

India, Italy, Sweden, Norway, the United Kingdom, Poland, the Czech

Republic and Brazil. With increased provision of fl ame-resistant

protection for armies in many countries around the world, this trend is

likely to continue. The international market potential is therefore strong.

Decision-making processes on the acquisition of new materiel in

defence markets depend on the adoption of fi nal specifi cations and are

bound up with government budgets. Nevertheless, the United States

of America will remain by far the most important market in the near

future, despite the expected budget cuts.

The same trend towards increased protection and/or wearing comfort

is being seen in police and fi re brigades. Revenues from TenCate

Defender™ M outside the defence market also increased as a result

of applications of the product for police and fi re brigades.

PROTECTIVE & OUTDOOR FABRICS

REVENUES BY GEOGRAPHIC REGION

Asia Pacific

EMEA

Americas

5%

30%

65%

REVENUES BY CUSTOMER GROUP (INDICATIVE)

Governmental

Non-governmental43%

57%

REVENUES BY MARKET THEME (INDICATIVE)

Defence

Personal protection

67%

Sports & leisure

28%

5%

>‘The best proof of a good performance is always a

satisfi ed customer. At Amsterdam-Amstelland, one of

the world’s best fi re brigades, teamwork was the key to

success. In order to develop a fi refi ghters suit which best

meets the requirements, the product developers at Lion

worked closely with our partner TenCate. TenCate’s

expertise and laboratory capacity in Nijverdal enabled us to

carry out a number of additional tests in a short period and

then to offer the best possible solution. We are delighted

to be the joint partner of Amsterdam-Amstelland Fire

Brigade over the next eight years’

- Timo Czech, Managing Director, Lion Apparel

Deutschland


The fi refi ghting market in the US, which is very important for TenCate,

remained sluggish in 2012 as a result of budget cuts among local

authorities. TenCate is nevertheless ideally positioned to respond to

changing market demand, due to the increasing need for cheaper and

better solutions, such as the use of TenCate Defender™ M in protective

clothing. This product has patented, inherently heat- and fl ame-resistant

characteristics which will not wash out or wear off. It is ideal for use as

a thermal lining for fi refi ghters’ protective clothing.

The fi refi ghting market offers new opportunities for TenCate outside the

United States of America, and major successes have been achieved. In

the fi rst quarter of 2012, TenCate received a large order from the UK

producer FlamePro, for the supply of inherently heat- and fl ame-

resistant materials for fi refi ghters’ uniforms for the Shropshire Fire &

Rescue Service in the United Kingdom. The seven-year contract is for a

new lightweight system, TenCate Tecasystem™ Millenia 450, for use in

over 1,200 fi refi ghting suits. The fi rst 300 suits were delivered in

mid-2012.

At the end of October 2012, TenCate also received a substantial order

in the Netherlands for TenCate Tecashield®, in partnership with Lion

Apparel, to supply inherently heat- and fl ame-resistant materials for

the fi refi ghter uniforms of the Amsterdam-Amstelland Fire Brigade.

TenCate’s material essentially comprises the lightweight outer fabric,

thermal protection lining and reinforcements.

In the industrial sector too, TenCate is able to respond effectively to the

combination of wearing comfort, sustainability and safety. The demand

for TenCate Tecasafe® Plus products continued to grow favourably in

2012, with the oil and gas industry representing an important potential

market. Orders have now been received from leading operators such

as Shell, BP, Gazprom and Total. TenCate has expanded the European

product portfolio with new products which are also attracting a high

level of interest.

TenCate Tecasafe™ Plus has built up such brand awareness that it now

occupies a leading position in the global market for industrial safety

fabrics.

TenCate Outdoor Fabrics, which focuses on the leisure market,

experienced a stable revenue trend in 2012. It consequently retains its

leading position in a mature market for outdoor fabrics, including new

fl ame-resistant fabrics.

SUSTAINABILITY

The TenCate Protective Fabrics market group in the Netherlands was

certifi ed for corporate social responsibility in 2012. A number of

stakeholders in the value chain were involved in the implementation of

the CSR Performance Ladder at level 3 and regular dialogue is

conducted on good working practice. The Plan-Do-Check-Act cycle is

being implemented for all 33 CSR indicators over the next three years.

These indicators are classifi ed under one of the 7 core CSR themes from

the ISO 26000 guideline. This market group has drawn up a code of

conduct to be signed by the relevant suppliers in the value chain, aimed

at combating child labour, infringements of human rights and corruption

and to promote legal compliance with local laws and regulations.

This is fully in line with the ILO conventions and UN declarations.

Steel giant in multi-safe work clothing

Several thousand employees of the German steel

company ThyssenKrupp Steel Europe wear protective

work clothing based on TenCate Tecapro® fabrics.

It is suitable for many different departments and

workplaces. The wearing comfort and sustainability of

the clothing have been greatly improved with TenCate

Tecapro® fabric. That has made the degree of

acceptance of this clothing even higher. A high degree

of acceptance is essential. ThyssenKrupp Steel Europe

often has to issue three or four sets of work clothing to

each person. The quantities involved are therefore high

and substantial sums have to be invested.



TenCate Protective Fabrics also installed new gas washers in Nijverdal

to further reduce odorous substances and organic components. Specifi c

departments have been trained in the handling of chemicals. The water

treatment system was optimised and the biogas installation was made

suitable for power generation during the reporting year. With the aid of

the product ecotool, work started on determining and lowering the

carbon footprint of protection products. This is part of the multi-year

CSR policy, under which many objectives have been formulated with

measurable KPIs. Finally, the PSA policy has been intensifi ed with a

focus on the internal code of conduct and the whistleblowers scheme

for employees.

Internal CSR campaigns for employees are being organised in this

market group at Nijverdal in 2013. The test setup for the ‘factory of the

future’ sustainable innovation project for digital fi nishing of protective

fabrics is moving into the next phase. In early 2013, a fi refi ghting

seminar will be organised as part of the end-user marketing in the

Netherlands, including workshops on optimum protection and correct

maintenance of protective clothing.

The joint production sites at Nijverdal-Noord have held the Authorised

Economic Operator (AEO) status granted by the Dutch customs authority

since 2012 due to their international trading. New training courses are

planned in 2013 for in-house emergency personnel in all market groups

at Nijverdal. Wearing trials will also be conducted in all market groups,

in anticipation of the replacement of the work clothing. A four-yearly

health examination (PAGO) will also take place among the employees at

Nijverdal.

INDICATIVE BREAKDOWN OF REVENUES OF TENCATE PROTECTIVE FABRICS USA

56%

37%

32%

2011 201226%

17%

1%

25%6%

Industrial

DefenseEmergency responseOther


PERFORMANCE OF TENCATE ADVANCED COMPOSITES

IN 2012

The TenCate Space & Aerospace Composites and Industrial Composites

market groups recorded revenue growth of 25% in 2012, partly as a

result of the acquisition of PMC Baycomp. Following on from 2011,

the production volume for the long-term Airbus A380, Airbus A350

and Boeing 787 programmes increased.

Relations with other aircraft manufacturers also developed positively.

The fi rst successful steps were taken towards a positioning in the

automotive sector. TenCate focuses mainly on aircraft components with

critical features, including with regard to safety.

TenCate Advanced Composites completed the acquisition of PMC

Baycomp in the second quarter of 2012. This acquisition offers TenCate

Advanced Composites a position in the growing industrial composites

markets. In addition to applications in the automotive market, these

could include medical and paramedical applications, the electronics

market, technical components and the sports market. PMC Baycomp has

innovative technologies in thermoplastic (unidirectional) composites.

The activities in the industrial composites market constitute a separate

organisational unit and will be further expanded.

PMC Baycomp and TenCate have complementary market positions in

thermoplastic composites. In addition to thermoplastics, TenCate has

an extensive portfolio of thermoset composites. This production is

currently concentrated in the United States of America. TenCate is thus

occupying a unique position.

In mid-2012, TenCate began market development of composites in

China. This is a large market, and the aerospace composites segment

that is of interest to TenCate is developing strongly.

Demand is growing for lightweight structures in hybrid and electric cars

for everyday use. This gradual process will take place by means of joint

development with partners who are suppliers to the automotive

industry, in close cooperation with the OEMs.

At the end of 2012, TenCate Advanced Composites successfully

qualifi ed carbon fi bre reinforced thermoplastic composites for a world-

leading automobile manufacturer. TenCate’s strategic focus in the fi rst

instance is on structural parts and other components which are crucial

for the integrity and safety of the vehicle.

SPACE & AEROSPACE COMPOSITES AND INDUSTRIAL COMPOSITES

INDICATIVE BREAKDOWN OF REVENUES OF TENCATE ADVANCED COMPOSITES

47%

56%

44%

2011 201253% Armour

CompositesStructuralComposites


Asia Pacific

EMEA

Americas

7%

25%

68%

REVENUES BY CUSTOMER GROUP(INDICATIVE)

Governmental

Non-governmental32%

68%


Defence

Mobility

2%

98%



PARTNERSHIPS

The European Thermoplastic Automotive Composites (eTAC) consortium

was offi cially launched in October 2012. eTAC is an initiative of DTC

Dutch Thermoplastic Components, KVE Composites, NLR Nationaal

Luchtvaart Laboratorium, VIRO and TenCate Advanced Composites.

These companies each have leading positions in their own fi elds in the

production and processing of fi bre-reinforced thermoplastic composites.

The aim is to promote the use of these advanced materials in the

automotive sector. The partners in eTAC have built up a successful track

record over the past decades in the aviation industry and aim to initiate

demand-driven projects in the automotive market.

During the reporting year, TenCate Advanced Composites North America

expanded the cooperation with 3M which had begun in 2010.

This cooperation has already considerably strengthened the partners’

positions, particularly in composites for the aerospace market. This

expansion provides an impetus for new applications for composites in

areas such as the aircraft and tooling markets (dies).

TenCate Advanced Composites and the German chemical company

BASF also entered a strategic alliance in 2012 to collaborate on the

development, production and marketing of thermoplastic composites

suitable for mass production of vehicles. The aim of this partnership is

to offer auto manufacturers tailor-made solutions for high-performance

composites structures, enabling this industry to further reduce the

weight and CO2 emissions of vehicles. The growing demand from the

automotive industry for composites for mass production requires the

rapid development of materials and production processes.

TenCate Advanced Composites joined the National Composites Centre

in Bristol (United Kingdom) in 2012. TenCate aims to cooperate with

major centres of expertise on research into an application of advanced

thermoplastic and thermoset composites.

AWARDS

TenCate is a progressive developer and producer of composites. Its

customers are leading operators in the aerospace market, which attach

great importance to the innovative capability and delivery reliability of

their suppliers.

CCS Composites in Fairfi eld (California, USA) – part of TenCate

Advanced Composites – received the Boeing Performance Excellence

Award 2011 at the beginning of 2012. Boeing presents this award

annually to suppliers who have delivered a superior performance.

This is particularly signifi cant due to the substantial investments which

TenCate made in production capacity in 2011. CCS Composites develops

and produces pressed components for the Boeing V-22 Osprey

programme and the F-18 programmes. TenCate also supplies low

dielectric composites for radomes in the Boeing 787 and the EA-18

Growler programme and TenCate Cetex® thermoplastic composites for

various Boeing aircraft.

At the beginning of 2012, TenCate Advanced Composites in the United

States of America received a Supplier Excellence Award from General

Atomics Aeronautical Systems. This is in recognition of the excellent

quality and delivery reliability of TenCate’s composite prepreg materials.

Since the formation of General Atomics Aeronautical Systems, TenCate

has supplied composite prepregs for this company’s unmanned vehicle

system programmes.

In the fi rst quarter, Northrop Grumman Aerospace Systems and its Astro

Aerospace business unit commissioned TenCate Advanced Composites

to supply pre-impregnated high-grade composites for use in the

construction of the solar shield of NASA’s James Webb space

telescope. This is the world’s largest astrophysical observatory, which

can look back 13.5 billion years in time. The telescope is scheduled to

enter service in 2018.

The commercial aerospace sector (including communication and

navigation satellites) in the United States of America and Europe

continued to show steady growth for composites. Unmanned aerial

vehicles (UAVs) for army use and the satellite industry remain an

important growth market for TenCate. These market positions were

further strengthened in 2012.

>‘We want to work for innovative businesses and for the

champion among those businesses. That is why we chose

TenCate.’

- Theo Wigger, General Manager, VIRO


TenCate prepregs go to Mars

Curiosity, an unmanned rover vehicle, is driving around

the surface of Mars. The fact that Curiosity landed

unscathed was partly due to the Lockheed Martin

aeroshell. An aeroshell protects a space vehicle

against pressure, heat and friction when entering the

atmosphere. The structure of the aeroshell includes

thermoset composites from TenCate. Thermoset

composites are exceptionally strong, light and durable.

They resist extreme temperatures and friction. TenCate

is one of the main suppliers of thermoset composites

to Lockheed Martin. TenCate Advanced Composites

has already supplied thermoset composites for the

Spirit, Opportunity and Phoenix Mars reconnaissance

missions in earlier years.

PERFORMANCE OF TENCATE ADVANCED ARMOUR IN 2012

The armour composites market in both the United States of America

and Europe remained sluggish in 2012. There was also a slowdown in

project orders. A promising prospect is the fact that the US Army,

despite major cost-cutting, is expected to begin a major modernisation

programme for its vehicle fl eet in the years ahead.

Since TenCate expects strong growth in the Asia-Pacifi c (APAC) region,

TenCate Advanced Armour opened a sales offi ce for the region in

Singapore at the beginning of 2012. This will become the centre for a

number of local production sites in countries in this region. A major

feature of the worldwide growth strategy is that TenCate produces

specifi c programmes for each individual country. The current production

for the region will take place in Europe or the USA, but can also be

carried out through local partners. An international presence is

essential. In Asia, TenCate is established in Singapore and India.

A sales offi ce for TenCate Advanced Armour was also opened in the

Middle East at the end of 2012. It is the next step in the long-term

strategy of offering state-of-the-art armour technologies in the United

Arab Emirates and the Middle East in a way which not only improves

the defence and security objectives of the country but also ensures

continuing industrial development.

In mid-2012, TenCate Advanced Armour was selected by QinetiQ

to supply the armour for the Foxhound LPPV, a military 4x4 vehicle.

The initial production of 200 vehicles will be followed by an order

for 100 vehicles, which General Dynamics European Land Systems,

Force Protection Europe, will supply to the UK Ministry of Defence.

The Foxhound was designed to give a vehicle of such dimensions an

unprecedented level of protection.

ADVANCED ARMOUR


Asia Pacific

EMEA

Americas

2%

62%36%


Non-governmental

Governmental

2%

98%


Personal protection

Defence

26%

74%



SYSTEM INTEGRATION

In Europe, TenCate positions itself as a system integrator for vehicle

armour. This market is moving increasingly in the direction of new

system programmes. These systems are fully integrated into vehicles

(survivability systems) and the programmes usually have a lead time of

several years.

In this connection, following approval by the Danish authorities, the

acquisition of ABDS ApS was completed in early 2012. The company

has been integrated as Ten Cate Active Protection ApS. This acquisition

followed successful testing and simulations with the TenCate ABDS™

active blast countermeasure system. The market implementation of the

system is expected to take place in 2013. The good results achieved so

far with the testing and simulations provide clear evidence of strong

market interest in various vehicle programmes. Innovative integration

concepts have also been designed for a series of combat and tactical

military vehicles. TenCate Advanced Armor North America is

endeavouring to shorten the market development and support both the

government and OEMs in accessing the technology of the TenCate

ABDS™ active blast countermeasure system. In Goleta (California, USA)

a new TenCate team has been created to supervise this project with the

necessary degree of professionalism.

SUSTAINABILITY

In 2012 the TenCate Advanced Composites market group in the

Netherlands was certifi ed to level 3 of the CSR Performance Ladder.

Stakeholders in the value chain were involved in the introduction of this

CSR management system and regular consultation is taking place on

good working practice. This market group will also implement the

Plan-Do-Check-Act cycle for all 33 CSR indicators in the next three

years. TenCate Advanced Composites further reduced the number of

chemical resin systems in 2012. This also had the effect of reducing the

waste fl ow from this market group. As part of the introduction of LEAN

manufacturing four maximum value realisation for customers with the

lowest possible waste, the 5S approach was implemented. This

involves the complete separation, sorting, standardisation,

systematisation and cleaning of production. Clean rooms were also

installed for laminate production. An additional effect is that the air

quality in this production unit has been further improved.

In 2013 even greater attention will be devoted to the recycling of

thermoplastic composites. The cooperation with knowledge institutions

both in the Netherlands and in the UK will also be intensifi ed. Alongside

universities, this will involve in particular the TPRC innovation centre in

Twente. Within the production process, more of the process cooling

water in Nijverdal will be recycled, in order to save energy. Finally, a 15%

increase will be pursued in regional purchasing of specifi c services and

products.

>‘Foxhound is a great example of what can be achieved

through the Ministry of Defence and industry working

closely together. I want to maximise the extent to which

industry uses an open systems approach both domestically

and in the global market, enabling us to buy off-the-shelf

as far as possible. (…) That will deliver a fl eet of state-of-

the-art, high-tech and easily deployable fi ghting vehicles.’

- Peter Luff, Minister for Defence Equipment, Support and

Technology, United Kingdom


Market groups and market themes

Geosynthetics & Grass Sector


>Sector Geosynthetics & Grass

KEY FIGURES GEOSYNTHETICS & GRASS


Revenues 497.8 392.1 469.3 525.9 518.7

Operating result before amortisation (EBITA) 37.8 16.8 31.4 26.3 31.5

EBITA margin (%) 7.6 4.3 6.7 5.0 6.1%

Operating result (EBIT) 34.8 13.8 27.7 20.8 25.1

Investments 29.0 9.0 9.9 12.2 5.3


Net capital employed (year-end) 427.4 332.7 380.8 429.5 399.7

Number of staff years (year-end) 2,129 1,795 2,128 2,160 2,102

EBITA as percentage of net average capital employed 8.8 4.1 8.2 6.2 7.3

REVENUES AND RESULTS OF THE GEOSYNTHETICS

& GRASS SECTOR

The Geosynthetics & Grass sector recorded a 1% decline in revenues

to € 518.7 million (2011: € 525.9 million).

The revenues of TenCate Geosynthetics decreased slightly, while those

of TenCate Grass remained almost unchanged, although there was a

shift in revenues within the Grass group towards downstream activities.

The operating result before amortisation of intangible fi xed assets rose

by 20% to € 31.5 million (2011: € 26.3 million).

The positive trend in EBITA was affected particularly by strict margin

and cost management, despite a slight decrease in revenues.

The initially strong performance in geosynthetics tailed off during

the year due to a partial decline in demand in the American market.

The EBITA for the grass activities improved compared to 2011

as a result of cost control.

The EBITA margin of this sector rose to 6.1% (2011: 5.0%). The margin

remained below the required level (minimum 10%).

INDICATIVE BREAKDOWN OF REVENUES OF THE GEOSYNTHETICS & GRASS SECTOR

25% 25%

17% 18%

57%

2011 201258% Geosynthetics

Grass upstreamGrassdownstream


PERFORMANCE OF TENCATE GEOSYNTHETICS IN 2012

At TenCate Geosynthetics the initially positive trend in revenues came

to a halt in the second half of the year, particularly in the United States

of America. This was partly the result of the economic circumstances

and a restrained investment policy on the part of the government.

A similar trend was discernible in Europe, although the fi nancial effects

remained limited. Revenues in Asia continued to grow, partly through

the acquisition of Emas Kiara.

The second half of the year proved somewhat disappointing in the

United States of America after an initially positive trend. At the

beginning of 2012, TenCate Geosynthetics Americas was chosen by

Parsons Engineering in New York as the sole producer to supply

TenCate Geotube® containers for the Onondaga Lake dredging project in

New York State. This project is the largest geotextile container project

in the United States and North America. It began in the spring of 2012

and is scheduled to run for four years. After completion of the dredging

and dewatering works, the TenCate Geotube® containers will be stored

permanently in the covered cell.

New initiatives were taken in 2012 to further develop the South

American market. No strong growth was seen in the European market.

In terms of production effi ciency and logistics, important steps were

taken to contend with the challenging market conditions.

TenCate Geosynthetics is also increasingly working with specialist

partners. A consortium of innovative Dutch businesses, led by

Witteveen+Bos and TenCate Geosynthetics, developed the Smart

Tailings concept on the basis of constructive cooperation. This concept

is focused on managing residues from pulverised stone resulting from

the extraction of metal, oil or coal. This waste causes one of the

biggest environmental problems in the world. The consortium combines

high-level expertise in the fi eld of restoration design and risk

evaluation. TenCate Geosynthetics and Witteveen+Bos provide

the consortium with complementary measurement and monitoring

technologies. These companies exchange know-how and provide

an insight into the effi cient management of mining waste.

Positive revenue growth was recorded in Asia. This was partly due

to the acquisition of Emas Kiara Industries (Malaysia) in 2011, which

strengthened TenCate’s position in the Asian markets. Emas Kiara

Industries is a producer and supplier of a wide range of geosynthetic

products and solutions. Activities are increasing in the major

infrastructure project market (civil engineering) and the environmental

market.

In China, TenCate Geosynthetics and AGT International signed a letter

of intent for cooperation on the installation of TenCate GeoDetect®

technology in dike bodies on the Yellow River in Dayulan (Zhengzhou)

in Henan province.

GEOSYNTHETICS

>‘Parsons Engineering is particularly pleased to have

TenCate as a partner in the implementation of the

Onondaga Lake Remediation Project. The experience,

technical knowledge and speed with which TenCate

Geosynthetics has responded to this assignment are a

perfect complement for their high-quality TenCate

Geotube® product.’

- Tom Drachenberg, Project Engineer, Parsons Engineering


Asia Pacific

EMEA

Americas22%

38%

40%


Governmental

Non-governmental

54%

46%


Water management

Infrastructure

6%

90%

4%

Sports & leisure



The proactive exchange of products and system solutions between the

various geographic regions leads to TenCate Geosynthetics being

involved in highly attractive projects worldwide. These are frequently

covered in media reports. An important trend is the provision of

environmental solutions.

The market is devoting increasing attention to the positive

environmental aspects of geosynthetics. Alternatives to TenCate

geosynthetics are usually traditional materials such as concrete, stone

and steel, which often have to be transported over long distances. In

the case of geosynthetics, by contrast, locally available materials (sand,

sludge) are used. This is a worldwide trend.

SUSTAINABILITY

During the reporting year the TenCate Geosynthetics market group in

the Netherlands laid the basis for the certifi cation in early 2013 of the

new management system for corporate social responsibility. Positive

experiences were also gained with the product ecotool for TenCate

Geotube® solutions. This determines the CO2 footprint of this innovative

solution for water management. Comparisons can also be made with

competing, traditional alternatives, such as the use of boulders or

spraying vast quantities of sand.

On the basis of the 5S approach, the internal audits relating to process

safety, order and tidiness were tightened in 2012. Preparations were

also made for the 2013 risk inventory and evaluation. Fork-lift truck

drivers were given further training. The collection of synthetic yarns

from the production process was intensifi ed in order to increase their

reuse. The permanent transfer of the shearing department from Almelo

to Nijverdal has cut the number of internal transport movements to

a minimum.

The in-house emergency plan for this market group in the Netherlands

is being updated in 2013. As part of an age-aware personnel policy,

the shift roster is being made more fl exible. Preparations are being

made for ISO 14001 certifi cation for the other TenCate Geosynthetics

production sites in Europe. To increase the sustainability of the product

portfolio, tests will be conducted in 2013 with biodegradable TenCate

Geotube® containers for specifi c applications. By analysing existing,

external transport movements and placing them with a single carrier,

savings can be made in terms of costs and CO2 emissions. Closer

cooperation will take place with suppliers and customers in order to

reduce the volume of waste.

TenCate GeoDetect® for dike monitoring

on the Yellow River

TenCate is partnering with AGT in China in a pilot

programme for the installation of a system to manage

dikes along the Yellow River in Dayulan. TenCate is

supplying the geotextiles and sensors for the system

and the installation. TenCate GeoDetect® is a

monitoring system based on geotextiles with

interwoven optical fi bres to record changes in slopes

and dikes. TenCate Geosynthetics has been involved in

projects with intelligent dike monitoring with TenCate

GeoDetect® for a number of years, including the

IJkdijk. TenCate GeoDetect® has been tested in dike

bodies and has already been used in the building of

roads and railways and the construction of retaining

walls, bridge heads and underground structures.


PERFORMANCE OF TENCATE GRASS IN 2012

The revenues of the Grass group declined in the reporting year

compared to 2011. This was partly due to a decrease in sales in the

European sports market. The southern European market in particular fell

sharply as a result of the economic problems. Spending cuts prompted

local authorities to pursue a restrained policy. In the United States of

America there was a tentative improvement, while Asia showed a

stable trend. Australia and New Zealand saw a slight decrease in the

market.

The weak market conditions meant that there was no improvement in

the underutilisation of production capacity for synthetic turf yarns. In

order to respond to market conditions and wider developments, the

policy remained focused on effi cient production and integration of

marketing and sales costs, and on sustainable synthetic turf systems.

The integrated approach in close cooperation with the marketing

organisation had the positive result that the market share of the

downstream activities increased.

A positive factor is that the market is increasingly distinguishing and

appreciating quality differences. TenCate’s strong and reliable

distribution channel is an important factor for success. As a quality

brand, TenCate pursues continuous improvement in the quality and

sustainability of synthetic turf pitches. This is partly achieved through

partners in the value chain. GreenFields positions itself as an innovative

market player with responsibility for large proportion of FIFA-related

projects around the world.

An illustration of the policy in 2012 was the incorporation of standard

heat-refl ecting (HR) properties in the TenCate XP Blade™ product

portfolio for the American market. Since 2004, TenCate XP Blade™ has

become the most durable fi bre in the market. Thanks to innovation, the

system delivers even better performance as a result of heat reduction

on warm, sunny days. Tests showed temperature reduction of 8°C.

TenCate XP Blade™ has been installed on more than 3,500 synthetic turf

pitches around the world. The production capacity for this most durable

synthetic turf product had already been increased strongly in the United

States of America in 2011. As a result, TenCate can now meet the

worldwide structural growth in demand for these wear-resistant

synthetic turf fi bres. The heat refl ection is now incorporated as standard

in TenCate XP Blade™ fi bres.

Since the 2012-2013 season, the Dutch Premier league clubs Heracles

Almelo and PEC Zwolle have played their home matches on an

innovative TenCate synthetic turf pitch based on a patented 3D weaving

technology. This incorporates a number of new developments, allowing

optimum ball and playing performance. The use this system for

top-fl ight matches enhances the image of the product nationally and

internationally.

In mid-2012 it was announced that GreenFields would be able to supply

the fi rst IRB- and FIFA-approved dual-use pitch. Maidenhead Rugby

Union Football Club became the fi rst club to use the One Turf pitch.

This is the new, global specifi cation for dual-use pitches, which has

been approved by both the International Rugby Board and FIFA and

which offers an optimum playing surface for rugby and football.

GreenFields is supplying this fi rst pitch in the world as a selected

partner in the framework agreement between the Rugby Football Union,

the FA and the FF under the management of Robinson Lage Francis.

GRASS


Asia Pacific

EMEA

Americas

17%

55%

28%


Non-governmental

Governmental

71%

29%


Infrastructure

Sports & leisure

7%

93%



At the end of 2012, Royal Ten Cate became the offi cial partner of the

Dutch National Hockey Association (KNHB). The cooperation between

TenCate Grass, GreenFields and the KNHB is focused among other

things on the Men’s and Women’s Hockey World Cup due to be held in

and around The Hague in 2014. TenCate is supplying state-of-the-art

synthetic turf systems for this event. The Men’s and Women’s World

Cup in and around the Hague is the next important international hockey

event after the Olympic Games in London. The partnership with the

KNHB will run initially to 31 August 2016.

Although the overall market situation in most countries in Europe and

elsewhere remains sluggish, the market is developing apace. It is

expected that the synthetic turf industry will consolidate further with

a growing emphasis on quality and durability, as the level of knowledge

among end-users is rising. Further penetration of the synthetic turf

market is expected, partly having regard to the considerably lower

maintenance costs compared to natural grass. The landscaping market

is also growing steadily. Water scarcity and ease of maintenance are

key drivers in this market.

SUSTAINABILITY

The TenCate Grass market group achieved CSR Performance Ladder

certifi cation to level 3 in the Netherlands during the reporting year.

The stakeholder dialogue included the drafting and signing of a code

of conduct aimed at eliminating child labour, infringements of human

rights and corruption. At the same time, a global mobility policy was

drawn up under which TenCate Grass customers are supplied from the

geographically closest location.

An extensive internal campaign was also conducted in 2012 to further

increase CSR awareness. During the themed months on quality, safety

and welfare, all disciplines within this market group worked closely

together, from HR to quality management and from production to offi ce

departments. The results of all the efforts were measured by conducting

surveys among employees.

Preparations were also made to replace the industrial clothing at

TenCate Grass in Nijverdal. The occupational health and safety plan

was also updated. This is closely aligned with the positive effects of

the 5S approach in fi bre production in Nijverdal. The aim is to achieve

an optimally organised and clearly arranged production site. This will

also further increase occupational safety. The 5S methodology was

introduced in 2012 for the backing production site. It is due to be

completed in the forthcoming reporting year.

With the inception of production using the innovative weaving

technology, work was carried out during the reporting year to further

increase the sustainability of the production portfolio. The fully

recyclable synthetic turf systems have been well received in the market.

At the same time, the regranulation of synthetic production waste and

its return to the extrusion process has been increased. On the basis of

the new product eco-tool, work is being carried out to determine the

carbon footprint of the synthetic turf products. TenCate is conducting

the Skin-comfort innovation project with Radboud University in

Nijmegen, the Netherlands, with the aim of further increasing the

sliding friendliness of synthetic turf. Finally, preparations are underway

for the next generation of synthetic turf systems, aimed at an ultimate

balance between properties and costs.

Innovative synthetic turf pitch for Dutch

Premier League sides

Since the 2012-2013 season, Heracles Almelo and

PEC Zwolle have played their home matches on an

innovative TenCate synthetic turf pitch based on a

patented 3D weaving technology. The interwoven

elastic fi bres remain resilient even after long-term

stress. These fi bres also take over part of the function

of the infi ll. That means less infi ll is required to

achieve the desired playing characteristics. The

weaving technology results in no streakiness and

makes it easier to use only raw materials of the same

type. That means the pitch can be entirely recycled.

The Heracles Almelo pitch is the fi rst offi cial pitch to

be approved by FIFA in accordance with the FIFA Two

Star standard for synthetic turf football pitches.


The wearing trial of the new work clothing at Nijverdal is taking place

in 2013. The in-house emergency organisation is being given further

training and associated disaster drills will be organised. Many projects

on energy-saving are planned.

With regard to the diversity of the workforce, TenCate Grass is aiming

for a 1% increase in the percentage of women in management positions

in 2013.

The ‘noise-resistant synthetic turf’ innovation project will be completed

in readiness for the market launch. Finally, increased recyclability of

synthetic turf systems will be high on the agenda in the forthcoming year.


Entities and market themes

KEY FIGURES OTHER ACTIVITIES


Revenues 53.8 52.7 66.8 74.5 69.7

Operating result before amortisation (EBITA) -3.9 -7.0 9.8 5.9 – 3.0

Operating result (EBIT) - 3.9 -8.1 8.3 4.1 – 6.1

Investments 7.3 4.1 6.9 5.2 1.9


Number of staff years (year-end) 657 670 624 611 655

REVENUES AND RESULTS OF OTHER ACTIVITIES

The revenues of the Other Activities sector (Xennia Technology,

TenCate Enbi and Holding & Services) amounted to € 69.7 million

(2011: € 74.5 million). EBITA amounted to – € 3.0 million (2011: € 5.9

million). The decrease in EBITA was due particularly to the loss-making

activities of Xennia Technology, including the recognition of € 2.7

million of non-recurring expenses.

PERFORMANCE OF XENNIA TECHNOLOGY IN 2012

In 2012 Xennia Technology began a process of cutting development

costs and terminating developments with a long lead time and/or

uncertain end-results. The focus was placed on revenues and results

achievable in the short term. Developments in the fi eld of digital textile

fi nishing were concentrated around applications which offer particular

prospects for TenCate, and around ink sales that could be achieved in

the textile market in the short term. Once the business model has

delivered results for the short-term, the focus can be shifted back to

the long term.

Many of Xennia’s business cases are in the start-up phase and have yet

to prove themselves. The ceramic printing market was one of the major

areas of application of inkjet technology in 2012. Xennia is now also

actively engaged in projects in the fi eld of product decoration (fl ooring

market, wall decoration).

PERFORMANCE OF TENCATE ENBI IN 2012

The printer and copier market, an important market in which TenCate

Enbi operates, remained reasonably stable overall. TenCate Enbi

generated an increase in revenues, primarily through growth in Asia.

The site in China (Zhuhai) received a growing number of qualifi cations

for components for Asian printer and copier manufacturers.

Other Activities Sector


Americas

Asia Pacific

EMEA50%

32%

18%


Non-governmental

100%

Royal Ten Cate Annual Report 2012 | OUTLOOK | 83

Outlook for 2013 84

Action plans for 2013 86

Corporate initiatives 87

OUTLOOKIn Outlook the company provides further information on the outlook and action plans for 2013 and subsequent years

84 | Royal Ten Cate Annual Report 2012 | OUTLOOK

There is uncertainty with regard to the precise details of budgetary

measures to be taken by the government in the United States of

America. The outcome of this process will also be of signifi cance for the

trend in TenCate’s revenues. European governments too are expected to

maintain a restrained stance towards government spending in the

short term. The market themes on which TenCate focuses and which

are mainly related to the safety of persons, protection of their living

environment and sustainability nevertheless remain on the agenda.

This offers opportunities for TenCate.

A change will take place in the marketing of safety fabrics in Asia in

2013. As part of the change, TenCate will establish a strong position for

the successful TenCate Tecasafe™ Plus portfolio in the industrial market

to boost sales in Asia. As a result, the joint venture in Thailand will be

closed.

A sharpening of the strategic focus was announced in mid-2012.

TenCate has focused intensively on the development of industrial

markets, such as safety clothing for industrial applications, the

automotive sector (weight reduction) and further geographic

diversifi cation (BRIC countries). TenCate aims to enter partnerships with

third parties to accelerate growth in this area. The fi rst results of this

were evident in 2012 (3M, BASF, automotive industry qualifi cations).

This policy will be continued in 2013.

For the main growth products, such as TenCate Cetex® (aerospace

composites), TenCate Tecasafe™ Plus and TenCate Geotube®

(geocontainers for water management systems), above-average growth

is expected. The international revenue growth of TenCate Defender™ M

will increasingly compensate for a possible further decline in American

revenues. The decline in revenues which occurred in this fi eld in 2012 is

not expected to continue in 2013.

OUTLOOK FOR EACH MARKET GROUP

TENCATE PROTECTIVE FABRICS

In view of the project-based nature of the government-related markets,

both in Europe and the United States of America, and the uncertainties

surrounding US government spending, the market outlook is uncertain.

Nevertheless, the focus in the United States of America on possible

foreign confl ict zones and terrorism, and on personal protection,

remains strong. The same applies to other army units. TenCate will

continue to devote full attention to new markets and geographic areas

in which the company has yet to build up any substantial positions.

TenCate has an excellent basis for this. Continuing market and product

development is expected to deliver long-term growth in protective

fabrics worldwide.

TENCATE ADVANCED COMPOSITES

AND TENCATE ADVANCED ARMOUR

The longer-term market outlook remains consistently positive. Annual

sales of armour products depend greatly on individual projects, for

which governments make budgets available. The armour systems

activities for aerospace are expected to make a growing contribution

to revenues.

The armour projects usually form part of programmes to upgrade and

modernise army vehicles, in order to counter new threats and achieve

a greater degree of mobility. The US Army is expected to begin a major

modernisation programme for its vehicle fl eets at some stage. This will

include a new infantry Ground Combat Vehicle (GCV), an armoured

replacement for the vulnerable M-113 and the Joint Light Tactical

Vehicle (JLTV). One of the main objectives in modernisation programmes

is an increase in the survivability of the occupants. The GCV and JLTV

vehicles will offer a higher level of protection against future ballistic

threats. The TenCate ABDS™ active blast countermeasure system is

well-positioned to contribute to a higher level of protection in such

vehicles.

Outlook for 2013


The trend in the structural demand for TenCate composites in the civil

aviation industry also remains positive. Revenues from the automotive

industry are expected to develop positively. This is partly due to the

qualifi cations which TenCate has obtained. During the current year,

TenCate expects to continue to benefi t from long-term contracts with

large international aircraft manufacturers and from the fi rst orders in

the automotive industry. The outlook for the military aviation market

and satellite programmes remains positive

TENCATE GEOSYNTHETICS

TenCate Geosynthetics expects to see growth in its activities in 2013.

To do so it will also enter new markets, including the oil and gas sector.

Cautious growth is expected in infrastructure projects on all continents

and as a result of new products and applications for water management

and the environmental market. In particular, there are high expectations

for the South American and Asian markets, but also for the protection

of the east coast of North America. Further cooperation is also being

sought with international and large regional engineering fi rms and

construction companies.

TENCATE GRASS

Volumes in the global market for synthetic turf are not expected to

show any signifi cant rise in 2013, particularly as a result of tight

government budgets. Regional differences, wide in some cases, will

nevertheless remain. TenCate’s presence across the entire world market

is an advantage. The increasing acceptance of synthetic turf as a

genuine alternative to natural grass in both landscaping and sports,

with football as the main growth market, will result in a growth trend.

XENNIA TECHNOLOGY

TenCate is providing increasing support for Xennia Technology’s market

development, partly by acting as a launch customer in the technical

textile sector.

TENCATE ENBI

TenCate Enbi has already provided information on the growth

opportunities in the Asian market. Relationships with producers are

developed on the basis of product qualifi cations. These qualifi cation

processes may be lengthy. The initial results of this are now becoming

evident, and attractive opportunities are emerging in the Asian market.

By contrast, developments relating to end-of-life products will cause

the respective revenues to decrease or come to an end. TenCate Enbi

is factoring in a further reduction in revenues from one of its major

US relationships. The main growth is expected to be achieved at the

Chinese site.


INCREASE IN IMPORTANCE OF MARKETING

■ To enhance TenCate’s positioning in new and existing markets,

greater importance will be attributed to the correct market

positioning and distinctive capability (the value proposition) of

TenCate’s products. This will be achieved in part by investing more

in strengthening the marketing and sales organisation.

■ More direct control of local markets and local customer relations.

This will strengthen operational fl exibility and increase the

readiness to respond to market opportunities.

■ Further development of the website, which was overhauled in 2012,

and exploitation of new media.

FOCUS ON SUCCESSFUL MARKET NICHES WITH PROVEN

PRODUCTS

■ TenCate operates in market niches with successful products which

have been developed in past years but have not yet generated the

desired sales volumes. Examples are TenCate Tecasafe™ Plus,

TenCate Geotube® and the TenCate matrix-woven synthetic turf

system. Efforts will be made to accelerate growth by means

of a greater focus on these products and customer groups.

■ A less fragmented product portfolio also has a positive impact

on the effi ciency and overall cost structure.

■ Partnerships with market participants.

CONTINUING PROFIT RECOVERY IN THE GRASS GROUP

■ Further development of access to end-markets is necessary in order

to increase capacity utilisation in synthetic turf yarn production.

This is being achieved in the fi rst place through high-quality systems

which can be marketed through reliable partners. Sustainability

and low total cost of ownership have the utmost priority.

■ Continued development of weaving technology, with a considerably

higher quality level being achieved which fi ts in well with the

requirements for the recycling of raw materials.

■ Continued development of systems incorporating multiple functions,

allowing considerable savings on installation costs.

CONSTANT FOCUS ON SUSTAINABLE COST SAVINGS

■ Markets are expected to show barely any recovery in 2013. Cost

savings, which are a permanent cornerstone of the TenCate business

model, therefore continue to have strategic priority.

MARKET DEVELOPMENT IN EMERGING GEOGRAPHIC

MARKETS

■ Markets in the BRIC countries are increasingly important to TenCate.

Priority is being given to achieving above-average growth in these

geographic areas, partly through cooperation with partners.

The development of new geographic markets is a gradual process,

because standards are often lacking and materials fi rst have to be

certifi ed or qualifi ed. TenCate is closely involved in these processes.

FURTHER STRENGTHENING OF REVENUE GROWTH IN

COMPOSITES

■ Integration of acquired companies.

■ Market development in the tooling and automotive segments

and applications in oil and gas extraction.

START OF PRODUCTION BASED ON INKJET TECHNOLOGY

AT TENCATE PROTECTIVE FABRICS

Action plans for 2013


Corporate initiatives in 2013


■ Green electricity. With effect from 1 January 2013 all market groups

in Nijverdal have switched entirely to green electricity. The TenCate

offi ces in Almelo have already been supplied with green electricity

and heating for some years.

■ Ultraviolet curing. Digital fi nishing enables UV curing. This is a

photochemical process in which high-intensity ultraviolet light is

used for the fast and direct drying of inks and coatings. This

increases production speed, reduces waste and promotes greater

attachment to the substrate. UV curing therefore offers a cleaner

process for ecologically aware fi nishing and coating of technical

textiles.

■ Digital inkjet technology. The fi rst digital fi nishing machines for the

production of technical textiles at TenCate Protective & Outdoor

Fabrics are scheduled to enter service in April 2013. This will lead

among other things to a sharp reduction in the consumption of

water and energy, and of wet chemicals. Environmentally friendly

water-based inks are used for the digital processing of textiles.

This innovative production method also contributes to a safe and

healthy working environment.

■ CSR Performance Ladder. The certifi cation of TenCate Geosynthetics

in the Netherlands was achieved at the beginning of 2013.

This certifi cation of corporate social responsibility will be promoted

in 2013 among TenCate’s other production sites worldwide. TenCate

Geosynthetics will also have the production sites at Bezons (France)

and Linz (Austria) certifi ed in accordance with ISO 14001 in 2013.

Preparations are also being made for CSR certifi cation for these two

sites in 2014.

■ Product ecotool. More CO2 footprints of products and systems are

expected in 2013. Further work will also take place to complete

the ecotool for TenCate Advanced Composites.

■ Process ecotool. On the basis of the results for 2012, the existing

critical performance indicators with regard to CSR will be

reassessed in terms of applicability and completeness. Work

will also be carried out on a further increase in the validation

percentage.

■ CO2 footprint. As well as carrying out a comprehensive assessment

and determination of the CO2 footprint of the overall TenCate

organisation, further work will take place in 2013 on reducing

the most comprehensive ecological footprint possible.

■ Sponsorship. In 2013 TenCate marks 10 years as the synthetic turf

sponsor of the Cruyff Foundation and 10 years as the main sponsor

of the Heracles Almelo professional football club. This Dutch

Premier League club fulfi ls an important social and community role

in the Almelo region. TenCate also wishes to give its name to the

planned new stadium of Heracles Almelo. In 2013 it will become

clear whether this sustainable stadium is to be built, with the

incorporation of TenCate materials and the next-generation synthetic

turf system that is currently under development. TenCate Grass is

also making preparations in 2013 for the 2014 Hockey World Cup in

the context of the partnership between TenCate and the Dutch

National Hockey Association.

CORPORATE RISK MANAGEMENT

During the current calendar year, the corporate risk management

department in both North America and the EMEA region will promote

recognition through the new Highly Protected Risk Awards. This will

be done jointly with the insurer FM Global and the local companies.

By way of preparation, the management of the production sites

concerned will implement the required organisational and process

changes relating to the relevant safety aspects.


As the Executive Board of Royal Ten Cate, we have prepared the annual

report and the fi nancial statements for 2012.

We declare that to the best of our knowledge:

■ The fi nancial statements give a true and fair view of the assets,

liabilities and the fi nancial position of the company and its

consolidated businesses

■ The annual report gives a true and fair view of the position on the

balance sheet date and the state of affairs of the company and its

associated companies during the year and that the principal risks

have been stated in the annual report


Executive Board

L. de Vries, President and CEO

B.J.H. Cornelese, CFO

Statement by the Executive Board

Royal Ten Cate Annual Report 2012 | FINANCIAL STATEMENTS | 89

2012 fi nancial statements 90

Other information 142

Ten-year summary 144

FINANCIAL STATEMENTSFinancial Statements contains the fi nancial statements of TenCate and the accompanying notes

90 | Royal Ten Cate Annual Report 2012 | FINANCIAL STATEMENTS

Consolidated profit and loss account 92

Consolidated statement of comprehensive income 93

Consolidated balance sheet 94

Consolidated cash flow statement 96

Consolidated statement of changes in group equity 98

Notes to the consolidated financial statements 99

1 General information on Koninklijke Ten Cate nv 99

2 General principles for fi nancial reporting 99

3 Principles for the preparation of the fi nancial

statements 99

4 Consolidation principles 99

5 Foreign currencies 100

6 Derivatives 101

7 Hedge accounting 101

8 Segment reporting 101

9 Revenues 101

10 Government subsidies 102

11 Raw materials and manufacturing supplies 102

12 Lease payments 102

13 Financial income and expenses 102

14 Profi t tax 102

15 Earnings per share 103

16 New standards and interpretations

not yet applied 103

17 Principles for the preparation

of the cash fl ow statement 103

18 Intangible assets 104

19 Tangible fi xed assets 104

20 Inventories 105

21 Trade debtors and other receivables 105

22 Cash and cash equivalents 105

23 Impairment 105

24 Share capital 106

25 Pension liabilities 106

26 Share-based payments 107

27 Provisions 107

28 Long-term debts 108

29 Trade creditors 108

30 Determination of fair value 108

Notes to the profi t and loss account 109

31 Operating segments 109

32 Acquisitions and sale of participating interests 111

33 Personnel costs 111

34 General management costs 111

35 Net fi nancial expenses 112

36 Profi t tax 112

Notes to the consolidated balance sheet 114

37 Intangible assets 114

38 Tangible fi xed assets 116

39 Investments in associated companies

and fi nancial fi xed assets 117

40 Deferred profi t tax assets and liabilities 118

41 Inventories 119

42 Trade debtors 119

43 Other receivables 119

44 Cash and cash equivalents 120

45 Total shareholders’ equity 120

46 Earnings per share 121

47 Long-term debts 122

48 Pension liabilities 123

49 Provisions 125

Royal Ten Cate

Financial statements 2012


Other information 126

50 Financial instruments 126

51 Liabilities not shown in the balance sheet 131

52 Investment liabilities 131

53 Contingent liabilities 131

54 Post balance sheet events 132

55 Related parties 132

56 Estimates and judgments

made by the management 133

Company fi nancial statements 134

57 Company profi t and loss account 134

58 Company balance sheet

(before appropriation of the result) 134

Notes to the company fi nancial statements 135

59 Financial fi xed assets 135

60 Equity 135

61 Called and paid-up capital 135

62 Ordinary shares 136

63 Share premium reserve 136

64 Legal reserves 136

65 Other reserves 136

66 Option plan 137

67 Provisions 140

68 Long-term liabilities 140

69 Short-term liabilities 140

70 Auditor’s fees 141

71 Liabilities not shown in the balance sheet 141


For the financial year ending on 31 December, in millions of euros note 2011 2012

REVENUES 1,138.8 1,049.0

Cost of sales* 894.1 842.3

Gross margin* 244.7 206.7

Selling costs* 62.8 67.3

R&D costs* 19.4 23.2

General management costs* 34 72.9 78.7

OPERATING RESULT (EBIT) 89.6 37.5

Financial income 35 0.2 0.4

Financial expenses 35 – 11.5 – 12.5

NET FINANCIAL EXPENSES – 11.3 – 12.1

RESULT BEFORE PROFIT TAX 78.3 25.4

Profi t tax 36 – 18.7 – 8.7

Result after profi t tax 59.6 16.7

Net result from associated companies – 1.3 – 0.3


Result attributable to:

Non-controlling interest – 0.4 – 5.9

SHAREHOLDERS OF ROYAL TEN CATE (NET RESULT) 58.7 22.3

Weighted average number of shares (x 1,000) 46 25,452 25,895

Weighted average number of shares after dilution (x 1,000) 46 25,736 26,040

Net earnings per share (euro) 46 2.31 0.86

Diluted net earnings per share (euro) 46 2.28 0.86


The notes in sections 1 to 71 form an integral part of these fi nancial statements.

Consolidated profi t and loss account


Consolidated statement of comprehensive income



Other comprehensive income (after profit tax)

Foreign currency translation differences for foreign activities 45 3.8 – 3.8

Effective portion of changes in hedging reserve (hedge accounting) 45 – 0.9 0.6

Actuarial gains and losses of pensions – 14.1 – 18.0

Other comprehensive income after profi t tax – 11.2 – 21.2

Comprehensive income after profi t tax 47.1 – 4.8

Comprehensive income attributable to:

Non-controlling interest – 0.3 – 5.9

Shareholders of Royal Ten Cate 47.4 1.1



in millions of euros note 31 December 2011 31 December 2012

NON-CURRENT ASSETS

Goodwill 37 212.0 214.5

Other intangible assets 37 61.0 54.9

Tangible fi xed assets 38 221.9 196.7

Investments in associated companies 39 4.6 4.1

Financial fi xed assets 39 11.1 12.9

Deferred profi t tax assets 40 21.1 30.0

Total non-current assets 531.7 513.1

CURRENT ASSETS

Inventories 41 267.9 226.4

Receivables

Trade receivables 42 152.4 140.0

Profi t tax receivables 6.5 3.8

Other receivables 43 22.2 15.9

Cash and cash equivalents 44 22.7 26.7

Total current assets 471.7 412.8

TOTAL ASSETS 1,003.4 925.9

Consolidated balance sheet


in millions of euros note 31 December 2011 31 December 2012

GROUP EQUITY 45

Share capital 64.8 66.2

Share premium reserve 44.8 43.4

Translation reserve 7.0 3.1

Hedging reserve – 4.5 – 3.9

Reserve for own shares – 15.6 – 15.1

Other reserves and undistributed result 369.3 363.5

Total shareholders’ equity 465.8 457.2

Non-controlling interest 3.7 – 1.9

Group equity 469.5 455.3

NON-CURRENT LIABILITIES

Long-term debts 47 275.1 220.3

Pension liabilities 48 22.6 42.3

Provisions 49 15.0 11.4

Deferred profi t tax liabilities 40 8.0 8.8

Total non-current liabilities 320.7 282.8

CURRENT LIABILITIES

Cash loans, overdrafts 44 35.4 35.4

Repayment of long-term debts 47 0.9 0.9

Trade creditors and other payables 169.1 142.4

Provisions 49 5.0 2.8

Profi t tax liabilities 2.8 6.3

Total short-term debts 213.2 187.8

Total liabilities 533.9 470.6

TOTAL GROUP EQUITY AND LIABILITIES 1,003.4 925.9



Consolidated cash fl ow statement


CASH FLOW FROM OPERATING ACTIVITIES

Result after profi t tax 58.3 16.4

Adjustments for:

Depreciation 38 35.0 37.1

Amortisation 37 12.9 14.5

Net fi nancial expenses before exchange rate differences 35 11.1 12.2

Profi t tax 36 18.7 8.7

Net result from associated companies 1.3 0.3

Result from sale of tangible fi xed assets 34 – 0.9 –

Costs of option scheme 1.9 2.0

Other items – 2.1 –

Change in provisions and pension liabilities – 7.8 – 10.9

CASH FLOW FROM OPERATING ACTIVITIES

BEFORE CHANGE IN WORKING CAPITAL 128.4 80.3

MOVEMENTS IN WORKING CAPITAL:

Inventories – 37.9 42.3

Receivables 9.9 18.7

Current liabilities – 18.4 – 22.7

– 46.4 38.3

CASH FLOW FROM OPERATING ACTIVITIES 82.0 118.6

Interest paid – 11.2 – 12.3

Profi t tax paid – 21.5 – 4.5

NET CASH FLOW FROM OPERATING ACTIVITIES 49.3 101.8


in millions of euros note 2011 2012

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of tangible fi xed assets 34 3.4 0.3

Interest received – 0.1

Acquisition of subsidiaries less cash acquired 32 – 29.3 – 15.7

Investments in intangible assets 37 – 4.4 – 4.6

Investments in tangible fi xed assets 38 – 21.3 – 12.0

Investments in associated companies 39 – 5.5 –

Increase in long-term receivables – 0.7 – 1.5

NET CASH FLOW FROM INVESTING ACTIVITIES – 57.8 – 33.4

NET CASH FLOW FROM OPERATING

AND INVESTING ACTIVITIES – 8.5 68.4

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from exercise of share options 2.4 0.5

Payments in respect of repurchase of own shares – 7.6 –

Repayment of long-term debts – 15.0 – 51.5

Drawing of long-term debts 69.5 –

Dividend paid to shareholders – 6.3 – 12.2

NET CASH FLOW FROM FINANCING ACTIVITIES 43.0 – 63.2

CHANGE IN CASH AND CASH EQUIVALENTS 34.5 5.2

Cash and cash equivalents on 1 January 44 – 44.1 – 12.7

Exchange rate and translation differences in cash and cash equivalents – 3.1 – 1.2

CASH AND CASH EQUIVALENTS ON 31 DECEMBER 44 – 12.7 – 8.7



in millions of euros Share

capital

Share

premium

Reserve for

translation

differences

Hedging

reserve

Reserve

for own

shares

Other

reserves

and un-

distributed

income Total

Non-

controlling

interests

Group

equity

BALANCE AS AT 1 JANUARY 2011 63.8 45.8 3.3 – 3.6 – 10.4 339.6 438.5 3.8 442.3

COMPREHENSIVE INCOME

Result after profi t tax 58.7 58.7 – 0.4 58.3

Actuarial gains and losses on

defi ned-benefi t pension schemes – 14.1 – 14.1 – 14.1

Currency translation differences 3.7 3.7 0.1 3.8

Hedging result after profi t tax – 0.9 – 0.9 – 0.9

Total – – 3.7 – 0.9 – 44.6 47.4 – 0.3 47.1

TRANSACTIONS WITH SHAREHOLDERS

Dividend to shareholders 1.0 – 1.0 – 6.3 – 6.3 – 6.3

Share-based payment transactions 1.9 1.9 1.9

Repurchase of own shares – 7.6 – 7.6 – 7.6

Issue of repurchased shares 2.4 2.4 2.4

Acquisition of non-controlling interest – – 1.0 – 1.0

Acquisition of non-controlling interest

not leading to change of control – 10.5 – 10.5 1.2 – 9.3

Total 1.0 – 1.0 – – – 5.2 – 14.9 – 20.1 0.2 – 19.9

BALANCE AS AT 31 DECEMBER 2011 /

1 JANUARY 2012 64.8 44.8 7.0 – 4.5 – 15.6 369.3 465.8 3.7 469.5

COMPREHENSIVE INCOME

Result after profi t tax 22.3 22.3 – 5.9 16.4

Actuarial gains and losses on

defi ned-benefi t pension schemes – 17.9 – 17.9 – 0.1 – 18.0

Currency translation differences – 3.9 – 3.9 0.1 – 3.8

Hedging result after profi t tax 0.6 0.6 0.6

Total – – – 3.9 0.6 – 4.4 1.1 – 5.9 – 4.8

TRANSACTIONS WITH SHAREHOLDERS

Dividend to shareholders 1.4 – 1.4 – 12.2 – 12.2 – 12.2

Share-based payment transactions 2.0 2.0 2.0

Issue of repurchased shares 0.5 0.5 0.5

Changes in non-controlling interest – 0.3 0.3

Total 1.4 – 1.4 – – 0.5 – 10.2 – 9.7 0.3 – 9.4

BALANCE AS AT 31 DECEMBER 2012 66.2 43.4 3.1 – 3.9 – 15.1 363.5 457.2 – 1.9 455.3


Consolidated statement of changes in group equity


ACCOUNTING STANDARDS

1 GENERAL INFORMATION ON KONINKLIJKE TEN CATE NV

Koninklijke Ten Cate nv (Royal Ten Cate) (the Company) is established

in Almelo, the Netherlands. The consolidated fi nancial statements of

the Company comprise the fi nancial statements of the Company and its

subsidiaries (referred to collectively as the 'Group') and the Group's

interests in other (non-consolidated) participating interests, associated

companies and proportionally consolidated joint ventures. The fi nancial

statements have been prepared by the Executive Board.

The 2012 annual report and accounts were discussed at the meeting of

the Supervisory Board on 28 February 2013. They were released for

publication on 1 March 2013. They will be presented to the general

meeting of shareholders for adoption on 18 April 2013.

The parent company fi nancial statements form part of Royal Ten Cate's

2012 fi nancial statements. Royal Ten Cate has made use of the

exemption pursuant to article 2:402 of Book 2 of the Netherlands Civil

Code with regard to the parent company fi nancial statements.

The original fi nancial statements were drafted in Dutch. This document

is an English translation of the original. In the case of any discrepancies

between the English and the Dutch text, the latter will prevail.

2 GENERAL PRINCIPLES FOR FINANCIAL REPORTING

The consolidated fi nancial statements have been prepared in

accordance with International Financial Reporting Standards, as

adopted within the EU (hereinafter EU-IFRS) and with Part 9 of Book 2

of the Netherlands Civil Code.

Changes to the principles for financial reporting

With effect from 2012, the profi t and loss account has been prepared

on the basis of the functional classifi cation instead of the category

classifi cation. The functional classifi cation is in line with the

information provision for the internal control of the company with

effect from 2012. The change has been adopted retrospectively from 1

January 2011. The change of system has no material effect on the

results and assets in 2011 and 2012.

The allocation of costs to the functional cost accounts can be analysed

as follows:

■ Cost of sales: comprises all production costs (including raw

material and energy costs) related to the recognised revenues.

■ Selling costs: comprises the costs of marketing and sales of the

products, including costs associated with sales but not related to

production (e.g. outgoing freight costs).

■ Research and development costs: comprises research costs with

the aim of acquiring new technological knowledge and

development costs associated with the development of new

products or processes for the start of commercial production.

■ General management costs: comprises the strategic and

management costs. The costs of support departments which do

not relate directly to the other cost accounts are also included

under general management costs.

3 PRINCIPLES FOR THE PREPARATION OF THE FINANCIAL

STATEMENTS

The fi nancial statements are presented in millions of euros (the euro

being the Company's functional currency) unless stated otherwise. The

fi nancial statements have been prepared on the basis of historical cost,

except for the following material balance sheet items, which are

carried at fair value: derivatives and fi nancial instruments held for

trading purposes.

In preparing the fi nancial statements, the Executive Board has used

estimates and assumptions which affect the application of accounting

standards and reported amounts stated in the consolidated fi nancial

statements (see note 56). The actual results may differ from such

estimates. The estimates and underlying assumptions are continuously

assessed. Revised estimates are stated in the period in which the

estimates are revised and in future periods in which the revision has

consequences.

The accounting principles set out below have been applied consistently

by the Group's subsidiaries and joint ventures for the periods presented

in these consolidated fi nancial statements. Certain comparative

information has been adjusted for the sake of comparability.

4 CONSOLIDATION PRINCIPLES

4.1 Business combinations

Business combinations are accounted for by the acquisition method as

at the acquisition date, i.e. the date on which control passes to the

Group. Control means the Group is able to determine an entity's

fi nancial and operational policy in order to obtain benefi ts from the

entity's activities. In assessing control, the Group takes account of

potential voting rights which can be exercised at that time.

The Group determines the goodwill on the basis of the fair value of the

consideration paid, the carrying amount of any non-controlling interest

in the acquired undertaking and, if applicable, the fair value of the prior

interest in the acquiree. The net amount of the identifi ed assets

acquired and the accepted liabilities is then deducted. If the difference

is negative, a book profi t from an advantageous purchase is stated

directly in the profi t and loss account. Any non-controlling interests are

Notes to the consolidated fi nancial statements


>Notes to the consolidated fi nancial statements

Other participating interests over which no signifi cant infl uence is

exercised are carried at fair value and the dividend is stated in the

profi t and loss account when it is made payable. If no fair value is

available and other methods do not result in a reasonable estimate, the

investment is carried at cost less impairment.

4.5 Elimination of transactions on consolidation

Intragroup balances and transactions between the subsidiaries in the

Group and unrealised gains and losses on such transactions are

eliminated in the preparation of the consolidated fi nancial statements.

Unrealised gains on Group transactions with proportionally

consolidated joint ventures and investments stated in accordance with

the equity method are eliminated in proportion to the Group's interest

in the investment. Unrealised losses are eliminated in the same way as

unrealised gains, but only to the extent that there is no indication of

impairment.

5 FOREIGN CURRENCIES

5.1 Transactions in foreign currencies

Receivables and liabilities denominated in foreign currencies are

converted into euros at the rate prevailing on the reporting date.

Transactions in foreign currencies are converted into euros at the

exchange rate applying on the transaction date. Currency translation

differences are stated in the profi t and loss account.

Non-monetary assets and liabilities which are denominated in foreign

currencies and valued on the basis of historical cost are converted at

the exchange rate on the transaction date.

5.2 Subsidiaries and joint ventures outside the eurozone

The revenues and expenses of subsidiaries outside the eurozone are

converted into euros at the exchange rate on the transaction date.

Assets and liabilities including goodwill and fair value adjustments in

respect of acquisitions are converted at the rate on the reporting date.

The resulting translation differences are carried in other comprehensive

income in equity. The proportionate share of the currency translation

difference is allocated to any non-controlling interests. If an activity

outside the eurozone is fully or partly divested, the accumulated

exchange rate difference is transferred from equity to the profi t and

loss account as part of the result of the sale.

carried at their proportionate share of the carrying amount of

identifi able assets of the acquired undertaking on the acquisition date.

The paid consideration includes no amount for the settlement of

existing relationships. Any such amount is stated in the profi t and loss

account.

Transaction costs other than those related to the issue of loans or

equity instruments allocated to the Group as a result of acquisitions

are charged to the result when they arise.

4.2 Acquisition of non-controlling interests

Acquired non-controlling interests are stated as transactions with

shareholders (directly as a charge to equity) and no goodwill is

therefore included.

4.3 Subsidiaries

Subsidiaries are undertakings in which the Company directly and/or

indirectly has a controlling interest. The fi nancial statements of

subsidiaries are included in the consolidated fi nancial statements from

the fi rst date on which control is exercised to the date on which such

control ends. Non-controlling interests in the Group's result and equity

are stated separately. Losses in connection with non-controlling

interests are allocated to the non-controlling interests, even if a defi cit

arises for the non-controlling interests in question.

4.4 Associated companies, joint ventures and other participating

interests

Associated companies are entities in which the Group has signifi cant

infl uence on the fi nancial and operational policy, but in which it has no

controlling interest. Signifi cant infl uence is assumed to exist if the

Group holds between 20% and 50% of the voting rights in another

entity. Associated companies are accounted for using the equity

method and are stated at cost including transaction costs on fi rst-time

inclusion. If the Group's share in losses exceeds the carrying value of

the associated company, the carrying value is stated at zero and further

losses are no longer stated, unless the Group has entered into a

liability or has made payments on behalf of the associated company.

Joint ventures are companies over which the Group has joint control

and in which such control has been set forth in an agreement and in

which strategic decisions on the fi nancial and operational policy are

taken on the basis of unanimity. Joint ventures are proportionally

consolidated.


asset or liability. If no hedge accounting is applied, profi ts or losses on

the derivative fi nancial instrument are stated directly in the profi t and

loss account.

8 SEGMENT REPORTING

An operating segment is a part of the Group conducting business

activities which can result in revenues and expenses, including

revenues and expenses associated with transactions with other parts

of the Group. The Group determines and presents operating segments

on the basis of the information reported internally to the Chief

Operating Decision Maker (CODM) committees, which take the

important operating decisions in the segment.

The operating results of an operating segment are assessed

periodically by the CODM committees in order to decide on the

allocation of resources to the segment and for performance

assessment.

The investment expenses of a segment concern the total expenses

incurred during the reporting period for the acquisition of tangible fi xed

assets and intangible assets with the exception of goodwill.

The assets and liabilities of the segment concern items which are or

may reasonably be allocated directly.

Unallocated assets comprise profi t tax receivables and cash and cash

equivalents. The unallocated liabilities comprise interest-bearing loans

and profi t tax liabilities.

9 REVENUES

Revenues comprise the revenues from goods and services supplied to

third parties. These are stated at the fair value of the consideration

received or to be received, less taxes and any volume, trade or payment

discounts due.

Revenues from sales of goods are recognised in the profi t and loss

account when the main risks and benefi ts of ownership have been

transferred to the purchaser.

Revenues from services supplied are recognised in the profi t and loss

account in proportion to the extent of performance of the work applying

on the reporting date.

The rates of the main currencies against the euro are as follows:

Closing rate Average rate

2011 2012 2011 2012

US dollar 1.30 1.32 1.39 1.29

British pound 0.84 0.81 0.87 0.81

Danish krone 7.43 7.46 7.45 7.44

UAE dirham 4.77 4.86 5.11 4.73

Malaysian ringgit 4.11 4.04 4.25 3.98

Singapore dollar 1.68 1.61 1.75 1.61

Chinese yuan 8.16 8.22 8.99 8.12

Australian dollar 1.27 1.27 1.35 1.25

6 DERIVATIVES

The Group uses derivatives in order to hedge exchange rate and

interest rate risks resulting from operating, fi nancing and investing

activities. Examples are currency options and forward contracts as well

as interest rate caps and swaps. In accordance with its treasury policy,

the Group does not use derivatives for trading purposes. Nor does it

issue such derivatives.

Derivatives are valued at fair value on fi rst-time inclusion. The resulting

income or expense is stated directly in the profi t and loss account

unless hedge accounting is applied (see section 7).

The fair value of derivatives is the estimated amount which the Group

would receive or would have to pay in order to terminate the derivative

on the reporting date, taking into account the current exchange rates

and the current interest rate.

7 HEDGE ACCOUNTING

Where specifi c conditions are met, hedge accounting can be applied.

Under these specifi c conditions, there must be a demonstrable

relationship between the variability of the future cash fl ows or balance

sheet positions (of the hedged item) and the hedging instrument, the

relationship must be documented and the hedge must be suffi ciently

effective. The Group applies cash fl ow hedge accounting to interest

rate derivatives. In this situation, the effective portion of the changes

in the fair value of the derivative fi nancial instrument is stated directly

in other comprehensive income of the hedging reserve in equity. The

ineffective portion of the changes in the fair value of the derivative

fi nancial instrument is stated directly in the profi t and loss account. If

the hedged future transactions are stated in the profi t and loss account,

the transfer takes place from equity to the profi t and loss account or is

stated in the cost price on the fi rst-time inclusion of the non-fi nancial



13 FINANCIAL INCOME AND EXPENSES

Financial income and expenses include the interest income and

expenses on invested and borrowed monies, interest charges on

fi nancial lease payments, foreign exchange rate differences, dividends

from other participating interests and results of derivatives for which

no hedge accounting is used and the realised and ineffective portion of

the change in the fair value of derivatives for which hedge accounting

is used. Interest income and expenses are stated in the profi t and loss

account as they accrue on the basis of the effective interest method.

Material fi nancial expenses in the construction period which are

directly attributable to the acquisition, construction or production of an

eligible asset (which will require a considerable period before it is

ready for use or sale) are capitalised as part of the costs of that asset.

Dividend income from other participating interests is stated in the

profi t and loss account at the time at which the Group's right to

payment is established.

14 PROFIT TAX

The tax on profi t for the fi nancial year includes the profi t tax that is

payable, available for set-off and deferred in respect of the reporting

period. The profi t tax is stated in the profi t and loss account, except

where it relates to items which are included directly in equity or in

other comprehensive income. Profi t tax that is payable and available

for set-off in respect of the reporting period is the profi t tax which is

expected to be payable on the taxable result, calculated on the basis of

tax rates which have been set on the reporting date, or on which a fi rm

decision has been taken by the reporting date, and any corrections to

profi t tax payable in respect of previous years. Additional taxes on

profi t from dividend payments are stated at the same time as the

liability to pay the respective dividend.

No revenues are recognised if the extent of the revenues cannot be

reliably determined and if signifi cant uncertainties remain with regard

to the collection of the remuneration due, the associated costs or the

possible return of goods, and also if there is a protracted management

involvement with such goods.

The Group also carries out projects to manufacture assets under

contracts with third parties. The costs relating to a project are

recognised when they are incurred. As soon as the result of a project in

progress can be reliably estimated, revenues from that project are

recognised in proportion to its degree of completion. Expected losses

on projects are stated immediately in the profi t and loss account.

10 GOVERNMENT SUBSIDIES

Subsidies granted as compensation for expenses incurred by the Group

are systematically stated as income in the profi t and loss account in

the same period as that in which the subsidisable expenses are

incurred and as soon as there is a reasonable certainty that they will

be received and that the Group will fulfi l the attached conditions.

Subsidies granted to compensate the Group for the cost of an asset are

systematically stated as cost of sales in the profi t and loss account

during the useful life of the asset.

11 RAW MATERIALS AND MANUFACTURING SUPPLIES

The consumption of raw materials and manufacturing supplies is

calculated on the basis of historical cost.

12 LEASE PAYMENTS

Lease payments in respect of operational leasing are stated in the

profi t and loss account on a straight-line basis over the lease term.

Remuneration received as an incentive to effect leases is stated as an

integral part of the total lease costs in the profi t and loss account over

the lease term.

Financial lease payments are stated partly as fi nancial expenses and

partly as a repayment of the outstanding liability. The fi nancing costs

are allocated to each period of the total lease term in such a way that

this results in a constant periodic interest rate on the residual balance

of the liability.


16 NEW STANDARDS AND INTERPRETATIONS NOT YET APPLIED

A number of new standards, amendments to standards and

interpretations were not yet in force in 2012 and have therefore not

been applied to these consolidated fi nancial statements:

■ IAS 19 revised – Employee Benefi ts, which becomes compulsory

in 2013. The main effects are that actuarial gains and losses are

credited or charged directly to group equity and the corridor

method is no longer permitted. In addition, the expected return on

fund investments must be equalised with the discount rate.

TenCate already credits or charges actuarial gains and losses

directly to group equity. Annual pension expenses are also

expected to increase by approximately € 2 million since the

expected return on fund investments is equal to the discount rate.

■ IFRS 11 – Joint arrangements, which becomes compulsory in 2013

and may give rise to changes in the treatment of joint ventures

and similar agreements. As a result of this standard, interests in

joint ventures will no longer be proportionally consolidated from

2013. The expected impact is limited.

The other new or amended standards are not expected to have any

material effect on the Group's consolidated fi nancial statements.

17 PRINCIPLES FOR THE PREPARATION

OF THE CASH FLOW STATEMENT

Cash fl ows from operating activities are presented on the basis of the

indirect method. Cash fl ows in foreign currencies are converted at the

exchange rate on the date of the cash fl ow or on the basis of averages.

Changes which have not resulted in cash fl ows, such as exchange rate

differences, acquisitions, fi nancial lease liabilities, changes in fair

value, recognised share-related transactions and similar transactions

are eliminated in this statement. Dividends paid to shareholders are

included in the cash fl ow from fi nancing activities. Dividends received

are stated in the cash fl ow from investing activities, and interest paid

is stated in the cash fl ow from operating activities. Overdrafts which

are immediately repayable and form part of the Group's cash

management are included in the balance of cash and bank current

accounts as part of the consolidated cash fl ow statement.

A receivable / provision is recognised for deferred tax differences

using the balance sheet liability method for temporary differences

between the carrying value of assets and liabilities for the fi nancial

reporting and the fi scal carrying value of the items concerned. No

provision is formed in respect of two temporary differences: non-tax-

deductible goodwill and the difference between the economic and

fi scal value of subsidiaries, associated companies, joint ventures and

other participating interests. The amount of the provision for deferred

profi t tax liabilities is based on the method by which the carrying value

of the assets and liabilities is expected to be realised or settled, using

tax rates which, on the reporting date, have been specifi ed by law or in

material terms.

Deferred profi t tax assets and liabilities are offset if there is a legally

enforceable right to offset the profi t tax assets and liabilities and such

assets and liabilities relate to profi t tax imposed by the same tax

authority on the same taxable entity, or on different taxable entities

which intend to offset the profi t tax assets and liabilities or whose

profi t tax assets and liabilities are realised simultaneously.

A deferred profi t tax asset is only recognised in respect of unused tax

losses, tax income and deductible temporary differences to the extent

that it is likely that future taxable profi ts will be available which can be

applied for the realisation of the timing difference. Deferred profi t tax

assets are reviewed on each reporting date and reduced if it is no

longer likely that the associated tax benefi t will be realised.

15 EARNINGS PER SHARE

The Group presents ordinary and diluted earnings per share for the

ordinary share capital. The earnings per ordinary share are calculated

on the basis of the net result attributable to shareholders of the Group

divided by the weighted average number of ordinary shares in issue

during the reporting period (corrected to take account of own shares).

In the calculation of the diluted earnings, the weighted average number

of ordinary shares in issue during the reporting period is corrected to

take account of the potential dilutive effect on the ordinary shares

arising from the share options granted to employees.



18.3 Expenses after first-time inclusion

Expenses after the fi rst-time inclusion of capitalised intangible assets

are capitalised only if they lead to an increase in the future economic

benefi ts embodied in the particular asset to which they relate. All other

expenses are charged to the profi t and loss account when they are

incurred.

18.4 Amortisation

Amortisation is calculated on the cost of the asset, less the residual

value.

Amortisation costs are charged on a straight-line basis to the profi t and

loss account in accordance with the estimated useful life of intangible

assets. Goodwill is tested each year on the reporting date to assess

whether any impairment has arisen. The amortisation of other

intangible assets begins as soon as the assets are available for use.

The estimated economic life is as follows:

■ Development costs 5 years

■ Other intangible assets 3 – 14 years

The amortisation method, economic life and residual value are

assessed periodically and adjusted if necessary.

19 TANGIBLE FIXED ASSETS

19.1 Owned assets

Tangible fi xed assets are valued at cost less accumulated depreciation

(see 19.4) and accumulated impairments (see note 23).

The cost of self-manufactured assets comprises material costs, direct

labour costs and any other costs attributable directly to the preparation

of the asset for use, any costs of dismantling and removing the asset,

the costs of restoring the location in which the asset is held and

capitalised fi nancing costs.

Where tangible fi xed assets consist of components with differing

useful lives, these are stated as separate items under tangible fi xed

assets.

The profi t or loss on the sale of a tangible fi xed asset is determined by

comparing the sales proceeds with the carrying value of the tangible

fi xed asset. The net difference is stated under general management

costs in the profi t and loss account.

18 INTANGIBLE ASSETS

18.1 Goodwill

Details of the valuation of goodwill on fi rst-time inclusion can be found

in note 4.1. Goodwill is valued at cost less accumulated impairments.

The carrying value of the goodwill on investments in associated

companies is included in the carrying value of the respective

investment. An impairment loss on an associated company is allocated

to the carrying value of the associated company investment. Goodwill

is allocated to cash generating units and is tested each year on the

reporting date to assess whether there is any indication of impairment.

18.2 Other intangible assets

The other intangible assets consist of:

Research and development

Expenses for research activities carried out with a view to acquiring

new scientifi c or technical knowledge and insights are stated as an

expense in the profi t and loss account when they are incurred.

Expenses for development activities, in which research results are used

for a plan or design for the production of new or substantially improved

products and processes, are capitalised if the development costs can

be reliably determined, the product or process is technically and

commercially feasible and the Group has suffi cient resources to

complete the development and use or sell the asset. The capitalised

expenses include material costs, direct labour costs, fi nancing costs

and an appropriate portion of directly attributable overheads. Other

development costs are stated as an expense in the profi t and loss

account when they are incurred. The capitalised development costs are

valued at cost less accumulated amortisation and accumulated

impairments (see note 23).

Other intangible assets

Other intangible assets acquired by the Group relate to customer

relationships, trademark rights, patents, software and similar rights.

These intangible assets are valued at cost less accumulated

amortisation and accumulated impairments (see note 23). Costs of

internally generated goodwill and trademarks are stated as an expense

in the profi t and loss account when they are incurred.


21 TRADE DEBTORS AND OTHER RECEIVABLES

Trade debtors and other receivables with a term of less than one year

are stated at amortised cost less impairments.

Projects in progress commissioned by third parties concern the gross

amount yet to be charged that is expected to be collected from

customers for the contract work carried out up to the reporting date.

This item is carried at cost plus the profi t recognised up to that time

less invoiced instalments in proportion to the progress of the project

and recognised losses. The cost includes all expenditure directly

related to specifi c projects and an allocation of the fi xed and variable

indirect costs incurred.

Projects in progress commissioned by third parties under contracts in

which the amount of costs incurred plus the recognised profi t is higher

than the invoiced instalments are stated in the balance sheet under

other receivables. If the amount of invoiced instalments is higher than

the costs incurred plus recognised profi t, the difference is stated in the

balance sheet under trade creditors and other payables.

22 CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances and immediately

claimable credit balances with an original term of three months or less.

Overdrafts at banks which are immediately claimable and form an

integral part of the Group's cash management are included as part of

the cash and cash equivalents for the purposes of the cash fl ow

statement.

23 IMPAIRMENT

The carrying value of the Group's assets, except that of inventories

(see note 20) and deferred profi t tax assets (see note 14) is examined

at each reporting date in order to determine whether there are

indications of impairment.

If there are such indications, an estimate is made of the realisable

value of the asset. In the case of goodwill and intangible assets which

are not yet available for use, the realisable value is estimated at each

reporting date. This also applies if there is an indication of impairment.

An impairment is recognised when the carrying value of an asset or the

cash generating unit thereof is higher than the estimated realisable

value. It is fi rst charged to any allocated goodwill and then deducted

proportionately from the carrying value of the other assets.

19.2 Leased assets

Leases in which the Group actually assumes all the risks and benefi ts

of ownership are classifi ed as fi nancial leases. Tangible fi xed assets

which are acquired by means of fi nancial leases are valued on fi rst-

time inclusion at the lower of fair value and the present value of the

minimum lease payments at the inception of the lease, less

accumulated depreciation (see note 19.4) and impairments (see note

23). Lease payments are stated as described in note 12.

19.3 Expenses after first-time inclusion

Expenses incurred for the replacement of a component of a tangible

fi xed asset are capitalised provided the future economic benefi ts

resulting from the asset accrue to the Group and the cost of such

replacement expenses can be reliably determined. All other expenses

are charged to the profi t and loss account when they are incurred.

19.4 Depreciation

Depreciation is calculated on the cost of an asset less the residual

value. Depreciation is charged to the profi t and loss account on the

basis of the straight-line method over the estimated economic life of

each component of a tangible fi xed asset. Land is not depreciated.

The estimated economic life is as follows:

■ buildings 33 years

■ fi xtures and installations in buildings 10 years

■ plant and equipment 7 – 10 years

■ inventory 5 years

■ computers and offi ce equipment 3 – 5 years

The depreciation method, economic life and residual value are

assessed periodically and adjusted if necessary.

20 INVENTORIES

Inventories are stated at the lower of cost or net realisable value. The

cost of inventories is based on the FIFO (fi rst in, fi rst out) principle and

includes the costs incurred for the acquisition of the inventories, their

production or conversion and bringing them to the existing location and

condition. In the case of inventories of fi nished products and work in

progress, the cost includes in addition to the direct costs an appropriate

portion of the indirect costs based on the normal production capacity.

The net realisable value is the estimated sale price in ordinary

operations, less the estimated costs of completion and the sale costs.



24 SHARE CAPITAL

24.1 Share capital

The share capital is classifi ed as equity.

24.2 Repurchase of own shares

On the repurchase of share capital which is stated in the balance sheet

as equity, the amount of the paid consideration, including directly

attributable costs, is stated as a change in equity. Repurchased shares

are classifi ed in the reserve for own shares and presented as

a deduction from total equity.

24.3 Dividend

Dividend is stated as a liability in the period in which it is declared.

25 PENSION LIABILITIES

25.1 Defined contribution schemes

Liabilities relating to contributions to defi ned contribution pension

schemes are charged to the profi t and loss account in the period to

which they relate.

25.2 Defined benefit schemes

The Group's net liability in respect of defi ned benefi t pension schemes

is calculated separately for each scheme by estimating the amount of

the future entitlement which employees have earned in the present

and previous reporting periods in exchange for their services. This

entitlement is discounted in order to determine the present value, with

the fair value of the fund investments being deducted. The discount

rate is the yield on the reporting date of bonds which have an AA credit

rating and a period to maturity which approximates the term of the

Group's liabilities and are denominated in the currency in which the

entitlements arise. The calculation is performed by an authorised

actuary on the basis of the projected unit credit method. If the

entitlements under a pension scheme are increased, the proportion of

the higher entitlement which relates to employees' past service is

stated as an expense in the profi t and loss account on a straight-line

basis over the average period up to the vesting of the rights. If the

rights are vested immediately, the expense is stated immediately in the

profi t and loss account.

For the testing of impairments, assets which cannot be tested

individually are combined into the smallest distinguishable group of

assets which, as a result of continuous use, generates cash fl ow that is

broadly independent of the incoming cash fl ows from other assets or

groups of assets (the cash generating unit). Taking into account the

maximum size of an operating segment before aggregation (the

'operating segment ceiling test'), cash generating units to which

goodwill has been allocated for the testing of goodwill with regard to

impairment are combined in such a way that the level at which such

impairment is tested refl ects the lowest level at which goodwill is

monitored in internal reporting. Goodwill acquired in a business

combination is allocated to groups of cash generating units which are

expected to benefi t from the synergy advantages of the combination.

23.1 Calculation of the realisable value

The realisable value is the higher of the recoverable amount, less costs

to sell, and the value in use. In determining the value in use, the

present value of the estimated future cash fl ows is calculated using a

discount rate before tax which refl ects both the current market

valuations of the time value of money and the specifi c risks relating to

the asset or cash generating unit. In the case of an asset which

generates no cash receipts that are largely independent of other

assets, the realisable value is determined for the cash generating unit

to which the asset belongs.

23.2 Reversal of impairments

An impairment relating to goodwill cannot be reversed. In the case of

other assets, an assessment is made on the reporting date as to

whether an impairment must be reversed if there is a change in the

estimates on which the realisable value was based.

An impairment is only reversed to the extent that the carrying value of

the asset is not higher than the carrying value which would have been

determined after the deduction of depreciation, if no impairment had

been recognised.

Goodwill which is part of the carrying value of an investment in an

associated company is not recognised separately and therefore not

tested separately for impairment. Instead, the total amount of the

investment in an associated company is tested for impairment as a

single asset if there are objective indications that the investment in an

associated company may be subject to impairment.


27.1 Claims and guarantees

The provision for claims relates to damages claims and any litigation

costs. The provision for guarantees relates to goods and services

supplied and is based on historical guarantee data.

27.2 Reorganisation

Reorganisation provisions are included if the Group has formalised a

detailed plan for the reorganisation and has begun or publicly

announced the reorganisation. The reorganisation provision does not

include costs incurred in relation to future activities.

27.3 Other personnel liabilities

Long-service leave and other allowances such as anniversaries form

part of the provisions under other personnel liabilities. These provisions

are accumulated over the respective period as in the case of defi ned

benefi t pension schemes, except that actuarial gains or losses are

recognised in the profi t and loss account in the period in which they

arise.

27.4 Environment

In accordance with the Group's published environmental policy and the

applicable legal obligations, a provision for the clearance of

environmental pollution is recognised when the pollution occurs.

27.5 Onerous contracts

A provision is recognised in the balance sheet for onerous contracts if

the benefi ts which the Group expects to obtain from a contract are

lower than the unavoidable costs of fulfi lling the liabilities under the

contract. The provision is valued at the lower of the present value of

the expected costs of terminating the contract and the present value of

the expected net costs of continuing the contract.

Actuarial gains and losses in respect of a pension scheme are credited

or charged directly to group equity.

If the calculation results in a receivable for the Group, the recognised

asset item is limited to an amount not exceeding any unrecognised

back-service costs and the present value of economic benefi ts in the

form of any future repayments by the fund or, if lower, future pension

contributions.

26 SHARE-BASED PAYMENTS

The option scheme enables the Group's management to acquire shares

in Royal Ten Cate.

The fair value of the granted options is stated under personnel costs,

with a corresponding entry in equity. The fair value is determined on

the grant date and is allocated over the period up to the time at which

the management acquires an unconditional right to the options. The

amount stated as costs is adjusted annually to the number of options

which will be exercised. The fair value of the granted options is

determined on the basis of the binomial model, taking account of the

conditions under which the options have been granted. Valuation

factors include the share price on the valuation date, the exercise price

of the instrument, the expected volatility, the weighted average

expected term of the instruments (based on past experience and the

conduct of the instrument holders), the expected dividends and the

risk-free interest rate (based on government bonds).

27 PROVISIONS

A provision is recognised in the balance sheet if there is a legally

enforceable or actual obligation as a result of a past event and it is

likely that an outfl ow of resources will be required to settle such

liability and such outfl ow can be reliably estimated. If the effect of this

is material, the provisions are determined by discounting the expected

future cash fl ows using a discount rate before profi t tax which refl ects

the current market valuations of the time value of money and, if

necessary, the specifi c risks of the liability. Interest accrual is stated as

a fi nancial expense.



■ Inventories

The fair value of inventories acquired as part of a business combination

is determined on the basis of the estimated sale price in normal

business operation, less the estimated costs of completion and the

sale costs, plus a reasonable profi t margin refl ecting the completion

and sale effort.

■ Trade debtors and other receivables

The fair value of trade debtors and other receivables, excluding

projects in progress commissioned by third parties, is estimated at the

present value of the future cash fl ows, on the basis of the market

interest rate applying on the reporting date. This fair value is

determined for information purposes or if the trade debtors and other

receivables are acquired by means of a business combination.

28 LONG-TERM DEBTS

When included for the fi rst time, interest-bearing loans received are

stated at fair value less directly attributable transaction costs. After

fi rst-time inclusion, interest-bearing loans are carried at amortised

cost, with the difference between the cost and the redemption price

being stated in the profi t and loss account on the basis of the effective

interest method over the term of the loans.

29 TRADE CREDITORS

Trade creditors and other payables are carried at amortised cost.

30 DETERMINATION OF FAIR VALUE

A number of principles and the Group's information provision require

the determination of the fair value of both fi nancial and non-fi nancial

assets and liabilities. For the purposes of valuation and information

provision, the fair value is determined on the basis of the following

methods. If applicable, further information on the principles for

determining the fair value is provided in the section of these notes

applying specifi cally to the respective asset or the respective liability.

■ Tangible fixed assets

The fair value of tangible fi xed assets included as a result of a business

combination is the estimated amount for which a property could be

traded on the valuation date between a willing buyer and a willing

seller in an arm's length transaction after proper marketing in which

the parties have each acted prudently and knowledgeably. The market

value of other tangible fi xed assets and inventories is based on the

listed market prices of comparable assets and items where available,

and on replacement costs where applicable.

■ Intangible assets

The fair value of patents and trademarks acquired as part of a business

combination is determined on the basis of the discounted estimated

royalties which have been avoided as a result of ownership of the

patent or trademark. The fair value of customer relationships acquired

in a business combination is determined using the excess earnings

method over several periods, with the respective assets being valued

after deduction of a real return on all other assets which jointly

constitute the associated cash fl ows. The fair value of other intangible

assets is based on the expected present value of the cash fl ow from

the use and ultimate sale of the asset.


Notes to the profi t and loss account

Limited transactions take place between the segments. The prices for

these transactions are determined on an objective business basis.

There is no segment in which the Group depends on sales to a single

customer for all its revenues.

Analysis by geographic location

The segments operate on four continents, namely Europe, North

America, Australia and Asia. In the presentation of information based

on geographic segments, the revenues of the segment are based on the

geographic location of origin. The assets of the segments are based on

the geographic location of the assets.

The following page contains an overview of each of the reporting

segments. The performance is determined on the basis of the operating

result, as stated in the internal management report to the CODM

committees.

31 OPERATING SEGMENTS

The Group consists of three segments, as described below. The

segments offer a range of products and services, are managed

separately and use various technologies. The summary below describes

the activities of the various segments of the Group:

■ Advanced Textiles & Composites

Manufacture and sale of protective and safety fabrics for professional

wear, outdoor fabrics, composites for personal and vehicle protection

and composites for industrial applications and technological

applications in aerospace.

■ Geosynthetics & Grass

Manufacture and sale of fabrics, non-wovens and grids for civil

engineering, environmental projects, recreational and industrial

applications and manufacture and sale of synthetic turf fi bres and

backing for a range of applications.

■ Other activities

Manufacture and sale of rubber and foam rollers for the offi ce

equipment industry and related products, development, production and

sale of inkjet technology and related components for industrial

applications, as well as country holding companies and service

companies.


>Notes to the profi t and loss account

31.1 Analysis by operating segment

Advanced Textiles

& Composites

Geosynthetics

& Grass Others

Eliminations between

sectors Consolidated

in millions of euros 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

EXTERNAL REVENUES 538.4 460.6 525.9 518.7 74.5 69.7 – – 1,138.8 1,049.0

Revenue from transactions

between segments* – – – – – – – – – –

Depreciation and amortisation – 15.3 – 15.7 – 28.9 – 30.7 – 3.7 – 5.2 – – – 47.9 – 51.6

OPERATING INCOME 64.7 18.5 20.8 25.1 4.1 – 6.1 – – 89.6 37.5

Financial income1 0.2 0.3

Financial expenses1 – 11.3 – 12.5

Profi t tax – 18.7 – 8.7

Net result of associated

companies – – – 1.3 – 0.3 – – – – – 1.3 – 0.3

ASSETS AND LIABILITIES

Assets of segments 387.2 341.9 484.7 454.8 76.8 65.0 – – 948.7 861.7

Investments in associated

companies – – 4.6 4.1 – – – – 4.6 4.1

Unallocated assets – – – – – – – – 50.1 60.1

TOTAL ASSETS 387.2 341.9 489.3 458.9 76.8 65.0 – – 1,003.4 925.9

Liabilities of segment2 82.1 62.7 80.1 74.8 49.6 61.7 – – 211.8 199.2

Unallocated liabilities – – – – – – – – 322.1 271.4

TOTAL LIABILITIES 82.1 62.7 80.1 74.8 49.6 61.7 – – 533.9 470.6

Investment expenditure 8.3 9.4 12.2 5.3 5.2 1.9 25.7 16.6

1 Excluding € 0.1 million of exchange rate differences (2011: € 0.2 million).

2 Excluding intercompany loans.



33 PERSONNEL COSTS 2011 2012

Wages and salaries 149.7 154.9

Social charges 29.8 32.3

Costs of option scheme 1.9 2.0

Pension costs 4.3 4.2

Temporary personnel 14.7 14.5

Other personnel costs 4.8 5.6

205.2 213.5

The pension costs amount to € 4.2 million. This fi gure includes income

of € 0.3 million (2011: expense of € 0.7 million) in respect of defi ned

benefi t schemes (see note 48.3) and an expense of € 4.5 million (2011:

€ 3.6 million) in respect of defi ned contribution schemes. The income in

respect of defi ned benefi t schemes includes non-recurring income of

€ 3.3 million (see note 48)

The average number of employees (permanent and temporary in the

Group in 2012 was 4,941 (2011: 4,797).

34 GENERAL MANAGEMENT COSTS

The general management costs include the following other operating

expenses and income.

Government subsidies amount to € 1.7 million (2011: € 2.4 million) and

relate particularly to subsidised research and development projects.

In 2012 the book profi t on the sale of tangible assets amounted to

€ 0.3 million (2011: € 3.4 million).

In 2011, income amounting to € 2.1 million was recognised in respect

of the acquisition of control of GreenFields BV and ABDS ApS.

31.2 Analysis by geographic location

Revenues by origin Non-current assets by origin

2011 2012 2011 2012

Netherlands 232.9 209.4 65.9 59.0

Rest of Europe 197.9 192.0 103.5 97.3

North America 544.7 468.9 154.2 153.2

Asia / Australia /

Middle East 163.3 178.7 175.9 160.7

Total 1,138.8 1,049.0 499.5 470.2

* Non-current assets exclude derivative fi nancial instruments and deferred profi t

tax assets.

32 ACQUISITIONS AND SALE OF PARTICIPATING INTERESTS

32.1 Acquisitions

On 2 May 2012 the Group Acquired full control of PMC Baycomp. PMC

Baycomp has technologies in thermoplastic composites and

components for applications including the automotive industry, oil and

gas extraction and consumer electronics. For reporting purposes, this

acquisition has been included in the Advanced Textiles & Composites

sector.

These acquisitions are being accounted for in accordance with the

acquisition method (IFRS 3). The acquisition amounts have been

allocated to the identifi ed acquired assets and liabilities, based on the

fair value. The expected synergy effects for the Group result in an

amount of € 4.6 million of goodwill paid for the acquisition.

The acquisition has no material impact on the assets and liabilities.

The purchase price allocation for the aforementioned acquisition has

not yet been completed.

In 2012 an amount of € 15.7 million was paid in respect of acquisitions.

The effect of the acquisition on 2012 revenues amounts to

€ 7.6 million. The acquisition has no effect on the 2012 result after tax.

The revenues and net results would not differ materially if the

acquisition had taken place on 1 January 2012. The Group incurred

expenses of € 1.0 million in connection with the acquisitions,

comprising particularly external legal expenses and due diligence

costs.

*


>Notes to the profi t and loss account

35 NET FINANCIAL EXPENSES 2011 2012

Interest income 0.2 0.3

Foreign currency exchange rate differences – 0.1

Financial income 0.2 0.4

Interest expenses – 8.0 – 8.9

Realised change in fair value of derivatives for which hedge accounting is used – 2.8 – 3.4

Ineffective portion of change in fair value of derivatives for which hedge accounting is used – 0.2 – 0.1

Result of derivatives for which no hedge accounting is used – 0.3 – 0.1

Foreign currency exchange rate differences – 0.2 –

Financial expenses – 11.5 – 12.5

Net financial expenses – 11.3 – 12.1

36 PROFIT TAX 2011 2012

Profit tax payable

Current fi nancial year – 16.9 – 10.6

Recognition of previously unrecognised tax losses 0.2 0.1

Underprovision (overprovision) in previous years 0.7 –

– 16.0 – 10.5

Deferred profit tax

Origination and reversal of temporary differences – 4.2 – 1.0

Recognition of previously unrecognised tax losses 0.1 0.1

Change in unrecognised temporary differences 1.1 2.7

Change in tax rates 0.3 –

– 2.7 1.8

Total profit tax charge in profit and loss account – 18.7 – 8.7


Reconciliation with applicable profit tax rate 2011 2012

Result before profi t tax 78.3 25.4

Tax on profi t at average weighted local profi t tax rate 29.8% 23.3 30.7% 7.8

Non-tax-deductible costs 1.4% 1.1 5.1% 1.3

Tax-exempt income / deductions – 6.9% – 5.4 – 13.4% – 3.4

Prior years adjustments – 0.9% – 0.7 0.0% –

Change in tax rates – 0.4% – 0.3 0.0% –

Losses in reporting year for which no deferred tax asset has been recognised 2.4% 1.9 29.2% 7.4

Change in tax losses from previous years for which no deferred tax asset has been recognised – 0.4% – 0.3 – 0.8% – 0.2

Change in unrecognised deferred tax assets in respect of temporary valuation differences – 1.4% – 1.1 – 10.6% – 2.7

Other differences 0.3% 0.2 – 5.9% – 1.5

Tax charge in the profit and loss account 23.9% 18.7 34.3% 8.7

The rise in the weighted average tax charge from 29.8% to 30.7% was due in particular to changes in the various countries’ shares in the result

before profi t tax. In comparison with 2011, a larger share of the result was generated in countries with a relatively higher tax rate in 2012.

The rise in the effective tax rate from 23.9% to 34.3% is due particularly to the increase in losses in countries in which no full deferred tax assets

are held.


Notes to the consolidated balance sheet

37 INTANGIBLE ASSETS Goodwill Change

Other intangi-

ble assets Total

in millions of euros

Cost

Balance as at 1 January 2011 195.0 10.0 77.4 282.4

Acquisitions through business combinations 14.0 – 18.2 32.2

Additions – 3.0 1.4 4.4

Exchange rate differences 5.5 0.3 2.5 8.3

Balance as at 31 December 2011 214.5 13.3 99.5 327.3

Acquisitions through business combinations 4.6 – 3.6 8.2

Additions – 4.2 0.4 4.6

Exchange rate differences – 2.1 – 0.1 – 0.4 – 2.6


Amortisation


Amortisation – 1.3 11.6 12.9

Exchange rate differences 0.1 0.1 1.6 1.8


Amortisation – 2.6 11.9 14.5

Exchange rate differences – – 0.1 – 0.6 – 0.7


Carrying value





37.1 Amortisation/impairment

The Group recognised no impairment losses on intangible assets in

2012 (2011: € 0).

37.2 Impairment testing for cash generating units which include

goodwill

The following units include goodwill items:

2011 2012

TenCate Grass 120.0 118.4

TenCate Advanced Armour EU 36.0 36.0

TenCate Advanced Composites USA 20.2 24.3

TenCate Armour USA 22.6 22.2

Xennia Technology 9.2 9.4

Others 4.0 4.2

212.0 214.5

The Group tested the existing goodwill for impairment in 2012.

The realisable value has been determined on the basis of the value in

use. The value in use is based on the future cash fl ows over the

forthcoming four years, based on historical empirical data, market

expectations and strategic plans. No growth rate is applied for the

period beyond four years. The value in use in 2012 has been determined

in the same way as in 2011. On the basis of this test, no goodwill

impairment has been recognised. The changes in 2012 related to

acquisitions and exchange rate differences.

Principal assumptions made in estimating the present value of cash

flows

The principal assumptions made in calculating the realisable value

concern discount rates, revenue growth and gross margins.

Discount rate

The discount rate is a pre-tax measure based on the risk-free interest

rate in the government bond market, adjusted for the risk premium for

both the higher risk of securities investments and the Group's systemic

risk. The pre-tax discount rates used range from 9.3% to 9.6% (2011:

8.6% to 11.2%).

Revenue growth

The expected revenue growth is expressed as the compound annual

growth in the fi rst four years of the schedules used to test impairment

and is based on past experience, market expectations and strategic

plans.

Gross margin

The gross margin is the margin based on cost prices (in accordance

with the inventory valuation principles) as a percentage of expected

revenues. 2016 is the fi nal year of the cash fl ow forecast. The 2016

cash fl ow forecast is also used to calculate the perpetual cash fl ow.

Sensitivity to changes in assumptions

We have examined the sensitivity of the principal assumptions

(discount rate, revenue growth and gross margin) and concluded that in

the TenCate Grass and Xennia units an increase in the discount rate or

a decrease in the gross margin (as a percentage of revenues) of over

1% would cause the carrying value to exceed the realisable value

(2011: TenCate Grass 0.9%). With regard to the other units, it was

concluded that on a reasonable basis an adjustment to one of these

assumptions would not cause the carrying value to exceed the

realisable value.


>Notes to the consolidated balance sheet

38 TANGIBLE FIXED ASSETS Land and

buildings

Plant and

equipment

Other

operating

assets

Operating

assets

under

construction Total

Cost

Balance as at 1 January 2011 137.8 415.7 47.3 6.7 607.5

Acquisitions through business combinations 6.9 10.7 1.3 – 18.9

Additions 1.3 22.1 2.8 – 4.9 21.3

Disposals – 5.4 – 2.1 – 0.8 – – 8.3

Exchange rate differences 2.6 7.2 0.6 0.3 10.7

Balance as at 31 December 2011 143.2 453.6 51.2 2.1 650.1

Acquisitions through business combinations – 1.1 0.1 0.6 1.8

Additions 0.8 8.5 2.6 0.1 12.0

Disposals – 0.2 – 4.2 – 1.4 – – 5.8

Deconsolidation – – 0.8 – – – 0.8

Exchange rate differences – 0.7 – 2.5 – 0.1 – – 3.3


Depreciation

Balance as at 1 January 2011 63.9 291.7 37.7 – 393.3

Depreciation 5.7 25.8 3.5 – 35.0

Divestments – 3.2 – 1.9 – 0.7 – – 5.8

Exchange rate differences 0.8 4.5 0.4 – 5.7

Balance as at 31 December 2011 67.2 320.1 40.9 – 428.2

Depreciation 5.8 27.7 3.6 – 37.1

Divestments – 0.2 – 4.0 – 1.3 – – 5.5

Deconsolidation – – 0.1 – – – 0.1

Exchange rate differences – 0.4 – 1.9 – 0.1 – – 2.4

Balance as at 31 December 2012 72.4 341.8 43.1 – 457.3

Carrying value





Associated companies and joint ventures

The summary fi nancial data have not been adjusted in respect of the

percentage owned by the Group and can be analysed as follows as at

31 December:

2011 2012

Non-current assets 26.8 26.9

Current assets 26.8 30.7

Total assets 53.6 57.6

Current liabilities 18.7 21.4

Non-current liabilities 7.7 8.9

Total liabilities 26.4 30.3

Revenues 64.8 111.0

Costs 69.0 112.3

Profit / (Loss) – 4.2 – 1.3

The changes in the associated companies item were as follows:

2011 2012

Balance as at 1 January 5.2 4.6

Investments 5.5 –

Divestment as a result of acquiring control – 5.2 –

Result – 1.3 – 0.3

Exchange rate differences 0.4 – 0.2

Balance as at 31 December 4.6 4.1

39.2 Financial fixed assets

The fi nancial fi xed assets comprise long-term receivables and

investments.

The main long-term receivables and investments concern invested

pension assets at a number of American subsidiaries of € 9.6 million

(2011: € 8.2 million) and an advance payment in connection with long-

term lease rights in China and Malaysia amounting to € 2.1 million

(2011: € 2.2 million).

38.1 Impairment and reversal of impairment

The Group recognised no impairment of tangible fi xed assets in 2012

(2011: € 0). No impairment losses were reversed during the year.

38.2 Leased buildings, plant and equipment

The Group leases buildings, plant and equipment under a number

of fi nancial leases.

The net carrying value of these assets as at 31 December 2012 was

€ 4.2 million (31 December 2011: € 4.8 million). The leased buildings,

plant and equipment serve as collateral for the fi nancial lease liabilities

(see note 47).

38.3 Collateral

As at 31 December 2012, plant and equipment belonging to Ten Cate –

Union Protective Fabrics Asia ltd worth € 7.1 million (2011:

€ 7.0 million) was pledged as collateral for a credit facility of

€ 9.9 million (2011: € 9.8 million). € 5.6 million of this credit facility

was drawn as at the end of 2012 (2011: € 6.8 million).

39 INVESTMENTS IN ASSOCIATED COMPANIES AND FINANCIAL

FIXED ASSETS

39.1 Associated companies

The associated companies item at the end of 2012 relates to the 30%

interest in the shares of Hellas, the 25% interest in the shares

of Landscape Solutions B.V. and the 49% interest in GreenFields

(All Sports) UK ltd. The share in the net income of associated

companies amounted to – € 0.3 million (2011: – € 1.3 million). TenCate

has the option from December 2011 of increasing its interest by 7% per

year at an acquisition price dependent on the development of the

EBITDA of Hellas.

The Group received no dividend payments from associated companies

in 2012 (2011: € 0). The associated companies have a carrying value

of € 4.1 million as at 31 December 2012 (31 December 2011:

€ 4.6 million).



40 DEFERRED PROFIT TAX ASSETS AND LIABILITIES

The deferred profi t tax assets and liabilities recognised in the balance

sheet are attributable to the following items:

Assets Liabilities Net

2011 2012 2011 2012 2011 2012

Intangible assets – – – 9.1 – 7.9 – 9.1 – 7.9

Tangible fi xed assets – – – 13.1 – 11.4 – 13.1 – 11.4

Financial fi xed assets 0.1 – – – 0.1 –

Inventories 5.6 6.6 – – 5.6 6.6

Derivatives 1.9 1.3 – – 1.9 1.3

Other receivables 0.7 – – – 0.3 0.7 – 0.3

Pension provisions 2.2 7.5 – – 2.2 7.5

Other provisions 9.6 9.8 – – 9.6 9.8

Tax value of recognised loss carry-forwards 12.9 13.1 – – 12.9 13.1

Other items 2.3 2.5 – – 2.3 2.5

Deferred profi t tax asset / liability 35.3 40.8 – 22.2 – 19.6 13.1 21.2

Set-off of assets and liabilities – 14.2 – 10.8 14.2 10.8 – –

Net deferred profit tax asset / liabilities 21.1 30.0 – 8.0 – 8.8 13.1 21.2

The changes in the temporary differences during the fi nancial year can

be analysed as follows:

Balance as at

1 January 2011

Recognised

in profi t

and loss

Recognised

in other

comprehen-

sive income

Acquired

through

business

combinations

Balance as at

31 December

2011

Recognised

in profi t and

loss

Recognised

in other

comprehen-

sive income

Acquired

through

business

combinations

Balance as at

31 December

2012

Intangible assets – 10.1 3.6 – – 2.6 – 9.1 2.5 – – 1.3 – 7.9

Tangible fi xed assets – 5.1 – 8.0 – – – 13.1 1.3 – 0.4 – 11.4

Financial fi xed assets – 0.1 – – 0.1 – 0.1 – – –

Inventories 5.3 0.3 – – 5.6 0.8 – 0.2 6.6

Derivatives 1.3 0.3 0.3 – 1.9 – 0.4 – 0.2 – 1.3

Other receivables 1.0 – 0.3 – – 0.7 – 1.0 – – – 0.3

Pension provisions 4.2 – 4.0 2.0 – 2.2 – 1.6 6.9 – 7.5

Other provisions 4.1 5.5 – – 9.6 – 0.1 – 0.3 9.8

Tax value of recognised

loss carry-forwards 13.7 – 2.2 1.4 – 12.9 0.2 – – 13.1

Other items 0.3 2.0 – – 2.3 0.2 – – 2.5

Deferred profit tax

asset / liability 14.7 – 2.7 3.7 – 2.6 13.1 1.8 6.7 – 0.4 21.2


42 TRADE DEBTORS 2011 2012

Due from third parties 150.0 136.2

Due from associated companies 1.3 3.2

Due from joint ventures 1.1 0.6

Trade debtors 152.4 140.0

Trade and other receivables with a term of less than one year are

stated at amortised cost less impairments. Transfers to provisions for

doubtful debts are included in the profi t and loss account under cost of

sales.

As at 31 December 2012 trade debtors with a value of € 6.5 million

(2011: € 6.5 million) were encumbered as security for credit facilities

amounting to € 6.5 million (2011: € 6.5 million). € 6.5 million of this

credit facility was drawn as at the end of 2012 (2011: € 6.5 million).

43 OTHER RECEIVABLES 2011 2012

Amount receivable in respect of other taxes 3.3 4.3

Derivatives at fair value 1.0 0.3

Projects in progress 3.5 2.1

Other receivables and prepayments 14.4 9.2

Other receivables 22.2 15.9

Amounts receivable in respect of other taxes relate mainly to

reclaimable VAT.

As at 31 December 2012 the prepayments amounted to € 6.0 million

(2011: € 7.7 million).

As at 31 December 2012 the total costs and recognised profi t

associated with projects in progress, less recognised losses, amounted

to € 20.2 million (2011: € 12.4 million). Trade debtors included no

amounts deducted in respect of projects in progress commissioned by

third parties (2011: € 0.2 million).

The tax effect of the other comprehensive income in Group equity is

€ 6.7 million (2011: € 3.7 million) and relates to the actuarial results in

respect of pensions and the hedging reserve.

The realisation of the deferred profi t tax assets depends on the future

taxable profi t being higher than the profi t from the reversal of taxable

temporary differences. On the basis of a projection of the estimated

taxable profi t and the existing fi scal planning possibilities, it is

considered likely that suffi cient taxable profi t will be generated in

future to realise these deferred profi t tax assets.

Deferred profit tax assets not recognised in the balance sheet

As at 31 December 2012 there were € 89.4 million (2011: € 66.2 million)

of unused losses available for set-off. No deferred profi t tax asset has

been recognised in respect of this amount because it is currently

unlikely that future taxable profi t will be available to the Group for the

losses to be set off.

The amount of profi t tax concerned as at 31 December 2012 was

€ 22.2 million (2011: € 16.1 million).

The expiry periods of the unused losses available for set-off are shown

in the table below:

2011 2012

Within 2 to 5 years 11.4 17.5

After 5 years 24.0 27.7

Unspecifi ed period 30.8 44.2

Non-recognised losses available

for set-off 66.2 89.4

41 INVENTORIES 2011 2012

Raw materials and manufacturing supplies 90.3 60.0

Semi-manufactures 59.8 50.3

Finished products 117.8 116.1

Inventories 267.9 226.4

In 2012 the reduction in the inventory value included as an expense

amounted to a net recoverable amount of € 12.6 million (2011:

€ 4.2 million). The reversal of the reduction in the inventory value in

2012 amounted to € 0.2 million (2011: € 3.2 million). The inventory

value included as an expense and the reversal have been stated under

cost of sales.



45.2 Repurchased ordinary shares 2011 2012

number x 1,000

Outstanding and fully paid as at 1 January 433 620

Repurchase of own shares 309 –

Own shares for conversion of physical

securities – 3

Exercise of options – 110 – 39

Directors’ remuneration – 10 –

Issued in connection with share savings plan – 2 –

Outstanding and fully paid

as at 31 December 620 584

Ordinary shares are repurchased to prevent earnings per share being

diluted by the granting of options. No own shares were repurchased in

2012 (2011: 308,820 shares).

Repurchase of own shares

The general meeting of shareholders has granted the Executive Board

the power to acquire fully paid-up shares in the Company (or

certifi cates thereof) for the period ending on 18 October 2013. The

maximum number of shares which may thus be acquired is 10% of the

issued capital at the time of acquisition of the shares (or certifi cates

thereof).

45.3 Share premium

The share premium reserve is to be considered as paid-up capital.

45.4 Translation reserve

The translation reserve comprises all exchange rate differences which

arise due to the translation of the fi nancial statements of activities

outside the eurozone. These exchange rate differences are carried in

equity. The accumulation of the respective amount began on 1 January

2004 and is not available for distribution to shareholders.

45.5 Hedging reserve

The hedging reserve consists of the unrealised effective portion of the

accumulated change in the fair value of the derivatives used to hedge

the interest rate risk. The reserve is not available for distribution to

shareholders. A negative reserve reduces the amount freely available

for distribution from the reserves.

The balance of the hedging reserve after tax on 31 December 2012 was

– € 3.9 million (2011: – € 4.5 million).

44 CASH AND CASH EQUIVALENTS 2011 2012

Bank balances 22.6 26.6

Cash balances 0.1 0.1

Cash and cash equivalents 22.7 26.7

Cash loans, overdrafts – 35.4 – 35.4

Cash in cash flow statement – 12.7 – 8.7

All amounts were freely available at the end of 2012 and 2011.

45 TOTAL SHAREHOLDERS' EQUITY

A statement of changes in equity can be found on page 98.

45.1 Ordinary shares 2011 2012

number x 1,000

Outstanding and fully paid as at 1 January 25,502 25,929

Issued stock dividend 427 569


as at 31 December 25,929 26,498

The authorised share capital amounts to € 200 million, divided into

80 million ordinary shares of a par value of € 2.50. The issued capital

as at 31 December 2012 amounts to 26,497,666 ordinary shares with a

par value of € 2.50 (as at 31 December 2011: 25,928,914 ordinary

shares of a par value of € 2.50).

The holders of ordinary shares are entitled to dividend as approved

periodically by the General Meeting of Shareholders. They are also

entitled to cast one vote per share at meetings of the Company.

Issue of shares and limitation of pre-emptive right

The general meeting of shareholders has granted the Executive Board

the power to issue shares and to exclude or restrict the pre-emptive

right for the period ending on 18 October 2013. The power to issue

shares concerns 10% of the issued share capital plus a further issue up

to a maximum of 10% of the issued share capital in the event that the

issue takes place in the context of a merger or acquisition. The same

applies to the power of the Executive Board, with the approval of the

Supervisory Board, to restrict or exclude the pre-emptive right.


number of outstanding ordinary shares during the 2012 fi nancial year of

25,895,322 (2011: 25,452,488), calculated as follows:

2011 2012

Net profit for financial year attributable

to holders of ordinary shares 58.7 22.3

Weighted average number of ordinary shares

2011 2012

number x 1,000

Outstanding ordinary shares on 1 January 25,502 25,929

Effect of ordinary shares held (including

repurchased shares) – 433 – 620

Effect of shares issued in connection

with stock dividend 427 569

Effect of repurchase of own shares – 133 –

Effect of shares issued as result

of exercised option rights 79 17

Effect of director’s remuneration 9 –

Effect of shares issued as result of share

savings plan 1 –

Weighted average number of ordinary

shares as at 31 December 25,452 25,895

46.2 Diluted earnings per share

The calculation of the diluted earnings per share as at 31 December

2012 is based on the net income of € 22.3 million (2011: € 58.7 million)

attributable to holders of ordinary shares and the weighted average

number of outstanding ordinary shares during the 2012 fi nancial year of

26,040,448 (2011: 25,735,802), calculated as follows:

2011 2012

Net profit for financial year attributable

to holders of ordinary shares 58.7 22.3

45.6 Other reserves and undistributed result

Subsequent to the reporting date the following dividend has been

proposed, which has not yet been included in the balance sheet. It is

proposed to set the dividend in respect of 2012 at € 0.50 per € 2.50 par

value share (2011: € 0.95), payable optionally in cash or as stock

dividend.

2011 2012

€ 0.50 par value share (2011: € 0.95) 24.0 13.0

45.7 Objective with regard to equity and financing

The objective with regard to equity and fi nancing, as in 2011, is to

guarantee the continuity of the Company by means of attractive returns

for shareholders and by guaranteeing benefi ts for other stakeholders.

The capital structure is adjusted if necessary in line with economic

developments and risks relating to assets.

With regard to fi nancing, the longer-term objective is a ratio of net

debt to EBITDA of a maximum of 2.5.

The calculation as at 31 December is as follows:

2011 2012

Non-current interest-bearing liabilities 275.1 220.3

Short-term portion of non-current liabilities 0.9 0.9

Cash loans, overdrafts 35.4 35.4

Total debt 311.4 256.6

Minus: cash and cash equivalents 22.7 26.7

Net debt 288.7 229.9

EBITDA* 136.0 90.3

Net debt / EBITDA 2.12 2.55

* EBITDA adjusted to take account of the effect of acquired and divested businesses,

non-recurring items and some components of the net fi nancial expenses, such as

currency translation differences: € 1.2 million (2011: – € 1.5 million).

46 EARNINGS PER SHARE

46.1 Ordinary earnings per share

The calculation of the ordinary earnings per share as at 31 December

2012 is based on the net income of € 22.3 million (2011: € 58.7 million)

attributable to holders of ordinary shares and a weighted average



Weighted average number of ordinary shares 2011 2012

number x 1,000

Weighted average number of ordinary shares as at 31 December 25,452 25,895

Effect of outstanding option rights 284 145

Weighted average number of ordinary shares (after dilution) as at 31 December 25,736 26,040

47 LONG-TERM DEBTS 2011 2012

Syndicated loan 267.4 215.0

Financial lease liabilities 3.2 2.2

Other loans 5.4 4.0

Total 276.0 221.2

Less: repayment of loans in forthcoming years – 0.9 – 0.9

275.1 220.3

2011

Total

2012

Total

2013

< 1 year

2014

1-2 years

2015/17

2-5 years

2018

and after

> 5 years

Syndicated loan

EUR – Variable interest 47.8 48.6 – – 48.6 –

USD – Variable interest 219.6 166.4 – – 166.4 –

Financial lease liabilities

EUR fi xed interest 8.0% 0.3 0.1 0.1 – – –

EUR variable interest 2.5 2.0 0.4 0.6 1.0 –

THB fi xed interest 3.45% – 3.65% 0.1 – – – – –

GBP variable interest 0.1 0.1 0.1 – – –

AUD variable interest 0.2 – – – –

Other loans

USD variable interest 3.1 3.0 – – – 3.0

EUR interest-free 1.3 1.0 0.3 0.2 0.5 –

EUR variable interest 1.0 – – – – –

276.0 221.2 0.9 0.8 216.5 3.0


Of the total of long-term loans, 100% had variable interest in 2012

(2011: 99%). The risk associated with this variability has been hedged

by means of interest rate swaps. Details of the hedging of the interest

rate risk borne by the Group can be found in note 50.3.

48 PENSION LIABILITIES 2011 2012

Defined-benefit pension schemes

Present value of obligations 332.5 370.2

Fair value of plan assets 321.0 340.6

11.5 29.6

Asset ceiling – 0.2

Present value of net liabilities

of defi ned-benefi t pension schemes 11.5 29.8

Others liabilities in respect of pensions 11.1 12.5

Pension liabilities 22.6 42.3

48.1 Changes in the valuation of the liability

as at the reporting date 2011 2012


Service costs 2.8 4.3

Members’ contributions 2.7 2.9

Interest costs 15.5 14.2

Benefi ts paid – 16.7 – 16.1

Income from change to pension scheme – – 3.3

Actuarial differences 32.4 35.7


48.2 Investments 2011 2012


Expected return 17.6 15.5

Employers’ contribution 6.7 6.4

Members’ contributions 2.7 2.9

Actuarial differences – 6.0 10.9

Benefi ts paid – 16.7 – 16.1


The syndicated loan of € 450.0 million (2011: € 450.0 million), which is

available for drawing in various currencies, was concluded with a

syndicate of 11 banks. € 215.0 million of this facility was drawn as at

31 December 2012 (2011: € 267.4 million). The loan is due to mature on

8 December 2015. Repayment is due in full on the maturity date. The

loan is valued at amortised cost in accordance with the effective

interest method.

The interest rate payable is linked to the net debt/EBITDA ratio, which

is calculated quarterly in respect of the preceding 12 months.

The EBITDA for acquired and divested businesses is annualised.

In accordance with the agreements entered into with the banks, the

EBITDA is also adjusted to take account of non-recurring items and a

number of components of the net fi nancial expenses, such as currency

translation differences. The interest margin above Euribor or Libor will

be between 0.70% and 1.50%. A utilisation fee of 0.20% is payable if

more than 50% of the facility is drawn. At the end of 2012 the interest

margin was 1.20% (2011: 0.95%).

The aforementioned syndicated loan is subject to a number of

covenants, the principal of which are:

■ total net debt/EBITDA less than 3.25 at the end of the fi rst quarter

of each year, less than 3.50 at the end of the second quarter of

each year and less than 3.00 at the end of the third and fourth

quarters of each year, with the once-only possibility of an increase

of 0.25 for two successive quarters following an acquisition,

but no higher than 3.50;

■ EBITDA/net interest greater than 4;

■ joint guarantee of subsidiaries with total assets of at least 60%

of the Group total.

The Group was meeting these covenants as at the reporting date.

In the event of a change of control of the Company, the syndicated

loan is immediately repayable if a two-thirds majority of the lenders

so require.

The € 2.0 million (2011: € 2.5 million) fi nancial lease liability relates

to a building in Hungary.

The USD loan with variable interest concerns a $ 4.0 million loan

(2011: $ 4.0 million) from the Development Authority of Pike County

Industrial Revenue Bonds. Repayment is due in full in 2018.



The board of the pension fund has applied a 2.3% reduction in pension

rights with effect from 1 April 2013. On the basis of the cover ratio as

at 31 December 2012, a further reduction of up to 7% will be made in

2014. The actual reduction in 2014 will depend on the trend in the

cover ratio in 2013. As the expected reductions are taken into account

in the indexation assumption, the effects of this have been stated in

Group equity through actuarial and gains and losses.

Agreements have been entered into with the pension fund in respect of

the contribution payable. The contribution percentage varies within an

agreed range, depending on the pension fund's cover ratio.

The current agreements cover the period up to 31 December 2014.

Other liabilities

The other liabilities in respect of pensions relate to defi ned contribution

schemes and a number of specifi c old-age provisions. The principal

defi ned contribution scheme is a 401K (savings) scheme in the United

States.

48.4 Principles for defined benefit schemes

The main actuarial assumptions as at the reporting date (in weighted

averages) are as follows:

2011 2012

Discount rate as at 31 December 4.3% 3.4%

Expected return on plan assets

as at 31 December 4.9% 3.4%

Future wage increases 2.5% 2.5%

Future pension increases

of inactive participants 0.8% 0.6%

Assumptions with regard to future mortality fi gures are based on

published statistical data and mortality probabilities. The mortality

tables used are the 2012-2062 forecast table of the Netherlands

Actuarial Association with a correction factor dependent on age and

gender. For the valuation of partner's pensions the age difference

between men and women has been set at three years. The total

expected long-term return on the investment is 3.4% (2011: 4.9%).

A 0.1% change in the discount rate would result in a change

of approximately € 0.3 million in the annual expenses (2011: 0).

A 0.1% change in the discount rate would cause the liability to rise or

fall by approximately € 6.0 million (2011: € 5.0 million).

Analysis of plan assets as at 31 December 2011 2012

Bonds 173.3 176.9

Equities 101.3 119.2

Commodities 13.9 13.0

Real estate 25.2 24.1

Cash 1.9 0.8

Other assets 5.4 6.6

Plan assets 321.0 340.6

48.3 Charges / income stated in the profit

and loss account 2011 2012

Service costs – 2.8 – 4.3

Interest on liabilities – 15.5 – 14.2

Expected return on plan assets 17.6 15.5

Income from change to pension scheme – 3.3

Pension (expenses) / income – 0.7 0.3

The actual return on fund investments amounts to € 26.4 million (2011:

€ 11.6 million).

Netherlands

The defi ned benefi t pension scheme concerns in particular the pension

rights of the Dutch employees which have been placed with Stichting

Pensioenfonds Koninklijke Ten Cate. In 2012 a change in the pension

scheme was agreed whereby the accrual percentage was reduced from

2.1% to 1.79%. As a result of the reduction in the accrual percentage,

income of € 3.3 million has been recognised as a credit to the result for

2012.

The main features of the scheme are:

■ pension accrual based on average salary;

■ accrual rate of 1.79 (2011: 2.1%).

■ conditional indexation, the target level being equivalent to 90% of

wage growth for active members (employees) and 90% of price

growth for inactive members (pensioners and members with paid-

up entitlements);

■ the employer contribution is increased by 50% if the cover ratio

falls below 110%.


The provision for reorganisations relates to a number of reorganisations

which were nearly all completed during the fi nancial year.

The provision for other personnel liabilities has been formed in respect

of long-term leave and other benefi ts, such as anniversaries.

The environmental provision has been formed for expected costs of

decontamination of industrial sites, on the basis of functional

decontamination (maintenance of business use).

Historical information 2008 2009 2010 2011 2012

Present value of obligations 275.1 295.7 295.8 332.5 370.2

Fair value of plan assets 272.4 298.5 316.7 321.0 340.6

Present value of net liabilities 2.7 – 2.8 – 20.9 11.5 29.6

Experience adjustments arising on obligations of the scheme 0.8 4.4 9.4 5.3 – 8.9

Experience adjustments arising on plan assets – 42.3 11.8 8.1 – 6.0 10.9

The Group expects to contribute € 6.3 million of employer's

contributions to defi ned benefi t pension schemes in 2013 (2012:

€ 6.5 million). The pension expense in respect of 2013 is estimated at

€ 5.3 million (2012: € 3.1 million).

49 PROVISIONSGuarantee/

claims

Reorgani-

sation

provision

Other

personnel

liabilities

Environ-

mental Others Total

Balance as at 1 January 2012 10.9 0.4 5.8 2.0 0.9 20.0

Provisions made during the year 3.1 2.6 0.5 – 0.2 6.4

Released to result – 5.8 – – 0.1 – – – 5.9

Expenditure in current year – 2.9 – 2.5 – 0.6 – – 0.3 – 6.3

Balance as at 31 December 2012 5.3 0.5 5.6 2.0 0.8 14.2

Of which short-term

as at 31-12-2011 4.0 0.4 0.3 – 0.3 5.0

as at 31-12-2012 1.6 0.4 0.3 – 0.5 2.8

The amount released to the result has been included in the profi t and

loss account as follows:

2011 2012

Cost of sales 0.1 2.6

General management costs 0.7 3.3

Total 0.8 5.9

The guarantee provision relates to goods and services supplied and the

provision for claims relates to claims for damages and possible legal

costs. The release of € 5.8 million relates to the settlement of legal

proceedings and a lower-than-expected fi gure for guarantee claims.


Other information

50 FINANCIAL INSTRUMENTS

As part of its normal business operations, the Group incurs liquidity,

credit, interest and currency risks.

The risk of fl uctuations, mainly in exchange rates and interest rates, is

hedged using derivatives.

50.1 Liquidity risk

The liquidity risk is the risk of the Group being unable to meet its

liabilities when they fall due. The Group's policy on control of the

liquidity risk is to guarantee to the best of its ability that suffi cient

liquidities are available to meet its liabilities on time, in both normal

and exceptional situations. € 233.6 million of the syndicated loan of

€ 450.0 million (2011: € 450.0 million) was undrawn as at 31 December

2012 (2011: € 180.4 million).

The term of the fi nancial liabilities as at 31 December 2011 was as

follows:

Carrying value

Expected

cash fl ow

(including

interest)

2012

< 1 year

2013

1-2 years

2014/16

2-5 years

2017 and

later

> 5 years

Financial liabilities (excluding derivatives)

Total long-term debts 276.0 – 299.6 – 5.7 – 8.1 – 282.7 – 3.1

Cash loans, overdrafts 35.4 – 35.4 – 35.4 – – –

Trade creditors and other payables 161.8 – 161.8 – 161.8 – – –

Derivatives

Interest rate swaps 6.9 – 7.1 – 3.4 – 2.3 – 1.3 – 0.1

Forward, FX swap contracts 0.4 – 0.4 – 0.4 – – –

Total 480.5 – 504.3 – 206.7 – 10.4 – 284.0 – 3.2

The term of the fi nancial liabilities as at 31 December 2012 was as

follows:

Carrying value

Expected

cash fl ow

(including

interest)

2013

< 1 year

2014

1-2 years

2015/17

2-5 years

2018 and

later

> 5 years

Financial liabilities (excluding derivatives)

Total long-term debts 221.2 – 233.2 – 4.1 – 4.5 – 221.6 – 3.0

Cash loans, overdrafts 35.4 – 35.4 – 35.4 – – –

Trade creditors and other payables 135.6 – 135.6 – 135.6 – – –

Derivatives

Interest rate swaps 5.8 – 5.8 – 3.2 – 1.9 – 0.7 –

Forward, FX swap contracts 1.0 – 1.0 – 1.0 – – –

Total 399.0 – 411.0 – 179.3 – 6.4 – 222.3 – 3.0


50.2 Credit risk

Credit risk is the risk of a fi nancial loss for the Group if a customer or

counterparty to a fi nancial instrument fails to meet its contractual

obligations. Credit risks result in particular from trade debtors and, to a

more limited extent, investments in securities.

The Group's exposure to credit risk is mainly determined by the specifi c

characteristics of the individual customers.

Credit risk is limited by internal research into the creditworthiness of

new and existing customers based on sources such as external reports,

annual reports and payment history or by insuring the credit risk. The

internal credit limits specifi ed on the basis of internal research are

reviewed at least once a year.

Customers for which no credit limit has been issued (internally or by

the insurer) can only do business with the Group on the basis of

guaranteed payment.

Goods are subject to reservation of ownership. In the event of non-

payment, the Group in most cases has a preferential claim to the extent

that the goods are still present. The Group does not demand collateral

for trade and other receivables.

Impairments are stated in the profi t and loss account as cost of sales.

The Group has no particular concentration risks in respect of trade

debtors.

The carrying value of the fi nancial assets refl ects the maximum

exposure to credit risk. The maximum exposure can be defi ned as

follows:

2011 2012

Trade debtors 152.4 140.0

Other (long-term) receivables 28.8 26.4


Forward foreign exchange contracts

and options 0.8 0.3

Interest rate swaps 0.2 –

Total 204.9 193.4

The age of the trade debtors and the related impairments can be

analysed as follows:

2011 2012

Gross Provisions Gross Provisions

Not due – 60 days

overdue 148.6 1.5 130.5 0.4

60 – 120 days overdue 3.8 0.7 6.3 0.1

120 – 360 days overdue 3.3 1.2 4.5 1.5

Over 360 days overdue 3.7 3.6 5.1 4.4

Balance as at

31 December 159.4 7.0 146.4 6.4

The movements in the provision for trade debtors are as follows:

2011 2012


Acquired through acquisition 1.2 –

Formed as charge against result 1.2 1.4

Released to result – 0.6 – 0.9

Written off during the year – 0.4 – 1.1


The Group believes that, with the exception of the foregoing, no

provision for impairment is required in respect of trade receivables

which are not yet due or which are up to 60 days overdue.

50.3 Interest rate risk

100% of the interest-bearing debts have a variable interest rate (2011:

99%). The risk of a rise in interest rates is in principle hedged 90% for

the subsequent year and 75%, 50% and 25% respectively for the years

thereafter. Both interest rate swaps and caps can be used for this

purpose. The impact of changes in the value of these fi nancial

instruments on the Group's result is limited as far as possible by the

use of hedge accounting. The conditions applying to the interest-

bearing debt are set out in note 47.


>Other information

50.4 Currency risk

The Group incurs currency risks on sales and purchases denominated in

currencies other than the functional currency of the respective

subsidiary. The currencies in which risk is incurred are mainly the euro,

the US dollar and the British pound.

Transaction risk

The Group hedges orders, trade receivables and payables denominated

in foreign currencies, to the extent that these may have a material

effect on the result. It uses foreign exchange forward contracts and

currency options for this purpose. The forward contracts have a term of

less than one year after the reporting date. If necessary they are

extended. The forward contracts are carried at fair value.

The principal amounts of the loans drawn in foreign currencies are

used to hedge intercompany loans in foreign currencies to subsidiaries

which report in the respective currency.

Competition risk

The Group hedges the estimated currency risk of the expected

purchases and sales in the subsequent six months as far as possible.

Currency options are used for this purpose.

Translation risk

The translation risk on the result of subsidiaries outside the eurozone

is offset internally as far as possible against euro-denominated

revenues of subsidiaries outside the eurozone, as well as purchases in

USD from subsidiaries in the eurozone.

At the end of 2012 the net balances of outstanding interest rate

instruments were as follows:

■ interest rate swap to 31-12-2013: € 50 million, received variable,

payment 2.48% fi xed

■ interest rate swap to 31-12-2013: $ 50 million, received variable,




■ interest rate swap to 31-12-2014: € 30 million, received variable,


(commencing 31-12-2013)





The Group values the interest rate swaps and interest rate caps at fair

value (see section 50.7). Of the fair value of the interest rate swaps as

at 31 December 2012, € 5.8 million has been included in trade creditors

and other payables (2011: € 0.2 million in other receivables and

€ 6.9 million in trade creditors and other payables).

The table below shows the periods in which the cash fl ows relating

to interest rate swaps that are the subject of cash fl ow hedge

accounting are expected to take place and in which they will affect the

profi t or loss.

2011Carrying

value

Expected

cash fl ow < 1 year 1-2 years 2-5 years

Interest rate

swaps

Assets – – – – –

Liabilities 5.9 – 5.9 – 2.9 – 2.1 – 0.9

2012Carrying

value

Expected

cash fl ow < 1 year 1-2 years 2-5 years

Interest rate

swaps

Assets – – – – –

Liabilities 5.2 – 5.2 – 3.1 – 1.8 – 0.3


50.5 Assets and liabilities stated in the balance sheet

Changes in the fair value of foreign exchange forward contracts and

options which are used to hedge, in an economic sense, monetary

assets and liabilities denominated in foreign currencies are stated in

the profi t and loss account. Both changes in the fair value of forward

contracts and options and the exchange rate differences relating

to monetary balance sheet items are included as exchange rate

differences in net fi nancial expenses.

Exposure

The exposure to currency risks in respect of trading transactions of

Group entities on the reporting date is as follows:

2011 2012

USD GBP EUR USD GBP EUR

Transaction risk 4.0 1.4 7.9 1.9 1.8 2.7

Competition risk – 0.6 1.3 15.0 3.4 2.2 20.6

Risk before hedging 3.4 2.7 22.9 5.3 4.0 23.3

Forward contracts – 4.2 – 1.5 – 7.7 3.3 – 1.1 – 2.2

Option contracts – 1.5 – 1.1 – 0.5 3.8 – 2.1 – 19.7

Risk after hedging – 2.3 0.1 14.7 12.4 0.8 1.4

The foreign currencies have been converted into euros at the closing

rate.

The USD risk relates mainly to the expected revenues in USD of Asian

subsidiaries and expected purchases and revenues in USD of European

subsidiaries. Due to fi nancial market restrictions, the risk relating to

Asian subsidiaries is not hedged.

The GBP risk relates mainly to trade receivables and expected revenues

of European subsidiaries.

The EUR risk relates mainly to trade receivables and expected revenues

in euros of Ten Cate Thiolon Middle East.

The Group carries options and foreign exchange forward contracts at

fair value. The fair value of options is determined on the basis of

statements supplied by banks or on the basis of the Black & Scholes

option valuation model. The fair value of foreign exchange forward

contracts with an underlying value below € 5.0 million is determined on

the basis of statements supplied by the bank; in the case of higher

amounts the Group's own calculation model is used. The fair value of

the options to hedge future transactions as at 31 December 2012

amounted to € 0.1 million (2011: € 0.1 million). This amount has been

included in other receivables. The net fair value of the forward foreign

exchange contracts was – € 0.8 million (2011: € 0.3 million).

€ 0.2 million of this amount has been included in other receivables and

€ 1.0 million in other debts (2011: € 0.7 and € 0.4 million).


>Other information

The effect of a general interest rate rise of one percentage point on

the pre-tax result in 2012 is estimated at – € 0.6 million (2011:

– € 1.1 million). The effect of a general interest rate rise of one

percentage point on equity is estimated at € 2.8 million before tax

(2011: € 5.0 million) due to the use of hedge accounting.

A general rise of one per cent in the value of the euro against other

currencies would not have had any downward effect on the result after

profi t tax (2011: € 0.3 million). A general rise of one per cent in the

value of the euro against other currencies would have reduced the

equity by approximately € 3.1 million (2011: € 2.4 million).

Fair value versus carrying value

The fair value and carrying value of fi nancial assets and liabilities

stated in the balance sheet are as follows:

2011 2012

Carrying value Fair value Carrying value Fair value

Assets carried at fair value

Long-term receivables and investments 8.2 8.2 9.6 9.6

Other interest rate derivatives 0.2 0.2 – –

Currency derivatives 0.8 0.8 0.3 0.3

9.2 9.2 9.9 9.9

Assets carried at amortised cost

Trade debtors and other receivables 173.0 173.0 156.8 156.8

Cash and cash equivalents 22.7 22.7 26.7 26.7

195.7 195.7 183.5 183.5

Liabilities carried at fair value

Interest rate swaps used for hedging – 5.9 – 5.9 – 5.2 – 5.2

Other interest rate derivatives – 1.0 – 1.0 – 0.6 – 0.6

Currency derivatives – 0.4 – 0.4 – 1.0 – 1.0

– 7.3 – 7.3 – 6.8 – 6.8

Liabilities carried at amortised cost

Syndicated loan – 267.4 – 267.4 – 215.0 – 215.0

Financial lease liabilities – 3.2 – 3.2 – 2.2 – 2.2

Other loans – 5.4 – 5.4 – 4.0 – 4.0

Trade creditors and other payables – 161.8 – 161.8 – 135.6 – 135.6

Cash loans and overdrafts – 35.4 – 35.4 – 35.4 – 35.4

– 473.2 – 473.2 – 392.2 – 392.2

The fair value of the syndicated loan is the same as the carrying value,

because it has a variable interest rate and a margin consistent with

market conditions.

50.6 Sensitivity analyses

In managing interest rate and currency risks, the Group's aim is to limit

the effect of short-term fl uctuations on the Group result. In the longer

term, however, sustained changes in exchange rates and interest rates

will have an effect on the consolidated result.


In 2012 the Group included expenses of € 8.8 million in the profi t and

loss account in respect of operating leases (2011: € 8.5 million).

52 INVESTMENT LIABILITIES

In 2012 the Group entered into contractual liabilities for the purchase

of tangible fi xed assets. The amount of the liabilities as at

31 December 2012, after deduction of advance payments already made

during the fi nancial year, is € 0.6 million (2011: € 3.1 million).

53 CONTINGENT LIABILITIES

The Group has received claims for damages arising from the conduct of

business. With the exception of those stated below, the claims are not

deemed to be substantial and provisions have been recognised to the

extent necessary.

A claim for damages has been made against Royal Ten Cate by United

Fabrics NV, a company registered in the Netherlands Antilles (majority

shareholder in Textielgroep Twenthe NV). The claim is based on an

outsourcing and management agreement from 1998 and originally

amounted to € 56 million. The claim in respect of the outsourcing

agreement has lapsed permanently as a result of a judgement by the

Supreme Court in 2006. The plaintiff was ordered to demonstrate the

damage suffered in respect of the management agreement. TenCate is

confi dent with regard to the remainder of the proceedings.

In the spring of 2011, FieldTurf Tarkett (‘FieldTurf’) instituted legal

proceedings against TenCate. These concerned alleged defi ciencies in

products mostly supplied to FieldTurf by Mattex Leisure Industries in

Dubai, several years before TenCate acquired part of the assets and

businesses of Mattex at the beginning of 2007. TenCate denies the

existence of any legal basis for this claim and therefore rejects it.

TenCate is confi dent with regard to the outcome of the legal

proceedings and expects no material fi nancial damage. In August 2011,

TenCate fi led a counterclaim against FieldTurf relating among other

things to damage to the good name of TenCate and TenCate products,

and to breach of contract in the period prior to TenCate's termination of

the supply contract.

50.7 Estimate of fair value

Details are given below of the main methods and assumptions used in

estimating the fair value of fi nancial instruments.

The fair value of foreign exchange forward contracts is calculated by

discounting the difference between the contractual and the current

forward price, multiplied by the principal amount of the contract, for

the residual term at the market interest rate.

The fair value of interest rate swaps is calculated by discounting the

difference between the contractual and the current interest, multiplied

by the principal amount of the interest rate swap, for the residual term

at the market interest rate. The result is periodically checked against

bank statements.

The fair value of long-term debts is calculated on the basis of the

discounted value of expected future cash fl ows from repayments and

interest payments.

The fair value of fi nancial lease liabilities is estimated on the basis of

the present value of future cash fl ows, discounted at the interest rate

for similar lease agreements.

In the case of trade debtors, other receivables, trade creditors and

other short-term debts due within one year, the nominal value is

deemed to refl ect the fair value. The fi nancial instruments valued on

the basis of fair value fall into category 2 as in 2011: no quoted market

price in an active market, with the fair value being determined

indirectly.

51 LIABILITIES NOT SHOWN IN THE BALANCE SHEET

Operating lease as lessee

The expected cash fl ows under non-cancellable operating leases are as

follows:

2011 2012

Less than one year 7.8 7.4

Between one and fi ve years 20.2 17.7

More than fi ve years 18.9 25.4


The Group leases buildings, plant, vehicles and offi ce equipment under

operating leases. The leased buildings have a term of ten to fi fteen

years. Lease payments are indexed annually. None of the leases

include conditional lease payments. In principle the Group does not act

as a lessor. The term of the other leases is a maximum of fi ve years.


>Other information

The fi xed remuneration paid to Mr De Vries was increased by 10% with

effect from 1 April 2011. Mr De Vries has a fi nal-salary pension plan.

The pension costs for Mr De Vries in 2011 included the sum of

€ 482,000 in respect of a back-service liability (2012 and 2010: 0).

Mr De Vries' results-related pay amounts to a maximum of 50% of the

fi xed salary. In 2012 Mr De Vries received a variable salary component

in respect of 2011 amounting to 50% of the fi xed salary. The variable

component paid to Mr Cornelese is a maximum of 40% of the fi xed

salary. In 2012 Mr Cornelese received a variable salary component in

respect of 2011 of 34% of the fi xed salary.

As at 31 December 2012 Mr De Vries held 203,160 shares in the

Company (31 December 2011: 203,160 shares) and 420,000 options

(31 December 2011: 360,000 options). In 2012 Mr De Vries was granted

60,000 options (2011: 60,000) with an exercise price of € 24.67. In 2011

Mr De Vries received 10,000 shares at a price of € 26.00 in the

Company. Mr Cornelese held 751 shares in the Company as at

31 December 2012 (31 December 2011: 718 shares) and 30,000 options

(31 December 2011: no options). In 2012 Mr Cornelese was granted

54 POST BALANCE SHEET EVENTS

On 15 January 2013 TenCate acquired 100% of the shares of Amber

Composites Ltd, a British producer of thermoset composites for industry

and the automotive market. The acquisition of Amber Composites will

allow an acceleration of activities in the European market in the fi eld of

thermoset composites.

55 RELATED PARTIES

55.1 Identity of related parties

The Group's related parties are its subsidiaries, associated companies

and other participating interests, joint ventures, the TenCate pension

fund and the members of the Executive and Supervisory Boards.

55.2 Directors' remuneration

The remuneration of the members of the Executive Board was as

follows:

L. de Vries B. Cornelese1 J. Lock2

in thousands of euros 2010 2011 2012 2011 2012 2010 2011

Periodic remuneration 613 659 675 270 360 300 120

Results-related pay for the previous year 230 307 337 – 92 68 117

Pension costs 189 698 221 63 105 85 44

Early Retirement (Pre-pension and Life Course

Savings) Act 58 140 – – – – –

Jubilee payment 51 – – – – – –

Shares _ 260 – – – – –

Option costs 338 375 455 – 80 169 77

1,479 2,439 1,688 333 637 622 358

1 From 1 April 2011.

2 2011: To 21 April 2011.


30,000 options with an exercise price of € 24.67. In 2012 Mr Lock was

granted 10,000 options with an exercise price of € 24.67.

On 2012 salaries above € 150,000, a once-only crisis levy (employer's

charge) of 16% is payable to the Dutch Government. The crisis levy for

the executive directors amounts to € 185,000, comprising € 139,000 for

the CEO and € 46,000 for the CFO. Damages of € 1.2 million have also

been made available to the CEO to resolve a legal dispute caused

by the company in 1995. The total amount in 2012 for the CEO is

€ 3.1 million and for the CFO € 0.7 million.

Mr De Vries and Mr Cornelese are participating in the Group's share

option plan. The costs of the options are charged to the result in three

years. Further information can be found in note 66.

The remuneration of the members of the Supervisory Board was as

follows:

2011 2012

in euro

J.C.M. Hovers – Chairman 1, 2 50,000 50,000

P.P.A.I. Deiters – Vice Chairman 2 * 35,000 35,000

F.A. van Vught 3 35,000 8,750

E. ten Cate 1 * 35,000 35,000

R. van Gelder 1 32,500 32,500

187,500 161,250

1 Member of the Financial Committee.

2 Member of the combined Remuneration, Selection and Appointments Committee.

3 2012: untill 19 April 2012.

* Chairman.

Mr Deiters received additional remuneration amounting to US$ 15,000

in 2011 and 2012 in respect of his supervisory directorship in Ten Cate

Thiolon Middle East in Dubai. The members of the Supervisory Board

held no shares or option rights of Royal Ten Cate at the end of 2012.

55.3 Transactions with associated companies, other participating

interests and joint ventures

During the 2012 fi nancial year, associated companies, other (non-

consolidated) participating interests and joint ventures purchased

goods from the Group amounting to € 17.5 million (2011: € 14.8

million). As at 31 December 2012 the outstanding trade receivables

due to the Group from associated companies amounted to € 3.4 million

(2011: € 1.5 million) and from joint ventures € 1.2 million (2011: € 2.2

million). The Group has no outstanding trade liabilities to associated

companies and joint ventures (2011: € 0.1 million).

Transactions with associated companies, other participating interests

and joint ventures take place on an objective, business basis.

55.4 Subsidiaries

A list of (signifi cant) subsidiaries and participating interests can be

found inside the back cover of this report.

56 ESTIMATES AND JUDGMENTS MADE BY THE MANAGEMENT

The Executive Board has conducted discussions with the Financial

Committee of the Supervisory Board on the critical principles for the

fi nancial reporting and estimates, as well as the application of such

principles and estimates. Information on assumptions and uncertainties

regarding estimates which entail a substantial risk of a material

adjustment in the subsequent fi nancial year is included in the following

notes:

■ With regard to the pensions, the main actuarial assumptions are

stated in note 48.

■ With regard to guarantees and claims, provisions have been

formed whenever there is an actual liability or it is likely that an

outfl ow of funds will be necessary. The result of this is stated in

note 49.

■ With regard to impairments in the case of loss-making companies,

an examination has been carried out to determine whether the

realisable value of any cash generating unit was lower than the

carrying value. This was not the case in 2012 and 2011. Future

detrimental changes in the estimate as a result of changed

assumptions may lead to the realisable value being lower than

the carrying value. See note 37.2.

■ Estimates with regard to the use of tax losses are included in

note 40.


Company fi nancial statements

57 COMPANY PROFIT AND LOSS ACCOUNT

in millions of euros note 2011 2012

Result from participating interests after profi t tax 59 57.4 17.8

Other results after profi t tax 1.3 4.5

NET INCOME 58.7 22.3

58 COMPANY BALANCE SHEET (BEFORE APPROPRIATION OF THE RESULT)

For the financial year ending on 31 December, in millions of euros note

31 December

2011

31 December

2012

FINANCIAL FIXED ASSETS 59

Participating interests in subsidiaries 680.0 692.3

Loans to subsidiaries 104.6 114.7

Deferred profi t tax assets 14.4 25.7

Total non-current assets 799.0 832.7

CURRENT ASSETS

Due from subsidiaries 1.1 0.7

Other receivables 1.9 0.8


Total current assets 4.2 2.5

TOTAL ASSETS 803.2 835.2

EQUITY

Share capital 61 64.8 66.2

Share premium reserve 63 44.8 43.4

Legal reserve 64 5.8 1.9

Other reserves 65 291.7 323.4

Undistributed result 58.7 22.3

465.8 457.2

PROVISIONS 67 1.1 1.1

NON-CURRENT LIABILITIES 68 273.1 219.4

CURRENT LIABILITIES 69 63.2 157.5

TOTAL EQUITY AND LIABILITIES 803.2 835.2


Notes to the company fi nancial statements

General

Accounting policies

The parent company fi nancial statements of Royal Ten Cate form an

inseparable whole with the 2012 fi nancial statements of Royal

Ten Cate and have been prepared in accordance with the statutory

requirements of Part 9 of Book 2 of the Netherlands Civil Code. In

determining the accounting policies for its parent company fi nancial

statements, Royal Ten Cate uses the option available under article

2.362 paragraph 8 of the Netherlands Civil Code. This means that the

accounting principles for the parent company fi nancial statements of

Royal Ten Cate are the same as those applying to the consolidated

fi nancial statements. Participating interests over which signifi cant

infl uence is exercised are valued in accordance with the equity method.

The consolidated fi nancial statements have been prepared in

accordance with the standards set by the International Accounting

Standards Board and adopted by the European Union. A description of

these standards can be found in the accounting policies applicable to

the consolidated fi nancial statements.

The share in the results of associated companies includes the share of

Royal Ten Cate in the results of these companies. Results from

transactions involving a transfer of assets and liabilities between

Royal Ten Cate and its participating interests and between individual

participating interests are not included to the extent that they can be

considered to be unrealised.

59 FINANCIAL FIXED ASSETSInterest in

subsidiaries

Loans to

subsidiaries

Deferred

profi t tax

assets Total

Balance as at 1 January 680.0 104.6 14.4 799.0

Investments / capital contributions 24.1 – – 24.1

Actuarial gains and losses of pensions – 24.8 – – – 24.8

Translation differences – 3.9 0.6 – – 3.3

Loans granted – 20.7 – 20.7

Repayment of loans – – 11.2 – – 11.2

Results of participating interests 17.8 – – 17.8

Dividend of participating interests – 0.9 – – – 0.9

Change in deferred tax – – 11.3 11.3

Balance as at 31 December 692.3 114.7 25.7 832.7

Royal Ten Cate is at the head of the Group and has capital interests in

the subsidiaries stated on the cover.

60 EQUITY

The equity in the parent company fi nancial statements corresponds to

the equity in the consolidated fi nancial statements. A statement of

changes in equity can be found on page 98.

61 CALLED AND PAID-UP CAPITAL 2011 2012

Authorised share capital 200.0 200.0

Of which not issued 135.2 133.8

64.8 66.2


>Notes to the company fi nancial statements

62 ORDINARY SHARES 2011 2012

The authorised share capital consists of:

80,000,000 ordinary shares of € 2.50 200.0 200.0

Issued share capital

Balance as at 1 january 2011 2012

Ordinary shares 25,501,907 and 25,928,914 63.8 64.8

Issued stock dividend 427,007 and 568,752 1.0 1.4


63 SHARE PREMIUM RESERVE 2011 2012


Issued stock dividend – 1.0 – 1.4


The share premium reserve is available for distribution to shareholders.

64 LEGAL RESERVES

64.1 Translation differences 2011 2012


Change 3.7 – 3.9


64,2 Hedging reserve 2011 2012

Balance as at 1 January – 3.6 – 4.5

Change – 0.9 0.6

Balance as at 31 December – 4.5 – 3.9

64.3 Other legal reserves 2011 2012


Change 0.5 – 0.6


The other legal reserves concern capitalised development costs,

undistributable reserves of subsidiaries and the hedging reserve.

Balance of legal reserves

as at 31 December 5.8 1.9

65 OTHER RESERVES 2011 2012


Actuarial gains and losses of pensions – 14.1 – 17.9

Transferred to Other legal reserves – 0.5 0.6

Added from 2011 / 2010 result 39.7 46.5

Share and option plans 1.9 2.0

Repurchase of own shares – 7.6 –

Issue of repurchased shares for share savings

plan / option plan 2.4 0.5

Acquisition of non-controlling interest – 10.5 –



66 OPTION PLAN

Royal Ten Cate operates a stock option plan for the management,

established by the Supervisory Board. The maximum possible account

has been taken of the recommendations of VNO-NCW and the Dutch

Investors' Association (VEB). Those eligible for options are members of

the Executive Board, the corporate and group directors and a number of

managers. The implementation of the share option plan is supervised

by the compliance offi cer.

The options are granted on a conditional basis. During the vesting

period, a performance condition must be fulfi lled. This condition is that

the earnings per share, adjusted to take account of non-recurring

items, over the past three, four or fi ve years must have increased on

average by at least a percentage equal to infl ation plus 3% per year. If

this performance condition has been fulfi lled, the options become

unconditional and may be exercised, unless restrictions have been

imposed by the Netherlands Authority for the Financial Markets.

The total term of the options is six to ten years. The exercise period is

three to fi ve years. The vesting period is three to a maximum of fi ve

years.

The option exercise price is equivalent to the average price of the

Royal Ten Cate share on Euronext Amsterdam nv on the fi ve stock

exchange trading days following publication of the annual fi gures. Each

granted option right lapses on early termination of employment.

In principle options amounting to approximately 1.5% of the total

number of shares outstanding will be granted in any one year.

The exercise of options is subject to the restrictions laid down in

the Securities Transactions Supervision Act.

66.1 Granting of options in 2013

On 28 February 2013 it was intended to grant 330,000 conditional

options at the average market price during the fi ve stock exchange

trading days following publication of the annual results on 1 March

2013. The distribution is as follows:

01-03-2013* 28-02-2012

Members of the Executive Board 100,000 100,000

Management and management support staff 230,000 209,500

330,000 309,500

* Provisional.

** Final.

**



66.2 Statement of movements in options of the Executive Board

in 2012

L. de Vries

Issued on Term until

Number

of options

Exercise

price

Exercised/

lapsed

to 2011

Exercised

in 2012

Lapsed

in 2012

Outstanding

31-12-2012

Exercisable

31-12-2012

25-02-2004 25-02-2012 40,000 10.29 40,000 – – – –

22-02-2005 22-02-2013 50,000 15.17 50,000 – – –

01-03-2006 01-03-2014 60,000 23.63 – – – 60,000 60,000

28-02-2007 28-02-2015 60,000 25.77 – – – 60,000 60,000

05-03-2008 05-03-2016 60,000 22.50 – – – 60,000 60,000

03-03-2009 03-03-2017 60,000 11.70 – – – 60,000 60,000

03-03-2010 03-03-2020 60,000 18.96 – – – 60,000 –

01-03-2011 01-03-2021 60,000 27.38 – – – 60,000 –

28-02-2012 28-02-2022 60,000 24.67 – – – 60,000 –

510,000 90,000 – – 420,000 240,000

01-03-2013 01-03-2023 60,000

B. Cornelese


Number

of options

Exercise

price

Exercised/

lapsed

to 2011

Exercised

in 2012

Lapsed

in 2012

Outstanding

31-12-2012

Exercisable

31-12-2012

28-02-2012 28-02-2022 30,000 24.67 – – – 30,000 –

30,000 – – – 30,000 –

01-03-2013 01-03-2023 40,000

No options were exercised by the Executive Board in 2012 (2011:

50,000). The share price on the exercise date in 2011 was € 28.60.

In March 2013 it was intended to grant 60,000 options to Mr De Vries

and 40,000 options to Mr Cornelese. 40,000 options in the 2009 series

are reserved for outstanding performance, a decision on which will be

taken in due course. These options are not included in the above

statements.


66.3 Statement of movements in options of management

and management support staff in 2012


Number

of options

Exercise

price

Exercised/

lapsed

to 2011

Exercised

in 2012

Lapsed

in 2012

Outstanding

31-12-2012

Exercisable

31-12-2012

25-02-2004 25-02-2012 55,600 10.29 51,598 4,000 2 – –

22-02-2005 22-02-2013 102,400 15.17 59,000 13,000 – 30,400 30,400

01-03-2006 01-03-2014 141,200 23.63 50,400 2,000 – 88,800 88,800

28-02-2007 28-02-2015 145,000 25.77 51,500 – 1,000 92,500 92,500

05-03-2008 05-03-2016 207,000 22.50 76,500 2,000 500 128,000 128,000

03-03-2009 03-03-2017 176,250 11.70 14,750 17,750 2,000 141,750 141,750

03-03-2010 03-03-2020 226,500 18.96 11,500 – 5,000 210,000 –

01-03-2011 01-03-2021 246,000 27.38 10,000 – 6,500 229,500 –

28-02-2012 28-02-2022 219,500 24.67 – – 1,000 218,500 –

1,519,450 325,248 38,750 16,002 1,139,450 481,450

01-03-2013 01-03-2023 230,000

66.4 Complete statement of movements in options in 2012


Number

of options

Exercise

price

Exercised/

lapsed

to 2011

Exercised

in 2012

Lapsed

in 2012

Outstanding

31-12-2012

Exercisable

31-12-2012

25-02-2004 25-02-2012 95,600 10.29 91,598 4,000 2 – –

22-02-2005 22-02-2013 152,400 15.17 109,000 13,000 – 30,400 30,400

01-03-2006 01-03-2014 201,200 23.63 50,400 2,000 – 148,800 148,800

28-02-2007 28-02-2015 205,000 25.77 51,500 – 1,000 152,500 152,500

05-03-2008 05-03-2016 267,000 22.50 76,500 2,000 500 188,000 188,000

03-03-2009 03-03-2017 276,250 11.70 14,750 17,750 2,000 241,750 241,750

03-03-2010 03-03-2020 286,500 18.96 11,500 – 5,000 270,000 –

01-03-2011 01-03-2021 306,000 27.38 10,000 – 6,500 289,500 –

28-02-2012 28-02-2022 309,500 24.67 – – 1,000 308,500 –

2,099,450 415,248 38,750 16,002 1,629,450 761,450

01-03-2013 01-03-2023 330,000



67 PROVISIONS 2011 2012

Guarantee and claims 1.0 1.1

Other items 0.1 –


The term of the provisions exceeds one year.

68 LONG-TERM LIABILITIES 2011 2012

Syndicated loan 267.4 215.0

Other items 5.7 4.4


The conditions of the syndicated loan can be found in note 48 in the

notes to the consolidated balance sheet.

69 SHORT-TERM LIABILITIES 2011 2012

Cash loans, overdrafts 53.6 145.6

Owed to consolidated subsidiaries 2.4 4.9

Trade creditors and other payables 7.2 7.0


The short-term liabilities are due in less than one year.

38,750 options were exercised in 2012 (2011: 109,500). The weighted

average share price on the exercise date for share options exercised

in 2012 was € 21.02 (2011: € 28.99).

The fair value of the share-based payments on the grant date has been

determined on the basis of the following input:

2011 2012

Price on grant date (15-day average) € 27.12 € 24.96

Exercise price € 27.38 € 24.67

Expected volatility 39.3% 39.7%

Option term 8 years 8 years

Expected dividend yield 3.00% 2.35%

Risk-free interest rate 2.93% 1.80%

66.5 Share savings plan

All employees in the Netherlands had the possibility of participating

in the share savings plan up to the end of 2011.

66.6 Repurchased shares

In principle the Company will repurchase shares in order to prevent any

dilution of earnings per share caused by the granting of options.

2011 2012

number of shares

Balance as at 1 January 433,256 620,321

Repurchase of own shares 308,820 –

Own shares for conversion

of physical securities – 2,716

Exercise of options – 109,500 – 38,750

Issued in connection with share savings plan – 1,855 –

Directors’ remuneration – 10,000 –

Exchange of physical securities – 400 –


as at 31 December 620,321 584,287


70 AUDITOR'S FEES

The following fees of KPMG Accountants N.V. and the other entities

affi liated to the KPMG network have been charged to the Group, in

accordance with article 382a Part 9 of Book 2 of the Netherlands Civil

Code.

Fees 2011 2012

in thousands of euros

Examination of the fi nancial statements 830 820

Other audit assignments 270 210

Other non-audit services 200 190

Total 1,300 1,220

71 LIABILITIES NOT SHOWN IN THE BALANCE SHEET

The Company has issued a declaration of liability in accordance with

article 403 of Book 2 of the Netherlands Civil Code on behalf of its

Dutch subsidiaries.

The Company forms a tax group together with the majority of the Dutch

subsidiaries for corporation and sales tax. Each of these subsidiaries is

severally liable for the tax payable by all the companies included in the

tax group.

We also refer to the notes in the section 53 concerning contingent

liabilities. Guarantees have also been issued for a number of foreign

subsidiaries.


Executive Board

L. de Vries, Chairman

B.J.H. Cornelese

Supervisory Board

J.C.M. Hovers, Chairman

P.P.A.I. Deiters, Vice-Chairman

E. ten Cate

R. van Gelder


Other information

INDEPENDENT AUDITOR'S REPORT

To the General Meeting of Shareholders of Royal Ten Cate

Report on the financial statements

We have audited the accompanying 2012 fi nancial statements of Royal

Ten Cate, Almelo, as set out on pages 90 to 141 of this report. The

fi nancial statements include the consolidated fi nancial statements and

the company fi nancial statements. The consolidated fi nancial

statements comprise the consolidated balance sheet as at

31 December 2012, the consolidated profi t and loss account, the

consolidated statement of comprehensive income, the consolidated

statement of changes in group equity and the consolidated cash fl ow

statement for the year then ended, and notes, comprising a summary of

the signifi cant accounting policies and other explanatory information.

The company fi nancial statements comprise the company balance

sheet as at 31 December 2012, the company profi t and loss account for

the year then ended and the notes, comprising a summary of the

accounting policies and other explanatory information.

Management's responsibility

Management is responsible for the preparation and fair presentation of

the fi nancial statements in accordance with International Financial

Reporting Standards as adopted by the European Union and with Part 9

of Book 2 of the Netherlands Civil Code, and for the preparation of the

management board report in accordance with Part 9 of Book 2 of the

Netherlands Civil Code. Furthermore, management is responsible for

such internal control as it determines is necessary to enable the

preparation of fi nancial statements that are free from material

misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these fi nancial

statements based on our audit. We conducted our audit in accordance

with Dutch law, including the Dutch Standards on Auditing. This

requires that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the

fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the fi nancial statements. The

procedures selected depend on the auditor's judgment, including the

assessment of the risks of material misstatement of the fi nancial

statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the

entity's preparation and fair presentation of the fi nancial statements 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 entity's internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as well

as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and

appropriate to provide a basis for our audit opinion.

Opinion with respect to the consolidated financial statements

In our opinion, the consolidated fi nancial statements give a true and

fair view of the fi nancial position of Royal Ten Cate as at 31 December

2012 and of its result and its cash fl ows for the year then ended in

accordance with International Financial Reporting Standards as

adopted by the European Union and with Part 9 of Book 2 of the

Netherlands Civil Code.

Opinion with respect to the company financial statements

In our opinion, the company fi nancial statements give a true and fair

view of the fi nancial position of Royal Ten Cate as at 31 December

2012 and of its result for the year then ended in accordance with Part 9

of Book 2 of the Netherlands Civil Code.

Report on other legal and regulatory requirements

Pursuant to the legal requirements under Section 2:393 sub 5 at e and f

of the Netherlands Civil Code, we have no defi ciencies to report as a

result of our examination as to whether the management board report,

to the extent we can assess, has been prepared in accordance with

part 9 of Book 2 of this Code, and whether the information as required

under Section 2:392 sub 1 at b - h has been annexed. Further, we report

that the management board report, to the extent we can assess, is

consistent with the fi nancial statements as required by Section 2:391

sub 4 of the Netherlands Civil Code.

Amstelveen, 28 February 2013

KPMG Accountants N.V.

T. van der Heijden RA


POST BALANCE SHEET EVENTS

On 15 January 2013 TenCate acquired 100% of the shares of Amber

Composites Ltd, a British producer of thermoset composites for industry

and the automotive market. The acquisition of Amber Composites will

allow an acceleration of activities in the European market in the fi eld of

thermoset composites.

PROVISIONS OF THE ARTICLES OF ASSOCIATION RELATING TO

APPROPRIATION OF PROFIT

(Article 27)

General

The authorised capital is divided into ordinary shares.

Summary of the provisions of the articles of association

1. Profi t distributions may only take place to the extent that the equity

of the Company exceeds the paid and called-up part of the issued

capital plus the reserves which must be held by law.

2. With the approval of the Supervisory Board, the Executive Board is

authorised to determine the part of the profi t that will be reserved.

3. The sum remaining from the profi t after the reservation in

accordance with paragraph 2 is at the disposal of the general

meeting of shareholders.

4. Shares held by the Company in its own capital are not taken into

account in calculating the appropriation of profi t.

5. The dividend payable shall be made payable no later than 30 days

after adoption of the fi nancial statements by the general meeting

of shareholders. It shall be made payable only to the authorised

persons in whose name the shares are held. Such payments shall

discharge the Company.

6. A shareholder's claim for payment shall be time-barred after

a period of fi ve years has elapsed.

PROPOSED APPROPRIATION OF PROFIT 2011 2012

In millions of euros

Net income 58.7 22.3

Added to other reserves in accordance with article 27, paragraph 2 of the articles of association – 34.5 – 9.5

24.2 12.8

Net change in legal reserves – 0.5 0.6

23.7 13.4

Undistributed dividend balance from previous year 0.3 –

24.0 13.4

Payment of € 0.95 and € 0.50 dividend to holders of ordinary shares in accordance with article 27

paragraph 3 of the articles of association – 24.0 – 13.0

Undistributed dividend balance at year-end, which is transferred to the relevant account – 0.4


Ten-year summary

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

In millions of euros, unless stated otherwise

CONSOLIDATED PROFIT

AND LOSS ACCOUNT

Revenues 569.6 641.0 686.5 770.5 886.0 1,032.6 842.1 984.5 1,138.8 1,049.0

EBITDA 48.3 53.8 57.8 73.2 102.1 126.1 75.4 119.5 137.5 89.1

EBITA 29.8 34.9 39.2 51.1 73.0 95.4 41.5 85.0 102.5 52.0

OPERATING RESULT (EBIT) 28.7 34.6 38.5 50.1 69.4 83.8 32.7 74.6 89.6 37.5

Net fi nancial expenses – 7.0 – 6.8 – 4.6 – 8.0 – 11.3 – 13.7 – 12.7 – 10.0 – 11.3 – 12.1

Profi t tax – 5.3 – 9.2 – 11.5 – 11.4 – 11.9 – 19.1 – 5.6 – 17.9 – 18.7 – 8.7

Share in net income of

associated companies 3.9 5.1 8.1 45.4 0.3 – 8.7 – 1.3 – 1.3 – 0.3

RESULT AFTER PROFIT TAX 20.3 23.7 30.5 76.1 46.5 51.0 23.1 45.4 58.3 16.4

Non-controlling interest – – 0.1 – – 0.1 – 0.1 0.1 0.8 0.6 0.4 5.9

NET INCOME 20.3 23.6 30.5 76.0 46.4 51.1 23.9 46.0 58.7 22.3

Dividend 8.5 10.2 12.5 16.2 18.8 20.4 15.0 18.8 24.0 13.0

EBITA in % of revenues 5.2% 5.4% 5.7% 6.6% 8.2% 9.2% 4.9% 8.6% 9.0% 5.0%

Return on average net capital

employed2 11.7% 13.5% 15.3% 14.4% 13.1% 13.4% 5.7% 12.1% 13.1% 6.4%

1 Figures based on Dutch GAAP.

2 Prior to 2007, based on net capital employed at year-end.

1 1


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

CONSOLIDATED

BALANCE SHEET

Intangible assets 10.6 12.1 13.8 12.4 136.8 212.1 203.8 242.8 273.0 269.4

Tangible fi xed assets 118.1 118.8 161.4 165.8 218.1 247.4 214.7 214.2 221.9 196.7

Financial fi xed assets 11.4 19.9 35.2 18.3 19.8 25.1 45.3 34.2 36.8 47.0

Total non-current assets 140.1 150.8 210.4 196.5 374.7 484.6 463.8 491.2 531.7 513.1

Inventories 110.0 138.6 157.5 157.7 176.2 211.5 155.0 216.9 267.9 226.4

Receivables 91.7 98.8 125.0 128.2 166.2 187.7 116.9 169.8 181.1 159.7

Securities and cash 5.8 2.7 4.6 6.7 4.8 5.4 12.8 11.6 22.7 26.7

Total current assets 207.5 240.1 287.1 292.6 347.2 404.6 284.7 398.3 471.7 412.8

TOTAL ASSETS 347.6 390.9 497.5 489.1 721.9 889.2 748.5 889.5 1,003.4 925.9

Equity 162.0 146.5 181.8 238.7 310.1 366.9 380.8 438.5 465.8 457.2

Non-controlling interest 0.1 0.1 – 0.2 0.3 5.1 4.1 3.8 3.7 – 1.9

Group equity 162.1 146.6 181.8 238.9 310.4 372.0 384.9 442.3 469.5 455.3

Provisions 15.6 52.1 56.1 43.8 40.8 43.5 40.5 32.0 50.6 65.3

Long-term debts 82.9 74.1 130.2 63.5 222.3 316.2 192.0 195.2 275.1 220.3

Banks and short-term loans 13.9 24.6 27.1 30.4 12.9 20.3 16.3 57.1 36.3 36.3

Other short-term debts 73.1 93.5 102.3 112.5 135.5 137.2 114.8 162.9 171.9 148.7

TOTAL LIABILITIES 347.6 390.9 497.5 489.1 721.9 889.2 748.5 889.5 1,003.4 925.9

Group equity/total equity 47% 38% 37% 49% 43% 42% 51% 50% 47% 49%

Acquisitions /(de)consolidations 0.3 29.2 40.8 – 63.0 175.1 88.1 – 3.3 24.7 34.8 15.7

Investments in tangible and

intangible fi xed assets 16 .9 12.0 26.2 43.0 62.9 48.0 17.3 21.3 25.7 16.6

Working capital 128.6 143.9 180.2 173.4 206.9 262.0 157.1 223.8 277.1 237.4

Depreciation and amortisation 19.6 19.2 19.3 23.1 32.7 42.3 42.7 44.9 47.9 51.6

Number of staff years

at year-end 3,245 3,634 3,578 3,532 4,020 4,437 3,805 4,271 4,353 4,454

Number of shares outstanding

at year-end (x1,000) 20,096 20,472 20,784 21,063 23,556 23,967 25,068 25,502 25,929 26,498

Net earnings per €2.50 share 1.03 1.17 1.48 3.66 2.04 2.18 0.97 1.84 2.31 0.86

Dividend per share in euros 0.43 0.50 0.60 0.70 0.80 0.85 0.60 0.75 0.95 0.50

Closing price in euros 9.02 13.55 21.50 23.21 21.27 16.05 18.43 28.00 21.26 19.87

1 Figures based on Dutch GAAP.

1 1


EBITDA Earnings before interest, profi t tax, net

fi nancial expenses, depreciation and

amortisation.

Fix it / exit strategy Making non-core parts of the company

healthy or profi table with a view to sale. The

proceeds are used for new acquisitions.

FM Global Award Certifi cate issued by FM Global to companies

which fulfi l all of this insurer's guidelines for

loss prevention.

Geosynthetics Woven geotextile materials, non-wovens and

grids based on polypropylene and

polyethylene.

Global Reporting

Initiative

The Global Reporting Initiative (GRI) is an

international organisation which draws up

guidelines and defi nitions for sustainability

reporting.

Joint venture Form of cooperation in which TenCate forms a

new company with one or more organisations

and develops new or existing joint activities

from that company.

Market group Clustering of subsidiaries (operating

companies) which cooperate in research and

development, production, end-user marketing

and sales.

Market window Market group with a series of related product-

market-technology combinations, in which the

basic technologies are complementary.

Market window The ideal time to launch a product on the

market. Also: possible market application.

Net capital

employed

The capital made available to the company,

comprising total equity plus loans and

provisions made available, less the balance of

cash and cash equivalents.

Glossary

Advanced composites Fibre-reinforced composites in a polymer

matrix.

Business model TenCate’s business model focuses on value

chain management based on four pillars:

■ End-user marketing

■ Technological innovation

■ Cost leadership

■ Product differentiation.

Buy & build strategy Acquisition and association of businesses and

business units with complementary product

portfolios, technologies and markets for

operational and strategic synergy resulting in

greater market opportunities and profi tability.

Composite A combination of two or more advanced

materials (e.g. based on carbon fi bre, glass

fi bre and aramid fabrics) which is stronger

than the materials in themselves.

Corporate

governance

Rules and conduct standards drawn up by the

Tabaksblat Committee, to which companies

must adhere for good governance and on

which they are accountable.

Also: good, effi cient and responsible

management of a company, on which the

company accounts to all its stakeholders.

CSR Performance

Ladder

Certifi cation standard with fi ve levels for

corporate social responsibility.

Earnings per share

(diluted)

Net result divided by the weighted average

number of diluted shares during the year.

Earnings per share

(ordinary)

Net result divided by the weighted average

number of ordinary shares during the year.

EBIT Earnings before interest, profi t tax and net

fi nancial expenses.

EBITA Earnings before interest, profi t tax, net

fi nancial expenses and amortisation.


Thermoplastic

composite

Composite which becomes soft when heated

and can thus be formed into the desired

shape; a reversible and hence physical

process. All thermoplastics are in principle

recyclable.

Thermoset composite Composite which remains hard and

disintegrates when heated; a chemical and

hence irreversible process.

Weighted average

number of shares

(diluted)

The weighted average number of ordinary

shares issued, including the effect of

outstanding option rights.

Weighted average

number of shares

(ordinary)

The weighted average number of shares

issued, including the weighted average

number of exercised option rights, corrected

for the weighted average of own shares held.

Working capital The total of inventories and receivables less

trade creditors and other payables and short-

term profi t tax liabilities.

Working capital in

days

Working capital expressed in days of

revenues over the last quarter (calculated on

an annual basis).

Net debt position Long-term and short-term interest-bearing

loans and other fi nancial liabilities, less cash

and cash equivalents.

Net result Result after deduction of non-controlling

interests (result attributable to shareholders

of the company).

Prepreg Thin fi lm of a substrate (usually fabric) which

is pre-impregnated with a resin.

Process ecotool A measuring instrument used to determine

the CO2 footprint of the processes in the

TenCate market groups as fully and clearly as

possible (‘inside the gate’).

Product ecotool Using specifi c parameters to determine the

CO2 footprint of TenCate products (‘outside

the gate’).

Sector Technology cluster of business units in which

the purchasing of raw materials is

concentrated on the basis of distinctive

technologies.

Stakeholders Stakeholders of the company, including

employees, suppliers, customers, end-users,

shareholders, analysts and residents in the

surrounding area.

Subsidiary (operating

company)

Unit (operating company) which is owned

more than 50% by Royal Ten Cate.

System approach Increasing desire/ability to provide

coordinated components (e.g. fabrics) as part

of a system.

TenCate base

technologies

Fibre, weaving and fi nishing technology;

market windows are protective fabrics,

outdoor fabrics and composites for aerospace,

automotive and armour. Non-woven, grid and

extrusion technology; market windows are

geotextiles, industrial fabrics and synthetic

turf.


TenCate would like to hear from you. Please let us know your views by

e-mailing [email protected], stating the market group or offi cer you wish

to contact. You can also contact us using the details shown below.

business development & investor relations

F.R. Spaan, director

[email protected]

Royal Ten Cate

Stationsstraat 11

P.O. Box 58

7600 GD Almelo, The Netherlands

Telephone +31 (0)546 544 911

Fax +31 (0)546 814 145

www.tencate.com

Contact
















































Worldwide trends


Market themes



environments


aircraft armour


mobility concepts




dewatering


PROTECTING PEOPLE




INNOVATION



TECHNICAL

TEXTILES











TenCate






niche markets.







Worldwide trends











markets.

Market themes













& Composites sector





composites











Royal Ten Cate
















































Worldwide trends


Market themes



environments


aircraft armour


mobility concepts




dewatering


PROTECTING PEOPLE




INNOVATION



TECHNICAL

TEXTILES











TenCate






niche markets.







Worldwide trends











markets.

Market themes













& Composites sector





composites











Royal Ten Cate

ADVANCED


SECTOR

























GEOSYNTHETICS

& GRASS SECTOR










landscaping

Upstream




Downstream



■ TigerTurf (80%)


OTHER ACTIVITIES

SECTOR


processes




machines and ATMs










inside back cover.





Contact

Text

Royal Ten Cate

Translation


Maartensdijk

Design

Frontwise, Utrecht

Realisation


Amsterdam

Printing


Almelo

Photography

Freek van Arkel

Joost van Baars

Marjo Baas

Stephen Barnett

Doug Bergen

Dennis de Beurs

Andreas Burmann

Frans Dekker

Paul Haverkort

Norbert Hekkink

Joel van Houdt

Cpl Ian Houlding

Vincent Jannink

Ton Kuper

Jonathan P. Larsen

Truls J. Lotvebt

Rens van Mierlo

Roelof Pot

Sylvain Ramadier

David Rozing

Robert Schlesinger

Frank Uijlenbroek

Courtesy © Airbus

Courtesy © BAM


Courtesy © KNHB

Courtesy © NASA




PROTECTING PEOPLE

Royal Ten C

ate A

nnual Report 2012

ADVANCED


SECTOR

























GEOSYNTHETICS

& GRASS SECTOR










landscaping

Upstream




Downstream



■ TigerTurf (80%)


OTHER ACTIVITIES

SECTOR


processes




machines and ATMs










inside back cover.





Contact

Text

Royal Ten Cate

Translation


Maartensdijk

Design

Frontwise, Utrecht

Realisation


Amsterdam

Printing


Almelo

Photography

Freek van Arkel

Joost van Baars

Marjo Baas

Stephen Barnett

Doug Bergen

Dennis de Beurs

Andreas Burmann

Frans Dekker

Paul Haverkort

Norbert Hekkink

Joel van Houdt

Cpl Ian Houlding

Vincent Jannink

Ton Kuper

Jonathan P. Larsen

Truls J. Lotvebt

Rens van Mierlo

Roelof Pot

Sylvain Ramadier

David Rozing

Robert Schlesinger

Frank Uijlenbroek

Courtesy © Airbus

Courtesy © BAM


Courtesy © KNHB

Courtesy © NASA




PROTECTING PEOPLE

Royal Ten C

ate A

nnual Report 2012