Scan-Hide A/S

Ledelsesberetning

MANAGEMENT’S REVIEW Business review The company’s main activity is to purchase, process, and resell the production and supply of hides and skins. The company is continuously developing to achieve this purpose. Additionally, the company may buy and resell hides, skins, and related products from sources other than the company’s owners on commercial terms. Financial review The global market for raw hides and semi-finished products has been extremely turbulent. The company is closely tied to the automotive, fashion and furniture industries and especially the automotive and furniture industries came to a sudden stop. Revenue has decreased by approximately 15% compared to the previous year. The annual profit of DKK -18.8 million after tax is considered very dissatisfactory, even in light of the intense revenue and cost pressures throughout the year. Over the course of the financial year, the company has recognised an impairment loss on inventory amounting to DKK 10.2 million. This write-down is primarily due to a significant decrease in the market prices for hides. The impairment reflects a prudent approach to ensure that the company’s financial statements accurately represent the current value of its assets. While the write-down reduces the company’s reported profit and equity for the year, it is not expected to have a material impact on the company's cash flow or its ability to meet future operational and financial obligations. The activity in the Swedish subsidiary, Scan-Hide Sweden AB, has ceased and the company has been sold off for liquidation. Outlook During the financial period 2023/24, the company has entered into new commercial supply agreements, which are expected to help maintain the current raw material base in the coming financial period, or with minor fluctuations. The result for the coming year is expected to be in the range of DKK 11-15 million. Research and development activities The product portfolio is continuously developed and optimized to meet the changing demands, desires, and expectations of customers and the market. The company supports this development by continually allocating the necessary resources and expertise to the task. There have not been, and there is not expected to be, any research activities in the coming period. Special risks The company does not engage in transactions associated with special financial risks. Foreign exchange transactions, naturally related to the business, are conducted to hedge sales in foreign currencies. Foreign currency transactions are primarily in EUR and USD. Interest rate risk is the risk of changes in the market value of assets or liabilities due to changes in interest rates. For Scan-Hide, this risk is mainly associated with the company’s debt, as the company does not have significant long-term interest-bearing assets at the reporting date. No financial instruments are actively utilised to minimise interest rate risk. Environmental conditions The company is subject to the Danish Environmental Protection Act. The latest environmental approval from Svendborg Municipality is dated 11 August 2017. The company continues to invest in a range of environmental improvements as well as safety measures. The company is well-prepared for future competition in global leather production. The company maintains an environmental management system based on the ISO 14001 standard and holds the highest rating in the leather industry (LWG Gold) for environmentally responsible tanning production. The company is both LWG Gold and OEKO-TEX STeP certified. These certifications have been achieved due to the company’s long-standing strategic focus on investing in state-of-the-art technologies and processes, which ensures that the company’s environmental impact in the production of wet blue and wet white is minimal.