Broen A/S

Ledelsesberetning

HIGHLIGHTS AND FINANCIAL RATIOS FOR THE GROUP 2023 2022 2021 2020 2019 T.DKK/ T.DKK/ T.DKK/ T.DKK/ T.DKK/ T.EUR T.EUR T.EUR T.EUR T.EUR _______ _______ _______ _______ _______ Five years’ highlights Net turnover 832,442 736,706 594,995 557,386 611,273 111,655 99,072 80,003 74,902 81,825 Operating profit 84,492 91,571 69,391 58,986 62,598 11,333 12,314 9,330 7,927 8,379 Net financial costs (17,667) (17,801) (1,885) (1,653) (5,088) (2,370) (2,394) (253) (222) (681) Profit before tax 66,825 73,770 67,506 57,333 57,510 8,963 9,921 9,077 7,704 7,698 Net Profit of the year 47,973 60,566 66,534 46,009 42,392 6,435 8,145 8,946 6,183 5,675 Total assets 1,037,410 945,148 728,969 606,712 634,460 139,148 127,104 98,017 81,530 84,929 Investments in tangible fixed assets 105,996 114,495 56,090 45,603 48,838 14,217 15,397 7,542 6,128 6,537 Equity 503,639 467,541 402,623 357,050 363,912 67,433 62,875 54,137 47,980 48,713 Profit margin 8.0% 10.0% 11.3% 10.3% 9.4% Asset turnover 0.8 0.8 0.8 0.9 1.0 Return on capital and reserves 9.9% 13.9% 17.5% 12.8% 12.2% Solvency ratio 48.5% 49.5% 56.5% 58.8% 57.4% Average number of employees 732 727 679 619 634 Financial highlights are defined and calculated in accordance with the current version of Recommendation & Ratios” is-sued by the CFA Society Denmark. 1 Profit margin (%) : Profit/loss before tax * 100 Net turnover 2 Asset turnover : Net turnover Total assets 3 Return on capital and reserves (%) : Profit/loss for the year * 100 Average equity 4 Solvency ratio (%) : Equity * 100 Total assets The BROEN group is part of the international group Aalberts N.V. listed on the Euro-next Amster-dam and on the AMX index. Principal activities The BROEN group’s activities are the development, production, marketing and sale of valves and fittings worldwide. The result of year 2023 and follow up from last year expected development In 2023 group sales were mDKK 832 compared to mDKK 737 in 2022, which represents a positive growth of 11.5%, this include a negative affected currency development of -3,9%. The sales devel-opment in 2023 has exceeded the expectations the management had for the year 2023, mainly driv-en by our District Heating business. The ordinary consolidated operating profit was mDKK 84 compared to mDKK 92 in 2022. Overall profit before tax was thus mDKK 69 compared to mDKK 74 in 2022. The operating profit was be-low the expectations the management had for the year 2023, mainly due to higher material cost than expected and inflation impact on our operating expenses such as freight and packaging, consuma-bles, energy costs and maintenance and tools. Russian business By the end of February 2022 the conflict between Ukraine and Russia started, which is still influ-encing our Russian business. The situation is still very difficult for our employees, and in respect for our employees, BROEN still maintain business in Russia, but on a lower activity level. The internal sales to Russia has been limited and local sourcing has been set in place, to make sure that we oper-ate within the sanctions and restrictions imposed by EU and US, and procedures and internal con-trols have been established to secure compliance with all sanctions. BROEN follows the situation closely, and will adjust our business if needed. Uncertainty relating to recognition and measurement related to business in Russia Due to the situation there are uncertainties relating to the recognition and measurement related to Russian assets. The Russian subsidiary accounts for 17% of the total assets and 22% in net assets ofthe Group figures. BROEN has received dividend from Russia during the year and the control over the Russian com-pany has been maintained and therefore the subsidiary is fully consolidated within BROEN Group financial statements. BROEN has used the following exchange rates in connection with the recognition of the subsidiary in Russia in the consolidation: - Result: 1 RUB = 0,081284 DKK - Balance 1 RUB = 0,075598 DKK The Group has carried out an impairment test that supports the valuation of the Russian subsidiary. Assumptions of the impairment test are based on Management’s forecast for 2024 as expected to be at the same level as 2023. A discount rate of 18% was used for the impairment test. The impairment test does not show any indication of impairment. The Russian activity shows positive results in 2024. There is more than usual uncertainties associated with the determination of the discount rate, which is used in the impairment test. This is because the market is currently affected by a very fluctuating interest rate level. The market Most of our markets and segments had a positive development in 2023. Especially District Heating in Europe & China, where we delivered to a large project for District Heating. Natural Gas market in USA had a negative growth due to overstocking within the distributors as a result of the panic buying in 2022. Building Industry market was slow in 2023 driven by postponed projects due to in-crease of building cost and interest rate. Our new products introduced the last years continued to contributed very well to our growth in 2023. Sales to the Marine market showed also a very positive growth in 2023. Products and Product Development Our Full Flow valve continues the positive development in the markets, and additional investments have been implemented for further automatization and to increase capacity during the year. This product will contribute to further growth in 2024 and the years to come. The development of a new innovative valve for midrange dimension for District Energy and Building Installation is in pro-gress. For this new product line we expect further growth in the coming years, where more produc-tion space is needed, and a therefore a new production facility has been finalized this year and the production line for this new valve is being installed and tested, production is expected to begin sec-ond half year 2024. In the course of the year BROEN investments amounted to mDKK 106, primarily in Denmark and Poland. It is important for the Group in both short and long term that the right portfolio of products and pro-duction technologies is ensured and that existing products and production technologies are continu-ously developed. The main focus of our ongoing projects is, to improve the features and quality of our products, and at the same improve the sustainable foot print of our products. The projects are progressing according to plan through the use of the resources allocated by Man-agement to the development. The products are expected to be sold in the present market to the exist-ing and potential new customers. Prior to the initiation of the projects, the Company research on re-turn on investments on these products. The total development costs for the above mentioned products amounted to mDKK 7,1 in the finan-cial year, which is a decrease of 6% compared to last year. This amount is recognized as intangible fixed asset. Risks Operating risks The Group is not predisposed to special risks in addition to ordinary risks within the industry, in-cluding business and financial risks. As a company working with international markets the Group is exposed to a certain financial risks. BROEN is monitoring the financial risk from the headquarter in Denmark in terms of interest, currency, liquidity and funding risk. Currency risks Currency risks is primarily based in trade across borders as most of our trade is done in DKK, EUR, PLN, USD, SEK as well as NOK. RUB is only traded locally. Market risks The management assesses that the Group is not affected by special market risks beyond the common risks in the industry. However, the activity of BROEN is dependent on domestic and global econo-mies and development and the resulting impact on our customers’ needs for transportation. Capital resources The Group's capital resources are still assessed to be fully adequate.Outlook Overall growth for 2024 expects to be limited not more than 1-2% and on profit from ordinary ac-tivities is expected to be at 2022 level due to the operating expenses expect to be normalized. The Russian market will be difficult to foresee in 2024, expects to be flat. In Europe and USA mar-kets expect still to improve further especially in the District heating and Natural Gas segment. The marine market expect to continue positive growth. In the Building Industry segment and the US ndNatural Gas segment expects to be come back in 2 half year. The improved projects and activity level in the market combined with the marketing of the new products will contribute to create fur-ther growths. The group will still continue in focusing on innovation and further product development, strengthen the organisation and continue to invest in sales resources in key markets. Further investments in production facilities and in production capacity increase and automation is planned to support fur-ther growth in 2024 and coming years. Subsequent events No events have occurred subsequent to the balance sheet date and up to this date that change the as-sessment of the annual accounts.