FLS INDUSTRIES A/S - KU Leuven · FLS INDUSTRIES 1999 1 COMPANY MISSION The FLS Group aims to be its customers’ preferred partner by offering them solutions and products that contribute

A N N UA L R E PO R T 1 9 9 9

FLS INDUSTRIES A/S

1FLS INDUSTRIES 1999

C O M P A N Y M I S S I O N

The FLS Group aims to be its customers’ preferred partner by

offering them solutions and products that contribute to their

competitiveness.

The FLS Group was established more than a century ago as an

international supplier of cement making equipment. This forms

the basis of the Group’s technological key competencies, pro-

cess control expertise and project management experience.

Working worldwide, the Group is today active in

• the development and planning and subsequent operation

and servicing of cement-making and mining equipment and

systems as well as power generation and waste incineration

facilities

• the production and distribution of cement-based building

materials

• the provision of total support to the aviation industry in

terms of technical management and maintenance services.

The Group’s presence in many markets within selected business

sectors reduces its dependence on regional business cycles and

enables it to focus the use of its resources.

The FLS Group consistently seeks to generate an attractive

long-term yield for the shareholders of FLS Industries. This is

also the best way of serving the interests of the other stake-

holders in the Group.

The subsidiaries of FLS Industries aim to win and maintain

market leadership in all areas where the Group is represented.

Their efforts towards this goal are strengthened not only by

organic growth and acquisitions but also by alliances and

strategic partnerships.

2 FLS INDUSTRIES 1999

C O N T E N T S

R E P O R T

Group – financial highlights in DKK 3Group – financial highlights in EUR 4Group Management Board 5Management report for 1999 6Financial report 8Risk factors 10Human resources 12Environment and ethics 13Shareholder information 14

B U S I N E S S A R E A S

F.L.Smidth-Fuller Engineering 16FLS miljø 24Aalborg Portland Holding 28FLS Aerospace 36Other and associated undertakings 40

A C C O U N T S

Companies in the FLS Group 42Accounting policies 45Consolidated accounts 54Notes - consolidated accounts 58Parent company accounts 67Notes - parent company 70Stock exchange messages in 1999 73Important Board and Management executive positions 74Auditors’ report 75Addresses 76

This 1999 Annual Report of FLS Industries A/S is an English translation of

the original Annual Report in Danish which was adopted by the Board of

Directors of FLS Industries A/S. Whereas all possible care has been taken to

ensure a true and faithful translation into English, differences between the

English and Danish versions may exist in which cases the original Danish

version shall prevail.

G R O U P • F I N A N C I A L H I G H L I G H T S

3FLS INDUSTRIES 1999FLS INDUSTRIES 1999

DKKm 1995 1996 1997 1998 1999

Profit and loss accountNet turnover 17,804 19,088 21,723 22,238 20,993Production costs (14,401) (15,417) (17,541) (17,428) (16,180)

Gross profit 3,403 3,671 4,182 4,810 4,813

Contribution margin 19.1% 19.2% 19.3% 21.6% 22.9%Sales, administrative, distribution costs and other oper. items 2,102 2,279 2,571 3,174 3,419

Earnings before interest, tax, depr./amort. (EBITDA) 1,301 1,392 1,611 1,636 1,394

EBITDA ratio 7.3% 7.3% 7.4% 7.4% 6.6%

Depreciation 671 634 694 710 801Amortisation 14 13 42 68 118

Earnings before interest and tax (EBIT) 616 745 875 858 475

EBIT ratio 3.5% 3.9% 4.0% 3.9% 2.3%

Share of pre-tax profit of associated undertakings 182 244 295 326 1,053Profit and loss on disposal of undertakings 20 99 117 115 1,350Net financial income and expenses (244) (149) (138) (152) (122)

Earnings before tax (EBT) 574 939 1,149 1,147 2,756

EBT ratio 3.2% 4.9% 5.3% 5.2% 13.1%

Tax for the year (172) (294) (338) (353) (216)

Profit for the year 402 645 811 794 2,540

Minority interests’ share of the profit for the year 110 151 195 246 452FLS Industries A/S’ share of the profit for the year 292 494 616 548 2,088

Cash flowsCash flows from operating activities 958 738 1,144 602 794Acquisition and disposal of undertakings (282) 382 79 (1,079) 1,780Acquisition of fixed assets (1,177) (1,301) (1,300) (1,042) (1,527)Disposal of fixed assets 475 470 441 0 165Other investments 123 180 105 (53) (97)

Cash flows from investing activities (861) (269) (675) (2,174) 321Cash flows from operating and investing activities 97 469 469 (1,572) 1,115

Cash flows from financing activities (175) (382) (847) 1,399 (948)

Change in cash funds (78) 87 (378) (173) 167

Interest-bearing debt (net) 2,836 2,180 2,141 3,873 2,499

Balance sheetIntangible fixed assets 156 115 282 351 151Tangible fixed assets 5,757 5,789 6,251 7,141 7,337Fixed asset investments 1,899 1,991 2,036 2,370 2,878Current assets 8,622 8,444 8,806 8,442 9,028

Total assets 16,434 16,339 17,375 18,304 19,394

Consolidated shareholders’ equity 4,967 5,500 5,740 5,791 8,033FLS Industries A/S’ share of shareholders’ equity 3,333 3,821 3,949 4,104 6,098Provisions 898 1,208 1,562 1,413 1,373Long-term and current liabilities 10,569 9,631 10,073 11,100 9,938

Total liabilities 16,434 16,339 17,375 18,304 19,394

Return on capital employed

Adjusted operating profit after tax (NOPAT) 793 1,011 1,051 1,274 2,814Average capital employed 11,920 12,082 11,839 12,444 13,326

Return on capital employed (ROCE) 6.7% 8.4% 8.9% 10.2% 21.1%

Financial ratiosIncluding minority interests’ shareReturn on equity 9% 12% 14% 14% 37%Equity ratio 30% 34% 33% 32% 42%Number of employees at 31 December 14,336 14,825 15,187 18,137 14,140Number of employees in Denmark 7,310 6,977 6,415 6,064 4,968

The key figures and financial ratios have been computed in accordance with the Guidelines for the Computation of Key Figures and Financial Ratios, issued by the Danish Society of Financial Analysts. ROCE is defined in note 35.

4 FLS INDUSTRIES 1999FLS INDUSTRIES 1999

G R O U P • F I N A N C I A L H I G H L I G H T S I N E U R

EURm 1995 1996 1997 1998 1999

Profit and loss accountNet turnover 2,393 2,566 2,920 2,989 2,822Production costs (1,936) (2,072) (2,358) (2,342) (2,175)

Gross profit 457 494 562 647 647

Contribution ratio 19.1% 19.3% 19.2% 21.6% 22.9%Sales, administrative, distribution costs and other oper. items 283 306 346 427 460

Earnings before interest, tax, depr./amort. (EBITDA) 174 188 216 220 187

EBITDA ratio 7.3% 7.3% 7.4% 7.4% 6.6%

Depreciation 90 85 93 95 108Amortisation 2 2 6 9 16


EBIT ratio 3.5% 3.9% 4.0% 3.9% 2.3%

Share of pre-tax profit of associated undertakings 24 33 40 44 142Profit and loss on disposal of undertakings 3 13 16 15 181Net financial income and expenses (33) (20) (19) (20) (16)

Earnings before tax (EBT) 76 127 154 155 370

EBT ratio 3.2% 4.9% 5.3% 5.2% 13.1%

Tax for the year (23) (40) (45) (47) (29)

Profit for the year 53 87 109 108 341

Minority interests’ share of the profit for the year 14 21 26 34 60FLS Industries A/S’ share of the profit for the year 39 66 83 74 281

Cash flowsCash flows from operating activities 129 99 154 81 107Acquisition and disposal of undertakings (38) 51 11 (145) 239Acquisition and disposal of fixed assets (94) (112) (115) (140) (183)Other investments 17 24 14 (7) (13)Cash flows from investing activities (115) (37) (90) (292) 43

Cash flows from operating and investing activities 14 62 64 (211) 150

Cash flows from financing activities (24) (51) (114) 188 (127)

Change in cash funds (10) 11 (50) (23) 23

Interest-bearing debt (net) 381 293 288 521 336

Balance sheetIntangible fixed assets 21 15 38 47 20Tangible fixed assets 774 778 840 960 986Fixed asset investments 255 268 274 319 387Current assets 1,159 1,135 1,184 1,135 1,213

Total assets 2,209 2,196 2,336 2,461 2,606

Consolidated shareholders’ equity 668 739 772 778 1,086FLS Industries A/S’ share of shareholders’ equity 448 514 531 552 820Provisions 121 162 210 190 185Long-term and current liabilities 1,420 1,295 1,354 1,493 1,335

Total liabilities 2,209 2,196 2,336 2,461 2,606

Return on capital employedAdjusted operating profit after tax (NOPAT) 107 136 141 171 378Average capital employed 1,602 1,624 1,591 1,673 1,791

Return on capital employed (ROCE) 6.7% 8.4% 8.9% 10.2% 21.1%

Financial ratiosIncluding minority interests’ shareReturn on equity 9% 12% 14% 14% 37%Equity ratio 30% 34% 33% 32% 42%Number of employees at 31 December 14,336 14,825 15,187 18,137 14,140Number of employees in Denmark 7,310 6,977 6,415 6,064 4,968

All periods are translated using the closing rate: 7.44Key figures and financial ratios are computed in accordance with the Guidelines for the Computation of Key Figures and Financial Ratios, issued by the Danish Society of Financial Analysts.

G R O U P M A N A G E M E N T B O A R D


Seated left to right: Ole Trolle; Jens Münter, Chairman of the Board of Directors; and Ib

Christensen. Standing left to right: Peter Assam, Aalborg Portland Holding; Birger Riisager,

Group President and CEO; Jens Due Olsen, Group CFO; Erik Hoffmann-Petersen, FLS miljø;

and Frank Gad, F.L.Smidth-Fuller Engineering.

Chief Financial Officer Jens Due

Olsen joined the FLS Group on

1 March 1999.

In November 1999, after an intro-

ductory period, Frank Gad suc-

ceeded Messrs Palle O. Jørgensen

and Ib Jacobsen as President and

CEO of F.L.Smidth-Fuller Engineer-

ing (FFE).

On 1 January 2000, Peter Assam

took over as President and CEO

of Aalborg Portland Holding, suc-

ceeding Executive Vice President

Ib Christensen who retired on

1 April 2000.

Group Executive Vice President

Steffen Harpøth, FLS Aerospace,

resigned on 3 February 2000.

Group Executive Vice President

Ole Trolle will resign early Septem-

ber 2000.

The parent company, FLS Industries

A/S, is responsible for the overall

allocation of resources within the

Group, which includes fixing the

return rates for operating units.

The Group coordinates its human

resource development efforts at

central level, and the parent com-

pany sees to it that knowledge is

shared and commercial conditions

are optimised across the Group.

The parent company also main-

tains relations with the capital

market and is, consequently, re-

sponsible for appropriate financ-

ing of activities.

The business units are responsible

for commercial operations and

development. The division of

responsibilities between the par-

ent company and the subsidiaries

is intended to maintain flexibility

at local level while ensuring the

necessary economies of scale at

central level.


M A N A G E M E N T R E P O R T F O R 1 9 9 9

DKKm 1998 1999

Net turnover 22,238 20,993Profit for the year 794 2,540Employees, year end 18,137 14,140

TurnoverDenmark 22% 20%

Rest of Scandinavia 16% 11%

Rest of Europe 28% 31%

North and South America 21% 25%

Africa, Asia, etc. 13% 13%

At the beginning of 1999 it was

still uncertain whether a slow-

down in the US economy and

continuing crisis in Asia might

lead to a worldwide recession or

slower economic growth. These

fears turned out to be unjustified

and prospects for the world econ-

omy now seem bright.

The 1999 Annual Accounts are

presented in accordance with

International Accounting Stan-

dards, IAS, and the FLS Group has

therefore changed its accounting

policies compared with 1998.

The net profit after tax at DKK

2,540m (1998: DKK 794m) was

the best ever achieved by the

Group, and both order intake

and order backlog had reached a

historic high at the end of 1999.

The net profit is affected by

extraordinary items in connection

with the sale of DanTransport

Holding and NKT Holding. When

adjusted for these items, the prof-

it for the year amounts to DKK

343m, considerably below the

anticipated level.

This result reflects disappointing

earnings and the tightening of

accounting procedures and esti-

mates within FLS Aerospace Hold-

ing in the UK and Denmark as well

as restructuring of loss-making

activities and special provisions and

write-downs within F.L.Smidth-

Fuller Engineering. In the Aalborg

Portland Holding Group, the con-

tinuing high level of earnings at

Aalborg Portland A/S was offset

by technical difficulties and ad-

verse weather conditions at Uni-

con Concrete in the Carolinas,

USA. FLS miljø attained the pro-

jected level of earnings.

Operating cash flow amounted

to DKK 794m, reflecting a DKK

192m improvement on 1998,

and is affected by the unsatisfac-

tory result as well as increasing

amounts tied up in working capi-

tal in FLS Aerospace. When disre-

garding the sale of DanTransport

Holding, cash flow to investment

activities remains high.

Consolidated shareholders’ equity

amounts to DKK 8,083m (1998:

DKK 5,791m). The 37 per cent

return on shareholders’ equity

and the 21 per cent return on

capital employed are the highest

ever. Adjusted for special items,

return on shareholders’ equity

at six per cent and return on

capital employed at six per cent

do not live up to the Group’s

own targets.

At the end of 1999, the Group

employed 14,140 people as

against 18,137 at the end of 1998.

The lower number of employees

is mainly related to the sale of

DanTransport Holding.

Continued focusingSince the beginning of the 1990s

the FLS Group has sold a number

of non-core activities and has con-

centrated its resources on under-

takings that possess market and

technological strengths.

In May 1999, the Group decided

to sell its freight forwarding inter-

ests, DanTransport Holding, to

DFDS because the price offered

exceeded the value of a realistic

rate of return under continued FLS

ownership and because DanTrans-

port was expected to have better

opportunities for growth under

the ownership of DFDS. The DKK

2bn proceeds from the sale will

strengthen the development of

the FLS Group’s continuing key

undertakings.

The four remaining key undertak-

ings invested over DKK 1.7bn in

fixed assets and undertakings

during 1999 compared with DKK

2.1bn in 1998.

Profitability to beimprovedIn 2000, the Group will intensify

its efforts to improve profitability.

All business units are to ensure a

return on capital employed that

exceeds the total cost of capital

at a competitive margin.

The Group retains its overall

objective of achieving an average

annual growth rate of minimum

10 per cent in turnover and earn-


ings before interest and tax (EBIT)

over the period 1998 to 2003,

which must be supported by a

higher return on capital employed

and improved cash generation.

During 1999 the Group adopted

detailed guidelines for value based

management. In the subsequent

implementation phase all under-

takings have identified and set

priorities for their main drivers for

profitability.

ManagementrestructuringIn December 1998 the Group

announced a restructure and a

generational change at manage-

ment level, its future Group Man-

agement Board comprising the

Group President and Chief Exe-

cutive Officer, the Group Chief

Financial Officer and the Chief

Executive Officers of the respec-

tive key undertakings. According-

ly, Group Executive Vice President

Ib Christensen retired on 1 April

and Group Executive Vice Presi-

dent Ole Trolle will resign on 1

September, both having served

the FLS Group for 25 years. This

completes the restructure.

In 1999 F.L.Smidth-Fuller Enginee-

ring (FFE) initiated a process of

closer integration of this Group’s

activities to strengthen the focus

on after-sales business. Its Indian

project processing organisation

serves FFE activities in Denmark

and the USA and strengthens

the Company’s efforts in regional

markets.

FLS miljø in 1999 completed the

physical integration of its main

Danish units. The objective is to

create a more efficient and cus-

tomer-oriented organisation in

which expertise and experience

is easily available to all. The inte-

gration process has affected

over 500 staff.

In 1999 Aalborg Portland Hold-

ing accelerated the process of

strengthening the interaction

between its four business sectors

while boosting the competitive

strength of its subsidiaries, partic-

ularly in international markets.

FLS Aerospace in 1999 changed

its organisational setup from a

geographical and corporate struc-

ture to an activity-based opera-

tion. Each activity will in future be

expected to meet the profitability

levels required of it.

Viewed against the disappointing

performance of FLS Aerospace,

in early February 2000 Steffen

Harpøth chose to resign from the

post of President and Chief Exe-

cutive Officer. A new President

and CEO with international ex-

perience from the aircraft mainte-

nance industry has been identi-

fied, and a contract is due to be

signed very soon.

Prospects for 2000Apart from the information re-

garding the FLS Aerospace Group

contained in the Stock Exchange

Message No. 3 issued on 3 Febru-

ary 2000, no significant events

have taken place since the end of

the 1999 financial year.

Assuming that economic condi-

tions remain unchanged in 2000

compared with 1999, the FLS

Group anticipates:

• lower turnover due to the dis-

posal of DanTransport Holding

with effect from 1 July 1999

• substantial improvement of the

earnings before interest and tax

(EBIT) and the earnings before

tax compared with 1999 when

excluding nonrecurring items.

Board of Directors’decisions and proposalsat the annual generalmeetingThe Board of Directors will pro-

pose at the annual general meet-

ing that an ordinary dividend

of DKK 5.00 per share and an

extraordinary dividend of DKK

2.50 per share be distributed.

The latter amount is due to the

extraordinary income received

from the sale of DanTransport

Holding and NKT Holding’s dis-

posal of Lexel.


F I N A N C I A L R E P O R T

DKKm 1998 1999

Net profit according to former accounting policy 810 2,449

IAS adjustmentsIncome criterion and work in progress 3 96

Financial items (3) (1)

Deferred tax (21) (9)

Other 5 5

Total adjustments due to IAS (16) 91

Net profit adjusted according to IAS 794 2,540

Consolidated shareholders’ equity,

former policy 5,582 7,808

IAS adjustmentsIncome criterion and work in progress (9) 61

Financial items (16) 11

Own shares (129) (169)

Deferred tax 40 (84)

Dividends 401 496

Currency losses (51) (41)

Other (27) 1

Total adjustments due to IAS 209 275

Consolidated shareholders’ equity based on IAS 5,791 8,083

The inclusion of the Group’s tax assetshad a positive effect on the sharehol-ders’ equity in 1998 at DKK 84m andon the profit for 1999 at DKK 9m.

The Group’s own shares are stated inthe Shareholders’ equity at DKK 169min 1999.

The proposed dividend is not statedamong the creditors but as a separateitem in the shareholders’ equity. Thishas increased the consolidated share-holders’ equity at the end of 1999 byDKK 496m, an amount that wouldpreviously have been stated as divi-dend payable.

The minority interests’ share of theprofit on internal sales to partly ownedundertakings, notably the transfer ofUnicon Beton to Aalborg Portland Hol-ding, used to be recognised as income.This has been adjusted so that the fullelimination is carried by FLS IndustriesA/S. The resulting negative effect onthe parent company, FLS IndustriesA/S, shareholders’ equity amounts toDKK 55m and the negative implicati-ons for the 1998 net profit amounts to DKK 174m. The effect is neutral asfar as the Group is concerned.

Several items in the profit and lossaccount and the balance sheet havebeen reclassified, and comparative fig-ures have been adjusted accordingly.

Acquisitions and disposalsIn 1999, the FLS Group acquired andsold a number of undertakings. TheFLS Group continuously seeks to opti-mise the Group undertakings and it isGroup management policy to ensurethat the Group companies are at alltimes under the right ownership.

1999 thus saw the sale of the FLS Group freight forwarding activities,DanTransport Holding, to DFDS be-cause the price offered exceeded thevalue of a realistic rate of return undercontinued FLS ownership and because

DanTransport is expected to have bet-ter opportunities for growth under theownership of DFDS.

The DKK 2.0bn proceeds from the salewill strengthen the development of the FLS Group’s continuing key under-takings. DanTransport is consolidateduntil 30 June 1999 inclusive.

Acqusitions by the FLS Group in 1999have been on a limited scale, althoughAalborg Portland Holding’s acquisitionof a 38 per cent interest in Sinai WhitePortland Cement Co. in Egypt and Unicon Beton’s acquisition of NOCOBetong in Norway have considerablestrategic implications.

It remains the FLS Group’s overall aimto strengthen the key undertakingsand provide them with the best pos-sible basis for growth. In this contextthe Group considered a number of ac-quisitions during 1999. These potentialinvestments, however, failed to matchthe Group’s return requirements anddid therefore not materialise.

Profit and loss accountTurnover in 1999 amounted to DKK20,993m as against DKK 22,238m in 1998.

Geographically, turnover grew in Northand South America and in southernEurope, whilst the closer home mar-kets in the Nordic countries declined.

When adjusting for the net effect ofacquisitions and disposals, turnoverrose some DKK 500m, mainly reflect-ing organic growth within FLS miljøand Unicon Beton Holding.

Administrative costs amounted toDKK 2,324m as against DKK 2,053min 1998. This increase reflects variati-ons in the cost structure of underta-kings acquired and sold. For example,DanTransport Holding, representingthe largest undertaking sold, had a dif-ferent cost structure from the FLS Aer-ospace (IRL) business acquired.

(31 December 1998: increase of DKK209m). The main effects on the profitfor the year and the shareholders’ equi-ty appear from the table above.

The income criterion and work in prog-ress have changed. According to theformer policy the FFE Group recognisedincome from major contracts in stepwith the machinery and technical ser-vices being shipped/delivered to thecustomer. Pursuant to IAS income re-cognition takes place in step with costsbeing defrayed, because these generallyreflect the degree of completion. More-over, FFE and FLS miljø now allocateengineering hours to the individualprojects and capitalise them as work inprogress. Whilst previously charged asadministrative costs, engineering hoursare now included in production costsin step with work in progress beingrecognised as income. This has had apositive overall effect on the profit forthe year, amounting to DKK 96m.

Unlike the former accounting policies,work in progress in the FFE Group isnow stated at the gross amount foreach contract and not at the net amount. This change of policy hasincreased work in progress and pay-ments on account from customers by DKK 678m in 1999.

The 1999 annual accounts of the FLSGroup, comprising the consolidatedprofit and loss account, the consoli-dated balance sheet and cash flow sta-tement with appertaining notes, coverthe parent company and 254 (1998:265) subsidiaries including 198 (1998:198) domiciled outside Denmark.

The accounts of the parent companyand the Group are shown separately.The parent company function as a holding company is reflected in thelayout of the accounts.

International Accounting Standards (IAS)The 1999 annual accounts are presen-ted in accordance with the IAS.

The FLS Group has for several yearsbeen adapting its accounting policiesto IAS. For example, since 1994 good-will has been capitalised and amorti-sed, and production overheads havebeen included in stocks since 1996.

The changes in accounting policies haveimproved the net profit before tax byDKK 100m (1998: DKK 5m improve-ment) and improved earnings after taxby DKK 91m (1998: a reduction amo-unting to DKK 16m). The effect onshareholders’ equity is an increaseof DKK 275m at 31 December 1999


Other operating income amountingto DKK 208m (DKK 169m in 1998)includes income recognition of negati-ve goodwill by FLS Aerospace Holding.The negative goodwill derives fromthe acquisition of TEAM Aer Lingus(now FLS Aerospace (IRL)) in 1998.DKK 34m has been recognised as in-come, reducing costs defrayed in con-nection with FLS Aerospace (IRL) joi-ning the Group. Moreover, DKK 45mhas been recognised as income, repre-senting depreciation on and usage ofthe non-monetary assets acquired,including depreciation on a capitalisedhangar situated on a leased site. Over-all income recognition of negativegoodwill will in future take place instep with depreciation on the assetsacquired.

Earnings before interest and tax(EBIT) fell by DKK 383m or 45 percent to DKK 475m. This decline is dueto disappointing earnings and thetightening of accounting proceduresand estimates within FLS AerospaceHolding as well as restructuring of lossmaking activities and special pro-vi-sions and writedowns within FFE.

The Group’s share of associatedundertaking earnings amountedto DKK 1,053m compared with DKK326m in 1998. This result positivelyreflects non-recurring items in NKT Holding.

Profit from sale of undertakingsrepresents a DKK 1,350m profit,mainly accruing from the sale of DanTransport Holding.

Tax on profit for the year amountsto DKK 216m, the Group’s tax percen-tage being 8 per cent. The low amountof tax and consequent tax percentageare primarily due to the tax-exemptprofit earned by FLS Industries A/S fromthe sale of DanTransport Holding andmodest tax payments by the Group’sassociated undertakings.

Earnings after tax increased by DKK 1,746m or 220 per cent to DKK2,540m. Adjusted for non-recurringitems, amounting to DKK 2,086m, theearnings amount to DKK 454m, 33 percent lower than in 1998. FLS Industries’own share rose by DKK 1,540m or 281per cent to DKK 2,088m.

Cash flow from operations increasedon 1998, from DKK 602m to DKK794m, reflecting the fact that higherpayments on account by customersmore than offset the unsatisfactoryincome.

Cash flow from investments at thepositive amount of DKK 321m reflectsthe acquisition and disposal of undert-akings (chiefly DanTransport Holding).Adjusted for this transaction, invest-ment activities represented a strain oncash flow in excess of DKK 1.7bn. Thisamount is lower than in 1998, but stillrepresents a high level of investments.

Despite an active investment policyand dividend payments amounting to DKK 382m, the FLS Group reducedits net borrowing requirement by DKK1,374m. This reduction reflects the disposal of DanTransport Holding less Group investments and dividendpayments. Net interest-bearing debtamounted to DKK 2,499m at the end of 1999, compared with DKK3,873m at the end of 1998.

Balance sheetIntangible fixed assets declined fromDKK 351m to DKK 151m as a result ofthe disposal of DanTransport Holdingand the reduction and income recog-nition of negative goodwill by FLS Aerospace Holding.

The acquisition of FLS Aerospace (IRL)entailed negative goodwill at the amount of DKK 360m. This amountderived partly from the capitalisation(DKK 221m) of a hangar situated on asite that is leased on favourable con-

ditions. In 1999 the negative goodwillwas reduced by deferred tax at DKK70m on the above-mentioned hangarand recognition of other operatingincome amounting to DKK 79m.

The increase in tangible fixed assets ismainly due to investments by FLS Aero-space Holding totalling DKK 705m in-cluding DKK 547m in aircraft compo-nents. The other companies in theGroup also maintained a high level ofinvestments. Mainly due to the dispo-sal of DanTransport Holding tangiblefixed assets reduced by DKK 1,135mand the grand total now stands atDKK 7,337m as against DKK 7,141min 1998.

Shares in listed associated underta-kings were entered at DKK 1,265m at31 December 1999 based on the equi-ty method. The market capitalisationof these undertakings amounted toDKK 837m. In February 2000 the Group received DKK 589m from NKTHolding in connection with the latter’srepurchase of own shares.

The capitalised tax reflects the Group’sprojected earnings plus investmentsand less depreciation by Group com-panies that hold tax assets. The Grouptax asset amounts to DKK 147m asagainst DKK 117m in 1998. Theunderlying net tax asset at DKK 836mhas thus reduced by DKK 691m whichfrom a conservative estimate will notbe used within the coming five years.

The consolidated shareholders’ equityamounted to DKK 8,083m at the endof 1999 compared with DKK 5,791mat the end of 1998. The FLS Industriesshare of the equity amounted to DKK6,098m at the end of 1999 as againstDKK 4,104m at the end of 1998.

Minority interests’ share of the conso-lidated shareholders’ equity has risenfrom DKK 1,687m at the end of 1998to DKK 1,985m at the end of 1999.

This increase is partly explained byminority interests’ share of the earn-ings of NKT Holding and partly by thefact that 50 per cent of the earnings ofAalborg Portland A/S accrue to BlueCircle.

The consolidated provisions are on apar with those of 1998. The Group hasreduced the total provision for warran-ty work by DKK 109m. Meanwhile, theprovision for deferred tax has increa-sed by DKK 90m.

Return on capital employed(ROCE)The FLS Group has decided to introdu-ce value-based management with theoverall objective of strengthening theframework for monitoring and control-ling the Group’s long-term capabilityfor generating earnings. For this pur-pose a version of EVATM – EconomicValue Added – is used. This entailsrelating the financial result to the capi-tal it requires and the risk it entails.Note 35 to the Consolidated Accountsgives a more detailed description ofthe economic model used.

Although the return on the capitalemployed is not satisfactory, over thepast five years the FLS Group has achieved an increasing return on itscapital employed. In 1995, ROCE a-mounted to 6.6 per cent, comparedwith 10.2 per cent in 1998 and 21.1per cent in 1999. Adjusted for non-recurring items, ROCE for 1999 amo-unts to 5.9 per cent.

In 2000 the Group will intensify thefocus on optimising capital employed.


R I S K F A C T O R S

DKKm

0

1,000

2,000

5,000

6,000

8,000

7,000

3,000

4,000

1990

Basic orders Major orders

1991 1992 1993 1994 1995 1996 1997 1998 1999

ORDERS RECE IVED BY THE FFE GRUP

Turnkey contractsIn 1999 F.L.Smidth-Fuller Engi-

neering (FFE) signed three cement

plant contracts on a semi-turnkey

basis, two in the USA and one in

Egypt, under which FFE, jointly

with local contractors, is responsi-

ble for the construction of com-

plete facilities, and not just sup-

plies of cement-making equip-

ment. These projects involve a

greater risk. At the end of 1999,

contracts on a turnkey basis

accounted for a quarter of the

total order book in terms of sales

value.

Long-term service contractsIn 1998 and 1999 FLS miljø won

two contracts to build and subse-

quently operate biomass power

stations in the UK and Spain. The

contracts cover 13 and 10 year

periods, respectively, and are the

first ever awarded to FLS miljø of

this kind.

At the start of year 2000, FFE Min-

erals signed a three year contract

for continuous maintenance of

part of one of the world’s largest

copper mines, Los Pelambres in

Chile. Long-term service contracts

is a new type of business for FFE.

FLS AerospaceThe difficulties related to control

in FLS Aerospace make prospects

for operations and earnings more

uncertain. Year 2000 will be affect-

ed by organisational and capacity

adjustments.

Managing financial risk It is Group policy that all major

financial exposures should be

identified and appropriately

hedged.

The FLS Group manages its finan-

cial position by having each Group

company optimise its individual

financial situation in close coope-

ration with the FLS Group in-house

bank.


The FLS Group in-house bank is

responsible for managing consoli-

dated financial exposure at Group

level. This entails management of

currency, interest, liquidity and

credit risk.

Most financial transactions take

place through the Group’s prima-

ry relationship banks. Currency

and interest rate exposure is

assessed through VaR-techniques

and scenario analyses, and is

hedged by means of financial

instruments. Group risk manage-

ment takes place within set limits

and defined scope of authority

and is enforced by special control

systems.

Currency exposureFLS Group currency exposure

derives from the impact of

exchange rates on contractual or

budgeted commercial payments

and financial payments in connec-

tion with loans and investments.

The valuation of foreign net

investments is also affected by

exchange rate variations. Further-

more the FLS Group is subject to

currency exposure, when negoti-

ating and quoting tenders.

Appropriate location of business

activities and production facilities

combined with flexible placing of

sourcing is used to the greatest

possible extent by the Group

companies as a natural hedge

against currency exposure. For the

part of the exposure that cannot

be naturally hedged or secured

via currency clauses in contract

negotiations, the Group compa-

nies use forward contracts and

currency options to minimise the

financial risk.

Interest rate riskThe FLS Group’s exposure to inter-

est rate risk may be described as

the market value fluctuations of

balance sheet items. Budgeted

payments also expose the FLS

Group to interest rate risks.

Interest rate risk is managed by

using interest sensitivity analysis

on the net position in different

life intervals and is hedged by the

use of FRA, interest swaps and

interest options.

Liquidity exposureOne of the main objectives of the

FLS Group in-house bank is to

ensure that the funding of the

Group remains sufficient. The FLS

Group manages its liquidity expo-

sure by using cash management

systems around the world and by

maintaining a number of short-

term overdraft facilities and long-

term committed credit facilities.

These arrangements are estab-

lished mainly with the Group’s

relationship banks.

Credit riskThe use of financial instruments

entails an element of risk that the

counterparty may not be able to

meet its obligations. The FLS

Group seeks to minimise this risk

by limiting its use of financial

institutions to those with a safe

degree of credit worthiness. Due

to these efforts there is no signifi-

cant credit risk on any individual

bank.

Financial instruments have a maxi-

mum credit risk not exceeding the

corresponding balance sheet val-

ues.

Credit risks on other counterpar-

ties than banks are minimised

through the use of bank guaran-

tees. The Group does not consid-

er to have significant credit risks

on any single customer.


H U M A N R E S O U R C E S

End 1999

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

AalborgPortlandHolding

FLSAerospace

FLSmiljø

F.L.Smidth-Fuller

Engineering

In Denmark

Outside Denmark

LOCAT ION OF EMPLOYEES ,KEY UNDERTAKINGS

End 1999

0

3,000

6,000

9,000

12,000

15,000

InDenmark

OutsideDenmark

Total

LOCAT ION OF EMPLOYEES ,GROUP

Ever since the FLS Group was

founded in 1882 its development

has been based on technical

capability and foresight.

Over the years products have

changed. Today, the Group sells

not only single machine units and

components, but, to an increasing

extent, services, solutions, com-

plete plants and long-term con-

tracts to operate the facilities.

These developments place heavy

demands on the main product

offered by the Group, viz. the

competence of its human

resources.

The knowledge and motivation of

the individual forms the basis for

the organisation’s ability to devel-

op itself and its products, which

in turn is crucial for the compa-

ny’s commercial success.

Close dialogue and cooperation

with customers requires that the

Group’s competence is locally pre-

sent around the world. The broad

mix of employees reflects the

global nature of the Group.

In 1999, the Group introduced an

overall Human Resources policy.

The purpose of this initiative is to

maintain focus on the develop-

ment of competence in all Group

companies, which are individually

responsible for implementing the

policy in accordance with their

respective strategies.

A particular aim of the human

resource policy is to ensure that

the Group at all times has the

necessary managerial talent and

capacity at its disposal. The wide

range of activities within the

Group gives its employees ample

scope for accumulating broad

international experience.

The FLS Group wishes to be seen

as an attractive organisation that

offers the individual employee

’careers without limits’ across

professional, business and geo-

graphical lines.

The Group’s new human resource

policy is the framework for a sys-

tematic and coordinated effort at

all levels within the Group. Con-

sistent routines will identify and

develop human competence so

that knowledge and experience

is exchanged across the organisa-

tion. In this way, the Group will

maintain its competitive strength.


E N V I R O N M E N T A N D E T H I C S

EnvironmentThe overall goal of the FLS Group

is at all times to at least comply

with current environmental legis-

lation and actively contribute to

sound environmental development

in society to strike a balance be-

tween the financial consequences

and industrial development and

potential.

The environmental goals of the

FLS Group are to:

• produce products with mini-

mum environmental impact

during production, use and

disposal;

• market products that con-

tribute to limiting the negative

environmental impacts;

• improve energy efficiency and

limit energy consumption;

• reduce polluting emissions to

the environment and the

amount of waste;

• train and motivate our employ-

ees to actively participate in

environmental efforts;

• follow up on and monitor the

development of the environ-

mental impacts.

The Group does not publish a

consolidated environmental report

nor environmental statement. The

cement producer, Aalborg Port-

land A/S, publishes an environ-

mental report – other companies

publish EMAS reports or are ISO

14001 certified. The FLS Group

plans to present an environmental

report for its manufacturing un-

dertakings as from the year 2001.

EthicsThe FLS Group wishes to be re-

garded as a responsible organisa-

tion. It is the Group’s general atti-

tude that the democratic process

should be promoted all over the

world, and that basic human

rights should be acknowledged.

Accordingly, basic human rights

must always be respected at

workplaces around the world that

are controlled by the FLS Group.

The FLS Group does not under-

take assignments in countries in

which its employees would have

to work under unacceptable con-

ditions or in countries with whom

trade is illegal.

Through its activities, the FLS

Group wishes to contribute to the

development of infrastructure and

economic growth in the countries

in which it operates, thereby

facilitating the process towards

democracy.

The FLS Group has long-standing

experience in supplying machinery

and equipment to poor countries

whose economy and infrastruc-

ture is less developed; this in-

cludes countries which by West-

ern standards have totalitarian

and oppressive political systems.

Economic improvement in these

countries is essential to the cre-

ation of a more humane politi-

cal and social environment. This

entails development and mod-

ernisation of the countries’ infras-

tructure and agricultural and

industrial sectors.

Experience from all parts of the

world shows that access to

cement, for example, plays an

important part in the develop-

ment of a country’s infrastructure.

Cement is a requisite to stimulat-

ing the process of industrialisa-

tion. The FLS Group wishes to

contribute to this process, build-

ing on the specific experience it

has gained from the positive

effect of trade on the develop-

ment and peaceful coexistence

of such countries.

During 1999 the FLS Group

continued the process of imple-

menting these ethical standards

throughout the organisation. Dur-

ing year 2000 a newly developed

module on ethics will be perma-

nently included in the FLS Group’s

general management training

programme.

In order to continuously develop

and update its ethical policy so

that the Group companies contin-

ue to meet the demands and

expectations of society, the FLS

Group takes part in a number of

bodies and working groups that

deal with human rights, codes of

conduct and responsibility.


S H A R E H O L D E R I N F O R M A T I O N

SHAREHOLDERS

Participating interest (%)

Potagua 52

ATP 11

PFA 5

Unidanmark 5

Other Danish institutional investors 5

Foreigninstitutions 2

FLS Industries 2

Individuals 7

Non-registered 11

Total 100

Market price

50

100

200

300

250

150

Jan-95

FLS-B KFX Industrial

Jan-96 Jan-97 Jan-98 Jan-99 Jan-00

PRICE DEVELOPMENT, CPH . STOCK EXCHANGE 1995 - 1999

FLS Industries is part of the Aktie-

selskabet Potagua group.

Four shareholders have reported a

participating interest that exceeds

five per cent of the share capital.

Aktieselskabet PotaguaKalvebod Brygge 20,

DK-1560 Copenhagen V

ATPKongens Vænge 8,

DK-3400 Hillerød

PFAMarina Park, Sundkrogsgade 4,

DK-2100 Copenhagen Ø

UnidanmarkTorvegade 2,

DK-1786 Copenhagen V

Share capital and votesThe Company share capital

amounting to DKK 930 million is

divided into 7,200,000 A shares

each entitling the holder to ten

votes and 39,286,885 B shares

each entitling the holder to one

vote.

The Company has more than

10,000 registered owners.

The total return on FLS B shares in

1999 amounted to nearly 49 per

cent. The KFX index, which con-

sists of the largest and most trad-

ed shares on the Copenhagen

Stock Exchange, rose 19 per cent,

similar to the return on shares

included in the Industrial index.

InvestorRelations activitiesIn Februar 1999 FLS Aerospace

invited investors, analysts and the

press to Dublin for a briefing on

the acquisition of Team Aer Lin-

gus. In December, Unicon Beton

organised a similar event to

explain the strategy behind the

Group’s concrete business.

Via messages to the Stock

Exchange, FLS Industries seeks to

maintain regular contact with the

stock market to ensure a consis-

tent development of the share

price that reflects the underlying

financial performance of the

Company.


KEY FIGURES OF SHARES AND DIVIDEND

1995 1996 1997 1998 1999

CFPS* (Cash flow per share) 20.8 16.0 24.8 13.0 17.1

EPS* (Earnings per share) 6.3 10.7 13.4 11.8 44.9

Net worth* 72 83 86 88 131

Dividend per share* 2.4 3.2 4.0 5.0 7.5

Pay-out ratio (%) 38 30 30 42 17

FLS B share price 86 150 163 129 186

Number of shares (000s) 46,098 46,098 46,098 46,487 46,487

Market capitalisation (DKKm) 4,051 6,911 7,521 5,896 8,733

* adjusted to share denomination DKK 20.

Option schemeAs from the 1998 financial year

the FLS Group has introduced a

share option scheme that includes

the Board of Directors of FLS

Industries, the Group Manage-

ment Board and a number of

executive staff, 51 individuals in

all. The number of options issued

depends on the Group’s earnings

before interest and tax (EBIT),

generation of Economic Value

Added (EVATM) and the return on

FLS B shares compared with the

Industrial index.

It is planned to extend the

scheme to cover a larger number

of persons over the coming years.

.

Financial calendar 2000

20 Jan. Dates of announcing

financial results and the

Annual General

Meeting

3 Feb. Estimated results

9 Mar. The 1999 financial

results statement

2 May Annual General Meeting

29 Aug. Announcement of

financial results for the

first half of 2000

21 Nov. Announcement of

financial results for the

third quarter of 2000

Resolution proposed atthe Annual General MeetingThe Board of Directors proposes

an ordinary dividend of DKK 5.00

per share and an extraordinary

dividend of DKK 2.50 per share

due to the divestment of

DanTransport Holding and NKT

Holding’s disposal of Lexel.

Contact personsCorporate public relations:

Torben Seemann Hansen

Tel: +45 36 18 18 60

Fax: +45 36 44 18 30

E-mail: [email protected]

Investor relations:

Peter Wenzel Kruse

Tel: +45 36 18 18 20

Fax.: +45 36 43 06 54


The FLS Industries web site at

www.flsindustries.com provides

useful information for the Com-

pany stakeholders. The site con-

tains links to the web sites of in-

dividual Group companies with

additional information on prod-

ucts and services offered.


F. L . S M I D T H - F U L L E R E N G I N E E R I N G

Jack Hilbert, FFE Bulk Handling; Søren Iversen, F.L.Smidth & Co.; Kai Lyngsie, Fuller; Peter Lauritz Holmblad, FLS Automa-

tion; Frank Gad, President and CEO; Jørgen Bo Johansen, CFO; George Robles, FFE Minerals Corp.; Ole Norhøj Nielsen,

Ventomatic; Michael Kleisli, Pfister; Hans Knudsen, MAAG Gear.

F.L.Smidth-Fuller Engineering provides production

plants, equipment and services to various industries,

notably the cement and mineral processing indu-

stries worldwide. The Group is the world’s leading

supplier to the cement industry.

DKKm 1998 1999

Net turnover 6,738 6,671Profit for the year 221 57Employees, year end 3,930 3,878






Order Order

Turnover intake* backlog*

1999 1999 31.12.1999

Cement 71% 77% 86%

Mineral processing 7% 7% 4%

Pyroprocessing 4% 2% 1%

Chemical and petrochemical 3% 3% 1%

Power generation 2% 2% 1%

Other 13% 9% 7%

Total, DKKm 6,671 7,593 6,283

*Sales prices


The F.L.Smidth-Fuller Engineering

Group, FFE, entered 1999 with

the lowest backlog of orders for

the past five years, which had a

negative impact on the year’s

earnings. The order intake for

1999 was satisfactory. For 1999

the FFE Group posted a net profit

of DKK 57m, representing a 7 per

cent return on the average capital

employed. The profit from opera-

tions was as projected, but divest-

ments and restructuring of loss-

making activities plus special pro-

visions and write-downs weak-

ened the overall result.

In 1999 the global demand for

new cement plants and equip-

ment remained on the same level

as the year before, this being con-

siderably below the record years

of 1994 to 1996. New and up-

graded kiln capacity contracted

by the cement industry on a glob-

al basis totalled approximately 22

million tonnes per year in 1999,

this being 15 per cent below the

average level of the past twenty

years. The US and Egyptian mar-

kets accounted for some 60

per cent of the overall new kiln

capacity contracted worldwide

in 1999.

The FFE Group was awarded nine

major contracts with customers

in the USA, Egypt, Nigeria, Spain,

India and Argentina, the total val-

ue of these orders amounting to

DKK 3.3bn. Two of the contracts

in the USA are on a turnkey basis

and both are being processed in

collaboration with a joint venture

partner. One of the Egyptian con-

tracts is also on a turnkey basis

and part of it is being handled in

cooperation with Egyptian con-

tractors. These three contracts

have a total sales value of DKK

2.3bn or some 30 per cent of

the total order intake. In 1999,

FFE’s share of the market for

new kiln capacity contracted by

the cement industry exceeded

50 per cent.

Sales of machinery and equip-

ment, automation and electrical

packages as well as spares and

services progressed satisfactorily

in 1999. Further steps will be tak-

en in 2000 to ensure continuous

growth in service sales.

The cement industry has in recent

years seen a vigorous move to-

wards consolidation. The world’s

global cement producers have

invested heavily in acquiring exist-

ing capacity instead of building

new plant. The international

acquisition trend is expected to

continue in the coming years.

To the FFE Group, the structural

change towards fewer, but larger

customers, means that competi-

tion will remain keen and that

close relations with the leading

cement and mineral producers

will be crucial for the continued

success of the Group. The de-

mand for new capacity is being

postponed because utilisation

of existing capacity is likely to

increase in step with consolida-

tion of the industry.

FFE Minerals Corp., which serves

the world’s mineral processing,

lime, pulp and paper, alumina and

bauxite industries, started off the

year in a good way. Two major

contracts were signed with mining

customers in Colombia and Peru,

at a total value of DKK 250m.

Sales of spares and services pro-

gressed successfully, improving 40

per cent on the year before. This

business now accounts for more

than one third of the year’s orders

in terms of sales value. A three-

year maintenance contract was

signed with the Chilean copper

producer Minera Los Pelambres.

This DKK 100m contract marks

a breakthrough for FFE Minerals

in its bid to become a major pro-

vider of maintenance and other

services to the mineral processing

industry.

Towards the end of 1999 FFE

Minerals acquired a small Chilean

engineering works, MACMIN, to

support its maintenance and ser-

vices strategy within FFE Services,

Chile. FFE will actively strengthen

its position as key supplier to its

customers by acquiring small and

major undertakings around the

world.



F.L.Smidth & Co.

and Fuller have developed

the modular SF Cross-Bar clinker cooler

which is simpler, more efficient and easier to operate than

any other cooler on the market. Weighing up to 330 tonnes,

the cooler measures up to 23 metres in length, 8 metres in

height and 5 metres in width.

The mineral processing market is

also experiencing a trend of con-

solidation of alumina and copper

production in the hands of fewer

players through mergers and

acquisitions.

In the marine gear market MAAG

Gear won a significant contract

for three special-purpose vessels

in Korea. China’s power gene-

rating industry again proved an

important market in 1999 for FFE

Bulk Handling. The excess capa-

city in the global petrochemical

market had a negative impact on

FFE Bulk Handling whose business

in this field fell far short of expec-

tations.

As the individual Group compa-

nies continue to develop their

competitiveness in the coming

years, the focus will be on cross

fertilising knowledge and compe-

tencies across the Group. Several

of the Group companies have

established a presence in India

that will increasingly support the

existing technology centres in

Denmark and the USA.

During the year, the FFE Group

divested a number of minor un-

dertakings. In the UK, Kemutec

Group was sold because its ac-

tivities did not match the future

strategy of FFE Bulk Handling. In

addition, FLS Automation sold

Jawo Handling based in Denmark

and FLS Airloq operating in Swe-

den and Norway.

At the end of 1999, the FFE

Group employed 4,200 people,

300 of whom were short-term

contract staff. The Group had

1,100 employees in Denmark.

Prospects for 2000The FFE Group enters year 2000

with a greater backlog of orders

than the year before. Most re-

gions are experiencing high eco-

nomic growth, and the Group

expects greater activity and

improved earnings in 2000.

Supplies to the cement industry

are expected to generate higher

earnings in 2000 as a result of the

larger volume of orders in hand

and the market prospects. Con-

tinuation of the current trend

towards contracts being signed

on a turnkey basis will put profit

margins under pressure.

Rising metal prices are likely to

lead to higher investment activity

in the mining industry. Sales of

services, maintenance and spare

parts will continue to be in focus

at FFE Minerals, and the grati-

fying trend in order intake and

financial performance is expected

to continue.

The total order backlog in terms

of sales price amounts to DKK

6.3bn which will be effected over

the next three years, mainly in

2000 and 2001.


F.L.Smidth & Co. andFullerF.L.Smidth & Co. and Fuller provide

the cement industry worldwide

with turnkey production units,

complete plants, plant installa-

tions, main machinery, single

machine units, spare parts and

control systems in addition to

knowhow, services and training.

F.L.Smidth & Co.A smaller volume of orders in

hand at the beginning of the year

and extraordinary depreciation

had a negative impact on the

overall financial result. The order

intake in 1999 was satisfactory.

Several major projects were com-

pleted in 1999, and a number of

production lines were commis-

sioned, for example in Bolivia,

El Salvador, Poland, Spain and

Turkey.

In 1999, F.L.Smidth & Co. won

three significant contracts in

Egypt. In March, Sinai Cement

placed an order for a 1,000

tonnes per day white cement

plant. In June, a contract was

signed with Misr Cement Compa-

ny (Qena) for a complete 4,500

tonnes per day plant to be sup-

plied on turnkey terms. Also in

June, Assiut Cement ordered a

major expansion of its cement

plant. During the year F.L.Smidth

& Co. also received an order from

West African Portland Cement for

a 3,000 tonnes per day produc-

tion line to be built at the Ewe-

koro cement works in Nigeria.

In Europe, the Company signed

a contract for a new 3,700 ton-

nes per day kiln destined for the

Lengerich cement plant in Ger-

many. Cimpor of Portugal has

ordered a kiln conversion project

including a new SF Cross-Bar

clinker cooler, while Cementos

Avellaneda in Argentina has

signed a contract for a new 3,000

tonnes per day production line.

Finally, F.L.Smidth & Co. received

an order for supplies of main

machinery for a 5,000 tonnes per

day upgrading project at A CC

Wadi in India to be effected in

collaboration with Larsen & Toubro.

Significant orders received for

major machinery include cement

grinding plants, separators and

coolers. There was a satisfactory

flow of sales of spare parts and

services during the year.

FullerFuller realised a satisfactory order

intake and financial result in 1999

based on the current level of the

market for cement plants and

equipment.

Several major contracts were

received for new cement plants as

well as for the expansion of exist-

ing plants. During 1999 Fuller was

chosen to supply and install a

new 5,400 tonnes per day clinker

production line to Texas Indus-

tries, USA. Southdown Company

in USA selected Fuller to supply a

new 4,500 tonnes per day kiln

system as part of the expansion of

its California plant. In September,

Ash Grove Cement and Fuller

signed a contract for the design,

supply and construction of a new

4,200 tonnes per day clinker line

at the existing plant site at

Chanute, Kansas.

The orders for Texas Industries

and Ash Grove Cement were

received on a turnkey basis. Fuller

has entered into joint venture

relationships for those two con-

tracts in order to be more com-

petitive and to minimise and man-

age the risks associated with the

construction part.

In the after market Fuller contin-

ued to focus its services towards

spare parts, replacement parts

and after sale services. In order to

maintain a sustained performance

towards its customer base Fuller

took some positive steps toward

future growth by offering new

products and services.

The number of employees at year

end was close to 1,100 employ-

ees around the world. At Fuller

India the number of engineers

increased through the year in

order to handle additional engi-

neering workload from F.L. Smidth

& Co. and Fuller.

FFE Bulk HandlingFFE Bulk Handling is a supplier of

systems and equipment for bulk

materials handling and air pollu-

tion control to the cement, mine-

rals, plastic, power, chemical and

petrochemical industry.

FFE Bulk Handling experienced

lower levels of profitability in

1999 as compared to previous

years primarily as a result of a

loss related to divestment of the

Kemutec Group operations in the

UK. The divested non-core activi-

ties included mainly sale of equip-

ment to the foodprocessing and

pharmaceutical industries.

The Materials Handling Systems

Division, which focuses on mate-

rial handling within a wide range

of industries, performed satis-

factorily, primarily due to the

strength of the North American

cement industry. Order intake

for fabric filter dust collectors

showed the best year yet for this

product line.



The Distribution Systems Division,

which focuses on the loading,

unloading and storage/distribu-

tion of cement transported by

ships and barges, had a success-

ful year in total. The division com-

pleted its largest project ever for

selfunloading vessels, and the

seventh continuous contract with

Taiwan Cement. The 23,000 DWT

vessel can load and discharge at

1,000 t/h. Several contracts were

received for ship loading and un-

loading equipment. During 1999

the division succesfully commi-

sioned the group’s first high ca-

pacity (800 tph) mechanical ship

unloader. The non-cement activi-

ties included sale and successful

startup of two pneumatic ship

unloaders in Spain to handle

alumina.

A newly formed Standard Prod-

ucts and Aftermarket Group was

organised to focus specifically on

the sale of components, spare

parts and aftermarket services.

Especially in the US market, FFE

Bulk Handling has a large popula-

tion of installed equipment which

presents a large opportunity for

aftermarket sales.

FLS AutomationFLS Automation supplies automa-

tion and electronic system solu-

tions to processing plants mainly

in the cement, mineral, environ-

mental and energy industries.

In 1999 the FLS Automation

Group turned around from the

difficulties encountered in 1998

and became profitable again.

After the organisational and per-

sonnel adjustments in Copen-

hagen effected in 1998/99, the

organisation is now well in place

partly for being FLS Automation’s

technology centre, partly for sales

and project execution in markets

not covered by subsidiaries.

Sales to the cement industry cov-

ering approximately 75 per cent

of the order intake in 1999 have

increased significantly compared

to the year before, especially in the

Americas and Africa. Numerous

projects have successfully been

delivered in 1999, among these

the total electrification project to

the new Rugby Cement works in

UK, the largest project ever un-

dertaken by FLS Automation.

The partnership with ASEC

Automation, Egypt has become

a success in leading to a number

of joint projects to the Egyptian

cement industry. The close coop-

eration with F.L.Smidth & Co. and

Fuller also resulted in a number

of new projects being secured in

Nigeria, Bolivia and USA.

Sales to the industry sector, cover-

ing 25% of the order intake in

1999, decreased somewhat due

to the fact that no major orders

were received in the waste-to-

energy market.

However, a number of electrifica-

tion projects sold earlier for waste

incineration plants resulted in a

high level of engineering activity

and projects were successfully

concluded in Rouen, France, and

Bergen, Norway.

A project in Umeå, Sweden,

encountered difficulties during

the installation phase and

entailed a financial loss.

MAAG GearMAAG Gear is a leading player in

the international gear manufac-

turing industry. The main product

lines comprise heavy-duty gears

for the cement industry, high-

speed gearboxes for compressor

drives and power generation, and

special engineered and complex

high power main gear transmis-

sions for the marine market.

For MAAG Gear the order intake

in 1999 was very satisfactory and

the financial result has improved.

The overall market situation has

influenced the three product

areas differently. Compared to

1998 MAAG Gear has significant-

ly increased the order intake of

heavy duty gears to the cement

industry, and has reached a satis-

factory result for the year. Mainly

markets like US, Egypt and South

America have developed posi-

tively with investments for new

installations as well as for re-

placements.

Higher oil prices in the second

half of the year resulted in higher

activity in the turbo high speed

gear market, serving the oil and

power generating industries. For

the whole year MAAG Gear

reached an order intake slightly

lower than the year before.

In the Marine market, in which

MAAG Gear’s main activity is high

speed marine gear units, order

intake was higher than the year

before.

To further improve competitive-

ness and profitability MAAG Gear

has continued to standardise gear

types and parts and has achieved

promising results in this respect.

MAAG Gear has intensified its

focus on the market for after

sales service and spares and

achieved a satisfactory result of

this business, primarily in the

Heavy Duty sector.

PfisterThe Pfister group focuses on

dosing equipment supplied to

cement manufacturers worldwide

and on industrial weighing equip-

ment and systems sold primarily

to the European haulage and

railway industry.


The Pfister Group’s overall finan-

cial result improved on 1998, but

is still unsatisfactory. The dosing

equipment activities developed

satisfactorily and contributed pos-

itively to the financial result,

whereas the traditional weighing

equipment activities had a bad

year with lower order intake re-

sulting in a larger loss than the

year before, which at the end of

the year entailed a restructuring

of these activities.

In 1999 a number of orders for

dosing equipment were received,

mainly from the cement industry

in Europe, North and South

America.

The setting up of a new subsi-

diary in USA proved a successful

step based on the volume of

orders received from the region

and the current number of pro-

jects in the pipeline.

Penetration into new industries

such as power generation and

waste-to-energy plants is making

progress. During the summer,

Pfister received its first contract

for a power plant in Germany

using only shredded carpet as fuel.

The 1999 earnings are negatively

influenced by orders related to

weighing in motion systems for

railway wagons showing a signifi-

cant drop compared to the year

before. A newly developed sys-

tem within this area is expected

to be introduced to the market

during 2000.

The stagnation in the German

market for weighing technology

as well as the decrease in order

intake have forced management

to introduce a restructuring plan

for the activities. The current ne-

gotiations with other European

players to establish joint ventures

or cooperation agreements are

expected to be finalised in 2000.

VentomaticVentomatic is an international

specialist supplier of high-efficien-

cy electronic packing machines,

loading and palletising systems

and other equipment used in the

handling of cement and similar

materials. The company also pro-

vides engineering services related

hereto.

Order intake in 1999 was lower

than in 1998 due to weaker de-

mand, which put prices under

pressure. Provisions for risks incur-

red in order processing also had

a negative impact on earnings.

The buoyant trend in the North

African region continued through-

out 1999. The Company received

orders via F.L.Smidth & Co. and

Fuller for ten packers including

automatic bag applicators and

truck loaders to be installed at

new cement plants in Egypt. In

terms of total order intake, Africa

was the Company’s largest mar-

ket in 1999.

In Europe, Ventomatic’s second

largest market area, 1999 saw a

flow of orders for 25 kg and 50

kg bag packing and palletising

systems in connection with plant

upgrades and replacements.

Compared with 1998, markets in

Central and South America gen-

erated a smaller volume of busi-

ness. Contracts were signed for

the supply of complete high-

capacity packing and palletising

systems in Argentina. The North

American market accounted for

an insignificant portion of the

year’s order intake since there is

little tradition for distributing

cement in bags in this region.

The new rotary dry mortar packer

developed in 1998, which has

been installed at various sites in

Europe, offers prospects of

becoming an interesting niche

product. Ventomatic has formed

a partnership with one of

Europe’s leading bag producers

who offers a patented bag clos-

ing system which is essential for

this type of material. In December

the prototype was demonstrated

to a number of prospective cus-

tomers who showed great inter-

est in the system.



FFE Minerals Corp.FFE Minerals is a worldwide group

of companies dedicated to provid-

ing engineered mineral processing

products and services to the min-

ing, metallurgical pyroprocessing,

and pulp and paper industries.

FFE Minerals had a satisfactory

year with order intake exceeding

the year before and a financial

result continuing the positive

development seen during the

last two years.

Despite the market situation with

lower commodity prices resulting

in reduced and even suspended

levels of operations, which con-

siderably lessened demand from

metal producing companies, FFE

Minerals moved forward to pur-

sue viable projects. End of 1999 it

was decided to reorganise the

worldwide structure into three

business groups, the Minerals

Technology Group, the Pyro Tech-

nology Group and the Service

Technology Group, in order to

better focus on the existing mar-

kets and growth for the future.

Major orders were received for a

nickel reduction kiln and dryer in

Colombia, milling and crushing

equipment for a major mining

project in Peru, milling equipment

in Mexico, and a preheater retrofit

in South Africa. In addition, FFE

Minerals secured other significant

orders and moved forward with

engineering orders that possess

strong potential for further suc-

cess when customers release the

orders for equipment manufac-

ture.

FFE Minerals increased its product

base through the purchase of a

majority share in McCarthy Mine

Machinery, a division of Dorbyl

Limited in South Africa. The com-

pany, named FFE Minerals-Buffalo

(Pty) Ltd., supplies a popular

range of feeder breakers and

sizers, which are complementary

to the overall FFE Minerals prod-

uct line.

The focused expansion in the

aftermarket parts and services

area has also been very positive,

as evidenced by a more than

doubling of the aftermarket busi-

ness in the last three years. FFE

Services in Chile, which offers

parts, maintenance services, and

diagnostics to the large South

American mining market, has

been successful in its first year of

operation. A major maintenance

contract was secured in Chile,

whereby FFE Services will supply

complete maintenance services

for a copper concentrator and

the associated port facilities.


FFE G

roup

F.L. S

mid

th &

Co.

Fulle

r

FFE B

ulk Han

dling

FLS A

utom

atio

n

FFE M

iner

als

DKKm

Net turnover 6,671 2,263 1,728 834 516 1,064

Production costs (5,306) (1,951) (1,398) (664) (382) (866)

Gross profit 1,365 312 330 170 134 198

Sales, administrative, distribution costs and other oper. items (1,096) (271) (187) (139) (117) (163)

Earnings before interest, tax, depreciationand amortisation (EBITDA) 269 41 143 31 17 35

Depreciation and amortisation (186) (27) (57) (15) (11) (13)

Earnings before interest and tax (EBIT) 83 14 86 16 6 22

Share of associated undertaking earnings before tax 0 0 0 0 0 0

Profit and loss from disposals (50) (23) 0 (27) 0 0

Financial items, net 87 67 2 (4) 1 8

Earnings before tax (EBT) 120 58 88 (15) 7 30

Tax on year’s profit (63) (24) (29) (2) (2) (12)

Net profit 57 34 59 (17) 5 18

Cash flows

Operating cash flow 512 533 89 71 (62) 47

Cash flow from investments (104) (5) (22) (39) (1) (32)

Cash from operations and investments 408 528 67 32 (63) 15

Financing cash flow (106) (59) 69 (40) 61 11

Change in cash funds 302 469 136 (8) (2) 26

Net interest-bearing debt / (deposits) (920) (1,207) (192) 63 82 (129)

BALANCE SHEET

Fixed assets 1,292 218 526 111 25 172

Current assets 4,928 2,688 1,237 343 247 485

Total assets 6,220 2,906 1,763 454 272 657

Consolidated shareholders’ equity 1,449 714 512 65 28 221

Provisions 496 205 85 31 8 60

Creditors 4,275 1,987 1,166 358 236 376

Total liabilities 6,220 2,906 1,763 454 272 657


NOPAT 229

Average capital employed 3,223

ROCE 7%

Employees, year end 3,878 925 1,085 308 271 582

The above figures show the FFE Group and the major subsidiaries. A few undertakings and eliminations are omitted.


F L S M I L J Ø

Brian Danebod, Arndt H. Nørgaard and Erik Hoffmann-Petersen, President and CEO.

FLS miljø is among the world’s leading providers of

flue gas cleaning systems for power stations and

other industrial plants and is also an international

supplier of complete waste incineration facilities and

biomass-fired power stations as well as boilers for

power stations using conventional fuels.

DKKm 1998 1999

Net turnover 1,891 1,958Profit for the year (6) 11Employees, year end 1,226 1,206






Order Order

Turnover intake* backlog*

1999 1999 31.12.1999

Power stations, biomass 18% 7% 12%

Power stations, fossil fuel 44% 59% 59%

Waste incineration 5% 2% 2%

Industrial 26% 20% 11%

Operation and maintenance 8% 13% 16%

Total, DKKm 1,958 2,445 2,578

*sales prices


In 1999 FLS miljø achieved a net

turnover of nearly DKK 2bn and a

net profit after tax at DKK 11m.

Compared with 1998 these results

represent a small increase in sales

and higher earnings which, how-

ever, are not yet satisfactory viewed

against the consolidated turnover.

The return on capital employed

amounted to eight per cent.

Early 1999 it was obvious that the

year’s earnings would be under

heavy pressure. Although the

order backlog was higher than

in the preceding years, a number

of sales projects had been post-

poned from 1998 to 1999, which

meant that the income recog-

nised from these contracts would

be less than originally projected.

Meanwhile, the introduction of

IT systems and special activities

launched due to the merger

between FLS miljø a/s and Bur-

meister & Wain Energi A/S were

likely to generate large costs.

The highly satisfactory order in-

take in the first quarter provided

some compensation for the post-

poned projects. On the other

hand, the level of orders received

in the second and third quarters

was disappointing and earnings

came under further pressure.

A healthy flow of new business

towards the end of the year led

to a highly satisfactory volume of

orders in hand amounting to DKK

2.6bn, the highest amount ever in

the Company’s history. A few of

the Group companies, however,

failed to meet the projected goals,

and Johannes Möller in Germany,

for example, achieved an order

intake that was far below that of

the previous year.

Tender preparation activities in

connection with several major la-

bour-intensive projects accelerat-

ed during the year, and since the

contracts did not materialise until

the end of the year, income receiv-

ed does not cover the resources

spent on making tenders and pro-

cessing orders. These projects will

not yield a profit until in 2000.

Additionally, several major internal

projects were carried out in 1999,

notably the relocation of more

than 500 staff in Copenhagen,

introduction of new IT systems in

Denmark and USA, implementa-

tion of the new sales strategy

focusing on complete plants and

the year 2000 review of the num-

erous projects supplied by the

Group over the years. The millen-

nium change caused no problems

at the Company’s installations.

The activities mentioned caused a

direct and indirect strain on the

organisation in 1999, but will in

future lead to improvements in

efficiency and profitability.

Business in the industrial sector

continued its recessional trend

whilst the power generation busi-

ness showed an increase in vol-

ume following the acquisition of

Burmeister & Wain Energi A/S.

The Group’s traditional business

in Air Pollution Control, APC,

now accounts for only 50% of

total new sales whilst power gen-

eration, both fossil and biomass

based, represents the largest in-

crease in the Group’s portfolio.

These trends are expected to

continue in 2000.

Demand for biomass-fired power

stations in Europe is set to experi-

ence remarkable growth with the

installed capacity of biomass pow-

er production due to double over

the next seven years.

The highlight of 1999 in FLS miljø’s

biomass business was a contract

for design, building and ten years

of operation of a 25 MW straw

fired plant in Spain. The project

is being executed in consortium

with the Abengoa engineering

and contracting group for client

Energia Hidroeléctrica de Navarra

s.a. and is located near the city of

Pamplona in North East Spain.

FLS miljø is constructing three

biomass plants with a total capac-

ity of 80 MW with more than 100

MW currently under offer or in

preparation.

The fossil fuel generation market

provides FLS miljø with its largest

source of order intake for 1999.

Activity was particularly buoyant

in the APC sector with several

large orders being secured in the

USA, UK, Greece and China.


FLS miljø’s Ultra Super Critical, USC,

boiler technology plays a key role

in the Group. The system has been

supplied to a number of power

plants the latest of which is the

world’s most efficient fossil fuel

fired plant, Nordjyllandsværket,

Denmark.

Liberalisation of the power gener-

ation markets of Europe and USA

together with the growth of private

producers in Asia is continuing.

Of the many consequences of this

movement a significant element

has been the desire of generators

to outsource much of the routine

operation and maintenance.

With its wide experience and

strong product line FLS miljø is

well placed to enter into close col-

laboration with power producers.

Initiatives have been launched in

Denmark, UK, Romania and Bul-

garia which have led to business

being written through the year.

The waste-to-energy sector per-

formed poorly in 1999 and the

market practically stood still. The

acquired BS grate technology en-

ables FLS miljø Group to offer ad-

vanced solutions for solid waste

incineration.

The market for APC equipment

for sectors such as metal process-

ing and pulp and paper remained

depressed in 1999. The cement

sector, on the other hand, saw ris-

ing sales.

FLS miljø’s investment in develop-

ing an advanced range of fabric

filters to exploit the industry move

away from the more traditional

electrostatic precipitator resulted

in a number of orders. In the UK it

led to a partnering arrangement

with a major industrial company

for sole supply by FLS miljø of their

APC requirements.

In the USA several orders were

gained in the wet electrostatic

precipitator product line.

Following the merger in Denmark,

all activities are now combined un-

der one roof. To ensure a rational

geographical structure of the vari-

ous employee teams, practically all

staff were relocated to ensure opti-

mum exchange of knowledge and

enhance customer focus, while

achieving several direct cost savings.

The two French subsidiaries, FLS

miljø s.a. and Manutair Möller s.a.,

merged in 1999 and will be based

at Amiens which means that the

Paris office is to close.

The total payroll at the end of

1999 slightly above 1,206 persons

represents a small decline on the

year before.

In the waste-to-energy sector, FLS

miljø refined its waste incineration

grate technology to double the

capacity. This has put the Group in

a position to achieve prequalifica-

tion as a bidder for the large-scale

waste-to-energy plants currently

being put up for tender.

EU has granted financial support

to refine the concept of greater

fuel flexibility in biomass. An inte-

grated partnership with a Finnish

company has been established to

develop biomass gasification as a

relevant alternative to existing FLS

miljø technology in certain appli-

cations.

In the APC sector, 1999 saw the

development and marketing of

equipment to remove dioxin and

bromine from the flue gases emit-

ted by waste incinerators. In a

joint effort with MHI, the absorp-

tion process of wet desulphurisa-

tion systems has been simplified,

thus reducing the size of the plant

and improving the Group’s com-

petitive standing in this market

segment.

In the field of supercritical technol-

ogy, FLS miljø developed a method

for proofing wood which will form

the basis for setting up a major

production facility in partnership

with several external investors. The

technology will be invested in a

new company that will build the

first facility and will receive the

patent rights for the new technol-

ogy from FLS miljø a/s. The agree-

ments on forming the company

and transferring the patent rights

were signed towards the end of

1999 and had a positive impact on

FLS miljø earnings. The technology

provided by FLS miljø represents a

25 per cent stake in the new com-

pany.

F L S M I L J Ø

The Group’s traditional product of

dry and wet electrostatic precipi-

tators saw healthy growth in a

competitive market, with the

companies in the USA, UK, France

and Denmark all winning success-

ful orders. Significant amongst

these was the order for electro-

static precipitators for a 2x660

MW power plant in Taiwan.

In China FLS miljø secured an

order with Yunnan Power Corpo-

ration for the country’s first semi

dry Flue Gas Desulphurisation

(FGD) plant using the unique GSA

process developed by FLS miljø.

In the wet FGD market the Group

secured its largest order ever at

DKK 1.1 billion for the supply of a

complete turnkey FGD plant at a

2,000 MW power station for East-

ern Generation in the UK. Due for

completion in 2003 this project

utilises the new Dual Contact

Flow Scrubber process developed

by Mitsubishi Heavy Industries,

MHI, of Japan and was offered in

collaboration with the latter.

The contract for the modernisation

of ENEL’s La Spezia power station in

northern Italy utilises a wide range

of FLS miljø’s current product line

including HEP coal classifiers, Low

NOx burners, gas heaters, new

boiler internals and APC equip-

ment. The demand for moderni-

sation systems such as La Spezia is

set to grow in Europe and USA.


Prospects for 2000The record order book, a stable

market in 2000, strengthened

organisational efficiencies and

fewer costly internal projects are

likely to ensure a higher level of

profit margin based on an in-

creasing turnover.

Most of the DKK 2.6bn worth of

orders in hand are expected to be

effected during the years 2000 to

2003.

DKKm

Net turnover 1,958 1,245 320 153 193

Production costs (1,594) (1,012) (288) (126) (136)

Gross profit 364 233 32 27 57

Sales, administrative, distribution costs and other oper. items (318) (200) (25) (29) (44)

Earnings before interest, tax, depreciation and amortisation (EBITDA) 46 33 7 (2) 13

Depreciation and amortisation (31) (22) (2) (4) (3)

Earnings before interest and tax (EBIT) 15 11 5 (6) 10

Share of associated undertaking earnings before tax 0 0 0 0 0

Profit and loss from disposals 0 0 0 0 0

Financial items, net 1 0 (4) 0 7

Earnings before tax (EBT) 16 11 1 (6) 17

Tax on year’s profit (5) 0 (0) 1 (6)

Net profit 11 11 1 (5) 11

Cash flows

Operating cash flow (119) (180) 0 2 53

Cash flow from investments (45) (40) (2) (2) (2)

Cash from operations and investments (164) (220) (2) 0 51

Financing cash flow 164 201 6 1 (41)

Change in cash funds 0 (19) 4 1 10

Net interest-bearing debt / (deposits) 147 136 72 (20) (28)

BALANCE SHEET

Fixed assets 149 215 5 11 28

Current assets 1,008 563 194 60 106

Total assets 1,157 778 199 71 134

Consolidated shareholders’ equity 155 155 22 12 72

Provisions 69 36 11 1 17

Creditors 993 587 166 58 46

Total liabilities 1,157 778 199 71 134


NOPAT 35

Average capital employed 453

ROCE 8%

Employees, year end 1,206 815 50 149 150

The above figures show FLS miljø and the major subsidiaries. A few undertakings and eliminations are omitted.

FLS m

iljø G

roup

FLS m

iljø a/

s

FLS m

iljø In

c.

Lodge S

turte

vant

Ltd.

Johan

nes M

öller

group


Left to right: Karl Worre Jørgensen, Bjarne Moltke Hansen, Dansk Eternit Holding; Peter Assam,

President and CEO, Aalborg Portland Holding; Søren Vinther, Aalborg Portland; Finn Thor Hansen, Densit;

Kent Arentoft, Unicon Beton.

A A L B O R G P O R T L A N D H O L D I N G

Via its subsidiaries Aalborg Portland Holding is

the world’s leading exporter of white cement and

Denmark’s only cement producer. With plants in

Denmark, Finland and the Czech Republic it is also

the only manufacturer of fibre cement products in

the Nordic countries, whilst being Denmark’s leading

concrete producer with activities in the USA, Sweden,

Norway, Poland, Spain, Portugal and the Philippines.

DKKm 1998 1999

Net turnover 2,324 4,621

Profit for the year 495 1,119

Employees, year end 3,584 3,638







The consolidated earnings after

tax amounted to DKK 1,119m.

The DKK 624m increase mainly

derives from the associated

undertaking NKT Holding. The

improvement in earnings before

interest and tax (EBIT) from DKK

384m to DKK 461m was slightly

less than originally projected.

Measured against turnover, EBIT

represents 10 per cent , which is

not quite satisfactory. The return

on shareholders’ equity and the

return on capital employed

amounted to 7 per cent and 10

per cent, respectively, exclusive of

special NKT Holding items.

The profit adjusted for non-recur-

ring items was lower than in 1998

as announced in the interim report.

Operations in 1999 generated a

positive cash flow amounting to

DKK 741m.

In February 2000, Aalborg Port-

land Holding received DKK 589m

in connection with NKT Holding’s

repurchasing of its own shares.

At the end of 1998, Aalborg Port-

land Holding acquired FLS Indus-

tries’ 65 per cent stake in Unicon

Beton I/S. Since the acquisition

took place at the end of the year

it did not affect the profit and loss

account. Unicon Beton is fully

consolidated in the Aalborg Port-

land Holding Group’s 1999 annu-

al accounts.

The four building material pro-

ducing companies within Aalborg

Portland Holding all operate on

an international scale. Interna-

tional business accounted for 56

per cent of the turnover in 1999,

while in 1998 this figure was 46

per cent. The percentage will con-

tinue to grow as the opportunities

for growth lie mainly abroad.

The markets for cement and

cement based building materials

are undergoing vigorous conso-

lidation. The Aalborg Portland

Holding Group will in some con-

texts focus more strongly on

international niche markets such

as white cement and Densit prod-

ucts. In the concrete business, its

aim is to the leading producer in

local and regional markets. It aims

to be a leading European player

in the fibre cement business.

Aalborg Portland A/S’ successful

performance and gratifying re-

sults mainly reflect the company’s

increasing focus on global sales

of white cement. Its sales of grey

cement to the Danish market

exceeded expectations, with the

declining market for major pro-

jects being offset by a general rise

in building activity. Utilisation of

capacity remained high by main-

taining exports of grey cement

to selected markets.

Unicon Beton’s profit for 1999

reflected a sharp decline in earn-

ings from the activities based in

North and South Carolina due

to the many hurricanes that hit

the American east coast in the

autumn. Technical difficulties in

connection with running in new

paver production lines also put

pressure on earnings in the USA.

Unicon Beton’s overall financial

result for 1999 fell short of ex-

pectations.

Dansk Eternit Holding’s produc-

tion in Denmark, accounting for

nearly half of this Group’s total

turnover, was affected by an

eight-day strike in September.

The heavy storm that hit Den-

mark in December led to rapidly

increasing sales, particularly of

roofing sheets.

The profit earned by the Densit

specialist producer is practically

as forecast and marks an increase

on the 1998 result. The company

expects to continue this improve-

ment in 2000.

The associated undertaking NKT

Holding contributed significantly to

the overall result of the Aalborg

Portland Holding Group in 1999.

The result includes NKT Holding’s

divestment of Lexel, with Aalborg

Portland Holding’s share of the

tax exempt gain amounting to

DKK 989m. Meanwhile, Aalborg

Portland Holding’s share of NKT

Holding’s loss on the NorNed con-

tract amounted to DKK 183m.


In 1999, 28 per cent of the DKK

693 million invested by the Aal-

borg Portland Holding Group

took place in Denmark.

1998 saw the start of an effort to

enhance profitability using value

based management as a platform.

Competitive cash flow generation

is an important factor in securing

the future international growth of

Aalborg Portland Holding. Funds

tied up in stocks and debtors will

be further reduced. A key ele-

ment in improving profitability is

to promote the use of partially

performance-related pay. The

Group intends to gradually intro-

duce this form of remuneration

taking local conditions into

account.

The provisions made for Aalborg

Portland Holding’s liability in rela-

tion to FLS Industries regarding

complaints of fibre cement prod-

ucts received by DEF 1994 have

proved not quite adequate. In

1999 an additional expenditure

amounting to DKK 15m therefore

had to be charged. This adjust-

ment is included in the contingent

liability regarding the transfer of

DEF 1994 from Aalborg Portland

Holding to FLS Industries. The

management maintains that pro-

visions are sufficient to cover

future complaints. The total pro-

vision amounted to DKK 22m

at the end of 1999 (1998: DKK

30m). During the year payments

amounting to DKK 23m have

been made.

Prospects for 2000For several years now the Aalborg

Portland Holding Group has be-

nefitted from bouyant building

activity in Denmark and a number

of major public construction pro-

jects. The Group’s international

activities and its focus on prof-

itability will enable it to maintain

the result of ordinary operations

in 2000 compared with 1999 –

despite the anticipated slowdown

in the Danish building trade.

Aalborg PortlandAalborg Portland is Denmark’s

only cement producer and the

world’s largest exporter of white

cement.

1999 was a good year for the

Aalborg Portland Group. The

increase in earnings is mainly

attributable to the company

strengthening its position as the

world’s leading exporter of white

cement. Ongoing customer focus

and concentration on core busi-

ness also helped to bring about

the improved earnings.

Sales in the Danish marketplace

were higher than anticipated, yet

fell in terms of volume by 2.5 per

cent on the year before. This de-

cline is due to the completion of

the contract for the Öresund link.

In the basic market segment, ex-

clusive of major projects, cement

volume increased by 7 per cent

on 1998.

In export markets, the company is

focusing on boosting its interna-

tional position in the specialised

white cement segment. Growing

sales are mainly attributable to

increasing sales in the North

American market. Meanwhile the

Company also made good use of

its overall production capacity by

distributing grey cement to select-

ed export markets.

Environmental and energy taxes

fell in 1999 to DKK 32m from

DKK 40m in 1998. The lower tax-

es compared with 1998 are partly

a result of the upgrading of the

desulphurisation system and the

heat recuperation system for

white kiln flue gases which came

on stream at the end of 1998.

As required by law, Aalborg Port-

land has precented an environ-

mental report for 1999. Among

the aspects covered by this state-

ment are the use of alternative



raw materials and fuels from oth-

er industries and current projects

aiming at environmental improve-

ments. Aalborg Portland’s envi-

ronmental management system

covering the manufacture of

cement received official certifica-

tion in accordance with the inter-

national ISO 14001 standards in

1998, and in 1999 the certifica-

tion was extended to include dis-

tribution terminals, road tankers

and three bulk carriers.

In 1998, Aalborg Portland and

Invest Miljø A/S together formed

the company CemMiljø A/S. The

main purpose of the company is

to collect and process combusti-

ble waste products, turning them

into a homogeneous fuel than

can be used in Aalborg Portland’s

cement production. CemMiljø

made good progress during 1999

and the company has proved a

technically and financially viable

project. Long-term contracts have

been signed with three municipal-

ities, including the City of Aal-

borg, to collect 7,500 tonnes of

dried sewage sludge per year.

In 1994 the European Commis-

sion administratively imposed a

fine on the company for alleged

participation in a European cartel

among various cement producers.

Including accrued interest until 31

December 1999 the fine amounts

to DKK 42m. Based on the opin-

ion of legal experts the Company

remains convinced that the mat-

ter will be closed without any

sanctions being imposed on Aal-

borg Portland. A final settlement

is expected in March 2000.

The other companies in the Aal-

borg Portland Group achieved

satisfactory earnings compared

with 1998. The improvement was

particularly pronounced in Lehigh

White Cement Company and

CemMiljø, while the profits

earned by the remaining compa-

nies, albeit satisfactory, were low-

er than in 1998.

Prospects for 2000In the Danish market building

activity is expected to slow down

compared with 1999 due to the

completion of the contract for

the Öresund fixed link in early

1999 and a general decline in

business. Competition is ex-

pected to intensify.

In the export markets for grey

cement, competition is becoming

fiercer due to overcapacity in the

Far East. Action taken by Aalborg

Portland to maintain exports of

grey cement will entail focus on

further cost savings and stream-

lining of the product range to

adapt to the current market situa-

tion. In the white cement seg-

ment the Company is building its

international strength in strategic

markets, while focusing on local

production in the expanding mar-

kets for white cement. Exports of

white cement are likely to face

increasing competition in certain

regions.

Aalborg Portland therefore antici-

pates a lower level of earnings in

2000 compared with 1999.

Dansk Eternit HoldingThe Dansk Eternit Holding Group

develops, produces and markets

fibre cement roofing and façade

products as well as indoor wall

and ceiling boards.

The Dansk Eternit Holding Group

is today the sole Nordic manu-

facturer of fibre cement products

and among Europe’s leading

producers. The Group has manu-

facturing facilities in Denmark,

Finland and the Czech Republic

as well as sales offices in the UK,

Germany, Holland, Poland and

France.

In 1999 the Dansk Eternit Holding

Group, DEH, grew its turnover by

10 per cent, 7 per cent of which is

organic. The 1999 earnings, how-

ever, are considered less satisfac-

tory. The return on capital em-

ployed (ROCE) amounted to 7

per cent compared with 11 per

cent in 1998. The decline in ROCE

is due to lower income and large

investments in 1999 that will not

have an impact until in the follow-

ing years.

The Danish market, which contin-

ues to account for nearly half the

total Group turnover, saw an

upswing in December 1999 due to

the violent storms that hit Den-

mark. Early in the year a new grey,

untreated corrugated sheet was

introduced in the Danish market.

The new corrugated sheet was

well received and has contributed

to consolidating the Group’s mar-

ket position in Denmark.

Sales in the other Nordic countries

made satisfactory progress, the

Finnish market, however, declined

slightly.

In the Czech Republic, where DEH

is also a market leader in fibre

cement products, sales lived up to

expectations. The Czech Republic

is the Group’s prime market for

slate products. Sales to other East-

ern European countries continue

to reflect a lower price level com-

pared with Western Europe. In

addition to the Czech Republic,

other Eastern European markets


include Poland, the Baltic coun-

tries, Slovakia and Slovenia.

The UK market was more active

than in 1998. Activity in the Dutch

market was lower than in 1998,

as foreseen, while the focus has

been on improving earnings.

As part of the continuing expan-

sion in Europe and to strengthen

the Group’s position in the French

market, Dansk Eternit Holding A/S

took over all shares in Interfer

S.A.S. with effect from 1 July

1999. This acquisition is a natural

consequence of France having

become an important market for

DEH in recent years.

The other markets served by the

Group developed practically as

anticipated.

1999 saw the largest ever total

amount of investment by Dansk

Eternit Holding, which benefitted

all its production facilities. Parallel

with the huge investments made,

production is being restructured

and specialised to improve pro-

ductivity and profitability and –

eventually – concentrate product

competencies at the individual

plants.

The 1999 profit is affected by pro-

visions for product warranty lia-

bilities which, in compliance with

Group policy, are made in the year

when the products were sold.

Prospects for 2000In year 2000 the Danish fibre

cement manufacturing facility will

finish its ongoing modernisation

programme. The aim of the pro-

gramme has been to automate a

greater part of the manufacturing

process and to streamline and

simplify production using fewer,

yet larger and more efficient pro-

duction units. During 2000 a new

production line for corrugated

sheets will be installed.

Competition in the European fibre

cement market is expected to

intensify in the coming years, not

least because of the current over-

capacity. DEH intends to play an

active part in the ongoing consoli-

dation to strengthen its overall

position in Europe.

Future growth will primarily be

sought outside Denmark by in-

creasing the sales of plane sheets

and slates.

With effect from 1 January 2000

DEH has bought all the shares in

the British trading company Blunn

Slates Ltd. The acquisition has

trebbled DEH turnover in the UK

and it is now the second-largest

provider of fibre cement products

in this market.

To strengthen the Dutch activities

it has been decided to concen-

trate all office and storage facili-

ties at a new and larger site,

establishing a better platform for

future growth in Holland.

Due to the higher turnover in

markets outside Denmark and the

demand created by the December

storms Dansk Eternit Holding ex-

pects its total earnings to reach a

satisfactory and much improved

level compared with 1999.

Unicon BetonUnicon Beton A/S produces and

sells ready-mix concrete and pre-

cast concrete products as well as

related services in Scandinavia,

USA, Poland, Spain, Portugal and

the Philippines. Unicon Beton

is Denmark’s largest concrete

producer.

1999 was Unicon Beton’s first full

trading year after the company

acquired the 65 per cent share of

Unicon Beton I/S at market value.

The Unicon Beton Group had an

unsatisfactory 1999. Turnover

rose – as expected – by over 10

per cent on 1998, and earnings

before interest and tax (EBIT)

amounted to DKK 131m. The re-

turn on invested capital amount-

ed to 7 per cent. The lower EBIT

compared with 1998 is due to

higher depreciation at DKK 46m

on tangible fixed assets and

amortisation of goodwill after the

acquisition of FLS Industries’ share



of the concrete making interests.

The rest of the decline is account-

ed for by higher costs arising from

difficult weather conditions in the

Carolinas, USA, and running-in

difficulties at two new precast

concrete product facilities, one in

North America and one in Spain.

Cash flow from operations and

investments improved and the

introduction of value based man-

agement has sharpened the focus

on capital tied up in stocks and

debtors. Yield targets for all oper-

ating units were set in 1999 and

reflect the prevailing market and

currency risks.

In 1999 Unicon Beton acquired

the Norwegian concrete producer

NOCO Betong. In Poland the

Group expanded its ready-mix

interests by acquiring an existing

facility in Warsaw and building a

new plant in Myslowice. The aim

here is to become market leader

in selected geographical regions.

Scale is important because it re-

duces logistics costs and enables

the company to maintain a high

level of service and quality while

remaining flexible within a coher-

ent geographical area.

From time to time Unicon Beton

performs customer satisfaction

studies. Customers highly empha-

sise delivery on time and of the

right quantities. Unicon Beton will

therefore continue to focus on

logistics and service in all its seg-

ments to create greater value for

its customers in the building and

construction trade.

In Denmark, 1999 was charac-

terised by substantial volumes of

ready-mixed concrete being de-

livered for the Copenhagen Mini-

metro project. This contract runs

until mid 2001 and there are no

prospects of similar major projects

within the next few years.

Paving stones are an increasingly

competitive market dominated by

building contractors, major DIY

centres and builders’ merchants.

Efficiency improvements to en-

able swift changes from one type

of paver to another will make

production more profitable.

Activities related to water pollu-

tion control products were affect-

ed by the relocation of the plant

from Roskilde to Ringe and devel-

opment of the existing product

line. Sales of these products have

not yet fulfilled expectations.

In 1999 Unicon Beton sold its

staircase and elements business

and foundation piles activities due

to less promising market

prospects.

For the year 2000, Unicon Beton

expects a slight decline in sales in

all three market segments.

Unicon Betons’s Swedish operations

comprise ready-mixed concrete

and aggregate (gravel and stone).

Both business segments achieved

gratifying sales in 1999, perform-

ing large construction material

contracts in the Malmö region in

connection with the Öresund fixed

link. The operating income was

satisfactory.

Somewhat lower sales are expect-

ed in year 2000, because these

construction activities will come to

an end during the year.

The newly acquired Norwegian

ready-mix facilities performed as

anticipated in 1999 and expect a

slight increase in business in year

2000.

In the USA, the many hurricanes

during the autumn put a damper

on sales and caused an inconsis-

tent production flow leading to

exceptionally higher costs. It was

necessary to introduce shiftwork

and weekend work to meet the

massive demand after the climatic

disruptions. The year’s overall finan-

cial result was not satisfactory.

Meanwhile, the commissioning of

a new paving stone plant in South

Carolina caused some difficulties

which resulted in lower sales and

much higher production costs. By

the end of 1999, production was

flowing satisfactorily.

The concrete pumping business,

which was acquired in the autumn

of 1998, is run separately from

the ready-mix activities and also

serves other concrete producers

in the area.

2000 is expected to be a normal

year of operation. Production

costs will be considerably lower

and the financial results will be

much more on a par with those

of the previous years. Growth

will be both organic and through

acquisition. Unicon Concrete ex-

pects to continue to benefit from

the economic growth in the two

Carolinas.

The ready-mix business in Poland

early doubled its sales in 1999 on

the year before. The facilities are

located in the Gdynia/Gdansk

region, in Warsaw and in Myslow-

ice in southern Poland. These are

all populous areas undergoing

rapid economic growth, which is

a prerequisite for setting up prof-

itable production of ready-mixed

concrete on an industrial scale.

The operating result for 1999 was

as forecast.

The Polish market is expected to

grow rapidly and two more plants

are being planned in the Warsaw

and Myslowice regions.

Sales in the Spanish market were

below the projected level in 1999.


This is due to production difficul-

ties caused by the relocation and

commissioning of a new plant in

Valdilecha south of Madrid and a

very rainy autumn. The financial

result for the year is unsatisfactory.

An unchanged level of activity is

forecast for year 2000.

Prospects for 20002000 is expected to see slight

improvement of the profit com-

pared with 1999. The improve-

ment will come primarily from the

USA which expects a normal trad-

ing year. Denmark and Sweden

foresee a decline in sales due to

the general slowdown in building

and construction activity and the

completion of the Swedish con-

struction projects in connection

with the Öresund link.

DensitDensit manufactures specialised

cement-based products used in

the security industry, for wear

protection, for industrial flooring

and for reinforcement of offshore

platforms. The company also pro-

duces wear-resistant components

used especially in the cement and

power generating industries.

1999 saw a turnaround in the

deteriorating performance of lat-

ter years. Turnover rose 30 per

cent on 1998. The profit after tax

amounted to DKK 3m and ROCE

at 8 per cent is considered satis-

factory. The higher sales have

accrued mainly from industrial

flooring and security products,

both types of business having

more than fulfilled expectations.

In 1997/98 the Company adopted

a growth-oriented strategy. Seg-

mentation and emphasis on inde-

pendent business units, all serving

niche markets, are to ensure

focused and profitable operations

across the organisation.

In the industrial flooring segment,

Densit won a major renovation

contract in 1999 for the Port of

Rotterdam, comprising 170,000

square metres of Densiphalt.

The security products business

aimed at customers in the money

safe and cash machine industry

is firmly rooted in Europe. This

position will be used to gain a

stronger foothold in Asian and

North American markets.

In the market for wear-resistant

components, sales did not grow

as in the other segments. A

restructuring of the distributor

network will ensure a higher rate

of repeat sales to existing cus-

tomers.

The offshore market, which is

Densit’s youngest business area,

was in a phase of formation and

development in 1999. The com-

pany has successfully delivered

several reinforcement solutions

to oil rigs.

Prospects for 2000In 2000 Densit anticipates con-

tinuing growth in earnings and

turnover. The volume of business

in hand at the beginning of 2000

totalled DKK 18m, the largest

amount in the company’s history.


DKKm

Net turnover 4,621 1,537 812 2,356 114

Production costs (2,562) (740) (591) (1,375) (54)

Gross profit 2,059 797 221 981 60

Sales, administrative, distribution costs and other oper. items (1,175) (366) (116) (621) (54)

Earnings before interest, tax, depreciationand amortisation (EBITDA) 884 432 105 360 7



Share of associated undertaking earnings before tax 851 23 9 6 0

Profit and loss from disposals (14) 0 0 0

Financial items, net (75) (15) (20) (58) 0

Earnings before tax (EBT) 1,223 304 28 79 5

Tax on year’s profit (104) (98) (16) (31) (2)

Net profit 1,119 206 12 48 3

Cash flows

Operating cash flow 741 335 124 237 2

Cash flow from investments (699) (67) (212) (309) (5)

Cash from operations and investments 42 268 (88) (72) (3)

Financing cash flow 29 (263) 57 66 1

Change in cash funds 71 5 (31) (6) (2)

Net interest-bearing debt / (deposits) 1,278 (17) 388 1,343 (5)

BALANCE SHEET

Fixed assets 5,469 1,347 667 2,036 16

Current assets 2,636 629 293 602 40

Total assets 8,105 1,976 960 2,638 56

Consolidated shareholders’ equity 4,547 841 334 783 33

Provisions 569 300 73 129 0

Creditors 2,989 835 553 1,726 23

Total liabilities 8,105 1,976 960 2,638 56


NOPAT 1,201


ROCE 20%

Employees, year end 3,638 734 1,035 1,772 95

The above figures show the Aalborg Portland Holding Group and the major subsidiaries. Elimination is omitted.


Aalborg

Portl

and

Holdin

gGro

up

Aalborg

Portl

and

Dansk

Eter

nit Hold

ing

Unicon B

eton

Densit


F L S A E R O S P A C E

Standing, left to right: Bernard Hensey, AOH and COH (IRL); Mike Humphreys,

Marketing and COH (UK); Claus Vang Ipsen, CFO. Seated, left to right: Jon

Gray, AMG; John Stenning, CMG.

FLS Aerospace is one of Europe’s leading independent

providers of aircraft maintenance and component

services. Customers are served from facilities in

Ireland, the UK, Denmark, Sweden and Spain.

DKKm 1998 1999


Loss for the year (134) (212)

Employees, end of year 3,648 3,669






FLS Aerospace consists of four divisions:

AOH (Aircraft Overhaul), comprising heavy and periodic aircraft maintenance

and repair,

CMG (Component Management Group), comprising component services

and leasing,

COH (Component Overhaul), comprising component repair,

AMG (Aircraft Management Group), comprising technical operations, services

and day-to-day aircraft maintenance.

The divisions operate across legal entities and geographical locations and are

thus the driving force behind customer service. The restructuring into products

and services is intended to enhance customer focus and emphasise value creat-

ing activities.


Viewed against the projections for

1999, the year’s loss of DKK 212m

is highly unsatisfactory. Particularly

AOH and COH, based in the UK,

and the aggregate Scandinavian

business suffered disappointing

results. The operations in Ireland

are performing better than origi-

nally expected when Team Aer

Lingus was acquired at the end of

1998. CMG posted earnings as

anticipated.

The return on capital employed,

ROCE, amounts to – 9 per cent.

The poor result is emphasised by

positive market trends and a level

of competition as foreseen.

The large deficit reflects operating

losses in AMG, AOH and COH in

Denmark and the UK and the

tightening of several financial

statement procedures. The year’s

DKK 212m loss includes the cost

of redundancies in Denmark in

connection with the closure of

heavy maintenance.

In reviewing the portfolio of con-

tracts it proved necessary to set

aside DKK 45m for two major

contracts that are expected to

generate losses. Losses on guar-

antee provisions in relation to

sales and the winding up of Dan-

ish Aerotech have been recorded.

In addition to the closure of AOH

activities in Denmark these losses

amount to DKK 35m. The suc-

cessful performance of the Irish

business has made it possible to

recognise negative goodwill as

income, amounting to DKK 79m

in 1999.

The negative goodwill recognised

as income consists of DKK 34m,

reducing costs defrayed in con-

nection with FLS Aerospace (IRL)

joining the Group, and DKK 45m

representing depreciation on and

usage of the non-monetary assets

acquired, including depreciation

on a capitalised hangar situated

on a leased site. Overall income

recognition of negative goodwill

will in future take place in step

with depreciation on the assets

acquired.

In addition to the acquisition of

Team Aer Lingus in late 1998 and

the subsequent integration into

the existing business, 1999 saw

the restructuring of operations

into the four separate divisions.

The acquisition of the Irish opera-

tion has given FLS Aerospace a

leading edge in the industry. Be-

sides, several synergies have been

identified which will not become

effective until in year 2000.

The integration effort has also

brought to the surface certain

weaknesses in the existing organi-

sation, both at operational and at

control level. In 2000 the neces-

sary control and management

routines will have top priority for

the new corporate management.

These efforts were initiated at the

end of 1999.

Under the Prime Maintenance

Organisation, PMOTM, concept FLS

Aerospace offers total support solu-

tions for aircraft maintenance and

service. This is a product consisting

of services provided by all four

business units. PMO customers

accounted for 33 per cent of the

turnover in 1999. The number of

full-service customers is increasing.

FLS Aerospace’s five largest cus-

tomers contribute about 40 per

cent of the turnover. The 15 largest

customers accounted for some 70

per cent of the turnover in 1999.

Among the narrow-body aircraft,

the main types served are the Air-

bus 320 family and Boeing 737,

while the wide-body types mainly

served are Boeing 747 and 767.

Concentrating on a few aircraft

types is important to ensure prof-

itable operations, as this enables

economies of scale in sourcing of

materials and efficient use of expe-

rience and expertise among the

personnel.

The backlog of orders at the end of

the year amounted to a total of DKK

8.6bn. This is stated as the nominal

value of services and solutions to be

provided under existing contracts

until 2008. A little over DKK 5bn

worth of the order backlog will have

been performed by the end of 2003.

The decline in order volume from

DKK 9.1bn at the end of 1998 is

due to an extraordinary portfolio of

short-term contacts received in the

first half of 1999 resulting from the


acquisition of Team Aer Lingus. The

total backlog consists of 25 per cent

AOH, 37 per cent CMG, 34 per

cent AMG and 4 per cent COH.

Aircraft OverhaulThis division has approximately

60,000 square metres of hanga-

rage at its disposal in Dublin,

Manchester and Stansted Airports

accommodating seven wide body

and 16 narrow body aircraft at

the same time.

Long-term contracts were signed

during the year with UPS, Virgin

Atlantic and Airtours.

As a result of the integration of

the UK and Irish operations a

process oriented production is

being established whereby each

production area specialises in

maintenance of certain aircraft

types. This setup was initiated in

the second half of 1999 and is

expected completed in the first

half of 2000. The new production

management system has proved

successful in Dublin. Experience

also shows, however, that it will

be some time before the full

advantage of higher productivity

materialises.

The results of the UK operation

reflect a combination of low

capacity utilisation, particularly

due to disappointing sales in the

offpeak season (the summer),

unsatisfactory efficiency, a few

less profitable contracts and rising

overhead costs.

Component ManagementGroupThis Division concentrates on leas-

ing mechanical and electronic air-

craft rotables including the neces-

sary logistics and repair manage-

ment under long-term contracts.

A new logistics centre opened in

Heathrow Airport during the year.

Major long-term contracts were

signed with aircraft operators

such as Air Malta, Virgin Atlantic,

Azurra Air, Airtours and Futura

Air. The division was serving 286

aircraft under long-term contracts

at the end of 1999.

The Division continued to grow

rapidly during 1999 and its DKK

508m investments were mainly

directed towards the newest ver-

sions of the Boeing 737 and Air-

bus 320 families. By the end of

the year investments in aircraft

component stock amounted to

DKK 1.4bn. These investments

will decline relatively in the years

to come in step with new cus-

tomers bringing with them

economies of scale.

At the end of the year the Divi-

sion held a more than 15 per cent

share of the European market for

the A-320 family and the B737.

Component OverhaulThe Division has workshops in

Dublin, Stansted and Palma Air-

ports that offer a broad range of

component repair services includ-

ing auxiliary power units, landing

gear, wheels and brakes as well as

avionics (navigation and commu-

nication equipment). This Division

is also working towards a higher

degree of specialisation and pro-

cess orientation to ensure a satis-

factory level of profitability.

Aircraft ManagementGroupThis Division has hangar capacity

in Dublin, Gatwick, Copenhagen,

Manchester, Stansted and Stock-

holm Airports. At some sites it

shares the facilities with AOH. The

Division is responsible for techni-

cal operations and services as well

as line maintenance and light

maintenance.

During the year significant long-

term contracts were signed with

Ryanair and Airtours.

The Division’s earnings seriously

reflect heavy losses from the

operations in Copenhagen and

Stockholm. The losses are due to

a combination of inadequate

capacity utilisation and low effi-

ciency. As it has proved impossible

to carry out heavy maintenance at

a profitable level, capacity in

Copenhagen will be adjusted and

refocused towards line mainte-

nance and light maintenance. It

remains a major challenge to

attain a level of activity that will

match overhead costs.

F L S A E R O S P A C E


Prospects for 2000The international conditions for

aviation are likely to continue to

provide opportunity for sustained

growth in European air traffic, this

being FLS Aerospace’s primary

market. Deregulation and the

consequent emergence of many

new and independent carriers,

combined with the outsourcing

by several major airlines of a num-

ber of technical functions, provide

the driving forces behind market

development.

In addition to intensifying its cus-

tomer orientation, the company

will focus on implementing the

integration and efficiency mea-

sures that were identified in 1999

as they offer significant potential.

Finally, the systems for opera-

tional and financial control are to

be improved to provide a basis for

a turnaround in earnings. Howev-

er, the tightening of the organisa-

tion may entail substantial non-

recurring costs, so the year’s over-

all result is not expected to be

positive.

DKKm

Net turnover 2,962 1.096 793 465 679

Production costs (2.212) (890) (454) (415) (539)

Gross profit 750 206 339 50 140

Sales, administrative, distribution costs and other oper. items (731) (310) (66) (100) (249)

Earnings before interest, tax, depreciationand amortisation (EBITDA) 19 (104) 273 (50) (109)


Earnings before interest and tax (EBIT) (146) (152) 167 (57) (128)

Financial items, net (88) (27) (45) (3) (12)

Earnings before tax (EBT) (234) (179) 122 (60) (140)

Tax on year’s profit 22 9 3 4 3

Net profit (212) (170) 125 (56) (137)

Cash flows

Operating cash flow (216)

Cash flow from investments (610)

Cash from operations and investments (826)

Financing cash flow 866

Change in cash funds 40

Net interest-bearing debt / (deposits) 1,982 429 1,174 36 125

BALANCE SHEET

Fixed assets 2,186 634 1,405 99 252

Current assets 1,339 564 311 198 208

Total assets 3,525 1,198 1,716 297 460

Consolidated shareholders’ equity 350 263 374 68 113

Provisions 121 0 15 0 31

Creditors 3,054 935 1,327 229 316

Total liabilities 3,525 1,198 1,716 297 460


NOPAT (220)


ROCE (9%)

The above figures show the FLS Aerospace Group and the four major business units. Negative goodwill is not allocated.

FLS A

erosp

ace

Group

AOHCM

GCOH

AMG

RM Industrial GroupRM Industrial Group is Europe’s

largest producer of perforated

metal products. The Group serves

a wide range of different indus-

tries throughout Europe.

As in 1998, 1999 saw great

regional variations in business

trends.

A general decline in demand

resulted in less activity compared

with 1998 and, consequently, a

profit much smaller than antici-

pated and that achieved in 1998.

Prospects for 2000Higher raw material prices

towards the end of 1999 are like-

ly to affect sales price levels and

improve margins. Against this

background, the year 2000 is

expected to see improved earn-

ings compared with 1999.

PedershaabPedershaab A/S’ main activities

are the production and world-

wide marketing of concrete pipe

machinery and complementary

products. The Energy Division

markets internal combustion

engines, generator sets and small

and medium-size co-generation

plants.

1999 saw a lower turnover than

the year before and considerably

less than projected. The financial

result was unsatisfactory, on a par

with that of 1998.

Prospects for 2000In 2000 the Company’s stronger

focus on after-handling products

and after-sales services is expect-

ed to lead to a profitable result.

.

Dansk TræemballageDansk Træemballage A/S is Den-

mark’s largest producer of wooden

packaging materials. Headquartered

in Haastrup on the island of Funen,

the company has production facili-

ties in Haastrup, Brande and Ribe.

The net profit for 1999 was less

than projected due to fierce com-

petition in the Danish pallet market.

Effective 1 October 1999, Dansk

Træemballage acquired Midtjysk

Træemballage A/S, thereby consid-

erably expanding its capacity and

customer base. During 1999, FLS

Industries A/S acquired the minori-

ty interests’ share of the business.

Prospects for 2000Year 2000 is likely to see consider-

able synergies from the acquisition

of Midtjysk Træemballage, reflect-

ed in a satisfactory financial result.


O T H E R A N D A S S O C I A T E D U N D E R T A K I N G S

DKKm 98 99

Net turnover 974 878

Earnings beforeinterest and tax (EBIT) 42 21

Profit for the year 34 8

Operating cash flow (2) 47

Cash flow fromoperations and investment (7) (5)

ROCE 6% 2%

Capital employed 569 550

Total assets 723 736

Shareholders’ equity 316 346

Employees, year end 1,016 984

DKKm 98 99


Earnings beforeinterest and tax (EBIT) (8) (11)

Profit for the year (11) (14)


Cash flow fromoperations and investment (12) 3

ROCE 5% 10%




Employees, year end 392 319

DKKm 98 99





Cash flow fromoperations and investment (7) (41)

ROCE 7% 4%




Employees, year end 203 252

DEF 1994The purpose of DEF 1994 A/S is to

handle claims received in connec-

tion with fibre cement products

supplied before 1 January 1995.

Most of the claims processed until

now are related to corrugated

sheets with developmental

defects that were produced dur-

ing the period 1984-88. In the

company’s opinion, the claims

raised are legally unsustainable

and are therefore refused. How-

ever, as an act of goodwill

towards the house owners con-

cerned, the company has offered

to refund half of the roofing

materials needed for replacement.

Most of the house owners have

accepted this offer.

A small number of house owners

have chosen to have the compa-

ny’s liability for damages tried in

court. The first decisions by the

Western Division of the Danish

High Court are expected by 1 July

2000 at the latest.

It remains company policy to

minimise payment of damages

by thoroughly processing all

claims. Working in close con-

sultation with the Dansk Eternit

Holding companies - DEF 1994

is contributing actively to enhanc-

ing confidence in the Group’s

products.

SecilSecil is Portugal’s second-largest

cement producer. FLS Industries

A/S owns 50 per cent of FLSHH

Sgps Lda. which in turn controls

44 per cent of Secil.

The financial result for 1999 was

better than anticipated due to an

improved pricing structure and

higher efficiency.

Year 2000 is forecast to see slow-

er market growth and keener

competition.

Around New Year Secil expanded

its activities to include cement

production in Tunisia.

AtlasAtlas is part of the Philippine

industrial group, Phinma, whose

main activity is to control a num-

ber of cement plants organised

within Union Cement Corporation

which is a listed company.

In 1999 the corporate structure of

the cement plants changed signif-

icantly with the merger between

Davao Union Cement Corporation

(DUCC), Bacnotan Cement Cor-

poration (BCC) and Hi Cement,

the latter being the continuing

company renamed Union Cement

Corporation.

After the restructure, FLS indirect-

ly owns 7 per cent of Union

Cement Corporation and directly

controls 6 per cent. Its total own-

ership consequently amounts to

13 per cent.

Despite the difficult business con-

ditions, Atlas earned a satisfactory

profit in 1999. As the economic

climate in Asia improves, the

company expects to continue its

successful performance

.

DanTransport HoldingIn 1999 DanTransport Holding

was sold to DFDS A/S, with effect

from 30 June 1999. The operat-

ing results of DanTransport Hold-

ing until that date lived up to

expectations.

NKT Holding and SpæncomNKT Holding and Spæncom are

listed on the Copenhagen Stock

Exchange and reference is made

to their respective annual reports.


DKKm 98 99




Operating cash flow 269 -

Cash flow fromoperations and investment (311) -

Total assets 2,116 -

Shareholders’ equity 419 -

Employees, year end 3,970 -


C O M P A N I E S I N T H E F L S G R O U P

FLS Industries A/S Share capital DKK 929,738,000

Nominal Directshare capital Group

(000’s) holding

F.L.Smidth-Fuller Engineering A/S Denmark DKK 300,000 100%F.L.Smidth & Co. A/S Denmark DKK 300,000 100%

International Holding Company A/S Denmark DKK 5,500 100%FLS Pakistan (Pvt) Ltd. Pakistan PKR 94,556 100%

International Consulting Company A/S Denmark DKK 500 100%International Engineering A/S Denmark DKK 500 100%F.L.Smidth-Fuller Limited UK GBP 1,500 100%F.L.Smidth-Fuller GmbH Germany DEM 1,000 100%SRM International S.A. France FRF 252 100%

Ameco S.A. France FRF 5,000 50%Ameco N.A. USA USD 25 100%

F.L.Smidth-Fuller S.A. France FRF 1,650 100%F.L.Smidth & Cia, Española, S.A. Spain ESP 60,000 100%F.L.Smidth & Co. Italiana S.R.L. Italy ITL 25,000 100%F.L.Smidth Polska Sp. z.o.o Poland PLN 4 100%F.L.Smidth-Fuller S.A. de C.V. Mexico MXN 19,120 100%F.L.Smidth-Fuller Comercio e Industria Ltda. Brazil BRL 13.331 100%

Fúrwald Sociadad Anònima Uruguay USD 5 100%FLS Participacâo e Representacóes Ltda. Brazil BRL 5,414 100%

F.L.Smidth & Co. (S.A.) (Pty) Ltd. South Africa ZAR 50 100%Portion Eleven Elf Three Five One Two Ltd. South Africa ZAR 1 100%

P.T. Fajar Laksana Sejahtera Indonesia IDR 3,500,000 100%Cement Construction International Egypt Egypt EGP 50 100%F.L.Smidth (Jersey) Limited UK GBP 50 100%

Fuller A/S Denmark DKK 100,000 100%FLS US Holdings, Inc. USA USD 0 100%

F.L.Smidth & Co. USA USD 9,000 100%Fuller Company Inc. USA USD 900 100%

SLS Corporation USA USD 1 100%Fuller Middle East Limited USA USD 1 100%Fuller Financial Services Corp. USA USD 1 100%Fuller International Trading Corp. USA USD 1 100%Fuller Maintenance Services Inc. USA USD 1 100%Fuller Power Corporation USA USD 1 100%Fuller-Traylor Inc. USA USD 1 100%HTPT Corporation USA USD 1 100%Fuller International Inc. USA USD 1 100%

Fuller-F.L.Smidth Cement Limited Canada CAD 1 100%Fuller India Ltd. India INR 100,000 100%

Fuller Capital Credit Corporation USA USD 1 100%Fuller Asia Inc. USA USD 1 100%Fuller FSC, Inc. Virgin Islands USD 1 100%P.T. Fuller International Indonesia Indonesia USD 100 100%Fuller International Inc. of PA USA USD 1 100%Fuller Properties, Inc. USA USD 1 100%General – Fuller International Corporation USA USD 1 100%

FLS Automation A/S Denmark DKK 10,000 100%FLS Airloq A/S Denmark DKK 500 100%

FLS Airloq AB Sweden SEK 100 100%FLS Automation SA France FRF 6,250 100%

TopTools Automation Systems Inc. USA USD 1 100%FLS Automation S.A. Spain ESP 19,000 100%FLS Automation Inc. USA USD 1 100%FLS Automation Pty Ltd. Australia AUD 1 80%

FFE Bulk Handling A/S Denmark DKK 12,000 100%H.W. Carlsen Holding AB Sweden SEK 100 100%

H.W. Carlsen AB Sweden SEK 1,800 100%FLS-Fuller Bulk Handling GmbH Germany DEM 500 100%

MOTAN-FULLER Verfahrenstechnik GmbH Germany DEM 500 100%MOTAN-FULLER ASIA PTE. Ltd. Singapore SGD 50 100%

Engineering UK Holdings Ltd. UK GBP 15,150 100%FLS-Fuller Bulk Handling Ltd. UK GBP 6,573 100%Braby Fuller Ltd. UK GBP 3,599 100%Braby Ltd. UK GBP 700 100%

Fuller Offshore Finance Corp. B.V. Netherlands NLG 5,000 100%Fuller-Kovako B.V. Netherlands NLG 35 100%

Fuller Bulk Handling US Holdings Inc. USA USD 1 100%Fuller Bulk Handling Corp. USA USD 1 100%

F.K.I. Inc. USA USD 1 100%FKC – Foreign Sales Company Barbados USD 1 100%

FLS-Fuller Bulk Handling India Limited India INR 10,000 100%Ventomatic A/S Denmark DKK 10,000 100%

Ventomatic France SarL. France FRF 50 100%Ventomatic SA Switzerland CHF 500 100%Ventomatic S.p.A. Italy ITL 350,000 100%

MAAG Gear AG Switzerland CHF 21,000 100%MAAG Gear A/S Denmark DKK 11,000 100%FFE Minerals Corporation USA USD 1 100%

FFE Minerals Denmark A/S Denmark DKK 11,000 100%ABON Engineering Pty. Ltd. Australia AUD 6 100%FFE Minerals USA Inc. USA USD 1 100%FMP Services Inc. USA USD 1 100%

FFE Services Ltda. Chile CLP 4,000 100%MACMIN S.A. Chile CLP 902,408 100%

FFE Minerals Canada Ltd. Canada CAD 1 100%Fuller-Traylor Inc. Canada CAD 0 100%Technequip Limited Canada CAD 0 100%

FFE Minerals Mexico SA de CV Mexico MXN 50 100%FFE Minerals Brazil Ltda. Brazil BRL 827 100%FFE Minerals Chile Ltda. Chile CLP 10,354 100%FFE Minerals South Africa (Pty.) Ltd. South Africa ZAR 40 100%

Fuller-Vecor (Pty.) Ltd. South Africa ZAR 38 60%FFE Minerals Buffalo (Pty) Ltd. South Africa ZAR 75 55%

FFE Minerals India Ltd. India INR 10,000 100%FFE Minerals Australia Pty. Ltd. Australia AUD 100 100%

Fuller-F.L.Smidth Pty. Ltd. Australia AUD 0 100%Fuller International Superannuation Pty. Ltd. Australia AUD 0 100%

Fuller-F.L.Smidth Technologies Pty. Ltd. Australia AUD 1 100%FFE Minerals Peru S.A. Peru PEN 3 100%

Pfister Holding GmbH Germany DEM 2,000 100%Pfister GmbH Germany DEM 7,750 100%

EHP Wägetechnik GmbH Germany DEM 50 100%Pfister Systemtechnik GmbH Germany DEM 50 100%Pfister Etablissement Schaan Liechtenstein CHF 200 100%Pfister Waagen AG Switzerland CHF 275 100%Pfister Hungaria Kft. Hungary HUF 5,140 100%Pfister Latino Americana Ltd Brazil BRL 100 63%

Pfister Waagen GmbH Germany DEM 61 100%Pfister Data GmbH Germany DEM 50 100%Pfister Weegtechniek BV Netherlands NLG 500 60%

Pfister North America Inc. USA USD 1 100%• Transweigh (India) Ltd. India INR 26,200 24%FFE Invest A/S Denmark DKK 25,000 100%

FLS miljø a/s Denmark DKK 100,000 100%BWE Engineering A/S Denmark DKK 1,000 100%Darcell A/S Denmark DKK 1,000 100%FLS miljö Oy Finland FIM 500 100%Johannes Möller HamburgEngineering GmbH Germany DEM 2,000 100%

Johannes Möller South Africa (Pty.) Ltd. South Africa ZAR 10 100%FLS miljø Ltd. UK GBP 550 100%

Lodge Sturtevant Limited UK GBP 500 100%Buell Ltd. UK GBP 0 100%Lodge-Cottrell Ltd. UK GBP 0 100%

Environmental Air Filtration Ltd. UK GBP 1,802 100%FLS miljø s.a. France FRF 3,260 100%FLS miljø S.A. Spain ESP 55,000 100%FLS miljø Sp. z o.o. Poland PLN 601 100%FLS miljø Inc. USA USD 0 100%

Lodge-Cottrell, Inc. USA USD 1 100%Colville Trading PTE Ltd. Singapore SGD 0 100%

Airpol Inc. USA USD 1 100%Epscon Inc. USA USD 1 100%AirPol Construction Company Inc. USA USD 1 100%FLS miljø Canada Inc. Canada CAD 0 100%

Aalborg Portland Holding A/S Denmark DKK 371,682 69%Aalborg Portland A/S Denmark DKK 300,000 50%

Øresundscement I/S Denmark DKK 200 50%Danaske I/S Denmark DKK 100 50%Aalborg Portland Polska Sp. z o.o. Poland PLN 100 94%Aalborg Portland U.S. Inc. USA USD 1 100%

Aalborg Energy Consultants Inc. USA USD 15 100%


Aalborg Cement Company Inc. USA USD 3,500 100%• Lehigh White Cement Company USA USD 0 20%

• CemMiljø A/S Denmark DKK 600 50%Unicon Beton A/S Denmark DKK 100,000 100%

Unicon, Inc. USA USD 1 100%Carolina Concrete Pumping Inc. USA USD 6 100%Unicon Concrete, LLC USA USD 73 100%

Københavns Betonfabrik A/S Denmark DKK 2,000 100%AB Sydsten Sweden SEK 15,000 50%

Sydsten A/S Denmark DKK 1,000 100%Ekblads Betong AB Sweden SEK 500 75%Everts Betongpumpning AB Sweden SEK 100 51%Sydsten Helsingborg AB Sweden SEK 100 75%Skåne Grus AB Sweden SEK 1,000 60%

• HB Forserumsten AB Sweden SEK 100 50%Unicon Betong AS Norway NOK 2,000 80%Formo Unicon S.A. Spain ESP 1,000,537 100%

Escribano Ptos. Prefabricados, S.L. Spain ESP 256,000 100%Unicon Beton Sp. z o.o. Poland PLN 26,426 71%Unicon Beton Polska Sp. z o.o. Poland PLN 10 100%Polish Gravel Industry Sp. z o.o. Poland PLN 8,404 100%

• Bauma Unicon Sp. z o.o. Poland PLN 12,689 41%• Unicon Phinma Concrete Corp. Philippines PHP 262,500 40%• Secil Unicon SGPS, Lda. Portugal PTE 1,000,000 50%

Secil Prebetão SA Portugal PTE 1,900,000 85%• EKOL-Unicon Sp. z o.o. Poland PLN 1,000 49%Dansk Eternit Holding A/S Denmark DKK 80,000 100%

Dansk Eternit A/S Denmark DKK 60,000 100%J.A. Plastindustri A/S Denmark DKK 500 100%Oy Minerit Ab Finland FIM 10,000 100%Eurocem GmbH Germany DEM 150 100%CemBrit UK Limited UK GBP 500 100%Austria B.V. Netherlands NLG 69 75%Cembrit Polska Sp. Z o.o. Poland PLN 4 100%Cembrit Moravia, a.s. Czech Rep. CZK 332,329 65%Cembrit Bohemia, a.s. Czech Rep. CZK 137,270 68%Interfer S.A.S. France FRF 2,103 100%Cembrit CZ, a.s. Czech Rep. CZK 8,830 100%

• Højslev Teglværk A/S Denmark DKK 4,500 50%Densit A/S Denmark DKK 4,000 100%

Aalborg Technology Consultants Inc. USA USD 15 100%Densit USA Inc. USA USD 0 100%Densit (M) Sdn. Bhd. Malaysia MYR 100 100%

Aalborg Portland White A/S Denmark DKK 500 100%• Sinai White Portland Cement Egypt EGP 70,000 38%

• NKT Holding A/S Denmark DKK 539,598 35%• Spæncom A/S Denmark DKK 49,850 28%

FLS Aerospace Holding A/S Denmark DKK 100,000 100%FLS Aerospace (DK) A/S Denmark DKK 11,000 100%

FLS Aerospace (SE) AB Sweden SEK 100 100%FLS Aerospace Real Estate A/S Denmark DKK 500 100%

DA 1999 A/S Denmark DKK 5,000 100%FLS Aerospace (UK) Limited UK GBP 168,812 100%

FLS Real Estate No. 11 Ltd UK GBP 11,200 100%FLS Aerospace (Light Aircraft) Ltd UK GBP 5,400 100%FLS Engineering Ltd UK GBP 220,000 100%FLS Maintenance Ltd UK GBP 130,484 100%FLS Maintenance Manchester Ltd. UK GBP 38,709 100%FLS Aerospace (ESP) S.A. Spain ESP 60,000 51%FLS Aerospace (USA) Inc. USA USD 1 100%FLS easyTech Ltd. UK GBP 0 75%

FLS Aerospace (IRL) Ltd. Ireland IEP 1 100%FLS Aerospace Real Estate (IRL) Ltd. Ireland IEP 1 100%

• FLSHH SGPS, Lda. Portugal PTE 5,300,000 50%• Secil – Companhia Geral de Cal e Cimento S.A. Portugal PTE 5,415,290 22%

• Atlas Cement Corporation Philippines PHP 220,000 20%RM Industrial Group A/S Denmark DKK 45,000 100%RM Rich. Müller A/S Denmark DKK 26,600 61%

Herlufmagle Værktøjsfabrik A/S Denmark DKK 2,101 100%RM Perfo AB Sweden SEK 10,000 100%

Perforerad Plåt AB Sweden SEK 100 100%RM Kabelbaner AS Sweden SEK 100 100%

RM Perforering AS Norway NOK 1,000 100%RM Kabelbaner AS Norway NOK 200 100%

RM Nold GmbH Germany DEM 2,000 100%RM Prestara AG Germany DEM 5,000 100%RM Perforating Ltd. UK GBP 510 100%

RM Cable Trays Ltd. UK GBP 10 100%Greenings Cable Support Systems Limited UK GBP 1 100%

RM Industrial Group Limited UK GBP 10 100%Perfinvest S.A. France FRF 1,000 100%

RM Besson S.A.S. France FRF 1,500 100%RM Perfo B.V. Netherlands NLG 425 100%RM Perfor N.V./S.A. Belgium BEF 8,748 100%RM PERFOMETAL Sp.zoo. Poland PLN 1,000 100%RM HEER Lochbleche AG Switzerland CHF 5,000 100%RM HUTTER Lochbleche GmbH Austria ATS 10,000 100%RM Metallurgica Genovese S.p.A. Italy ITL 2,777,143 70%RM Permesa, S.A. Spain ESP 185,000 100%

Perforaciones Metállicas Lda. Portugal PTE 5,700 100%RM Canalcable S.L. Spain ESP 30 100%

Pedershaab A/S Denmark DKK 41,000 100%Betodan A/S Denmark DKK 1,000 100%Bio-Con A/S Denmark DKK 3,285 100%Pedershaab GmbH Germany DEM 520 100%Pedershaab Limited UK GBP 100 100%Pedershaab USA, Inc. USA USD 100 100%

PMUS Inc. USA USD 0 100%Dansk Træemballage A/S Denmark DKK 17,500 100%

Midtjyske savværk og emballagefabrik A/S Denmark DKK 500 100%DEF 1994 A/S Denmark DKK 80,000 100%FLS Plast A/S Denmark DKK 1,000 100%FLS Real Estate A/S Denmark DKK 3,000 100%FLS Real Estate A/S II (in liquidation) Denmark DKK 1,500 100%FLS Real Estate No. 4 Ltd. UK GBP 4,154 100%FLS Real Estate A/S V Denmark DKK 13,000 100%FLS Real Estate A/S VI Denmark DKK 600 100%FLS Real Estate A/S X Denmark DKK 15,000 100%Aktieselskabet af 1. januar 1990, Valby Denmark DKK 6,000 100%NL1998 A/S Denmark DKK 500 100%FLS Energy A/S Denmark DKK 5,000 100%UBH 1999 A/S (in liquidation) Denmark DKK 3,000 100%

• Associated undertaking. All other companies are Group undertakings.

44


A C C O U N T I N G P O L I C I E S

General commentsThe annual and consolidated

accounts for 1999 are prepared in

accordance with the provisions of

the Danish Annual Accounts Act

including relevant executive

orders and the guidelines fixed by

the Copenhagen Stock Exchange

for the annual accounts of listed

companies including current Dan-

ish Accounting Standards.

The accounts are also prepared in

accordance with the International

Accounting Standards (IAS) issued

by the International Accounting

Standards Committee. The ac-

counts comply with the standards

that apply to 1999 and the follow-

ing standards where implementa-

tion is not yet required:

• IAS 10 (revised 1999), Events

After the Balance Sheet Date.

• IAS 16 (revised 1998), Property,

Plant and Equipment

• IAS 22 (revised 1998), Business

Combinations

• IAS 28 (revised 1998),

Accounting for Investments in

Associates

• IAS 31 (revised 1998), Financial

Reporting of Interests in Joint

Ventures

• IAS 36 Impairment of Assets

• IAS 37 Provisions, Contingent

Liabilities and Contingent Assets

• IAS 38 Intangible Assets

Some of the information required

by the IAS has been included in

the financial report, which is an

integral part of the annual and

consolidated accounts.

Changes in accounting policies

The implementation of IAS has

led to a change in the accounting

policies for the following areas:

1. Income recognition

Work in progress

2. Intangible fixed assets

Development costs

Software

3. Tangible fixed assets

Revaluation

4. Own shares

5. Pension commitments, etc.

6. Deferred tax

7. Borrowing costs

8. Dividends

9. Acquisition and disposal of

undertakings

Acquisitions

Goodwill/negative goodwill

and provisions for acquisitions

Discontinuing operations

10. Accounting for minorities in

connection with intercom-

pany transactions

The change of accounting poli-

cies is due to the fact that FLS

Industries, being an international-

ly based business group, wishes

to meet the requirements which

leading international businesses

are expected to fulfil.

The effects of the change in

policies on the profit and loss

accounts and balance sheets for

1998 and 1999 are detailed in

the table on the next page.


E F F E C T O F C H A N G E S I N A C C O U N T I N G P O L I C I E S


N O T E S DKKm 1998 1998 1998 1999 1999 1999old changes according old changes according

policy due to to IAS policy due to to IASIAS IAS

Profit and loss account

1 Net turnover 21,492 746 22,238 20,748 245 20,9931 Production costs 16,598 830 17,428 15,400 780 16,180

Gross profit 4,894 (84) 4,810 5,348 (535) 4,813

1 Sales, admin., distribution costs and other oper. items 3,199 (25) 3,174 4,056 (637) 3,419

Earnings before interest, tax, depreciation/amortisation (EBITDA) 1,695 (59) 1,636 1,292 102 1,394

Depreciation 710 0 710 801 0 801Amortisation 67 1 68 117 1 118

Earnings before interest and tax (EBIT) 918 (60) 858 374 101 475

Share of pre-tax profit of associated undertakings 326 0 326 1,053 0 1,053

9 Profit and loss on disposal of undertakings 47 68 115 1,350 0 1,3507 Net financial income/expenses (149) (3) (152) (121) (1) (122)

Earnings before tax (EBT) 1,142 5 1,147 2,656 100 2,756

6 Tax for the year 332 21 353 207 9 216

Profit for the year 810 (16) 794 2,449 91 2,540

10 Minority interests' profit share 81 165 246 442 10 452

10 FLS Industries A/S' profit share 729 (181) 548 2,007 81 2,088

Balance Sheet

2, 9 Intangible fixed assets 680 (329) 351 146 5 1513 Tangible fixed assets 7,163 (22) 7,141 7,336 1 7,3376 Fixed asset investments 2,220 150 2,370 2,879 (1) 2,878

1, 4 Current assets 8,375 67 8,442 8,575 453 9,028

Total assets 18,438 (134) 18,304 18,936 458 19,394

3, 8 Consolidated shareholders' equity 5,582 209 5,791 7,808 275 8,0834, 10 FLS Industries A/S' share 4,257 (153) 4,104 6,091 7 6,098

2, 5, 6 Provisions 1,753 (340) 1,413 1,351 22 1,3737, 8 Long-term and current liabilities 11,103 (3) 11,100 9,777 161 9,938

Total liabilities 18,438 (134) 18,304 18,936 458 19,394

It should be noted that the emphasis has been on major effects and thatthe net figures stated above are not fully explained.


1. Income recognition and

work in progress have been

changed. According to the

former policy the FFE Group

recognised income from major

contracts in step with the

machinery and technical ser-

vices being shipped/delivered

to the customer. Pursuant to

IAS income recognition takes

place in step with costs being

defrayed, because they gener-

ally reflect the degree of com-

pletion. Moreover, FFE and FLS

miljø now allocate engineering

hours to the individual projects

and capitalise them as work

in progress. Whilst previously

charged as administrative costs,

engineering hours are now

included in production costs

in step with work in progress

being recognised as income.

This has had a positive overall

effect on the profit for the

year, amounting to DKK 96m.

Unlike the former accounting

policies, work in progress in the

FFE Group is now stated at the

gross amount for each contract

and not at the net amount. This

change of policy has increased

work in progress and payments

on account from customers by

DKK 678m in 1999.

2. Intangible fixed assets are

primarily affected by the trans-

fer of negative goodwill from

provisions to intangible fixed

assets, the relevant amount

being DKK 362m.

3. Tangible fixed assets are the

opening values adjusted for

previous revaluation provisions.

This has limited effect in terms

of amount.

4. The Group’s own shares are

stated in the Shareholders’

equity at DKK 169m in 1999.

5. Pension commitments, etc.

are detailed in the notes. This

item is now stated as a provi-

sion and a debtor. There is no

effect in terms of amount.

6. The statement of the Group tax

asset has had a positive effect

on the shareholders’ equity in

1999 amounting to DKK 84m,

and on the net profit for 1999

amounting to DKK 8m.

7. The Group formerly capitalised

borrowing costs and recognis-

ed them as expenditure in step

with the repayment of loans.

They are now expensed in con-

nection with raising the loans,

which has had a positive effect

on the year’s profit amounting

to DKK 9m and a negative

effect on the shareholders’

equity amounting to DKK 41m.

8. The proposed dividend is not

stated among the creditors but

as a separate item in the share-

holders’ equity. This has in-

creased the consolidated share-

holders’ equity at the end of

1999 by DKK 496m, an amount

that would previously have been

stated as dividend payable.

9. Acquisitions and diposals are

subject to severe limitations

in the scope for making provi-

sions. This has not affected

the year’s profit because the

Group’s existing accounting

procedure for acquisitions is

in accordance with IAS. In

connection with discontinuing

operations, the Group has

previously ceased to consoli-

date from the time of making

the decision to dispose of the

undertaking. This has had a

positive effect on the “Profit

and loss from disposal of un-

dertakings” in 1998, amount-

ing to DKK 68m. The total

profit is not affected, since

the undertakings concerned

have now merely been fully

consolidated.

10. The minority interests’ share

of the profit on intercom-

pany transactions to partly

owned undertakings, notably

the transfer of Unicon Beton

to Aalborg Portland Holding,

used to be recognised as

income. This has been adjust-

ed so that the full elimination

is carried by FLS Industries

A/S. The resulting negative

effect on the parent company,

FLS Industries A/S, sharehold-

ers’ equity amounts to DKK

232m and the negative impli-

cations for the 1998 net profit

amounts to DKK 174m. The

effect is neutral on the consol-

idated accounts.



The aggregate effect of the above

changes in policy is an increase

in the profit for the year before

tax of DKK 100m (1998: increase

of DKK 5m) and after tax an in-

crease of DKK 91m (1998: reduc-

tion of DKK 16m). The effect on

shareholders’ equity is an increase

of DKK 275m at 31 December

1999 (31 December 1998: in-

crease of DKK 209m). The total

assets have increased by DKK

458m in 1999, while reducing

DKK 134m in 1998.

In addition to the above changes

in accounting policies, the presen-

tation and disclosures are adjust-

ed in certain areas.

The profit and loss account format

classified by function, as stipulated

by Danish accounting legislation,

has been adapted so that depreci-

ation is not allocated to the indi-

vidual function, but is stated sep-

arately in connection with amorti-

sation of intangible fixed asssets.

The comparative figures of the

accounts for 1998 have been re-

stated to reflect the new account-

ing policies and presentation of

the accounts.

In the comparative five-year sum-

mary, only the major items have

been restated for 1995, 1996 and

1997. The restating is to some

extent based on estimate either

because the information is not

available due to the acquisition or

disposal of the undertakings con-

cerned or because the resources

required to find it would have been

unreasonable considering the

anticipated benefit to the readers.

Otherwise the accounting policies

applied are consistent with those of

last year. The description of the ac-

counting policies has been adapted

to reflect the above changes.

Associated undertakings generally

do not present their annual ac-

counts in accordance with IAS.

Adjustment for this fact is made

where possible.

Consolidation principles

The consolidated financial state-

ments comprise the parent com-

pany, FLS Industries A/S, and all

undertakings in which the Group

holds the majority of the voting

rights or in which the Group in

some other way holds a controlling

influence. Undertakings in which

the Group holds between 20%

and 50% of the voting rights or

in some other way has significant

influence, but not a controlling

interest, are regarded as associat-

ed undertakings.

The consolidated accounts are

based on the accounts of the

parent company and the individu-

al subsidiaries which are drawn

up in accordance with FLS Group

accounting policies, all items of a

uniform nature being combined,

while intercompany income, ex-

penses, accounts and sharehold-

ings are eliminated. Unrealised

gains and losses on transactions

between consolidated companies

are also eliminated.

The purchase accounting method

is applied to the acquisition of

new undertakings according to

which assets and liabilities of the

acquired undertakings are re-

stated to their fair value at the

date of acquisition. The statement

of consolidated goodwill/negative

goodwill only includes provisions

for closure or reduction of the

activities in the undertaking ac-

quired if this restructuring was

decided and announced in the

connection with the acquisition.

Undertakings acquired are includ-

ed in the consolidated accounts

from the date of acquisition.

Undertakings disposed of are con-

solidated until the date of disposal.

The difference between the sales

consideration and the carrying

amount of the net assets at the

time of disposal including remain-

ing goodwill/negative goodwill

and less expected costs of dispos-

al is included under a separate

item in the profit and loss account.

The net earnings and equity

attributable to minority interests

are shown as separate items in

the consolidated accounts.

Foreign currency

Transactions in foreign currency

are translated at the exchange

rate of the day of transaction.


Financial assets and liabilities in

foreign currency are translated

at the exchange rates quoted at

the balance sheet date. Any result-

ing foreign exchange variations

are stated in the profit and loss

account.

Non-financial assets and liabilities

in foreign currency are stated at

the rate of exchange quoted on

the day of transaction.

The profit and loss accounts of

independent foreign subsidiaries

and associated undertakings are

translated at average exchange

rates while their balance sheet

items are translated at the ex-

change rates quoted at the bal-

ance sheet date. The calculation

differences deriving from the

translation of the profit and loss

accounts of companies abroad at

average exchange rates and of

their balance sheet items at the

rate of exchange at the balance

sheet date are adjusted in the

shareholders’ equity.

The assets and liabilities of a for-

eign company acquired are trans-

lated at the exchange rate on the

day of transaction (acquisition

date).

If the accounts of an independent

foreign business unit are drawn

up in a currency in which the ac-

cumulated rate of inflation over

the past three years exceeds 100

per cent, adjustments for inflation

are made. The adjusted accounts

are translated at the exchange rate

quoted on the balance sheet date.

Financial instruments

The FLS Group uses financial in-

struments to control financial risks

deriving from operating, financing

and investment activities.

If the hedged items are assets or

liabilities, profits and losses on the

financial instruments are entered

in the profit and loss account

together with the items hedged.

Financial instruments not used for

hedging are stated in the balance

sheet at the market value on the

balance sheet date. Realised and

unrealised exchange rate differ-

ences are stated in the profit and

loss account as financial items.

Unrealised foreign exchange

adjustments of financial instru-

ments effected to hedge future

transactions are deferred until the

future transaction takes place.

Premiums received or paid when

using financial instruments are re-

cognised as financial expenditure

or income on a straight line basis

within the life of the instruments.

Profits and losses on loans and

financial instruments used to

hedge foreign business units or

parts of them are set off against

the calculation differences that

occur in consolidation and are

included in the shareholders’

equity until the net investment

is disposed of.

Share-based remuneration

A share option scheme covering

the Board of Directors of FLS

Industries A/S, the Group Man-

agement Board and a number of

executive staff is described in the

notes to the consolidated accounts.

Discontinuing operations

Discontinuing operations repre-

sent a major business activity

from the date when its disposal is

decided and published. Financial

information on the operations,

including the profit for the year

for each discontinuing operation,

is stated in the annual report.

Grants

Grants related to the acquisition

of assets and liabilities are recog-

nised in step with spending and

depreciation on the assets con-

cerned. Grants received to cover

costs are entered as a liability and

recognised in step with the costs

being defrayed.

Repayment obligations that be-

come relevant if the conditions

for receiving the grants are not

fulfilled are stated in the notes as

contingent liabilities.

Dividend

Dividend is stated in the accounts

at the time when it is decided by

the company in general meeting,

the company thereby having

incurred a liability. The dividend

which is proposed for distribution

is therefore stated separately in

the shareholders’ equity and,

unlike normal Danish accounting

standards, not as short-term

creditors.

Profit and loss accountThe profit and loss account for-

mat classified by function, as

stipulated by Danish accounting

legislation, has been adapted so

that depreciation is not allocated

to the individual function, but is

stated separately in connection

with amortisation of intangible

fixed asssets.

Net turnover

Net turnover comprises invoiced

sales for the year.

In companies with work in pro-

gress for third parties, turnover is

recognised by reference to the

value of the work completed at the

balance sheet date. The general

rule is to base degree of comple-

tion on the costs defrayed. The

value of the work completed is

based on the costs defrayed in

percentage of the total budgeted

costs.

Production costs

Production costs comprise costs

defrayed to achieve the year’s

net turnover. Production costs

include raw materials, consum-

ables, direct labour costs and

production overheads such as

maintenance and operation

of production plant as well as

administration and factory

management.



Research and development

costs

Research costs are charged to the

profit and loss account for the

period in which they are defrayed.

Development costs are mainly

expensed in the period during

which they were defrayed. De-

velopment costs related to a cer-

tain product or process that is

demonstrated to be technically

and commercially viable are re-

cognised as assets to the extent

that such costs are likely to

generate future earnings.

Sales and distribution costs

Sales and distribution costs com-

prise the costs of sale and distri-

bution, including direct distribu-

tion and marketing costs, salaries

for the sales and marketing func-

tions as well as other indirect

costs.

Administrative costs

Administrative costs comprise the

costs of administrative staff and

management and other indirect

costs.

Other operating income

Other operating income compris-

es income of a secondary nature

in relation to the activities of the

group, including certain grants,

rentals and royalties. Negative

goodwill is also recognised as other

operating income. Operating costs

of a secondary nature in relation

to the Group’s activities are set off

against other operating income.

Income from subsidiaries and

associated undertakings

In the parent company profit

and loss account a proportionate

share of the profits and losses

of the individual subsidiaries is

recognised after adjustment for

unrealised internal profits / losses,

deduction of amortisation on

goodwill and addition of included

negative goodwill. The proportion-

ate share of taxes in subsidiaries

is stated under Tax on the profit

for the year.

In the parent company and con-

solidated profit and loss account a

proportionate share of the profits

and losses of the associated under-

takings is recognised after adjust-

ment for unrealised internal profits/

losses, deduction of amortisation

of goodwill and addition of in-

cluded negative goodwill. The pro-

portionate share of taxes in associ-

ated undertakings is stated under

Tax on the profit for the year.

Profit and loss from disposal

of undertakings

Subsidiaries for sale are consoli-

dated until the time of sale. Any

profits and losses deriving from

the sale are stated separately.

Financial items

Interest income and expenses

are stated in the profit and loss

account with the amounts relat-

ing to the financial year.

Financial items also include costs

of financial leasing and write-

downs of listed bonds and shares

that are recognised as fixed assets.

Both realised and unrealised profits

and losses on financial instruments,

securities and foreign currency

items are also included.

Tax

Tax on the profit or loss for the

year comprises current tax and

the change in deferred tax. Tax

on the profit or loss for the year

relates to the profits or losses on

ordinary and extraordinary activities.

Current tax comprises tax payable

calculated on the basis of the

expected taxable income for the

year, using the applicable tax

rates for the financial year, and

any adjustment of tax payable

for previous years.

Deferred tax is calculated using

the balance sheet liability method

on all temporary differences be-

tween the carrying amounts for

financial reporting purposes and

the amounts used for taxation

purposes, except differences re-

lating to goodwill not deductible

for tax purposes. Furthermore,

deferred tax is calculated based

on the applicable tax rates for

the individual financial years. The

effect of changes in the tax rates

is stated in the profit and loss ac-

count unless they are items pre-

viously entered direct in the share-

holders’ equity.

A deferred tax provision is made

to cover retaxation of losses in


foreign undertakings if shares in

the undertakings concerned are

likely to be sold or the undertak-

ings are likely to leave the Danish

joint taxation scheme. No deferred

tax liabilities regarding shares in

subsidiaries are calculated if the

shares are unlikely to be sold in

the short term.

The tax value of losses that are ex-

pected with adequate certainty to

be available within a five year pe-

riod for utilisation against future

taxable income in the same legal

tax unit and jurisdiction is set off

against the deferred tax liability.

Tax assets are presented on a

separate line among financial

fixed assets.

In Denmark, FLS Industries A/S is

taxed jointly with certain wholly-

owned Danish and foreign sub-

sidiaries. The parent company

provides for and pays the aggre-

gate Danish tax on the taxable

income of these companies. The

jointly taxed Danish companies

are included in the Danish tax

payable on account scheme.

Balance sheetIntangible fixed assets

Intangible fixed assets are stated at

acquisition or cost less accumula-

ted amortisation and write-downs.

At the time of an acquisition, con-

solidated goodwill/negative good-

will is calculated as the excess of

the cost of acquisition over the

market value of the net assets.

Where the market value of

acquired assets and liabilities

proves to differ from the comput-

ed values at the time of acquisi-

tion, within the financial year

after the year of acquisition,

goodwill / negative goodwill is

adjusted accordingly. All other

adjustments are stated in the

profit and loss account.

The amortisation period for good-

will is fixed according to manage-

ment’s assessment of the life of

the undertaking/activity acquired.

Negative goodwill is presented

among Intangible fixed assets and

is recognised as income in step

with the realisation of estimated

costs and losses. Remaining ne-

gative goodwill is systematically

recognised as income in the profit

and loss account in step with con-

sumption and depreciation on

non-monetary assets in the under-

taking acquired.

Amortisation takes place on a

straight line basis within the esti-

mated life of the assets which is

as follows:

• Goodwill/Consolidated good-

will, up to 20 years.

• Development costs, up to 5

years.

• Software applications,

up to 5 years.

• Licences and other rights,

up to 20 years.

• Fitting up rented premises,

up to 5 years.

Tangible fixed assets

Tangible fixed assets are stated at

purchase price or production cost

less accumulated depreciation

and write-downs.

The cost of assets of own con-

struction includes the cost of

materials, direct labour and an

appropriate proportion of pro-

duction overheads.

Depreciation is charged on a

straight line basis during the

estimated useful life of the asset

concerned until it reaches the

estimated residual value. Esti-

mated useful life is as follows:

• Buildings, 20-40 years.

• Main machinery for making

cement, 20-25 years.

• Plant and machinery used in

connection with cement pro-

duction, 5-15 years.

• Other plant and machinery, tools

and equipment, 3-10 years.

• Ships, 10-15 years.

• Aircraft rotables over the

expected useful life of the

aircraft, maximum 20 years.

The period of depreciation for

buildings used for administrative

purposes may exceed 40 years.

Assets of low acquisition value or

short life are charged to the profit

and loss account in the year of

acquisition.

Newly acquired assets are depre-

ciated from the time they come

into use. Assets of own construc-

tion are depreciated from the

time when the asset is finished

and taken into use. Land is not

depreciated. Expenditure for re-

pairs or maintenance of property,

plant and equipment is recognis-

ed as an expense.

Financially leased assets are stated

in the balance sheet at market

value or at the present value of

future leasing payments at the

time of acquisition, if lower. In

calculating the present value the

internal interest rate of the leas-

ing agreement is used as a dis-

counting factor or as an approxi-

mate value. Financially leased

assets are depreciated like other

Group tangible fixed assets.

The capitalised residual leasing

liability is stated in the balance

sheet as debt whilst the interest

component of the lease payment

is charged to the profit and loss

account.

For operating leases, the lease

payments are expensed on a

straight line basis over the lease

term.



Impairment of assets

The carrying amounts of intang-

ible and tangible fixed assets are

reviewed at each balance sheet

date to determine whether there

is any indication of impairment.

If any such indication exists, the

recoverable amount is estimated

as the higher of net selling price

and value in use.

The write-down of intangible and

tangible fixed assets is charged

to the same items as the related

amortisation and depreciation.

Financial fixed assets

Shares in subsidiaries and shares

in associated undertakings are

valued according to the equity

method. The proportionate share

of the net worth of subsidiaries

for accounting purposes is stated

net of unrealised inter-company

profits and losses, plus consolidat-

ed goodwill and less consolidated

negative goodwill.

The net revaluation of shares in

subsidiaries and associated un-

dertakings is taken to the reserve

for net revaluation according to

the equity method under Share-

holders’ equity.

Subsidiaries with a negative net

worth for accounting purposes

are stated at nil, while outstand-

ing accounts against these sub-

sidiaries are written down by the

parent company share of the neg-

ative net worth for accounting

purposes. If the negative net

worth for accounting purposes

exceeds the outstanding account,

the remaining amount is stated

as a provision.

Listed shares are stated at acquisi-

tion cost or market value if lower.

In special cases where the value

quoted on the stock exchange is

considered not to represent the

actual market value, the assets

concerned are stated at an esti-

mated market value. Realised gains

and losses as well as write-downs

and reversal of write-downs are

included in the profit and loss

account under financial items.

Shares in cement plants acquired

in connection with orders received

are prudently assessed. Reserva-

tions regarding the acquisition

price of the shares are charged to

the profit and loss account over a

period not exceeding the duration

of processing the orders.

Work in progress for third party

Work in progress for third party is

stated according to the percent-

age of completion method at the

sales value of the portion of the

contract completed.

Invoicing on account that exceeds

the value of the work completed

is stated as Payments received on

account from customers among

Short-term creditors. Other pay-

ments are set off against work in

progress for third party.

A reservation is made for losses

on work in progress. The reserva-

tion is based on individual assess-

ment of the estimated loss until

the work is completed.

Costs deriving from sales work

and the winning of contracts are

charged to the profit and loss

account in the financial year dur-

ing which they are defrayed.

Stocks

Stocks are valued at acquisition or

cost according to the FIFO princi-

ple. In cases where the acquisition

or cost value exceeds the net real-

isable value, a write-down to this

lower value is made.

Work in progress and finished

goods are entered at manufactur-

ing cost including materials con-

sumed and labour costs plus an

allowance for production over-

heads. Production overheads

include operating costs, mainte-

nance and depreciation of pro-

duction plant and administration

and factory management.

In cases where the acquisition or

manufacturing cost exceeds the

estimated sales price less comple-

tion and selling costs, a write-

down is made to such lower net

realisable value.

Debtors

Debtors are stated net of provi-

sions for anticipated losses based

on individual assessment.

Shares and bonds

Bonds and shares that are current

assets are stated at market value


on the balance sheet date. Both

realised and unrealised capital

gains and losses are included in

the profit and loss account under

financial items.

Own shares

Own shares are entered in the

balance sheet at zero value. When

selling or buying own shares, the

purchase or selling amount is

stated in the shareholders’ equity

among Other reserves.

Pension commitments

The Group has signed pension

schemes and similar contracts

with most of its employees.

Payments by an undertaking into

contributory schemes are stated

in the profit and loss account as

at the date on which they are due

and any outstanding payments

are stated in the balance sheet

among Other debtors.

In the case of benefit schemes,

an actuarial calculation is made

of the net present value of future

benefits to be paid by the under-

taking pursuant to the scheme.

The net present value is calculated

on the basis of assumed trends

in, for example, rates of interest,

inflation, mortality and disable-

ment, etc. The net present value

is only calculated for benefits

to which the employees have

become entitled through their

employment with the company

so far. The actuarial net present

value less the market value of

any assets related to the scheme

is stated in the balance sheet

under the heading of Pension

commitments. Changes in the

provision are stated in the profit

and loss account.

Provisions for warranty

work, etc.

Where after closing the accounts

of an order, additional supplies,

etc. remain to be effected to

complete the order, provision is

made for this in the accounts. An

allocation is made to creditors

covering the part of the outstand-

ing subsupplies whose price and

scope is agreed. The balance of

the provision is allocated to Provi-

sions which covers estimated own

costs of completion, possible sub-

sequent warranty supplies and

any unsettled claims from custom-

ers or subsuppliers.

Other provisions

Other provisions consist of provi-

sions for acquisitions and provi-

sions for restructuring within the

existing Group. The provisions are

included when the Group has a

legal or constructive obligation.

Provisions for acquisitions only

consist of provisions regarding the

business acquired which have been

decided at the time of acquisition

comprising redundancy payments,

closure of business premises, re-

duction of product lines and ter-

mination of loss-making contracts.

These provisions are included in

the statement of goodwill or con-

solidated goodwill.

Other provisions for restructuring

consist of provisions for the ac-

quiring undertaking in connection

with acquisitions and provisions

for decisions to restructure exist-

ing business units.

Other provisions also include

sums set aside for loss-making

contracts and legal disputes.

Mortgage debt, interest-

bearing loans and borrowings

Mortgage debt, interest-bearing

loans and lending are stated at

nominal value. Any debt dis-

counts are charged to the profit

and loss account.

Other creditors

Other creditors consist of holiday

pay obligations, taxes and dues

and interest payable.

Cash flow statementThe consolidated cash flow state-

ment is presented according to

the indirect method and shows

the composition of the Group’s

cash flow divided into operating,

investing and financing activities,

respectively, and the Group’s cash

funds at the beginning and end

of the year.

Operating cash flow is stated as

the year’s profit adjusted for non-

cash operating items, changes in

working capital, financial items

and paid tax.

Cash flows from investing activi-

ties comprise payments made in

connection with the acquisition

and disposal of undertakings and

activities and the acquisition and

disposal of tangible and financial

fixed assets.

Cash flows from financing activi-

ties comprise payments to and

contributions from owners as well

as the raising and repayment of

loans.

The Group’s cash funds mainly

consist of money deposited with

banks.


C O N S O L I D AT E D P R O F I T A N D L O S S A C C O U N T

N O T E S DKKm 1998 1999

2 Net turnover 22,238 20,993 3 Production costs 17,428 16,180

Gross profit 4,810 4,813

3 Sales and distribution costs 1,290 1,303 3 Administrative expenses and other expenses 2,053 2,324 4 Other operating income 169 208

Earnings before interest, tax, depreciation and amortisation (EBITDA) 1,636 1,394

15 Depreciation and write-downs of tangible fixed assets 710 801 14 Amortisation and write-downs of intangible fixed assets 68 118

Earnings before interest and tax (EBIT) 858 475

17 Share of pre-tax profit of associated undertakings 326 1,053 5 Profit and loss on disposal of undertaking 115 1,350 6 Financial income 1,005 1,068 6 Financial expenses 1,157 1,190

Earnings before tax (EBT) 1,147 2,756

7 Tax for the year 353 216


Minority interests’ share of the profit for the year 246 452

FLS Industries A/S’ share of the profit for the year 548 2,088

29 Earnings per share (EPS) 11.8 44.9 29 EPS, diluted 11.9 45.6

C O N S O L I D A T E D A C C O U N T S

C A S H F L O W S TAT E M E N T F O R T H E F L S G R O U P


N O T E S DKKm 1998 1999

Cash flows from operating activities

Earnings before interest, tax, depreciation and amortisation (EBITDA) 1,636 1,394 8 Adjustments (494) (254)9 Change in working capital (204) (373)

Cash flows from operating activities before prepayments from customers and interest 938 767

Change in prepayments from customers (349) 456

Cash flows from operating activities before interest 589 1,223

Dividends received from associated undertakings 177 78 Cash flows from disposal and discontinuance of undertakings and activitiesnot included in cash flows from investing activities 175 0

10 Financial payments and disbursements (84) (304)7 Corporation taxes paid (255) (203)

Cash flows from operating activities 602 794

Cash flows from investing activities

11 Acquisition of undertakings and activities (1,126) (161)12 Disposal and discontinuance of undertakings and activities 47 1,941 13 Fixed assets (1,042) (1,527)

Bonds and listed shares (53) 68

Cash flows from investing activities (2,174) 321

Cash flows from operating and investing activities (1,572) 1,115

Cash flows from financing activities

Capital increase, employee shares 8 0 Dividends (302) (382)Interest-bearing debt 1,693 (566)

Cash flows from financing activities 1,399 (948)

Change in cash funds (173) 167

Cash funds at 1 January 905 732 Cash funds at 31 December 732 899

The Group’s cash funds consist primarily in bank balances.The cash flow statement cannot be inferred from the published financial information only.


A S S E T S

N O T E S DKKm 1998 1999

Fixed assets

Goodwill 687 338 Negative goodwill (362) (212)Other intangible fixed assets 26 25

14 Intangible fixed assets 351 151

Land and buildings 3,309 2,925 Plant, machinery and ships 2,220 2,378 Operating equipment, fixtures and fittings 509 396 Aircraft rotables 857 1,374 Assets in course of construction 246 264

15 Tangible fixed assets 7,141 7,337

16,17 Investments in associated undertakings 1,984 2,319 16 Other securities and investments 189 325 16 Other fixed asset investments 33 21 23 Amount owing, pension fund contribution 47 66 18 Tax asset 117 147

Fixed asset investments 2,370 2,878

Total fixed assets 9,862 10,366

Current assets

19 Work-in-progress for third parties 598 1,471 Raw materials and consumables 586 670 Work-in-progress 102 130 Finished goods and goods for resale 515 466 Prepayments for goods 89 131

20 Stocks 1,890 2,868

Trade debtors 4,264 3,291 Amounts owed by associated undertakings 5 601 Other debtors 1,144 877 Prepayments 278 342

21 Debtors 5,691 5,111

22 Own shares 0 0Bonds and listed shares 129 150

Securities 129 150

Cash at bank and in hand 732 899

Total current assets 8,442 9,028

TOTAL ASSETS 18,304 19,394

C O N S O L I D A T E D B A L A N C E S H E E T

L I A B I L I T I E S

N O T E S DKKm 1998 1999

Shareholders’ equity

Share capital 930 930 Net revaluation reserves according to the equity method 792 925 Other reserves 2,150 3,894

FLS Industries A/S’ share of shareholders’ equity before proposed dividend 3,872 5,749

Proposed dividend distribution 232 349

FLS Industries A/S’ share of shareholders’ equity 4,104 6,098

Minority interests’ share of shareholders’ equity before proposed dividend 1,518 1,838 Proposed dividend distribution 169 147

Minority interests’ share of shareholders’ equity 1,687 1,985

22 Total consolidated shareholders’ equity 5,791 8,083

Provisions

18 Deferred tax 443 533 23 Pensions and similar commitments 135 112 24 Warranty provisions 552 443 24 Other provisions 283 285

Total provisions 1,413 1,373

Long-term and current liabilities

Mortgage debt 459 369 Currency loans and bank debt 3,345 2,063

25 Long-term liabilities 3,804 2,432

26 Current portion of long-term debt 371 218 Currency loans and bank debt 1,591 1,087 Prepayments from customers 794 1,343

19 Work-in-progress 452 766 Trade creditors 2,318 2,093 Amounts owed to affiliated undertakings 86 82 Amounts owed to associated undertakings 1 3 Corporation tax payable 0 33

28 Other creditors 1,330 1,347 Deferred income 353 534

15 Current liabilities 7,296 7,506

Total long-term and current liabilities 11,100 9,938

Total long-term and current liabilities and provisions 12,513 11,311

TOTAL LIABILITIES 18,304 19,394

Notes not referred to in the annual accounts1 Breakdown of the Group by key undertakings in 1999

27 Interest-bearing debt, net30 Mortgages/pledges31 Contingent liabilities, etc. 32 Financial instruments33 Related party transactions34 Non-recurring items35 Return on capital employed



N O T E S • C O N S O L I D A T E D A C C O U N T S

F.L. Smidth- FLS miljø Aalborg FLS Discontinuing Other FLSFuller Portland Aerospace operations companies Group

Engineering Holding Holding etc. 1 etc. 2

TurnoverDenmark 48 535 2,012 278 987 255 4,115Rest of Scandinavia 91 10 393 49 1,868 15 2,426Rest of Europe 1,386 785 885 2,269 1,207 80 6,612North and South America 2,909 225 1,260 267 446 63 5,170Africa 856 105 16 31 2 3 1,013Asia, etc. 1,327 202 31 45 48 4 1,657

External turnover 6,617 1,862 4,597 2,939 4,558 420 20,993Intercompany turnover 54 97 24 23 118 (316) 0

Net turnover 6,671 1,959 4,621 2,962 4,676 104 20,993Production costs 5,306 1,592 2,562 2,212 3,242 1,266 16,180

Gross profit 1,365 367 2,059 750 1,434 (1,162) 4,813Contribution margin 20.5% 18.7% 44.6% 25.3% 30.7% 22.9%Sales, administrative, distribution costs and other oper. items 1,096 320 1,175 731 1,248 (1,151) 3,419

Earnings before interest, tax, depr./amort. (EBITDA) 269 47 884 19 186 (11) 1,394

EBITDA ratio 4.0% 2.4% 19.1% 0.6% 4.0% 6.6%

Depreciation 133 24 365 165 85 29 801Amortisation 53 8 58 0 16 (17) 118

Earnings before interest and tax (EBIT) 83 15 461 (146) 85 (23) 475

EBIT ratio 1.2% 0.8% 10.0% (4.9%) 1.8% 2.3%

Share of pre-tax profit of associated undertakings 0 0 851 0 0 202 1,053Profit and loss on disposal of undertakings (50) 0 (14) 0 0 1,414 1,350Net financial income and expenses 87 1 (75) (88) (21) (26) (122)

Earnings before tax (EBT) 120 16 1,223 (234) 64 1,567 2,756

EBT ratio 1.8% 0.8% 26.5% (7.9%) 1.4% 13.1%

Tax for the year 63 5 104 (22) 25 41 (216)

Profit/loss for the year 57 11 1,119 (212) 39 1,526 2,540

Minority interests’ share of profit/loss for the year 6 0 122 0 5 319 452FLS Industries A/S’ share of profit/loss for the year 51 11 997 (212) 34 1,207 2,088

Cash flowsCash flows from operating activities 512 (119) 741 (216) 47 794

Acquisition and disposal of undertakings (7) 0 (116) 0 0 1,780Additions of fixed assets (58) (45) (549) (685) (73) (1,527)Disposals of fixed assets 14 0 39 75 21 165Other investments (53) 0 (73) 0 0 (97)

Cash flows from investing activities (104) (45) (699) (610) (52) 321

Cash flows from operating and investing activities 408 (164) 42 (826) (5) 1,115Cash flows from financing activities (106) 164 29 866 (48) (948)

Change in cash funds 302 0 71 40 (53) 167

Interest-bearing net debt/balances (921) 147 1,278 1,982 115 2,499

Balance sheetIntangible fixed assets 165 57 675 (212) 14 (548) 151Tangible fixed assets 909 92 3,166 2,378 353 439 7,337Fixed asset investments 218 0 1,628 20 16 996 2,878Current assets 4,928 1,008 2,636 1,339 353 (1,236) 9,028

Total assets 6,220 1,157 8,105 3,525 736 (349) 19,394

Consolidated shareholders’ equity 1,429 155 4,547 350 346 1,236 8,083FLS Industries A/S’ share of shareholders’ equity 1,407 155 3,914 347 278 (3) 6,098Provisions 496 69 569 121 40 78 1,373Long-term and current liabilities 4,275 933 2,989 3,054 350 (1,663) 9,938

Total liabilities 6,220 1,157 8,105 3,525 736 (349) 19,394

Return on capital employedNOPAT 229 35 1,201 (220) 2,814Average capital employed 3,223 426 5,871 2,486 13,326

ROCE 7.1% 8.2% 20.5% (8.8%) 21.1%

Number of employees at 31 Dec. 3,878 1,206 3,638 3,658 1,011 749 14,140

1 Discontinuing operations comprise DanTransport Holding, which was sold in 1999, and RM Industrial Group, which is to be sold.

2 More details on DanTransport and RM Industrial Group are given in the Annual Report.Other companies, etc. consist of non-core businesses, the parent company and eliminations.

1 . BREAKDOWN OF THE GROUP BY KEY UNDERTAKINGS IN 1999


DKKm 1998 1999

Government subsidies and other grants 19 2 Rent income 22 13 Royalties, etc. 10 15 Badwill booked as income, cf. note 14 0 79 Other income 118 99

169 208

4 . OTHER OPERAT ING INCOME

DKKm 1998 1999

Profit on disposals 269 1,400 Loss on disposals 154 50

115 1,350

5 . PROF IT AND LOSS ON D ISPOSAL OFUNDERTAKINGS

DKKm 1998 1999

Financial income:Interest receivable and similar income 200 140 Realised capital gains on bonds 6 6 Unrealised capital gains on bonds 1 0 Realised capital gains on shares 21 33 Unrealised capital gains on shares 2 5 Realised foreign-exchange gains 739 681 Unrealised foreign-exchange gains 36 203

1,005 1,068

Financial expenses:Interest payable and similar charges 418 319 Realised capital losses on bonds 14 0 Unrealised capital losses on bonds 6 0 Affiliated undertakings 5 8 Realised capital losses on shares 0 2 Unrealised capital losses on shares 3 9 Realised foreign-exchange losses 613 835 Unrealised foreign-exchange losses 98 17

1,157 1,190

6 . F INANCIAL INCOME AND EXPENSES

DKKm 1998 1999

Staff costs

Wages and salaries 4,235 3,918 Pension contributions 185 174 Other staff costs 304 322

4,724 4,414

The amounts are included in the items: Production costs, Sales and distribution costs, and Administrative expenses and other expenses.

The remuneration received by the parent company’s Management and Board of Directors in Group companies is DKK 22m (1998: DKK 15m) and DKK 7m (1998: DKK 7m), respectively (including provision for severance pay commitments).

Number of employees at 31 December 18,137 14,140

Share optionsThe Board of Directors and a number of executive officers in the Group have been granted an optionto purchase 216,062 shares of the company’s portfolio of own shares, allocated as follows:

Board of Directors 0 20,736 Group Management 0 104,425 Other employees 0 90,901

0 216,062

The strike price of the options is set at the average of the market prices 15 business days before and 15 business days after the announcement of financial results prior to the yearin which the options are granted. The strike price for 1998 and 1999 is fixed at 135 and139, respectively. The options cannot be exercised until between 3 and 8 years after thedate of grant. The value of the share options was DKK 11m at 31 December (at the priceof 186 per share).

At year-end, no obligations were incumbent on the company as a result of the shareoption plan.

3 . STAFF COSTS

DKKm 1998 1999

TurnoverBy geographical areas:Denmark 4,925 4,115 Scandinavia excl. Denmark 3,547 2,426 Rest of Europe 6,264 6,612 North and South America 4,619 5,170 Africa 791 1,013 Asia, etc. 2,092 1,657

22,238 20,993

Income recognitionIncome recognised when invoiced 16,674 15,158 Income recognised according to the percentage-of-completion method 5,564 5,835

22,238 20,993

AssetsDenmark 7,668 8,773 Scandinavia excl. Denmark 1,838 373 Rest of Europe 5,443 6,399 North and South America 2,699 3,065 Africa 237 283 Asia, etc. 419 501

18,304 19,394

Capital expendituresDenmark 287 325 Scandinavia excl. Denmark 123 68 Rest of Europe 747 886 North and South America 132 150 Africa 101 120 Asia, etc. 9 11

1,398 1,560

2 . SEGMENTAL REPORT ING



DKKm 1998 1999

Tangible fixed assets 854 55 Fixed asset investments 124 68 Stocks 181 23 Debtors 769 42 Securities 100 0 Cash at bank and in hand 81 1 Provisions (223) (17)Long-term and current liabilities (982) (69)Acquisition and disposal of minority interests 192 0

Net assets 1,096 103 Goodwill /Negative goodwill 111 58 Adjustment of cash at bank and in hand (81) 0

Cash cost 1,126 161

11 . ACQUIS I T ION OF UNDERTAKINGS AND ACT IV IT IES

DKKm 1998 1999

Intangible fixed assets 0 341 Tangible fixed assets 93 719 Fixed asset investments 9 86 Stocks 116 26 Debtors 146 965 Securities 0 75 Cash at bank and in hand 6 3 Provisions (3) (100)Long-term and current liabilities (192) (1,438)Acquisition and disposal of minority interests 0 (8)

Net assets 175 669 Profit/loss (128) 1,350

Total disposal and discontinuance of undertakings and activities 47 2,019

Adjustment of cash at bank and in hand 0 (78)

Cash sales price 47 1,941

12 . D ISPOSAL AND D ISCONT INUANCE OF UNDERTAKINGS AND ACT IV IT IES

DKKm 1998 1999

Deferred tax/tax asset (16) (4)Warranty provisions (95) (11)Other provisions (383) (239)

(494) (254)

8 . ADJUSTMENTS

DKKm 1998 1999

Change in stocks 484 (581)Change in debtors 329 (218)Change in trade creditors and other creditors (1,017) 426

(204) (373)

9 . CHANGES IN WORKING CAP ITAL

DKKm 1998 1999

Financial income 966 860 Financial expenses (1,050) (1,164)

(84) (304)

10 . F INANCIAL PAYMENTS AND D ISBURSEMENTS

DKKm 1998 1999

Acquisition of tangible fixed assets (1,072) (1,541)Disposal of tangible fixed assets 0 165 Acquisition and disposal of fixed asset investments 30 (151)

Cash cost (1,042) (1,527)

13 . F IXED ASSETS

DKKm 1998 1999

Tax for the yearCurrent tax on the profit for the year 228 171 Deferred tax adjustment 6 19 Adjustment of tax asset 0 (27)Share of tax on the profit for the year in associated undertakings 120 43 Other adjustments (1) 10

353 216

Taxes paid in the Group 255 203

Reconciliation of tax rateDanish tax rate 34% 32%Difference in the tax rates in foreign companies (relative to 32%) 8% 5%Difference in the tax rate applied by associated undertakings (relative to 32%) (4%) (11%)Deferred tax adjustment 1% (1%)Non-taxable income and non-deductible expenses (10%) (18%)Non-deductible amortisation of goodwill 2% 1%

Effective tax rate 31% 8%

The FLS Group’s effective tax rate for 1999 was 8% (31% in 1998). The low tax rate for 1999 is primarily due to the following:

• Tax exempt profits on the sale of DanTransport Holding in FLS Industries A/S and largetax exempt profits in the Group’s associated undertakings.

• The Group’s composition of both Danish and foreign jointly and individually taxedcompanies and associated undertakings in Denmark and elsewhere.

7 . TAX ON THE PROF IT FOR THE YEAR AND DEFERRED TAX


DKKm Goodwill Negative Other Totalarising goodwill intang-

on acqui- arising iblesition on acqui- fixed

sition assets

Cost at 1 January 885 (362) 71 594 Exchange adjustments and other adjustments 36 71 (19) 88 Acquisition/disposal of group undertakings (366) (14) (380)Additions 58 0 12 70 Disposals (22) 0 (18) (40)

Cost at 31 December 591 (291) 32 332

Amortisation at 1 January 198 45 243 Exchange adjustments and other adjustments 18 (27) (9)Aquisition/disposal of group undertakings (74) (18) (92)Additions 0 0 0 Disposals 0 0 0 Amortisation in the year 98 7 105

Amortisation at 31 December 240 7 247

Write-downs at 1 January 0 0 0 Exchange adjustments and other adjustments 0 0 0 Acquisition and disposal of group undertakingsAdditions 0 0 0 Disposals 0 0 0 Write-downs in the year 13 0 13

Write-downs at 31 December 13 0 13

Negative goodwill booked as income at 1 January 0 0 Booked as income to cover realisedcosts and losses. (34) (34)Booked as income as non-monetary assetsare applied and depreciated (45) (45)Negative goodwill booked as income at 31 December (79) (79)

Net book value at 31 December 338 (212) 25 151

Net book value at 31 December 1998 687 (362) 26 351

Goodwill arising on acquisition of undertakings primarily relates to Unicon Beton’s acqui-sition of NOCO Betong in Norway, FFE’s acquisition of Buffalo Ltd. in Australia, DanskEternit Holding’s acquisition of Interfer in France and Dansk Træemballage’s acquisitionof Midtjysk Savværk og Emballagefabrik. The year’s acquisitions and disposals of groupundertakings are primarily a result of the sale of DanTransport Holding.

Negative goodwill arising on acquisition of undertakings concerns FLS Aerospace Holding’sacquisition of TEAM Aer Lingus (FLS Aerospace (IRL)) in 1998. FLS Aerospace Holding’stotal costs and expected losses on the acquisition in FLS Aerospace (IRL) were DKK 34m,realised in 1998 and 1999. The negative goodwill arising on the acquisition totalled DKK257m to be booked as income as the non-monetary items in FLS Aerospace (IRL) areapplied/ amortised, resulting in DKK 45m being booked as income under “Other oper-ating income” in 1999 and an expected DKK 13m in 2000. The remaining negative goodwill is expected to be booked as income concurrently with the amortisation in FLSAerospace (IRL) until 2026.

Negative goodwill was estimated at DKK 362m in the annual accounts for 1998. The finalcomputation of negative goodwill in 1999 shows an amount of DKK 291m. The differen-ce of DKK 71m primarily concerns the separation of a deferred tax charge of DKK 70m.

Other intangible fixed assets comprise patents and licences, capitalised developmentcosts, capitalisation of leased premises, etc.

Much of the knowledge generated in the FLS Group is based on the work performed forcustomers. In 1999, the FLS Group’s research and development costs totalled DKK 199m(DKK 187m in 1998). As these costs mainly relate to improvements of already existingproducts, they have not been capitalised. In 1999, the FLS Group capitalised develop-ment costs and patents and licences at a total amount of DKK 4m.

14 . INTANGIBLE F IXED ASSETS

DKKm Land Plant, Opera- Aircraft Assets Totaland machin- ting, compo- in

build- ery and equip- nents courseings ships ment & of con-

fittings struction

Cost at 1 January 4,701 4,845 1,386 956 246 12,134 Exchange and other adjustments 272 202 44 104 (104) 518 Acquisition/disposal of undertakings (609) (1) (523) 0 (2) (1,135)Additions 164 468 199 547 176 1,554 Disposals (182) (175) (73) (26) (52) (508)

Cost at 31 December 4,346 5,339 1,033 1,581 264 12,563

Depreciation at 1 January 1,392 2,625 877 99 0 4,993 Exchange and other adjustments 58 52 17 13 0 140 Acquisition/disposal of undertakings (170) (126) (401) 0 (697)Reversed depreciationof disposals (4) 3 (6) (4) 0 (11)Depreciation in the year 145 399 150 99 0 793

Depreciation at 31 December 1,421 2,953 637 207 0 5,218

Write-downs at 1 January 0 0 0 0 0 0 Exchange and other adjustments 0 0 0 0 0 0 Additions 0 0 0 0 0 0 Disposals 0 0 0 0 0 0 Write-downs in the year 0 8 0 0 0 8

Write-downs at 31 December 0 8 0 0 0 8

Net book value at 31 December 2,925 2,378 396 1,374 264 7,337

Including leased assets 15 0 50 0 0 65 Amounts payable on leased assets 17 0 60 0 0 77

Net book value of Danishproperties at 31 December 1999 881

Taxable value of Danishproperties at 1 January 1999 1,332

Net book value at 31 December 1998 3,309 2,220 509 857 246 7,141

Including leased assets 15 0 59 0 0 74 Amounts payable on leased assets 17 0 71 0 0 88

The net book value of land and buildings includes the value of buildings on a site inDublin leased on favourable terms until 2017, when FLS Aerospace Holding A/S, also on favourable terms, has an option to purchase the building.

The utility value was capitalised at DKK 221m in connection with the takeover.

15 . TANGIBLE F IXED ASSETS

DKKm 1998 1999

Fixed assets acquired under financial leases and included in fixed assets:

Leasing debt:Falling due within one year 11 11 Falling due between one and five years 59 58 Falling due after more than five years 18 8

88 77 Leasing interest:Falling due within one year 4 3 Falling due between one and five years 8 8 Falling due after more than five years 2 1

14 12 Present value:Falling due within one year 7 8 Falling due between one and five years 51 50 Falling due after more than five years 16 7

74 65

Timing differences between the statements for accounting andtax purposes, gross

DKKm Balance Exchange Change in Balanceat 1 Jan. adjustment the year at 31 Dec.

Intangible fixed assets 14 0 129 143 Tangible fixed assets (1,675) (36) 345 (1,366)Fixed asset investments (81) (13) 6 (88)Current assets (28) (6) (41) (75)Provisions 255 4 (9) 250 Long-term and current liabilities 104 22 (23) 103 Loss carry-forwards, gross 3,083 220 266 3,569 Reduction of tax asset (2,857) (204) (852) (3,913)

Deferred tax provisions, gross (1,185) (13) (179) (1,377)

Deferred tax provisions, net (326) (3) (57) (386)

The gross deferred tax charge of the Group reflects the differences between the bookand the tax value of the Group’s assets and liabilities and the Group’s loss carry-forwards.The change in the year is the change affecting the profit and loss account and the ad-justment resulting from acquired and sold undertakings and adjustments resulting fromadditions and disposals of undertakings in the Group.

The part of the Group’s tax asset expected to be utilised within a five-year period hasbeen capitalised. Tax liabilities, if any, of the Group are valued irrespective of the time for payment of tax, if any. Tax assets and tax liabilities in the Group are, thus, valued differently.

The stated net deferred tax reflects the tax value of the Group’s aggregate deferred taxcharge and the stated tax asset.

Specification of net deferred tax and tax asset

DKKm Deferred Deferred Deferredtax tax taxnet assets liabilities

Intangible fixed assets 47 72 (25)Tangible fixed assets (412) 171 (583)Fixed asset investments (39) 19 (58)Current assets (24) 29 (53)Provisions 88 100 (12)Long-term and current liabilities 35 35 0 Loss carry-forwards, gross 872 872 0 Reduction of tax asset (953) (953) 0

Tax assets/liabilities before set-off, if any, at 31 December (386) 345 (731)

Set-off within legal tax entities and jurisdictions (198) 198

Tax assets/deferred tax at 31 December (386) 147 (533)

Tax assets/deferred tax at 31 December 1998 (326) 117 (443)

In the above table, consolidated net deferred tax is divided into assets and liabilities.Where both tax assets and deferred tax exist within a legal unit, the two are set off against each other.

Change in tax assets/deferred tax in the yearNet tax assets/liabilities at 1 January (326) 117 (443)

Movements in the profit and loss account 8 27 (19)The year’s balance sheet movements on acquisition and disposal of undertakings (68) 2 (70)

Net tax assets/deferred tax at 31 December (386) 146 (532)

The most significant net tax assets relate to FLS Aerospace having loss carry-forwards inthe order of DKK 600m, of which DKK 20m has been capitalised. The Group’s deferredtax charge is incumbent mainly on Aalborg Portland Holding. The capitalised deferred taxprimarily relates to Aalborg Portland Holding. Most of the non-stated tax assets are notsubject to limitations in terms of time.

In connection with an acquisition of an undertaking, a deferred tax provision of DKK 70m has been made in the opening balance sheet. FLS Aerospace has a tax liability of DKK 287m, which can materialise in connection with disposal of shares in a specificsubsidiary.

The valuation of tax assets is highly dependent on the earnings of the Group undertak-ings holding the tax assets. Consequently, increasing earnings are required in order tofurther utilise the tax asset.

18 . TAX ASSETS AND L IAB IL I T IES

DKKm Investments Other Other Totalin securities fixed

associated and assetunder- invest- invest-

takings ments ments

Cost at 1 January 1,652 336 33 2,021 Exchange adjustments and other adjustments 8 (1) (18) (11)Additions 59 155 15 229 Disposals (392) (8) (9) (409)

Cost at 31 December 1,327 482 21 1,830

Adjustments at 1 January 332 (147) 185 Exchange adjustments 25 (23) (1) 1 Disposals (243) 0 0 (243)Profit shares 1,010 0 0 1,010 Dividends for the year (78) 0 0 (78)Value adjustments (39) (9) 0 (48)Other adjustments (15) 22 1 8

Adjustments at 31 December 992 (157) 0 835

Net book value at 31 December 2,319 325 21 2,665

Net book value at 31 December 1998 1,984 189 33 2,206

The market value of other securities and investments listed at 31 December was DKK 138m (1998: DKK 76m). The corresponding book value is DKK 206m. (1998: DKK 168m).

The difference relates to the Group’s shares in DUCC. As DUCC is a highly illiquid share, thevaluation in the FLS Group was made at an estimated market value of DKK 150m, based,among other factors, on the year’s acquisitions and the size of the FLS Group’s interest.

16 . F IXED ASSET INVESTMENTS

DKKm FLS share FLS shareShare- Group of net of net Group

holders’ holding result be- result holdingequity % fore tax after tax

NKT Holding A/S, Denmark 3,441 34.9 808 847 1,201 Secil, S.A., Portugal (FLSHH SGPS, LDA,. Portugal) 2,205 22.3 206 124 492 Atlas Cement Corporation, Philippines 515 27.1 2 3 140 Lehigh White Cement Company, USA 334 20.0 22 22 67 Spæncom A/S, Denmark 225 28.6 4 4 64 Sinai White Portland Cement Co.* 153 38.0 (1) (1) 58 Højslev Teglværk A/S, Denmark 109 50.0 10 7 55 Secil Unicon Lda., Portugal 67 50.0 1 1 34 Bauma Unicon Sp. zo.o., Poland 38 41.0 5 3 16 Phinma Himb Concrete Corp., Philippines 8 40.0 (4) (4) 3 Foserumsten AB, Sweden 4 50.0 1 0 2 Other and internal adjustments (1) 4 187

1,053 1,010 2,319

The proportion of voting rights does not differ significantly from the interests held.

* Sinai White Portland Cement Co. is an associated company in the Aalborg PortlandHolding Group. On 14 February 2000, the company adopted a capital increase of EGP70m, equivalent to DKK 153m. Aalborg Portland White participates in the capitalincrease on a pro rata basis, maintaining an interest of 38%.

The market value corresponding to the FLS Group’s interest in associated undertakingslisted at 31 December was DKK 837m (1998: DKK 1,118m). The corresponding bookvalue is DKK 1,265m (1998: DKK 1,053m). The Group’s associated undertakings do notpresent their accounts in accordance with IAS. Adjustments have been made for signifi-cant deviations, where possible. The share of the profit of NKT Holding A/S after tax isaffected positively by non-recurring items.

17 . INVESTMENTS IN ASSOC IATED UNDERTAKINGS




DKKm Share Reserve Other Other FLS Total Totalcapital acc. to undistri- reserves total minority

equity butable share interests’method reserves share

Shareholders’ equity, 1 Jan. 1998 before IAS* 922 611 117 2,165 3,815 1,712 5,527Adjustments resulting from the adoption of IAS 0 0 (15) 149 134 79 213

Shareholders’ equity1 January 1998 922 611 102 2,314 3,949 1,791 5,740

Employee share issue 8 8 0 8Exchange adjustments (17) (155) (172) (15) (187)Hedging 10 10 3 13Profit for the year 119 429 548 246 794Proposed dividend (232) (232) (169) (401)Dividend distributed (184) (184) (118) (302)Value adjustments, ATLAS, etc. 84 84 (1) 83Write-down of own shares (101) (101) 0 (101)Reversal of intra-group profits (33) (33) 0 (33)Other adjustments inshareholders’ equity (2) (3) (5) (2) (7)Additions and disposals of minority interests 0 (217) (217)Transfer between reserves (3) 2 1 0 0 0

Shareholders’ equity, 31 December 1998 before dividend 930 792 71 2,079 3,872 1,518 5,390

Proposed dividend 232 232 169 401

Shareholders’ equity, 31 December 1998 930 792 71 2,311 4,104 1,687 5,791

Exchange adjustments 20 1 177 198 23 221Hedging (23) (23) (8) (31)Profit for the year 160 5 1,923 2,088 452 2,540Proposed dividend (349) (349) (147) (496)Dividend distributed (232) (232) (150) (382)Value adjustments, ATLAS, etc (49) (49) (6) (55)Other adjustments in shareholders’ equity 12 12 3 15Additions and disposals of minority interests 0 (16) (16)Transfer between reserves 2 (2) 0 0 0 0

Shareholders’ equity, 31 December 1999, before dividend 930 925 75 3,819 5,749 1,838 7,587

Proposed dividend 349 349 147 496

Shareholders’ equity, 31 December 1999 930 925 75 4,168 6,098 1,985 8,083

*Note that shareholders’ equity has been adjusted in the 5-year summary

FLS Industries A/S owns 727,304 own class B shares. The nominal value is DKK 14.5m, or 1.6% of the share capital. The shares were acquired to cover the company’s optioncommitments, cf. note 3.

The share capital consists of shares in the following denominations:

A shares: 7,200,000 at nominal value DKK 20B shares: 39,286,885 at nominal value DKK 20

No additional shares were issued in 1999.

22 . CONSOL IDATED SHAREHOLDERS ’ EQU ITY

DKKm 1998 1999

Analysis of changes in the profit recognised on work-in-progress:

Profit booked as income at 1 January 1,593 1,135 Profit included in the profit for the year (458) (359)

Profit booked as income at 31 December 1,135 776

Work-in-progress:Total costs incurred in respect of work-in-progress 7,550 10,632 Profit booked as income 1,135 776

8,685 11,408

Invoicing on account to customers 8,539 10,703

146 705 Of which work-in-progress for third parties are stated under “Assets” 598 1,471 and prepayments from customers are stated under “Liabilities” (452) (766)

146 705 The profit included in the profit for the year is included in the gross profit in the P&L account. Production overheads include a share of work-in-progress for third parties of: 33 7

33 7

19 . WORK- IN -PROGRESS FOR TH IRD PART IES

DKKm 1998 1999

Production overheads include a share of stocks of 96 81

96 81

Production costs include cost of goods sold

As no significant write-downs were made in the year, no significant stocks are stated at a net realisable value below the actual cost.

20 . STOCKS

In February 2000, Aalborg Portland Holding A/S received DKK 589m from the company’sassociated company NKT Holding A/S in connection with NKT Holding A/S’ repurchase ofown shares. Aalborg Portland Holding A/S maintains its interest of 34.9%.

The interest-bearing portion of total debtors and cash at bank and in hand was DKK1,475m in 1999 (1998: DKK 921m).

Debtors falling due after more than one year totalled DKK 107m in 1999 (1998: DKK 387m).

21 . DEBTORS

DKKm Warranties Restruc- Other Totalturing

Provisions at 1 January 552 38 245 835

Additions in the year 81 12 84 177 Disposals/application in the year 175 26 54 255 Reversals in the year 15 0 14 29

Provisions at 31 December 443 24 261 728

Warranty provisionsAt 31 December 1999, the FLS Group had a provision of DKK 443m (1998: DKK 552m)for expected warranty claims in respect of goods or services already supplied/provided.

Provisions for restructuringMost of the company’s commitments with regard to restructuring relate to the provisionsfor restructuring in existing undertakings, of which DKK 11m affected other operatingincome for 1999.

Other provisionsOther provisions include:• Warranties and obligations resulting from disposal of undertakings• Provisions for restoration of sites, etc.• Provisions for loss-making contracts.

24 . WARRANTY PROVIS IONS AND OTHER PROVIS IONS

DKKm 1998 1999

Maturities:Falling due between one and two years 358 135 Falling due between two and five years 1,611 1,328 Falling due after more than five years 1,835 969

3,804 2,432

25 . LONG-TERM L IAB IL I T IES

DKKm 1998 1999

Mortgage debt 76 59 Dansk Eksport Finansierings Fond 198 76 Currency loans, bank debt, etc. 97 83

371 218

26 . CURRENT PORT ION OF LONG-TERM L IAB IL I T IES



Under contribution-based pension schemes, the employer is required to contribute acertain amount (for instance a fixed amount or a fixed percentage of the pay). Under the contribution-based scheme, it will usually be the employees who bear the risk withregard to future trends in the rates of interest, inflation, mortality and disablement.

Under benefit-based pension schemes, the employer is required to pay a certain benefit(for instance a retirement pension as a fixed amount or a fixed percentage of the final pay).Under the benefit-based scheme, it will usually be the undertaking that bears the riskwith regard to future trends in the rates of interest, inflation, mortality and disablement.

Changes in the computation basis result in a change in the actuarial net present value.Such a change in the net present value is considered an actuarial profit or loss. If theactuarial profit or loss exceeds more than 10% of the actuarial net present value, suchprofit or loss must be amortised and recognised in the profit and loss account over therelevant employees’ expected remaining term of service in the undertaking. Losses andprofits are made up per individual scheme.

Changes in benefits concerning the employees’ former employment in the enterpriseresult in a change in the actuarial net present value, which is considered a historical cost.Historical costs are charged to the profit and loss account immediately if the employeeshave already acquired a right to the changed benefit. Otherwise, the historical costs areamortised in the profit and loss account over the period for which the employees acquirea right to the changed benefit.The pension commitments incumbent on the Danishundertakings are covered by insurance. Certain foreign undertakings are also covered by insurance. Foreign undertakings not – or only partly – covered by insurance (benefit-based) state the uncovered pension commitments on an actuarial basis at the presentvalue at the balance sheet date. These pension schemes are covered by pension funds,and a provision of DKK 46m has been made in the FLS Group (DKK 88m in 1998) considering the assets comprised by the schemes.

In 1999, DKK 341m was charged to the profit and loss account (1998: DKK 311m) forstatutory schemes and schemes covered by insurance (contribution-based). An amountof DKK 12m has been charged to the profit and loss account in respect of benefit-basedschemes (DKK 7.0m in 1998).

23 . PROVIS IONS FOR PENS IONS AND S IMILARCOMMITMENTS

DKKm 1998 1999

Present value of benefit-based schemes 352 362 Market value of the assets comprised by the scheme (271) (361)Unrealised actuarial loss/profit 7 45

In total 88 46

Change in recognised commitmentNet commitment at 1 January 84 64 Net expense taken to the profit and loss account 7 12 Other adjustments 1 (10)Payments (4) (20)

Net commitment at 31 December 88 46

Stated as an asset (Amounts owing, contribution to pension fund) (47) (66)Stated as a liability (Pension provisions) 135 112

88 46

Amounts taken to the profit and loss accountCosts 13 20 Interest on commitment 16 20 Expected return on the assets comprised by the scheme (22) (37)Actuarial loss or profit 0 9

Total amount taken to the profit and loss account 7 12

The assumptions on which the actuarial computations are based at the balance sheetdate are as follows, on average:

Average discounting rate applied 10% 10%Expected return on tied-up assets 2% 2%Future pay increase rate 10% 5%Expected increase in pensions (10%) (10%)


DKKm 1998 1999

Mortgage debt 535 429 Bank debt 4,260 2,335 Amounts owed to affiliated undertakings 86 82 Interest-bearing debtors (921) (376)Bonds and shares (104) (164)Other interest-bearing items 17 193

3,873 2,499

Net interest-bearing debt by currencies and interest rate structure:

Principal in DKKm USD GBP EUR DKK Other Total

Payable within one year 80 750 168 53 100 1,151Payable between one and five years 0 450 0 175 0 625Payable after more than five years 0 400 0 323 0 723In total 80 1,600 168 551 100 2,499

The above maturities indicate the extent to which and in which currencies the interest isfixed in the intervals stated. The cash maturity profile of the debt is not relevant here. There is no significant difference between the book value and the market value of prima-ry financial instruments such as debtors, cash at bank and in hand, securities, long-termand current liabilities and derivatives. Reference is made to note 16 concerning securitiesrecognised as fixed asset investments.

27 . ANALYS IS OF THE FLS GROUP ’S INTERESTBEAR ING DEBT:

Other creditors comprise due holiday pay, taxes and indirect taxes, accrued interest andthe statement of financial contracts at market value for financial businesses.

28 . OTHER CREDITORS

1998 1999

FLS’ share of the profit for the year after tax (in DKKm) 548 2,088 Weighted average number of shares 46,389,635 46,486,885

EPS 11.8 44.9

No new shares were issued in 1999.

EPS, dilutedFLS’ share of the profit for the year after tax (in DKKm) 548 2,088 Weighted average number of shares 46,195,135 46,486,885 Adjustment of weighted average number of own shares 181,826 727,304

46,013,309 45,759,581

EPS, diluted 11.9 45.6

No additional own shares were acquired in 1999.

29 . EARNINGS PER SHARE (EPS )

DKKm Book Mortgages/ Book Mortgages/value of pledges value of pledges

assets 1998 assets 19991998 1999

Bonds and bank balances 26 17 66 40 Trade debtors, etc. 639 681 224 205 Real property 1,535 576 1,440 479

2,200 1,274 1,730 724

30 . MORTGAGES /PLEDGES

Notes – without reference

DKKm 1998 1999

Guarantees 159 240 Claim set up by the Customs and Tax Administration 96 94 Rent obligations 27 23

Minimum leasing obligations on operational leasing:Falling due within one year 67 80 Falling due between one and five years 120 115 Falling due after more than five years 23 63

210 258

Other liabilities 212 45

704 660

When stating work-in-progress in the F.L.Smidth-Fuller Engineering group and in the FLSmiljø group, allowance has been made for a number of project-related risks, for whichprovisions have been made on the basis of the management’s estimates. A few claimsare pending in respect of previously supplied goods. Provisions have been made for anyrisks estimated as a result of these claims.

A number of actions have been brought against DEF 1994 A/S, in which full compensa-tion is claimed in connection with the replacement of fibre cement roofs built using pro-ducts with developmental defects in the period from 1984 to 1988. From a legal point ofview, these claims are not considered valid. However, in order to accommodate the house-owners facing these roof problems, the company has offered an ex gratia payment ofhalf of the roofing sheets required for a replacement of the roof. No provisions havebeen made for judicial decisions which, contrary to expectations, might go against thepresent legal assessment concerning products with developmental defects. Nor has anyamount been included under “Contingent liabilities”.

The Aalborg regional Customs and Tax Authority has demanded that the taxable incomestated in the Aalborg Portland Holding joint tax returns for 1993, 1994 and 1995 be in-creased. The tax on the total increases is approx. DKK 94m. No provision has been madefor any tax charge in respect of the increased income, as it is assumed that the incomereported in the tax returns is correct.

An amount of DKK 42m, including interest, was included under “Contingent liabilities”(1998: DKK 40m) concerning the action pending between Aalborg Portland A/S and theEuropean Commission. Aalborg Portland A/S is still convinced that the action will be sett-led without resulting in any sanctions for the company.

In 1999, FLS Industries A/S sold DanTransport Holding A/S to DFDS A/S. The claim set upby the Customs and Tax Authorities against DanTransport A/S has not been taken over byDFDS A/S. The reason for the tax claim was that DanTransport A/S had been subjected tofraud, which turned out to be part of widespread international crime involving abuse of theEuropean Union’s dispatch arrangements. The claim is still considered to be unjustified.

In connection with the Group’s sale of undertakings, usual warranties are given towardsthe acquiring undertakings. Provisions are made for estimated losses on such warranties.

In addition, the Group is from time to time involved in disputes usual for the Group’s busi-ness. No significant liabilities are considered to be incumbent on the Group in that respect.

31 . CONT INGENT L IAB IL I T IES , ETC .

Most of the financial instruments entered into by the Group to hedge financial risks are arranged by the Group’s internal bank. The below tables show the outstanding financial instru-ments entered into by the Group’s internal bank to hedge the companies’ currency exposure and interest rate risks on cash flows, profit and balance sheet items. The outstanding instru-ments do not reflect the FLS Group’s net currency and interest rate exposure. The internal bank may, within certain limits, optimise the financial net position arising from intra-group transactions.

Currency hedgingIn order to hedge currency risks on the FLS companies’ underlying contractual and budgeted payments and currency exposure on loans and investments, the internal bank has enteredinto the following outstanding forward exchange contracts and currency options with commercial banks. The outstanding transactions have been made up as net principals in terms ofmarket values. Unrealised gains and losses on hedged budgeted payments are immaterial.

Market value in USD GBP EUR OtherDKKm 1998 1999 1998 1999 1998 1999 1998 1999Forward exchange contracts (677) (2,177) (694) (2,072) (642) (1,294) 279 417 Currency options 139 38 0 0 90 35 141 0

The above transactions do not reflect the FLS Group’s net currency exposure, but show net principals in terms of market values of the transactions entered into by the internal bank forpurposes of hedging the currency exposure on the FLS companies’ underlying, contractual and budgeted payments and currency risks on loans and investments. Unrealised gains and losses on hedged, budgeted payments are immaterial.

Maturities on outstanding forward exchange contracts entered into to hedge the FLS Group’s currency exposure:

DKKm USD GBP EUR Other

Falling due within one year (2,170) (2,072) (1,300) 407 Falling due between one and five years (7) 0 6 10 Falling due after more than five years 0 0 0 0

In total (2,177) (2,072) (1,294) 417

The companies’ underlying commercial payments typically fall due after more than one year, but are hedged through a combination of short-term, current forward exchange contractsand associated interest swaps. The above maturities do therefore not reflect the FLS Group’s interest rate exposure.

Interest rate hedgingThe FLS Group hedges interest rate risks using financial instruments such as interest swaps, future rate agreements (FRA) and interest-rate options. The principal in terms of market valueson the below, outstanding contracts does not reflect the FLS Group’s interest rate risk, but shows the outstanding financial instruments in the internal bank, which hedges the total inter-est rate risk in the companies in the FLS Group.

The below table shows that, in addition to the above forward exchange contracts and the above net statement of liabilities, FRAs, interest swaps and interest-rate options have been ente-red into – primarily with a view to pegging the rate of interest on the underlying payments.

Market value in USD GBP EUR OtherDKKm 1998 1999 1998 1999 1998 1999 1998 1999FRA 97 72 0 0 0 0 81 198 Interest swaps 575 528 528 840 12 64 1,253 560 Interest-rate options 0 0 0 0 0 0 200 87

The above derivatives mature after between 0 and 8 years.

32 . F INANCIAL INSTRUMENTS



In 1999, the companies in the Group did not carry through any significant transactionswith major shareholders, the Board of Directors or Management or with companies outside the FLS Group in which the relevant parties have interests.

Connected parties:Aktieselskabet Potagua, Kalvebod Brygge 20, DK-1560 Copenhagen V.

Aktieselskabet Potagua has a deposit in FLS Industries A/S’ Finance Department on usualmarket terms.

33 . RELATED PARTY TRANSACT IONS

The FLS Group’s profit for 1999 was affected by non-recurring items of DKK 2,086m in total (1998: DKK 115m).

• In 1999, the FLS Group sold undertakings, generating a total profit of DKK 1,350m• As NKT Holding A/S was considerably affected by non-recurring items in 1999, the

total profit after tax of DKK 847m is considered to be non-recurring.• FLS Aerospace’s profit was affected by provisions for loss-making contracts, more con-

servative methods of income recognition, conversion from AOH activity to AMG activityin Copenhagen and bad debts, etc. in a sold undertaking, DKK 100m.

• The profit for the year was further affected by a provision of DKK 11m for re-structuring.

Excepting the above non-recurring items, the pre-tax profit for the year was DKK 454magainst DKK 679m in 1998.

34 . NON-RECURR ING I TEMS

Return on Capital Employed is defined as follows:

NOPATROCE =

Capital Employed

Capital Employed is made up as the opening/closing average of shareholders’ equity plusnet interest-bearing debt with the following, significant additions:

• financial assets tied up outside the Group• accumulated amortisation of goodwill • provisions for deferred tax

NOPAT (Net Operating Profit After Tax) is the profit for the year with the following, signi-ficant additions:

• the cost of net interest-bearing debt (after tax)• the income from financial assets tied up outside the Group (after tax)• amortisation of goodwill

35 . RETURN ON CAP ITAL EMPLOYED


N O T E S DKKm 1998 1999

1 Share of pre-tax profit of subsidiary undertakings 742 723 9 Share of pre-tax profit of associated undertakings 113 202 2 Profit and loss on disposal of undertakings 117 1,399

Other income 28 30

Total income 1,000 2,354

Property costs 5 7 3 Staff costs 41 42 4 Other operating income 45 42

Depreciation 9 9

Total expenses 100 100

Profit before financial income and expenses 900 2,254

Income from other fixed asset investments 1 0 5 Interest receivable and similar income 886 1,071 5 Interest payable and similar charges 984 1,101

Total financial income and expenses (97) (30)

Earnings before tax 803 2,224

6 Tax for the year 255 136


To be distributed as follows:Provision for net revaluation based on the equity method 212 595Transferred to other reserves 336 1,493

548 2,088

Proposal for distribution of dividend:Preferential 6 per cent dividend on DKK 786m class B shares 47 476 per cent dividend on DKK 144m class A shares 9 919 per cent additional dividend on classes A and B shares 176 176Extraordinary 12.5 per cent dividend on classes A and B shares 0 117

232 349

P A R E N T C O M P A N Y A C C O U N T S

PROFIT AND LOSS ACCOUNT OF THE PARENT COMPANY FLS INDUSTRIES A/S


B A L A N C E S H E E T • P A R E N T C O M P A N Y

A S S E T S

N O T E S DKKm 1998 1999

Fixed assets

Land and buildings 137 140 Operating equipment, fixtures and fittings 5 6

7 Tangible fixed assets 142 146

Investments in subsidiary undertakings 5,314 4,503 9 Investments in associated undertakings 683 789

Other securities and investments 63 143 10 Tax asset 50 50

8 Fixed asset investments 6,110 5,485

Total fixed assets 6,252 5,631

Current assets

Amounts owed by subsidiary undertakings 4,816 5,025 Amounts owed by associated undertakings 6 0 Other debtors 307 393

11 Debtors 5,129 5,418

12 Own shares 0 0Bonds and other securities 3 3

Securities 3 3

Cash at bank and in hand 1 1

Total current assets 5,133 5,422

TOTAL ASSETS 11,385 11,053

L I A B I L I T I E S

N O T E S DKKm 1998 1999

Shareholders’ equity

Share capital 930 930 Reserve according to the equity method 2,107 2,717 Other reserves 835 2,102 Proposed dividend distribution 232 349

12 Total shareholders’ equity 4,104 6,098

Provisions

Provisions 22 75

13 Total provisions 22 75

Long-term and current liabilities

Mortgage debt 39 34 Currency loans, bank debt, etc. 3,262 1,882

14 Long-term liabilities 3,301 1,916

15 Current portion of long-term liabilities 197 5 Currency loans, bank debt, etc. 834 582 Amounts owed to subsidiary undertakings 2,646 2,034 Amounts owed to associated undertakings 85 82

16 Other creditors 196 261 Dividend for the financial year 0 0

Current liabilities 3,958 2,964

Total long-term and current liabilities 7,259 4,880

TOTAL LIABILITIES 11,385 11,053

Notes not referred to in the annual accounts

17 Mortgages / Pledges18 Contingent liabilities,


DKKm 1998 1999

Financial income:Interest receivable and similar income 52 28 Realised capital gains on bonds 6 0 Unrealised capital gains on bonds 0 0 Affiliated undertakings 202 235 Realised capital gains on sharesUnrealised capital gains on sharesRealised foreign-exchange gains 626 622 Unrealised foreign-exchange gains 0 186

886 1,071

Financial expenses:Interest payable and similar charges 233 213 Realised capital losses on bonds 8 0 Unrealised capital losses on bondsAffiliated undertakings 119 85 Realised capital losses on sharesUnrealised capital losses on sharesRealised foreign-exchange losses 545 799 Unrealised foreign-exchange losses 79 4

984 1,101

5 . F INANCIAL INCOME AND EXPENSES

DKKm 1998 1999

Tax on the profit for the yearCurrent tax on the profit for the year 1 0 Share of tax on the profit for the year in subsidiary undertakings 340 106Joint taxation contribution to the parent company (138) (45)Adjustment of negative deferred tax 0 0 Share of tax for the year in associated undertakings 52 75 Other adjustments 0 0

255 136

Taxes paid in the period 1 0

Reconciliation of tax rateDanish tax rate 34% 32%Difference in the tax rates applied by non-Danish subsidiary undertakings (relative to 32%) 11% (6%)Differences in the tax rates applied by associatedundertakings (relative to 32%) 2% 0%Non-taxable income and non-deductible expenses (9%) (21%)Other, including prior year adjustments (6%) 1%

Effective tax rate 32% 6%

The company’s effective tax rate was 6% for 1999 (32% in 1998). The most importantdifference relates to the company’s profit on the sale of DanTransport Holding.

6 . TAX FOR THE YEAR AND DEFERRED TAX


N O T E S • P A R E N T C O M P A N Y

DKKm 1998 1999

Proportionate share of pre-tax profit 1,251 659 Amortisation of value added on acquisition of undertakings (2) (3)Adjustment of intra-group profit on the transfer of shares and real property, etc. (507) 67

742 723

1 . SHARE OF PRE -TAX PROF IT OF SUBS ID IARYUNDERTAKINGS

DKKm 1998 1999

Profit on disposal 19 1,399 Loss on disposal 98 0

117 1.399

Profit and loss on disposal of undertakings includes an adjustment of provisions,analysed as follows:

Provisions for structural adjustments 150 0

150 0

2 . PROF IT AND LOSS ON D ISPOSAL OFUNDERTAKINGS

DKKm 1998 1999

Wages and salaries 38 38 Other staff costs 3 4

41 42

Remuneration to the Board of Directors was DKK 4.0m for 1999 (1998: DKK 4.0m). Total remuneration to the Management of the parent company was DKK 22m for 1999 (1998: DKK 15m), of which DKK 14m (1998: DKK 12m) has been paid by the parent company(including a provision for severance pay commitments).

Number of employees at 31 December 55 53

The Board of Directors and the Management of the parent company are comprised by the Group’s share option plan. Reference is made to note 3 in the consolidated accounts.

3 . STAFF COSTS

Fees to the auditors appointed by the company in general meeting, KPMG and Deloitte& Touche, are DKK 1.0m to each of the accounting firms (1998: DKK 1.0m).

4 . AUDIT FEES


DKKm FLS’s FLS’s Partici-Shareholders’ Interest share of share of pating

equity % pre-tax profit interestprofit after tax

Secil, S.A., Portugal (FLSHH SGPS, LDA, Portugal) 2,205 22.3 206 124 492 Atlas Cement Corporation,Philippines 515 27.1 2 3 140 Other and internal adjustments (6) 1 157

202 128 789

The proportion of voting rights does not differ significantly from the percentage interestsheld. The Group’s associated undertakings do not present their accounts in accordancewith IAS. Adjustments have been made for significant deviations, where possible.

9 . INVESTMENTS IN ASSOC IATED UNDERTAKINGS

DKKm Land and Other Totalbuildings fixtures

and equip-ment

Cost at 1 January 374 10 384 Additions 10 4 14 Disposals 0 (2) (2)

Cost at 31 December 384 12 396

Depreciation at 1 January (237) (5) (242)Reversed depreciationof disposals 0 1 1 Depreciation in the year (7) (2) (9)

Depreciation at 31 December (244) (6) (250)

Write-downs at 1 January 0 0 0 Exchange adjustments and other adjustments 0 0 0 Additions 0 0 0 Disposals 0 0 0 Write-downs in the year 0 0 0

Write-downs at 31 December 0 0 0

Net book value at 31 December 140 6 146

Net book value of Danish properties at 31 December 1999 136

Taxable value of Danishproperties at 31 December 1999 327

Net book value at 31 December 1998 137 5 142

The parent company has not entered into any operational leasing agreements.

7 . TANGIBLE F IXED ASSETS

DKKm Invest- Invest- Other Totalments in ments in securities

subsi- associ- and diaries ated invest-

under- mentstakings

Cost at 1 January 6,189 68 63 6,320 Additions 7 0 80 87 Disposals (924) 0 0 (924)

Cost at 31 December 5,272 68 143 5,483

Adjustments at 1 January (875) 615 0 (260)Disposals 394 0 0 394 Exchange adjustment of foreign undertakings’ opening net assets 141 14 0 155 Profit shares 617 128 0 745 Dividends for the financial year (1,010) 0 0 (1,010)Goodwill arising on the acquisition of undertakings (2) (10) 0 (12)Value adjustments (12) (26) 0 (38)Other adjustments (22) 0 0 (22)

Adjustments at 31 December (769) 721 0 (48)

Net book value at 31 December 4,503 789 143 5,435

Net book value at 31 December 1998 5,314 683 63 6,060

The market value of other securities and investments listed at 31 December was DKK75m (1998: DKK 30m). The corresponding book value was DKK 143m (1998: DKK 63m).

The difference relates to the Group’s shares in DUCC. As DUCC is a highly illiquid share,the valuation in the FLS Group was made at an estimated value of DKK 150m, based,among other factors, on the year’s acquisitions and the size of the FLS Group’s interest.

8 . F IXED ASSET INVESTMENTS

Timing differences between the statements for accounting and tax purposes

DKKm Balance Exchange Change in Balanceat 1 Jan. adjustment the year at 31 Dec.

Intangible fixed assets 0 Tangible fixed assets (40) 16 (24)Fixed asset investments 167 (25) 362 504 Current assets 0 0 0 Provisions 53 (18) 35 Long-term and current liabilities 0 Loss carry-forwards, net 0 Reduction of loss carry-forwards (25) (334) (359)

Deferred tax provisions, gross 155 (25) 26 156

Deferred tax provisions, net 50 (8) 8 50

Specification of deferred tax

DKKm Total Tax Deferredtax assets tax

assets liabilities

Intangible fixed assets (8) 7 15 Tangible fixed assets 169 204 35 Fixed asset investments 0 0 0 Current assets (12) 11 23 Provisions 11 17 6 Long-term and current liabilities 0 0 Loss carry-forwards, net 0 0 Reduction of tax asset (110) (110)

Tax assets/liabilities before set-off,if any, at 31 December 50 129 79

Set-off within legal tax entities and jurisdictions 0 (79) (79)

Net tax assets/liabilities at 31 December 50 50 0

Net tax assets/liabilities at 31 December 1998 50 50 0

The portion of the company’s tax asset expected to be utilised within a five-year periodhas been capitalised. Any tax liabilities in the Group are valued irrespective of the timefor payment of tax, if any. Consequently, there is a prudent difference between the valuation of tax assets and tax liabilities in the Group.

See also the explanation of tax assets and liabilities in the Consolidated accounts, note 18.

10 . TAX ASSETS AND L IAB IL I T IES

Debtors falling due after more than one year totalled DKK 789m in 1999 (at 31 December 1998: DKK 2,497m).

11 . DEBTORS


N O T E S • P A R E N T C O M P A N Y

DKKm 1998 1999

Maturities:Falling due between one and two years 5 5 Falling due between two and five years 1,348 1,143 Falling due after more than five years 1,948 768

3,301 1,916

14 . LONG-TERM L IAB IL I T IES

DKKm 1998 1999

Mortgage debt 5 5 Currency loans 0 0 Bank loans 192 0 Other 0 0

197 5

15 . CURRENT L IAB IL I T IES

Other creditors comprise due holiday pay, taxes and indirect taxes and accrued interestand the statement of financial instruments at market values for financial businesses.

16 . OTHER CREDITORS

DKKm Book Mort- Book Mort-value of gaging value of gaging

assets 1998 assets 19991998 1999

Real property 125 44 122 39

17 . MORTGAGES /PLEDGES

DKKm Share Reserve Other Other Totalcapital acc. to undistri- reserves

equity butablemethod reserves

Shareholders’ equity at 1 Jan. 1998 before IAS* 922 1,813 5 1,075 3,815 Adjustments resulting fromadoption of IAS 0 (53) (5) 192 134

Shareholders’ equity at 1 Jan. 1998 922 1,760 0 1,267 3,949

Employee share issue 8 8Exchange adjustments (126) (46) (172)Hedging 10 0 10Profit for the year 212 336 548Proposed dividend (232) (232)Dividend distributed (184) (184)Value adjustments, ATLAS 75 75Other value adjustments 4 5 9Write-down of own shares (101) (101)Reversal of intra-group profits 172 (205) (33)Other adjustments in shareholders’ eq. (5) (5)Transfer between reserves 0Shareholders’ equity at 31 Dec. 1998 before dividend 930 2,107 0 835 3,872

Proposed dividend 232 232

Shareholders’ equity at 31 Dec. 1998 930 2,107 0 1,067 4,104

Exchange adjustments 76 122 198Hedging (17) (6) (23)Profit for the year 595 1,493 2,088Proposed dividend (349) (349)Dividend distributed (232) (232)Value adjustments, ATLAS (32) (32)Other value adjustments (17) (17)Reversal of intra-group profits 0Other adjustments in shareholders’ eq. 7 5 12Transfer between reserves (2) 2 0

Shareholders’ equity at 31 Dec. 1999 before dividend 930 2,717 0 2,102 5,749

Proposed dividend 349 349

Shareholders’ equity at 31 Dec. 1999 930 2,717 0 2,451 6,098

*Note that shareholders’ equity has been adjusted in the 5-year summary

FLS Industries A/S holds 727,304 own class B shares. The nominal value is DKK 14.5m, or1.6% of the share capital. The shares were acquired to cover the company’s option com-mitments, cf. note 3.

The share capital is divided into the following denominations:Class A shares: 7,200,000 of DKK 20 eachClass B shares: 39,286,885 of DKK 20 each

No additional shares were issued in 1999.

12 . SHAREHOLDERS ’ EQU ITY

DKKm Otherprovisions

Provisions at 1 January 22 Additions in the year 95 Provisions applied in the year 28 Reversal in the year 14

Provisions at 31 December 75

The provisions in the year mainly concern warranties given in connection with the disposal of undertakings.

13 . PROVIS IONS

DKKm 1998 1999

Guarantees to subsidiary undertakings 7 0 Other liabilities 0 0

7 0

The company guarantees certain subsidiary undertakings’ supply and trading obligations.

In 1999, FLS Industries A/S sold DanTransport Holding A/S to DFDS A/S. The claim set upby the Customs and Tax Administration against DanTransport A/S has not been takenover by DFDS A/S. The reason for the tax claim was the fact that DanTransport A/S hadbeen subjected to fraud, which turned out to be part of widespread, international crimeinvolving abuse of the European Union’s dispatch arrangements. The claim is still consi-dered to be unjustified.

When undertakings are sold, usual guarantees are given to the acquiring undertaking.Provisions are made for estimated losses on such guarantees.

18 . CONT INGENT L IAB IL I T IES


S T O C K E X C H A N G E M E S S A G E S I N 1 9 9 9

15 Jan. FLS IndustriesJens Due Olsen appointed Chief

Financial Officer

18 Jan. FLS Industries/Aalborg Portland HoldingArbitration settled

(Faxe Kalk/Lhoist)

20 Jan. FLS PlastDue diligence of French subsidiaries

completed

1 Feb. F.L.Smidth-Fuller Engineering – Group ManagementFrank Gad appointed Chief Executive

Officer of FFE

3 Feb. Unicon BetonInvestment in Norway

11 Feb. FLS AerospaceNew contracts – Air 2000 and Air

Europa

16 Feb. FullerContract in the U.S. worth DKK

220m (Lone Star)

3 Mar. FFE Minerals CorporationContracts worth DKK 275m from

South America (Compania Minera

Antamina, Peru and Cerro Matoso,

Colombia)

5 Mar. RM Industrial GroupDisposal postponed

19 Mar. Aalborg Portland HoldingAnnouncement of financial results

22 Mar. FLS IndustriesAnnouncement of financial results

25 Mar. Aalborg Portlandstrengthens global leadership in

white cement (Sinai White Portland

Cement Company Ltd.)

29 Mar. F.L.Smidth & Co.Nigeria orders new cement plant

worth DKK 300m (WAPCO)

6 Apr. FLS IndustriesAmbitious, yet realistic growth target

(editorial in FLS Update 2/99)

23 Apr. TEAM FLS AerospaceSuccessful start

26 Apr. DanTransportRestructuring of the E1-European

Logistics Services alliance under way

26 Apr. FullerFuller wins large contract in the USA

(Texas Industries)

28 Apr. FLS miljøTwo landmark power station

contracts in Italy (La Spezia) and

Greece (Megalopolis)

19 May DanTransportFLS Industries A/S sells DanTransport

to DFDS

2 June FLS miljøManagement strengthened (Arndt

Hovald Nørgaard)

9 June FFE – MAAG GearTwo world-class gear manufacturers

join forces (A. Friedr. Flender to buy

MAAG Gear)

16 June F.L.Smidth & Co.Egyptian Assiut Cement Co. places

order with FLS

17 June F.L.Smidth-Fuller EngineeringBillion Danish kroner contract from

Egypt (Qena)

24 June F.L.Smidth & Co.Plant expansion contract in Argentina

(Cementos Avellaneda)

29 June FLS Industries/Aalborg Portland HoldingProspects for 1999

1 July Danish AerotechSold

16 Aug. MAAG Gearstays within the FFE Group

25 Aug. Aalborg Portland HoldingHalf-yearly report 1 Jan. - 30 June 1999

26 Aug. FLS IndustriesHalf-yearly report 1 Jan. - 30 June 1999

30 Sep. FullerNew billion Danish kroner contract

(Ash Grove, Chanute, Kansas)

4 Oct. FLS miljøStrategic half billion Danish kroner

contract in Spain (EHN)

8 Oct. FullerNew cement kiln contract in the USA

(Southdown. Inc.)

22 Dec. Secil S.A.Acquisition of Société des Ciments

de Gabès

74 FLS INDUSTRIES 1999FLS INDUSTRIES 1999

Important board andmanagement executivepositionsPursuant to Section 56, Subsec-

tion 3 of the Danish Company

Accounts Act, the annual report

of a listed company shall contain

information on the executive posi-

tions which the members of its

board of directors and manage-

ment hold in other Danish limited

liability companies, except wholly-

owned subsidiaries.

Board of DirectorsJens Münter

(Chairman)

Vice Chairman of the Board of

Spæncom A/S. Member of the

Boards of Aktieselskabet

Potagua, A/S Højkol, NKT Holding

A/S and Modulbeton A/S.

Michael Arnstedt

(Vice Chairman)

Chairman of the Boards of IAS

(Industrial Automation Solutions

ApS) and K/S Søndergade 30.

Member of the Boards of Aalborg

Portland Holding A/S, Aalborg

Portland, IBS, K/S Lyngby Hoved-

gade and Silentor Notox A/S.

Chief Executive Officer of Indus-

trial Bar Code Solutions A/S.

Christian Kjær

(Vice Chairman)

Chairman of the Boards of Aal-

borg Portland Holding A/S, NKT

Holding A/S, A/S Segalith af 1/4-

1987 and Sct. Gertruds Stræde

10 A/S. Vice Chairman of the

Board of Nilfisk A/S. Member of

the Boards of Aktieselskabet

Potagua, Ejendomsselskabet Nor-

den A/S, A/S Højkol and Nye

Kommercielle Aktiviteter Holding

A/S.

Pernille Friis Clausen

None.

Michael Fiorini

Vice Chairman of the Board of

FORAS Holding A/S.

Jan Folting

Chief Executive Officer of Becada

A/S and P. Larsens Eftf. A/S.

Member of the Boards of

Centralsavværket A/S, NKT

Holding A/S, Unicon Beton A/S

and Dansk Træemballage A/S.

Kalle Jensen

Member of the Board of Aalborg

Portland A/S.

Philip Kjær

Member of the Boards of Aalborg

Portland Holding A/S, Dansk

Eternit Holding A/S, Aktieselska-

bet Potagua, Sct. Gertruds Stræde

10 A/S, A/S Segalith af 1/4-1987,

Gubi.com A/S, Interface Biotech

A/S, Holdingselskabet R.D. A/S,

R.M. af 21.12.1993 A/S, Hold-

ingselskabet af 12.5.1993 A/S,

Radiometer Finans A/S and

Holdingselskabet RDAS af 26/6-

94 A/S.

Grethe Machholm

None.

Per Overgaard

None.

Johan Schrøder

Managing Director of Radiometer

A/S. Chairman of the Boards

of Rockwool International A/S

and Investeringsselskabet af

30.4.1992 A/S. Member of the

Board of Johan Schrøder A/S and

Managing Director of K.V.Ander-

sen Non-Food Import Company

A/S. CEO of Axcel IndustriInvestor

A/S, Axcel IKU Invest A/S, Heto-

Holten A/S and Keops A/S.

Jens Stephensen

Chairman of the Boards of Ørskov

Christensen Stålskibsværft A/S

and related companies, of Holm

og Grut A/S and Dansk Maritimt

Institut. Member of the Boards of

Aalborg Portland Holding A/S,

Aalborg Portland A/S, Dansk Eter-

nit Holding A/S and Combus A/S.

ManagementBirger Riisager

Chairman of the Board of Dan-

foss A/S. Member of the Boards

of Aalborg Portland Holding A/S,

C.W.Obel A/S and Ferritslev Jern-

varefabrik A/S and member of the

Committee of Shareholders of

Den Danske Bank A/S.

Peter Assam

President and CEO of Aalborg

Portland Holding A/S. Member of

the Board of Directors of Danaske

I/S, Danske Entreprenører and

Larco A/S.

Ib Christensen

Chairman of the Boards of Aalborg

Portland A/S, Aalborg Portland

White A/S, Dansk Eternit Holding

A/S and Dansk Eternit A/S. Mem-

ber of the Boards of Aalborg Port-

land Holding A/S, Det Berlingske

Officin A/S, A/S De Berlingske

Dagblade, De Berlingske Virksom-

heder A/S, Investeringsforeningen

Alfred Berg, BRF holding a/s, Pres-

salit A/S, IndustriPension Holding

A/S, Industriens Pensionsforsikring

A/S and the Danish Employers

Confederation. President of the

Confederation of Danish Indus-

tries. Member of the Committee

of Representatives of PFA Pension.

Chairman of the Council for

Technological Service. Member

of the executive committee of

the Danish Academy of Technical

Sciences.

Frank Gad

None.

Erik Hoffmann-Petersen

Member of the Boards of Carl

Bro Group A/S and Brdr. A & O

Johansen A/S.

Jens Due Olsen

None.

Ole Trolle

Chairman of the Boards of ICEA

A/S, Industriens Realkreditfond,

Rich. Müller-Fonden, the Danish

Securities Centre and Combus

A/S. Member of the Boards of

Nykredit A/S and Nykredit Holding

A/S. Member of the Committee

of Shareholders of Scandinavian

Airlines System (SAS).

I M P O R T A N T M A N A G E M E N T P O S I T I O N S


A U D I T O R S ’ R E P O R T

Auditors’ report

We have audited the consolidated accounts of the Group and the annual accounts of the parent company FLS

Industries A/S for the year 1999.

Audit

We have prepared and carried out our audit in accordance with generally accepted auditing standards for the

purpose of satisfying ourselves that the accounts are free of material errors, omissions or misstatements. Dur-

ing our audit we have examined the basis for and documentation of the amounts and other information set

out in the accounts from criteria of materiality and risk. In doing so, we have given consideration to the

accounting policies and estimates of the management and have assessed the adequacy of the accounting

information as a whole.

Our audit gave rise to no qualifications.

Conclusion

In our opinion the consolidated accounts of the Group and the annual accounts of the parent company are

presented in conformity with the accounting requirements of Danish law and International Accounting Stand-

ards (IAS) and give a true and fair view of the assets and liabilities of the Group and parent company, their

financial position and the results of their operations.

Copenhagen, 9 March 2000

KPMG C.Jespersen Deloitte & ToucheStatsautoriseret Revisionsaktieselskab

Wilh.P. Børgesen · Finn L. Meyer Bent Hansen · Jørgen Holm Andersen

State Authorised Public Accountants State Authorised Public Accountants


A D D R E S S E S

FLS Industries A/SVigerslev Allé 77

DK-2500 Valby

Tel: + 45 36 18 18 00

Fax: + 45 36 30 44 41


www.flsindustries.com

CVR No. 58180912

F.L.Smidth-Fuller Engineering A/SVigerslev Allé 77

DK-2500 Valby

Tel: + 45 36 18 17 00

Fax: + 45 36 30 17 87


www.ffegroup.com

FLS miljø a/sRamsingsvej 30

DK-2500 Valby

Tel: + 45 36 18 11 00

Fax: + 45 36 17 45 99


www.flsmiljo.com

Aalborg Portland Holding A/SVigerslev Allé 77

DK-2500 Valby

Tel: + 45 36 18 28 00

Fax: + 45 36 44 11 46


www.aph.dk

FLS Aerospace Holding A/S

Vigerslev Allé 77

DK-2500 Valby

Tel: + 45 36 18 19 00

Fax: + 45 36 18 19 36

E-mail:

[email protected]

www.flsaerospace.com

RM Industrial Group A/SIndustriparken 40

DK-2750 Ballerup

Tel: + 45 44 20 89 60

Fax: + 45 44 20 89 61


www.rmig.com

Pedershaab A/SSaltumvej 25

DK-9700 Brønderslev

Tel: + 45 96 45 40 00

Fax: + 45 96 45 40 40

E-mail:

[email protected]

www.pedershaab.com

Dansk Træemballage A/SBanevej 3

DK-5600 Faaborg

Tel: + 45 62 68 13 23

Fax: + 45 62 68 14 43



FLS Industries A/S 2000

Design: Bysted Hovedkvarteret A/S

Printed by: Repro & Tryk A/S

FLS Industries A/S

Vigerslev Allé 77

DK-2500 Valby

www.flsindustries.com

Documents

FLS INDUSTRIES A/S - KU Leuven · FLS INDUSTRIES 1999 1 COMPANY MISSION The FLS Group aims to be its customers’ preferred partner by offering them solutions and products that contribute