Annual Report
2023
Management report Financials
Carte Blanche
Farrow & Ball Ball launched Carte Blanche,
a collaboration with fashion designer Christopher
John Rogers, consisting of 12 new paint shades
and three wallpaper patterns (page 17).
INTRODUCTION 3
Highlights from 2023 4
Key figures 5
Letter to stakeholders 6
THE BIG PICTURE 8
Our value chain 9
Strategy 10
Spotlight on innovation 12
OUR BUSINESS 15
Customer segment overview 16
Decorative 17
Marine 18
Energy 19
Infrastructure 20
Performance review 21
SUSTAINABILITY IN EVERYTHING WE DO 25
Sustainability leadership 26
Environment 28
Social 32
Governance 34
• Tax 38
• Risk management 42
• Whistleblowing, business ethics and data protection 46
STATEMENTS AND ESG 50
Management's statement 51
Executive Group Management 52
Board of Directors 53
Independent auditor's report 55
Independent limited assurance report on ESG data 57
2023 ESG performance 59
ESG data & accounting policies 60
FINANCIAL STATEMENTS 68
Consolidated financial statements 69
Parent company financial statements 113
EUR 2,351 million
Revenue
2023 saw Hempel deliver its best financial results
ever. The results were above expectations in a year
that also brought progress on our ambitious sus-
tainability journey (page 6).
Contents
Hempel Annual Report 2023
Introduction
Letter to
stakeholders
We are steadfastly navigating an
ambitious growth path, aiming to
amplify our positive influence on
customers, colleagues, and society
as a whole.
→ Highlights from 2023
→ Key figures
→ Letter to stakeholders
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 3Statements and ESG
Highlights from 2023
Organic growth
1
(%)
Revenue
(EUR m)
Cash conversion
1
(%)
EBITDA margin, adjusted
1
(%)
2021
2021 2021
2021
5.9
11.8
59
1,744
12.7
11.9
64
2,159
2022
2022 2022
20222023
2023 2023
2023
13.7
14.8 80
2,351
Governance
Total supplier spend screened
(Procurement sustainability screening for our suppli-
ers, based on monetary spend and climate footprint)
(%)
Environment
Scope 1 & 2 reduction from 2019 baseline
(%)
Social
Women in leadership
(%)
90%
2026 target
30%
2024 target
51%
2
2023
28%
2023
44%
2023
70%
2025 target
1 Please see definition on page 111.
2 Excluding company vehicles, we reached a reduction of 64% in Scope 1 & 2.
Amounts in absolute tonnes are shown on page 61.
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroduction 4
Hempel Annual Report 2023
Key figures
(EUR m, unless otherwise stated) 2023 2022 2021
1
2020
1
2019
1
Profit and loss
Revenue 2,351 2,159 1,744 1,541 1,534
EBITDA 337 219 196 176 157
EBITDA, adjusted 349 257 205 185 N/A
Amortisation, depreciation and impairment 148 105 90 77 65
Operating profit 189 114 106 99 92
Financial items, net -107 -58 -17 -28 -13
Profit before tax 82 56 89 71 79
Net profit for continuing operations 61 37 58 N/A N/A
Net profit for the year 50 35 63 50 50
Financial position
Total assets 2,667 2,655 2,466 1,542 1,300
Investment in tangible assets 59 91 113 77 43
Shareholders’ equity 502 519 526 456 443
Net interest-bearing debt 1,075 1,052 907 120 86
Cash flow
Total cash flow from operating activities 127 72 69 191 71
Cash flow from acquisitions / divestments of enterprises 6 -28 -511 0 -2
Cash flow from net investments in property, plant and
equipment and intangible assets
-104 -107 -87 -65 -33
Free cash flow 29 -64 -529 126 51
Dividend distributed 26 33 25 25 30
Working capital
Net working capital (NWC) days 61 72 70 70 67
(EUR m, unless otherwise stated) 2023 2022 2021
1
2020
1
2019
1
Ratios (%)
Organic growth 13.7 12.7 5.9 3.2 2.5
Gross margin 38.9 36.3 37. 8 39.1 39.0
EBITDA margin 14.3 10.1 11.2 11.4 10.2
EBITDA margin, adjusted 14.8 11.9 11.8 12.0 N/A
Operating profit margin 8.0 5.3 6.1 6.4 6.0
Return on invested capital 8.5 5.6 7.5 9.5 9.2
Equity ratio 18.8 19.5 21.3 29.6 34.1
Cash conversion 80 64 59 129 86
Leverage ratio 3.1 4.2 3.7 0.7 N/A
Environment, social and governance (ESG)
Scope 1 & 2 emissions (tonnes CO
2
e) 21,167 19,090 29,710 39,872 43,089
Waste to landfill (tonnes) 934 1,353 1,630 1,666 3,934
Average number of employees (FTEs) 7,40 3 7,3 43 6,746 6,099 6,219
Gender diversity in leadership positions
2
, female/male 28/72 29/71 23/77
3
21/79 N/A
Satisfaction and motivation
4
75 72 73 N/A
5
74
Suppliers screened through Hempel Procurement
Sustainability Screening (% of spend) 44 40 22 N/A N/A
For definitions of financial ratios, see page 112.
1 Comparative figures for 2021 have been restated to
reflect changes in accounting policies and presentation of
discontinued operations, see note 1.1. 2020 has not been
restated and 2019 is presented in accordance with the
Danish Financial Statements Act, as the Group implemented
IFRS on 1 January 2020.
2 Leadership positions with minimum 3 direct reports.
3 Data from Farrow & Ball was not included in 2021.
4 Answers are given on a scale from 1-10 (with 10 being the
highest) and are subsequently converted to index figures on
a scale from 1-100.
5 In 2020, due to COVID-19 and the unusual work
environment, the employee engagement survey was only
conducted among PC users.
Hempel Annual Report 2023
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroduction 5
Letter to stakeholders
from our Chair and CEO
2023 saw Hempel deliver its best financial results ever. The
results were above expectations in a year that also brought
progress on the company’s ambitious sustainability journey.
STRONG PERFORMANCE ACROSS SEGMENTS
Driven by our Double Impact strategy, Hempel is steadfastly navigat-
ing an ambitious growth path, aiming to amplify our positive influence
on customers, colleagues, and society as a whole. This expansion
is facilitated by cutting-edge technologies and compelling brands,
all geared towards fulfilling our customers' demand for increasingly
sustainable solutions. At the heart of this growth expedition lies the
synergy between our highly skilled people and our extensive global
presence.
In 2023, we maintained sharp focus on innovations to develop more
sustainable solutions that meet our customers’ needs, enabling them
to lower their CO
2
footprint while protecting and beautifying their
assets.
Our Decorative segment continued to innovate and inspire with new
ranges, colours, designer collaborations and collections, such as the
new multi-surface, ultra-matt finish, Dead Flat from Farrow & Ball.
Our Marine segment performed strongly, launching new products,
such as Hempablue which reduces fuel consumption and emissions
while providing customers with unique anti-fouling characteris-
tics. Our Energy and Infrastructure segments also performed very
well, supported by both existing and new technologies, such as our
Hempaprime Strength solution for offshore wind turbines.
With our new state-of-the-art Chinese factories in Yantai and Zhang-
jiagang now up and running, we are in a robust position to accelerate
growth in the years to come. All this made for a 2023 that we can be
very proud of.
TURNING AMBITION INTO ACTION WITH SUSTAINABILITY
LEADERSHIP
During 2023, we made significant progress on our ambition to
become the sustainability leader within paints and coatings. In May,
the Carbon Disclosure Project (CDP) recognised our efforts to engage
our supply chain on climate issues, awarding us an A in its 2022
Supplier Engagement Rating. Having our efforts validated externally
is integral to becoming the sustainability leader in our industry within
our core business areas.
Richard Sand
Chair of the Board
of Directors of Hempel A/S
Michael Hansen
Group President &
Chief Executive Officer
of Hempel A/S
Hempel Annual Report 2023
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroduction 6
In September, our CEO, Michael Hansen, joined the Private Sector
Forum, which took place during the United Nations General Assembly.
The forum gave us an opportunity to exchange ideas and collaborate
with other leaders who are equally passionate about shaping a more
sustainable and equitable future.
Our customers and industry partners remain key to our success and
focus within sustainability. We entered into many new partnerships
and collaborations in 2023, including with the Mærsk Mc-Kinney
Møller Center for Zero Carbon Shipping.
BECOMING AN INDUSTRY-WINNING ENTERPRISE
We unveiled our Double Impact strategy in 2020 with the ambitious
goal of doubling both our revenue and positive influence within a five-
year timeframe. The success and efficacy of this strategic framework
have been evident, prompting us to extend its application beyond the
initial 2025 horizon. Continuing the current trajectory, we are confi-
dent that we are firmly on the path to establishing ourselves as an
industry-winning enterprise. This is not just a goal; it is our unwaver-
ing ambition and the focal point of our dedicated efforts.
In 2023, we added a fourth pillar to our strategy called Scalable
Operations. We did so to make sure that we maintain focus on fos-
tering a profitable business that is scalable for future growth. This in
turn will ensure that we can continue to invest in innovation, digital-
isation and our people – the enablers of our strategy. Our ultimate
goal is to increase value creation for the Hempel Foundation, so it
can have an even more positive impact on society through its impor-
tant philanthropic work.
During the year, we welcomed more high calibre leaders to our execu-
tive team: Peter la Cour Gormsen, new CFO and EVP of Finance, and
Ana Henriques, new EVP and Head of Hempel’s Decorative segment.
We also strengthened our focus on digital transformation when René
Overgaard Jensen joined Hempel’s Executive Group Management
(EGM) as Chief Transformation & Information Officer. Together with
the rest of the EGM, they will help us unleash our full potential in the
coming years.
We remain firmly committed to achieving a balanced workforce with
no more than 60% of one gender represented. As women currently
remain underrepresented in our general workforce, we are increasing
our efforts in this area, with focus on both our general workforce and
leadership.
We completed the sale of our assets in Russia in July and were able
to exit the market in a responsible way (see page 22 for further
details). During this process, looking after the safety and wellbeing of
our now former Russian colleagues was paramount to us.
2024 OUTLOOK
In 2024, we expect to see single-digit organic revenue growth and an
EBITDA margin around 15%.
CELEBRATING THE HEMPEL FOUNDATION AND THANK YOU
30 November 2023 marked the Hempel Foundation’s 75
th
anniver-
sary. At Hempel, we take pride in not just working for a company, but
working for a purpose. The anniversary was an opportunity to cele-
brate our collective contributions to the important philanthropic work
undertaken by the Hempel Foundation. We marked the anniversary
internally and externally, sharing our pride with our colleagues, cus-
tomers and partners. We are committed to our growth journey – not
just because it makes good business sense, but because it will max-
imise the positive impact that our company, people and owner can
have together on the world around us.
Finally, we would like to extend thanks to all our Hempel colleagues
for their efforts, enthusiasm and dedication over the year. You remain
the heartbeat of our company. We would also like to thank all our cus-
tomers and other stakeholders for their continued trust and support.
"In 2023, we delivered our best financial result
ever with a total revenue of EUR 2,351m and
an adjusted EBITDA margin of 14.8%."
— Michael Hansen, Group President & CEO
Hempel Annual Report 2023
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroduction 7
The big picture
→ Our value chain
→ Strategy
→ Spotlight on innovation
Innovation
Innovation comes to life in all aspects of
what we do. An innovative mindset keeps
us ahead of our customers - anticipat-
ing their needs and responding to their
challenges.
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 8Statements and ESG
World-leading supplier of trusted, sustainable
and innovative paints and coating solutions.
Produce & scale
We constantly strive for greater
excellence, efficiency and
scalability in our production.
Suppliers
With a mindset to continuously
improve, we engage and work
with our suppliers to shorten
lead times and collaborate on
sustainability.
Brand & sell
We strive to always under-
stand our customers' busi-
ness. We communicate the
value and benefits of our
solutions to give customers
the best possible experience
no matter how or where they
meet us.
Distribution
Our global integrated supply
chain and store network allow
us to deliver products and
solutions to our customers
across the world every day.
Advise & support
Our global team of coating
advisors ensure efficiency
and quality during application.
They help our customers opti-
mise processes to keep their
assets in the agreed condi-
tion, reduce maintenance
costs, cut down on waste and
improve environmental per-
formance. In our stores, we
advise and inspire our private
customers.
Customers first
We solve our customers' chal-
lenges and add value to their
business across the indus-
tries we serve.
• Decorative
• Marine
• Energy
• Infrastructure
Monetary streams
Parts of our profits are re-in-
vested into our company. The
rest is paid as dividends to
the Hempel Foundation to
be invested into biodiversity,
education and science pro-
jects around the world.
Research & develop
We research and develop new
products and adjust existing
solutions to improve perfor-
mance. We partner with cus-
tomers to innovate and test in
the field.
Innovate
Sustainability is at the heart
of our business. And it is a key
driver of our product develop-
ment and innovation across
our 15 R&D centres.
Research, develop & innovate Deliver & supply Re-invest profitsAdd value to customers
Our value chain
Produce
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 9Statements and ESG
Doubling our impact
In 2020, we launched Double Impact, a strategy aiming to deliver
innovative, sustainable solutions that create a significant positive
impact for our customers and society at large. We also strive for a
positive impact for our colleagues, who are not just working for a
company, but truly for a purpose: Shaping a brighter future with sus-
tainable coating solutions. Lastly, our strategy is about the social
impact we want to make through the dividends we pay to our owner,
the Hempel Foundation.
Initially, our strategy had one clear goal: doubling our revenue
within five years. We are well on our way to deliver on this. However,
our strategy encompasses much more than revenue growth and
increased dividends.
Double Impact has proved very robust and effective, and in 2023, we
decided to let the principles of our strategy guide us beyond 2025.
We will naturally refine and adjust as we move forward to ensure our
course remains aligned with the changing external landscape around
us. This will allow us to consistently achieve our intended impact.
INCREASING VALUE CREATION AND IMPACT
In 2023, we added ‘Scalable Operations’ as a pillar in our strategy
to drive a more harmonised global setup, enabling smarter use of
resources across functions and segments. The aim is for us to gener-
ate higher sales, without seeing an equal increase in costs, through
more effective and efficient ways of working together.
The four strategic pillars in Double Impact now are: Segment Leader-
ship, Sustainability Leader, Trusted Partner and Scalable Operations.
See the next page for 2023 highlights for each of the four pillars.
We also added three strategic enablers to guide execution of our
strategy and give us greater impact in the market as we move for-
ward: Innovation, Digitalisation and People.
Innovation is what sets us apart from the competition. Our innova-
tive and sustainable solutions are a key driver, enabling us to be a
sustainability leader in our segments.
Digitalisation, enabled by strong data, will be the key to success in
our quest to standardise key processes to build scale. Digitalisation
will further differentiate our customer offerings. We build long-term
partnerships with our key customers because we deliver best-in-
class innovation and superior technology.
We emphasise the importance of our people in the updated Double
Impact strategy, and we aim for each and every one of our colleagues
to find their work engaging and meaningful. Hempel colleagues
should feel empowered and guided by a strong purpose, in which
we deliver value for our owner, the Hempel Foundation, by counting
Hempel among the best performers in our industry.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 10Statements and ESG
SEGMENT LEADERSHIP
•
We continued to build customer segment leadership
positions in 2023. One example is the launch of our
innovative and sustainable solution Hempablue, a new
biocide-free hull coating for the world merchant fleet
(see page 18).
•
We revitalised our product offering in our luxury Dec-
orative brand, Farrow & Ball, with the launch of new
finishes and collections (see page 17).
•
We expanded our leadership position within the mar-
ket for cellulosic passive fire protection (C-PFP), where
our Hempafire product portfolio continues to perform
strongly (see page 20).
TRUSTED PARTNER
•
Thanks to an organisational structure implemented in
2022, today we work and organise around our custom-
ers. In 2023, this allowed us to get even closer to cus-
tomers across the industries we serve, and to embrace
their full eco-system when we engage with them. We
continued to differentiate our offerings by moving
beyond selling coatings to selling differentiated solu-
tions that solve our customers’ business challenges.
•
In our bi-annual Customer Engagement Survey, we were
happy to see that our customers rated Hempel as ‘High’
in terms of sustainability, an increase compared to the
last survey in 2021. Likewise, customers continued to
rate Hempel as ‘Excellent’, the highest score possible
in the survey, when it comes to trust.
SCALABLE OPERATIONS
•
We continuously optimise how we work with our cus-
tomers across segments. We acknowledge the value of
a scalable organisation in supporting our customers in
the most efficient way now and in the future. In 2023,
we formed a new Customer Care department serving
customers across our Marine, Energy and Infrastruc-
ture segments. With this change, we promote scala-
bility and synergies in our three performance coatings
customer segments: Marine, Energy and Infrastructure.
•
Our new state-of-the-art factories in Yantai and Zhang-
jiagang in China are now fully operational. This provides
us with the capacity to meet increasing demand in the
region and allows us to better serve our customers in
the Marine, Energy and Infrastructure sectors. With
the majority of the world’s marine newbuild business
located in China, and over 50% of Chinese shipyards
located in a 200km radius around Zhang jiagang, anti-
fouling coatings are in high demand. This new location
will significantly improve our ‘time to market’ of both
products and services, especially at the shipyards
along the Yangtze River.
•
We announced our plans to form a Digital Hub in Mum-
bai, where a team of specialists will focus on develop-
ment and configuration of our ERP platforms, automa-
tion, IT infrastructure and architecture.
SUSTAINABILITY LEADER
•
We are turning our ambitions within sustainability into
actions and our efforts are increasingly recognised
and validated by our customers and partners. Our work
to engage our supply chain on climate-related issues
received an A score in the Carbon Disclosure Project’s
Supplier Engagement Rating (see page 49).
•
Our Sustainable Procurement Programme created vis-
ibility on sustainability within the supply chain, while
linking sustainable performance to our commercial
evaluation of suppliers (see page 48).
2023 strategic
milestones
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 11Statements and ESG
Spotlight on
innovation
Segments served
Decorative
Marine
Energy and Infrastructure
R&D centres innovating new solu-
tions with world-class capabilities
and scientists.
+330 15
R&D employees as of 31 December
2023 in a network of 15 locations
around the world to ensure close
proximity to our customers.
We innovate for and with our customers.
Our R&D centres are located across the world,
driving innovation in new products and solutions.
Dallas
Darwen Copenhagen
Busan
Zhangjiagang
Kampen
Dorset
Coesfeld
Merzig
Barcelona
Mina Salma
Kilburn
Nashik
Guangzhou
Footscray
Research & Development Development & Support
Product and Business
Technical Support
Coesfeld Darwen Busan Merzig Zhangjiagang Footscray
Copenhagen Guangzhou Dorset Mina Salma Kilburn
Dallas Barcelona Kampen Nashik
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 12Statements and ESG
Innovation — a vital enabler
for executing our strategy
ACCELERATING THE ENERGY TRANSITION
The urgency of climate action has increased focus on innovation, par-
ticularly around optimising processes, reducing use of raw materials
and enabling our customers to reduce their environmental footprint.
In the wind power industry, for example, we are working in partner-
ship with key industry players to enhance wind turbine blade
durability, reduce maintenance expenses, and extend blade lifespan.
When it comes to wind turbine blades, the leading edge presents a
unique protection challenge. In this respect, our membership of the
DURALEDGE Consortium, which we joined when it launched in 2018,
has proven extremely important. New insights from the DURALEDGE
Consortium supported the development of our advanced leading
edge protection (LEP) solution and has contributed to a better, indus-
try-wide understanding of the leading edge erosion challenges, pav-
ing the way for future solutions.
WHAT YOU MEASURE, YOU CAN MANAGE
As part of delivering on Sustainability Leadership, we have performed
a structured assessment of the environmental impacts of our prod-
uct portfolio across the entire value chain, including data from raw
materials suppliers. Gathering this data has been a complex process,
involving collecting and analysing carbon information (for example, on
the embodied and downstream CO
2
of each product), as well as infor-
mation on circularity and the footprint of the application process.
In 2023, we applied this information in our Product Sustainability
Scorecards, which enable our customers to make better, more sus-
tainable choices on which coating solutions to choose. In many mar-
kets – the Marine, Energy and Infrastructure industries in particular
– a more sustainable option is often also a more financially sound
choice, which makes our Product Sustainability Scorecards valuable
from both a financial and a sustainability point of view.
The scorecards are the result of extensive work and innovative col-
laboration with customers. As well as providing our customers with
data on the sustainability impacts and benefits of our solutions, they
also give us insight to drive our future product portfolio towards more
sustainable products.
Innovation comes to life in all aspects of what we do – in how we develop
new paints and coatings, in our services, our business models and our new
strategic initiatives. An innovative mindset keeps us one step ahead of our
customers – anticipating their needs and responding to their challenges.
Innovating new technologies
and business models
At Hempel, our innovation ambitions stretch far beyond liquid
in the can. We want to transform how paints and coatings are
made, packaged, sold and applied in order to increase impact
and value, for both our customers and our planet. This happens
in many ways – for example, developing coatings that deliver
higher quality protection while using less raw material, recycling
and reusing coating materials to create new coatings or other
products, and developing technologies that reduce the carbon
footprint of coating application.
We do this by fostering an innovative culture where our people
and our partners think differently. Where we are encouraged to
re-write the status quo and change the industry and the planet
for the better. One example is PaintGreen, a dedicated
innovation programme within our Decorative customer segment,
focused on sustainability in product innovation.
Innovation also includes how we innovate in the digital space. We
develop digital solutions that address customer needs and give
us the capability to act as a strategic advisor in order to foster
closer partnerships. For example, SHAPE (Systems for Hull And
Propeller Efficiency), is our fully integrated maintenance concept
for customers in Marine, which gives a holistic view on biofouling
on the ship hull from multiple data sources, and allows the cus-
tomer to lower fuel consumption and emissions.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 13Statements and ESG
ARTIFICIAL INTELLIGENCE SPEEDS UP CUSTOMER FEEDBACK
The use of generative Artificial Intelligence (AI) is accelerating in all
areas of work and life. At Hempel, generative AI is, for example, being
applied to the retrieval of technical information and documentation.
Hempawise is our own generative AI solution, which is based on
OpenAI’s language model. In 2023, we loaded Hempawise with tech-
nical documentation. Working with Hempawise, our business tech-
nical experts in R&D receive feedback in a dialogue format – includ-
ing links to relevant documents – which significantly reduces the
response time in relation to the approximately 6,000 enquiries they
receive annually.
CLOSER PARTNERSHIPS BOOST SUSTAINABLE INNOVATION
The urgent demand for more sustainable coating solutions calls for
even closer collaboration across Hempel’s value chain, and with uni-
versities, to speed up early research and testing of new solutions. No
one entity can respond to market demands at the pace needed by
our customers. Therefore, we accelerate innovation through closer
partnerships that leverage each partner’s diverse competencies,
both within and beyond the industry.
Over the years, Hempel has sponsored several PhDs at DTU's Coatings
Science and Technology Centre (CoaST). These have typically used
deep exploration to understand the mechanism of performance in
Hempel’s industry-leading technology, for example in fouling defence
and passive fire protection. In 2023, we began a collaboration with
CoaST on our waterborne technology roadmap, triggering two work-
streams: "Improving the adhesion performance of waterborne primers"
and "Improving the film formation of waterborne coating systems".
"We're tapping into the power
of AI with care — seeking
opportunities to reduce our
environmental footprint and
enhance customer service.
It's about innovating wisely
with a clear purpose in mind.”
— Emilie Lundblad, Head of AI and Automation
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 14Statements and ESG
Our business
→ Customer segment overview
→ Decorative
→ Marine
→ Energy
→ Infrastructure
→ Performance review
12
New colours and three wallpapers
were created this year in a collaboration
between Farrow & Ball and Christopher
John Rogers.
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 15Statements and ESG
The Decorative customer segment delivered 4.0% organic
growth, landing at EUR 792 million revenue in 2023.
Rising living costs, inflation, and interest rates posed chal-
lenges across Decorative paint sectors and geographies,
but we successfully achieved revenue growth in nearly all
our brands. This was supported by the positive impact of
price increases implemented following the raw material
price increases in early 2022.
The Infrastructure customer segment grew 9.6% organi-
cally, ending the year at EUR 470 million revenue in 2023.
During 2023, geopolitical and economic instability contin-
ued and the investment climate in parts of our global busi-
ness continued to be low.
Our global structure continues to support the winning of
projects as we are present in every step of our customers’
value chain, and we therefore continued to expand sales in
the Infrastructure customer segment. We did this by main-
taining clear focus on solutions that help both new and
Customer segment overview
The Energy customer segment grew 18.6% organically,
ending the year at EUR 364 million revenue in 2023.
Global energy companies continue to ratify their commit-
ment to the energy transition, as they increasingly adhere
to ESG principles and work to minimise their environmental
footprint.
We continued to benefit from the trust earned with our
partners throughout the different sub-segments and
geographies.
The Marine customer segment delivered 26.2% organic
growth, landing at EUR 725 million revenue in 2023.
We realised growth in all main sub-segments. The main
growth driver in 2023 was the New Build business, where
we achieved significant gains due to strong global commer-
cial collaboration, our global presence and a favourable
market development. This allowed us to serve our custom-
ers' full eco-system. In addition, the strong growth also
reflected our customers’ need for solutions that improve
18.6%
9.6%
4.0%
26.2%
Organic growth Organic growth
Organic growth Organic growth
364
470
792
725
Revenue in EUR m Revenue in EUR m
Revenue in EUR m Revenue in EUR m
the energy efficiency of their vessels, such as our premium
antifouling hull coating Hempaguard, which helps custom-
ers to decarbonise and save on fuel costs.
Silicone hull coatings continued to attract new custom-
ers searching for ways to decrease fuel consumption and
reduce their environmental impact. The market for silicone
coatings is a low-volume business compared to older
solutions.
Despite a declining market in 2023 and the ongoing chal-
lenges in Do-It-Yourself since Covid-19, our team navigated
the context with resilience.
The Middle East business delivered strong double-digit
growth, the UK businesses gained market share and the
business in Australia showed positive momentum.
A continued focus on specification work, high-value solu-
tions and close customer relationships enabled us to
continue our strong growth during 2023. We returned to a
strong double-digit growth rate across geographies,
measured in both revenue and volume.
We have benefitted from the annualisation of price
increases introduced in 2022. We also experienced strong
performance in premium solutions, such as Avantguard
and hydrocarbon passive fire protection (H-PFP).
existing customers improve within sustainability, increase
safety and lower their costs.
A clear focus on our key technologies, such as Avantguard,
Hempafire and cellulosic passive fire protection (C-PFP),
helped us return to solid double-digit growth within key
markets.
In 2023, we also benefitted from the annualisation of price
increases introduced in 2022.
DECORATIVE
INFRASTRUCTUREENERGY
MARINE
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 16Statements and ESG
The power
of colour
Decorative
Our Decorative brands inspire consumers through a range of
high-quality, colourful and easy-to-use solutions and services. We
provide a complete portfolio of paints and wallpapers for Do-It-Your-
self consumers, retailers and professional painters. Our solutions
include premium brands for the home, coating solutions for commer-
cial buildings and private label products for retailers.
In 2023, we saw a return to Do-It-For-Me after a strong Do-It-Yourself
trend during the pandemic. Demand increased for more sustainable
solutions for both interior and exterior use.
We opened new stores and developed stronger partnerships with
large retailers in 2023, and we added approximately 50 new third-
party outlets in the Middle East.
Inspiration, quality and sustainability remain central to our work.
Across the Decorative segment, we introduced new colours and wall-
papers, enhanced our digital marketing and store designs, and con-
tinued to improve sustainability within our range – all in close
collaboration with customers.
Product innovations
• Farrow & Ball launched a new unique finish – called Dead Flat –
which boasts a sheen of just 2% and is easy to clean. Like all Farrow
& Ball products, the Dead Flat finish is water-based.
• Farrow & Ball launched Carte Blanche, a collaboration with fashion
designer Christopher John Rogers, consisting of 12 new paint shades
and three wallpaper patterns.
• J.W. Ostendorf developed a floor & roof paint concept under the
product brand Renaulac that is characterised by its project-oriented
product range and was launched at one of the most important DIY
retailers in Europe.
• Wattyl won a significant partnership in the Interior Category with new
DIY product lines, including a Kitchen & Bathroom range and a high
opacity paint. This strengthens the Wattyl brand as a powerful whole-
of-house solution.
• Hempel Middle East successfully launched a new cement filler and
exterior textured paint named Casa Moderno. Both products are
water-based and exceeded sales expectations.
• Crown Paints reinvigorated its core range, packaging and in-store
presence.
Sustainability highlights
• We reached 1.4 million paint cans collected and recycled through our
Can Back Scheme in the UK and Ireland. We are participating in simi-
lar recycling schemes in Australia, New Zealand and France.
• We want to be at the forefront of packaging sustainability. Our goal is
to use an average of 50% recycled content in our plastic cans in
Decorative by 2025. By the end of 2023, we reached 49%.
• Working in collaboration with customers, J.W. Ostendorf expanded its
bio-based and biocide-free product ranges.
1.4 million
Cans returned in 2023 through
our Can Back Scheme in the UK
and Ireland.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 17Statements and ESG
Working with
the industry to
lower emissions
Marine
As a trusted advisor to the maritime industry, we combine world-class
coatings and services to help customers protect their assets, lower
operating costs and reduce carbon emissions. We launched a num-
ber of new innovations in 2023 to improve both flexibility and perfor-
mance for our customers. Hempablue, for example, is a groundbreak-
ing biocide-free product that enables more efficient hull performance.
We continued to strengthen our digital services, and developed a
new platform for SHAPE (Systems for Hull And Propeller Efficiency),
our fully integrated maintenance concept. SHAPE combines perfor-
mance data, automatic identification system, environmental data,
and visual data into a holistic biofouling monitoring of the custom-
er’s fleet. We also began developing live customer login functionality
and AI-enhanced proactive recommended actions, to build stronger
trusted partnerships aimed at lowering both fuel consumption and
emissions. In addition, we launched our Sea Stock Alert system,
which simplifies the ordering process for customers and is used by
more than 300 vessels worldwide.
At the same time, we continued to support our customers' decarbon-
isation journey by collaborating with different stakeholders as part-
ners in pursuit of the accelerated decarbonisation of the maritime
industry. For example, we became a member of the network of Mis-
sion Ambassadors to the Mærsk Mc-Kinney Møller Center for Zero
Carbon Shipping to drive this work further and broaden our impact.
Product innovations
• Our groundbreaking Hempablue hull coating solution delivers
significant antifouling performance without biocides.
• We launched the Flex hull coating system, which gives customers
greater flexibility during application – extending the application
window.
• Our new state-of-the-art Ultraclean cargo hold coating gives dry bulk
operators greater operational flexibility by reducing their turnaround
time for cleaning, and improving their ability to change cargoes
frequently.
Sustainability highlights
• We continue to provide market-leading hull performance solutions –
with our Hempaguard brand and SHAPE – that enable our customers
to reduce fuel consumption and emissions. High performance hull
coatings, such as our Hempaguard solutions, are an extremely effi-
cient way to improve the energy efficiency of a vessel, contributing to
the decarbonisation of the maritime industry. In 2023 alone, our high
performance hull coatings helped customers in the maritime industry
reduce their CO
2
e emissions by 6.5 million tonnes (see page 67 for
definition). This is an improvement of 16% compared to 2022 (5.6
million tonnes).
• In 2023, we joined the International Maritime Organization’s Global
Industry Alliance for Marine Biosafety to provide best practice guid-
ance on biofouling reduction to governments and NGOs.
6.5 million
Tonnes CO
2
e saved for our customers
in the maritime industry in 2023.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 18Statements and ESG
Energy
Supporting our
customers in the
energy transition
2023 was another challenging year due to geopolitical and economic
instability. Despite this, revenue and volume growth remained stable
in our energy customer segment.
Hempel has a strong position in downstream oil & gas and an emerg-
ing presence in chemical plants. In the renewables sector, we hold a
leadership position in the wind tower industry, built on trusted part-
nerships with OEMs.
Onshore technology continues to dominate the wind market, but off-
shore is growing. At the same time, investments in natural gas and
liquified natural gas projects are increasing, as is the use of robotics
and other automated solutions, which are seen as key tools to opti-
mise construction, maintenance and inspection of energy assets in
the future.
We saw strong revenue and volume growth in linings and solutions
for corrosion under insulation and high heat, consolidating our strong
position in the downstream anti-corrosion market.
We continue to offer solutions that extend the lifetime of energy
assets and provide sustainability benefits to customers, such as our
award-winning Avantguard solutions. In addition, we offer key new
technologies, wind blade coatings for the protection of wind blades
and hydrocarbon passive fire protection (H-PFP).
Product innovations
• We launched the Hempablade solution. The system consists of an
overall blade coating and a robust leading edge protection (LEP) coat-
ing. It is designed to support production efficiency, and all coatings
fully comply with the highest technical industry requirements.
• We launched Hempaprime Strength 530, a heavy-duty coating for
aggressive corrosive environments, such as splash zones, that pro-
longs the lifetime of offshore wind structures.
• We secured key wins for Hempatop Repel 800, an advanced water-re-
pellent coating that extends the lifetime of offshore assets by reduc-
ing the cost and frequency of maintenance cycles.
Sustainability highlights
• We launched Hempablade - a full system solution developed espe-
cially to protect wind turbine blades against ever increasing blade-tip
speeds and challenging site conditions, such as erosion caused by
rain. Hempablade uses less material and takes less time to apply.
From putty to filler, and from topcoat to final LEP coating, all applica-
tion stages are optimised to provide excellent performance with fewer
process steps and manhours, and less coating consumption.
75% less waste
Our Hempablade solution delivers a reduction
in application waste as well as 30% less
manpower costs.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 19Statements and ESG
Infrastructure
New take on
structures and
equipment
From stadiums and airports to other public buildings and structures,
our solutions are used across the infrastructure sector to protect
assets from corrosion, abrasion, extreme temperatures, harsh
weather and fire. All our Infrastructure solutions are designed to
improve sustainability performance by extending asset lifetime and
reducing maintenance requirements.
2023 was a challenging year within the construction and infrastruc-
ture business due to global geopolitical and economic instability.
While growth in infrastructure investments remained relatively stable,
many projects were delayed or indefinitely postponed.
We performed well despite these conditions, extending our sales
footprint due to our key leadership positions in several areas, includ-
ing cellulosic passive fire protection (C-PFP), where our Hempafire
product portfolio continues to perform strongly.
Sustainability is increasingly becoming a qualifier for customer pro-
jects. We offer a full range of solutions to help customers reach their
sustainability targets. Our Avantguard anti-corrosion solutions, for
example, require less paint than other solutions, yet provide the
same amount of protection, which reduces costs and carbon foot-
print during application. In addition, we provide many low carbon foot-
print solutions to support green building schemes.
Product innovations
• We launched HEET Dynamic (Hempel Estimation and Engineering
Technology), a software solution that enables fabricators to perform
PFP estimations quickly, easily, and accurately. With an intelligent
BIM (Building Information Modeling) plug-in, HEET Dynamic enables
advanced users to automate estimations and incorporate the data
into 3D models and objects at a 10 times faster pace.
• We began piloting CraneCare, a new service solution that helps
port equipment owners and operators identify critical maintenance
requirements, suggesting maintenance schemes with long-lasting
coating solutions that optimise costs and protect assets more sus-
tainably.
• We launched Hempatop Direct 420 for freight railcar exteriors – a
market where sustainability is a must. The Hempatop Direct 420
waterborne acrylic coating is easily applied direct-to-metal in one
coat, and ensures high durability, flexibility and a long-lasting
appearance.
Sustainability highlights
• We introduced carbon footprint information on our product data
sheets for our core Energy, Infrastructure and Marine products,
enabling customers to choose products with the lowest carbon foot-
print for a given project. The carbon footprint includes raw materials,
in-bound transport to the Hempel factory, the manufacturing pro-
cesses, and any volatile organic compounds (VOCs) emitted during or
after product application.
100%
Up to 100% estimation accuracy
with our HEET Dynamic software
automatic volume calculations.
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 20Statements and ESG
2,351
2,159
1,744
1,541 1,534
2.53.2
5.9
12.7
13.7
2021 2020 201920222023
Revenue and earnings
REVENUE AND ORGANIC GROWTH
Total revenue in 2023 reached EUR 2,351 million.
Organic growth in constant currencies amounted
to 13.7%, and annualisation of business acquired
in 2022 contributed to 0.4%.
Despite geopolitical and macro-economic unrest,
our optimistic expectations for mid-to-high single-
digit organic revenue growth, as outlined in the
2022 outlook, were surpassed. Total revenue
growth was driven by volume expansion and the
full-year impact of price increases.
Growth was driven by double-digit growth in our
Marine and Energy customer segments.
Our Decorative customer segment delivered 4.0%
organic growth, ending the year at EUR 792 million
revenue in 2023. The main driver of growth was
the positive impact of price increases taken in
2022 following raw material price developments.
Revenue and organic growth
Revenue (EUR m) Organic growth (%)
in 2023
in 2022
38.9%
36.3%
SALES, DISTRIBUTION AND ADMINISTRATIVE COSTS
Sales, distribution and administrative costs
amounted to EUR 726 million in 2023, EUR 53
million higher than 2022.
The operating expenses to revenue ratio was 31%,
0.3 percentage points lower than 2022.
The increase in operating expenses was driven by
investments to support growth, increased manning
to support higher volumes in the supply chain,
and technical service, as well as inflation, which
impacted merit and operation costs.
Additionally, we invested in capabilities to support
and drive digitalisation.
673726
EUR m in 2022 EUR m in 2023
Our Marine customer segment drove the strongest
organic growth of 26.2%, landing at EUR 725 million
revenue in 2023. Growth was driven by increased
volumes in New Build business solutions and our
premium antifouling hull coating Hempaguard.
Our Energy customer segment grew 18.6% organically,
landing at EUR 364 million revenue in 2023. The expan-
sion of our customer base and the strong performance
of our Avantguard solutions contributed to this growth.
Our Infrastructure customer segment reported 9.6%
organic growth, ending the year at EUR 470 million
revenue in 2023. The result was strong consid-
ering the challenging geopolitical and economic
instability causing delays in projects. Hempafire and
Avantguard were among the main drivers of growth.
725
364
470
792
4.0
9.6
18.6
26.2
InfrastructureDecorative EnergyMarine
Revenue and organic growth by segment
Revenue (EUR m) Organic growth (%)
GROSS PROFIT AND MARGIN
Gross profit increased by 16.7% in 2023, up from
EUR 784 million in 2022 to EUR 915 million in
2023. The gross profit margin increased from
36.3% in 2022 to 38.9% in 2023.
The positive impact on gross profit and margin is
attributed to higher volumes, increased demand
for high value proposition products, increased
sales prices, and a decline in raw material costs.
Performance review
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 21Statements and ESG
58m
107m
2023 2022
33.9%
25.4%
2023 2022
337
219
196
176
157
10.2
11.411.2
10.1
14.3
2021 2020 201920222023
FINANCIAL ITEMS AND FOREIGN EXCHANGE
Financial items, net amounted to EUR 107 million
(EUR 58 million in 2022). The increase was driven
by net foreign exchange losses and increasing
interest costs.
The loss on foreign exchange was heavily impacted
by currency devaluation in Argentina and partially
offset by financial income.
Increasing interest rates, coupled with a sta-
ble and unchanged debt position, explains the
increase in interest costs and bank charges.
Net financial expenses
(EUR m)
Effective tax rate
(%)
TAX AND NET PROFIT
Tax on profit of continued business in 2023
amounted to EUR 21 million, resulting in an effec-
tive tax rate of 25.4%, down from 33.9% in 2022.
The effective tax rate adjusted for hyperinflation
was 23.6% and was reduced from 26.8% in 2022.
This was due to a lower weighted tax rate for the
group and a reduction of uncertain tax positions.
Net profit for the year from continued business
amounted to EUR 61 million (EUR 37 million in
2022).
DISCONTINUED OPERATIONS
As a result of the Russian invasion of Ukraine,
Hempel decided to leave Russia and ceased oper-
ations in Russia in 2022. The associated oper-
ations, assets and liabilities were consequently
presented as discontinued operations and assets
and liabilities held for sale.
On 13 July 2023, the divestment of Hempel's
activities in Russia was completed.
The total impact on the profit and loss statement
in 2023 amounted to a loss of EUR 11 million
(EUR 2 million in 2022), mainly driven by the
reclassification of accumulated foreign exchange
differences.
EBITDA AND EBITDA MARGIN
EBITDA from continuing business amounted to
EUR 337 million in 2023, an increase of EUR 118
million from 2022. The improved EBITDA was the
result of flowthrough from the improvement in
gross profit. The result was well above our outlook
of an EBITDA of EUR 260-290 million for 2023.
The EBITDA margin increased by 4.2 percentage
points, from 10.1% in 2022 to 14.3%, in line with
the expectation of growing the EBITDA margin in
2023.
EBITDA and EBITDA margin
EBITDA (EUR m) EBITDA margin (% of revenue)
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 22Statements and ESG
Financial position and related key figures
TOTAL ASSETS
Total assets increased from EUR 2,655 million
at 31 December 2022 to EUR 2,667 million at
31 December 2023.
Non-current assets amounted to EUR 1,514 mil-
lion in 2023, a decrease of EUR 30 million from
2022. The decrease is partly attributed to asset
impairments.
Current assets amounted to EUR 1,153 million in
2023, an increase of EUR 42 million from 2022.
The increase is attributed to a higher cash pos-
tion, income tax receivables, and an increase in
trade receivables driven by revenue growth.
EUR m in 2023
EUR m in 2022
2,667
2,655
RETURN ON INVESTED CAPITAL
Return on invested capital amounted to 8.5% in
2023, up from 5.6% in 2022. A significantly higher
operating profit, linked to an improved gross
profit, drove the positive development in return on
invested capital.
Average invested capital increased in 2023 follow-
ing investments in the expansion of our production
capabilities in China.
NET WORKING CAPITAL
The trade receivables balance amounted to EUR
505 million in December 2023, up by EUR 29 mil-
lion from 2022. The increase in trade receivables
followed revenue growth.
The inventory balance amounted to EUR 332 mil-
lion in 2023, down by EUR 11 million from 2022.
The result followed an improved sales and opera-
tions planning process and decreasing raw mate-
rial prices.
Trade payables amounted to EUR 332 million in
2023, down by EUR 23 million from 2022. The
result followed a decline in raw material prices and
year-over-year timing of payments.
NET INTEREST-BEARING DEBT AND LEVERAGE RATIO
Net interest-bearing debt at 31 December 2023
amounted to EUR 1,075 million, an increase of
EUR 23 million from 31 December 2022.
The leverage ratio improved to 3.1x in December
2023, down from 4.2x in December 2022.
The deleveraging of our financial posi-
tion was a key success criteria for the year, fol-
lowing the acquisitions made in 2021. This pos-
itive shift is primarily attributed to the enhanced
profitability of our underlying business. The net
interest-bearing debt was adversely affected
by increased net working capital, resulting from
higher growth in 2023.
Return on invested capital
(%)
Net working capital
(% of revenue)
NIBD and leverage
NIBD (EUR m) Leverage (NIBD / EBITDA)
8.5
5.6
7.5
9.5
9.2
2021 2020 201920222023
1,075
1,052
907
120
86
3.1
4.2
3.7
0.7
0
2021 2020 201920222023
Inventories Accounts receivable
Accounts payables
Performance review
2021 2020 201920222023
30
20
10
0
-10
-20
-30
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 23Statements and ESG
2021 2020 201920222023 2021 2020 201920222023
127
72
69
191
71
2021 2020 201920222023
29
-64
-529
126
51
-104
-107
-87
-65
-33
2
4
55
4
Cash flow
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities amounted to
EUR 127 million in 2023, up from EUR 72 million
in 2022.
The higher cash flow from operating activities was
mainly driven by the positive development in the
operating profit.
The positive development offset the slight nega-
tive development of cash flow from working capital
of EUR 87 million, which was driven by increased
receivables coming from higher revenues. It also
offset the higher absolute tax and interest paid, in
total up by EUR 69 million in 2023.
Cash flow from operating activities
(EUR m)
Cash flow from net investments in property,
plant and equipment and intangible assets
(EURm) (EURm, % of revenue)
Free cash flow
(EUR m)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash outflows from investing activities, including
cash flows from acquisitions and divestments,
amounted to EUR 98 million in 2023, down from
EUR 136 million in 2022.
Investments in 2023 mainly related to comple-
tion of factories in China and in digitalisation. The
investment in factories in China will allow us to
materially increase our capacity from 2024. Dig-
italisation includes investments in ERP systems.
These are key to delivering on our strategy, Double
Impact.
Net cash flows from divestments and acquisitions
amounted to EUR 6 million.
Capital expenditure accounted for 4% of revenue,
down from 5% in 2022.
FREE CASH FLOW
Free cash flow amounted to EUR 29 million in
2023, up from negative EUR 64 million in 2022.
The increase was mainly a result of improved
cash flows from operating activities. The result
was driven by a positive development in volume
and product mix, supported by the annualisation
of price increases implemented in 2022 following
raw material price increases.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities totalled EUR
12 million and included a dividend payment of
EUR 26 million. Net proceeds from borrowings
amounted to EUR 83 million and repayment of
lease liabilities amounted to EUR 38 million.
Performance review
Hempel Annual Report 2023
Financial statementsSustainability in everythingOur businessThe big pictureIntroduction 24Statements and ESG
Sustainability in
everything we do
→ Sustainability leadership
→ Environment
→ Social
→ Governance
→ Tax
→ Risk management
→ Whistleblowing, business ethics and data protection
'A' score
We received an 'A' score in Carbon
Disclosure Project's Supplier Engage-
ment Rating.
25Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Futureproof
Our sustainability framework
Sustainability
leadership
WHAT SUSTAINABILITY LEADERSHIP MEANS TO US
At Hempel, sustainability leadership means being frontrunners within
the coatings industry; working with material topics such as climate,
biodiversity, resource depletion and diversity. By making clear com-
mitments and setting relevant targets, we can turn ambition into
action.
‘Action’ is critical for us. ‘Turning our ambitions into action’ has
required us to continuously seek new knowledge around sustainabil-
ity. Our sustainability framework, Futureproof, has been instrumen-
tal in driving our work. Over the last two years, we have built on our
Futureproof framework, deep diving into our material topics to create
a baseline that aligns with the EU Corporate Sustainability Reporting
Directive (CSRD) implementation. As a decisive step, we have chosen
to structure this Annual Report around the essential components of
Environment, Social and Governance (ESG).
UNDER ENVIRONMENT WE FOCUS ON:
• Scope 1, 2 & 3 CO
2
e emissions
• Product and packaging goals
• Waste and circularity
UNDER SOCIAL WE FOCUS ON:
•
P
eople sustainability
•
D
iversity, Equity & Inclusion
•
L
earning and development
•
H
ealth and safety
•
M
aterials harzardous to people and the environment
UNDER GOVERNANCE WE FOCUS ON:
• Corporate governance
• Tax
• Risk management
• Compliance
• Procurement Sustainability Screening
We commit to our science-based targets and have linked our credit
facilities to four ESG targets. This has intensified focus on these
topics.
THE FOUR ESG TARGETS LINKED TO OUR CREDIT FACILITIES ARE:
•
R
educe Scope 1 and 2 CO
2
e emissions
• Suppliers screened
• Reduce waste to landfill at production sites
• Reduce and phase-out hazardous raw materials
The annual savings in interest and fees that we will gain by meeting
our ESG targets total approximately EUR 500,000.
Hempel Annual Report 2023
26Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
To maintain a position of sustainability leadership in the future, and
to prepare for the European Sustainability Reporting Standards
(ESRS), we will focus on the ESG issues that are most material to our
business. Our approach is based on double materiality assessments,
which enable us to define, act and report on issues where Hempel
has a significant impact on the environment and society, as well as
issues that pose significant risks or opportunities for our business.
We connect our material issues to our Futureproof framework pillars
(see table on the right).
In 2022, we conducted our first materiality assessment to ensure
our efforts are geared towards the most relevant and key areas, spe-
cific to Hempel. The assessment confirmed that the Climate Crisis,
Resource Depletion, Biodiversity Crisis and Health & Wellbeing are
the most important material issues for us to focus on.
As our ESG efforts and reporting processes mature, we expect the
quality of our disclosures around these issues to improve further.
This will bring us in line with the future reporting requirements speci-
fied in the CSRD. Our materiality assessment serves as the basis for
preparation for CSRD, which mandates a structured approach to ESG
governance and a systematic process to engage with ESG subject
matter experts. During 2023, we established processes for this, with
the aim of improving ESG data quality and creating robust internal
controls for reporting.
Linking material
issues to
Futureproof
Futureproof pillars Hempel sustainability targets Climate Crisis Resource Depletion Biodiversity Crisis Health & Wellbeing
PERFORMANCE
90% reduction of Scope 1 & 2 CO
2
e
emissions by 2026
Achieve zero waste to landfill at our
production sites by end of 2025
PRODUCTS
Reduce CO
2
e emissions in our value
chain by 50% by 2030 (Scope 3)
Complete a five-year plan to reduce
and phase out hazardous materials
Achieve 50% recycled plastic in primary
plastic packaging by end of 2025
PEOPLE
Build an even stronger safety culture
and eliminate all Lost Time Accidents
and other injuries
Achieve the targets of 33% women in
general workforce and 30% women in
leadership by 2024
PARTNERS
Reduce customer emissions by at least
30 million tonnes CO
2
e by 2025
1.3 million cans collected and
recycled through the Can Back
Scheme
Promote and further good ethical
behaviour and environmental
practices in our supply chain
27Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
S
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p
p
l
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2
Environment
Hempel Annual Report 2023
28Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
29Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
29
50%
recycled plastic in packaging
of Decorative products
Environment
Hempel Annual Report 2023
30Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Environment
Hempel Annual Report 2023
31Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Social
60%
40%
Our long-term goal is to have no more
than 60% of one gender represented.
Hempel Annual Report 2023
32Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
33Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Corporate governance
GOVERNANCE STRUCTURE
Our organisational management structure is centred around our Dec-
orative, Marine, Energy & Infrastructure customer segments,
as well as Technology & Operations, our integrated global supply
chain and R&D, as illustrated in the figure on the right. This structure
ensures that our teams can provide the best possible service to our
customers, both globally and locally. At the same time, our global sup-
port functions and Digital, Strategy & Transformation enable manage-
ment to drive group-wide initiatives and help speed up decision-mak-
ing processes and strategy execution.
In 2023, our transformation and digital capabilities were united
under the new role of Chief Transformation & Information Officer. This
enables a coordinated and efficient approach to transforming pro-
cesses through standardisation, automation and digitalisation. René
Overgaard Jensen was appointed to this role in 2023.
BOARD OF DIRECTORS
The Board of Directors consists of six members elected for a one-
year term by the shareholder at the Annual General Meeting and
three employee members elected for a four-year term by the employ-
ees based in Denmark (the latest election took place in 2023).
Governance
Our strong corporate governance structure supports long-term value
creation for our company, customers, suppliers, employees and
the communities in which we operate, and promotes responsible
sustainable business behaviour.
COMPOSITION AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS
The Board of Directors includes both professional board members
and members with executive positions. As well as in-depth knowledge
of Hempel’s business, board members possess expertise within a
wide range of areas, from innovation, sustainability, product develop-
ment, online marketing and commercialisation through to finance and
human resources. These diverse profiles ensure that the Board of
Directors can operate efficiently and support the Group’s strategy.
Each year, the Board of Directors carries out a self-evaluation of its
competencies and skills. The evaluation is carried out systematically,
using clearly defined criteria to ensure the Board constantly improves
its own performance and its cooperation with the Executive Group
Management. The current composition of the Board of Directors is
deemed appropriate as it provides a good balance between know-
ledge, competencies and experience.
The Board of Directors is responsible for safeguarding the interests of
the shareholder, while also considering all other stakeholders. On an
annual basis, the Board of Directors aligns its priorities and tasks with
the overall strategic direction of the Hempel Group. The Board of Direc-
tors also evaluates the performance of the Executive Group Manage-
ment on a continual basis. The Board of Directors and Executive Group
Management have a formal agreement with the Hempel Foundation,
the ultimate owner of the Hempel Group, regarding decisions that
must be presented to the Hempel Foundation for agreement.
CEO
CTIO
Digital, Strategy
& Transformation
CFO
Finance
CPCO
People & Culture
Technology &
Operations
Decorative
Integrated Supply Chain, incl. R&D
Marine
Energy &
Infrastructure
Hempel Annual Report 2023
34Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Q1 Q2
Hempel Leadership Summit
Leaders gather to set the
agenda for the year ahead
Q3
Annual Leadership Seminar
Q4
Board Strategy Day
Executive Group
Management meets
with the Board to
review the strategy plan
Meeting activity 2023
The Annual Management Cycle 2023
Board of Directors Audit Committee RemCo and NomCo*
7 March 27 September 6 March 18 September 7 March
21 April 22 November 24 May 14 November 27 September
20 June 22 November
Name Title Board of Directors Audit Committee RemCo and NomCo*
Richard Sand Chair
Eric Alström Deputy Chair
Karsten Munk Knudsen Chair of the Audit Committee
Susanna Schneeberger Board member
Søren P. Olesen Board member
Leif Jensen Board member
Mark Sutton Elected by the employees
Kim Scheibel Elected by the employees
Helle Fiedler Elected by the employees
Stephan Rolsted Elected by the employees
Vibeke Stendal Larsen Elected by the employees
Attended meeting Absent from meeting
*Remuneration and Nomination Committee.
35Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
The Executive Group Management currently consists of three women
and five men. The Group's members are of three different national-
ities. More information on our initiatives to increase diversity and
inclusion, as well as relevant statistics for other management levels
in Hempel, can be found on pages 32 and 63.
REMUNERATION
Hempel offers its Board of Directors and Executive Group Manage-
ment remuneration that is competitive with industry peers and other
global companies with their headquarters in Denmark, as this enables
it to attract and retain competent and professional business leaders
and board members. Members of the Board of Directors receive fixed
remuneration and do not participate in any incentive programmes.
Remuneration of the Executive Group Management includes a fixed sal-
ary, company car and other standard fringe benefits, as well as bonus
payments in the form of an annual cash bonus and a long-term cash-
based incentive scheme. The annual cash bonus payment is contingent
upon the fulfilment of ESG targets and the realisation of specific finan-
cial targets for organic growth, EBITDA and working capital. The annual
cash bonus cannot exceed 70-100% of the individual’s fixed salary.
The long-term cash-based incentive scheme comprises rolling three-
year cash-based bonus programmes. All programmes are subject
to vesting criteria based on a number of factors, including the reali-
sation of minimum financial targets for the nominal EBITDA accumu-
lated over the three-year period. The outcome is calculated at the
end of the three-year programme period. Potential payments are
made in the first quarter of the year after the programme expires.
The long-term cash incentive programme payment cannot exceed
110-220% of the individual’s fixed annual salary. The Board of Direc-
tors determines annually whether to instigate new programmes and,
if so, the scope and objectives of said programmes.
The Executive Group Management has service and employment
agreements in line with market terms. Conditions for notice of
termination are determined individually for each member of the Exec-
utive Group Management. The company has a general fixed termina-
tion notice of 12 months if given by the company and six months if
given by a member of the Executive Group Management.
BOARD COMMITTEES
The Board of Directors has established dedicated committees to
supervise and solve specific tasks. Currently, there are two perma-
nent committees: a Remuneration and Nomination Committee, and
an Audit Committee.
THE REMUNERATION AND NOMINATION COMMITTEE
The Remuneration and Nomination Committee assists the Board of
Directors with the recruitment of its executives. In addition, it assists
with the establishment of remuneration for the Group’s executives
and helps ensure that the Group’s general remuneration policies are
balanced appropriately and that the existing long-term incentive pro-
gramme is aligned with comparable listed companies. Furthermore,
the committee evaluates the Board of Directors and the Executive
Group Management each year and makes recommendations to the
Board of Directors in relation to the skills that the Board of Directors
and the Executive Group Management must have to best perform
their tasks. The committee also assists the Board of Directors by
selecting and proposing candidates for executive positions, often
with the assistance of a professional global search firm. In 2023,
Executive Vice President and Chief Financial Officer Lars Dollerup left
the company, and Executive Vice President for the Decorative seg-
ment Joe Devitt retired. Both positions were filled by candidates rec-
ommended by the Remuneration and Nomination Committee.
The committee convenes as necessary. However, it has three fixed
meetings during the year.
36Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Hempel Group’s Data
Ethics Policy
AUTONOMY
The data subject shall be in control
of his/her own data.
EQUALITY AND FAIRNESS
The technology may not discriminate
between equal partners and data shall
be processed in a fair manner.
DIGNITY
The inherent dignity of the data subject
shall not be compromised.
PROGRESSIVENESS
The development of new technology
shall be progressed with implementation
of data ethics in the solutions.
ACCOUNTABILITY
Any link of the supply chain using techni-
cal solutions shall be responsible for the
consequences of choices.
TRANSPARENCY
The processing of data shall be transpar-
ent and traceable for the data subject.
THE AUDIT COMMITTEE
The Audit Committee’s work includes assisting the Board of Directors
with its oversight responsibilities for the financial reporting process,
the system of internal control, the internal and external audit pro-
cess, the Group’s process for monitoring compliance with laws and
regulations and its Code of Conduct, as well as risk management.
The Audit Committee reviews the annual report, main accounting
policies, including significant accounting estimates and judgements,
treasury policy and tax policy. In addition, the Audit Committee has
an oversight role in relation to the Group’s whistleblower reporting
system and cases. In 2023, the Audit Committee also oversaw the
annual review of cybersecurity, the continued roll-out of the Group’s
new ERP platform and the Group’s progress on sustainability targets
and reporting.
INTERNAL AUDIT FUNCTION
The Internal Audit function provides independent and objective assur-
ance to the Board of Directors, Audit Committee and Executive Group
Management primarily within areas related to governance, business
ethics and internal control. It reports to the General Counsel with
dotted lines to the Group’s Chief Financial Officer and the Audit Com-
mittee. The Head of Internal Audit acts as Secretary to the Audit Com-
mittee, participates in all Audit Committee meetings and meets sep-
arately with the Audit Committee at least once a year. Internal Audit’s
assessments and recommendations are reported to relevant stake-
holders, Executive Group Management and the Audit Committee.
In accordance with its charter, the Audit Committee annually
assesses the need for an Internal Audit function. Based on the rec-
ommendations of the Audit Committee, the Board of Directors deter-
mines whether an Internal Audit function is required. The Board of
Directors’ assessment is that the Internal Audit function is required
and that its mandate and scope, processes in place, and planned
and performed activities are adequate to provide independent and
objective assurance.
Hempel Annual Report 2023
37Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Taxes are important for societies to help fund development, edu-
cation, healthcare, infrastructure and other services. Hempel is a
global company and taxpayer, and had a global revenue of EUR 2,351
million in 2023. Global taxes are a complex area. There are many
technical considerations and different tax systems across the world
that do not always align on cross-border activities. The international
tax system is slowly evolving to manage these challenges. We believe
that we can help ensure that the dialogue on an international tax sys-
tem is based on facts. Being transparent about our tax affairs is part
of this.
TAX GOVERNANCE
We are committed to being open and transparent about how we con-
duct our tax affairs and ensuring the highest level of tax compliance
with laws and regulations in every country where we operate. We
believe this is a key part of being a responsible corporate citizen.
Our Tax Policy is built upon two pillars: Compliance and Transpar-
ency. It contains the principles, guidance and expectations, set
by Hempel’s Board of Directors, for how all Hempel Group compa-
nies should approach tax. Our Tax Policy is relevant to all directors,
managers and employees who are involved in, or whose actions
impact, the management of taxes within the Hempel Group, and it
applies to all types of taxes (direct, indirect, collected and borne).
Our Tax Policy is reviewed, amended as needed and approved by the
Board of Directors annually. It can be found at hempel.com/about/
ethics-and-compliance.
COMPLIANCE
• We have global policies and procedures to ensure that our taxes
are correct and paid on time.
• We commit to complying with the letter of the law and the spirit of
the law.
• We commit to only undertaking transactions with commercial
substance.
• We commit to paying taxes in the jurisdictions where value is
created.
• We file tax returns everywhere required by local legislation.
TRANSPARENCY
• We provide regular information to our external stakeholders about
our approach to tax and taxes paid.
• Where appropriate, we disclose information about our tax posi-
tion and the choices we make, as long as such disclosures do not
damage our business or the business of our partners.
• We take an active part in the global and local debate on tax.
Through our participation in Dansk Industri’s Tax Panel, we pro-
vide input to Danish and EU tax legislation if relevant.
Our approach to tax
Governance
Sustainability is integrated into our Double Impact strategy and
decision-making processes, including how we approach and pay tax.
EMPLOYEE-RELATED TAXES
134.6
OTHER TAXES
1.7
INCOME TAXES
62.1
PRODUCT/SALES
TAXES
101.4
Total tax footprint
EUR million
Hempel Annual Report 2023
38Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Global tax footprint
Employee-related taxes
Income taxes
Product/sales taxes
Other taxes
The Americas
67.9m
Tax borne
34.9m
Tax borne
126.9m
Tax collected
48.6m
Tax collected
APAC
5.5m
4.4m
11.5m
0.1m
32.0m
18.8m
32.1m
0.6m
63.9m
1.0m
38.9m
91.0m
5.6m
Tax borne
15.9m
Tax collected
EMEA
Hempel Group
EUR million
300m
was the global tax footprint
including EUR 62.1m in
corporate income taxes.
2,351m
EUR in revenue
81.7m
Profit before tax
21m
Corporate tax accrued
62.1m
Corporate tax paid
7,600+
Employees
Hempel Annual Report 2023
39Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
In 2023, Hempel’s tax function focused on multiple areas, including:
• Global Minimum Tax (Pillar Two)
• Improvements to the management of tax data
• Alignment and improvement of global tax compliance processes
The work conducted in these areas also contributed to increasing our
readiness for the upcoming EU Directive on Public Country-by-
Country reporting.
With the exception of one country, we filed all of our tax returns in
2023 within the deadline set by the relevant tax authority.
In 2022, we appointed one global provider for tax compliance to
ensure consistency, quality and central monitoring. The transition to
the global provider continued in 2023.
TRANSPARENCY
In line with our Futureproof sustainability framework, we are commit-
ted to increased tax transparency. Our Tax Policy is publicly available,
and we report on our global tax footprint. Our global tax footprint for
2023 can be found on page 39.
Focus areas
within tax in 2023
We maintain a proactive and transparent relationship with tax author-
ities, as set out in our Tax Policy:
• We act in a responsible, professional and courteous manner.
• We respond to the tax authorities’ enquiries in a timely and trans-
parent manner.
• Where appropriate and possible, we engage in early dialogue with
the tax authorities if significant uncertainties related to tax mat-
ters apply to our business operations. We believe behaving in this
way will reduce the risk of disputes or damage to Hempel’s cred-
ibility or reliability if uncertainties exist in tax regulations or if tax
matters are inadvertently incorrect.
TRANSFER PRICING
We seek to pay taxes in the countries where value is created. In doing
so, we follow Organization for Economic Co-operation and Develop-
ment (OECD) guidance and apply the arm’s length principle to inter-
company transactions. These are benchmarked against comparable
transactions to non-related parties (e.g., customers and suppliers)
and reviewed to ensure the profits are aligned with value creation.
We continually adapt our business strategy. Therefore, we also adapt
our transfer pricing model on a continuous basis to reflect changes in
the business and to ensure that taxable profits always reflect where
value is created.
Governance
We do not set up
companies in low or
no-tax jurisdictions
for the purpose of
minimising taxes
Hempel Annual Report 2023
40Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
GLOBAL MINIMUM TAX
In 2023, we actively worked to prepare for the Change to Global
Minimum Tax compliance requirements, which come into effect in
2024. We conducted preliminary impact assessments, assessed the
use of transitional safe harbours, and are configuring systems and
processes to effectively collect the large amount of data needed for
Pillar Two reporting.
More details on Hempel’s financial exposure to Global Minimum Tax,
including risk areas, can be found on page 84.
TAX INCENTIVES RECEIVED IN 2023
As stated in our Tax Policy, the countries in which we do business may
offer tax incentives or preferential tax relief. Hempel only accepts
such incentives when these are specified in law and generally avail-
able. As an example, in 2023, Hempel made use of the Danish R&D
super deduction. The costs qualifying for the super deduction were
used for innovation in new products and solutions for our customers,
which contribute to Hempel’s sustainability framework and objective
of developing more sustainable products.
ACTIVITY IN LOW TAX JURISDICTIONS OR COUNTRIES
CATEGORISED AS TAX HAVENS
As a policy, Hempel is only active in countries where we have com-
mercial substance. We do not set up companies in low or no-tax juris-
dictions for the purpose of minimising taxes.
In 2023, Hempel was present for a part of the year in Russia,
which was added to the EU list of non-cooperative jurisdictions
on 14 February 2023. We completed our exit from Russia in July
2023, and were not present in any other country listed by the EU as
non-cooperative.
In addition, we are also present in Bahrain and the United Arab Emir-
ates, which are both zero-tax jurisdictions. Hempel has long had a
presence in these countries, with production and sales companies in
both countries, and close to 200 employees in total.
41Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
As a company, we face a wide range of business risks and uncertain-
ties (“risks”). Ensuring an effective approach to managing such risks
is fundamental to deliver on our strategic objectives and secure sus-
tainable growth.
We operate in a global business setting. This exposes our company
to a wide variety of risks and opportunities as part of our geograph-
ical footprint and due to the mixture of segments we operate in
and the products we sell. Therefore, our active risk management
approach maintains focus on the key risks, threats and opportunities
that may impact our business objectives or result in adverse conse-
quences .
TOP RISKS IN RANDOM ORDER
Cyber Security
Geopolitical Instability
Macroeconomic Volatility
Supply Chain
Research & Development Innovation
Climate Adaptation
Risk management
Governance
Risk management is key to achieving the desired level
of resilience to support our strategy execution and to
safeguard our existence.
Hempel Annual Report 2023
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Enterprise Risk Management function
Assists and supports the EGM in fulfilling its
Enterprise Risk Management responsibilities.
Reviews and maintains the enterprise risk
management framework and tools to ensure
its ongoing effectiveness.
Reports to the EGM/Risk Committee and Audit
Committee on key risks including emerging risks.
Compliance function
Provides guidance and expertise to segments
and functions.
RISK MANAGEMENT IN 2023
In 2023, we focused on the continued implementation of our Enter-
prise Risk Management model across the organisation, including
strengthening our governance processes.
Due to Russia’s invasion of Ukraine in 2022, we decided to cease our
operations in Russia. Following a strategic review, Hempel initiated
a controlled exit from the country. In April 2022, all production was
suspended. The strategic divestment process was completed in July
2023 when Atomstroykomplex acquired the legal entity in Russia,
including its assets and employees. No active business was part of
the transaction.
The war in Ukraine sent inflation to levels not seen in decades. The
geopolitical tensions, increased interest rates and financial instability
combined with supply chain disruption can have an adverse effect on
our business. This geopolitical risk is something we constantly monitor
and manage. However, we remain focused on strategy execution and
meeting increasing demand for innovative sustainable coating solu-
tions in a volatile market. Our aggregated key risks are described on
pages 44-45.
RISK MANAGEMENT FRAMEWORK
The Board of Directors is ultimately responsible for the management
of risks and for deciding Hempel’s risk appetite. At least once a year,
the Board of Directors signs off on the key risks and ensures that our
governance is adequate vis-à-vis enterprise risk management.
The Audit Committee is responsible for overseeing the effectiveness
of our risk management system and monitoring its performance.
The Risk Committee consists of Hempel's Executive Group Manage-
ment team, see page 52. The Committee is responsible for signing
off on key risks before they are reported to the Audit Committee and
Board of Directors. Each key risk is assigned an executive owner (Risk
Sponsor), who is responsible for ensuring the execution of the agreed
risk treatment plans and bringing the risk within the agreed risk appetite.
Board of Directors
Oversees the effectiveness of the Enterprise Risk Management programme.
Executive Group Management (EGM) / Risk Committee
Reviews and approves risk management governance, evaluates and approves
Hempel’s key risks and ensures the allocation of accountability of risks to risk sponsors.
Reports to the Audit Committee & Board of Directors on a bi-annual basis.
Risk Sponsors
Ensure that risk management processes are implemented in the segment/functional area.
Assess, manage, and own risks and controls impacting the objectives
in the segment/functional area.
Risk Owners
Responsible for the assigned risks in the segments/functions,
and the design, implementation and monitoring of risk treatment plans.
Segments and functions
Decorative, Marine, Energy and Infrastructure,
Digital , Strategy & Transformation, Finance,
Legal and People & Culture
Technology & Operations
Supply Chain, Procurement, Quality, Health
& Safety, Sustainability and R&D
Q3
Risk and strategy review
• Risk Committee meeting
Q1
Risk governance
• Risk Committee meeting
Q2
Mid-year risk review
• Risk Committee meeting
• Audit Committee meeting
• Board of Directors meeting
Q4
Annual risk review
• Risk Committee meeting
• Audit Committee meeting
• Board of Directors meeting
Annual Enterprise Risk Management Cycle
Hempel Annual Report 2023
43Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Cyber Security
Global digital connectivity continues to transform Hempel. Like
other organisations, we are heavily dependent on a robust dig-
ital infrastructure for e-commerce and data sharing technology
to conduct our day-to-day business activities and serve our
customers.
There is a constant threat of sophisticated cyber-attacks,
including phishing, ransom attacks and malware, and in general
attacks are becoming much more frequent.
—
RISK DRIVERS
• Breaches of our infrastructure can lead to internal breaches or system
failure, which could in turn lead to the theft of personal data and disrup-
tion to critical assets and our business in general.
• Malicious attempts to cause long-term damage to Hempel, our custom-
ers, our suppliers and partners through unauthorised access, destruc-
tion, corruption or manipulation of data could cause our systems to be
inaccessible for a period.
• Loss of proprietary information could cause financial impact and limit
our business opportunities.
+ MITIGATING ACTIONS
• We ensure an appropriate governance structure including futureproof-
ing and enhancing to protect our critical and sensitive data, assets and
reputation.
• We ensure regulatory compliance through various protection mecha-
nisms within our IT systems and business processes, as well as
company-wide internal audits of selected information security controls.
• We foster a culture of awareness around cybersecurity via employee
information security education and training (e.g., mandatory and fre-
quent e-learning).
• We ensure our Crisis Management Team and Digital Disaster Recovery
organisation carry out structured annual exercises.
Geopolitical Instability
With a footprint that stretches across the world, we are exposed to
global market forces and changes in government policies and legisla-
tion, as well as increasing complexity in the regulatory environment.
—
RISK DRIVERS
• Geopolitical tensions between China and the US may impact our production
costs.
• Trade tariffs imposed by the US on Chinese goods and export restrictions to
protect national security interests, tackle climate change or promote human
rights may lead to increased complexity in cross-border sales.
• Escalating geopolitical unrest may lead to economic sanctions or military
action.
• Inadvertent breaches of sanctions could damage our brand and reputation.
+ MITIGATING ACTIONS
• We continuously strive to minimise risks via diversification and have a bal-
anced product portfolio across the Americas, EMEA and APAC.
• We have a global manufacturing footprint which allows us to continuously
monitor risk developments in our key markets and develop and adjust contin-
gency plans accordingly.
• We carefully review cross-border relations and adapt to changing business
environments in both public and private sectors as we grow our business.
• We seek to mitigate risks via our comprehensive sanction screening, export
control and legal compliance setup.
Macroeconomic Volatility
Our financial performance can be adversely affected, for exam-
ple by changes in foreign policies and economic sanctions com-
bined with high energy costs, currency fluctuations, inflation
and rising interest rates, which may push major economies into
recession.
—
RISK DRIVERS
• Market dynamics could impact raw material prices.
• An economic slowdown caused by higher unemployment rates and sus-
tained inflation could lead to a decline in consumer confidence, impact-
ing sales and profits.
• We may experience uneven performance as potential inflationary reces-
sion leads to reduced growth and demand. Hempel’s customers could
delay their spend decisions if necessary price adjustments impact their
behaviour and willingness to pay.
+ MITIGATING ACTIONS
• We seek to minimise uneven performance risks through strategy execu-
tion and financial planning.
• We have a balanced geographical presence, with revenue generated
from various regions, which helps to ensure a steady revenue.
• We ensure value-based price setting through our revenue management
programme.
• We hedge interest rates, assess currency developments and follow strict
financial planning on costs and cash.
Hempel Annual Report 2023
44Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Climate Adaption
Predictions state that warming of 1.5˚C may be reached or
exceeded in the early 2030s. Although the full extent and
impact of climate change and ensuing impacts is complex to
predict, Hempel is inevitably exposed to a larger number of vari-
ous climate-related risks.
We are aligning our assessment and disclosure practices with
the requirements of the Taskforce on Climate-related Financial
Disclosures (TCFD) as described on page 66.
•
— RISK DRIVERS
• Potential regulatory risks associated with the shift to a low-carbon emis-
sions economy may impact government regulation and Hempel’s ability
to deliver on its strategic objectives.
• Potential regulatory risk can have a significant impact on our ability to
manufacture products in their current form.
• Climate action failure may change markets in which Hempel conducts
business activities.
• As water sources may be depleted or disappear, the potential for
cross-border conflicts may intensify.
• Extreme weather conditions can cause disruption to our supply chain,
challenging our business continuity.
• Extreme weather such as cyclones, tornados, hurricanes and floods can
cause business interruption at our production facilities with the risk of
delaying production for safety reasons or causing damage to physical
assets.
•
+ MITIGATING ACTIONS
• We assess the impact that climate related risk can have on our busi-
ness, and we periodically carry out materiality assessments. Hempel’s
science-based targets are approved by the Science Based Targets
initiative (SBTi).
• We conduct comprehensive climate impact assessments, covering the full
range of issues beyond water, based on recommendations from the TCFD.
• We assess and react to our fire and natural hazard reports, and work to
reduce the risk of losses by ensuring proper protection plans are in place.
• Investments to further mitigate risk form an integrated part of CAPEX
planning and prioritisation.
Supply Chain
Our manufacturing operations and global supply chain part-
ners are exposed to adverse risks, such as physical disruption,
cyber-attacks, trade restrictions and climate change risks. The
loss of a critical supplier or multiple suppliers would have a dam-
aging impact on our ability to fulfil contractual obligations and
could ultimately impact our ability to serve our customers.
—
RISK DRIVERS
• Risk factors such as power supply disruption, raw material shortages
and trade restrictions can cause delay or non-delivery of critical raw
materials.
• Suppliers are exposed to cyber-attacks and trade restrictions which can
limit the delivery of raw materials.
• Extreme weather events such as drought, high temperatures, floods or
storms can cause physical damage to critical suppliers’ locations.
• Potential regulatory changes can have an impact on our ability to manu-
facture products in their current form.
• Climate action failure may change markets in which Hempel conducts
business activities or sources raw materials.
+ MITIGATING ACTIONS
• We seek to prevent disruptive risks through our operational risk man-
agement approach, which includes a loss prevention risk engineering
programme.
• We review and assess interdependencies and back-up possibilities
across manufacturing sites to secure a steady production pipeline.
• We have implemented a business continuity management programme.
• We have implemented a dual-sourcing strategy, whereby our Procure-
ment team constantly investigates and qualifies alternative sourcing
opportunities.
• We have implemented specific supply chain risk assessments, which
also include assessment of climate-related risks.
Research & Development Innovation
In order to come out ahead of our competition, we must ensure that
research and development is a continuing catalyst for innovative
product development.
—
RISK DRIVERS
• Our market position may be challenged if competitors develop new products
that better meet the future needs of our customers.
• Insufficient research, development and product management resources may
cause delays in new product development.
• Hempel could miss our commitment to the SBTi as we would be unable to
provide an industry leading sustainable product assortment.
+ MITIGATING ACTIONS
• We assess our innovation goals and product pipeline on an ongoing basis to
respond to new trends and translate them into key risks and opportunities.
• We foster an innovative culture that prioritises our capacity to innovate in
order to optimise value from innovation and meet our business goals.
• We closely monitor our strategic initiatives to ensure we remain focused
on delivering futureproof solutions that will help our customers across our
segments achieve their business goals, sustainability agendas and ESG
ambitions.
Hempel Annual Report 2023
45Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Governance
Hempel Annual Report 2023
46Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Governance
47Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Leading on sustainable
procurement
Hempel operates a complex global supply chain. To ensure respon-
sible business conduct throughout our supply chain and achieve our
sustainability ambitions, we must engage and collaborate extensively
with our suppliers. We do this through our Sustainable Procurement
Programme, through which we are proud to have received an A score
in the Carbon Disclosure Project’s Supplier Engagement Rating.
SUSTAINABILITY RISK MANAGEMENT
We are committed to avoiding and mitigating sustainability risk in our
supply chain. To this end, we use EcoVadis, an external provider of
company sustainability assessments. The assessment covers four
key topics – labour and human rights, environment, ethics and sus-
tainable procurement – and our strategic direct spend suppliers are
expected to participate.
In 2023, 83% of our suppliers (by spend) were risk assessed by Eco-
Vadis, compared to 75% in 2022. In addition, we increased the focus
of the EcoVadis risk assessments by implementing a regular procure-
ment risk review to identify and follow up high risk suppliers.
SUPPLIER ENGAGEMENT FOR POSITIVE IMPACT
To drive positive impact, we launched Hempel’s Procurement Sus-
tainability Screening in 2021. This gives us a structured approach to
dialogue and development with suppliers around key environmental
sustainability topics. The screening process has been rolled out at
category level, starting with the largest categories in terms of mone-
tary spend and climate footprint. These include raw materials, such
as epoxy, titanium dioxide and metallic pigments, as well as other
categories such as steel packaging and logistics.
Our goal is to screen suppliers representing 70% of our total spend
by 2025. In 2023, Hempel Group Procurement screened 49 suppli-
ers, 29 for the first time and 20 to follow up on low performance in
earlier years. In total, this brought the spend covered by the screen-
ing to 44%. During 2023, we piloted the screening in tenders for
selected categories.
CONFLICT MINERALS
Hempel monitors suppliers of conflict minerals (tin, tantalum, tung-
sten and gold, also called 3TG) on an annual basis. Screening and
reporting are based on guidelines from the Responsible Minerals
Initiative.
44%
70%
Procurement Sustainability Screening:
Our goal is to engage with suppliers repre-
senting 70% of our total spend by 2025.
In 2023, we achieved 44%.
Governance
Hempel Annual Report 2023
48Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
ESG ratings and benchmarks
EXTERNAL VALIDATION AND RECOGNITION
Based on our customers' and other stakeholders’ requirements, we
have selected and prioritised three ESG ratings and reporting frame-
works connected to our readiness and material issues. In 2022,
we began reporting according to recommendations from the Task
Force on Climate-related Financial Disclosures (TCFD), Carbon Dis-
closure Project (CDP) and EcoVadis. TCFD and CDP are considered
the thought leaders on the climate and disclosure agenda. EcoVadis
takes a more holistic approach to ESG by including the social aspect.
We continue disclosing to the UN Global Compact.
CARBON DISCLOSURE PROJECT
This is our second year of disclosing to CDP’s annual environmental
disclosure and scoring process, which is regarded as the gold stand-
ard for corporate environmental transparency. Our CDP rating for
global sustainability initiatives for 2023 was B, in line with our last
year's score and the industry average, which was also B. This indi-
cates that our environmental management and efforts to address the
environmental impacts of our business continue to be at a good level.
In addition, we were recognised by CDP for having best practices
(A rating) within Scope 1 & 2 emissions, emission reduction targets
and sustainability governance. We also submitted to CDP’s Supplier
Engagement Rating (SER) on climate issues, receiving an A rating. In
the rating, CDP recognised our work to accelerate climate action in
our supply chain, including our Sustainable Procurement Programme,
validated science-based targets on Scope 3 emissions, and sustain-
ability governance and reporting. The top rating demonstrates that
we are a supplier engagement leader and validates our overall sus-
tainability framework, Futureproof.
Disclosure requirements See page
99a
Policies on
Human rights 32-33
Worker and social conditions 32-33, 46-47
Environment and climate 28-31
Anti-corruption and anti-bribery 47
Due diligence process 26-49, 66
Activities during the year
Human rights 32-33, 67
Worker and social conditions 32-33, 46-47,
67
Environment and climate 28-31, 48, 67
Anti-corruption and anti-bribery 47
KPIs and results 48-49, 59-67
Sustainability risks 42-49
99b
Diversity in the Board of Directors (including
current gender composition and target)
35, 63
Diversity in management (including policy,
activities during the year and results)
32, 63
Disclosure requirements, cf. §99a and 99b
of the Danish Financial Statements Act
Disclosing to CDP helps us prepare to meet increasing demand for
environmental transparency from financial institutions, customers
and policymakers – and shows we are taking action to deliver on our
goals and ambitions.
ECOVADIS
In January 2023, we received our first corporate sustainability exter-
nal ESG rating from EcoVadis, with a score of 55 out of 100. This is
above the paint industry average of 47. The score was based on a
self-assessment, covering our policies, actions and results within
labour & human rights, ethics, sustainable procurement and environ-
mental impacts. We have established a structured process to follow
up on EcoVadis’ corrective actions, and we are continuing to improve
and track our performance and progress for the next upcoming
self-assessment.
UN GLOBAL COMPACT
At the end of 2023, we submitted our Communication on Progress
(CoP) to the UN Global Compact (UNGC). We continue to disclose and
report on our progress within the Sustainable Development Goals
(SDGs) and are also proud members of the Valuable 500 and EV100
Climate Group.
In our Sustainability section you can read more about our actions
and ambitions related to the UNGC’s Ten Principles, the Sustainable
Development Goals, and information required by the Danish Financial
Statements Act §99a and §99b. Read more about our business and
value chain on page 9.
Hempel Annual Report 2023
49Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Statements
and ESG
→ Management's statement
→ Executive Group Management
→ Board of Directors
→ Independent auditors' report
→ Independent limited assurance report on ESG data
→ 2023 ESG performance
→ ESG data & accounting policies
51%
Reduction compared to 2019 for
scope 1 & 2 CO
2
e emissions in
our own operations.
50Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Registered Executive Management
Board of Directors
Hempel Annual Report 2023
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroduction 51
Michael Hansen
Group President
& Chief Executive Officer
Peter la Cour Gormsen
Executive Vice President
& Chief Financial Officer
Ana Henriques
Executive Vice President,
Decorative
Alexander Enström
Executive Vice President,
Marine
Born 1975 1974 1983 1983
Core capabilities • Commercial
• Strategy development and
execution
• Finance and IT
• M&A
• Commercial and marketing
• Portfolio management and
strategy
• Commercial
• Industry knowledge
Education • IE Business School,
Global Executive MBA
• MSc in Finance,
University of Aarhus
• MSc Marketing,
Northwestern University
• MSc Material Chemistry,
Uppsala University
Steen Niemann Madsen
Executive Vice President,
Energy & Infrastructure
Katarina Lindström
Executive Vice President
& Chief Operations Officer
Pernille Fritz Vilhelmsen
Executive Vice President
& Chief People & Culture Officer
René Overgaard Jensen
Executive Vice President & Chief
Transformation & Information Officer
Born 1971 1965 1980 1972
Core capabilities • Commercial and marketing
• Industry knowledge
• Operations and supply chain
• Product management
• People and HR
• Diversity, Equity & Inclusion
• Communication
• Strategy development and
execution
• Innovation
Education • Diploma in Business Administration,
Copenhagen Business School
• MSc Materials Science, KTH Royal
Institute of Technology
• MSc Human Resource Management,
Birbeck, University of London
• MBA Business Administration &
Management, Heriot-Watt University
Executive Group
Management
Hempel Annual Report 2023
52Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Board of Directors
Richard Sand
Chair
Eric Alström
Deputy Chair
Leif Jensen Karsten Munk Knudsen
Born 1959 1966 1954 1971
First elected in 2009 (and Chair since 2010) 2017 2011 2021
Core capabilities • Foundation and company law, M&A
• Strategy development and
execution
• ESG/Sustainability
• Industry knowledge
• Operations
• Supply chain
• Industry knowledge
• Commercialisation through finance
• Finance
• ESG/Sustainability
Committees • Chair of Nomination and Remuner-
ation Committee
• Nomination and Remuneration
Committee member
• Audit Committee and Remuner-
ation & Nomination Committee
member
• Chair of Audit Committee
Selected positions
and directorships
• Partner at Bech-Bruun Law Firm
with right of audience,
The Danish Supreme Court
• Chair: Aller A/S, Pressalit Hold-
ing A/S, E. Callsen & Co. A/S and
Kivan Food A/S
• Board member: Aller Foundation
and Esplanadens Ejendomssel-
skab P/S
• President: Danfoss Power
Solutions
• Managing Director: Benteler
Automotive
• Chair: Strømberg Holding A/S
• Chair: Strømberg Ejemdomme A/S
• Board member: WindowMaster
International A/S
• CFO and EVP Finance,
Legal & Global Solutions:
Novo Nordisk A/S
• Chair: NNE A/S
• Board member: 3shape Holding A/S
Education • Master of Law, University of
Copenhagen
• MSc Management, Stanford Univer-
sity Graduate School of Business
• MSc in Economics and Manage-
ment, Aarhus University
• MSc Finance, University of Aarhus
Hempel Annual Report 2023
53Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Søren P. Olesen Susanna Schneeberger Helle Fiedler
Elected by the employees
Stephan Rolsted
Elected by the employees
Vibeke Stendal Larsen
Elected by the employees
Born 1967 1973 1963 1971 1965
First elected in 2018 2018 2015 2023 2023
Core capabilities • Industry knowledge
• Product development
• M&A
• Commercial and go-to-market
• Transformation and digitalisation
• Product development
• Innovation
• Facility service management
• Working Environment
• Product development and
performance
• Safety compliance
• Working Environment
Committees • Audit Committee member • N/A • N/A • N/A • N/A
Selected positions
and directorships
• CEO: STARK Group A/S
• Board member: Industriens
Arbejdsgivere i Danmark, IAD
• Chair: Yunex Traffic
• Board member: SKF Group,
Hennecke Group and Concentric AB
• Lead Scientist R&D, Hempel A/S • Campus Service Manager,
Hempel A/S
• HSE & Compliance Manager,
Hempel A/S
Education • MSc Economics, Aalborg University
• MA (Econ), Rijksuniversiteit
Limburg, Maastricht
• Master of European Affairs (MBA),
MSc International Business, Lund
University
• MSc Chemical Engineering • Business school • Chemical technician
• Employee Board Member
certification
Hempel Annual Report 2023
54Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Independent
auditor’s report
Hempel Annual Report 2023
55Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
CVR No 33 77 12 31
mne32800
mne35412
Hempel Annual Report 2023
56Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Independent limited assurance
report on the ESG data 2023
To the stakeholders of Hempel A/S
Hempel A/S (Hempel) engaged us to provide limited assurance on
the ESG data for the period 1 January - 31 December 2023 on pages
60-65 in the Annual Report for Hempel for 2023.
OUR CONCLUSION
Based on the procedures we performed and the evidence we
obtained, nothing has come to our attention that causes us to believe
that the ESG Data on pages 60-65 in the Hempel Annual Report
2023 have not been prepared, in all material respects, in accordance
with the ESG Accounting Policies stated on pages 60-65.
This conclusion is to be read in the context of what we say in the
remainder of our report.
WHAT WE ARE ASSURING
The scope of our work was limited to assurance over the ESG Data on
pages 60-65 in Hempel’s Annual Report.
PROFESSIONAL STANDARDS APPLIED AND LEVEL OF ASSURANCE
We performed a limited assurance engagement in accordance with
International Standard on Assurance Engagements 3000 (Revised)
‘Assurance Engagements other than Audits and Reviews of Historical
Financial Information’ and, in respect of the greenhouse gas emis-
sions stated on pages 61-62, in accordance with International Stand-
ard on Assurance Engagements 3410 ‘Assurance engagements on
greenhouse gas statements’, issued by the International Auditing and
Assurance Standards Board. Quantification of greenhouse gas emis-
sions is subject to inherent uncertainty because of incomplete scien-
tific knowledge used to determine emissions factors and the values
needed to combine emissions of different gases.
A limited assurance engagement is substantially less in scope than
a reasonable assurance engagement in relation to both the risk
assessment procedures, including an understanding of internal
control, and the procedures performed in response to the assessed
risks; consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance
that would have been obtained had a reasonable assurance engage-
ment been performed.
OUR INDEPENDENCE AND QUALITY CONTROL
We have complied with the independence requirements and other
ethical requirements in the International Ethics Standards Board
for Accountants’ International Code of Ethics for Professional
Accountants (IESBA Code), which is founded on fundamental princi-
ples of integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour and ethical requirements
applicable in Denmark.
PricewaterhouseCoopers applies International Standard on Quality
Management 1, ISQM 1, which requires the firm to design, implement
and operate a system of quality management including policies or
procedures regarding compliance with ethical requirements, profes-
sional standards and applicable legal and regulatory requirements.
Our work was carried out by an independent multidisciplinary team
with experience in sustainability reporting and assurance.
UNDERSTANDING REPORTING AND MEASUREMENT
METHODOLOGIES
The ESG Data needs to be read and understood together with the
ESG accounting policies (pages 60-65), which management of
Hempel is solely responsible for selecting and applying. The absence
of a significant body of established practice on which to draw to eval-
uate and measure non-financial information allows for different, but
acceptable, measurement techniques and can affect comparability
between entities and over time.
Hempel Annual Report 2023
57Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
WORK PERFORMED
We are required to plan and perform our work in order to consider the
risk of material misstatement of the ESG Data. In doing so, we:
• Conducted interviews with data owners to understand the key
processes and controls for reporting site performance data;
• Obtained an understanding of the key processes and controls for
measuring, recording and reporting the ESG Data;
• On a sample test basis agreed and reconciled reported data to
underlying documentation;
• Performed analysis of data from reporting sites, selected based
on risk and materiality to the Group; and
• Evaluated the evidence obtained.
MANAGEMENT’S RESPONSIBILITIES
Hempel’s management are responsible for:
• Designing, implementing and maintaining internal controls over
information relevant to the preparation of the ESG Data that are
free from material misstatement, whether due to fraud or error;
• Establishing objective accounting policies for preparing the ESG
Data;
• Measuring and reporting the ESG Data based on the accounting
policies and the content of the ESG Data.
Hellerup, 4 March 2024
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no. 33771231
Anders Stig Lauritsen
State Authorised Public Accountant
mne32800
Kristian Pedersen
State Authorised Public Accountant
mne35412
OUR RESPONSIBILITY
We are responsible for:
• Planning and performing the engagement to obtain limited assur-
ance about whether the ESG Data are free from material mis-
statement, and are prepared, in all material respects, in accord-
ance with the ESG accounting policies;
• Forming an independent conclusion, based on the procedures we
have performed, and the evidence obtained; and
• Reporting our conclusion to the stakeholders of Hempel A/S.
Hempel Annual Report 2023
58Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2023 ESG
performance
ENVIRONMENTAL PERFORMANCE
We outperformed our target for 2023 with a reduction of 51% com-
pared to 2019 for Scope 1 & 2 CO
2
e emissions in our own opera-
tions. We have expanded our reporting scope to include the fuel from
our company vehicles. Excluding company vehicles, our reduction is
64%. We achieved a reduction of 70% when we look at the compar-
ative baseline (excl. acquisitions, warehouses and standalone R&D
facilities). For Scope 3 CO
2
e emissions, we observed an increase of
7% compared to 2022, driven by our increase in production.
In 2023, we saw a reduction of waste sent to landfill at our produc-
tion sites of 85% compared to 2022. This resulted in a total reduction
of 95% compared to our 2019 comparative baseline (excl. acquisi-
tions) and exceeded our target for the year of 90%.
SOCIAL PERFORMANCE
Our Lost Time Accident (LTA) frequency slightly increased from 1.19
per 1,000,000 working hours in 2022 to 1.62 per 1,000,000 work-
ing hours in 2023. However, the severity rate was lower in 2023
than the previous 4 years. We are committed to reducing the LTA fre-
quency, and a comprehensive action plan has been formulated as an
integral component of the overarching process.
Diversity and inclusion are key to how we evolve as a company. Gen-
der equality remains a significant part of our diversity and inclusion
agenda, and ensuring a balanced workforce is an important part of
our strategy. By the end of 2023, 32% of our employees were women
and 28% of leadership positions were held by women at a Group
level. For 2024, our target for women in leadership is 30%. To ensure
we fulfil our ambition going forward, we will continue to engage with
our female colleagues to get their input and follow up with action.
GOVERNANCE PERFORMANCE
In 2023, Hempel had 69 registered new compliance cases, a 57%
increase in new reports compared to last year. This reflects a healthy
speak-up culture, as well as increased reporting from Hempel's more
recently integrated businesses.
We continued to implement GDPR as a standard data protection
compliance framework for all companies within the Hempel Group. In
line with previous years, we also continued to train employees in our
Code of Conduct.
We also continued to implement Hempel Procurement Sustainabil-
ity Screening to strengthen focus and collaboration with suppliers
on environmental sustainability. In total, we screened 49 suppliers
and started follow-up screening of 20 low-performing suppliers from
the previous year. 44% of our spend is now subject to sustainability
screening, exceeding our target for 2023 of 43%.
Hempel Annual Report 2023
59Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
ESG data &
accounting policies
BASIS FOR PREPARATION
The environmental, social and governance (ESG) data disclosed
in this section is prepared based on guidance from the UN Global
Compact, recommendations from the CFA Society Denmark and the
metrics most relevant and material to the Hempel Group. The con-
version of data reported to CO
2
equivalents is completed by applying
relevant conversion factors from widely accepted authorities, such
as the UK Department for Energy Security and Net Zero (DESNZ). The
consolidation principles are based on the same consolidation princi-
ples and period as the financial statements unless otherwise stated.
Data from entities acquired or divested are included/excluded as of
the date of the acquisition/divestment defined as the date Hempel
obtains or ceases control.
The accounting policies set out in this section have been applied con-
sistently in the preparation of the consolidated ESG data and related
disclosures for all the years presented.
ESTIMATES & JUDGEMENTS
In preparing the ESG data, management is required to make judge-
ments, estimates and assumptions that affect the amounts reported.
The estimates and assumptions are based on experience, external
sources and various other factors that management considers to
be reasonable under the given circumstances. In general, carbon
footprint scope 3 emissions have a higher degree of judgement and
complexity, and changes in the assumptions and estimates could
result in different outcomes than those recorded and presented in
the scope 3 emissions.
REPORTING SCOPE
Environmental KPIs include Hempel Group data from all sites with
production or warehouses in which Hempel has operational control.
This includes 26 factories (2022: 28), 15 R&D centres (2022: 17)
and 27 warehouses (2022: 24) referred to as 'Hempel sites'.
In 2023, the scope was expanded to also include emissions from
company cars in scope 1 emissions and the new factory located in
Zhangjiagang, China, which was completed in Q2 2023 and has con-
tinuously increased its production, expecting to reach full capacity in
2025.
In 2022, Hempel ceased production in Russia and closed its factory
in Syria. The Khimji production site in Oman, acquired during the year,
was added to the reporting scope as well as the new factory located in
Yantai, China, which was completed and fully operational in Q2 2022.
Emissions from production and warehouses, company cars, purchase
of raw and packaging materials, energy consumption for surface
preparation and Volatile Organic Compounds in produced products
cover all material activities in Hempel's value chain. Environmental
data related to retail stores and HQ offices are considered immate-
rial and not included in the ESG data. Emissions from production at
toll manufacturing sites on behalf of Hempel are included under the
assumption that one tonne of toll-produced goods requires the same
energy and results in the same waste generation as if the products
had been produced at Hempel sites (i.e. the impact of these third-
party emissions is estimated using the Hempel average material,
energy and waste impacts per tonne of paint).
The social and governance data covers the Hempel Group, compris-
ing Hempel A/S and entities controlled by Hempel A/S unless other-
wise stated in the accounting policy.
General accounting policies
Hempel Annual Report 2023
60Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
* Excluding company vehicles we reached a reduction of 64% in Scope 1&2
All environmental data are presented in absolute numbers, as well as relative to
production. The intensity data are given as the absolute data per 1,000 litres of
paint produced.
Energy (kWh)
Energy consumption is defined as the energy used at Hempel sites and company
cars and includes the amount of electricity, fuel, refrigerant top-up, district heat-
ing and gas consumption.
Electricity consumption at Hempel sites is calculated based primarily on readings
from power managers and invoices, and adjusted to account for the reporting
period. Electricity is classified according to source as either renewable, non-re-
newable or renewable energy through electricity bought with renewable energy
certificates (RECs). Classification is based on the energy’s source of origin,
applying generally accepted definitions.
Waste generation (tonnes)
Waste generation includes amounts in tonnes of disposed waste, based on
waste volumes collected by third-party waste handling providers. All waste gen-
erated is categorised by disposal method. Waste disposed through landfill is
separately disclosed.
Carbon footprint scope 1 (tonnes CO
2
e)
Scope 1 covers direct emissions originating from Hempel sites. Scope 1 emis-
sions are based on energy consumed in the form of fuel (fuel oils and natural
gas) as well as refrigerants (top-up). The consumption of fuels is converted to
CO
2
e emissions by applying relevant Greenhouse Gas Conversion Factors for
Company Reporting from DESNZ (previously Defra) for the relevant year.
Carbon footprint scope 2 (tonnes CO
2
e)
Scope 2 covers indirect emissions from electricity and district heating consumed
at Hempel sites. The consumption of electricity and district heating is converted
to CO
2
e by applying the relevant emission factors (market or location based).
Sites using documented renewable electricity contribute with zero emissions in
the market-based approach. Electricity supplied through use of renewable certifi-
cates is, in the market-based approach, deducted in accordance with the guiding
principles provided by RE100.
Environmental data
Energy & Waste 2023 2022 2021 2020 2019
Renewable energy (kWh) 30,615,786 30,274,856 26,160,687 N/A N/A
Renewable energy through use of RECs (kWh) 22,873,014 12,281,000 0 N/A N/A
Non-renewable energy (kWh) 78,861,943 63,063,036 69,596,587 N/A N/A
Total energy consumption (kWh) 132,350,743 105,618,892 95,757,274 95,248,110 104,555,353
Share of renewable energy 40% 40% 27% N/A N/A
Share of renewable electricity 80% 71% 51% N/A N/A
Energy (kWh / 1,000 L paint produced) 291 290 263 245 270
Waste generation (tonne) 19,123 17,23 3 17,784 20,426 22,189
Waste generation (kg / 1,000 L paint produced) 42 47 49 53 57
Waste to landfill (tonne) 934 1,353 1,630 1,666 3,934
Waste to landfill (kg / 1,000 L paint produced) 2 4 4 4 10
% reduction of waste to landfill from production sites (Baseline: 2019) -95% -83% -70% -58% N/A
Carbon footprint 2023 2022 2021 2020 2019
Carbon footprint scope 1 (tonnes CO
2
e) 13,614 8,163 8,952 8,193 8,808
Carbon footprint scope 2 (tonnes CO
2
e) Location based 30,968 26,317 25,195 26,644 29,344
Carbon footprint scope 2 (tonnes CO
2
e) Market based 7,55 3 10,927 20,758 31,679 34,281
Carbon footprint scope 3 (tonnes CO
2
e) 2,561,928 2,402,253 2,803,278 1,902,794 1,922,694
% reduction in absolute CO
2
e emissions for Scope 1 & 2 (Baseline: 2019) -51% * -56% -31% -7% N/A
Carbon footprint scope 1 (tonnes CO
2
e / 1,000 L paint produced) 0.03 0.02 0.02 0.02 0.02
Carbon footprint scope 2 (tonnes CO
2
e / 1,000 L paint produced) Location based 0.07 0.07 0.07 0.07 0.08
Carbon footprint scope 2 (tonnes CO
2
e / 1,000 L paint produced) Market based 0.02 0.03 0.06 0.08 0.09
Carbon footprint scope 3 (tonnes CO
2
e / 1,000 L paint produced) 5.41 6.35 5.68 4.3 3.84
Hempel Annual Report 2023
61Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Category 4: Upstream transportation and distribution
This category includes emissions from the transportation and distribution of raw
materials, as well as products to customers, that are not transported by Hempel
owned or controlled vehicles. Emissions in this category are calculated based on
data on distances converted to CO
2
e using factors from DESNZ.
Category 5: Waste generated in operations
The calculation of CO
2
e from waste generation is based on waste reported (as
described in the Waste generation section) and is converted to CO
2
e using fac-
tors from DESNZ.
Category 6: Business travel
A hybrid approach is used for business travel emissions. The distance-based
method is applied for business air travel using data provided by Hempel’s travel
agency. Business Travel by Air with Radiative Forcing emission factors are used
from the factors from DESNZ. The spend-based calculation principle is deployed
for terrestrial business travel by taxi, rental car and train, and converted to CO
2
e
using DEFRA indirect emission factors.
Category 7: Employee commuting
This category contains emissions from the transportation of employees between
their homes and their worksites. The average-data method is applied to estimate
the emissions from employee commuting based on the national average com-
muting patterns.
Category 9: Downstream transportation and distribution
This category contains emissions related to product distribution from our cus-
tomers’ delivery locations to their retail stores as well as our non-operational
control warehouses. A distance-based approach is used for the transportation
emissions, and converted to CO
2
e using factors from DESNZ. The energy con-
sumption is based on the footprint of our operational control warehouses, and is
extrapolated based on the area of the non-operational control warehouse that is
occupied by Hempel.
Category 11: Use of sold products
This category covers direct use-phase emissions (VOC emitted from products),
as well as indirect use-phase emissions (energy used in surface preparation and
application of products).
Volatile Organic Compounds (VOCs) in products
The calculation of CO
2
e from VOCs in products is based on the amounts of VOC
in products sold (i.e. grams per litre of product sold). All VOCs are converted to
carbon dioxide equivalent emissions using xylene as a representative profile.
Energy for application of products
The volume of sold paint is calculated based on actual production and sales
data. The data are split per country and recommended product application
method. The relevant country-specific emission factor (IEA dataset) is utilised to
determine energy consumption for each country. To account for surface prepara-
tion, an average coverage of the sold products is calculated based on products
supplied. The CO
2
e is calculated by applying an estimated abrasive blasting
emission factor (kg CO
2
e/m
2
).
Category 12: End of life treatment
The waste-type specific method is applied to the total volumes produced at
Hempel sites and at third-party toll manufacturing sites. A reduction of 15% in
product volumes for paint lost to the environment during application (see also
category 10.1 for the calculation of emissions related to VOCs in products) is
assumed in the calculation. The average waste recovery rates for 2010 to 2022
are used to determine total waste per treatment method, based on DEFRA waste
statistics.
The following categories were deemed insignificant or not relevant for Hempel:
Category 8: Upstream leased assets; Category 10: Processing of sold products;
Category 13: Downstream leased assets; Category 14: Franchises; Category 15:
Investments.
Carbon footprint scope 3 (tonnes CO
2
e)
Scope 3 covers all relevant categories in the Greenhouse Gas Protocol. The
emission factors used to convert to CO
2
e are from the following datasets:
• Ecoinvent 3.4
• Raw materials LCI database for the European coatings and printing ink indus-
tries (CEPE database)
• Department for Energy Security and Net Zero (DESNZ) (previously Defra,
2023 v.1.1)
• Intergovernmental Panel on Climate Change (IPCC) (2013)
• Defra input/output emission factors for indirect supply chain emissions (2020
v.1) (Defra indirect)
• Defra Recovery Rate from Non-Hazardous Construction and Demolition Waste
for the UK and England (2020) (Defra waste)
Category 1: Purchased goods and services
For purchased goods and services, office supplies and incidentals, a spend-
based approach is used. The spend data are converted to CO
2
e using Defra
indirect emission factors. Subcategory 1.2 (Raw materials and packaging) uses
an average-data approach. The calculation of CO
2
e from ingredients used in
Hempel’s production is based on the type and amount of raw materials con-
sumed during the year. For each type of raw material, a relevant conversion
is used as indicated by the CEPE database, or Ecoinvent 3.4 characterisation
factors are applied. The calculation of CO
2
e from packaging used in Hempel’s
production is based on volumes purchased by material type during the year. For
each type of packaging, a relevant conversion factor from DESNZ is used.
Category 2: Capital goods
A spend-based calculation method is applied to this category. The spend data
are converted to CO
2
e using Defra indirect conversion factors.
Category 3: Indirect energy
This category includes emissions from three activities: upstream emissions from
purchased fuels; upstream emissions from purchased electricity; and transmis-
sion and distribution (T&D) losses. The detailed information from scope 1 and 2
emissions is converted to scope 3 emissions using factors from DESNZ.
Hempel Annual Report 2023
62Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Social data
Lost Time Accident frequency
(number of accidents/1,000,000 working hours)
We use Lost Time Accidents (LTAs) as a key measure of workplace safety. LTA
frequency is calculated as the number of LTAs per one million working hours.
LTAs are defined as occupational accidents that result in at least one day’s
absence following the day of the accident, as recommended by a medical pro-
fessional. Days such as weekends, holidays and vacation are included. If the
employees go to work, even though a licensed healthcare professional advises
not to, the accident will be reported as an LTA. Similarly, if the employee stays
away from work without recommendation from a licensed healthcare profes-
sional, it is not included.
Only accidents involving employees employed directly or supervised by Hempel
are reported. The number of working hours used to calculate the LTA frequency
is based on the number of average full-time employees working for Hempel, mul-
tiplied by the most recent OECD average for actual working hours of 1,752 hours
per employee per year (2022: 1,716 hours).
Consumption of hazardous raw materials (kg/1,000 L paint produced)
Hazardous raw materials is a subset of raw materials used in Hempel’s produc-
tion, which is monitored and compiled based on formulations and production
data for specific products. The volume of paint produced includes all products
produced by and for the Hempel Group, including products with no red raw mate-
rial consumption.
A raw material falls under the Hazardous Raw Materials Programme if it carries
any of the following hazard classifications according to the UN’s Globally Harmo-
nised System of Classification and Labelling:
• Carcinogen mutagen reprotoxic (CMR) category 1A or 1B
• Acute toxic category 1, 2 or 3
• Respiratory sensitisers category 1, 1A or 1B
Or if the raw material has the following properties:
• Persistent, bioaccumulative and/or toxic chemicals (PBT) or very persistent,
very bioaccumulative (vPvB)
• Endocrine (hormonal) disruptors
Diversity 2023 2022 2021 2020 2019
Average full-time equivalents (FTEs) 7,403 7,343 6,746 6,099 6,219
Number of employees (headcount) 7,643 7,542 6,922 N/A N/A
Health & Safety 2023 2022 2021 2020 2019
Lost Time Accident frequency (number/million work hours) 1.62 1.19 1.72 1.61 2.68
Consumption of red raw materials (kg /1000 L paint
produced)*
47.8 8 50.65 26.67 7.90 8.09
* The scope of red raw materials was expanded during 2021 to include candidate list substances as well as respiratory sen-
sitives. The figures from 2019-2021 are therefore not directly comparable to 2022. During 2023 regulatory changes from
ATP18 were implemented causing additional raw materials to become a part of the programme.
Diversity in Hempel Group 2023 2022 Target for
the under-
represented
gender
Total Ratio female/
male
Total Ratio female/
male
General workforce (total employees 31 Dec 2023) 7,64 3 32/68 7,542 31/69
Leadership positions (3 directreports) 952 28/72 942 29/71 30% in 2024
Statutory gender reporting under Danish law
(only including Hempel A/S)
2023 2022 Target for
the under-
represented
gender
Total Ratio female/
male
Total Ratio female/
male
Board of Directors, excludingemployee-elected members 6 17 /8 3 6 17 /83 33 % in 2025
Upper Management* 40 28 /72 37 35 /65 29 % in 2024
* Upper management consists of Executive Group Management (EGM) and employees who report to
EGM with staff responsibility.
Hempel Annual Report 2023
63Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Or is listed on the Registration, Evaluation, Authorisation and Restriction of
Chemicals (REACH) Candidate list or Authorisation list (Annex XIV).
The list of raw materials is reviewed and updated on a frequent basis, and our
approach for reducing the amount of hazardous substances is split between
two tracks: Substitution and Major Category Challenge. The Substitution track
focuses on replacing existing raw materials with a less hazardous alternative,
while the Major Category Challenge track focuses on long-term plans for some of
the main ingredients in our paint products, resulting in position papers and over-
all business guidance related to the specific chemistry type.
Employee engagement 2023 2022 2021 2020 2019
Response rate 84% 83% 87% N/A* 90%
Satisfaction & Motivation 75 72 73 N/A* 74
Learning & Development 81 80 80 N/A* 80
* Employee engagement in 2020 was, due to COVID-19, only conducted among PC users. The data
for 2020 is therefore not directly comparable to other years.
Hempel Annual Report 2023
64Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Governance data
Percentage of employees required to complete the Code of Conduct refresher
The percentage is calculated as the number of employees who completed and
signed off on the Code of Conduct Refresher 2023 e-learning in Hempel’s Learn-
ing Management System out of the total target group, consisting of over 4,500
employees. The relevant target group consists of employees who:
• were active Hempel employees and regular PC users with access to Workday
from the day of the global roll-out on 19 October 2023 until the end of the
year
• were not on long-term leave, and not departing Hempel before year-end
• were not assigned the longer foundational Code of Conduct course in July
2023 or later. (The foundational course is assigned to all new PC-using
employees during onboarding.)
Compliance cases
The number of compliance cases includes all cases that are recorded in our
Hempel Ethics Hotline system, operated by NAVEX Global, and handled in accord-
ance with Hempel’s Ethics Hotline Policy. Such cases may have been submitted
directly to the Ethics Hotline website, reported to our Compliance Department or
management, or registered following an internal finding.
Hempel Procurement Sustainability Screening Programme
The number of suppliers screened is the number of screenings completed within
the current year and previous year. The percentage of direct and indirect spend
on screened suppliers is calculated by dividing the total direct and indirect spend
of the Hempel Group within the relevant year by the amount of direct and indirect
spend on screened suppliers within the last two years.
Code of Conduct 2023 2022 2021 2020 2019
Percentage of employees with a Hempel e-mail address who
completed and signed off on the Code of Conduct Refresher
99% 100% 100% 100% 100%
Compliance cases 2023 2022 2021 2020 2019
Open compliance cases, beginning of the period 15 23 23 16 25
New compliance cases reported during the year 69 44 46 30 34
- Environment, health & safety - 3 3 2 0
- Work environment 29 13 13 3 1
- Integrity 40 28 30 25 33
Compliance cases closed as substantiated during the year 34 21 23 11 18
Compliance cases closed as unsubstantiated during the year 33 31 23 12 25
Total cases under investigation, end of period 17 15 23 23 16
Sustainability Procurement Screening Programme 2023 2022 2021 2020 2019
Suppliers screened 29 77 41 N/A N/A
% of direct and indirect spend suppliers screened through
Hempel Procurement Sustainability Screening
44% 40% 22% N/A N/A
Hempel Annual Report 2023
65Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Topic Disclosures What is Hempel doing Reference
Governance
a. Describe the board’s oversight of climate-
related risks and opportunities.
The Board of Directors maintains full overview of Hempel’s key risks, including any risks and oppor-
tunities related to climate and/or environmental sustainability. The risk identification process, as
well as risk reporting, is anchored in our Enterprise Risk Management (ERM) Policy.
The Board of Directors has overall responsibility for reviewing and challenging the top key risks on a
biannual basis; the Audit Committee has responsibility for overseeing the effectiveness of the risk
management activities.
Page 42-45 (Sustainability
governance)
b. Describe management’s role in assess-
ing and managing climate-related risks and
opportunities.
Executive Group Management, including the Risk Committee, oversees our risk management pro-
cess on a quarterly basis. This also includes a holistic review of the key risks in our segments and
functions. Furthermore it is the Executive Group Management’s role
to ensure that the risk appetite in our strategy, objectives, and business model is appropriate to
ensure a sustainable business.
Page 42-45 (Sustainability
governance)
Strategy
a. Describe the climate-related risks and oppor-
tunities the organisation has identified over the
short, medium, and long term.
Climate change is one of the top risks to Hempel and has the potential to impact our business
in the short, medium and long term. We are exposed to various physical risks from the effects of
climate change, both at our factories and our R&D centres around the world. The risks include
extreme weather and water scarcity, as well as the fact that our products contain volatile organic
compounds (VOC) and solvents. Further, we must ensure that our production facilities are ade-
quately protected to secure resilience. We assess risk stemming from the changing physical envi-
ronment – such as acute and chronic weather changes (e.g., flood, fires, droughts, increasing
temperatures and rising sea levels) – as part of our overarching ERM process.
Potential regulatory risks associated with the shift to a low carbon emissions economy may impact
governmental regulation and our ability to deliver on our strategic objectives. The potential regu-
latory risk can have a significant impact on our ability to manufacture our products in their current
form. Although these risks are significant, they also present opportunities for R&D, new product
development and recycling.
Page 42-45 (Risk management)
b. Describe the impact of climate-related risks
and opportunities on the organisation’s busi-
nesses, strategy, and financial planning.
The potential impacts of climate change are taken into account when we assess our top enter-
prise-wide risks. The materiality assessment highlighted the most material issues for Hempel
to focus on, including greenhouse gas (GHG) emissions, resource consumption, waste disposal,
hazardous materials, and social and economic inequality.
Page 27 (Futureproof), 42-45
(Risk management)
c. Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario.
We have performed a scenario analysis for our science-based targets. This is the starting point we
are using to formulate our climate adaptation strategy to ensure long-term business continuity.
Page 28-29 (Science-based
targets)
Risk
management
a. Describe the organisation’s processes for
identifying and assessing climate-related risks.
The process for assessing and identifying climate-related risks is the same as identifying any other
principal business risks. The overall process is an integral part of the ERM framework, which ena-
bles us to assess risks and opportunities in a consistent manner.
Our current method is based on a scenario analysis in which we evaluate risks based on the possi-
ble risk scenario and how it could impact our objectives.
Page 42-45 (Risk management)
b. Describe the organisation’s processes for
managing climate-related risks.
We continue to review our business risks and opportunities consistently. The top key risks are
reported to our Executive Group Management and the Board of Directors according to our
ERM framework and our Annual Enterprise Risk Management Cycle.
Page 42-45 (Risk management)
c. Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organisation’s overall risk
management.
We continue to consider and integrate climate-related matters into our overarching ERM framework
in order to identify and analyse relevant climate-related data. We are also continuing to develop
tools and explore opportunities for third-party data to measure and quantify climate-related risks.
Page 42-45 (Risk management)
Metrics
& targets
a. Disclose the metrics used by the organisation
to assess climate-related risks and opportuni-
ties in line with its strategy and risk manage-
ment process.
We report on environmental targets and KPIs in our annual report. Relevant metrics include energy
consumption, waste generation and disposal method, GHG emissions, carbon intensity and haz-
ardous materials management.
Page 60-65 (ESG data)
b. Disclose Scope 1, Scope 2 and, if appropri-
ate, Scope 3 greenhouse gas (GHG) emissions
and the related risks.
We report absolute CO
2
emissions on Scope 1, 2 and 3 in our annual report. We report according to
the Greenhouse Gas Protocol and our data reporting is subject to a limited assurance statement by
our independent auditors.
Page 28-29 (Science-based
targets)
Page 60-65 (ESG data)
c. Describe the targets used by the organisation
to manage climate-related risks and opportuni-
ties and performance against targets.
We have set validated science-based targets for Scope 1, 2 and 3 CO
2
e emissions. We are proud to
have earned a B rating by CDP, recognising our work on tackling climate change through
environmental management. We are committed to the UN Global Compact, Climate Group’s EV100,
and disclosure through the EcoVadis platform.
Page 28-29 (Science-based
targets)
Page 49 (ESG ratings and
benchmarks)
TCFD Table
Hempel Annual Report 2023
66Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Target summary
Futureproof pillars Hempel Sustainability targets SDGs 2023 status Page no
PERFORMANCE 90% reduction of Scope 1 & 2 CO
2
e emis-
sions by 2026 (2019 baseline)
For our Scope 1 & 2 CO
2
e emissions, we achieved a reduction of 51% in 2023. 4
Achieve zero waste to landfill at our produc-
tion sites by end of 2025
In 2023, we reduced waste to landfill by 69% at Hempel's production sites compared to 2022. Compared to our baseline year of
2019, this is a total reduction of 95% (using a comparative baseline that excludes acquisitions).
31
PRODUCTS Reduce CO
2
e emissions in our value chain
by 50% by 2030 (Scope 3)
We saw an increase of 7% in our value chain (Scope 3) CO
2
e emissions in 2023, compared to 2022. This is in line with our
increased production volume. In 2023, we progressed our efforts around Scope 3 with continued focus on our three value chain
decarbonisation themes: Use less, Sell different and Improve existing.
30
Complete a five-year plan for reducing and
phasing out hazardous materials
In 2023, we removed or found less hazardous substitutes for 29 raw materials through our Hazardous Raw Materials
Programme.
30, 33, 63
Achieve 50% recycled plastic in primary
plastic packaging by end of 2025
In 2023, we reached 49% recycled content (from 0% in 2017). As a result, we decided to expand the scope of our 2025 target
to include all plastic packaging (primary and secondary) across all our customer segments: Decorative, Marine, Energy and
Infrastructure.
30
PEOPLE Build an even stronger safety culture and
eliminate all Lost Time Accidents and other
injuries
In 2023, despite our increased focus on safety, our Lost Time Accident (LTA) frequency increased slightly from 1.19 per 1,000,000
working hours in 2022 to 1.62 per 1,000,000 working hours in 2023. We will continue to focus on this in 2024 and beyond.
33, 63
Achieve the targets of 33% women in gen-
eral workforce and 30% women in leader-
ship by 2024
In 2023, 32% of our general workforce were women. At the same time, 28% of our leaders (defined as people with 3 or more direct
reports) were women.
59
PARTNERS Reduce customer emissions by at least 30
million tonnes CO
2
e by 2025
In 2023, our high performance hull coatings helped customers in the maritime industry reduce their CO
2
e emissions by 6.5 million
tonnes. This is an improvement of 16% compared to 2022 (5.6 million tonnes). Fuel savings are calculated based on Hempaguard's
speed loss reductions and out of dock fuel savings compared to the market average speed loss estimated by IMO (2009). These
are multiplied by the number of vessels using Hempaguard annually during drydock, with assumptions on service life, consumption,
and activity. The resulting savings are converted to CO
2
emission reductions using BEIS Greenhouse Gas Conversion Factors.
18
1.3 million cans collected and recycled
through the Can Back Scheme
We reached 1.4 million paint cans collected and recycled through our Can Back Scheme in the UK & Ireland. We are participating
in similar recycling schemes in Australia, New Zealand and France.
17
Promote and further good ethical behaviour
and environmental practices in our supply
chain
In 2023, Hempel Group Procurement screened 49 suppliers; 29 for the first time and 20 to follow up on low performance in
earlier years. In total, this brought the spend covered by the screening to 44%. During 2023, we piloted the screening in tenders
for selected categories.
48
67Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Financial
statements
→ Consolidated financial statements
→ Parent company financial statements
We delivered our best financial result
ever in 2023 with a revenue of EUR
2,351m and and EBITDA of EUR
337m.
337
EBITDA EUR MILLION
68 Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Consolidated financial statements
Notes
1. Basis of preparation
1.1 General accounting policies
. . . . . . . . . . . . . . . . . . . . . . . 74
1.2 Significant accounting estimates and judgements
. . . . . . . 77
2. Results for the year
2.1 Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
2.2 Employee costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2.3 Other operating income and expenses
. . . . . . . . . . . . . . . 81
2.4 Special items
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
2.5 Income tax, tax assets and liabilities
. . . . . . . . . . . . . . . . 82
3. Operating assets and liabilities
3.1 Intangible assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
3.2 Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . 89
3.3 Leases
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3.4 Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
3.5 Trade receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
3.6 Pensions and similar obligations
. . . . . . . . . . . . . . . . . . . 95
3.7 Provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
3.8 Other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
4. Capital structure and financing items
4.1 Share capital, distribution to shareholder
. . . . . . . . . . . . . 99
4.2 Borrowings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4.3 Financial risks
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.4 Financial instruments
. . . . . . . . . . . . . . . . . . . . . . . . . . 104
4.5 Financial income and expenses
. . . . . . . . . . . . . . . . . . . 105
4.6 Discontinued operations, assets and
liabilities held for sale
. . . . . . . . . . . . . . . . . . . . . . . . . . 106
5. Other disclosures
5.1 Fee to the auditors appointed at the General Meeting
. . . . 107
5.2 Adjustment for non-cash items
. . . . . . . . . . . . . . . . . . . . 107
5.3 Contingent liabilities and other commitments
. . . . . . . . . . 107
5.4 Events after the reporting period
. . . . . . . . . . . . . . . . . . 107
5.5 Related parties and ownership
. . . . . . . . . . . . . . . . . . . 108
5.6 The Hempel Group
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.7 Financial definitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Primary statements
Revenue and earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Consolidated statement of profit and loss
. . . . . . . . . . . . . . . . 68
Consolidated statement of comprehensive income
. . . . . . . . . 68
Financial position and related key figures
. . . . . . . . . . . . . . . . 69
Consolidated statement of financial position
. . . . . . . . . . . . . 70
Consolidated statement of changes in equity
. . . . . . . . . . . . . 71
Cash flow
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Consolidated cash flow statement
. . . . . . . . . . . . . . . . . . . . . 73
69Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Consolidated statement of profit and loss Consolidated statement of comprehensive income
Note (EUR m) 2023 2022
2.1 Revenue 2,351 2,159
2.4 Production costs - 1,436 - 1,375
Gross profit 915 784
2.4 Sales and distribution costs - 561 - 552
2.4 Administrative costs - 165 - 121
2.3 Other operating income - 4
2.3 Other operating expenses - - 1
Operating profit 189 114
4.5 Financial income 14 12
4.5 Financial expenses - 121 - 70
Profit before tax 82 56
2.5 - 21 - 19
Income tax
Net profit for the year from continuing operations
4.6 Net loss for the year from discontinued operations - 11 - 2
Net profit for the year 50 35
Attributable to:
Equity holders of the parent company 41 46
Non-controlling interests 9 - 11
Net profit for the year 50 35
Note (EUR m) 2023 2022
Net profit for the year 50 35
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange rate differences on translation of foreign operations 1 - 23
4.4 Value adjustments of hedges - 5 -
2.5 Tax on other comprehensive income - 1 2
Items that will not be reclassified to profit or loss:
3.6 Remeasurements of defined benefit obligations - 1 5
2.5 Tax on other comprehensive income - - 1
Other comprehensive income for the year, net of tax - 6 - 17
Total comprehensive income for the year 44 18
Attributable to:
Equity holders of the parent company 37 26
Non-controlling interests 7 - 8
Total comprehensive income for the year 44 18
70Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Consolidated statement of financial position
31 December
Note (EUR m) 2023 2022
3.1 Intangible assets 761 765
3.2 Property, plant and equipment 492 511
3.3 Right-of-use assets 136 161
Other financial assets 13 13
2.5 Deferred tax assets 112 94
Total non-current assets 1,514 1,544
3.4 Inventories 332 343
3.5 Trade receivables 505 476
Income tax receivables 18 4
Prepayments 18 17
Other receivables 71 70
Cash 209 180
4.6 Assets held for sale - 21
Total current assets 1,153 1,111
Total assets 2,667 2,655
Note (EUR m) 2023 2022
4.1 Share capital 15 15
Translation reserve - 24 - 25
Cash flow hedging - 4 -
Retained earnings 490 529
Proposed dividend for the year 25 -
Shareholders in Hempel A/S’s share of equity 502 519
Non-controlling interests 57 28
Total equity 559 547
4.2 Borrowings 1,034 901
3.3 Lease liabilities 105 129
3.7 Provisions 36 36
3.6 Pensions and similar obligations 19 16
2.5 Deferred tax liabilities 77 99
Total non-current liabilities 1,271 1,181
4.2 Borrowings 53 100
3.3 Lease liabilities 35 36
Trade payables 332 355
5.5 Payables to parent companies 57 66
Deferred income 8 7
3.7 Provisions 10 11
Income tax payables 41 26
3.8 Other liabilities 301 320
4.6 Liabilities held for sale - 6
Total current liabilities 837 927
Total liabilities 2,108 2,108
Total equity and liabilities 2,667 2,655
71Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Consolidated statement of changes in equity
Note (EUR m) Share
capital
Translation
reserve
Cash flow
hedging
Retained
earnings
Proposed
dividend
Shareholders
in Hempel A/S’
share of equity
Non-
controlling
interest
Total
equity
Equity at 1 January 2022 15 - 1 - 479 33 526 41 567
Net profit for the year - - - 46 - 46 - 11 35
Other comprehensive income - - 24 - 4 - - 20 3 - 17
Total comprehensive income for the year - - 24 - 50 - 26 - 8 18
Transactions with owners in their capacity as owners:
Paid dividends - - - - - 33 - 33 -5 - 38
Total transactions with owners - - - - - 33 - 33 - 5 - 38
4.1 Equity at 31 December 2022 15 - 25 - 529 - 519 28 547
Equity at 1 January 2023 15 - 25 - 529 - 519 28 547
Net profit for the year - - - 41 - 41 9 50
Other comprehensive income - 1 - 4 - 1 - - 4 - 2 - 6
Total comprehensive income for the year - 1 - 4 40
Transactions with owners in their capacity as owners:
Paid extraordinary dividend - - - - 26 - - 26 - - 26
Paid dividend - - - - - - - 5 - 5
Proposed dividend - - - - 25 25 - - -
Transactions with non-controlling interests
1
Total transactions with owners - - - - 79 25 - 54 22 - 32
4.1 Equity at 31 December 2023 15 - 24 - 4 490 25 502 57 559
1
On 28 June 2023, the remaining 35% of shares in the JWO Group, previously recognized as non-controlling interests, were
acquired. The non-controlling interests related to the 35% of shares have been transferred directly to retained earnings.
72Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Consolidated cash flow statement
Note (EUR m) 2023 2022
Cash flows from financing activities
4.4 Repayment of lease liabilities -38 - 42
Proceeds from borrowings 188 254
Repayment of borrowings - 105 - 95
Transactions with shareholders:
4.1 Dividend distributed to shareholders - 26 - 33
4.1 Dividend distributed to and other transactions with non-controlling interests - 7 - 5
Total cash flows from financing activities 12 79
Net cash flow 41 15
Cash beginning of year 183 176
Exchange adjustment -15 - 8
Cash end of year 209 183
Note (EUR m) 2023 2022
Cash flows from operating activities
Operating profit 189 114
Operating profit from discontinued operations - 11 - 5
5.2 Adjustment for non-cash items 172 105
Total cash flows from operating activities before financial items, tax and
changes in working capital 350 214
Changes in working capital:
Change in receivables - 62 - 97
Change in inventories 1 - 10
Change in trade payables, other liabilities etc. - 26 32
Total change in working capital - 87 - 75
Total cash flows from operating activities before financial items and tax 263 139
Income tax paid - 62 - 27
Interest received 12 5
Interest paid - 86 - 45
Total cash flows from operating activities 127 72
Cash flows from investing activities
Purchase of property, plant and equipment -71 - 84
Purchase of intangible assets -34 - 28
Sale of property, plant and equipment 1 5
Acquisition of enterprises - - 28
Divestment of enterprises 6 -
Change in deposits, net - - 1
Total cash flows from investing activities - 98 - 136
Free cash flow 29 - 64
73Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
1 Basis of preparation
Introduction
The consolidated financial statements of
Hempel A/S for the period 1 January –
31 December 2023 comprise Hempel A/S
and its subsidiaries (the Group).
The Board of Directors considered and approved
the 2023 Annual Report of Hempel A/S on 4
March 2024. The Annual Report will be submitted
to the shareholders of Hempel A/S for approval at
the Annual General Meeting on 2 May 2024.
Accounting policies
The consolidated financial statements have been
prepared in accordance with the IFRS accounting
standards as endorsed by the EU and additional
Danish disclosure requirements applying to enti-
ties of reporting class C for large companies.
The notes are grouped in sections and include the
relevant accounting policies. The Group’s signif-
icant accounting estimates and judgements are
described in note 1.2 Significant accounting esti-
mates and judgements.
Basis of measurement
The consolidated financial statements have been
prepared under the historical cost basis, except
for derivative financial instruments and assets
held for sale that are measured at fair value.
The accounting policies have been applied consist-
ently in the preparation of the consolidated finan-
cial statements and for the comparative figures.
Assets held for sale and discontinued
operations
Non-current assets and disposal groups are clas-
sified as held for sale when their carrying amount
will be recovered through a sale transaction rather
than through continuing use. Non-current assets
and disposal groups are measured at the lower of
the carrying amount and fair value less costs to
sell. Costs to sell are the incremental costs directly
attributable to the disposal of the disposal group,
excluding financial costs and income tax. Property,
plant and equipment, intangible assets and right-
of-use assets are not depreciated or amortised
once classified as held for sale. Assets and liabili-
ties held for sale are presented separately as cur-
rent items in the statement of the financial posi-
tion. Discontinued operations are excluded from
the results of the continuing operations and pre-
sented as a single amount in profit and loss after
tax from discontinued operations in the statement
of profit and loss. For discontinued operations,
comparatives are restated in the statement of
profit and loss. Refer also to note 4.6 Discontin-
ued operations, assets and liabilities held for sale.
New standards, interpretations
and amendments adopted
The Group applied certain standards, interpre-
tations and amendments, which are effective for
annual periods beginning on or after 1 January
2023: Amendments to IAS 1, IAS 8, IAS 12 and
IFRS 17.
The amendments listed above did not have any
impact on the amounts recognised in current or
prior periods and are not expected to significantly
affect future periods.
Changes to IAS 12 Income taxes
The changes to IAS 12 provides a temporary relief
from the requirement to recognise and disclose
deferred taxes arising from enacted or substan-
tively enacted tax law that implements the Pillar
two model rules published by the OECD, including
tax law that implements qualified domestic mini-
mum top-up taxes. Reference is made to note 2.5
Income tax, tax assets and liabilities.
New standards and interpretations
not yet adopted
Certain new accounting standards and interpreta-
tions that have been published are not mandatory
for the 31 December 2023 reporting period and
have not been early adopted by the Group. These
standards are not expected to have a material
impact on the Group in future reporting periods, or
on foreseeable future transactions.
Basis of consolidation
The consolidated financial statements comprise
the parent company, Hempel A/S, and entities
controlled by Hempel A/S (subsidiaries). Control
is achieved when the Group is exposed to, or has
a right to variable returns from, its involvement
with the investee and has the power to affect
those returns through its power over the investee.
Subsidiaries are consolidated from the date on
which control commences until the date on which
control ceases.
Control is usually achieved by directly or indirectly
owning, or in other ways controlling, more than
50% of the votes or other rights through agree-
ments of management control. De facto control
and other potential voting rights at the balance
sheet date are also considered when determin-
ing whether control is achieved. Consolidation is
1.1 General accounting policies
74Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
performed by summarising the financial state-
ments of the parent company and its subsidiaries.
On consolidation, items of a uniform nature are
combined. Elimination is made of intercompany
income and expenses, shareholdings, dividends
and intra-Group balance accounts as well as of
realised and unrealised gains and losses on trans-
actions between the consolidated enterprises.
When the Group loses control of a subsidiary, it
derecognises assets (including goodwill), liabili-
ties, the carrying amount of any non-controlling
interests and components of other comprehensive
income attributable to the non-controlling inter-
ests. Any gain or loss is recognised within other
operating income and expenses.
The acquisition method of accounting is used to
account for business combinations by the Group.
Non-controlling interests
Non-controlling interests’ share in the results
and equity of subsidiaries is shown separately
in the consolidated statement of profit and loss,
statement of comprehensive income, statement
of financial position and statement of changes in
equity, respectively.
The Group treats transactions with non-controlling
interests that do not result in a loss of control
as transactions with equity owners of the Group.
A change in ownership interest results in an
adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect
their relative interests in the subsidiary. Any dif-
ference between the amount of the adjustment
to non-controlling interests and any consideration
paid or received is recognised in retained earnings
within equity.
Where a non-controlling interest holds a put option
to sell the remaining minority shares to the Group,
a liability is recognised in the statement of finan-
cial position at fair value calculated as the pres-
ent value of the exercise price of the option. Any
subsequent adjustment to the fair value of the put
option is recognised directly within equity under
retained earnings.
Presentation currency
The functional currency of the parent company is
DKK, however the consolidated financial state-
ments are presented in million EUR as the Group
operates in a global environment with international
stakeholders.
Translation of transactions and balances
in foreign currencies
Items included in the financial statements of each
of Hempel’s entities are measured using the cur-
rency of the primary economic environment in
which the entity operates (functional currency).
Transactions denominated in other currencies
than the functional currency are considered trans-
actions denominated in foreign currencies.
Transactions in foreign currencies are translated
into the functional currency defined for each com-
pany using the exchange rates prevailing at the
date of transaction.
Receivables, payables and other monetary
items in foreign currencies are translated at
the exchange rates on the balance sheet date.
Foreign exchange differences arising between
the exchange rates at the transaction date and
at the date of payment are recognised as for-
eign exchange gains and losses in the state-
ment of profit and loss as financial income or
financial expenses.
Non-monetary items recognised in foreign curren-
cies are measured at the transaction date rates
and are not retranslated subsequently.
Translation of Group companies
The results and financial position of foreign
operations with a functional currency other than
EUR (and which is not the currency of a hyperinfla-
tionary economy) are translated into the presenta-
tion currency EUR as follows:
― assets and liabilities are translated at the
exchange rate on the balance sheet date
― income and expenses in profit and loss and in
the statement of comprehensive income are
translated at monthly average exchange rates
(unless this is not a reasonable approximation
of the rates prevailing on the transaction dates,
in which case income and expenses are trans-
lated at the dates of the transactions)
― share capital denominated in a currency that
differs from the presentation currency of the
consolidated financial statements is translated
at historical cost
― all resulting exchange differences are recog-
nised in other comprehensive income and attrib-
uted to a separate translation reserve in equity.
However, where the foreign entity is not wholly-
owned, a proportion of the translation differ-
ence is allocated to the non-controlling interests.
Foreign currency translation adjustments of a loan
to or borrowings from subsidiaries which are nei-
ther planned nor likely to be settled in the foresee-
able future, and which are therefore considered to
form part of the net investment in the subsidiary,
are recognised directly in other comprehensive
income under the separate translation reserve
within equity. When a foreign operation is derec-
ognised, the associated cumulative exchange
rate differences are reclassified to profit or loss,
as part of the gain or loss on sale. Repayment of
loans considered a part of the net investment in
a subsidiary is not considered a disposal when
Hempel retains its proportionate ownership inter-
ests, thus the cumulative exchange difference is
not reclassified to profit and loss.
1.1 General accounting policies — continued
75Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Goodwill and fair value adjustments arising on the
acquisition of a foreign operation are treated as
assets and liabilities of the foreign operation.
Hyperinflation
In foreign subsidiaries that operate in hyperin-
flationary economies, income and expenses are
translated into the presentational currency EUR
at the exchange rate at the balance sheet date.
Prior to translating the financial statements of for-
eign operations in hyperinflationary economies,
the income statement and non-monetary balance
sheet items are restated taking into account
changes in the general purchasing power of the
functional currency based on the inflation up to
the balance sheet date (’inflation adjustment’).
The effect of the inflation adjustment is recognised
in Other comprehensive income within the trans-
lation reserve. In the income statement, gain/loss
on the net monetary position in the foreign entities
is recognised as financial income or expense. The
assessment as to when an economy is hyperinfla-
tionary is based on qualitative as well as quanti-
tative factors, including whether the accumulated
inflation over a three-year period exceeds 100%.
Currently, Turkey, which entered into hyperinflation
as of 30 June 2022, and Argentina are considered
hyperinflationary economies and thus the Group’s
operations in Argentina and Turkey have been
remeasured in accordance with the principles
described, applying the national Consumer Price
Index (CPI) of Argentina and Turkey, respectively,
for the inflation adjustment. The effect on the
opening balance of Turkey entering into hyperinfla-
tion in 2022 was recognised directly within equity
under retained earnings.
Classification of operating expenses in the
statement of profit and loss
Production costs
Production costs comprise costs incurred to
achieve revenue for the year. Costs comprise raw
materials, consumables, direct labour costs and
indirect production costs, such as maintenance
and amortisation and depreciation, as well as
costs for operation, administration and manage-
ment of factories. Production costs also include
research and development costs that do not
qualify for capitalisation as well as amortisation
of capitalised development costs (except for amor-
tisation of business application software). Write-
downs of inventory are also included.
Sales and distribution costs
Sales and distribution costs comprise costs
incurred to distribute sales and for sales cam-
paigns, including costs for sales and distribu-
tion staff, advertising costs, depreciation of
sales equipment and amortisation of customer
relationships.
Administrative costs
Administrative costs comprise costs incurred for
management and administration of the Group,
including costs for administrative staff and man-
agement as well as office costs, depreciations and
write-downs for bad debt. Amortisation of brands
and software business applications are also rec-
ognised in administrative costs.
Cash flow statement
The statement of cash flows is presented using
the indirect method. The statement of cash flows
for the Group shows the cash flows for the year,
broken down into operating, investing and financ-
ing activities and changes in the Group’s cash and
cash equivalents from the beginning of the year to
the end of the year. The statement of cash flows
cannot be immediately derived from the published
financial records.
Cash flow from operating activities
Cash flow from operating activities is calculated as
the operating profit/loss for the year adjusted for
changes in working capital, non-cash items such
as depreciation, amortisation and impairment
losses and provisions as well as interest and tax
paid.
Cash flow from investing activities
Cash flow from investing activities comprises cash
flows from purchases and disposals of intangible
assets, property, plant and equipment and acqui-
sitions of enterprises.
Cash flow from financing activities
Cash flow from financing activities comprises cash
flows from raising and repayment of principal long-
term and short-term debt, including repayment of
lease liabilities as well as payments to and from
shareholders.
Cash flow in currencies other than the functional
currency
Cash flow in currencies other than the functional
currency are translated at the average exchange
rates for the month, unless these differ signifi-
cantly from the rates at the transaction date, in
which case the exchange rate at the transaction
date is applied.
Cash
Cash comprises cash at hand and bank deposits.
1.1 General accounting policies — continued
76Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
1.2 Significant accounting estimates and judgements
In preparation of the consolidated financial state-
ments, management is required to make various
accounting judgements and estimates that affect
the reported amounts of assets, liabilities, income
and expenses, including the related disclosures.
A degree of uncertainty is involved in carrying out
these judgements and estimates which could
result in adjustments to the carrying amount of
assets and liabilites in future periods.
The judgements, estimates and the related
assumptions made are based on historical expe-
rience and other factors that management con-
siders to be reasonable under the given circum-
stances. Estimates and judgements are reviewed
on an ongoing basis.
The Group’s significant accounting estimates and
judgements are described below.
Significant accounting estimates
The significant accounting estimates are those
that have a significant risk of resulting in a mate-
rial adjustment to the carrying amounts of assets
and liabilities in the following reporting period.
Warranties
The Group generally offers warranties for its prod-
ucts. Management makes estimates regarding
the related provisions, including the probability
of pending legal disputes and future litigation
outcomes. When determining the most likely out-
come, management considers input from internal
and external counsel, historical warranty claim
information, as well as recent trends that might
suggest that historic cost levels do not accurately
represent an approximation of the costs of future
claims. The assumptions made in relation to the
current period are consistent with those in the
prior year. Factors that could impact the estimated
amounts include whether the claims are deemed
valid, to which extent the claims are covered by
the product warranty and estimates of the costs of
coating and other associated costs for remediat-
ing any product failure. Reference is made to note
3.7 Provisions for information about the Group’s
warranty provision.
The Group has taken out insurance against prod-
uct failures. The product failure insurance is, to
a certain extent, linked to the size and nature of
claims. This reduces the overall exposure to war-
ranty claims and the potential net impact on profit
and loss from claims.
Uncertain tax positions
Hempel has activities and subsidiaries in many
different countries, and therefore is subject to
income taxes in tax jurisdictions around the world.
Uncertain tax positions relate to uncertainty in the
interpretation of tax legislation in the countries
Hempel operates in.
Significant estimates and judgements are required
when determining the worldwide accrual for
income taxes, deferred income tax assets and lia-
bilities, and provision for uncertain tax positions.
In the course of conducting business globally,
transfer pricing disputes with tax authorities may
occur, and management’s judgement is applied
to assess the possible outcome of such disputes.
Hempel believes that the provision made for
uncertain tax positions is adequate. However, due
to the uncertainty, there is a possibility that, on
conclusion of open tax matters at a future date,
the final outcome may differ significantly. Refer-
ence is made to note 2.5 Income tax, tax assets
and liabilities.
Valuation of deferred tax assets
The deferred tax assets comprise carry-forward
tax losses expected to be utilised and temporary
differences.
The Group recognises deferred tax assets, includ-
ing the expected value of carry-forward tax losses,
based on an assessment of the recoverability of
the deferred tax assets.
The assessment of the recoverability of the
deferred tax assets involves estimates by manage-
ment as to the likelihood of the utilisation of the
deferred tax assets within a foreseeable future.
This depends on a number of factors, including
whether there will be sufficient taxable profits
available in future periods, against which the car-
ry-forward tax losses can be utilised. In the event
that actual future taxable profits generated are
less than expected, and depending on the tax
strategies that the Group may be able to imple-
ment, impairment of the deferred tax assets may
be required. Reference is made to note 2.5 Income
tax, tax assets and liabilities.
Impairment test of goodwill
In performing the annual impairment test, manage-
ment assesses whether the groups of Cash Gen-
erating Units (CGUs) to which the goodwill relates
will be able to generate sufficient positive net cash
flows to support their carrying amount together
with other net assets of the respective groups of
CGUs. This assessment is based on estimates of
expected future cash flows. The cash flows are
derived from the forecast for the next five years
and do not include restructuring activities that
Hempel is not yet committed to or significant
future investments that will enhance the perfor-
mance of the assets of the groups of CGUs being
tested. The recoverable amount is sensitive to the
discount rate used, as well as the expected future
cash inflows and the terminal growth rate used
for extrapolation purposes. The key assumptions
used to determine the recoverable amount for the
different groups of CGUs are disclosed and further
explained in note 3.1 Intangible assets.
77Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Impairment test of brand
In performing the annual impairment test of the
Farrow & Ball brand, management assesses
whether the brand will be able to generate suffi-
cient positive net cash flows to support the carry-
ing amount of the brand. The assessment is per-
formed using a relief-from-royalty method based
on expected future cash flows generated from the
royalty savings attributable to owning the brand.
The expected cash flows are based on assump-
tions about the royalty rate, expected future rev-
enue and the discount rate. The key assumptions
used to determine the recoverable amount of the
brand are disclosed and further explained in note
3.1 Intangible assets.
Impairment test of Decorative Germany and
France CGU
An impairment test of Decorative Germany and
France CGU has been performed based on a fair
value less costs of disposal model. The signifi-
cant estimates relate to improvements of revenue
through volume increases, development in fixed
expenses and the discount rate.
The applied assumptions are based on expecta-
tions for market development, expansion of our
relationship with key customers and increased
focus on toll manufactoring and optimization of
production capacity. Refer to note 3.2 Property,
plant and equipment.
A change in key estimates, i.e. a decrease/
increase in EBITDA margin in the terminal period
by 0.5% would result in a decrease/increase in
impairment loss of EUR 10 million, whereas an
increase or decrease in the long-term growth rate
of 0.5% would result in an decrease in impairment
loss of EUR 6 million, respectively an increase of
EUR 5 million. If the development of net working
capital in the terminal period was affected posi-
tively or adversely by 5%, a decrease, or a corre-
sponding increase, in impairment loss of EUR 13
million would have been recognised in the financial
statements. An increase in the discount rate of 1%
would result in an additional impairment of EUR
12 million, where a corresponding decrease of 1%
would positively impact the recoverable amount by
EUR 17 million.
Significant accounting judgements
The significant judgements, apart from those sst-
hat involve estimations, are the judgements that
management made in the process of applying the
Group’s accounting policies and that have the
most significant effect on the amounts recognised
in the consolidated financial statements.
Useful life of brands
Management has assessed that certain brands,
mainly the Farrow & Ball brand, have indefinite
useful life as there is no foreseeable limit to the
period over which the brand is expected to gen-
erate net cash inflows, based on the brand being
well-established in its markets, having existed for
decades and having no legal, regulatory, contrac-
tual, competitive, economic or other factors limit-
ing the useful life of the brand.
1.2 Significant accounting estimates and judgements — continued
78Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2 Results for the year
Accounting policies
The Group mainly generates revenue from the
sale of paints and coatings (goods for resale and
finished goods) based on prices and conditions
stated in the contracts with customers. Sale of
finished goods comprises business-to-business
sales and, in the Decorative customer category,
also retail sales. In addition, the Group generates
a minor part of its revenue from provision of tech-
nical services.
Revenue from sale of paints and coatings is rec-
ognised when the related performance obligation
is satisfied by transferring control of the promised
goods to a customer. The Group’s customer con-
tracts usually include only a single performance
obligation. Control of the paints and coatings is
obtained when the goods are transferred to the
customer. Where the Group provides technical
services, including advice, training, project over-
sight and surface management services, etc., rev-
enue is recognised over time as the services are
rendered.
Revenue from contracts with customers is meas-
ured at an amount that reflects the considera-
tion to which Hempel expects to be entitled in
exchange for those goods and services (transac-
tion price), which normally comprises the price
specified in the contract, net of discounts and
customer bonuses.
The Group offers various discounts, including
rebates, bonuses, volume discounts and pay-
ments to customers depending on the nature of
the customer and business. These discounts are
considered variable consideration. Bonuses and
discounts payable to a customer are accrued
for as the related performance obligations are
satisfied and revenue is recognised. Historical
experience is used to estimate and provide for the
discounts, using the expected value method. Vari-
able consideration related to discounts is only rec-
ognised as revenue to the extent that it is highly
probable that a significant reversal will not occur
in a later period. In the case of expected returns,
a refund liability and a right to the returned goods
(included in other current assets) are recognised
for the products expected to be returned.
Revenue
The vast majority of the Group’s performance
obligations are satisfied within one year or less.
Amounts for remaining performance obliga-
tions (order backlog) are therefore not disclosed
in accordance with the practical expedient in
IFRS 15.121.
Payments from customers are due depending on
the type of customer and local business prac-
tices, though typically within 30-90 days. Longer
credit terms are provided in certain countries,
though normally not exceeding 180 days. Retail
payments are normally due immediately after con-
trol of the goods has transferred to the customer.
Accordingly, no significant element of financing is
present.
Disaggregation of revenue
The following table displays revenue disaggregated
into sale of goods per geographical region:
(EUR m) 2023 2022
EMEA 1,338 1,240
Asia-Pacific 750 653
Americas 263 266
Total revenue 2,351 2,159
Revenue disaggregated into sale of goods
per customer category:
(EUR m) 2023 2022
Decorative 792 775
Marine 725 626
Infrastructure 470 445
Energy 364 313
Total revenue 2,351 2,159
2.1 Revenue
79Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2.2 Employee costs
Accounting policies
Employee costs include wages and salaries,
pensions, social security contributions, annual
leave and sick leave, bonuses and non-monetary
benefits.
Employee costs are recognised in the financial
year in which the associated services are ren-
dered. Costs for long-term employee benefits pro-
vided by the Group are recognised in the period in
which they are earned.
For further information about the Group’s pension
plans, reference is made to note 3.6 Pensions and
similar obligations.
Key management compensation
Together with the Board of Directors, key manage-
ment personnel comprise individuals in the Execu-
tive Board and the Executive Group Management
(EGM). The Executive Board is a part of the EGM
and the EGM consists of 8 individuals (2022: 8
individuals).
Remuneration of the Executive Group Manage-
ment includes a fixed salary, company car and
other standard fringe benefits, as well as bonus
payments in the form of an annual cash bonus
and a long-term cash-based incentive scheme.
of specific financial targets for organic growth,
EBITDA and working capital. The annual cash
bonus cannot exceed 70-100% of the individual’s
fixed salary.
(EUR m) 2023 2022
Employee costs
Wages and salaries 413 381
Pensions – defined contribution plans 22 21
Pensions – defined benefit plans 1 2
Other social security contributions 29 28
Other employee costs 25 23
Total employee costs for the year 490 455
Average number of full-time employees 7,40 3 7,3 43
Employee costs have been recognised in the profit and loss as follows:
Production costs 155 131
Sales and distribution costs 247 258
Administrative costs 88 66
Total employee costs in the profit and loss 490 455
(EUR m) 2023 2022
Executive Board
Wages and salaries 3.6 3.4
Pensions, defined contribution plans 0.2 0.1
Severance pay 1.8 -
Other long-term benefits 3.3 - 0.3
Total 8.9 3.2
Other key management personnel
Wages and salaries 4.9 3.9
Pensions, defined contribution plans 0.2 0.3
Other long-term benefits 2.1 1.6
Total 7.2 5.8
Board of Directors
Board fee 1.1 1.1
Total 1.1 1.1
Total compensation to key management personnel 17.2 10.1
The annual cash bonus payment is contingent
upon the fulfilment of ESG targets and the
realisation
The long-term cash-based incentive scheme com-
prises rolling three-year cash-based bonus pro-
grammes. All programmes are subject to vesting
criteria based on a number of factors, including
the realisation of minimum financial targets for the
nominal EBITDA accumulated over the three-year
period. The outcome is calculated at the end of the
three-year programme period. Potential payments
are made in the first quarter of the year after the
programme expires. The long-term cash incentive
programme payment cannot exceed 110-220% of
the individual’s fixed annual salary. The Board of
Directors determines annually whether to instigate
new programmes and, if so, the scope and objec-
tives of said programmes.
The compensation paid or payable to the
key management personnel for employee services
is shown in the table to the right. Total remunera-
tion for the Executive Board and Board of Directors
amounted to EUR 10 million in 2023 (2022: EUR
4.3 million).
80Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2.3 Other operating income and expenses 2.4 Special items
Accounting policies
Other operating income and expenses comprise
items of a secondary nature to the core activities
of Hempel, including gains and losses on the sale
of intangible assets and property, plant and equip-
ment and certain government grants.
Government grants are recognised in other oper-
ating income at fair value where there is a reason-
able assurance that the grant will be received and
Hempel will comply with all attached conditions.
Government grants relating to costs are deferred
and recognised in the statement of profit and
loss and presented in the same line item as the
relating costs, over the period necessary to match
them with the costs that they are intended to
compensate.
Grants received for the acquisition of property,
plant and equipment are recognised as deferred
income, which is recognised in the statement of
profit and loss under other operating income on a
systematic basis over the useful life of the asset.
Special items include significant income and
expenses of a special nature relative to the
Group’s earnings-generating activities, such as
costs related to M&A activities, integration of
acquired businesses and restructuring costs.
Other significant amounts of non-recurring nature
are also included in special items, such as gain/
loss on divestments of subsidiaries.
In 2023, special items comprised employee redun-
dancy costs and related costs in connection with
organisational changes.
Special items also included M&A related costs,
mainly consultancy costs and an insurance set-
tlement payment related to a past business
acquisition.
Due to the significant impact on the statement of
profit and loss, these non-recurring items of spe-
cial nature are disclosed separately in this note.
The special items are presented in the statement
of profit and loss within the functions, shown in the
table below.
Special items (EUR m) 2023 2022
Restructuring costs 5 27
M&A and integration related costs 5 3
Insurance settlement - 3 -
Total special items 7 30
(EUR m) 2023 2022
Production costs 1 5
Sales and distribution costs 3 11
Administrative costs 3 14
Total special items 7 30
Other operating income (EUR m) 2023 2022
Gain on sale of property, plant and equipment - 4
Total other operating income - 4
Other operating expenses (EUR m) 2023 2022
Loss on disposal of property, plant and equipment - - 1
Total other operating expense - - 1
81Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2.5 Income tax, tax assets and liabilities
Income tax
Accounting policies
The income tax expense for the year is the tax pay-
able on the current year’s taxable income based
on the applicable income tax rate for each jurisdic-
tion, adjusted for changes in deferred tax assets
and liabilities attributable to temporary differences
and to unused tax losses, changes due to changes
in tax rates, adjustments to tax from previous
years and changes in provision for uncertain tax
positions.
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries
where the parent company and its subsidiaries
operate and generate taxable income. Manage-
ment periodically evaluates positions taken in tax
returns with respect to situations in which appli-
cable tax regulation is subject to interpretation. It
establishes provisions, where appropriate, on the
basis of amounts expected to be paid to the tax
authorities.
Current tax payable and receivable are recognised
in the consolidated statement of financial position
as tax computed on the taxable income for the
year, adjusted for tax on taxable income for prior
years and for prepaid tax.
Current tax and changes in deferred tax are recog-
nised in profit and loss, except to the extent that
it relates to items recognised in other comprehen-
sive income or directly in equity. In these cases,
the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Uncertain tax positions are recognized where the
probability of the tax position being upheld in indi-
vidual cases is considered less than 50%. Uncer-
tain tax positions are assessed individually, and
the possible outcome is measured based on man-
agement’s best estimate of the amount required
to settle the obligation. Uncertain tax positions
relate to various tax disputes, including transfer
pricing cases.
Tax for the year (EUR m) 2023 2022
Tax for the year is specified as follows:
Tax on profit for the year - 21 - 19
Tax on other comprehensive income - 1 1
Total tax for the year - 22 - 18
Tax on profit for the year is calculated as follows:
Current tax for the year - 59 - 51
Deferred tax for the year 41 31
Adjustment in respect of previous years - 3 1
Total tax on profit for the year - 21 - 19
Effective tax rate of the Group
Danish tax rate 22.0% 22.0%
Higher/(lower) tax rates of foreign subsidiaries - 12.0% - 8.6%
Permanent differences 4.7% - 0.1%
Unrecognised deferred tax assets 28.2% 21.8%
Recognised deferred tax assets related to prior years - 8.1% - 18.3%
Adjustments in respect of previous years - 3.7% 1.6%
Other adjustments (mainly changes in uncertain tax position) - 14.9% 1.9%
Withholding taxes etc. 7.4% 6.5%
Effective tax rate of the Group excluding hyperinflation 23.6% 26.8%
Hyperinflation 1.8% 7.1%
Effective tax rate of the Group 25.4% 33.9%
82Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2.5 Income tax, tax assets and liabilities — continued
Deferred tax
Accounting policies
Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities
and their carrying amounts in the consolidated
financial statements. However, deferred tax liabili-
ties are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also
not accounted for if it arises from initial recogni-
tion of an asset or liability in a transaction other
than a business combination that, at the time of
the transaction, affects neither accounting profit
nor taxable profit or loss. Deferred income tax is
calculated using tax rates (and laws) that have
been enacted or substantially enacted by the end
of the reporting period and are expected to apply
when the related deferred income tax asset is real-
ised or the deferred income tax liability is settled.
Deferred tax is adjusted for elimination of unreal-
ised intra-group gains and losses.
Deferred tax assets are recognised if it is probable
that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax liabilities and assets are not rec-
ognised for temporary differences between the
carrying amount and tax bases of investments in
foreign operations where Hempel A/S is able to
control the timing of the reversal of the temporary
differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to offset
current tax assets and liabilities and when the
deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable
right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability
simultaneously.
Deferred tax recognised in the balance sheet (EUR m) 2023 2022
Deferred tax, beginning of year - 5 - 41
Recognised in profit or loss 41 32
Adjustments in respect of previous years - 1 4
Deferred tax assets and liabilities at 31 December, net 35 - 5
Specification of deferred tax assets (EUR m) 2023 2022
Intangible assets 14 17
Property, plant and equipment 5 10
Inventories 2 2
Trade receivables 1 4
Provisions and defined benefit obligations 27 17
Lease liabilities 1 3
Tax loss carryforwards 62 41
Deferred tax assets at 31 December 112 94
Specification of deferred tax liabilities (EUR m) 2023 2022
Intangible assets 38 54
Property, plant and equipment 4 3
Provisions and defined benefit obligations 35 42
Deferred tax liabilities at 31 December 77 99
83Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
The Group recognises deferred tax assets, includ-
ing the expected value of tax loss carryforwards,
based on an assessment of the expected recover-
ability. At 31 December 2023, Hempel recognised
a deferred tax asset related to tax loss carryfor-
wards of EUR 62 million (2022: EUR 41 million).
Management has considered future taxable
income and applied judgement in assessing
whether deferred income tax assets should be rec-
ognised. The assessment of the recoverability of
the deferred tax assets depends on a number of
factors, including whether there will be sufficient
taxable profits available in future periods in tax
jurisdictions for which the tax losses carryforwards
can be utilised.
Assessment of the recoverability of the deferred
tax assets is based on taxable income projections
that contain estimates of, and tax strategies for,
the future taxable income, taking into account the
general market conditions, recent financial perfor-
mance of the individual entities and the Group’s
approved business plan. The projections are
based on the Group’s five-year forecast, though in
certain cases a longer forecast period is applied,
and are inherently subject to uncertainty, as the
realisation of the projections are dependent on
the outcome of future events. It is management’s
assessment that the forecast is achievable and
supports the capitalised deferred tax assets. In
making this assessment, business initiatives to
improve organic growth and taxable income are
considered together with expected allocation of
future taxable income based on the transfer pric-
ing policy in place.
Implementation of the Pillar Two reform
As a response to the increasing tax challenges
arising from Digitalization of the Economy, OECD
has worked on a tax avoidance project called BEPS
(base erosion and profit shifting). In 2021, Pillar
One (not in scope for Hempel) and Pillar Two were
introduced as a set of Global Anti-Base Erosion
Model Rules (GloBE).
The overall purpose of Pillar Two is to impose a
minimum tax of 15% on the local income in each
jurisdiction in which a company operates. The
GloBE rules are a key component of Pillar Two,
providing a coordinated system of taxation that
imposes a top-up tax on profits arising in a juris-
diction whenever the effective tax rate, deter-
mined on a jurisdictional basis, is below the mini-
mum effective tax rate.
The Pillar Two tax rules will generally be applicable for
the Hempel Group as of 1 January 2024. For some
countries, Pillar Two qualifying domestic minimum top
up tax legislation will be implemented at a later date.
It is estimated that additional taxes arising from
implementing Pillar Two amounts to EUR 0.7-1.7
million in 2024. As the analysis of the Pillar Two
impact is not finalised, there is still uncertainty
about the final tax impact. The estimated increase
in taxes mainly relates to the activities in the follow-
ing jurisdictions: United Arab Emirates and Cyprus.
Hempel has applied the temporary mandatory
exception of not recognising deferred tax assets
and liabilities arising from the implementation
of the Pillar Two tax legislation. The exception is
applied retrospectively.
2.5 Income tax, tax assets and liabilities — continued
Deferred tax not recognised in the balance sheet (EUR m) 2023 2022
Temporary differences 9 9
Tax loss carryforwards 50 36
Total tax asset not recognised 59 45
Out of recognised tax loss carry forwards 1% (2022: 0%) expire within 1 year, and 0% (2022: 10-15%) within 5 years from the
balance sheet date and 40-45% after five years. The remaining tax loss carry forwards does not have an expiration date.
84Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3 Operating assets and liabilities
Accounting policies
Goodwill
Goodwill is initially recognised in the statement
of financial position at cost and allocated to
groups of CGUs at which goodwill is monitored.
Subsequently, goodwill is measured at cost less
accumulated impairment losses. Goodwill is
not amortised.
Brands with an indefinite useful life
Brands acquired in a business combination are ini-
tially recognised in the statement of financial posi-
tion at fair value and subsequently measured at
cost less accumulated impairment losses. Brands
which are considered to have an indefinitely useful
life are not amortised, since there is no foresee-
able limit to the period over which the brands are
expected to generate net cash inflows.
Software and software under development
Acquired software and developed software are ini-
tially measured at cost and subsequently at cost
less amortisation and impairment losses. Acquired
software and developed software are amortised
on a straight-line basis over the estimated useful
life, which is 3-10 years, though typically 5 years
for ERP systems.
For software as a service (SaaS) arrangements,
implementation costs are capitalised only where
customisation and configuration of the SaaS
arrangement results in an intangible asset con-
trolled by the Group. Where customisation and
configuration costs do not result in an intangible
asset, costs are either expensed as incurred or
alternatively over the contract term when the
received services are not distinct from the SaaS
solution.
Software under development is recognised at cost
less impairment losses. Software under develop-
ment is not amortised.
Customer relationships
Customer relationships acquired in a business
combination are initially recognised at fair value
and subsequently measured at cost less accumu-
lated amortisation and impairment losses. Amor-
tisation is calculated on a straight-line basis over
the estimated useful life, which is 5-12 years.
Other intangible assets
Other intangible assets comprise development
projects such as development of products or pro-
cesses, formulas and smaller brands.
Development projects concerning products
or processes (other than software development
projects) that are clearly defined and identifiable,
and in respect of which technical feasibility, suf-
ficient resources and a potential future market
or development opportunity in the enterprise can
be demonstrated, and where it is the intention to
manufacture, market or use the product or pro-
cess in question, are recognised as intangible
assets. Development projects are initially meas-
ured at cost, which comprises expenses, including
salaries, amortisation and external costs, directly
attributable to these development projects. Devel-
opment projects are subsequently measured at
cost less amortisation and impairment losses.
Development projects are amortised on a straight-
line basis over the estimated useful life, which is
3-10 years.
Formulas and smaller brands are measured at
cost less accumulated amortisation and impair-
ment losses. The assets are amortised on a
straight-line basis over their estimated useful
lives. The amortisation period is 2-10 years.
Amortisation and impairment are included
as follows in the statement of profit and loss.
3.1 Intangible assets
Amortisations and impairment included in profit and loss (EUR m) 2023 2022
Production costs 6 5
Sales and distribution costs 13 -
Administrative costs 27 16
Total amortisation and impairment 46 21
85Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Research and development costs expensed
Research and development costs not eligible for
capitalisation are expensed in the period incurred
and included in the statement of profit and loss
within production costs. In 2023, this amounted to
EUR 34 million (2022: EUR 29 million).
Impairment of non-current assets
Goodwill, intangible assets with an indefinite
useful life and software under development that
is not subject to amortisation are tested annu-
ally for impairment, or more frequently if events
or changes in circumstances indicate that they
might be impaired. Other assets are tested for
impairment whenever events or changes in circum-
stances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair
value less costs of disposal and value in use. For
the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are
separately identifiable cash inflows that are largely
independent of the cash inflows from other assets
or groups of assets (CGUs). Non- financial assets
other than goodwill that suffered an impairment
are reviewed for possible reversal of the impair-
ment at the end of each reporting period.
Impairment test
Hempel has tested the carrying amount of soft-
ware under development, brands with indefinite
useful life and goodwill for impairment.
Goodwill is monitored based on four commercial
business units (Marine, Energy, Infrastructure and
Decorative) and one internal business unit (Tech-
nology & Operations). Goodwill is allocated to the
groups of CGUs as follows:
(EUR m) 2023 2022
Marine 4 4
Energy 3 3
Infrastructure 3 3
Decorative 180 160
T&O 345 341
Unallocated - 18
Total goodwill 535 529
In 2022, EUR 18 million of goodwill recognised from
acquisitions of Paint World, Cap Couleurs and two smaller
acquisitions was not allocated to the respective groups of
CGUs. The goodwill allocation was finalised in 2023 with EUR
18 million allocated to Decorative.
The four key commercial business units manage
sales and are responsible for daily contact with
the customers.
Marine customers comprise both newbuilding
shipyards, ship owners requiring maintenance
in dry dock or at sea, and maintenance contrac-
tors. Maintenance work relates to every area of a
vessel, most notably hull coating systems to pro-
tect the metal structure of the vessels.
Energy customers are owners of energy assets,
which are often subject to harsh weather conditions,
such as windmills and other energy solution assets.
Infrastructure mainly relates to bridges, transpor-
tation assets and other infrastructure buildings.
Customers are e.g. governments responsible for
maintenance of critical infrastructure, companies
that own of infrastructure assets and maintenance
contractors.
Decorative sells indoor and outdoor coating prod-
ucts. Decorative customers are both private and
commercial customers, e.g. retailers.
Technology & Operations is an internal business
unit where most of the Group’s production and
supply chain is managed, and where R&D activities
take place. All products developed and produced
by Technology & Operations are sold internally to
the four key commercial business units.
Impairment test goodwill
For the purpose of impairment testing, revenue
in Technology & Operations comprises internal
sales of coating and paint products to the four
commercial business areas. The internal selling
prices in Technology & Operations and thus COGS
in the commercial business units are, for the pur-
pose of impairment testing, adjusted to reflect
management’s best estimate of prices that could
have been achieved in an arm’s length transaction
based on the commercial business units’ operat-
ing model. In determining the carrying amount of
net assets of each group of CGUs, certain alloca-
tion keys were applied.
The recoverable amounts of each group of CGUs
are based on value in use calculations and based
on cash flow projections for the years 2024-
2028. The forecast represents management’s
best expectation of the future cash flows and
is assumed to be both reasonable and achieva-
ble. The assumptions applied by management in
forecasting the future cash flows reflect manage-
ment’s expectations considering all relevant fac-
tors, including Hempel’s strategic initiatives, local
initiatives, past experience and external sources
of information, where possible and relevant. The
key assumptions used in the cash flow projections
are revenue growth, EBITDA margin, long-term
growth rate and pre-tax discount rate (refer to the
table on the next page). Cash flows beyond the
five-year forecast period are extrapolated using
the estimated growth rates stated in the table on
the next page.
Sensitivity analysis
Management reasonably considered and
assessed possible changes for the key assump-
tions and did not identify any instances that could
cause the carrying amount of goodwill to exceed
its recoverable amount.
3.1 Intangible assets — continued
86Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.1 Intangible assets — continued
Impairment test of the Farrow & Ball brand
The carrying amount of the Farrow & Ball brand
with indefinite useful life of EUR 136 million (2022:
136 million) was tested separately for impairment
as the brand relates to the Farrow & Ball CGU.
The recoverable amount is calculated based on
a relief-from-royalty method, assuming a steady
revenue growth of average 5.1% in the forecasting
period based on expected market development
within the luxury paint business. Further, the fore-
cast assumes that selling prices increase in line
with raw material price increases.
The royalty rate applied in the relief-from-royalty
calculation is based on a benchmark study for
high-end brands with similar market position
to Farrow & Ball. A royalty rate of 6.15% (2022:
6.15%) and a weighted average cost of capital
(WACC) of 9.35% (2022: 8.79%) were applied.
Impairment test of software business
applications
One of Group's software business applications
systems (ERP) was scrapped and replaced with
a more flexible IT-solution to ensure scalable
operations and to streamline processes across
the Group. Consequently, the software business
application was written down, and an impairment
of EUR 18 million was included in administrative
expenses in the statement of profit and loss. Refer
also to note 3.2 Property, plant and equipment for
impairment of customer relationships.
Key assumption Description
Revenue growth and EBITDA margin Revenue for all commercial business units is assumed to increase over the forecasting period on average by mid single-digit growth
rates, assuming a slight increase in market share. This is based on past performance and assumptions about the general market
development in the different commercial business areas, taking into consideration the maturity of the market and the current
challenges with valatile energy and raw material prices, and an assumption of a normalisation of the global economy over the
forecasting period. Further, Group and local strategic initiatives are considered when estimating the revenue growth rates for the
individual commercial businesses, including initiatives focusing on increasing sales prices and volumes. A stable EBITDA margin is
assumed in all the commercial business units in the forecasting period, based on the business units' ability to generally increase
selling prices in line with long-term inflation.
The estimated revenue growth in Decorative is, in particular, to be achieved through our strong market position, brand awareness
and companies and stores acquired in 2021 and 2022 that increase Decorative’s accessibility in selected markets. For Marine,
the estimated revenue growth is to be achieved through our highly, competitive products, e.g. hull coatings, and higher sales prices
through a more value-based price setting model, as well as increased sales volumes based on the assumed continuation of the trend
of increasing demand for products in the marine industry that reduce both fuel consumption and CO
2
emissions. For Energy and
Infrastructure, the estimated revenue growth is based on an increased demand for sustainable solutions in the renewable energy
and infrastructure sectors and higher sales prices through a more value-based price setting model.
For Technology & Operations, revenue and EBITDA margin is derived from sales to the four commercial business units. Sales volumes
are therefore based on the expected sales volumes in the four commercial business units. The internal sales prices are adjusted to
reflect an arm’s length selling price. EBITDA margin is assumed to increase over the forecasting period. This is based on assumptions
of a stabilisation of raw material prices, the ability to continuously optimise the production and supply chain, including higher
utilisation of existing production capacity and reduction in production and employee cost, as well as the realisation of expected
synergies from businesses acquired during the period and in previous years. In addition, completion of the ongoing construction of
new cost-efficient factories in 2022 and 2023 is assumed to improve the EBITDA margin over the forecast period.
Long-term growth The terminal growth rates do not exceed expected long-term inflation.
Pre-tax discount rate The pre-tax discount rate reflects the specific risks to the CGUs.
(EUR m) Long-term growth
rate 2023
Long-term growth
rate 2022
Pre-tax discount
rate 2023
Pre-tax discount
rate 2022
Marine 2.00% 2.00% 17.35% 15.26%
Energy 2.00% 2.00% 17.36 % 15.11%
Infrastructure 2.00% 2.00% 17. 36% 15.11%
Decorative 2.00% 2.00% 16.01% 14.30%
Technology & Operations 2.00% 2.00% 16.02% 14.35%
87Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.1 Intangible assets — continued
Intangible assets (EUR m) Goodwill Brands
(indefinite life)
Software Software
under
development
Customer
relationships
Other
intangible
assets
Total
Costs at 1 January 2023 529 138 56 29 142 91 985
Effect of exchange rate adjustment 6 2 - 1 - - 2 1 6
Additions for the year - - - 32 - 1 33
Transfer and reclassifications - - 23 -29 - 6 -
Disposals for the year - - - 2 - - - 2
Costs at 31 December 2023 535 140 76 32 140 99 1,022
Accumulated amortisation at 1 January 2023 - - 45 - 112 63 220
Effect of exchange rate adjustment - - - 1 - - 2 - - 3
Amortisation for the year - - 8 - 8 6 22
Impairment for the year - - 18 - 5 1 24
Reversal of amortisation of assets disposed - - - 2 - - - - 2
Accumulated amortisation at 31 December 2023 - - 68 - 123 70 261
Carrying amount at 31 December 2023 535 140 8 32 17 29 761
Costs at 1 January 2022 530 145 50 18 139 84 966
Effect of exchange rate adjustment - 23 - 7 - - 3 2 - 25
Additions for the year - - 1 22 - 1 24
Acquisition of enterprises 22 - - - - - 22
Transfer and reclassifications - - 7 - 11 - 4 -
Disposals for the year - - - 1 - - - - 1
Reclassification to assets held for sale - - - 1 - - - - 1
Costs at 31 December 2022 529 138 56 29 142 91 985
Accumulated amortisation at 1 January 2022 - - 42 - 101 57 200
Effect of exchange rate adjustment - - - - 2 - 1 1
Amortisation for the year - - 5 - 9 7 21
Reversal of amortisation of assets disposed - - - 1 - - - - 1
Reclassification to assets held for sale - - - 1 - - - - 1
Accumulated amortisation at 31 December 2022 - - 45 - 112 63 220
Carrying amount at 31 December 2022 529 138 11 29 30 28 765
88Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Property, plant and equipment are measured at
cost less accumulated depreciation and impair-
ment losses.
Costs comprise the purchase price, including
import duties and non-refundable taxes, and
expenses directly related to the acquisition up
until the time when the asset is ready for intended
use. In the case of assets of own construction,
costs comprise direct expenses for labour, materi-
als, components and suppliers.
Material general and specific borrowing costs that
are directly attributable to the construction or pro-
duction of a qualifying asset are capitalised during
the period of time that is required to complete and
prepare the asset for its intended use. Qualifying
assets are assets that necessarily take a substan-
tial period of time to get ready for their intended
use or sale.
Subsequent costs, such as partial replacement
of property, plant and equipment, are included
in the carrying amount of the asset in question
when it is probable that such costs will result in
future economic benefits. The carrying amount
of the replaced parts is derecognised from the
balance sheet and recognised in the statement of
profit and loss. All other repairs and maintenance
are charged to profit or loss during the reporting
period in which they are incurred.
Depreciation is based on the costs of an asset
less its residual value. Depreciation is calculated
on a straight-line basis over the expected useful
lives of the assets, which are:
Buildings (max.) 50 years
Laboratory equipment 10 years
Plant and machinery 10 years
Other fixtures and fittings,
tools and equipment 3-10 years
If the individual material components of an asset
have different useful lives, each component will
be depreciated separately. Gains and losses
on disposals are determined by comparing pro-
ceeds with the carrying amount. These gains and
losses are included in other operating income
and expenses (refer to note 2.3 Other operating
income and expenses). The assets’ residual val-
ues and useful lives are reviewed, and adjusted if
necessary, at the end of each reporting period.
Information about commitments for acquisition of
property, plant and equipment is provided in note
5.3 Contingent liabilities and other commitments.
The carrying amounts of property, plant and equip-
ment are reviewed on an annual basis to deter-
mine whether there is any indication of impair-
ment. If an asset’s carrying amount exceeds its
recoverable amount, an impairment loss is recog-
nised in the statement of profit and loss.
Impairment test Decorative Germany and
France
An impairment test was carried out for the Decora-
tive CGU Germany and France due to challenging
market conditions.
The CGU mainly comprises production buildings,
customer relationships and current assets such as
inventories and trade receivables.
The CGU is measured within level 3 of the fair
value hierarchy and the impairment amount was
determined based on a fair value less costs of
disposal model, i.e. a market specific model using
discounted cash flow projections approved by
management, covering a five-year period.
The key assumptions used when determining the
cash flow projections are development in EBITDA
margin, development in net working capital, the
long-term growh rate and the discount rate.
Cash flows beyond the five-year forecast
period are extrapolated applying a 2.0% growth
rate, corresponding to the long-term inflation. A
post tax discount rate of 7.5% was applied, reflect-
ing the specific risk of the CGU. Development
in EBITDA margin assumes increasing revenue,
utilization of idle production capacity and costs
adjustments, a market participant would consider
when pricing the CGU.
The carrying amount of the CGU was reduced to
its recoverable amount, approx. EUR 67 million. An
impairment loss of EUR 23 million was recognised,
hereof EUR 6 million within intangible assets and
the remaining EUR 17 million within property, plant
and equipment. The impairment loss is recognised
within production cost EUR 18 million and sales
and distribution costs EUR 5 million, respectively.
The main classes of assets impaired were produc-
tion buildings and customer relationships.
3.2 Property, plant and equipment
89Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.2 Property, plant and equipment — continued
Property, plant and equipment (EUR m) Land and
buildings
Plant and
machinery
Other fixtures
and fittings, tools
and equipment
Assets under
construction
Total
Costs at 1 January 2023 323 292 129 135 879
Effect of exchange rate adjustment - 9 - 4 - 1 - 6 - 20
Additions for the year - 4 5 50 59
Transfer and reclassifications 72 53 8 - 133 -
Disposals for the year - - 4 - 7 - - 11
Costs at 31 December 2023 386 341 134 46 907
Accumulated depreciations at 1 January 2023 100 189 79 - 368
Effect of exchange rate adjustment - 3 - 2 - 1 - - 6
Depreciation for the year 13 20 12 - 45
Impairment loss for the year 17 - - - 17
Transfer and reclassifications 1 - - 1 - -
Reversal of depreciations of assets disposed - - 3 - 6 - - 9
Accumulated depreciation at 31 December 2023 128 204 83 - 415
Carrying amount at 31 December 2023 258 137 51 46 492
Costs at 1 January 2022 321 277 113 111 822
Effect of exchange rate adjustment 6 1 - 1 - 3 3
Acquisition of enterprises - 1 - - 1
Additions for the year 1 2 5 83 91
Transfer and reclassifications 10 28 18 - 56 -
Disposals for the year - 2 - 7 - 4 - - 13
Reclassification to assets held for sale - 13 - 10 - 2 - - 25
Costs at 31 December 2022 323 292 129 135 879
Accumulated depreciations at 1 January 2022 89 183 73 - 345
Effect of exchange rate adjustment 4 2 - 1 - 5
Depreciation for the year 10 19 11 - 40
Transfer and reclassifications - 1 - 1 - -
Reversal of depreciations of assets disposed - - 7 - 4 - - 11
Reclassification to assets held for sale - 2 - 8 - 1 - - 11
Accumulated depreciation at 31 December 2022 100 189 79 - 368
Carrying amount at 31 December 2022 223 103 50 135 511
Capitalised interest expenses in the year amounts to EUR 2 million (2022: EUR 1 million).
90Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Accounting policies
Lease liabilities
At the commencement date of leases, the Group
recognises lease liabilities, measured at the pres-
ent value, of the lease payments to be made over
the lease term. The lease payments include fixed
payments less any lease incentive receivables,
variable lease payments that depend on an index
or rate, e.g. when a minimum indexation is applied,
and amounts expected to be paid under resid-
ual value guarantees. The lease payments also
include the exercise price of a purchase option
reasonably certain to be exercised by the Group
and payment of penalties for terminating a lease,
if the lease term reflects the Group exercising the
option to terminate. The present value is calcu-
lated using the Group’s incremental borrowing rate
if the interest rate implicit in the lease is not read-
ily determinable.
Contracts may contain both lease and non-lease
components. The Group has elected to separate
lease and non-lease components. For these con-
tracts, the consideration promised in the contract
is allocated based on the relative stand-alone
prices between the lease and non-lease compo-
nent. Non-lease components are accounted for in
accordance with the accounting policy applicable
to such items.
Some lease contracts include extension and ter-
mination options. Management exercises judge-
ment in determining whether these options are
reasonably certain to be exercised. Management
considers all relevant facts and circumstances
that create an economic incentive to exercise the
extension option.
After initial recognition, the lease liability is meas-
ured at amortised cost using the effective interest
method. The lease liability is increased to reflect
the accretion of interest and reduced for lease
payments made. The lease liability is remeas-
ured when there is a change in the lease term
or a change in the assessment to purchase the
underlying asset. In addition, the lease liability is
remeasured if there is a change in future lease
payments arising from a change in an index or
rate, including revised lease payments that reflect
a change in market rental rates, or if there is a
change in the Group’s estimate of the amount
expected to be payable under a residual value
guarantee.
When lease liabilities are remeasured, a corre-
sponding adjustment is made to the carrying
amount of the right-of-use asset. If the carrying
amount of the right-of-use asset is reduced to
zero, any further reduction is recognised in the
statement of profit and loss.
Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease. Right-of-use
assets are initially measured at cost comprising
the amount of the initial measurement of the lease
liability, adjusted for any lease payments made at
or before the commencement date and any initial
direct costs incurred, as well as an estimate of dis-
mantling and restoration costs to be incurred.
After initial recognition, right-of-use assets are
measured at cost less accumulated deprecia-
tion and impairment losses and adjusted for any
remeasurement of the lease liability. Deprecia-
tion is calculated on a straight-line basis over the
shorter of the useful life of the asset and the lease
term.
Right-of-use assets mainly comprise office and
warehouse buildings, stores, warehouses and
vehicles, such as cars, trucks and vans. Lease
terms of buildings are usually 5-10 years whereas
vehicles typically have a lease term of 3-5 years.
COVID-19 rent concessions
The Group elected to apply the practical expedient
for COVID-19 rent concessions applicable for pay-
ments due on or before 30 June 2022. Under the
practical expedient, rent concessions arising as a
direct consequence of the COVID-19 pandemic are
not accounted for as a lease modification. Instead,
the amount forgiven is recognised directly within
the income statement.
Short-term and low-value leases
Short-term and low-value leases are expensed
directly as operating costs in the statement of
profit and loss, usually on a straight-line basis over
the lease term.
The Group has recognised the following amounts
relating to leases, as shown on the next page.
3.3 Leases
91Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.3 Leases — continued
The statement of profit and loss shows the
following expenses relating to leases:
Amounts relating to leases (EUR m) Land and
buildings
Vehicles Other
fixed assets
Total
Right-of-use assets
Costs at 1 January 2023 209 27 1 237
Effect of exchange rate adjustment - 2 - - - 2
Additions for the year 6 6 - 12
Remeasurement 5 - - 5
Disposals - 10 - 6 - - 16
Cost at 31 December 2023 208 27 1 236
Depreciation at 1 January 2023 62 14 - 76
Effect of exchange rate adjustment - 1 - - - 1
Depreciation for the year 32 8 - 40
Disposals - 9 - 6 - - 15
Accumulated depreciation at 31 December 2023 84 16 - 100
Carrying amount at 31 December 2023 124 11 1 136
Right-of-use assets
Cost at 31 January 2022 196 26 1 223
Effects of exchange rate adjustments - 1 - - - 1
Acquisition of enterprises 3 - - 3
Additions for the year 7 8 - 15
Remeasurement 16 - 1 - 15
Disposals - 11 - 6 - - 17
Reclassification to assets held for sale - 1 - - - 1
Cost at 31 December 2022 209 27 1 237
Depreciation at 1 January 2022 40 11 - 51
Effects of exchange rate adjustments - 1 - - - 1
Depreciation for the year 35 9 - 44
Disposals - 11 - 6 - - 17
Reclassification to assets held for sale - 1 - - - 1
Accumulated depreciation at 31 December 2022 62 14 - 76
Carrying amount at 31 December 2022 147 13 1 161
Lease liabilities (EUR m) 2023 2022
Current 35 36
Non-current 105 129
Total 140 165
Expenses relating to leases (EUR m) 2023 2022
Depreciation expense of right-of-use assets 40 44
Interest expense on lease liabilities 4 3
Expense relating to short-term leases, excluding short-term leases of low-value assets 1 1
Total amount recognised in profit or loss 45 48
Total cash outflow from leases amounts to EUR 43 million, including cash outflow from short-term and low-value leases
(2022: EUR 46 million).
The maturity analysis of undiscounted cash flow in lease liabilities is disclosed in note 4.3
92Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.4 Inventories
Accounting policies
Inventories are measured at cost, determined
using the FIFO-method, or net realisable value if
the net realisable value is lower. Costs of inven-
tories comprise purchase costs of raw materials,
including import duties and transportation costs
directly attributable to the acquisition of raw mate-
rials, costs of conversion and other costs incurred
in bringing the inventories to the present location
and condition.
The costs of finished goods and work in progress
also include indirect production costs, which com-
prise the cost of indirect materials and labour
as well as maintenance and depreciation of the
machinery, factory buildings and equipment used
in the manufacturing process and costs of factory
administration and management.
The net realisable value is calculated as the selling
price less costs of completion and costs neces-
sary to make the sale and is determined based on
the most reliable evidence available at the time
the estimates are made, taking into account obso-
lescence and development in expected selling
prices.
(EUR m) 2023 2022
Raw materials and consumables 92 109
Work in progress 9 7
Finished goods 231 227
Total inventories 332 343
Cost of inventories, included under production costs 1,307 1,283
Hereof write-downs to net realisable value during the year 12 11
Reversal of write-downs during the year - -
93Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.5 Trade receivables
Accounting policies
Trade receivables are recognised initially at their
transaction price. The Group holds trade receiva-
bles with the objective of collecting the contractual
cash flows and therefore measures them subse-
quently at amortised cost using the effective inter-
est method, less loss allowance. Due to the short-
term nature of trade receivables, amortised cost
will equal the invoiced amount less loss allowance
for expected credit losses.
Credit risk
The Group is exposed to financial and commercial
counterparties but has no particular concentration
of customers. To minimise the credit risk related
to trade receivables, financial vetting is under-
taken for all major customers and credit limits
are assigned for major customers based on the
Group’s credit risk assessment.
The Group applies the simplified approach to pro-
viding the expected credit losses, which permits
the use of the lifetime expected loss provision for
all trade receivables. To measure the expected
credit losses, trade receivables are grouped
based on shared credit risk characteristics and
the days past due. Trade receivables not due are
also included when assessing the expected life-
time loss provision.
Trade receivables are written off when there is no
reasonable expectation of recovery, i.e. typically
when customers are undergoing restructuring or
bankruptcy proceedings have commenced.
The Group’s maximum exposure to credit risk at
the end of the reporting period related to trade
receivables is the carrying amount of trade receiv-
ables mentioned above. The Group does not hold
collateral as security.
Expected credit loss 2023 (EUR m) Carrying
amount, gross
Expected
loss rate (%)
Loss
allowance
Carrying
amount, net
Current 367 0.7% 2.4 364.6
Overdue 1-30 days 63 0.6% 0.4 62.6
Overdue 31-60 days 31 1.5% 0.5 30.5
Overdue 61-120 days 23 1.6% 0.3 22.7
Overdue 121-240 days 16 7.2% 1.2 14.8
Overdue 241-360 days 4 16.8% 0.6 3.4
Overdue > 360 days 39 84.1% 32.7 6.3
Total 543 38.1 504.9
Expected credit loss 2022 (EUR m) Carrying
amount, gross
Expected
loss rate (%)
Loss
allowance
Carrying
amount, net
Current 352 0.7% 2.3 349.7
Overdue 1-30 days 61 0.9% 0.6 60.4
Overdue 31-60 days 27 1.5% 0.4 26.6
Overdue 61-120 days 19 1.7% 0.3 18.7
Overdue 121-240 days 12 6.8% 0.8 11.2
Overdue 241-360 days 6 26.1% 1.5 4.5
Overdue > 360 days 31 82.7% 25.7 5.3
Total 508 31.6 476.4
Loss allowance provision (EUR m) 2023 2022
Provision at 1 January 31 29
Additions for the year 9 2
Losses recognised -2 -2
Currency translation - 2
Total 38 31
94Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.6 Pensions and similar obligations
Accounting policies
The Group operates various post-employment
schemes, including defined benefit and defined
contribution pension plans.
Defined contribution plans
Hempel operates a number of defined contribution
plans which receive fixed contributions from Group
companies. The Group’s contributions to the
defined contribution plans are recognised in the
statement of profit and loss in the year to which
they relate. The Group’s obligation is limited to the
amount that it agrees to contribute to the pension
funds. Contributions payable are recognised in the
statement of financial position under other current
liabilities. The Group has no further obligations
once the contributions have been paid.
Defined benefit plans
In regards to defined benefit plans, the liability
or asset recognised in the balance sheet is the
present value of the defined benefit obligation at
the end of the reporting period less the fair value
of plan assets. The net defined benefit obligation
is calculated annually by independent actuaries
using the projected unit credit method. This is
done separately for each major plan by estimating
an amount of future benefits that employees have
earned in return for their service in the current and
prior periods. The present value of the defined
benefit obligation is determined by discounting
the estimated future cash outflows using interest
rates of high-quality corporate bonds that are
denominated in the currency in which the benefits
will be paid, and that have terms approximating
to the terms of the related obligation. In countries
where there is no deep market in such bonds, the
market rates on government bonds are used.
The net obligation is recognised in Pensions and
similar obligations where service costs are recog-
nised as employee benefit expenses.
Service costs comprise current service costs and
past service costs. Current service cost is the
increase in the present value of the defined ben-
efit obligation resulting from employee services
in the current period. Changes in the present
value of the defined benefit obligation resulting
from plan amendments or curtailments are rec-
ognised immediately in profit and loss as past
service costs.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined
benefit obligation and the fair value of plan assets.
This cost is included in financial expenses in the
consolidated statement of profit and loss.
Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in
which they occur, directly in other comprehensive
income. They are included in retained earnings in
the statement of changes in equity and the bal-
ance sheet.
Pension costs
In 2023, net costs of EUR 25 million relating to
Hempel’s pension plans were recognised in the
statement of profit and loss (2022: EUR 24 million).
The figures break down as shown in the table below.
Pension costs (EUR m) 2023 2022
Costs for defined contribution plans:
Employee costs 22 21
Costs for defined benefit plans:
Employee costs 2 2
Interest expense 1 1
Total costs recognised in the profit and loss 25 24
95Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.6 Pensions and similar obligations — continued
Hempel’s defined benefit plans
The Group operates defined benefit plans in a
range of countries with the major plans being in
Ireland and the UK. None of the plans are individu-
ally significant at Group level.
The plans are generally final salary pension plans,
which provide benefits to the employees in the
form of a guaranteed level of pension payable for
life. The level of benefits provided depends on the
employees’ length of service and their salary in
the final years leading up to retirement. The major-
ity of benefit plans are funded. However, there
are also a number of unfunded plans in which the
Group meets the benefit payment obligation as it
falls due. Plan assets held in trusts are governed
by local regulations and practice in each country,
as is the nature of the relationship between the
Group and the trustees and their composition.
The development in the present value of defined
benefit pension obligations breaks down as, as
shown in the table to the right.
Present value of the net obligation at 31 December (EUR m) 2023 2022
Present value of defined benefit obligation 50 51
Fair value of assets related to the plans 31 35
Pension obligations recognised in the balance sheet, net 19 16
Of these obligations, EUR 22 million relates to unfunded pension obligations (2022: EUR 19 million) and EUR 28 million relates to partly
funded obligations (2022: EUR 32 million). Of the total gross obligation, 48% (2022: 51%) relates collectively to Ireland and the UK.
(EUR m) 2023 2022
Present value of obligation at 1 January 51 64
Current service cost 2 2
Interest expense 2 1
Actuarial (gains)/losses arising from changes in financial assumptions - 3 - 13
Actuarial (gains)/losses arising from experience adjustments 2 1
Exchange differences - - 1
Benefit payments from employer - 1 -
Acquired in business combinations - 1
Payments from the plans - 3 - 4
Present value of obligation at 31 December 50 51
96Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.6 Pensions and similar obligations — continued
The expected average duration of the obligations
is 11 years (2022: 12 years) and the expected
contributions to post-employment benefit plans
for the year ending 31 December 2024 are EUR 3
million.
The development in the fair value of pension plan
assets and the composition of plan assets are
shown in the tables below.
Sensitivity analysis
The following table illustrates the change in the
gross obligation relating to defined benefit plans
due to a change in the key actuarial assumptions.
The analysis is based on fairly probable
changes, provided that the other parameters
remain unchanged.
The following table summarises the key assump-
tions of the defined benefit plans:
Recognised defined benefit pension obligation (EUR m) 2023 2022
Discount rate
Increase of 0.5 p.p. - 2 - 3
Decrease of 0.5 p.p. 2 3
Future wage / salary increase
Increase of 0.5 p.p 1 1
Decrease of 0.5 p.p. - 1 - 1
Mortality
Increase of +1 year 1 1
Decrease of -1 year - 1 - 1
Defined benefit plans (%) 2023 2022
Specification of plan assets:
Cash and cash equivalents 2% 1%
Shares and properties 23% 26%
Debt instruments 47% 48%
Real estate 1% 2%
Investment funds 18% 16%
Assets held by insurance company 5% 5%
Other 4% 2%
Total 100% 100%
% 2023 2022
Discount rate 4.57% 4.24%
Future wage / salary increase 3.45% 3.86%
(EUR m) 2023 2022
Fair value of pension plan assets at 1 January 35 43
Calculated interest in plan assets 1 -
Return on plan assets excluding calculated interest - 2 - 7
Exchange differences - - 1
Contributions:
Employer 1 1
Payments from the plans - 3 - 1
Effect on asset ceiling - 1 -
Fair value of pension plan assets at 31 December 31 35
97Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3.7 Provisions
Accounting policies
Provisions are recognised when the Group has a
present legal or constructive obligation as a result
of past events, it is probable that an outflow of
resources will be required to settle the obligation,
and the amount can be reliably estimated.
Provisions for environmental, warranty and restruc-
turing obligations, as well as other obligations, are
measured at the present value of management’s
best estimate of the expenditure required to settle
the present obligation at the end of the reporting
period. The costs required to settle the liability are
discounted if the effect is material to the meas-
urement of the provision. The discount rate used
to determine the present value is a pre-tax rate
that reflects current market assessments of the
time value of money and the risks specific to the
liability. The increase in the provision due to the
passage of time is recognised as interest expense.
Decommission and restoration obligations are
measured at the present value of the future liability
in respect of decommissioning as expected at the
balance sheet date. The present value of the provi-
sion and changes in estimate are recognised as part
of the cost of property, plant and equipment and
depreciated together with the associated asset.
Interest on provisions is recognised in the state-
ment of profit and loss under financial expenses.
Environmental provisions
Environmental obligations relate to restoration of
various sites and to remedying established envi-
ronmental damages that occurred in connection
with the production of coatings and disposal
or release of certain wastes. Management
anticipates that the resolution of the Group’s
environmental obligations will occur over an
extended period, in some cases over a period of
more than 5 years.
Warranties
Provision is made for estimated warranty claims in
respect of products sold that are still under war-
ranty at the end of the reporting period. Warranty
cases are normally resolved within 0 - 5 years,
though some complex cases are resolved over an
extended period of more than 5 years.
In line with accounting policies, potential product
warranties are recognised as warranty provisions
when revenue from the related sale is recognised.
Other provisions
The Group is involved in a number of legal cases,
tax cases and other disputes. Some of these
involve significant amounts and are subject to
some uncertainty. Management continuously
assesses the risks associated with the cases and
disputes, and their likely outcome. It is the opinion
of management that, apart from items recognised
in the financial statements, the outcomes of these
cases and disputes are not probable or cannot be
reliably estimated in terms of amount or timing. The
Group does not expect these to have a material
impact on the consolidated financial statements.
(EUR m) Environmental
obligations
Warranties Other
provisions
Total
Total provisions, beginning of year 20 15 12 47
Effect of exchange rate adjustment - 1 - - - 1
Additions for the year 4 7 4 15
Reversed for the year - 2 - - 4 - 6
Consumed for the year - 1 - 7 - 2 - 10
Unwind of discount 1 - - 1
Total provisions, end of year 21 15 10 46
Current liabilities 5 3 2 10
Non-current liabilities 16 12 8 36
Total provisions, end of year 21 15 10 46
3.8 Other liabilities
Accounting policies
Other liabilities mainly comprise accrued employee
costs, including bonuses, withholding tax and VAT,
customer bonuses, commission payables, accrued
interests and prepaid rent.
Other financial liabilities are measured at initial
recognition at fair value. Subsequently, other
financial liabilities are measured at amortised cost
using the effective interest method, which usually
corresponds to the nominal value. Other non-liabil-
ities arising from e.g., taxation or employer bene-
fits, are measured in accordance with the appro-
priate standards.
98Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4 Capital structure and financing items
Accounting policies
Dividends proposed by management for the year
are presented separately within equity.
The translation reserve comprises foreign
exchange differences arising from the translation
to EUR of financial statements of the parent com-
pany and its subsidiaries. Also, the effect of the
inflation adjustment from hyperinflationary econo-
mies is recognised within the translation reserve.
The cash flow hedge reserve covers cash flow
hedging of interest rates associated with loans
and borrowings.
Share capital
The two share classes, comprising 110 A shares of
DKK 1 million each, one A share of DKK 900,000,
four B shares of DKK 1 million each and four B
shares of DKK 25,000 each have been amalga-
mated into one single share class. The share capi-
tal has been fully paid and no shares have special
dividend rights.
Dividends
The Group proposes a dividend of EUR 217 thou-
sand per share (2022: EUR 0 thousand per A
share and EUR 0 thousand per B share), in total
amounting to EUR 25 million (2022: EUR 0 million
per A share and EUR 0 million per B share).
During 2023, ordinary dividends related to the year
2022 amounted to EUR 0 thousand per share
(2022: EUR 297 thousand per A share and EUR
8 thousand per B share) equal to a total dividend
payment of EUR 0 million (2022: EUR 33 million).
Extraordinary dividends of EUR 229 thousand per
share was paid out in 2023, in total amounting to
EUR 26 million (2022: EUR 0 million).
Capital structure
The capital structure of the Group is intended to
ensure sufficient financial flexibility and stability for
the Group to reach its strategic goals. The Group
aims to maintain an optimal capital structure, and
to use the free operating cash flow after financial
items and tax for debt servicing and business
development.
The Group’s dividend policy is to distribute 50% of
net profit for the year, with a lower limit of EUR 25
million.
The Group strives to ensure adequate credit
resources at all times, which includes securing
access to committed bank financing and refi-
nancing maturing debt in a timely manner. The
Group aims to have minimum EUR 250 million of
free committed credit resources available for the
next 12 months.
In order to achieve this overall objective, the
Group’s capital management aims to ensure that
it meets its financial covenants attached to the
interest-bearing loans and borrowings that define
capital structure requirements. The covenants’
terms relate to the Group’s leverage ratio. At the
end of 2023, the leverage ratio was 3.1x (2022:
4.2x). The Group aims to maintain a leverage ratio
below 2.5x in the long term while a higher lever-
age ratio is accepted when acquiring strategic
businesses.
Breaches in meeting the financial covenants would
permit the bank to immediately call loans and
borrowings. There have been no breaches, nor
close to default, of the financial covenants of any
interest-bearing loans or borrowings in the current
period or in the previous period.
No changes were made in the objectives, policies
or processes for managing capital during 2023 or
2022.
4.1 Share capital, distribution to shareholder
Share capital, distribution to shareholder 31 December 2023 31 December 2022
Number of
shares
Nominal
value (DKK)
Number of
shares
Nominal
value (DKK)
The share capital comprise:
A shares - - 111 110,900,000
B shares - - 8 4,100,000
Shares in Hempel A/S 115 115,000,000 - -
Share capital (fully paid) 115 115,000,000 119 115,000,000
99Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.2 Borrowings
Accounting policies
Long-term loans, such as loans from credit insti-
tutions, are recognised initially at fair value net
of directly attributable transaction costs. Subse-
quently, the loans are measured at amortised cost
using the effective interest method. The difference
between the proceeds initially received and the
nominal value is recognised as financial expenses
in the statement of profit and loss over the loan
term.
The bank loans are floating interest loans based
mainly on EURIBOR. Further, the interest rate is
linked to the Group’s leverage ratio and to achieve-
ment of the Group’s sustainability targets aimed at
reducing CO
2
emissions, landfill waste and use of
hazardous materials in production.
A negative pledge clause is attached to the
Group’s long-term loan arrangements that pre-
vents Hempel A/S from pledging certain assets as
security.
Secured loans
Lease liabilities are effectively secured as the
rights to the leased assets recognised in the finan-
cial statements revert back to the lessor in the
event of default.
The Group’s borrowings consists of the following,
se table to the right:
2023 (EUR m) Average
interest rate
Maturity Carrying
amount
Bank loans 5.46% 2025-2027 1,034
Overdraft facilities 5.21% 2024 53
Lease liabilities 0.2%-13.1% 2024-2047 140
Loan to parent company 6.28% 2024 57
Total borrowings 1,284
Current 145
Non-current 1,139
Total borrowings 1,284
2022 (EUR m) Average
interest rate
Maturity Carrying
amount
Bank loans 3.8% 2024-2026 901
Overdraft facilities 2.8% - 7.9% 2023 100
Lease liabilities 0.2% - 12.0% 2022-2045 165
Loan from parent company 4.4% 2023 66
Total borrowings 1,232
Current 202
Non-current 1,030
Total borrowings 1,232
100Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.3 Financial risks
This note describes the exposure to financial
risks and how these risks could affect the Group’s
future financial performance.
The Group’s activities expose Hempel to a variety
of risks related to the Group’s financial assets and
liabilities. The Group’s financial liabilities comprise
primarily borrowings, trade and other payables
and lease liabilities, whereas the financial assets
primarily comprise trade receivables and cash
deposits.
Management has assessed the following key
financial risks and their significance to the Group:
The above financial risks are inherent to the way
Hempel operates as a global company with a
large number of operating units across the world.
The Group’s overall risk management programme
seeks to identify, assess, and mitigate these
financial risks in order to reduce the effects on the
Group’s financial performance. The risks are man-
aged in accordance with the policies and guide-
lines laid out by the Board of Directors. Hempel
has centralised handling of these risks, except
for commercial credit risk, which is managed
locally. There are no changes in the Group’s finan-
cial risk management policies compared to the
previous year.
It is the Group’s policy not to speculate actively on
financial risks.
To some extent, the Group’s income and expenses
in foreign currencies net out and create a natural
hedge of the Group’s profitability margin. Hempel
hedges intercompany loans in the major curren-
cies using financial instruments. Foreign exchange
hedges are entered into in order to mitigate for-
eign exchange risks related to internal balances
between Group entities. See further description
under market risk.
Market risk
The Group’s exposure to market risks is related
to foreign exchange risks and interest rate risk.
All market risks are managed in accordance with
the Group’s Treasury Policy.
Foreign exchange risk
Foreign exchange risk is the risk that the fair value
or future cash flows of a balance sheet expo-
sure will fluctuate because of changes in foreign
exchange rates.
Hempel’s exposure to the risk of changes in
foreign exchange rates relates primarily to the
Group’s trade receivables and trade payables,
arising respectively from revenue and purchase
transactions denominated in a foreign currency
and intercompany loans and deposits. The cur-
rency exposure in these balances may affect
Hempel’s result.
The overall objective of foreign exchange risk
management is to reduce the short-term negative
impact of exchange rate fluctuations on net finan-
cials and cash flows, thereby contributing to the
predictability of the financial results.
To manage exposure to foreign exchange risk, it
is Hempel’s policy to pool funding activities cen-
trally through intercompany loans and deposits.
In each subsidiary, foreign exchange risk derived
from trade receivables or payables is mitigated by
Hempel A/S establishing an intercompany loan/
receivable towards the local entity in the same for-
eign currency, thereby creating a natural hedge.
Currency risk is, as a main policy, hedged against
DKK or EUR when exposure exceeds EUR 0.5 mil-
lion (higher thresholds are applied for US, SGD,
HKD and PLN). Some currencies cannot be hedged
within a reasonable price range, in which case
correlation to a proxy currency is considered and,
if deemed appropriate, proxy hedging is applied.
Foreign exchange forward contracts are used to
hedge the exposure to currency risk. As the vast
majority of intercompany loans are hedged, and
because changes in the fair value of both the
hedged item and the foreign exchange forward
is recognised in profit and loss under financial
items, the net exposure to foreign currency risk is
deemed low, though a higher foreign exchange risk
persists in countries with high inflation.
Foreign currency sensitivity
The sensitivity analysis is based on financial
assets and liabilities recognised as of 31 Decem-
ber. The table on the next page demonstrates
the sensitivity to a reasonably possible change in
USD and GBP exchange rates against EUR, with all
other variables held constant. The Group’s expo-
sure to foreign currency changes for all other cur-
rencies is not material.
The impact on the Group’s profit before tax is due
to changes in the fair value of monetary assets
and liabilities denominated in foreign currencies
and non-designated foreign exchange derivatives.
Although the derivatives have not been designated
in a hedge relationship, they act as an economic
hedge and will offset the underlying transactions
when they occur.
The movement in pre-tax equity equals the effect
on profit before tax adjusted for fair value move-
ments of interest rate swaps designated as hedg-
ing instruments.
Financial risk type 2023 2022
Foreign exchange risk Low Low
Interest rate risk Medium Medium
Credit risk Low Low
Liquidity risk Low Low
101Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Interest rate risk
Interest-bearing debt increased primarely due to
additional net working capital driven by organic
growth.
The Group's exposure to changes in interest rates
primarily relates to long-term loans and borrowings
with floating interest rates. The Group's policy is
to hedge its interest rate risk depending on the
Group's interest coverage level (EBITDA/interest).
When the Group’s interest coverage level falls
below 10, the Group assesses whether it is nec-
essary to mitigate the interest rate risk by entering
into hedging instruments.
Hempel has fixed the interest rate on EUR 700
million of debt by entering into variable-to-fixed
interest rate swaps maturing in December 2025,
which reduces the exposure to changes in interest
rates in 2024 and 2025. The interests related to
the EUR 700 million debt is fixed at an average
interest rate of 3.01% until December 2025.
There is an economic relationship between the
loans and the hedging instruments as both the
nominal amount and terms of the interest rate
swaps mirror the hedged exposure, creating an
equal opposite interest receipt and a fixed inter-
est payment. The Group has established a hedge
ratio of 1:1 for the hedging relationships as the
underlying risk of the interest rate swaps are iden-
tical to the hedged risk.
The table above demonstrates sensitivity to rea-
sonable possible changes in interest rates, with all
other variables held constant.
The sensitivity analysis is based on financial
assets and liabilities recognised as of 31 Decem-
ber and assumes that the interest rate hedges are
100% effective. The sensitivity analysis is based
on a change of 100 bps which is considered a rea-
sonable possible change at 31 December 2023.
4.3 Financial risks — continued
(EUR m) Increase/
decrease in bps
Effect on profit
before tax
Effect on equity
2023
Euro +100 bps - 2 - 2
Euro - 100 bps 2 2
2022
Euro +100 bps - 9 - 7
Euro - 100 bps 9 7
(EUR m) Change in rate Nominal value Effect on profit
before tax
Effect on equity
2023
USD/EUR 5% - 66.7 - 3.3 - 2.6
USD/EUR - 5% - 66.7 3.3 2.6
2023
GBP/EUR 5% - 6.8 -0.3 -0.3
GBP/EUR - 5% - 6.8 0.3 0.3
2022
USD/EUR 5% - 45.5 - 2.3 - 1.8
USD/EUR - 5% - 45.5 2.3 1.8
2022
GBP/EUR 5% 2.3 0.1 0.1
GBP/EUR - 5% 2.3 - 0.1 - 0.1
102Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.3 Financial risks — continued
Credit risk
Credit risk arises from the possibility that trading
partners and customers may default on their obli-
gations, causing financial losses for the Group.
The Group is exposed to credit risk on cash, trade
and other receivables. Please refer to note 3.5 for
a description of the Group’s credit risk in relation
to trade receivables.
The carrying amount of EUR 278 million (2022:
EUR 253 million) represents the maximum credit
exposure related to cash and other receivables.
Hempel’s main banks are all financial institutions
with a high credit rating and, therefore, finan-
cial assets such as cash are considered to be of
low risk.
Other financial assets measured at amortised
cost comprise other receivables. These financial
assets are considered to have a low credit risk,
and thus the impairment provision calculated
based on 12 months of expected losses is con-
sidered immaterial. The financial assets are con-
sidered to be low risk when they have a low risk
of default, and the issuer has a strong capacity to
meet its contractual cash flow obligations in the
near term.
The Group has no material risks relating to a
single customer or business partner. It is the
Group’s credit policy to rate major customers and
other business partners on a current basis. Bank
Acceptance Bills are used as a financial instru-
ment to further limit the risk of credit losses.
The Group considers a financial asset in default
when the Group is unlikely to recover the outstand-
ing contractual amount in full. A financial asset is
written off when there is no reasonable expecta-
tion of recovering the contractual cash flows.
Liquidity risk
The liquidity risk is assessed to be low. Hempel
ensures the availability of the required liquidity
through a combination of cash management and
both uncommitted and committed credit facilities.
Hempel applies cash pool arrangements for opti-
misation and centralisation of cash management.
Hempel has an undrawn credit facility of
EUR 472 million (2022: EUR 565 million).
Maturities of financial liabilities
The table to the right provides an analysis of
Hempel’s financial liabilities divided into relevant
maturity groupings based on their contractual
maturities for non-derivative financial liabilities.
The amounts disclosed in the table are the con-
tractual undiscounted cash flows.
Contractual undiscounted cashflows (EUR m) Less than
1 year
Between
1 and 5 years
More than
5 years
2023
Non-derivatives:
Borrowings, current and non-current 88 1,080 -
Loan from parent company 60 - -
Trade payables 332 - -
Lease liabilities 36 84 32
Derivatives:
Derivatives financial instruments 4 4 -
Total contractual undiscounted cash flows at the end of the year 520 1,168 32
Non-current liabilities 1,200
Current liabilities 520
2022
Non-derivatives:
Borrowings, current and non-current 136 953 -
Loan from parent company 69 - -
Trade payables 355 - -
Lease liabilities 39 95 42
Total contractual undiscounted cash flows at the end of the year 599 1,048 42
Non-current liabilities 1,090
Current liabilities 599
For borrowings, the contractual payments are based on the variable interest rates at December 2023, except for a total of EUR 700
million in loans for which the fixed interest swap rates are applied until the swap rates mature in December 2025, thus reflecting
the Group's expected net cash outflow until maturity of the loan and the interest rate swaps.
103Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.4 Financial instruments
Accounting policies
Derivative financial instruments, foreign exchange
forwards, currency swaps and interest rate swaps
are initially recognised in the balance sheet at fair
value and subsequently remeasured at their fair
value.
Derivatives are used for economic hedging pur-
poses and not as speculative investments. Where
the derivatives do not meet the hedge accounting
criteria, they are measured at fair value through
profit and loss.
Hedging instruments not qualifying for
hedge accounting
For foreing exchange forwards and currency
swaps, positive and negative fair values of
these derivative financial instruments are recog-
nised as Other receivables and Other payables,
respectively. Changes in the fair values of foreign
exchange forwards and currency swaps are rec-
ognised in the statement of profit and loss under
financial income and expenses.
Cash flow hedge accounting
For interest rate swaps, cash flow hedge account-
ing is applied. Positive and negative fair values
are recognised as Other receivables and Other
payables, respectively. Changes in the fair values
are recognised directly within Other comprehen-
sive income. The amount accumulated in equity
is reclassified to profit and loss as a reclassifica-
tion adjustment in the same periods during which
the hedged cash flows affect profit and loss. Fair
value of the interest rate swaps was negative EUR
4.5 million as of 31 December 2023.
Financial instruments, fair value disclosures
The carrying amount of financial instruments
is a reasonable approximation of the fair value,
except for loans measured at amortised cost.
The carrying amount of loans measured at amor-
tised cost amounts to EUR 1,144 million (2022:
1,067 million) compared to a fair value of EUR
1,147 million (2022: 1,070 million). The fair value
is determined based on the present value of
expected future cash flows.
The carrying amount of lease liabilities amount to
EUR 140 millions (2022: 165 million) compared to
a fair value EUR 116 million (2022: 145 million).
Financial instruments measured at fair value
Financial instruments measured at fair value can
be divided into three levels:
Level 1 — Quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2 — Inputs other than quoted prices included
within level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3 — Inputs for the asset or liability that are
not based on observable market data.
Foreign exchange contracts, currency swaps
and interest rate swaps are within level 2 of the
fair value hierarchy and are calculated based on
observable market data, such as foreign exchange
rates and yield curves at the end of the reporting
period, and generally accepted valuation methods.
Loans are with level 3 of the fair value hierarchy.
Reconciliation of liabilities arising from
financing activities (EUR m)
Non-cash movements
Beginning of
the year
Cash flows Additions Disposals Acquisitions Exchange rates End of the year
2023
Lease liabilities 165 - 38 12 - - 1 140
Borrowings, current and non-current 1,067 83 - - - - 6 1,144
Liabilities arising from financing activities 1,232 38 14 - - - 1 1,284
2022
Lease liabilities 176 - 42 30 - 3 - 2 165
Borrowings, current and non-current 907 159 - - - 1 1,067
Liabilities arising from financing activities 1,083 117 30 - 3 - 1 1,232
104Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.5 Financial income and expenses
Accounting policies
Financial income and expenses comprise interest
income and expenses, gains and losses on receiv-
ables, payables, realised and unrealised exchange
gains and losses on transactions denominated in
foreign currencies.
Financial income (EUR m) 2023 2022
Interest income 12 5
Gain on derivative financial instruments at fair value through profit and loss 2 7
Total financial income 14 12
Financial expenses (EUR m) 2023 2022
Interest expense on borrowings - 53 - 23
Interest expense on lease liabilities - 4 - 3
Interest expenses to parent company - 3 - 2
Interest expenses on financial liabilities measured at amortised cost - 60 - 28
Foreign exchange loss (net) - 38 - 19
Net monetary loss - 2 - 3
Other financial expenses - 21 - 20
Total financial expenses - 121 - 70
”Gain and losses on foreign exchange derivative financial instruments measured at fair value through profit and loss has been
presented separately. Last year, these instruments were presented within the line item foreign exchange gain/loss. As a result of the
change in presentation, comparative figures have been restated.”
105Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4.6 Discontinued operations, assets and liabilities held for sale
Hempel was established in Russia in 1996 and
employed 124 employees at the beginning of
2022. Following a strategic review of its presence
in Russia, Hempel decided to leave Russia per-
manently as a result of the Russian invasion of
Ukraine. The associated operations, assets and
liabilities were consequently presented as discon-
tinued operations and assets and liabilities held
for sale in the 2022 financial statement.
On 13 July 2023, the divestment of the assets in
Russia was completed.
The total impact on the profit and loss statement
in 2023 amounts to a loss of EUR 11 million
(2022: 2 million), primarily related to reclassifica-
tion of accumulated foreign currency translation
reserve in equity to profit and loss. The loss is
attributable to the shareholder of Hempel A/S.
The carrying amounts of assets and liabilities as of
the date of sale (13 July 2023) were:
Net loss from discontinued operations (EUR m) 2023 2022
Revenue - 10
Expenses - 1 - 15
Net profit before tax - 1 -5
Income tax - 3
Loss on sale of Hempel Russia after income tax - 10 -
Net profit from discontinued operations - 11 - 2
Cash flow from discontinued operations (EUR m) 2023 2022
Cash flow from operating activities - 1 - 6
Cash flow from investing activities (including net cash inflow from sale of Hempel Russia of
EUR 6 million)
6 -
Cash flow from financing activities - -
Total 5 - 6
Statement of financial position of business classified as held for sale (EUR m) 2023 2022
Fixed assets - 14
Deferred tax asset - 3
Cash - 3
Other current assets - 1
Assets held for sale - 21
Deferred tax liabilities - 4
Current liabilities - 2
Liabilities held for sale - 6
Loss on sale of Hempel Russia (EUR m) 2023 2022
Net cash received 6 -
Net cash receivables 4 -
Total consideration received or receivables 10 -
Carrying amount of net assets sold - 13 -
Reclassification of foreign currency translation reserve - 7 -
Total loss on sale of Hempel Russia - 10 -
(EUR m) 2023
Fixed assets 11
Cash 1
Other current assets 1
Total assets 13
Total liabilities -
106Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
5 Other disclosures
Fees for services other than statutory audit of the
financial statements provided by Pricewaterhouse-
Coopers Statsautoriseret Revisionspartnerselskab
to the Hempel Group mainly consist of financial
due diligence and transaction advice, account-
ing advisory services, and other advisory and tax
services.
Other contingent liabilities
The Group is, through its ongoing business,
involved in product liability claims and disputes in
connection with the Group’s operational activities.
The Group does not expect the pending litigations,
claims and investigations, individually or in aggre-
gate, to have a material impact on the Group’s
financial position, operating profit or cash flows in
addition to the amounts accrued as provision for
legal disputes.
Hempel A/S and its Danish subsidiaries are
jointly taxed with several Danish companies in the
Hempel Foundation Group. The Group’s Danish
enterprises are jointly and severally liable for
Danish taxes at source and income taxes. Refer to
the tax administration company Hempel Invest A/S
for the total amount of corporate tax payable for
the Group of jointly taxed companies.
Commitments
Contruction of a factory in China has been final-
ised. Hence, the total capital expenditure con-
tracted for at the end of the reporting period
related to the construction of the factory, but not
recognised as liabilities, amounted to EUR 0 mil-
lion (2022: EUR 6 million).
No events occurred after the balance sheet date
that could have a material impact on the company’s
financial results, assets, liabilities or equity.
For the purpose of presenting the statement of
cash flows, non-cash items with effect on the state-
ment of profit and loss must be reversed to identify
the actual cash flow effect from the statement of
profit and loss. The adjustments are specified as
follows:
5.1 Fee to the auditors appointed at the General Meeting 5.3 Contingent liabilities and other commitments
5.4 Events after the reporting period
5.2 Adjustment for non-cash items
(EUR m) 2023 2022
Audit fee 2 2
Tax advice 1 1
Other fees - 1
Total 3 4
(EUR m) 2023 2022
Amortisation,
depreciation and
impairment
148 107
Provisions 9 - 7
Gains and losses on the
sale of fixed assets
- - 3
Losses from divestment
of discontinued
operations
10 -
Hyperinflation
adjustment
5 8
Total 172 105
107Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Parent companies
Hempel Foundation
Hempel A/S paid rent expenses of EUR 3 million
(2022: EUR 2 million) to Hempel Foundation.
At 31 December 2023, Hempel A/S had EUR 0 mil-
lion deposit receivables from Hempel Foundation
related to office leases (2022: EUR 1 million).
Hempel Invest A/S
Hempel A/S paid rent expenses of EUR 2 million
(2022: EUR 2 million) to Hempel Invest A/S.
At 31 December 2023, Hempel A/S did not have
any deposit receivables from Hempel Invest A/S
related to office leases (2022: EUR 1 million).
As of 31 December 2023, loan payables to
Hempel Invest A/S amounted to EUR 57 million
(2022: EUR 66 million). Interest expenses during
the year amounted to EUR 3 million (2022: EUR 2
million).
Dividend
Extraordinary dividend of EUR 26 million was paid
to Hempel Invest A/S (2022: EUR 0 million). No
ordinary dividend was distributed to shareholders
of Hempel A/S (2022: EUR 33 million).
Other related parties
At 31 December 2023, Hempel A/S had EUR 1
million deposit receivables from Hempel Ejen-
domme A/S related to office leases (2022: EUR
0 million). The leased buildings were previously
owned by the Hempel Foundation and Hempel
Invest A/S, respectively, but ownership transferred
to Hempel Ejendomme A/S in December 2023.
Key management personnel of the entity
or its parent
For information on remuneration of key manage-
ment personnel of Hempel, please refer to note
2.2 Employee costs. There were no material unset-
tled balances with key management personnel at
the end of the year.
5.5 Related parties and ownership
Related parties and ownership Basis
Controlling influence:
Hempel Foundation,
Amaliegade 8, 1256 Copenhagen K, Denmark
Ultimate parent company
Hempel Invest A/S,
Amaliegade 8, 1256 Copenhagen K, Denmark
Majority shareholder (100%)
Members of the Executive Board and Board of Directors
of Hempel A/S as well as the Board of Directors of the
Hempel Foundation and Hempel Holding A/S are also
regarded as related parties. The members of the Boards
of Directors of the Hempel Foundation and Hempel
Holding coincide.
Other related parties:
Hempel's Employee Foundation,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Hempel's Cultural Foundation,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Brænderupvænge ApS,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Keldskov ApS,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Hempel Employee Foundation from 2017,
2800 Kongens Lyngby, Denmark
Related party
Frontier Innovation ApS,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Hempel Administration ApS,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Hempel Invest II ApS,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
Hempel Ejendomme A/S,
Amaliegade 8, 1256 Copenhagen K, Denmark
Related party
108Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
5.6 The Hempel Group
Location Name Currency Ownership
Denmark Hempel A/S DKK 100%
Argentina Hempel Argentina S.R.L. ARS 100%
Australia Hempel (Australia) Pty. Ltd. AUD 100%
Australia Hempel NewCo (Australia) Pty. Ltd. AUD 100%
Australia Hempel (Wattyl) Australia Pty. Ltd. AUD 100%
Austria Ostendorf GmbH EUR 100%
Bahrain Dahna Paint Middle East Holding B.S.C. BHD 51%
Bahrain Hempel Paints (Bahrain) S.P.C. BHD 51%
Brazil Hempel Tintas do Brasil Ltda BRL 100%
Canada Farrow & Ball Canada Limited CAD 100%
Canada Hempel (Canada) Inc. CAD 100%
Chile Pinturas Hempel Chile SpA CLP 100%
China Hempel North Asia Holding Co., Ltd CNY 100%
China Hempel (Hong Kong) Limited HKD 100%
China Hempel (China) Limited HKD 100%
China Hempel (Kunshan) Coatings Ltd. CNY 100%
China Hempel (Yantai) Coatings Ltd. CNY 100%
China Hempel (Guangzhou) Coatings Ltd. CNY 100%
China Hempel (Zhangjiagang) Coatings Ltd. CNY 100%
Croatia Hempel Coatings (Croatia) Ltd. HRK 100%
Cyprus Hempel Coatings (Cyprus) Limited EUR 100%
Czech Republic Hempel (Czech Republic) s.r.o. CZK 100%
Denmark HSA (Danmark) A/S DKK 100%
Denmark Hempel Decorative Paints A/S DKK 100%
Denmark Brifa Maling A/S DKK 100%
Denmark HF (Denmark) A/S DKK 100%
Ecuador Hempel Ecuador S.A. USD 100%
Egypt Hempel Coatings (Egypt) LLC EGP 100%
Egypt Hempel Egypt L.L.C. EGP 100%
Egypt Hempel Paints Egypt LLC EGP 99%
Finland OY Hempel (Finland) AB EUR 100%
France Hempel (France) SAS EUR 100%
France BB Participations SAS EUR 100%
France B.B Fabrications SAS EUR 100%
France Bontemps-Bonnarme SAS EUR 100%
France Capcouleurs SAS EUR 100%
France Cap Couleurs Brignoles SAS EUR 100%
France Cap Couleurs Distribution SAS EUR 100%
Location Name Currency Ownership
France Cap Couleurs Est SAS EUR 100%
France Cap Couleurs Gestion SAS EUR 100%
Germany Farrow & Ball DE GmbH EUR 100%
Germany Hempel (Germany) GmbH EUR 100%
Germany Hempel Beteiligungsgesellschaft GmbH EUR 100%
Germany J.W. Ostendorf GmbH & Co. KG* EUR 100%
Germany Ostendorf-Beteiligungs-GmbH EUR 100%
Germany FLT Handel & Service GmbH EUR 100%
Germany Brand.IQ GmbH EUR 100%
Germany Rottkamp Immoblilien GmbH & Co. KG* EUR 100%
Germany Rottkamp Immobilien Verwaltung GmbH EUR 100%
Greece Hempel Coatings (Hellas) Single Member S.A. EUR 100%
India Hempel Paints (India) Private Limited INR 100%
Indonesia P.T. Hempel Indonesia IDR 100%
Ireland Crown Paints Ireland Limited EUR 100%
Italy Hempel (Italy) S.r.l. EUR 100%
Kenya Hempel Paints Kenya Company Limited KES 100%
Korea Hempel Korea Co. Ltd. KRW 100%
Kuwait Hempel Paints (Kuwait) K.S.C.C. KWD 51%
Malaysia Hempel (Malaysia) Sdn. Bhd MYR 100%
Malaysia Hempel Manufacturing (Malaysia) Sdn. Bhd. MYR 100%
Mexico Pinturas Hempel de Mexico S.A. de C.V. MXN 100%
Morocco Hempel Maroc SARL MAD 100%
New Zealand Hempel (Wattyl) New Zealand Ltd. NZD 100%
Norway Hempel Norway AS NOK 100%
Oman Hempel (Oman) L.L.C OMR 25%
Oman Hempel Manufacturing LLC OMR 25%
Peru Hempel Pinturas Del Perú S.A.C. PEN 100%
Poland Hempel Paints (Poland) S.p. z o.o. PLN 100%
Portugal Hempel (Portugal) Lda EUR 100%
Qatar Hempel Paints (Qatar) W.L.L. QAR 28%
Saudi Arabia Hempel Paints (Saudi Arabia) W.L.L. SAR 51%
Saudi Arabia Painting Materials and Equipment Centre Co. LTD SAR 26%
Singapore Hempel (Singapore) Pte. Ltd. SGD 100%
South Africa Hempel Paints South Africa (Pty) Ltd. ZAR 100%
Spain Pinturas Hempel SAU EUR 100%
Sweden Hempel (Sweden) AB SEK 100%
Switzerland Hempel Schweiz AG CHF 100%
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroductionConsolidated financial statements 109
5.6 The Hempel Group — continued
Location Name Currency Ownership
Switzerland J.W. Ostendorf (Schweiz) AG CHF 100%
Syria Hempel Paints (Syria) W.L.L. SYP 43%
Taiwan Hempel (Taiwan) Co., Ltd. TWD 100%
Thailand Hempel (Thailand) Ltd. THB 100%
The Netherlands Hempel (The Netherlands) B.V. EUR 100%
The Netherlands Hempel Industrial B.V. EUR 100%
Turkey Hempel Coatings San. ve Tic. Ltd. Sti. TRY 100%
UK Crown Brands Limited GBP 100%
UK Crown Paints Limited GBP 100%
UK Crown Paints Group Limited GBP 100%
UK Crown Paints Holdings Limited GBP 100%
UK FB Ammonite Limited GBP 100%
UK FB Brassica Limited GBP 100%
UK FB Brinjal Limited GBP 100%
UK FB Calluna Limited GBP 100%
UK Farrow & Ball Holding Limited GBP 100%
UK Farrow & Ball Limited GBP 100%
UK Hempel Decorative Paints Limited GBP 100%
UK Hempel UK Ltd. GBP 100%
UK Reebor Limited GBP 1%
UK Ostendorf U.K. Ltd. GBP 100%
Ukraine Hempel Ukraine LLC UAH 100%
United Arab Emirates Hempel Paints Company Abu Dhabi L.L.C. AED 24%
United Arab Emirates Hempel Paints Emirates L.L.C. AED 49%
USA Farrow & Ball Inc. USD 100%
USA Hempel (USA), Inc. USD 100%
USA Jones-Blair Company, LLC USD 100%
Vietnam Hempel Vietnam Company Limited VND 100%
J.W. Ostendorf GmbH & Co. KG and Rottkamp Immobilien GmbH & Co. KG are exempt from their obligation to
prepare, have audited and disclose annual financial statements and a management report in accordance with
the regulations applicable to partnerships pursuant to Section 264b of the German Commercial Code (HGB).
Financial statementsSustainability in everything Statements and ESGOur businessThe big pictureIntroductionConsolidated financial statements 110
5.7 Financial definitions
Financial ratios have been calculated as follows:
Organic growth =
Organic revenue
Revenue in comparative period
Organic growth is defined as growth from one year to the next, based on values in fixed
currencies for both years excluding mergers, acquisitions and divestments, etc.
Gross margin =
Gross profit
Revenue
EBITDA margin =
EBITDA
Revenue
EBITDA margin, adjusted =
EBITDA, adjusted
Revenue
EBITDA = Operating profit (and loss) before impairment, amortisation and depreciation
EBITDA, adjusted = EBITDA before special items and before adjustment for hyperinflation according to IAS 29
Operating profit margin =
Operating profit (loss)
Revenue
Return on invested capital (ROIC) =
12 month operating profit less effective tax rate + Special items
(∑
i=T
Invested capital) / 12
i=T–12
Invested capital =
Intangibles + property, plant and equipment + inventories + receivables
– provisions – trade payables – other payables
Equity ratio =
Shareholders’ equity
Total assets
Leverage ratio =
Net interest-bearing debt
EBITDA before special items (incl. full-year figures from acquisitions)
Net interest-bearing debt =
Overdraft facilities +bank loans, etc. + interest-bearing payables to Group enterprises
+ lease liabilities - cash at bank and in hand
Free cash flow = Total net cash generated from operating activities less net cash used in investing activities
Cash conversion =
Total net cash flows from operating activities before financial items and tax
Total EBITDA
Financial ratios have been calculated as follows:
Accounts receivable days =
Accounts receivable x 90
Revenue (last 3 months)
Accounts payable days =
Accounts payable x 90
Cost of goods sold + change in inventory (last 3 months)
Inventory days =
Inventory x 90
Cost of goods sold (last 3 months)
Average net working capital days = Accounts receivable days + inventory days – accounts payable days (12 months average)
The following key figures are calculated as follows (EUR m) 2023 2022
Operating profit 189 114
Amortisation, depreciation and impairment 148 105
EBITDA = 337 219
Special items, c.f. note 2.4 7 30
Adjustment for hyperinflation according to IAS 29 5 8
EBITDA, adjusted = 349 257
The following key figures are calculated as follows:
Borrowings 1,087 1,001
Payables to parent company 57 66
Lease liabilities 140 165
Cash - 209 - 180
Net interest-bearing debt = 1,075 1,052
EBITDA, adjusted 349 257
Adjustment for hyperinflation according to IAS 29 - 5 - 8
EBITDA from 1 January to date of acquisition for acquired companies - 1
EBITDA before special items = 344 250
Leverage ratio = 3.1 4.2
111Consolidated financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Parent company financial statements
Primary statements
Statement of profit and loss . . . . . . . . . . . . . . . . . . . . . . . . 113
Statement of financial position
. . . . . . . . . . . . . . . . . . . . . . 114
Statement of changes in equity
. . . . . . . . . . . . . . . . . . . . . . 115
Notes
1. Basis of preparation
1.1 General accounting policies
. . . . . . . . . . . . . . . . . . . . . 116
2. Results for the year
2.1 Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
2.2 Employee costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
2.3 Income tax, tax assets and liabilities
. . . . . . . . . . . . . . . 117
3. Operating assets and liabilities
3.1 Intangible assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
3.2 Property, plant and equipment
. . . . . . . . . . . . . . . . . . . 118
3.3 Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
4. Capital structure and financing items
4.1 Share capital, distribution to shareholder
. . . . . . . . . . . . 119
4.2 Borrowings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
4.3 Net financials
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
5. Other disclosures
5.1 Fee to the auditors appointed at the General Meeting
. . . 120
5.2 Contingent liabilities and other commitments
. . . . . . . . . 120
5.3 Events after the reporting period
. . . . . . . . . . . . . . . . . . 120
5.4 Related parties
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
5.5 Investments in subsidiaries
. . . . . . . . . . . . . . . . . . . . . . 121
112Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Statement of profit and loss
Note (EUR m) 2023 2022
2.1 Revenue 234 220
Production costs - 115 - 119
Gross profit 119 101
Sales and distribution costs - 32 - 28
Administrative costs - 90 - 73
Other operating expenses - 11 -
2.2 Operating profit (loss) - 14 0
5.5 Income from investments in subsidiaries 18 - 2
Profit (loss) before financial income and expenses 4 - 2
4.3 Net financials - 32 - 8
Loss before tax - 28 - 10
2.3 Income tax - - 2
Net loss for the year - 28 - 12
113Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Statement of financial position
31 December
Note (EUR m) 2023 2022
4.1 Share capital 15 15
Reserve for development costs 32 30
Retained earnings 252 372
Proposed dividend for the year 25 -
4.1 Total equity 324 417
4.2 Borrowings 970 900
Provisions 24 6
Total non-current liabilities 994 906
Overdraft facilities 33 10
Trade payables 11 12
4.2 Payables to parent company 55 66
Payables to Group enterprises 462 401
Other liabilities 62 50
Total current liabilities 623 539
Total liabilities 1,617 1,445
Total equity and liabilities 1,941 1,862
Note (EUR m) 2023 2022
Software 3 6
Software under development 33 29
Other intangible assets 9 7
3.1 Intangible assets 45 42
Plant and machinery 6 7
Leasehold improvements 19 21
Other fixed assets 1 1
Assets under construction 8 8
3.2 Property, plant and equipment 34 37
5.5 Investments in subsidiaries 915 891
Loans to Group enterprises 159 136
2.3 Deferred tax assets 23 13
Deposits 2 2
Other non-current assets 1,099 1,042
Total non-current assets 1,178 1,121
3.3 Inventories 6 7
Trade receivables 12 17
Receivables from Group enterprises 673 643
Other receivables 34 25
Prepayments 10 14
Cash 28 35
Total current assets 763 741
Total assets 1,941 1,862
114Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Statement of changes in equity
Note (EUR m) Share
capital
Reserve for
development
costs
Retained
earnings
Proposed
dividend
Total
equity
Equity at 1 January 2022 15 16 431 33 495
Net profit for the year - - - 12 - - 12
Exchange adjustment - - - 39 - - 39
Remeasurements of defined benefit plans - - 5 - 5
Tax on equity transactions - - 1 - 1
Dividend distributed - - - - 33 - 33
Development projects reserve, additions - 16 - 16 - -
Development projects reserve, amortisation - - 2 2 - -
4.1 Equity at 31 December 2022 15 30 372 - 417
Equity at 1 January 2023 15 30 372 - 417
Net profit / (loss) for the year - - - 28 - - 28
Exchange adjustment - - - 2 - - 2
Remeasurements of defined benefit plans - - - 1 - - 1
Cash flow hedging - - - 5 - -5
Other adjustments
1
- - - 30 - - 30
Tax on equity transactions - - - 1 - - 1
Extraordinary dividend distributed - - - 26 - - 26
Proposed dividend - - - 25 25 -
Development projects reserve, additions - 8 - 8 - -
Development projects reserve, amortisation - - 6 6 - -
4.1 Equity at 31 December 2023 15 32 252 25 324
1
On 28 June 2023, the remaining 35% of shares in the JWO Group. The negative equity reserve,
including the transaction price has been transferred to equity.
115Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
The financial statements of Hempel A/S have been
prepared in accordance with the Danish Financial
Statements Act (Årsregnskabsloven) applying to
large enterprises of reporting class C.
The financial statements for 2023 are presented
in EUR million.
Because a statement of cash flows is prepared
for the Group in the consolidated financial state-
ments, no separate statement of cash flows has
been prepared for the parent company (as per-
mitted under the Danish Financial Statements
Act). Please refer to the consolidated statement of
cashflows for the Group.
The accounting policies and presentation for the
parent company are the same as for the consol-
idated financial statements with the exceptions
described in the following sections. For a descrip-
tion of the accounting policies of the Group, please
refer to the consolidated financial statements.
Revenue
Revenue is generated mainly from the sale of
goods for resale and finished goods. Revenue is
recognised in the income statement when all sig-
nificant risk and rewards have been transferred
to the customer and when the income can be
reliably measured and is expected to be received.
Revenue is measured at the fair value of the con-
sideration expected to be received. Revenue is
recognised exclusive of VAT and net of discounts
relating to sales.
Receivables
Receivables are measured in the balance sheet
at the lower of amortised costs and the net real-
isable value, which normally corresponds to the
nominal value.
Leases
A finance lease is a lease that transfers sub-
stantially all the risk and rewards incidental to
ownership of an asset. The parent company does
not have any finance lease agreements. An oper-
ating lease is a lease other than a finance lease.
Operating lease commitments mainly relate to
office buildings, leased cars and, to some extent,
office equipment. Payments made under operating
leases are recognised in the income statement
over the lease term.
Hyperinflationary economies
The results and financial position in Argentina
and Turkey are translated into the presentational
currency EUR following the principles described
in note 1.1 Translation of Group companies in the
consolidated financial statements. The results and
financial position are therefore not restated taking
into account inflation adjustments in hyperinfla-
tionary economies.
Assets held for sale and discontinued
operations
Activities in Russia are not presented as assets
held for sale and discontinued operations. Assets
in Russia are depreciated until the assets are
derecognised at disposal.
1 Basis of preparation
1.1 General accounting policies
116Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
2 Results for the year
All revenue is derived from activities within the
EMEA region. The following table displays revenue
disaggregated into the sale of goods per customer
category.
Disaggregation of revenue is based on internal
management reporting. The other category primar-
ily consists of intercompany sales.
For remuneration of the Board of Directors and the
Executive Board, please refer to note 2.2 in the
consolidated financial statements.
2.1 Revenue 2.3 Income tax, tax assets and liabilities
2.2 Employee costs
Deferred tax
Deferred tax recognised in the balance sheet (EUR m)
2023 2022
Deferred tax (net):
Deferred tax, beginning of year 13 6
Recognised in profit and loss 10 2
Adjustment in respect of previous years - 5
Deferred tax (net), end of year 23 13
The Danish corporate tax rate was 22% in 2023 (22% in 2022). At 31 December 2023, the company had recognised a deferred tax
asset of EUR 23 million (2022: EUR 13 million) which relates to temporary differences.
(EUR m) 2023 2022
Marine 47 46
Infrastructure 5 4
Energy 6 6
Other 176 164
Total revenue 234 220
Staff costs (EUR m) 2023 2022
Wages and salaries 68 52
Pension costs 4 3
Other social security
contributions 1 1
Other employee costs 3 2
Total 76 58
Average number of
employees 382 347
Income tax
Tax for the year (EUR m)
2023 2022
Tax for the year is specified as follows:
Tax on profit for the year 5 - 2
Tax in respect of subsidiaries - 5 -
Total tax for the year - - 2
Tax on profit for the year is calculated as follows:
Current tax for the year 10 - 5
Deferred tax for the year - 10 2
Adjustment in respect of previous years - 1
Total tax on profit for the year - - 2
117Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
3 Operating assets and liabilities
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Inventories
Intangible assets (EUR m) Software Software under
development
Other intangi-
ble assets
Total
Costs at 1 January 2023 17 29 35 81
Additions for the year - 17 - 17
Disposals for the year - - 7 - - 7
Transfer between categories - - 6 6 -
Costs at 31 December 2023 17 33 41 91
Accumulated amortisation at 1 January 2023 11 - 28 39
Amortisation for the year 3 - 4 7
Accumulated amortisation at 31 December 2023 14 - 32 46
Carrying amount at 31 December 2023 3 33 9 45
Other intangible assets comprise mainly brands and formulas.
Property, plant and equipment (EUR m) Plant and
machinery
Leasehold
improvements
Other fixed
assets
Assets under
construction
Total
Costs at 1 January 2023 11 26 3 8 48
Additions for the year - - - - -
Transfer and reclassifications - - 1 1 - -
Costs at 31 December 2023 11 25 4 8 48
Accumulated depreciations at
1 January 2023 4 5 2 - 11
Depreciation for the year 1 1 1 - 3
Accumulated depreciation and impairment
at 31 December 2023
5 6 3 - 14
Carrying amount at 31 December 2023 6 19 1 8 34
Inventories (EUR m) 2023 2022
Raw materials and
consumables
6 7
Finished goods - -
Inventories 6 7
118Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
4 Capital structure and financing items
4.1 Share capital, distribution to shareholder 4.3 Net financials
Refer to note 4.1 in the consolidated financial
statements for an overview of the changes in
share capital.
An amount equal to capitalised development
costs, net of tax, is reserved in the Reserve for
development costs within equity. The reserve is
reduced with amortisation and write-downs of
development projects. The reserve cannot be
used for payments of dividends.
4.2 Borrowings
As of 31 December 2023, loans from Hempel
Invest A/S amounted to EUR 55 million (2022: EUR
66 million). Overdraft facilities amounted to EUR
33 million (2022: EUR 10 million).
Distribution of profit
(EUR m)
2023 2022
Proposed dividends 25 -
Retained earnings - 53 - 12
Total - 28 - 12
(EUR m) 2023 2022
Interest income from subsidiaries 49 27
External interest expenses - 49 - 20
Interest income, other 1 -
Other financial expenses - 8 - 6
Interest paid to Group enterprises - 14 - 6
Realised and unrealised exchange gains/losses, net - 11 - 3
Net financial income/expenses - 32 - 8
Long-term borrowings
etc. including short-
term part (EUR m)
2023 2022
Due within 1 year 88 76
Due within 1 to 5 years 970 900
Total borrowings 1,058 976
119Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
5 Other disclosures
5.1 Fee to the auditors appointed at the General Meeting
5.2 Contingent liabilities and other commitments
The audit fee is disclosed in the consolidated
financial statements, note 5.1.
The operating lease commitments are related to
non-cancellable operating leases primarily related
to buildings, company cars and office equipment.
Payments made under operating leases are recog-
nised in the income statement on a straight-line
basis over the lease term. The parent company
guarantees unutilised local loans and bank credits
to subsidiaries.
Hempel A/S is jointly taxed with a number of
Danish companies in the Hempel Foundation
Group. The Group’s Danish enterprises are jointly
and severally liable for Danish taxes at source
and income taxes.
Refer to note 5.3 in the consolidated financial
statements for more information.
5.3 Events after the reporting period
5.4 Related parties
Refer to note 5.4 in the consolidated financial
statements for more information.
The parent company has chosen only to disclose
transactions that have not been made on an arm’s
length basis in accordance with section 98c (7) of
the Danish Financial Statements Act.
(EUR m) 2023 2022
Rental and lease obligations:
Due within 1 year from the balance sheet date 6 6
Due within 1 to 5 years from the balance sheet date 24 22
Due more than 5 years from the balance sheet date 12 16
Total rental and lease obligations 42 44
Guarantees:
For local loans and bank credits to subsidiaries 67 49
Total guarantees 67 49
120Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
5.5 Investments in subsidiaries
Accounting policies
Investments in subsidiaries are recognised and
measured under the equity method. This implies
that the proportionate share of the net result,
less amortisation of goodwill and other fair value
adjustments from business acquisitions, is rec-
ognised in income from investments in subsidiar-
ies in the statement of profit and loss. Goodwill
and brands are amortised over 10 years. Good-
will is amortised over the period the company is
expected to derive benefits from the goodwill,
which is based on the acquisition business case.
The investments are measured in the balance
sheet at the proportionate ownership share of the
net asset value of the enterprises with deduction
or addition of shares of unrealised intercompany
profits and losses.
The total net revaluation of investments in sub-
sidiaries is transferred upon distribution of profit
to ‘Reserve for net revaluation under the equity
method’ under equity. The reserve is reduced
by dividends distributed to the parent company
and adjusted for other equity movements in
subsidiaries.
Subsidiaries with a negative net asset value are
recognised at EUR 0. Any legal or constructive obli-
gation of the parent company to cover the negative
balance of the subsidiary is recognised in receiva-
bles from subsidiaries or as a provision.
Impairment of investments in subsidiaries
An impairment of EUR 32 million was made in the
parent financial statements recognised within
income from investment in subsidiaries. The
impairment test was performed based on the prin-
ciples described in note 3.2 in the consolidated
financial statements.
Investments in subsidiaries (EUR m) 2023 2022
Costs at 1 January 1,049 521
Additions for the year - 528
Disposals for the year - 4 -
Costs at 31 December 1,045 1,049
Net revaluations at 1 January - 195 - 114
Exchange rate adjustments - 14 - 44
Remeasurements of defined benefit plans - 1 4
Net profit for the year 93 69
Amortisation and impairment of goodwill and brands - 75 - 71
Dividend received - 47 - 39
Disposal - 9 -
Other adjustments
1
- 28 -
Net revaluations at 31 December - 274 - 195
Carrying amount at 31 December 769 854
Recognised in the balance sheet as follows:
Subsidiaries with negative equity - 146 - 37
Investments in subsidiaries 915 891
769 854
Subsidiaries with negative equity are recognised in the balance sheet as follows:
Recognised as provisions - 24 - 6
Recognised in receivables from subsidiaries - 122 - 31
Net value at 31 December - 146 - 37
1 On 28 June 2023, the remaining 35% shares in the JWO Group were acquired resulting
in an adjustment to the carrying amount of the subsidiaries.
Please refer to note 5.6 in the consolidated financial statements for an overview of the
Hempel Group.
121Parent company financial statements Financial statementsSustainability in everythingOur businessThe big pictureIntroduction Statements and ESG
Tel: +45 4593 3800
Email: hempel@hempel.com
CVR no. 59946013
Financial year:
1 January – 31 December
Auditors