2021
Annual report
CONTENTS
Annual review 3
Orthex in brief 4
Key figures 5
Highlights of the year 6
CEO review 7
Strategy 9
Sustainability 12
Sustainability highlights 13
Sustainability at Orthex 14
Economic aspects 19
Environmental aspects 22
Social aspects 27
Sustainable business practices 31
Governance 33
Corporate governance statement 2021 34
Board of Directors 38
Management team 42
Remuneration report 2021 46
Financial review 49
Board of Directors’ report 51
Financial statements 71
ANNUAL
REVIEW
ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
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Orthex in brief
Orthex is a leading Nordic houseware company. Orthex designs, produces
and sells household products with a mission to make consumers’ everyday
life easier: Orthex strives to create functional, long lasting and sustainable
high-quality household products. Orthex’s products cover multifunctional
assortment of storage boxes, kitchen products and products for home and
yard. Orthex markets and sells its products under three main consumer
brands: SmartStore, GastroMax and Orthex. In addition, it sells externally
produced kitchen products under the Kökskungen brand.
Orthex has more than 100 years of experience in the production, design and
marketing of household products, and it has approximately 800 customers
in more than 40 countries. Orthex’s core geographic markets include the
Nordics (i.e., Finland, Sweden, Norway, Denmark and Iceland) and export
markets, including Germany, France and the United Kingdom. Orthex is
headquartered in Espoo, Finland, and it currently has seven local sales offices
located in the Nordics, Germany, France and the United Kingdom. Orthex’s
production facilities are located in Tingsryd and Gnosjö, Sweden, and in
Lohja, Finland. In addition, Orthex has centralized warehousing in Sweden
and Finland in connection with its Tingsryd and Lohja production facilities, as
well as an outsourced warehouse in Überherrn, Germany.
Orthex aims to be the industry forerunner in sustainability by promoting safe
and long-lasting products, reducing the carbon footprint of its operations and
products, as well as by sourcing an ever-increasing amount of raw materials
from bio-based and recycled materials. Orthex aims for its production
process to be carbon neutral by 2030.
Product categories:
Storage Kitchen Home
& yard
Plant care
)
Invoiced sales of SmartStore, GastroMax, Orthex, and Kökskungen branded
products accounted for % of total invoiced sales in
+ employees
~ customer countries
Sustainability focus
~% own brand sales
)
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Key figures
Net sales, EUR million . . .
Adjusted EBITA, EUR million . . .
Adjusted EBITA margin, % .% .% .%
Operating profit, EUR million . . .
Net debt / Adjusted EBITDA .x .x .x
Earnings per share, basic (EUR) . . .
27.4%
Net sales growth
outside Nordics
314
Personnel,
FTE during the year
20.4%
Growth of Storage
category
100%
All of our factories switched
to 100% fossil-free hydro
powered electricity
66.4
75.9
88.7
2019 2020 2021
Net sales, EUR million
7.6
12.9
11.0
2019 2020 2021
Adjusted EBITA, EUR million
11.4%
17.0%
12.4%
2019 2020 2021
Adjusted EBITA margin, %
6.5
12.3
9.3
2019 2020 2021
Operating profit, EUR million
66.4
75.9
88.7
2019 2020 2021
Net sales, EUR million
7.6
12.9
11.0
2019 2020 2021
Adjusted EBITA, EUR million
11.4%
17.0%
12.4%
2019 2020 2021
Adjusted EBITA margin, %
6.5
12.3
9.3
2019 2020 2021
Operating profit, EUR million
66.4
75.9
88.7
2019 2020 2021
Net sales, EUR million
7.6
12.9
11.0
2019 2020 2021
Adjusted EBITA, EUR million
11.4%
17.0%
12.4%
2019 2020 2021
Adjusted EBITA margin, %
6.5
12.3
9.3
2019 2020 2021
Operating profit, EUR million
66.4
75.9
88.7
2019 2020 2021
Net sales, EUR million
7.6
12.9
11.0
2019 2020 2021
Adjusted EBITA, EUR million
11.4%
17.0%
12.4%
2019 2020 2021
Adjusted EBITA margin, %
6.5
12.3
9.3
2019 2020 2021
Operating profit, EUR million
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Green energy
All of our factories switched
to 100% fossil-free hydro
powered electricity.
IPO
Initial Public Offering. Orthex
Corporation was listed on
the Nasdaq Helsinki on
25 March 2021.
Highlights of the year
Investments
We brought forward the
machine investment of about
EUR one million originally
planned for 2022 to increase
our production capacity.
CO2
We calculated the carbon
footprint of our operations
and value chain.
SITRA
The Finnish Innovation Fund
Sitra selected Orthex as one of
the pioneering Finnish circular
economy companies.
ISO 45001 certificate
Our operations were audited
for and received the ISO 45001
certification for occupational
safety.
FebruaryJanuary
2021
March July August December
CO2
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CEO review
With the first year as a listed company completed, I am very pleased with the strong performance
during turbulent conditions and the important strategic steps taken in 2021. I am especially proud of
how well our personnel has navigated through the volatile times flavoured by uncertainty and the
COVID-19 pandemic. Although the sight is already set on 2022, I am happy to share what we have
accomplished together at Orthex in 2021.
In 2021, Orthex’s net sales increased by 16.9% to EUR 88.7 million. The positive sales development
is a result of successful commercial strategy implementation including launch of new products,
widened distribution, customer collaboration and new customers.
Raw material prices reached their highest levels so far during the last quarter of 2021. Our
understanding is that raw material availability has been scarce, but we have been able to source the
needed raw material for our production. To ensure stable operations, we deliberately increased our
inventories of high-runner products and critical raw materials.
Orthex has been able to ramp up capacity according to plan to secure delivery performance. We
have also been able to speed up our capacity increase which has affected our delivery performance
positively. The result can also be seen in a quite sharp increase in inventory value towards the end
of the year. The inventory value is affected by the higher raw material prices and by higher stock of
our best-selling products in preparation for continued sales growth.
Sustainability is at the heart of our strategy. The company aims to be a pioneer in the industry in
terms of sustainability by offering timelessly designed, high-quality, safe, and long-lasting products,
reducing the carbon footprint of its operations and products, and sourcing more and more of its
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raw materials from bio-based and recycled materials. Orthex has set as a main target to reach
carbon neutrality in production by 2030. For example, all our three factories in Finland and Sweden
are already ISO 14001 and 9001 -certified for environmental and quality management. In December
2021, we were granted a new ISO 45001 certification. It is an international standard that specifies
requirements for an occupational health and safety management system.
We are committed to implementing our growth strategy with a focus on accelerated international
growth and sustainability. Orthex’s products are sold in more than 40 countries, and export to
non-Nordic countries grew by 1.7 percentage points and accounted for 19.4% (17.7) of the Orthex’s
invoiced sales at the end of the period. Some of the benefits of being a listed company is that it
creates awareness and trust among new and existing customers, which we believe can lead to
increased business opportunities. Awareness can also positively influence supplier relations and
hopefully also attracted talent when we strengthen our organisation.
Some of the benefits of being a listed
company is that it creates awareness
and trust among new and existing
customers
With many good learnings from 2021, we are thrilled to start our second year as a listed company.
I take this opportunity to thank the whole Orthex team, our stakeholders, and investors for an
exciting year 2021!
Alexander Rosenlew
CEO
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Orthex’s key priorities in its growth strategy are to become the number one brand in the Storage category in Europe,
and strengthen its position as a leading household player in the Nordics.
Solid actions to keep
winning in the
Nordics
Accelerating growth in the
export markets through a
key account approach
Accelerating the online
retail distribution
channel
Market consolidation
provides growth
opportunities
1 2 3
Orthex aims to continue its efforts to grow the Storage
product category in the Nordics through campaigns,
expansion of excellence concepts in stores and launch
of new products. Orthex targets growth in the Kitchen
product category by focusing on sustainability and
identified cross-sell expansion opportunities. Orthex also
aims to capture the e-commerce opportunities and the
scalability of its business model.
Orthex expects major growth opportunities in the export
markets and its go-to-market strategy is delivered
through a key account approach. At the same time, the
key is to improve the distribution of export markets,
invest in strategic customers and new customer
acquisition, and build new business.
The company strives to take advantage of the growth
opportunities offered by the e-commerce channel by
building relationships with e-commerce companies and
working closely with retailers implementing a multi-
channel strategy.
Orthex anticipates that potential acquisitions
will be an important opportunity to achieve the
company’s objectives, and Orthex intends to
carefully evaluate the acquisition opportunities
in the Storage product category in particular.
The synergies achieved through acquisitions
are typically related to production, sales
and marketing, logistics, product category
expansions, overheads, and a stronger
bargaining position vis-à-vis suppliers.
In 2021, invoiced sales in the
Nordics totalled 80.6 per cent
of Orthex total invoiced sales
In 2021, export markets
accounted for 19.4 per cent
of Orthex total invoiced sales
Strategy
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Commercial factors supporting growth strategy
• Accelerating efforts to grow the Storage product category
especially in key export markets utilizing the company’s strong
position in the Nordics.
• The close linkage between Kitchen and Storage product
categories enables cross-selling by leveraging Orthex’s existing
customer and supplier networks.
CLEAR CATEGORY STRATEGY
FOCUSING ON STORAGE
• Orthex aims to be the industry forerunner in sustainability
by offering high-quality, safe, and long-lasting products with
timeless design, reducing the carbon footprint of its operations
and products, and sourcing more and more of its raw materials
from bio-based and recycled materials.
• Orthex believes that it has potential to become the preferred
supplier of sustainable products.
• Innovations play an important role in Orthex growth strategy
• When designing and planning new product launches and
concepts Orthex will focus on sustainable materials and its
growing product categories Storage, Kitchen and Plant Care.
MAINTAIN A HIGH INNOVATION RATESHOWING THE WAY IN SUSTAINABILITY
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Long-term
financial targets
Sales growth
Pay-out ratio
An annual organic net sales growth to
exceed 5 per cent on a Group level, and
10 per cent outside the Nordics (growth
in local currencies).
Leverage
Net debt to adjusted EBITDA below 2.5x.
Leverage may temporarily exceed the
target (for example, in conjunction with
acquisitions).
Profitability
Improving EBITA margin
(adjusted for items affecting
comparability) exceeding 18 per
cent over time.
Distribution of a stable and over
time increasing dividend with a pay-
out of at least 50% of net profit on
a bi-annual basis.
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Sustainability highlights
The Finnish Innovation
Fund Sitra selected Orthex
as one of the pioneering
Finnish circular economy
companies.
We introduced and
rolled out the Orthex
Code of Conduct.
All of our factories switched
to 100% fossil-free hydro
powered electricity.
Our operations were audited
for and received the
ISO 45001 certification for
occupational safety.
We calculated
the carbon footprint of
our operations and
value chain.
Read more
Read more
Read more
Read more
Read more
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Sustainability at Orthex
Sustainability is a core element in realizing Orthex’s growth strategy and
key objectives for being the number one brand in the Storage product
category in Europe, and to strengthen Orthex’s position as a leading
household item company in the Nordics. Sustainability is a key factor in
all decision making at Orthex and a significant driver of our development
and investment agenda.
The main building blocks of our approach to sustainability are our products,
sustainable raw materials, and our carbon neutrality target. Orthex’s high-
quality, safe, and durable products are made with care and timeless design.
They are made for long-term use and are recyclable in all our markets.
We are also actively increasing the share of bio-based and recycled raw
materials. At the same time, we continuously strive to reduce the carbon
footprint of our operations and products and are aiming for carbon neutrality
by 2030
1
. With these priorities, our goal is to be an industry forerunner in
sustainability.
Several initiatives around the world strive to reduce the use of single-
use plastic products that can end up as waste in nature or the oceans.
Orthex does not make single-use products. On the contrary, we believe
that plastic is a valuable raw material that should be used to make long-
lasting, reusable, and recyclable products, such as our own.
As stated in the EU’s European strategy for plastics, “plastics are an
important material in our economy and daily lives”. Orthex’s products
and highly resource-efficient operations contribute to the EU’s target
to accelerate the transition to a circular plastics economy. We have also
signed the European Plastics Pact. The Pact brings together governments
and frontrunner organisations to accelerate the shift toward the reuse and
recycling of plastic products and packaging.
Orthex supports the Plastics Roadmap for Finland which identifies
measures to reduce the harm caused by plastic waste, enhance the
recycling and product design of plastics, create conditions for circular
innovations, and reduce the dependency on fossil-based raw materials
by advancing bio-based solutions.
Orthex’s sustainability priorities
We have identified priority sustainability topics in the areas of economic,
environmental, and social responsibility (see next page). The topics have
been chosen based on the significance of Orthex’s impact on them, and
where Orthex can make the biggest difference.
1
Target includes Orthex’s Scope 1 and 2 greenhouse gas emissions and relevant
parts of Scope 3 emissions. More details later in this section.
Our products are part of the
transition to a circular and
resource-efficient plastics
economy
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KPIs
Aspects
Environmentally sustainable choices
Resource efficiency
Responsible production and consumption
Caring for our people
Stakeholder engagement
Product safety
Growing and profitable business
Sustainable products
Customer satisfaction
Constant growth and improved profitability
Improvement suggestions
Long-lasting & recyclable products
Customer satisfaction rate
Sustainable materials
Energy efficiency
Production scrap
Reducing carbon footprint
Employee health and safety
Zero accidents culture
Work environment evaluation
Important stakeholder evaluation
Sustainable supply chain
Safe and tested products
ECONOMIC ENVIRONMENTAL SOCIAL
PURPOSE: Improve everyday life with sustainable practical products
Orthex Group develops, produces and markets functional household products to customers and
consumers. Our offering is based on appealing and innovative concepts, responsibly produced
mass market products of high quality and leading brands.
3. Promote circular economy
4. Climate compensation
1. Sustainable raw materials share 2030: 80%
2. Energy efficiency and green energy
Actions:
VISION
#1 Brand in Storage in Northern Europe and the leading household player in the Nordics.
Showing the way in sustainability in the industry
TARGET 2030
Carbon neutral production
MISSION
Sustainability priorities
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Targets and indicators
Orthex’s sustainability targets and key performance indicators (KPIs)
Aspect Theme KPI Indicator Target Result Result
ECONOMIC
Growing and profitable business
Constant growth and improved
profitability
Net sales growth
Average annual organic net sales growth to
exceed percent at the group level (growth in
local currencies)
.% .%
Adjusted EBITA
EBITA margin (adjusted for items affecting
comparability) to exceed percent over time
.% .%
Improvement suggestions Number (factory employees) : / person .
Sustainable products Long-lasting and recyclable products Recyclability of products % of products recyclable % %
Customer satisfaction Customer satisfaction rate Average rating Improve . / () . /
ENVIRONMENTAL
Environmentally sustainable
choices
Sustainable materials
Share of biobased and recycled materials
(used kg)
: > % .% .%
Increase in sales of biobased and recycled
materials (€)
> times net sales growth .% .%
Resource efficiency
Energy efficiency kWh / produceg kg -% rolling year . .
Production scrap Scrap rate : <.% .% .%
Responsible production and
consumption
Reducing carbon footprint
CO2 calculation for our operations ( t CO2eq./a) Carbon neutral production by , ,
CO2 per produced kg ( kg CO
eq./a) Carbon neutral production by . .
SOCIAL
Caring for our people
Employee health and safety Sickness absence rate <% .% .%
Zero accidents culture Work related accidents Zero accidents
Work environment evaluation ParTy Key indicator > . (Finnish manufacturing companies avg.) N/A . /
Stakeholder engagement
Yearly stakeholder evaluation for
most important stakeholders
% of evaluation made / updated (Group A) % % %
Sustainable supply chain
Coverage of BSCI member suppliers in
high-risk countries
% N/A %
Product safety Safe and tested products All food contact materials tested % % %
Achieved In progress
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Sustainability governance
and risk management
At Orthex, sustainability is driven by the Board of Directors, the CEO, and the
Management Team. Progress in sustainability is part of the CEO’s incentive
plan (read more in the Remuneration Report 2021). The Board of Directors
and the Management Team, including the CEO, review the company’s
sustainability indicators monthly, with a more comprehensive review once
a year. A three-year sustainability strategy is confirmed annually.
Sustainability is a key
factor in all decision
making at Orthex
Orthex’s sustainability strategy is implemented by a dedicated working
team which sets targets for sustainability and monitors their progress.
The working team is led by the Chief Marketing Officer (CMO) and
Operations Director (OD) who report directly to the CEO and are part
of the Management Team. The team comprises representatives of our
quality functions and, through the CMO and OD, covers production,
procurement, marketing, product development, and commercial
functions. The everyday sustainability work at Orthex is integrated into
all our operations and functions.
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Orthex has a company-wide risk management policy that classifies risks
into three groups: Strategic risks, Operational risks, and Financial risks.
Sustainability-related risks are typically covered under Operational risks,
where we review circumstances or events that can cause harm to people,
property, business, information, or the environment. The responsibility for
implementing risk management lies with the Management Team, and we
strive to ensure that each employee understands and can control risks
within their operational environment and responsibilities. We do this by, for
example, implementing our Code of Conduct (business ethics risks) and ISO
45001-certified management system (safety risks). All our employees also
receive training in cyber security, and competition law training is provided
for employees in our commercial functions. Read more about our risk
management in the Board of Directors’ Report for the year 2021.
How we contribute to the UN
Sustainable Development Goals
Orthex supports all seventeen UN Sustainable Development Goals (SDGs).
Based on identified priority sustainability topics, we have determined the
most relevant SDGs for Orthex, and how we can best contribute to them.
We aim to be
carbon neutral by
2030
SDG 8 Decent work and
economic growth
We care for our employees and the people who work for our partners and
suppliers. We strive for sustainable growth by providing environmentally
sustainable choices and enhancing energy efficiency.
SDG 8 is integrated into the following sustainability topics:
Growing and profitable business, Environmentally sustainable choices,
Resource efficiency, Caring for our people, and Stakeholder engagement.
SDG 9 Industry, innovation,
and infrastructure
We produce sustainable and safe products. In our operations, we
continuously seek to improve energy efficiency.
SDG 9 is integrated into the following sustainability topics:
Resource efficiency and Product safety.
SDG 12 responsible production
and consumption
In our operations, we are committed to reducing our greenhouse gas
emissions, controlling our chemical use and waste management in a
responsible manner, and minimising scrap. Our products are recyclable
and increasingly made with bio-based and recycled materials, and
we are committed to responsible sourcing. The foundation of our
sustainability work lies upon ethical business conduct, compliance
with legislation, certified environmental management systems, and
sustainability reporting.
SDG 12 is integrated into the following sustainability topics:
Environmentally sustainable choices, Resource efficiency, Responsible
production and consumption, and Stakeholder engagement.
SDG 13
Climate action
We are committed to reducing our greenhouse gas emissions and aim to be
carbon neutral in our operations by 2030.
SDG 13 is integrated into the following sustainability topics:
Sustainable products and Responsible production and consumption.
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Economic aspects:
Investing in sustainability
while catering to our
customers’ needs
Growing and profitable business
A thriving business enables investments in sustainability
With a profitable and growing business, we are able to invest in new, more
sustainable products and energy-efficient equipment and technology, provide
a meaningful job for a growing number of people, and secure the future
of the company. We also generate economic wellbeing in society through
the payment of taxes. In 2021, we paid EUR 801 thousand in income taxes
(EUR 355 thousand in 2020). Read more about our financial performance in
our 2021 Financial review.
Investing in new equipment and technology is a significant factor in
achieving our sustainability targets. Our Purchase policy requires that all
new machines must be energy efficient, and since 2013, we have invested
in 27 new energy-efficient machines. Five of these machines were acquired
in 2021. In addition, as a profitable company, we are also able to implement
our strategy for increasing the share of bio-based and recycled materials
in production volumes. During 2022, we will continue to invest in new
products, processes, and machines in order to secure our growth and
sustainability targets.
Sustainable products
Our products contribute to a circular economy
Orthex’s business is based on responsibly produced, durable, reusable, and
recyclable plastic products, which play an important role in a sustainable
circular economy. Our products are made with high-quality raw materials
and last for decades – 90% of them are manufactured in our own factories
under our strict quality and safety control. This enables us to, for example,
offer a 10-year warranty for our SmartStore product line. Furthermore,
consumer feedback demonstrates that some of our products have been in
use since the 1950s.
Plastics have many advantages in reusable, durable products. For example,
the lightness of plastic reduces emissions from logistics, and its durability
and moldability allow for countless end-uses. Plastic products also provide
weather-proof solutions for outdoor use and help consumers store food and
other items, such as clothes, in good condition for longer. The plastic grades
used in Orthex’s products are also highly recyclable.
Innovation is another important element driving Orthex’s growth
and sustainability strategy. We actively launch new products
that respond to the increased environmental awareness among
consumers. For example, the SmartStore Collect sorting solution,
which received the Red Dot design award in 2020, is made with
recycled materials and helps consumers sort and recycle waste at
home.
Plastic belongs in high-quality
reusable products and in
recycling, not in nature
INNOVATIONS THAT DRIVE SUSTAINABILITY
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Customer satisfaction
We help our customers achieve their sustainability targets
Orthex serves various customer types in retail, such as traditional
convenience stores, specialty and hardware retailers, online stores, and
department stores. Consumers – the customers of our customers – are
another important stakeholder group to us. We believe that satisfied
customers will lead to a healthy and growing business. We work hard to
meet or exceed the expectations of our customers and consumers, and
we seek to be the preferred value-creating partner to our customers.
As we increase the share of bio-based and recycled raw materials in
production and proceed towards carbon neutrality, we can further
support our customers in achieving their own sustainability targets.
We actively participate in the sustainability work of our customers
and provide data and information for them to use in their calculations
and target setting. For example, we are a member of the supplier
sustainability group of a major retailer customer. The platform is used
to share ideas and best practices among suppliers.
LIFETIME VALUE
Lifecycle perspective in Orthex’s business model
• Ethically sourced bio-based,
recycled, and new raw materials
• Efficient use of raw materials
• After use, the product can be:
- Recycled and reused in
production
- Burned and used as energy
• Minimum transport emissions due
to product design optimised for
logistics
• Production close to the main
markets
• Strive to fulfil customer needs
1. Product development6. Disposal / Recycling
• Minimise energy consumption,
production scrap and packaging
materials
2. Manufacturing
• Products improve everyday life and
last for decades
5. Consumer use
3. Transportation
4. Trade
We support our customers
in achieving their own
sustainability targets
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Some 90% of our products are manufactured in Finland and Sweden,
which means that the distance to our core markets – Finland, Sweden,
Norway, Denmark, and Iceland – is short. This enables us to react to
customer needs in a timely manner and with less tiers in the customer’s
supply chain. Our warehouse in Germany, opened in 2020, further
increases the efficiency of our logistics in Europe.
We measure customer satisfaction with a survey every second year.
In 2021, our average rating on a scale of 1 to 5 was 3.93 showing an
improvement to the previous survey conducted in 2019 (3.87).
Some 90% of our products
are manufactured in our
own factories in Finland
and Sweden
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Environmental aspects:
Continuously striving for
minimal environmental
impact
Environmentally sustainable choices
Sustainable raw materials are high on our agenda
Orthex promotes sustainability in all choices made along the life cycle of a
product. We only use durable and recyclable raw materials while minimising
their use and optimising logistics. In 2021, the Finnish Innovation Fund Sitra
selected Orthex as one of 41 pioneering Finnish circular economy companies.
Orthex was commended for its long history in contributing to the circular
economy by increasing the use of recycled plastic and designing recyclable
products. Read more at sitra.fi.
Calculations show that our products made with bio-based or recycled raw
materials have significantly smaller carbon footprints compared to those
made exclusively from conventional plastic. Our target is to increase the
share of bio-based and recycled raw materials to 80% by 2030. In 2021, this
share was 14.1% (13.6% in 2020). Due to the growth of our entire business,
this share increased only slightly compared to 2020, but the sales of the
products made of these materials increased as much as 30%.
Recycled raw materials
We want to create value out of what has been discarded, which is why
we have used recycled plastic in production since the 1990s. For example,
the carbon footprint of our SmartStore products made with recycled
content is reduced by up to 60% compared to only using conventional
plastic. The SmartStore Recycled product line is also certified according to
the Blue Angel ecolabel which sets strict standards for environmentally
friendly products and services.
Orthex was among the first consumer goods companies in the world
to start using plastic packaging recycled by consumers as raw material
for new products in 2017, as soon as technology allowed it. Today, this
plastic comes from EuCertPlast-certified suppliers in Finland and the
Netherlands. The EuCertPlast certification (European Certification of
Plastics Recycling) focuses on the traceability of plastic materials and
the quality of recycled content in the end-product.
We also use recycled plastic from industrial sources. This material
originates from various reliable sources in Europe. The plastic in our
products can be recycled approximately 10 times. In practice, however,
recycled plastic is always a mix of plastics of different ages (some
recycled more, some fewer times). This means that while a certain part of
the plastic mass can be recycled ten times, the product as a whole can be
recycled almost indefinitely.
Orthex was among the first in
the world to start using consumer-
recycled plastic packaging as
raw material
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Due to requirements for food-approved products, we are not able to use
recycled plastic in our tableware and kitchen utensils products. The chemical
recycling of plastic – the dissolving of plastic into molecules which can
then be utilised to make new products – could change this. We are closely
following the development of this methodology, as it would support our
carbon neutrality journey.
Bio-based raw materials
Orthex launched its first bio-based products already in 2016, and we
calculated the carbon footprints of all our bio-based product lines in 2020. For
example, the carbon footprint of our GastroMax BIO food storage products,
which include sugarcane-based content, is reduced by more than 80%
compared to only using conventional plastic. The reduction is explained by the
carbon dioxide (CO2) generated in manufacturing being largely compensated
for by the CO2 absorbed during plant growth.
We currently use three bio-based raw materials for our BIO products:
wood fibre, sugarcane, and castor oil. All these products are certified by
OK Biobased, which assures the share of bio-based raw materials in the
products. Our wood fibre originates from spruce trees in FSC and/or PEFC-
certified, managed semi-natural forests in Sweden. The certification ensures
that the fibre comes from sustainably managed forests where biodiversity
values are considered. Our sugarcane fibre comes from Bonsucro-certified
sources in Brazil. The certification provides transparency and assurance
for the sustainability of the sugarcane value chain, including the active
management of biodiversity. Our castor oil originates from China through
a Netherlands-based supplier that is fully committed to sustainability in
its value chain. Read more about how we work with our suppliers later in
this report.
We also use plastic raw material made from old fishing nets to
produce household buckets. Fishing nets are a major source of plastic
ocean waste. Reusing them as raw material prevents ocean pollution
and considerably reduces the carbon footprint of the new products,
compared to virgin plastic material.
Resource efficiency
Our efficient operations save natural resources
Orthex’s own operations are highly resource efficient and have minimal
impact on the environment, including local biodiversity. In optimizing
resource efficiency, our focus areas are improving energy efficiency and
decreasing production waste, or scrap. Our objective is always to save natural
and other resources. This is further incentivised by the sustainability related
terms of some of our funding. These terms include indicators for the energy
consumption in our production and the percentage of scrap. Our operations
were fully in line with the indicators in 2021.
A significant way to improve energy efficiency in our operations is to replace
old machines with energy efficient ones. Investments in energy efficient
machines have contributed to reducing Orthex’s energy consumption from
1.203 kWh per kilogram of production in 2018 to 1.100 kWh/kg in 2021 (1.131
kWh/kg in 2020). Our target for improving energy efficiency is to reach
a -5% reduction compared to the average of the preceding three years
(measured in kWh/kg). In 2021, we achieved our energy efficiency reduction
target as we did in the four previous years as well.
Orthex’s operations
have minimal impact on
the environment, including
local biodiversity
BUCKETS FROM FISHING NETS
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Progress in energy consumption 2017-2021 (kWh/kg)
Year Outcome Target
. N/A
. .
. .
. .
. .
We optimise our production in a way that minimises the emergence of poor-
quality products or production scrap. If scrap is created despite our measures,
mainly due to colour or material change during production, we are able to
reuse the vast majority of it as raw material elsewhere in production. This
effectively eliminates the creation of actual scrap. Our target is to achieve a
production scrap rate (cost of scrap products compared to produced volume)
of 1.42% by 2024. In 2021, we managed to reduce scrap even futher so that
the scrap rate was only 0.97%.
Progress in reducing production scrap 2017-2021
(cost of scrap products compared to produced volume, %)
Year Outcome Target
.% .%
.% .%
.% .%
.% .%
.% .%
All our factories have closed-loop systems for water use. Our operations
use cooling water in their manufacturing processes, and the water is fully
recycled in production. No wastewater is created in our operations, and no
water is released into nature.
As our products only contain the raw material and colour, we use
minimal volumes of chemicals in our production. Some chemicals are
used for other purposes, such as cleaning products. We also follow the
Substitute It Now (SIN) list to control the chemicals included in the
making of our raw materials. The SIN-list is a database of chemicals likely
to be restricted or banned in the EU. The purpose of this list is to support
organisations in identifying and replacing substances of high concern, based
on the criteria defined in REACH, the EU’s chemical regulation.
Responsible production and consumption
We are committed to climate action
Orthex strives to minimise its impact on the environment and climate.
All our factories are ISO 14001 and 9001-certified for environmental and
quality management, respectively. For more than a decade, we have also
been a member of the Responsible Care programme of the Chemical
Industry Federation of Finland. The programme seeks to support corporate
sustainability in the chemical industry through co-operation in networks and
development projects.
Our focus areas within Responsible production and consumption are reducing
our greenhouse gas emissions and promoting the recycling of plastics.
Relying on these and other measures, we seek to be carbon neutral in our
operations by 2030. We will further define our roadmap to carbon neutrality
in 2022.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Reducing our carbon footprint
We have calculated the carbon footprint of our operations and value chain. In
addition to direct greenhouse gas emissions from our operations (Scope 1) and
the production of purchased energy (Scope 2), we included the following indirect
(Scope 3) emissions in our calculation: purchased goods and services; fuel
and energy-related activities; upstream transportation and distribution; waste
generated in operations; and end-of-life of sold products.
The majority of our greenhouse gas emissions originate from purchased goods
and services, such as raw material extraction, and the end-of-life of sold
products, such as the incineration of products for energy. The latter is excluded
from our 2030 carbon neutrality target. This is because of our limited ability to
influence consumer behaviour – whether they recycle or discard our products
after use – but also because it is difficult to evaluate how the recycling of plastic
develops. As our products will be in use for decades, it is likely that by the time
they reach their end-of-life stage, most plastic will be fully recycled. This, and
future chemical recycling, will significantly reduce the greenhouse gas emissions
from the end-of-life
stage of plastic products.
Increasing the share of bio-based and recycled raw materials in our production will
have the biggest impact on reducing our greenhouse gas emissions. Another main
factor in driving down our emissions is improving energy efficiency, with a special
focus on reducing electricity use. We also strive to replace fossil-based electricity
with renewable electricity, and took a significant step in this work in 2021, when all
our factories switched to 100% fossil-free hydropower. This switch enabled us to
reduce our Scope 2 emissions to zero in 2021.
SCOPE 2
SCOPE 3
Waste generated
in operations
EoL sold
products
Production of
purchaced energy
Fuel and energy
related activities
SCOPE 1
Direct emissions
at production
plants
Upstream
transportation
and distribution
Purchased
goods and
services
Orthex’s carbon footprint 2021
The end-of-life of sold products
is excluded from our 2030 carbon
neutrality target and from our reported
carbon footprint. This is because of our
limited ability to influence consumer behaviour
but also because it is difficult to evaluate how the
recycling of plastic develops.
Annual Report 2021
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Carbon footprint in 2020 and 2021 (t CO2-e)
Year Scope Scope Scope Total
kg CO eq./kg
of plastic products EoL sold products
, , , . ,
, , . ,
In 2021, our Scope 2 emissions were reduced to zero due to our factories switching to hydropower. While our greenhouse gas emissions may increase in absolute numbers as
our business grows, they keep reducing in relative terms. In 2021, the relative carbon footprint remained at the same level as in 2020 due to increased use of materials and
changed shares of different materials.
Some of our funding is
tied to our performance
in sustainability
indicators
Promoting the recycling of plastic
Orthex fully supports the notion that plastic belongs in circulation,
not in nature. We proactively promote the recycling of plastics in our
communication channels and various events, while also engaging in dialogue
with relevant actors. In addition, we actively participate in awareness-raising
activities, organised by the Finnish Plastics Industries Federation, that seek to
advance the recycling of plastics in Finland. Orthex also cooperates with its
customers to raise awareness on recycling. For example, in 2020, Orthex, the
retailer K Group, and the waste and materials management company Lassila
& Tikanoja campaigned together to pilot an experiment where scrap-quality
plastic buckets were used as raw material for producing flowerpots.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Social aspects:
Understanding our impact
on people
Caring for our people
Employee feedback helps us build a safe and motivating workplace
It is our responsibility to ensure that everyone feels safe and motivated
at work, enjoys their workplace, and can contribute through continuous
improvement. We do this by managing our occupational health and safety
risks, taking preventive measures, educating employees, and continuously
evaluating and improving our work. Leadership, commitment, and engaged
employees are key factors for us to succeed in this area and in general. We
follow up on our progress in monthly and annual reports and meetings.
Occupational safety
Orthex promotes a zero-accident vision and culture. We want to ensure
that all our employees have a safe workplace every day. Our focus is on
preventing safety incidents, which is why we encourage our employees
to report any near-misses, unsafe practices, or other safety observations.
All reports are carefully analysed, and actions are carried out to prevent
similar situations from re-occurring in the future. To ensure the safe use of
chemicals, we provide our employees with bulletins that define the hazard
level of the chemical and include relevant instructions for use and protective
gear. Our Supplier Code of Conduct also requires our suppliers to ensure a
safe and healthy working environment for their employees.
Orthex’s operations were audited for and awarded with ISO 45001
certification for occupational health and safety (OHS) in 2021. The certificate
provides requirements for and guidance on establishing an OHS management
system. The goal is to enable organisations to prevent work-related injuries
and health issues, and to improve their OHS performance. The auditor
commended Orthex for existing practices, such as the “safety rounds”
that are used to make safety observations at our factories. One identified
improvement area was that the Lost-Time Incident Frequency (LTIF) rate is
not yet a key performance indicator (KPI) at Orthex. The LTIF rate will become
our KPI for safety in 2022.
Health and well-being
We believe that the health and well-being of our employees form an
important part of their working ability. To ensure this, Orthex offers its
employees high-quality employer-provided healthcare plans. We also
promote an early support model that aims to prevent and detect early any
negative developments regarding employee health, safety, and well-being.
The model also enables managers to provide adequate and timely support to
employees and to promote dialogue as part of the company culture.
Orthex promotes
a zero-accident
company culture
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
We measure employee health and well-being with a key performance
indicator for sickness absence rate (% of total theoretical working hours).
The target for this indicator is to maintain the good level of below 5%. In
2021, this rate was 6.6% (6.5% in 2020). During the Covid-19 pandemic,
it has been a top priority for us to ensure the health and safety of our
employees. Employees were instructed to stay at home with the slightest
symptoms of an illness, which led to increased illness-related absences
during the pandemic.
Human resources
In human resources, we focus on constantly developing an organisation
with highly motivated and skilled employees and great leadership, while
enabling continuous improvement for all. Orthex’s people management and
development process is a key element in guiding employee performance
and development. All managers are evaluated by their teams annually, and
all employees are provided with a structured way of giving and receiving
feedback. This helps ensure that everyone has the opportunity to influence
their personal development. Our employee performance reviews and
employee survey, both conducted annually, are also important elements
of people management at Orthex.We promote equality and do not tolerate
discrimination in any form. Our employees have the freedom to organize
themselves, and we respect and engage openly with trade union and
personnel representatives.
We promote equality
and do not tolerate
discrimination in any form
Men 54%
Women 46%
Employees
by gender
In addition to our whistleblowing channel, launched in 2021, we operate
an internal feedback system for improvement proposals from employees.
Each proposal is evaluated and documented. Based on these employee
observations, we have done numerous improvements in, for example, our
ways of working, work environment, and safety equipment. Our target is
to have each operation unit employee submit at least two development
proposals or reports of deviations annually. In 2021, one proposal or report
was submitted per employee. The low number is explained by changes in
the ways of working, including working remotely, which made it difficult
to maintain a sufficient level of communication on the improvement
proposals routine.
Production (174)
Warehouse (69)
Sales (48)
Admin (18)
Marketing (11)
Headcount
by function
Members of the
Board of Directors
by gender
Men (3)
Women (2)
In 2021, we began measuring Group headcount as “at year-end”
instead of full-time equivalents (FTEs). After recalculation,
figures for 2020 change slightly (from 284 to 329).
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Stakeholder engagement
Identifying stakeholder concerns and expectations
We strive to engage with our stakeholders in a transparent manner through,
for example, customer satisfaction surveys and investor discussions. We
also monitor discussions on social media and respond to our stakeholders’
concerns and questions, as appropriate.
Since 2019, Orthex has cooperated with Cancer Foundation Finland to raise
funds for cancer research through the Pink Ribbon campaign. In 2021, we
participated with our SmartStore storage and GastroMax kitchen products
and, together with our customers and the consumers who bought these
items, raised nearly EUR 35 thousand, more than doubling our 2020
contribution (EUR 16 thousand).
We review our impact on our stakeholders and their impact on Orthex
annually, with risk assessments based on ISO management system
requirements for quality, the environment, and occupational safety. In this
work, we have identified the following stakeholders as most important to
Orthex:
• Customers
• Consumers
• Suppliers
• Shareholders
• Personnel
• Media
• Authorities
• Non-governmental
organisations
• Trade unions.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Product safety
We always make sure our products are safe to use
Product safety is a top priority for Orthex. We take great pride in offering
products that are manufactured with safe, high-quality raw materials
that make them durable, functional, and safe to use. We comply with all
relevant product safety regulations and guidelines, such as the EU’s Good
Manufacturing Practices and regulation concerning Plastic Materials and
Articles Intended to Come into Contact with Food.
All our products made from conventional plastic are free of Bisphenol A (BPA)
and phthalates. Recycled plastic is also tested and safe, but as it originates
from multiple plastic products, it cannot be used in food-contact products.
90% of Orthex’s products are manufactured at our factories in Finland
and Sweden. The remaining 10% are manufactured by carefully selected
suppliers, mainly in China. We only work with big, reliable suppliers that
follow all regulations for food contact materials and test their raw materials.
For more information about how we work with our suppliers, see the
next page.
Food-contact product
We follow all EU regulations concerning food-contact products. All these
products are carefully tested on a regular basis in independent, accredited
laboratories to ensure product safety. For example, our Gastro Max BIO food
storage products undergo microwave testing to ensure that no substances
are released into the food during heating. We specify these details in
our product-specific Declarations of Compliance. In addition, symbols
on our products and their packaging present which temperatures the
product endures and whether it is safe to use, for example, in microwave,
fridge, or dishwasher. For more information about product symbols, visit
orthexgroup.com.
Product safety is
a top priority for
Orthex
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Sustainable business
practices: Ensuring ethical
behaviour in our business
and supply chain
Responsible sourcing
We have strict sustainability requirements for our suppliers
Our suppliers are key partners for us in controlling and developing the
sustainability of our value chain. In addition to engaging with our suppliers
directly, we are also a member of amfori BSCI, a platform that enables
companies to improve visibility over the social performance of their supply
chain. We aim for active engagement with and continuous evaluation of
our suppliers.
Supplier Code of Conduct
Our Supplier Code of Conduct (SCoC) presents Orthex’s sustainability
requirements for suppliers. Our suppliers must either commit to our
Supplier Code of Conduct or present their own code of conduct with similar
or stricter sustainability requirements compared to those in our SCoC. In
countries that we have determined high-risk, we monitor compliance with
our SCoC in the supply chain through amfori BSCI which carries out on-site
inspections, audits, and periodic self-evaluations of suppliers and their
sub-contractors.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
When Orthex receives a report on suspected misconduct or non-
compliance, the matter is first investigated by the CEO and relevant
Operations Director. After processing the report, the CEO determines
potential further actions, which can be corrective or disciplinary.
The whistleblowing reports are always processed in confidence, and
information on the report’s content, the subject of the report, or
the whistleblower are disclosed only to persons that are part of the
investigation. In 2021, we did not receive any reports through the
whistleblowing channel.
We introduced
a whistleblowing
channel in 2021
Ethics and compliance
We always aim to go beyond compliance
Orthex operates internationally, and we comply with all laws and
regulations applicable to our operations. However, our way to conduct
business goes beyond that: high ethical standards and integrity are present
in everything we do. Everyone at Orthex has a role in ensuring that the
company operates in an ethical and responsible manner, regardless of the
situation. We strive to ensure that our employees understand what ethical
behaviour is and how to demonstrate it.
In 2021, we introduced and rolled out the Orthex Code of Conduct which
applies to all our employees, Management Team, and Board of Directors.
The Code of Conduct defines the key principles for how we engage in
business, treat each other, and safeguard Orthex’s assets. It is a tool that
helps recognise ethical dilemmas and presents ways to solve them. Our
employees are encouraged to report any breaches of the Code of Conduct
to their supervisors or through Orthex’s whistleblowing channel.
To promote accountability and foster a responsible company culture,
we introduced an internally operated whistleblowing reporting
channel in 2021. The channel is open to all internal and external
stakeholders and can be used anonymously. Stakeholders may use the
channel to report suspected non-compliance with Orthex’s Code of Conduct
or Supplier Code of Conduct; breaches of legislation; or other regulations or
guidelines. Such non-compliance may include, for example, approval of a
gift against guidelines, fraud, forgery, conflicts of interest, or inappropriate
behaviour by a colleague or partner.
75% of our suppliers were
amfori BSCI-certified by
the end of 2021
If the measures of amfori BSCI, or our own, reveal non-compliance with
our SCoC, we require the supplier to take corrective action and remedy
any adverse impacts on people or the environment, as well as ensure the
prevention of similar issues taking place in the future. The supplier is given
a timeframe to complete the agreed actions. If the supplier is unable to take
corrective, remedial, or preventive measures on its own, we will support in
developing and implementing an action plan. If the supplier is unwilling to
take corrective action, or there are repeated and serious breaches of our SCoC,
Orthex has the right to end the business relationship. Orthex will not conduct
any business with a supplier engaged in violations of fundamental human
rights, and we will immediately terminate the business relationship with a
supplier that commit such violations. These zero-tolerance practices are
listed in our SCoC.
amfori BSCI
Companies can join amfori BSCI to have access to a joint platform for
monitoring and auditing their supply chain. The platform is based on
sharing supplier information with members, which reduces time, effort, and
costs for individual companies but also increases consistency for buyers
and suppliers. Orthex has been a member of amfori BSCI since 2018. Our
goal is to increase the share of amfori BSCI-certified suppliers in our supply
chain, with a focus on new suppliers. We achieved a share of 75% in 2021.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
CORPORATE GOVERNANCE
STATEMENT 2021
Orthex Corporation (”Orthex” or ”the company”) is a Finnish publicly listed
limited liability company since 29 March 2021 when the trading of its shares
started on the official list of Nasdaq Helsinki Ltd. The company’s corporate
governance complies with the company’s Articles of Association and
Corporate Governance Principles as well as rules and regulations applicable
to Finnish listed companies such as the Finnish Limited Liability Companies
Act and Securities Markets Act, and rules and regulations of Nasdaq Helsinki
Ltd. The company also adheres to the Finnish Corporate Governance Code
2020 (”CG Code”) issued by the Securities Market Association. The CG Code is
available on the association’s website (www.cgfinland.fi).
This Corporate Governance Statement is issued as a separate statement
from the Board of Directors’ Report, but it is published simultaneously
with it and with the company’s Financial Statements, Sustainability
Report, and the Remuneration Report on the corporate website at
https://investors.orthexgroup.com/. As the company has no audit
committee, the company’s Board of Directors has reviewed the Corporate
Governance Statement.
Governing Bodies
The Annual General Meeting, the Board of Directors and the CEO are
responsible for the governance of Orthex. The company’s shareholders
exercise the highest decision-making power at the general meeting of
shareholders. The Shareholders’ Nomination Board prepares proposal for the
composition of the Board of Directors to the Annual General Meeting (AGM).
The AGM elects the members of the Board of Directors. The company is
managed by the Board of Directors and the CEO, appointed by the Board of
Directors. The company’s Management Team assists the CEO in the operative
management of the company. The members of the Management Team are
appointed by the Board of Directors together with the CEO.
Governance structure of Orthex Corporation
Shareholders
External independent auditor General meeting of shareholders
Board of Directors
CEO
Management Team
Shareholders’ Nomination Board
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
General Meeting of Shareholders
The General Meeting of Shareholders is the ultimate decision-making body
of the company. At the General Meeting of Shareholders, shareholders
exercise their powers in accordance with the Companies Act and the Articles
of Association. The General Meeting of Shareholders decides on matters
that under the Companies Act and the Articles of Association are within its
purview. The Annual General Meeting of Shareholders is convened by the
Board of Directors annually within six months from the end of the previous
financial year. An Extraordinary Meeting of Shareholders may be convened
as stipulated in the Companies Act. Matters on which the Annual General
Meeting decides include the adoption of the financial statements, distribution
of profits, discharge from liability, and election of the members of the
Board of Directors and the auditor, as well as their remuneration. Decisions
to amend the Articles of Association are also taken by a General Meeting
of Shareholders.
Annual General Meeting 2021
In the Orthex Oy’s Annual General Meeting held on 28 February 2021,
shareholders decided to approve the parent company’s Financial Statements
for the financial period 1 January–31 December 2020. The members of the
Board of Directors and the CEO were discharged from liability for the year
2020. It was decided that no dividend will be distributed and that the profit
for the financial year amounting to EUR 1,002,216.03 will be recognised in
retained earnings.
Shareholders decided to change the company’s company form into a public
company and change the company’s name to Orthex Corporation. At the
same time, the company’s share capital was increased from the company’s
invested unrestricted equity funds to the amount of EUR 80,000 required for
a public company.
The Annual General Meeting also decided to cancel the company’s treasury
shares and the Board of Directors was authorised to decide on a share issue
for the implementation of the public offering and on including the shares in
the book-entry securities system managed by Euroclear Finland Oy.
The shareholders decided to elect four members to the Board of Directors
and to re-elect Sanna Suvanto-Harsaae, Juuso Kivinen and Satu Huber to the
Board. Ari Jokelainen (b. 1955) was elected as a new member to the Board.
He has been the company’s Board member previously between the years
2016 and 2017. Mr Jokelainen is a Finnish citizen and holds a master’s degree
in economics. Since 2007, he has been a partner in a Finnish private equity
investment company Sponsor Capital Oy. Prior to that, he made a long career
as the Chief Executive Officer of Exel Plc.
On 3 March 2021, the Board of Directors resolved to elect Sanna Suvanto-
Harsaae as the new Chair of the Board of Directors. The election of the new
Chair was conditional upon the successful completion of the public offering
and became effective when the company shares were admitted to trading
on Nasdaq Helsinki Ltd. on 29 March 2021. Juuso Kivinen chaired the Board
prior to that.
The members of the Board of Directors are independent of the company
and its significant shareholders. Juuso Kivinen and Ari Jokelainen have been
independent of the company’s significant shareholders since 17 November
2021 when Sponsor Fund IV Ky, the company’s former majority shareholder,
sold the rest of its shares in the company.
Extraordinary General Meetings 2021
The Extraordinary General Meeting held on 5 March 2021 decided to establish
a Shareholders’ Nomination Board for the company and approved the Charter
of the Shareholders’ Nomination Board. The Nomination Board’s appointment
process, composition and operations are described later in the section
Shareholders’ Nomination Board.
At the Extraordinary General Meeting held on 3 July 2021, the number of
members of the company’s Board of Directors was confirmed to be five,
and Jens-Peter Poulsen (b. 1967) was elected as a new member of Orthex
Corporation’s Board of Directors as of 1 August 2021. Poulsen is a Danish
citizen with a master’s degree in economics. Since 2013, Poulsen has been
the CEO of Kvik A/S. Prior to that, he made a more than ten-year career
with the LEGO Group, e.g., in Vice President and Senior Director positions
in sales and marketing. Poulsen is a member of the Board of Holmris B8
A/S since 2017 and a member of the Board of the European House of Beds
A/S since 2021. Poulsen is independent of the company and the company’s
significant shareholders.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
The Board of Directors
Under the company’s Articles of Association, the Board of Directors is
composed of a minimum of four and a maximum of eight members. Members
of the Board of Directors are elected at the general meeting. The term of
office of a member of the Board of Directors commences from the close of
the general meeting in which they are elected and expires at the close of the
following annual general meeting. The Board of Directors elects a chair from
among its members.
The Board of Directors is quorate when more than one-half of its members
are present. A decision by the Board of Directors is the opinion supported by
more than one-half of the members present at a meeting. In the event of a
tie, the Chair of the Board has the casting vote.
The Board of Directors convenes according to a pre-agreed schedule
normally from six to ten times a year and holds extra meetings when deemed
necessary. Meetings can also be held as teleconference meetings or by using
other technical means or devices.
The Board evaluates its operations and working methods once a year.
Duties of the Board of Directors
The tasks and responsibilities of the Board of Directors of the company
are determined on the basis of the Finnish Limited Liability Companies Act
as well as other applicable legislation. The Board of Directors has general
authority to decide and act in all matters not reserved for other corporate
governing bodies by law or under the provisions of the company’s Articles
of Association. The general task of the Board of Directors is to duly organise
Orthex’s management and operations. In all situations, the Board of Directors
must act in accordance with Orthex’s best interest.
The Board of Directors has a charter that specifies its duties. The duties of
the Board of Directors include:
• approving reports of the Board of Directors, financial statements, and
interim reports
• seeing to the appropriate organisation of accounts and financial
administration
• preparing proposals for the general meeting of shareholders and convening
general meetings of shareholders
• approving and confirming strategic guidelines and long-term strategic
targets
• approving principles for risk management and internal control
• confirming annual budgets and operating plans
• appointing the CEO and deciding on the terms and conditions of the CEO
contract
• deciding on the company structure
• making significant business decisions, such as mergers and acquisitions,
significant contracts, investments, and financing arrangements, and
• deciding on other matters falling under the statutory responsibilities of the
Board of Directors.
Orthex’s Board of Directors has no committees, but the Board may consider
setting up potential committees in the future. As there are no committees,
the entire Board of Directors is responsible for discharging the statutory
duties of the audit committee.
Number of Board Meetings and Attendance Rates
In 2021, the Board held 17 meetings. Some of these meetings were held
remotely or the resolutions were recorded per capsulam without convening.
Attendance in the meetings is reported in the table below. The members of
the Board of Directors attended all meetings held during their term of office.
Number of Board Meetings and Members’ Attendance 2021
Director
No. of meetings /
attendance
Sanna Suvanto-Harsaae (ch.) /
Satu Huber /
Ari Jokelainen (member as of Feb ) /
Juuso Kivinen /
Jens-Peter Poulsen (member as of Aug ) /
Thomas Sandvall (member until Mar ) /
Matti Virtanen (member until Mar ) /
Diversity of the Board of Directors
Orthex regards diversity as an important and natural approach in its
operations. Diversity shall be part of such cooperative and functional Board
of Directors which is able to respond to the requirements set out in the
company’s business and strategic objectives. Such Board of Directors will also
be able to support and challenge the company’s operative management in a
proactive and constructive manner. The principles concerning the diversity of
the Board of Directors are in line with this premise.
When preparing the composition of the Board of Directors of Orthex,
attention is paid to the requirements set by the company’s Articles
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
of Association and the Corporate Governance Code, as well as to the
requirements set by the company’s operations and the premises of diversity
derived therefrom.
Significant factors concerning the composition of the Board of Directors
include mutually complementary variety of competences, education and
experience in different areas and professional fields and in management
and business operations existing in different development phases, as well as
the personal capabilities of each member, all of which add to the diversity
of the Board of Directors. Diversity is considered not only from the aspect of
gender but also from other factors promoting the Board’s diversity, such as
the age structure of the Board, the members’ educational and professional
background, their experience relevant for the position, and personal
characteristics. When preparing the composition, it is also assessed how
the members’ skills, education and experience complement each other. The
company’s long-term needs are also considered.
The purpose of the diversity principles is to contribute to making sure that
the Board of Directors’ combined competence and experience and the
diversity of its composition are sufficiently aligned with Orthex’s operational
needs. With regard to gender structure, the objective is that different genders
are sufficiently represented on the Board.
At year-end 2021, the company’s Board of Directors comprised five members.
Diversity of the Board of Directors with respect to gender, nationality, age
as well as educational and professional background is described on the
next two pages. Additional information for example on the Board members’
previous positions of trust is available in the Investors section on the
corporate website.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Sanna Suvanto-Haarsae
Chair of the Board of Directors from 29 March 2021, member since 2020
Born 1966
Finnish and Danish citizen
Bachelor’s degree in Economics
Independent of the company and its significant shareholders
Main occupation: Professional director
• Posti Group Corporation, Chair of the Board of Directors since 2020
• BoConcept A/S, Chair of the Board of Directors since 2016
• TCM Group A/S, Chair of the Board of Directors since 2016
• Nordic Pet Care Group A/S, Chair of the Board of Directors since 2012
• Babysam A/S, Chair of the Board of Directors since 2008
• Anora Group Plc, Vice-Chair of the Board of Directors since 2021
• Harvia Plc, Vice-Chair of the Board of Directors since 2020
• Elopak ASA, member of the Board of Directors since 2021
• CEPOS (Center for Political Studies), member of the Board of Directors since 2017
• Broman Group Oy, member of the Board of Directors since 2016
Satu Huber
Member of the Board of Directors since 2020
Born 1958
Finnish citizen
Master’s degree in Economics
Independent of the company and its significant shareholders
Main occupation: Professional director
• Elo Mutual Pension Insurance Company, Chief Executive Officer 2015–2021
• Elo Mutual Pension Insurance Company, Deputy Chief Executive Officer 2014–2015
• LähiTapiola Pension Insurance Company, Chief Executive Officer 2008–2013
• Finance Finland, Chief Executive Officer 2006–2008
• State Treasury of Finland, Director of Finance 1997–2006
• Several different positions in the banking sector 1982–1997
• Schibsted ASA, member of the Board of Directors since 2020
• Agence France Trésor, member of the Strategic Advisory Group since 2015
• HIFK - Idrottsföreningen Kamraterna, Helsingfors rf., member of the Supervisory
Board since 2021
Ari Jokelainen
Member of the Board of Directors since 2021, as well as 2016–2017
Born 1955
Finnish citizen
Master’s degree in Economics
Independent of the company and its significant shareholders
Main occupation: Partner at Sponsor Capital Oy since 2007
• Exel Plc, Chief Executive Officer 1990–2006
• Valmet Paper Machines, Pansio Works, Chief Financial Officer 1987–1990
• Wihuri Oy Wipak, Chief Financial Officer 1983–1987
• Monetari Invest Oy, CEO and Chair of the Board since 2006
Members of the Board of Directors on 31 December 2021
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Juuso Kivinen
Member of the Board of Directors since 2016, Chair 2016–2021
Born 1969
Finnish citizen
Master’s degree in Economics
Independent of the company and its significant shareholders
Main occupation: Partner at Sponsor Capital Oy since 1997
• Sponsor Capital Oy, member of the Board of Directors since 2020
• StaffPoint Oy, Chair of the Board of Directors since 2018
• Jukivest Oy, sole shareholder
Jens-Peter Poulsen
Member of the Board of Directors from 1 August 2021
Born 1967
Danish citizen
Master’s degree in Economics
Independent of the company and its significant shareholders
Main occupation: Chief Executive Officer of Kvik A/S since 2013
• LEGO Group, Senior Vice President of the Market Group Asia & Emerging Markets
2011–2012
• LEGO System A/S, Senior Vice President, Market Group 1, 2006–2011
• LEGO System A/S, various Vice President and Senior Director positions
and responsibilities for different operations 2000–2005
• Jensen’s Catering A/S, Sales and Marketing Manager 1999–2000
• Several various positions at Arla Foods 1993–1999
• European House of Beds A/S, member of the Board of Directors since 2021
• Holmris B8, member of the Board of Directors since 2017
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Shareholdings and Share-Based Rights of the Members of the
Board of Directors
In connection with the company’s public offering, the members of the Board
of Directors were provided with an opportunity to subscribe the company’s
shares for a subscription price of EUR 6.14 per share. This price was 10 per
cent lower than the subscription price offered to other subscribers except
those belonging to the company’s personnel. Board members Sanna
Suvanto-Harsaae and Satu Huber subscribed shares (5,701 and 13,000
respectively) in connection with the public offering.
The shareholdings of the members of the Board of Directors and the
corporations over which they exercise control, as at the end of 2021, are
presented in the table below. None of the members of the Board of Directors
nor corporations over which any of them exercise control has any share-
based rights in Orthex or its Group companies.
Board of Directors’ Shareholdings on 31 December 2021
Director Position
Number of shares on
Dec.
Sanna Suvanto-Harsaae Chair ,
Satu Huber member ,
Ari Jokelainen member -
Monetari-Invest Oy
*)
,
Juuso Kivinen member -
Jukivest Oy
*)
,
Jens-Peter Poulsen member -
Total ,
% of total number of shares .%
Orthex total number of shares ,,
*)
controlled corporation
Shareholders’ Nomination Board
As stated earlier, the company has the Shareholders’ Nomination Board. The
duties of the Nomination Board include annual preparation of proposals for
the remuneration, number of members and the composition of the Board of
Directors to the next annual general meeting and presenting those proposals
at the meeting. It is also the duty of the Nomination Board to search for new
director candidates.
The Nomination Board consists of the four (4) largest shareholders of
the company as of 31 August or, if the company has more than four
(4) shareholders, whose shareholding and voting rights in the company
are more than 10 per cent, the corresponding number of shareholders
or persons appointed by them. The Chair of the Board acts as an expert
member of the Nomination Board.
Based on the shareholder register of Orthex Corporation as of 31 August 2021,
the shareholders represented in the Shareholders’ Nomination Board were
Conficap Oy, Sponsor Fund IV Ky, Alexander Rosenlew and Thomasset Oy.
In accordance with the Charter of the Shareholders’ Nomination Board,
Juuso Kivinen resigned from the Nomination Board on 1 December 2021 as
the shareholder he represented, Sponsor Fund IV Ky, the company’s former
majority shareholder, sold the rest of its shares in an accelerated book-
building process on 17 November 2021 following the expiry of the lock-up
period agreed on in connection with the company’s IPO.
Resulting from Sponsor Fund IV Ky’s share sale, Mutual Pension Insurance
Company Ilmarinen became one of the Company’s four largest shareholders
and announced that it will appoint its representative to the Shareholders’
Nomination Board.
As a result, the representatives of the four largest shareholders in the
Nomination Board are:
• Maarit Toivanen, CEO, Chair of Board of Directors, Conficap Oy
• Alexander Rosenlew
• Annika Ekman, Head of Direct Equity Investments, Ilmarinen Mutual
Pension Insurance Company
• Mats Söderström, CEO, Thomasset Oy
and as an expert member Sanna Suvanto-Harsaae, Chair of Orthex’s Board of
Directors. Maarit Toivanen chairs the Nomination Board.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Chief Executive Officer
Alexander Rosenlew has been the Chief Executive Officer of Orthex
Corporation since 2010. Mr Rosenlew holds master’s degrees both in
economics and in management.
The CEO is responsible for the operational management of Orthex in
accordance with the instructions and orders given by the Board of Directors.
The CEO prepares matters to be decided by the company’s Board of Directors,
develops Orthex’s operations together with the Board in accordance with
the set objectives and ensures the proper implementation of the Board’s
decisions. The CEO is also responsible for ensuring that Orthex complies
with applicable laws and regulations and that the company’s financial affairs
have been arranged in a reliable manner. The CEO chairs the meetings of the
Management Team.
Management Team
The role of Orthex’s Management Team is to manage Orthex’s operative
business as a whole. The members of the Management Team have certain
powers to act within their respective areas of responsibility, and they have
a duty to develop Orthex’s business in accordance with the objectives set by
the company’s Board of Directors and Orthex’s CEO.
Orthex’s Board of Directors appoints the members of the Management Team
together with the CEO. The Management Team meets regularly on a monthly
basis or when deemed necessary.
Members of Orthex’s Management Team are presented on the following
page. Additional information on the Management Team members’ career
history and potential positions of trust is available in the Investors section on
the corporate website.
Shareholdings and Share Based Rights of the Members of the
Management Team
The shareholdings of the CEO and other members of the Management Team
(including potential corporations over which they exercise control), as at the
end of 2021, are presented in the table below.
The CEO or other members of the Management Team (or potential
corporations over which they exercise control) have no share-based rights in
Orthex or its Group companies.
Management Team’s Shareholdings on 31 December 2021
Management Team
member Position
Number of shares
on Dec.
Alexander Rosenlew CEO ,,
Saara Mäkelä Chief Financial Officer ,
Hanna Kukkonen Chief Marketing Officer ,
Michel Mercier Sales Director, Export ,
Nicholas Ledin Sales Director, Nordic ,
Hans Cronquist Operations Director, Tingsryd ,
Peter Ottosson Operations Director, Gnosjö ,
Tom Ståhlberg Operations Director, Lohja ,
Total ,,
% of total number of shares .%
Orthex total number of shares ,,
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Members of the Management Team on 31 December 2021
Tom Ståhlberg
Operations Director, Lohja
Management Team member since 2012
Employed by Orthex since 2012
Born 1969
Finnish citizen
Master’s degree in Industrial Engineering and Management
Peter Ottosson
Operations Director, Gnosjö
Management Team member since 2013
Employed by Orthex since 2009
Born 1974
Swedish citizen
Bachelor’s degree in Machine Engineering, eMBA
Hans Cronquist
Operations Director, Tingsryd
Management Team member since 2019
Employed by Orthex since 2019
Born 1970
Swedish citizen
Master’s degree in Mechanical Engineering
Nicholas Ledin
Sales Director, Nordic
Management Team member since 2015
Employed by Orthex since 2001
Born 1970
Swedish citizen
High school graduate
Alexander Rosenlew
Chief Executive Officer
Management Team member since 2010
Employed by Orthex since 2010
Born 1971
Finnish citizen
Master’s degrees in Economics and in Management
Saara Mäkelä
Chief Financial Officer
Management Team member since 2017
Employed by Orthex since 2017
Born 1976
Finnish citizen
Master’s degree in Economics
Hanna Kukkonen
Chief Marketing Officer
Management Team member since 2012
Employed by Orthex since 2012
Born 1973
Finnish citizen
Master’s degree in Economics
Michel Mercier
Sales Director, Export
Management Team member since 2015
Employed by Orthex since 2015
Born 1966
French citizen
Master’s degree in Agricultural Engineering
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Financial Reporting Process
Orthex compiles its financial reporting in accordance with the International
Financial Reporting Standards (IFRS), the Finnish Securities Markets Act, the
Finnish Accounting Act and the guidelines and statements of the Finnish
Accounting Board, while also complying with the rules and regulations
of the Financial Supervisory Authority and the rules of Nasdaq Helsinki
Ltd. The principles, instructions, practices, and areas of responsibility in
internal auditing and risk management relating to the company’s financial
reporting process are aimed at ensuring that the company’s financial
reporting is reliable and that the financial statements have been prepared
in accordance with applicable laws, regulations, and the company’s
operating principles. Orthex’s financial reporting is supervised on two levels,
in individual companies and at the group level. On both levels, control
measures and analyses are carried out to ensure the validity of financial
reporting. The Board of Directors is responsible for overseeing the financial
reporting process.
Risk Management
The purpose of Orthex’s risk management is to ensure the fulfilment of
customer promises, business profitability, ability to pay dividends, value
creation for shareholders, responsible business and business continuity. To
achieve this, Orthex strives to be aware of the uncertainties and risk factors
and opportunities associated with its objectives and operations, and to
identify, assess and manage risks and their consequences in a consistent and
effective manner.
Orthex has a risk management policy approved by the Board of Directors
that guides risk management in a way that supports the achievement of the
company’s objectives, protects personnel and the company’s various assets,
and ensures the financial sustainability of operations.
The responsibility for implementing risk management lies with the
Management Team. In addition, each employee must be aware of and
manage the risks associated with their own operating environment and areas
of responsibility. The company’s Board of Directors approves the company’s
risk management policy and monitors and assesses the effectiveness of
risk management.
Risk management principles
Risk management is a systematic activity designed to ensure comprehensive
and appropriate risk identification, assessment, management, and control.
It is an integral part of Orthex’s planning and management process,
decision making, day-to-day management of operations, and monitoring
and reporting procedures. Risks are assessed and managed in a business-
oriented and thorough manner. This means that key risks are systematically
identified, evaluated, managed, monitored, and reported as part of
the business.
Risk management process and reporting
Orthex prioritises risks according to the importance of the risk by
assessing the impact, likelihood, and level of risk management of the risk
materialisation. Risk management measures address the most significant
risks through cost-effective and appropriate policy options.
The Management Team regularly monitors the implementation of risk
management. If necessary, corrective measures will be taken.
The Management Team reports to the Board of Directors on risks and risk
management measures 2–3 times a year. The Board reviews the most
significant risks, measures to manage them and assesses the efficiency and
effectiveness of risk management. The Board reports on the most significant
risks and uncertainties in the annual Board of Directors’ Reports and in the
financial statements and any material changes in these factors in the interim
reports. Additional information on the company’s risk management and
on the most significant risks and uncertainties is available in the Board of
Directors’ Report for the year 2021.
Internal Control and Audit
The Company’s Board of Directors has confirmed the operating principles
of internal control followed at Orthex, aiming to ensure that the company’s
objectives regarding, inter alia, Orthex’s strategy, operations, practices, and
financial reporting in particular are met. The operating principles of internal
control also contribute to ensuring the company’s compliance with legislation
and regulations. Internal control is an essential part of business management
and in ensuring that the set objectives are met. Internal control is aimed to
be organised efficiently, so that any deviations from targets can be detected
as early as possible or that they can be prevented.
Orthex’s tools of internal control include internal policies, guidelines, and
instructions, together with manual controls as well as controls built into
systems. In addition, internal control is implemented in the form of various
monitoring reports and meetings. The Board of Directors of Orthex is
responsible for organising the internal control and oversees the efficiency
of internal control. The Management Team and the CEO are responsible that
functioning control procedures are in use.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Orthex Group has not organised its internal audit as a separate function. The
Board assesses annually the need for internal audit procedures and may use
internal company resources or external service providers for internal audit
measures. Any outcomes of such procedures or measures are reported to the
Board of Directors.
Related Party Transactions
The Board of Directors has defined the principles for monitoring and
evaluating related party transactions. The company evaluates and monitors
transactions concluded between the company and its related parties and
ensures that any conflicts of interest are taken into account appropriately in
the decision-making process of the company. The company keeps a list of
related parties.
Approval of related party transactions concluded in the ordinary course of
business and on customary commercial terms is subject to the company’s
normal approval policies and processes. Approval of a related party
transaction that is not concluded in the ordinary course of business or
on customary terms is subject to the Board of Directors’ approval. The
company’s finance function monitors related party transactions as a part of
the company’s normal reporting and control procedures and reports related
party transactions to the Board of Directors.
The Board of Directors regularly evaluates the reported related party
transactions and the appropriateness of the company’s process and policies
on related party transactions. Information on transactions concluded
between the company and its related parties is disclosed, as required,
annually in the notes to the company’s consolidated financial statements.
Material related party transactions are disclosed in accordance with Chapter
8, section 1a of the Securities Markets Act.
Insider Administration
Orthex has prepared insider guidelines approved by the company’s Board of
Directors, the purpose of which is to clarify and supplement the operating
methods of Orthex and its insiders and to serve as a practical tool in handling
insider matters. The Insider Guidelines define clear operating instructions for,
among other things, the management of inside information, the maintenance
of insider lists and the reporting of transactions by persons subject
to disclosure.
The Insider Guidelines apply to Orthex and persons in managerial positions at
Orthex, as well as to persons working for Orthex who have access to inside
information or who have otherwise become aware of inside information. In
addition, the Insider Guidelines apply by agreement to persons otherwise
acting on behalf of or for Orthex in the performance of their duties through
which they have access to inside information.
Orthex’s insider administration compiles insider lists and keeps them up to
date in electronic form. In addition to individual insider lists (project-specific
insider list), Orthex may prepare a supplement for permanent insiders
(permanent insiders). Permanent insiders include only those persons who,
by virtue of their duties, are considered to have continuous access to all
inside information about Orthex. In the project-specific insider list, Orthex
will include those with insider information about the project, including any
external advisors and experts.
Insider lists are maintained by an electronic procedure prepared and / or
approved by the Financial Supervisory Authority or another appropriate body
that meets the applicable requirements. Insider lists are not public and are
not made available to the public.
Orthex will notify the insider in writing of his or her insider status, the
resulting obligations and any penalties for breach of those obligations.
The person entered in the project-specific insider list will be notified of the
termination of the project and the closure of the project-specific insider list.
Orthex executives and other permanent insiders, as determined by Orthex,
should schedule their trading in Orthex financial instruments in a manner
that does not undermine confidence in the securities market.
The persons discharging managerial responsibilities are the members of
Orthex’s Board of Directors, the CEO, and the members of the Management
Team. Orthex maintains a list of the persons discharging managerial
responsibilities and the persons and entities closely associated with them.
A person discharging managerial responsibilities in Orthex as well as any
other persons possibly deemed permanent insiders by Orthex may not enter
into transactions for their own account or for the account of a third party
during a closed period beginning 30 days prior to the disclosure date of
Annual Report 2021
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Orthex’s financial statement release, half-year report and the three- and
nine-month interim reports provided periodically by Orthex and ends 24
hours after publishing the group’s interim report, half-year report or financial
statement release.
In accordance with Nasdaq Helsinki Oy’s insider guidelines, Orthex stipulates
that persons who participate in the preparation, auditing or publication
of Orthex’s financial reports may not carry out transactions for their own
account or on behalf of a third party during a closed period.
The trading restriction also applies to disabled persons under the control
of the interests of the persons covered by the trading restriction. A person
subject to a trading restriction is responsible for complying with the trading
restriction even when the management of his or her securities and other
financial instruments has been entrusted to another person, such as a
portfolio manager.
Orthex executives and their close associates shall disclose to Orthex and
the Financial Supervisory Authority all transactions they make on their own
account in respect of Orthex with its shares, debt instruments or derivatives
or other related financial instruments. The reporting obligation applies to
transactions carried out on or off any marketplace.
A person in Orthex’s management position or another person subject to a
trading restriction specified by the company should request an assessment
of the legality and regularity of the proposed transaction in the financial
instrument from the company’s insider administration. Notwithstanding
the appraisal procedure, the person in a management position or the other
person mentioned above is responsible for ensuring that they comply with
the laws, regulations, and instructions.
Orthex has an internal whistleblowing channel through which Orthex
employees can anonymously report any suspected violations of financial
market rules and regulations.
External Audit
According to the Articles of Association, the company has one auditor.
The auditor must be a firm of authorised public accountants. The auditor
is elected annually by the Annual General Meeting for a term that expires
at the end of the next Annual General Meeting following the election. The
task of the auditor is to audit the consolidated financial statements, the
financial statements of the parent company, the accounting of the Group
and the parent company and the administration of the parent company.
The company’s auditor submits the auditor’s report to the shareholders in
connection with the annual financial statements and submits regular reports
on its findings to the Board of Directors.
Ernst & Young Oy, a firm of Authorised Public Accountants, is Orthex’s
auditor, with Johanna Winqvist-Ilkka, Authorised Public Accountant, as
the signing audit partner. The fees for the audit paid to the auditor in 2021
totalled EUR 0.2 million. In addition, EUR 0.5 million was paid to the auditor
for non-audit services that mainly related to services provided in connection
with the listing of the company.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
REMUNERATION REPORT
2021
Orthex Corporation (“Orthex” or the “company”) is a Finnish publicly listed
limited liability company since 29 March 2021 when the trading of its shares
started on the official list of Nasdaq Helsinki Ltd. This is the company’s first
remuneration report, and it describes the remuneration of the members of
the Board of Directors and the CEO during the financial year 2021. It also
includes a description of the company’s financial development over the past
five years in comparison with the development of the remuneration of the
Board of Directors and the CEO. This remuneration report has been approved
by the company’s Board of Directors and it will be presented to the Annual
General Meeting to be held on 6 April 2022 for the shareholders’ approval.
The shareholders’ decision on the report is advisory.
Introduction
The company’s remuneration policy for the governing bodies has not yet
been presented to the Annual General Meeting so the company did not
have a remuneration policy in place during the financial year 2021. Hence,
this remuneration report does not describe implementation of such policy
but in other respects it follows the requirements of the applicable laws and
regulations and the Finnish Corporate Governance Code 2020. The company’s
first remuneration policy for governing bodies will be presented to the Annual
General Meeting to be held on 6 April 2022.
The actual remuneration of the members of the Board of Directors and the
CEO in 2021 followed the remuneration principles of Orthex.
The goal of Orthex’s remuneration schemes is to promote the company’s
competitiveness and support the implementation of the company’s strategy.
The remuneration schemes also aim to engage key personnel in long-term
work to achieve personal and shared goals and increase shareholder value.
Effective and competitive remuneration is an essential tool for hiring capable
management in the company, which in turn contributes to the company’s
financial success and implementation of good governance. Remuneration
supports the implementation of the company’s strategy and long-term
profitability and promotes the company’s competitiveness.
Development of the Group’s financial performance
and remuneration
The development of the CEO’s total remuneration correlates with the
company’s performance, as described below. The achievement of
the short-term incentive plan’s performance targets for 2021 and the
incentive to be paid in 2022 are disclosed in the tables at the end of this
remuneration report.
Development of total remuneration and financial development over the past five years
EUR thousand , FAS , FA S
Net sales , , , , ,
Adjusted EBITA , , , , ,
Board of Directors
)
CEO
)
Employees' average remuneration
)
)
The remuneration of the Board of Directors and the CEO was adjusted in connection with the company’s IPO in March .
)
Employees’ average remuneration is total employee remuneration excluding side costs divided by the average number of personnel during the year.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Remuneration of the Board of Directors
The Annual General Meeting decides on the remuneration to be paid to
the members of the Board of Directors. The Board of Directors prepared a
proposal for the remuneration of the members of the Board of Directors for
the 2021 Annual General Meeting. The proposal for the remuneration of the
members of the Board of Directors for the 2022 Annual General Meeting has
been prepared by the company’s Shareholders’ Nomination Board.
In accordance with the decision of the Annual General Meeting in 2021, the
Chair of the Board was paid between 1 March and 31 March a remuneration
of EUR 2,500 per month and EUR 1,700 per month for each member of the
Board. As of 1 April 2021, the remuneration paid to the Chair of the Board was
EUR 4,000 per month and to each other member of the Board EUR 2,000
per month.
Board fees are paid monthly in cash. No meeting fees are paid for Board
meetings. The remuneration of the members of the Board of Directors does
not involve pension contributions and the members of the Board of Directors
are not covered by Orthex’s incentive schemes.
In February 2021, a non-recurring consulting fee of EUR 25 thousand was
paid to RaKaAs ApS, the consulting company of the Chair of the Board, Sanna
Suvanto-Harsaae, in connection with the company’s listing.
Reasonable travel expenses for Board members’ meetings were reimbursed
in accordance with the company’s travel rules.
The remuneration paid to the members of the Board of Directors in 2021 is
shown in the table below. The members of the Board of Directors have not
received any other financial benefits.
Remuneration of the Board of Directors 2021
EUR Total
Sanna Suvanto-Harsaae ,
Satu Huber ,
Ari Jokelainen ,
Juuso Kivinen ,
Jens-Peter Poulsen
)
,
Thomas Sandvall
)
,
Matti Virtanen
)
,
Total ,
)
Member of the Board as of August
)
Member of the Board until March
Remuneration of the CEO
The Board of Directors decides on the remuneration of the CEO. The CEO’s
remuneration consists of a fixed base salary with fringe benefits and a
variable short-term incentive. In 2021, Orthex did not have any long-term
share-based or other incentive schemes. The purpose of rewarding the CEO
is to guide the implementation of the company’s strategic goals and thereby
promote the Company’s long-term financial success, competitiveness,
and favourable development of shareholder value. The CEO’s significant
shareholding (11.5%) in the company strengthens the alignment of the CEO’s
interests with those of shareholders.
Under Orthex’s variable short-term incentive scheme, the CEO may be
granted annual performance-based incentives in addition to his fixed annual
salary. The aim of the incentive scheme is to encourage the CEO to commit
to the company and motivate him to achieve the best possible result. In
addition, the incentive scheme is intended to encourage the CEO to work in a
way that supports Orthex’s strategy, growth, and competitiveness.
Incentives under annually commencing short-term incentive plans are
discretionary and tied to Orthex’s results of operations and the achievement
of relevant performance metrics and/or individual performance targets. The
terms and objectives of the incentive plan, including performance metrics
and weights, are determined, and approved annually in advance by the
company’s Board of Directors. In 2021, the metrics and weights of the CEO
incentive plan were as follows: profitability 60%, turnover 25%, sustainability
15%. During the financial year 2021, the maximum amount of the CEO’s
incentive corresponded to 7 months’ gross base salary.
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
The CEO is entitled to a statutory pension. The CEO’s pension and retirement
age are determined on the basis of the Employees’ Pensions Act. The CEO
does not have any supplementary pension insurance paid by the company.
The salaries, incentives and fringe benefits paid to the CEO in 2021 are shown
in the table below. The incentive paid in 2021 is based on the 2020 short-
term incentive plan.
Remuneration of the CEO paid in 2021
EUR
Fixed based salary and mobile phone benefit ,
Incentives ,
Other financial benefits -
Total ,
Share of fixed pay of total remuneration %
Share of variable pay of total remuneration %
The CEO’s earned short-term incentive for 2021 was 43% of the annual
maximum short-term incentive. The performance-based incentive for 2021
will be paid in April 2022.
Remuneration of the CEO not yet paid but due based on the
year 2021
Short-term incentive scheme EUR
Remuneration due based on the achievement of STI
performance measures in
,
Annual Report 2021
50
ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
CONTENTS
Board of Directors’ report 51
KEY FIGURES 64
Financial statements 71
CONSOLIDATED FINANCIAL STATEMENTS, IFRS 72
Consolidated income statement 72
Consolidated statement of other comprehensive income 72
Consolidated statement of financial position 73
Consolidated statement of changes in equity 74
Consolidated statement of cash flows 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 76
1. Accounting principles for the consolidated financial statements 76
2. Net sales 79
3. Other operating income 81
4. Operating expenses 81
5. Employee benefits 81
6. Financial income and expenses 84
7. Income taxes 85
8. Intangible assets 88
9. Property, plant and equipment 90
10. Leases 92
11. Financial assets and financial liabilities 94
12. Fair value hierarchy 104
13. Inventories 106
14. Trade and other receivables 106
15.Trade and other payables 106
16. Share capital and reserves 107
17. Related party disclosures 109
18. Collaterals, commitments and contingent assets and liabilities 110
19. Subsequent events 110
PARENT COMPANY FINANCIAL STATEMENTS, FAS 111
Parent company income statement 111
Parent company balance sheet 112
Parent company cash flow statement 113
Notes to the parent company financial statements 114
SIGNATURES FOR THE BOARD OF DIRECTORS’ REPORT
AND FINANCIAL STATEMENTS 118
AUDITOR’S REPORT 119
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Board of Directors’ report
Orthex is a leading Nordic houseware company. Orthex designs, produces
and sells household products with a mission to make consumers’ everyday
life easier. Orthex offers a broad assortment of household products in four
product categories: Storage, Kitchen, Home & Yard and Plant Care.
Orthex strives to create functional, sustainable and high-quality household
products. Orthex also aims to be the industry forerunner in sustainability.
Orthex markets and sells its products under three main consumer brands:
SmartStore, GastroMax and Orthex. In addition, it sells externally produced
kitchen products under the Kökskungen brand. Orthex’s core geographic
markets are the Nordics and the export markets. The export markets
are divided into the rest of Europe and the rest of the world. Orthex is
headquartered in Espoo, Finland, and it currently has seven local sales offices
located in the Nordics, Germany, France, and the United Kingdom.
Key figures
EUR million
Invoiced sales . . .
Net sales . . .
Gross margin . . .
Gross margin, % .% .% .%
EBITDA . . .
EBITDA margin, % .% .% .%
Adjusted EBITDA . . .
Adjusted EBITDA margin, % .% .% .%
EBITA . . .
EBITA margin, % .% .% .%
Adjusted EBITA . . .
Adjusted EBITA margin, % .% .% .%
Operating profit . . .
Operating profit margin, % .% .% .%
Net cash flows from operating activities . . .
Net debt / Adjusted EBITDA .x .x .x
Adjusted return on capital employed (ROCE), % .% .% .%
Equity ratio, % .% .% .%
Earnings per share, basic (EUR) . . .
FTEs
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Market overview
Orthex operates in Europe in the home storage, food storage and
kitchenware market, which has historically been stable and resilient
throughout different economic cycles. The market size was estimated at
EUR 8.0 billion in 2019. Household goods are purchased on demand and
unit prices are generally low, which means that market downturns have a
smaller impact on consumers’ purchasing power and demand.
The market for household products in Europe is fragmented. Orthex
estimates that it had a leading market position in the Nordic home storage
market, with an estimated market share of 20–25 per cent in 2019.
Additionally, the company had a strong position in the food storage and
kitchenware market. The size of the Nordic home storage market was
estimated to be approximately EUR 140 million in 2019.
There were no significant changes in Orthex‘s market position or
competitive situation during the financial year of 2021. The management’s
view is that the fast growth in Europe outside the Nordic market
comes from a steadily improving competitive position with presence
in new customers and widened distribution in existing customers’
shop assortment.
There has typically not been significant seasonal variation in Orthex’s sales.
However, the uncertain market situation caused by the COVID-19 pandemic
may affect the comparability of sales between quarters and financial years.
The COVID-19 pandemic affected Orthex’s business both positively and
negatively during the financial year.
As a result of the pandemic, restrictions on movement in some markets
had a positive impact on Orthex’s sales, as people spent more time at
home and focused on, for example, cooking and interior design solutions,
including storage solutions. However, in some export markets, restrictions
on movement adversely affected the company’s sales, as stores selling the
company’s products were closed for part of 2020 and 2021. Raw material
prices fell exceptionally much in the spring of 2020 due to the COVID-19
pandemic, but prices started to rise during the latter part of 2020.
During the financial year, raw material prices have risen to exceptionally
high levels.
Long-term financial targets
As long-term financial targets the company has adopted to an average
annual organic Net sales growth to exceed 5 per cent at the Group level
and to exceed 10 per cent outside the Nordics (growth in local currencies),
adjusted EBITA margin (adjusted for items affecting comparability) to exceed
18 per cent over time and net debt to adjusted EBITDA ratio to stay below
2.5x. Leverage may temporarily exceed the target range (for example, in
conjunction with acquisitions).
The company aims to distribute a stable and over time increasing
dividend with a pay-out of at least 50 per cent of net profit, in total, on a
biannual basis.
Group performance
Net sales and profitability
In 2021, the Group’s Net sales increased by 16.9% to EUR 88.7 million (75.9).
Invoiced sales amounted to EUR 90.6 million (77.9). The increase of constant
currency Net sales was 15.7% compared to 2020. Net sales growth was
strong especially in the Storage product category and in export markets.
EBITA was 9.4 million (12.3) during 2021 and decreased by 24.0%. Adjusted
EBITA decreased by 15.0% to EUR 11.0 million (12.9). Adjusted EBITA margin
decreased to 12.4% (17.0). Operating profit was EUR 9.3 million (12.3). Items
affecting comparability totalled EUR 1.6 million (0.6), of which listing costs
affected the operating profit negatively with about EUR 1.5 million (0.6).
Orthex’s financial income and expenses during the financial year consisted of
EUR 1.6 million net expenses (2.4). No interest expenses incurred during the
year from convertible loans as the convertible loans were repaid at the end
of 2020. Also, the impact of foreign exchange rates on Orthex’s internal loan
arrangements is smaller compared to the last year.
Development by geography
Orthex’s core market area by geography is the Nordics, where the Group’s
invoiced sales in 2021 amounted to EUR 73.0 million (64.1). In the Nordic
countries, the increase in sales was mainly due to increased sales to
existing customers. Invoiced sales in the Nordics totalled 80.6% (82.3) of
the Group’s total invoiced sales. Invoiced sales in the rest of Europe grew to
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EUR 15.1 million (11.4). Invoiced sales in the rest of the world were at the same
level as last year at 2.4 million euros (2.4). In the export market, the increase
in sales was due to increased sales to both new and existing customers.
Orthex’s products are sold in more than 40 countries, and export to non-
Nordic countries grew by 1.7 percentage points and accounted for 19.4% (17.7)
of the Group’s invoiced sales at the end of the period.
Invoiced sales by geography
EUR million
Nordics . . .
Rest of Europe . . .
Rest of the world . . .
Total . . .
Development by product category
Orthex has four product categories: Storage, Kitchen, Home & Yard and
Plant Care. The largest category is Storage with invoiced sales totalling
EUR 59.4 million (49.4) during 2021. Products in the Storage category will
play a key role in Orthex’s expansion in Europe, as Orthex often uses them as
flagship products when seeking agreements with new retailers.
Orthex has a strong position in the Nordics in food storage and kitchenware
markets. The Group’s invoiced sales in the Kitchen category grew to
EUR 20.1 million (19.0) which was both due to new customers and increased
demand among existing customers.
Invoiced sales in the Home & Yard category increased to EUR 5.4 million (5.0).
Invoiced sales in the Plant Care category grew to EUR 5.7 million (4.5). The
increase was mainly due to the increase in the cultivation of green plants,
herbs and vegetables in flowerpots made of recycled plastic material.
Invoiced sales by product category
EUR million
Storage . . .
Kitchen . . .
Home & Yard . . .
Plant Care . . .
Total . . .
Financial position and cash flow
The balance sheet totalled EUR 88.8 million (75.4) at the end of the
financial year, of which equity constituted EUR 31.8 million (17.0). The
listing carried out during the first quarter of the year had a net effect of
EUR 9.3 million on the company’s equity.
At the end of the financial year, the Group’s net debt was EUR 25.9 million
(38.9). Non-current interest-bearing liabilities were EUR 36.0 million (40.0)
and Orthex’s total interest-bearing liabilities were EUR 40.2 million (44.1).
Interest-bearing liabilities include pension liabilities and lease liabilities.
During 2021, the Group’s net cash flows from operating activities were
EUR 9.0 million (12.7) and cash conversion was 67.7% (81.2). Cash and
cash equivalents amounted to EUR 14.3 million (5.3) at the end of the
financial year.
Net debt/adjusted EBITDA was 1.7x (2.3). Orthex’s long-term target is to
keep Net debt/adj. EBITDA below 2.5x.
At the end of the financial year, the Group’s Equity ratio was 35.8% (22.6).
Adjusted return on capital employed (ROCE) was 33.0% (40.3) and Return
on equity (ROE) 24.7% (49.0).
Investments, product development and
acquisitions
Orthex’s investments during 2021 amounted to EUR 4.8 million (3.2) and
were mainly related to increasing the production capacity for new and
existing products.
The company’s Board of Directors decided to bring forward the machine
investment originally planned for 2022 to increase production capacity
and decided to purchase a 650-ton injection moulding machine for the
manufacture of larger storage boxes. The investment was brought forward
from the plan so that the machine would be put into production as early as
the end of 2021, so that Orthex would be better able to meet the demand
for the Storage category products. During 2021, Orthex has made a total of
5 significant machine investments at the Tingsryd and Lohja factories, as
well as investments in automation and product moulds.
Orthex focuses on the most important product categories and markets and
decided to exit local snow toy manufacturing to make room for growth
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by selling its snow toys moulds to Wiitta Oy in June 2021. Snow toys
accounted for a small share of Orthex’s Home & Yard product group sales.
The contract did not include any trademarks. The parties have agreed not
to disclose the amount of the transaction.
Personnel
The number of personnel employed by Orthex in 2021 was 314 (285) in
average. Wages and salaries were EUR 19.7 million in 2021 (17.1). Group
headcount at the end of the financial year was 320 (329), of which 54%
(57) worked in production, 22% (20) in warehouse, 15% (15) in sales, 6%
(5) in administration and 3% (4) in marketing.
Governance
The company’s corporate governance complies with the company’s Articles
of Association and Corporate Governance Principles as well as rules and
regulations applicable to Finnish listed companies such as the Finnish
Limited Liability Companies Act and Securities Markets Act, and rules
and regulations of Nasdaq Helsinki Ltd. The company also adheres to
the Finnish Corporate Governance Code 2020 (”CG Code”) issued by the
Securities Market Association. The CG Code is available on the association’s
website (www.cgfinland.fi).
Further information on the company’s governance principles is available in
the Corporate Governance Statement 2021 published simultaneously with
the Report of the Board of Directors and the Financial Statements. As the
company has no audit committee, the company’s Board of Directors has
reviewed the Corporate Governance Statement.
Decisions of General Meetings
Orthex Corporation held three general meetings of shareholders during
the year. The meetings were held at Orthex Group headquarters in Espoo,
Finland. The Extraordinary General Meeting held on 2 July 2021 was
arranged in accordance with exceptional meeting procedures to limit the
spread of the COVID-19 pandemic. A shareholder or their representative
could attend the meeting and exercise the shareholder’s rights only by
voting in advance and by making counterproposals and asking questions in
advance, they were not able to attend the meeting in person.
In Orthex Oy’s Annual General Meeting held on 28 February 2021,
shareholders decided to approve the parent company’s Financial
Statements for the financial period 1 January–31 December 2020.
The members of the Board of Directors and the CEO were discharged
from liability for the year 2020. It was decided that no dividend will be
distributed and that the profit for the financial year of EUR 1,002,216.03 will
be recognised in retained earnings.
Shareholders decided to change the company’s company form into a public
company, change the company’s name to Orthex Corporation, and include
the company’s shares in the book-entry securities system managed by
Euroclear Finland Ltd. At the same time, the company’s share capital was
increased from the company’s invested unrestricted equity fund to the
amount of EUR 80,000 required for a public company, and the Articles of
Association were amended to incorporate these changes in the articles.
The Annual General Meeting further decided to issue 15,880,000 new
shares without payment to the company’s existing shareholders in
proportion to their existing shareholdings to implement the public offering.
Each share entitled its holder to receive 40 new shares. It was also resolved
to cancel all 3,000 treasury shares held by the company. Further, the
Board of Directors was authorised to decide on a directed share issue with
payment deviating from the shareholders’ subscription right. The Board
of Directors was authorised to issue a maximum of 2,000,000 shares to
Orthex Group personnel and members of the Board of Directors and other
management to facilitate their participation in the public offering.
The shareholders decided to elect four members to the Board of Directors
and to re-elect Sanna Suvanto-Harsaae, Juuso Kivinen and Satu Huber to
the Board. Ari Jokelainen was elected as a new member to the Board. He
has been the company’s Board member previously between the years 2016
and 2017.
The Annual General Meeting decided that Ernst & Young Oy, a firm of
Authorised Public Accountants, will continue as the company’s auditor,
with Johanna Winqvist-Ilkka, Authorised Public Accountant, as the signing
audit partner.
On 3 March 2021, the Board of Directors resolved to elect Sanna Suvanto-
Harsaae as the new Chair of the Board of Directors. The election of the new
Chair was conditional upon the successful completion of the public offering
and became effective when the company shares were admitted to trading
on Nasdaq Helsinki’s main list on 29 March 2021. Juuso Kivinen chaired the
Board prior to that.
The Extraordinary General Meeting held on 5 March 2021 decided to
establish a Shareholders’ Nomination Board for the company and approved
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the Charter of the Shareholders’ Nomination Board. The Nomination
Board’s appointment process, composition and operations are described
in the Corporate Governance Statement under section Shareholders’
Nomination Board.
At the Extraordinary General Meeting held on 3 July 2021, the number of
members of the company’s Board of Directors was confirmed to be five, and
Jens-Peter Poulsen was elected as a new member of Orthex Corporation’s
Board of Directors as of 1 August 2021.
Board of Directors
On 31 December 2021, the company’s Board of Directors consisted of
the following members: Sanna Suvanto-Haarsae (Chair), Satu Huber, Ari
Jokelainen, Juuso Kivinen and Jens-Peter Poulsen.
Management’s ownership and remuneration
On 31 December 2021, the members of the Board of Directors, the CEO
and other members of the Management Team, including their controlled
corporations, owned a total of 3,356,477 shares corresponding to 18.9%
of the total number of shares. Information on the shareholdings of the
members of the Board of Directors, the CEO, and other members of the
Management Team is disclosed in the Corporate Governance Statement.
Information on the remuneration of the members of the Board of Directors,
the CEO, and other members of the Management Team is disclosed in the
notes to the Financial Statements.
Group structure
In order to simplify the Group structure, Orthex Corporation’s Finnish
subsidiary Oy Orthex Group Ab was merged into Orthex Corporation as of 31
October 2021.
Shares and shareholders
Trading in Orthex’s share began on the Nasdaq Helsinki pre-list on 25
March 2021 and on the Nasdaq Helsinki main list on 29 March 2021. In
the Initial Public Offering, Orthex issued 1,481,854 new shares, in addition
to which funds managed by Sponsor Fund IV Ky and certain other
shareholders in the company sold a total of 10,668,937 shares. Orthex
accumulated gross proceeds of approximately EUR 10 million in the Initial
Public Offering. The final subscription price of the share in the IPO was
EUR 6.82 per share.
In connection with the company’s listing, the Group’s personnel subscribed
for 156,236 shares in the personnel issue. The subscription price of EUR 6.14
per employee share was 10 percent lower than the subscription price of the
shares offered to others in the listing. In accordance with IFRS, the discount
received by the personnel, EUR 106 thousand, has been recognised in its
entirety in personnel expenses as a share-based payment.
All shares carry one vote and have equal voting rights. There are no voting
restrictions associated with the shares. The shares hold no nominal
value. The trading code of the shares is “ORTHEX”, and the ISIN code
is FI4000480504.
Share capital and share
At the end of the reporting period, Orthex Corporation’s registered share
capital amounted to EUR 80,000 and the registered number of issued
shares was 17,758,854.
Shareholders and share trading
Trading volume during the period was EUR 180.3 million and 21,933,614
shares. The highest price of the share was EUR 12.50 and the lowest
was EUR 7.30. The closing price of the share at the end of December
was EUR 11.04. These figures include share sales related to the IPO. The
year-end market value of the share capital stood at EUR 196.1 million. The
company did not have any treasury shares at the end of the period as the
Annual General Meeting held on 28 February 2021 decided to cancel 3,000
treasury shares held by the company.
The number of registered shareholders at the end of the review period
was 18,523 and 1,838,522 shares representing 10.35% of the total number
of the shares were nominee registered. At the end of the period, the
ten largest shareholders possessed a total of 48.2% of Orthex’s shares
and votes.
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Authorisations, option and share-based incentive
programmes
During 2021, Orthex did not have any share option programmes or share-
based incentive schemes. Orthex’s Board of Directors did not have any
share-based authorisations at the end of the review period.
Major shareholders 31 Dec 2021*
Shareholder
No. of
shares
% of
shares
Conficap Oy ,, .
Rosenlew Alexander , , .
Ilmarinen Mutual Pension Insurance Company ,, .
Thomasset Oy , .
Varma Mutual Pension Insurance Company , .
OP-Finland Micro Cap , .
Fondita Nordic Micro Cap Investment Fund , .
Ståhlberg Tom Christian , .
Oy Julius Tallberg Ab , .
Aktia Capital Mutual Fund , .
Total ,, .
*)
Source: Euroclear Finland
Under the provisions of the Securities Market Act, changes in holdings
must be disclosed when the holding reaches, exceeds or falls below
5, 10, 15, 20, 25, 30, 50 or 66,7 (2/3) per cent of the voting rights or
the number of shares in the company. The stock exchange releases on
notifications of changes in holdings (flaggings) are available on the corporate
website at https:/investors.orthexgroup.com/.
Share distribution 31 Dec 2021*
Number of shares Number of shareholders % of shareholders Number of % of shares
- , . , .
-, , . ,, .
,-, . ,, .
,-, . ,, .
,-,, . ,, .
> ,, . ,, .
Total , ,,
Nominee registered . ,, .
*)
Source: Euroclear Finland
Sector distribution 31 Dec 2021*
Sector
No. of
shares
% of
shares
Households ,, .
Private companies ,, .
Financial and insurance institutions ,, .
Public sector organisations ,, .
Non-profit institutions , .
Rest of the world , .
Total ,,
*)
Source: Euroclear Finland
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Sustainability
Orthex has emphasised sustainability since the early 1990s. The company
aims to be a pioneer in the industry in terms of sustainability by offering
timelessly designed, high-quality, safe and long-lasting products, reducing
the carbon footprint of its operations and products, and sourcing more and
more of its raw materials from bio-based and recycled materials. Orthex has
set as a main target to reach carbon neutrality in production by 2030.
Orthex’s responsible choices are based on the United Nations Sustainable
Development Goals and the company has identified four sustainable
development goals: (i) decent work and economic growth, (ii) sustainable
industry, innovation and infrastructure, (iii) responsible consumption and
production, and (iv) climate action. Orthex reviews its sustainability strategy
annually and sets targets and key performance indicators for three-year
periods. Orthex publishes an annual sustainability report, which sets out the
company’s sustainability goals, achievements and investments.
One of the goals of Orthex’s sustainability strategy is to reduce energy
consumption, and investments in energy-efficient machines have helped
reduce Orthex’s energy consumption. The company’s energy efficiency goal
is to reduce energy consumption by 5 percent compared to the average of
the previous three years. Improving energy efficiency is also an essential part
of reducing emissions. Orthex pays special attention to reducing the use of
fossil-based electricity, and in 2021, all our factories switched to use 100%
fossil-free hydropower. This was a major step for Orthex towards carbon-
neutral production by 2030.
In September 2021, Orthex was selected as a pioneering company to the
Finnish Innovation Fund Sitra’s list of the most interesting companies in
circular economy in Finland. The list presents 41 pioneering companies that
offer circular economy solutions to the global sustainability crisis.
In December 2021, Orthex was audited for and granted an ISO 45001
certification. It is an international standard that specifies requirements for
an occupational health and safety management system. The goal with an
ISO 45001 certification is to enable organisations to provide safe and healthy
workplaces by preventing work-related injuries and health issues.
More information on Orthex’s sustainability can be found in the Annual
Report’s dedicated section Sustainability.
Risks and uncertainties
Risk management
The purpose of Orthex’s risk management is to ensure the fulfilment of
customer promises, business profitability, ability to pay dividends, value
creation for shareholders, responsible business and business continuity. To
achieve this, Orthex strives to be aware of the uncertainties and risk factors
and opportunities associated with its objectives and operations, and to
identify, assess and manage risks and their consequences in a consistent and
effective manner.
Orthex’s risk management policy guides risk management in a way that
supports the achievement of the company’s objectives, protects personnel
and the company’s various assets, and ensures the financial sustainability of
operations.
The responsibility for implementing risk management lies with the
Management Team. In addition, each employee must be aware of and
manage the risks associated with their own operating environment and areas
of responsibility. The company’s Board of Directors approves the company’s
risk management policy and monitors and assesses the effectiveness of
risk management.
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Risk management principles
Risk management is a systematic activity designed to ensure comprehensive
and appropriate risk identification, assessment, management and control.
It is an integral part of Orthex’s planning and management process,
decision making, day-to-day management of operations, and monitoring
and reporting procedures. Risks are assessed and managed in a business-
oriented and thorough manner. This means that key risks are systematically
identified, evaluated, managed, monitored and reported as part of
the business.
Risk management process and reporting
Orthex prioritises risks according to the importance of the risk by
assessing the impact, likelihood and level of risk management of the risk
materialisation. Risk management measures address the most significant
risks through cost-effective and appropriate policy options.
The Management Team regularly monitors the implementation of risk
management. If necessary, corrective measures will be taken.
The Management Team reports to the Board of Directors on risks and risk
management measures 2-3 times a year. The Board reviews the most
significant risks, measures to manage them and assesses the efficiency and
effectiveness of risk management.
Risk classification
Risk refers to an event or circumstance that may hinder or prevent the
achievement of targets or may result in missing of business opportunities.
Orthex classifies risks in three groups:
• Strategic risks
• Operational risks
• Financial risks
Strategic risks refer to uncertainty that is primarily related to changes in the
operating environment and the ability to utilize or anticipate these changes.
These changes may relate, for example, to the general economic situation,
customer consumption behaviour, competition, legislation or technological
developments. When assessing strategic risks and opportunities, the goal
is to find the business opportunities that are used to achieve the goals with
manageable risks, while avoiding those that present unreasonably high risks.
Operational risk means a circumstance or event that can prevent or hinder
the achievement of objectives or cause harm to people, property, business,
information or the environment. Operational risks are avoided or reduced,
but in such a way, that the costs of risk avoidance are proportionate to the
magnitude of the risk.
Financial risks are those related to Orthex’s financial position. These include
e.g., availability and cost of finance, NWC and liquidity, and foreign exchange
rate fluctuations. The main principles of Orthex’s financial risk management
are described in the consolidated financial statements.
Non-economic impacts are also considered when assessing risks. Reputation
risk arises if Orthex’s operations conflict with the expectations of various
stakeholders, such as customers, suppliers, regulators or shareholders.
Responsible practices are key to preventing reputational risks. Reputation
risks are managed through timely and adequate communication.
Main strategic, operational, and financial risks
Risks relating to the macroeconomic environment
Economic downturns, due to COVID-19 or otherwise, or restrictions related to
COVID-19 may adversely affect the operations of Orthex’s customers. Should
Orthex’s customers be forced to close their stores or cease their operations
due to COVID-19 or otherwise, this could adversely affect the distribution of
Orthex’s products and, hence, Orthex’s results of operations. Financial and
operational challenges experienced by Orthex’s customers could also affect
Orthex’s ability to collect outstanding receivables fully, or at all.
Although the COVID-19 pandemic did not materially impair the Group’s
operating profit during the review period, prolonged or extended restrictions
could have a material adverse effect on business, financial condition and/or
operating profit.
Risks relating to changes in competitive environment
Orthex operates in a competitive and fragmented home storage, food
storage and kitchen utensils market. Even though the markets in which
Orthex operates are fragmented, Orthex’s competitors may consolidate,
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establish consortiums or aim to expand their operations in the future, which
may increase competition in Orthex’s markets, including in the Nordics.
Any significant consolidation could create competitors with more financial,
technical, marketing or other resources that would enable them to assign
more resources to the sale of home and food storage products and kitchen
utensils than currently, which, in turn, could have an adverse effect on
Orthex’s business and growth opportunities.
Risks relating to sourcing of raw materials
Plastic polymers are the largest group of raw materials used in the
production of Orthex’s products. Raw material prices are typically negotiated
annually based on estimated volumes for the year ahead. Orthex does
not hedge against raw material price fluctuations. Accordingly, Orthex’s
profitability is particularly exposed to fluctuations in virgin plastic polymer
(produced directly from crude oil and never been used or processed before)
prices, which have historically fluctuated to a certain extent in line with crude
oil price fluctuations. Orthex also uses bio-based and recycled materials
in the production of its products and sells products entirely sourced from
external suppliers, as well as products that are partly produced in-house and
partly consist of externally sourced components. The prices of these raw
materials and traded goods have not historically been subject to the same
level of fluctuation as virgin plastic polymers. If Orthex is unable to offset
price increases in raw materials and traded goods, whether through price
increases or otherwise, or should there be significant disruptions in their
availability, this could have a material adverse effect on Orthex’s profitability
and/or margins.
Raw material prices fell exceptionally much in the spring of 2020 due to the
COVID-19 pandemic, but prices started to rise during the latter part of 2020.
During the financial year 2021, raw material prices have risen to exceptionally
high levels which has impacted Orthex’s profitability.
Risks relating to quality of products
Thanks to its own production, Orthex can control the quality of its products
and the health and environmental aspects of production and products.
Although Orthex has several quality control measures in place, there can
be no assurances that such measures will always be adequate to detect
potential product quality defects.
Any significant quality issue may require a considerable amount of
management resources. Responding to detected or suspected quality issues,
for example, by proactively adjusting production processes or by switching
the materials or components used, usually gives rise to costs that may be
significant. Such events may also lead to product recalls, product liability or
warranty claims, and contractual liabilities towards Orthex’s customers and/
or end-customers, or to third-party claims. Product quality issues or product
recalls may also harm Orthex’s reputation and lead to loss of customers.
Furthermore, Orthex’s insurance coverage does not cover claims based on
quality issues and product liability claims concerning Orthex’s products.
Realisation of the aforementioned risks may have a material adverse
effect on Orthex’s business, results of operations, financial condition and/
or reputation.
Risks relating to changes in customer preferences
Several megatrends and consumer preferences have been driving the
demand in the home storage, food storage and kitchen utensils markets in
recent years, including population growth, urbanisation, changes in the form
of housing, sustainability and design preferences among the end-customers
of Orthex’s products. Changes in consumer preferences could relate to,
among others, improved functionality, higher quality, innovative solutions,
new technologies, attractive design and new and more advanced materials.
If Orthex is unable to successfully anticipate and identify changing consumer
preferences, Orthex could lose its market share in the Nordics, its sales
development may be slower than expected, and it may be forced to rely on
price reductions to dispose of excess or slow-moving inventory or to make
significant investments in the future to remain competitive. Any of these
could have a material adverse effect on Orthex’s business, financial condition
and/or results of operations.
Risks relating to production facilities and warehouse
operations
As Orthex’s production largely relies on its own production facilities, events
that would cause significant disruptions in or the suspension of Orthex’s
production facilities could materially affect Orthex’s ability to deliver its
products to its customers in a timely manner. Orthex’s production facilities
may be damaged or destroyed or they may be closed or the equipment on
the premises may be damaged due to, for example, fire, accident, natural
disaster or equivalent events beyond Orthex’s control. Similarly, Orthex’s
warehouses could be subject to similar events, which could destroy all or
part of Orthex’s inventory. Such events or incidents could result in material
disruptions and delays in Orthex’s production and deliveries and in Orthex
not necessarily being able to fulfil its obligations to its customers. If Orthex
were unable to locate alternative production facilities, transfer production
to Orthex’s other production facilities or to repair the damaged premises or
equipment in a timely and cost-effective manner, such conditions could have
a material adverse effect on Orthex’s business, financial condition and/or
results of operations.
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Risks relating to IT infrastructure and systems
Difficulties in maintaining and updating IT infrastructure, deficiencies in
IT systems, and external cyber-attacks related to IT systems may have an
adverse effect on Orthex. Orthex uses information technology infrastructure,
applications and software products that cover essential aspects of its
business, such as production, inventory management, logistics, human
resources, finances and other administrative systems. Orthex’s IT systems
and infrastructure may be vulnerable to cybersecurity risks, including
cyber-attacks, direct or indirect, such as computer viruses and worms,
phishing attacks, and penetrating or bypassing security measures in order
to gain unauthorised access to Orthex’s information networks and systems.
Exploitation of possible weaknesses in Orthex’s security controls could
disrupt its business and cause leakage of sensitive information, theft of
intellectual property and damage to Orthex’s reputation.
Risks relating to management and employees
The success of Orthex’s business and strategy depends on Orthex’s ability
to attract and retain key management and production personnel. The loss
of management or key personnel may result in the loss of expertise or, in
certain circumstances, the transfer of expertise to Orthex’s competitors. In
addition, Orthex’s production processes require qualified, skilled production
workers (particularly with specialized training and knowledge of plastic).
In accordance with its current strategy, in addition to strengthening its
market position in the Nordics, Orthex will focus on accelerating its growth
in the export markets outside the Nordics, which imposes new demands to
Orthex’s management and personnel. Orthex’s geographical expansion also
requires the recruitment of additional personnel. If Orthex is not successful
in recruiting and retaining qualified key personnel, this may have an adverse
effect on Orthex’s business..
Risks relating to regulation and compliance
With operations in several countries, Orthex is subject to a variety of laws and
regulations, and potential violations of such laws and regulations could have
an adverse effect on Orthex. Orthex must comply with laws and regulations
enacted at both the national and EU level concerning its operations in
relation to matters including health, safety, consumer protection and
marketing, general product safety, environment, employment, competition,
company law, data protection, international trade and taxation in all
countries in which Orthex pursues business. Failure to comply with applicable
laws and regulations may cause Orthex financial losses, undermine Orthex’s
business opportunities and harm Orthex’s reputation.
Risks relating to taxation
Orthex’s tax burden depends on certain tax laws and regulations and their
application and interpretation (for example, with regard to transfer pricing
rules). Changes in tax laws and regulations or their interpretation and
application may increase Orthex’s tax costs to a significant degree, which
could have an adverse effect on Orthex’s financial condition and/or results
of operations. In addition, Orthex may at times be subject to tax audits
conducted by national tax authorities. Tax audits or other auditing measures
carried out by tax or other authorities, such as customs officials, could result
in an imposition of additional taxes (such as income taxes, taxes at source
and property, capital, transfer and value-added taxes), which could lead to an
increase in Orthex’s tax liability.
Orthex Group was subject to a tax audit of Orthex Corporation regarding
the financial years 2020 and 2021. Orthex Corporation received in February
2022 a tax audit report from the Finnish tax authorities. The tax audit
report included subsequent taxes and tax increases amounting to a total
of EUR 0.3 million, relating to the VAT deductibility of IPO related costs. The
company disagrees with the interpretation made in the tax audit and has
filed a claim for adjustment.
Risks relating to currency fluctuations
Orthex has operations in several countries, so the company is exposed to
transaction and translation risk related mainly to the Swedish krona, the
Norwegian krone, the Danish krone, the British pound sterling and the
U.S. dollar. The Group is typically not hedged against currency risk, except
for certain large purchases under the Kökskungen brand. Fluctuations in
exchange rates and interest rates can have a material adverse effect on
the Group.
Risks relating to liquidity
Orthex currently finances its business and investments with operational
cash flows and debt financing. Sufficient cash flow is required for Orthex’s
business and maintaining its ability to service its debt. There can be no
assurance that Orthex will be able to secure financing to a sufficient extent
and on competitive terms to finance its business and investments. Changes
in the macroeconomic environment or in the general financial markets may
have an adverse effect on the availability, price and other terms of financing.
Changes in the availability of equity and debt financing and in the terms
of the financing available may have an effect on Orthex’s ability to invest
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in developing and growing its business in the future. If Orthex is not able
to obtain financing on competitive terms or at all, this may have a material
adverse effect on Orthex’s business, financial condition and/or results
of operations.
Board of Directors’ proposal for the use
of profit shown on the balance sheet and
for capital return
According to the balance sheet to be adopted for the financial year ended
31 December 2021, the parent company’s distributable funds amount to
EUR 11,198,022.37, including loss for the period of EUR 64,539.03.
The Board of Directors proposes to the Annual General Meeting of Orthex
Corporation to be held on 6 April 2022 that no dividend will be distributed
based on the balance sheet to be adopted for the financial year ended on 31
December 2021.
Instead, the Board of Directors proposes that based on the balance sheet to
be adopted for the financial year ended on 31 December 2021, shareholders
be paid a capital return of EUR 0.18 per share from the invested unrestricted
equity fund totalling approximately EUR 3.2 million based on the number of
registered shares in the company at the time of the proposal.
The capital return is proposed to be paid in two instalments as follows:
The first instalment of the capital return amounting to EUR 0.09 per share
will be paid to a shareholder who is registered in the company’s shareholder
register held by Euroclear Finland Oy on 8 April 2022 that is the record date
for the first instalment of the capital return. The Board of Directors proposes
that the first instalment of the capital return be paid on 21 April 2022.
The second instalment of the capital return amounting to EUR 0.09 per
share will be paid in October 2022 to a shareholder who is registered in the
company’s shareholder register held by Euroclear Finland Oy on 3 October
2022 that is the record date for the second instalment of the capital return.
The Board of Directors proposes that the second instalment of the capital
return be paid on 11 October 2022.
The Board of Directors further proposes that the Board be authorised to
decide, if necessary, on a new record date and date of payment for the
second instalment of the capital return should the rules of Euroclear Finland
Oy or statutes governing the Finnish book-entry system change or otherwise
so require.
As the balance sheet to be adopted for the financial period ended on 31
December 2021 does not show profit for the period, shareholders do not have
the right to demand minority dividend pursuant to Chapter 13 Section 7 of the
Finnish Limited Liability Companies Act.
There have been no significant changes in the parent company’s financial
position after the end of the financial year. The company’s liquidity is good,
and the Board of Directors deems that the company’s solvency will not be
jeopardised by the proposed capital return.
Events after the financial year
On 28 January 2022, Orthex Corporation disclosed the Shareholders’
Nomination Board’s proposals to the Annual General Meeting 2022 regarding
the composition and remuneration of the Board of Directors.
The Shareholders’ Nomination Board proposes that the Board of Directors
would consist of five (5) members and that Sanna Suvanto-Harsaae, Satu
Huber and Jens-Peter Poulsen would be re-elected to the Board and that
Markus Hellström and Jyrki Mäki-Kala elected as new members to the Board,
all for a term of office ending at the end of the next Annual General Meeting.
Ari Jokelainen and Juuso Kivinen were no longer available for re-election to
the Board.
All director nominees have given their consent to the election and are
independent of the company and of the major shareholders of the company.
Further information on the director nominees is available on the corporate
website https://investors.orthexgroup.com/.
The Shareholders’ Nomination Board proposes that the remuneration of
the members of the Board of Directors remains the same and that the
Chair of the Board of Directors be paid a monthly fee of EUR 4,000 and
other members of the Board of Directors a monthly fee of EUR 2,000.
The Nomination Board further proposes that reasonable travel and other
expenses related to the Board work be reimbursed in accordance with the
company’s travel rules.
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63
Market outlook 2022
To ensure effective implementation and adoption of its strategy Orthex is
constantly evaluating consumer trends, customer demands and market
conditions. The strategy is designed to deliver the specified long-term
financial goals. In addition, an overall focus on sustainability is at the heart
of business development. It is likely that the unpredictable market conditions
seen in 2021 will continue, including volatile cost drivers with quick changes
in cost components and high overall or increasing cost levels compared to the
year 2020.
Orthex will strive to navigate as efficiently as possible, adopting swiftly to
potentially fast changing conditions. In 2021, we successfully increased the
production capacity in our factories, and we are prepared for growth. We are
also prepared to further increase capacity when needed. Product and process
innovation and testing new sustainable materials will have a continued
important role in the commercial strategy. The focus will be on growing the
sales of our branded products throughout Europe, thus improving everyday
life with practical sustainable products.
Orthex has no Russian or Ukrainian suppliers nor any other business in
Russia, so the effect of the Ukrainian crisis is not directly impacting Orthex’s
business. However, there can be negative business impacts from volatility or
cost increases due to the crisis.
Espoo, 8 March 2022
Board of Directors
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64
EUR thousand
Net sales , , ,
Net sales growth, % .% .% n.a.
Constant currency invoiced sales growth, % .% .% n.a.
Invoiced sales , , ,
Invoiced sales growth, % .% .% n.a.
Gross Margin , , ,
Gross Margin, % .% .% .%
EBITDA , , ,
EBITDA margin, % .% .% .%
EBITA , , ,
EBITA margin, % .% .% .%
Operating profit , , ,
Operating profit margin, % .% .% .%
Items affecting comparability , ,
Adjusted Gross Margin , , ,
Adjusted Gross Margin, % .% .% .%
Adjusted EBITDA , , ,
Adjusted EBITDA margin, % .% .% .%
Adjusted EBITA , , ,
Adjusted EBITA margin, % .% .% .%
Adjusted operating profit , , ,
Adjusted operating profit margin, % .% .% .%
FTEs
Personnel expenses , , ,
EUR thousand
Key cash flows indicators
Net cash flows from operating activities , , ,
Operating free cash flows , , ,
Cash conversion, % .% .% .%
Investments in tangible and intangible assets -, -, -,
Financial position key figures
Net debt , , ,
Net debt / adjusted EBITDA last months .x .x .x
Net working capital , , ,
Capital employed excluding goodwill , , ,
Return on capital employed (ROCE), % .% .% .%
Adjusted return on capital employed (ROCE), % .% .% .%
Equity ratio, % .% .% .%
Return on equity, % .% .% .%
Key figures
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65
Share-related key figures
EUR thousand
Earnings per share, basic (and diluted), EUR . . .
Equity per share, EUR . . .
Effective dividend yield, % .% n.a. n.a.
Price per earnings, EUR . n.a. n.a.
Closing share price on the last day of trading, EUR . n.a. n.a.
Highest, EUR . n.a. n.a.
Lowest, EUR . n.a. n.a.
Market value of shares at the end of period , n.a. n.a.
Number of shares outstanding at the end of the period ,, ,, ,,
Weighted average number of shares outstanding ,, ,, ,,
Dividend payout per share and capital return total, EUR .* n.a. n.a.
Dividend payout per share and capital return, total of
result, % .%* n.a. n.a.
*)
Board proposal
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Reconciliation of alternative performance measures
EUR thousand
Net sales growth, %
Net sales , , ,
Net sales growth, % .% .% n.a.
Constant currency Net sales growth, %
Net sales , , ,
FX rate adjustment - -
Constant currency Net sales , , ,
Constant currency Net sales growth, % .% .% n.a.
Invoiced sales
Net sales , , ,
Discounts and bonuses , , ,
Other sales and refunds -, - -,
Invoiced sales , , ,
Invoiced sales growth, % .% .% n.a.
Gross margin
Net sales , , ,
Cost of sales -, -, -,
Gross margin , , ,
Gross margin, % .% .% .%
EUR thousand
EBITDA
Operating profit , , ,
Depreciation, amortisation and impairment , , ,
EBITDA , , ,
EBITDA margin, % .% .% .%
EBITA
Operating profit , , ,
Amortisation and impairment
EBITA , , ,
EBITA margin, % .% .% .%
Operating profit
Operating profit , , ,
Operating profit margin, % .% .% .%
Items affecting comparability / adjustments
(Gross margin)
Restructuring related expenses - -
Other items affecting comparability - -
Items affecting comparability / adjustments
(Gross margin) -
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Reconciliation of alternative performance measures
EUR thousand
Items affecting comparability / adjustments
(EBITDA)
Restructuring related expenses - -
Other items affecting comparability -
Costs related to listing , -
Items affecting comparability / adjustments
(EBITDA) , ,
Adjusted gross margin
Gross margin , , ,
Adjustments (gross margin) -
Adjusted gross margin , , ,
Adjusted gross margin, % .% .% .%
Adjusted EBITDA
Operating profit , , ,
Depreciation, amortisation and impairment , , ,
Adjustments (EBITDA) , ,
Adjusted EBITDA , , ,
Adjusted EBITDA margin, % .% .% .%
Adjusted EBITA
Operating profit , , ,
Amortisation and impairment
Adjustments (EBITA) , ,
Adjusted EBITA , , ,
Adjusted EBITA margin, % .% .% .%
EUR thousand
Adjusted operating profit
Operating profit , , ,
Adjustments , ,
Adjusted operating profit , , ,
Adjusted operating profit margin, % .% .% .%
Earnings per share, basic (and diluted), EUR
Profit for the period , , ,
Average number of shares , , ,
Earnings per share, basic (and diluted), EUR . . .
Operating free cash flows
Adjusted EBITDA , , ,
Investments in tangible and intangible assets -, -, -,
Operating free cash flows , , ,
Cash conversion, %
Operating free cash flows , , ,
Adjusted EBITDA , , ,
Cash conversion, % .% .% .%
Net debt
Total interest-bearing liabilities , , ,
Cash and cash equivalents -, -, -,
Net debt , , ,
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Reconciliation of alternative performance measures
EUR thousand
Net debt/ Adjusted EBITDA
Net debt , , ,
Adjusted EBITDA, months , , ,
Net debt/ Adjusted EBITDA .x .x .x
Net working capital
Inventories , , ,
Trade and other receivables , , ,
Trade and other payables -, -, -,
Net working capital , , ,
Capital employed excluding goodwill
Total equity , , ,
Net debt , , ,
Goodwill -, -, -,
Capital employed excluding goodwill , , ,
Return on capital employed (ROCE), %
Operating profit , , ,
Average capital employed excluding goodwill , , ,
Return on capital employed (ROCE), % .% .% .%
EUR thousand
Adjusted return on capital employed (ROCE), %
Adjusted operating profit , , ,
Average capital employed excluding goodwill , , ,
Adjusted return on capital employed (ROCE), % .% .% .%
Equity ratio, %
Total equity , , ,
Total assets , , ,
Equity ratio, % .% .% .%
Return on equity, %
Profit for the period , , ,
Total equity (average for the first and last day of the
period)
, , ,
Return on equity, % .% .% .%
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69
Calculation of key figures
IFRS key figures
Earnings per share,
basic (and diluted)
= Profit for the period attributable to the owners
of the parent / Weighted average number of
shares outstanding
Alternative performance measures
Orthex presents alternative performance measures as additional information
to financial measures presented in the consolidated income statement,
consolidated balance sheet and consolidated statement of cash flows
prepared in accordance with IFRS. In Orthex’s view, alternative performance
measures provide significant additional information on Orthex’s results of
operations, financial position and cash flows to management, investors,
analysts and other stakeholders.
Alternative performance measures should not be viewed in isolation or as
a substitute to the IFRS financial measures. All companies do not calculate
alternative performance measures in a uniform way, and therefore Orthex’s
alternative performance measures may not be comparable with similarly
named measures presented by other companies.
Key figure Formula
Constant currency invoiced sales growth, % Invoiced sales growth calculated by using previous year’s revenue translated at average foreign
exchange rates for the current year
Invoiced sales Product sales to resale customers excluding off invoice discounts, customer bonuses and cash
discounts
Invoiced sales growth, % Increase in invoiced sales
Gross Margin Net Sales less Cost of sales
Gross Margin, % Gross Margin / Net Sales
EBITDA Operating profit before depreciation, amortisation and impairment
EBITDA margin, % EBITDA / Net sales
EBITA Operating profit before amortisation and impairment
EBITA margin, % EBITA / Net sales
Operating profit Operating profit
Operating profit margin, % Operating profit / Net sales
Items affecting comparability Material items outside ordinary course of business including restructuring costs, net gains or losses
from sale of business operations or other non-current assets, strategic development projects,
external advisory costs related to capital reorganisation, impairment charges on non-current assets
incurred in connection with restructurings, compensation for damages and transaction costs related
to business acquisitions
Adjusted Gross Margin Gross Margin excluding items affecting comparability
Adjusted Gross Margin, % Adjusted Gross Margin / Net Sales
Adjusted EBITDA EBITDA excluding items affecting comparability
Adjusted EBITDA margin, % Adjusted EBITDA / Net Sales
Adjusted EBITA EBITA excluding items affecting comparability
Adjusted EBITA margin, % Adjusted EBITA / Net sales
Adjusted operating profit Operating profit excluding items affecting comparability
Adjusted operating profit margin, % Adjusted operating profit / Net Sales
Net cash flows from operating activities Net cash from operating activities as presented in the consolidated statement of cash flows
Operating free cash flows Adjusted EBITDA less investments in tangible and intangible assets
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70
Key figure Formula
Cash conversion, % Operating free cash flows / Adjusted EBITDA
Investments in tangible and intangible assets Investments in tangible and intangible assets as presented in the consolidated statement of cash
flows
Net debt Current and non-current interest-bearing liabilities less cash and cash equivalents
Net debt / adjusted EBITDA last months Net debt / Adjusted EBITDA
Net working capital Inventories, trade and other receivables less trade and other payables
Capital employed excluding goodwill Total equity and net debt and less goodwill
Return on capital employed (ROCE), % Operating profit / Average capital employed excluding goodwill
Adjusted return on capital employed (ROCE), % Adjusted operating profit / Average capital employed excluding goodwill
Equity ratio, % Total equity / Total assets
Return on equity, % Result for the period / Total equity (average for the first and last day of the period)
Share-related key figures
Equity per share, EUR Total equity attributable to the equity holders of the parent / Number of outstanding shares at the
end of the financial year
Effective dividend yield, % Dividend/share / Price of share at the end of the accounting period
Price per earnings, EUR Closing price of share at the end of the financial year / Earnings per share
Market value of shares at the end of period The number of shares at the end of accounting period x The price of the
share at the end of accounting period
Dividend payout per share and capital return, total of
result, %
(Dividend/share + Return of capital/share) / Earnings per share
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ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
72
Part of the financial statements
Consolidated income statement
EUR thousand Note
Jan - Dec
Jan - Dec
Net Sales 88,694 75,865
Cost of sales -65,490 -51,264
Gross Margin 23,204 24,601
Other operating income 549 278
Selling and marketing expenses -8,468 -7,978
Administrative expenses -6,035 -4,620
Operating profit 9,250 12,281
Financial income and expenses -1,586 -2,423
Profit before taxes 7,664 9,858
Income taxes -1,629 -2,165
Profit for the period 6,035 7,692
Profit for the period attributable to:
Equity holders of the parent 6,035 7,692
Earnings per share for profit attributable
to the equity holders of the parent:
Earnings per share, basic (and diluted), EUR 0.35 0.47
Consolidated statement of comprehensive income
EUR thousand Note
Jan - Dec
Jan - Dec
Profit for the period 6,035 7,692
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Translation differences -622 1,261
Items that will not be reclassified to profit or loss:
Remeasurement gains (+) / losses (-) from defined benefit plans -58 -100
Other comprehensive income for the period, net of tax -680 1,161
Total comprehensive income for the period 5,355 8,853
Total comprehensive income attributable to:
Equity holders of the parent 5,355 8,853
Consolidated financial statements, IFRS
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73
Part of the financial statements
Consolidated statement of financial position
EUR thousand Note Dec Dec
ASSETS
Non-current assets
Intangible assets 23,901 24,149
Property, plant and equipment 13,131 11,382
Right-of-use assets 8,030 9,244
Other non-current assets 94 98
Deferred tax assets 1,163 1,070
Total non-current assets 46,320 45,944
Current assets
Inventories 12,647 9,906
Trade and other receivables 15,528 14,264
Derivative financial instruments 14 -
Income tax receivables - 5
Cash and cash equivalents 14,334 5,250
Total current assets 42,522 29,424
TOTAL ASSETS 88,842 75,368
EUR thousand Note Dec Dec
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the parent company
Share capital 80 3
Treasury shares - -71
Invested unrestricted equity fund 11,047 1,775
Retained earnings 19,138 13,161
Translation differences 1,532 2,154
Total equity 31,798 17,022
Non-current liabilities
Loans from credit institutions 23,720 26,652
Lease liabilities , 7,544 8,668
Pension liabilities , 4,742 4,658
Deferred tax liabilities 742 572
Total non-current liabilities 36,748 40,550
Current liabilities
Loans from credit institutions 3,000 3,000
Lease liabilities , 1,214 1,158
Trade and other payables 13,692 11,791
Derivative financial instruments - 110
Income tax liabilities 2,390 1,736
Total current liabilities 20,296 17,796
Total liabilities 57,044 58,346
TOTAL EQUITY AND LIABILITIES 88,842 75,368
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74
Part of the financial statements
Consolidated statement of changes in equity
Equity attributable to the equity holders of the parent company
EUR thousand Share capital Treasury shares
Invested unrestricted
equity fund Retained earnings
Translation
differences Total equity
Equity at Jan 3 -71 1,775 13,161 2,154 17,022
Profit for the period 6,035 6,035
Translation differences -622 -622
Remeasurement gains (+) / losses (-) from defined benefit plans -58 -58
Total comprehensive income for the period 5,977 -622 5,355
Transactions with owners:
Increase in share capital 78 -78 -
Cancellation of treasury shares 71 -71 -
Share issue 10,000 10,000
Expenses related to the share issue -686 -686
Discount related to the personnel share issue 106 106
Equity at Dec 80 - 11,047 19,138 1,532 31,798
Equity at Jan 3 -97 7,997 5,569 893 14,365
Profit for the period 7,692 7,692
Translation differences 1,261 1,261
Remeasurement gains (+) / losses (-) from defined benefit plans -100 -100
Total comprehensive income for the period 7,592 1,261 8,853
Transactions with owners:
Capital return from the invested unrestricted equity fund -6,228 -6,228
Directed issue of treasury shares 26 6 32
Equity at Dec 3 -71 1,775 13,161 2,154 17,022
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75
Part of the financial statements
Consolidated statement of cash flows
EUR thousand Note
Jan - Dec
Jan - Dec
Cash flows from operating activities
Profit before taxes 7,664 9,858
Adjustments:
Depreciation, amortisation and impairment 3,976 4,177
Financial income and expenses 1,586 2,423
Other adjustments -48 43
Cash flows before changes in working capital 13,179 16,501
Changes in working capital
Decrease (+) / increase (–) in trade and other receivables -1,489 -2,275
Decrease (+) / increase (–) in inventories -2,905 -149
Decrease (–) / increase (+) in trade and other payables 2,326 1,299
Cash flows from operating activities before financial
items and taxes
Interests received - 0
Interests paid -1,331 -2,319
Dividends received - 7
Income taxes paid -801 -355
Net cash flows from operating activities 8,979 12,709
Cash flows from investing activities
Investments in tangible and intangible assets -4,797 -3,201
Sale of tangible and intangible assets 132 -
Other investments - 4
Net cash flows from investing activities -4,665 -3,197
EUR thousand Note
Jan - Dec
Jan - Dec
Cash flows from financing activities
Proceeds from share issue 10,000 -
Costs from share issue recoqnised in equity -857 -
Repayment of lease liabilities -1,286 -1,183
Proceeds from long-term borrowings - 27,000
Repayment of long-term borrowings - -29,637
Proceeds from short-term borrowings - 3,000
Repayment of short-term borrowings -3,000 -2,500
Capital return from the invested unrestricted equity fund - -6,228
Directed issue of treasury shares , - 32
Net cash flows from financing activities 4,857 -9,516
Net change in cash and cash equivalents 9,172 -3
Net foreign exchange differences -88 81
Cash and cash equivalents at January 5,250 5,173
Cash and cash equivalents at December 14,334 5,250
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Part of the financial statements
Notes to the consolidated
financial statements
1. Accounting principles for the
consolidated financial statements
Basic information about the Company
Orthex is principally engaged in producing and marketing household
products. The Group is a Nordic producer of household products that make
everyday life easier for the consumer. Orthex sells its products to major
retailers that sell the products to consumers. Orthex has customers in 40
countries and on four continents. It has three factories of its own and it
launches a variety of functional products every year.
The consolidated financial statements of O rt he x Co rp or atio n and its
subsidiaries (collectively, the Group) for the year ended 31 Dec 2021
were authorised for issue in accordance with a resolution of the Board
of Directors on 8 March 2022. According to the Finnish Companies Act,
shareholders have the option of approving or rejecting the financial
statements at the Annual General Meeting held after their publication. The
Annual General Meeting also has the opportunity to make a decision to
amend the financial statements. Or th ex C or po rat ion (the Company or the
parent) is a p ublic limit ed liabilit y comp any incorporated and domiciled in
Finland and whose shares are quoted on Nasdaq Helsinki since 29 March
2021. The registered office is located at Suomalaistentie 7 in Espoo.
Basis of preparation
Orthex’s consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
EU and have been prepared in accordance with the IAS and IFRS standards
and SIC and IFRIC interpretations in force on 31 Dec 2021. The notes to the
consolidated financial statements also comply with the Finnish accounting
and corporate legislation.
The consolidated financial statements have been prepared on a historical
cost basis, except for financial assets and financial liabilities that are
measured and presented at fair value through profit or loss and defined
benefit pension plans that are measured and presented at fair value.
The consolidated financial statements are presented in euros and all values
are rounded to the nearest thousand, except when otherwise indicated.
Amendments and annual improvements to IFRS standards
Orthex Group has applied amendments and annual improvements to IFRS
standards effective from 1 Jan 2021. The amendmed standards are: Interest
Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9 Financial
Instruments, IAS 39 Financial Instruments: Recognition and Measurement,
IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and
IFRS 16 Leases: The amendments provide temporary reliefs which address
the financial reporting effects when an interbank offered rate (IBOR) is
replaced with an alternative nearly risk-free interest rate (RFR).
Amendments and annual improvements have not had a major impact on the
consolidated financial statements.
Standards issued but not yet effective
Orthex adopts the new and amended standards and interpretations, if
applicable, when they become effective. The new and amended standards
that become effective of 1 Jan 2022 or later are not expected to have an
impact on Orthex’s consolidated financial statements.
The following new and amended standards have been issued and become
effective on 1 Jan 2022 or later. Only the amendments relevant from Orthex’s
perspective have been included in the summary below.
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current
• Amendments to IAS 16: Property, Plant and Equipment: Proceeds before
Intended Use
• Amendments to IAS 37: Onerous Contracts – Costs of Fulfilling a Contract
• Amendments to IFRS 9: Fees in the ’10 per cent’ test for derecognition of
financial liabilities
• Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16
• Amendments to IFRS 3: Reference to the Conceptual Framework
• Definition of Accounting Estimates - Amendments to IAS 8
• Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction- Amendments to IAS 12
• Sale or Contribution of Assets between and investor and its Associate or
Joint Venture - Amendments to IFRS 10 and IAS 28
• Additionally IFRS 17 Insurance contracts and amendments to IFRS 1 and IAS
41 have been issued but they will not have an impact on Orthex’s financial
statements.
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Part of the financial statements
Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires
management to make judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities, and
the accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
In the process of applying the Group’s accounting policies, management has
made various judgements. Those which management has assessed to have
the most significant effect on the amounts recognised in the consolidated
financial statements are discussed in the individual notes.
The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are also described in the
individual notes of the related financial statement line items. The Group
based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. Existing circumstances
and assumptions about future developments, however, may change due to
market changes or circumstances arising that are beyond the control of the
Group. Such changes are reflected in the assumptions when they occur.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
the Group and its subsidiaries as of 31 Dec 2021. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power
over the investee. Control exists when Orthex has a majority of voting rights
in a subsidiary or can otherwise demonstrate having control in a subsidiary.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of during
the year are included in the consolidated financial statements from the
date the Group gains control until the date the Group ceases to control the
subsidiary. All Group companies follow uniform accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full
on consolidation.
Foreign currencies
The consolidated financial statements have been prepared in euros that
is both the functional and the presentation currency of the Group’s parent
company. Foreign currency transactions are translated into euros using
the exchange rate at the date of the transaction. Receivables and liabilities
denominated in foreign currency are translated into euros using the closing
rate. Exchange differences arising on settlement or translation are recognised
in the income statement.
The income statement and balance sheet items of the subsidiaries operating
outside the euro zone are initially recognised in the functional currencies of
their operating environments. In the consolidated financial statements the
income statements of foreign subsidiaries are translated into euros using
the average exchange rates of the period. The balance sheet items of the
subsidiaries are translated using the closing rates. The exchange differences
are recognised in other comprehensive income and presented under
translation differences in equity.
When a foreign subsidiary is disposed of, the translation differences
accumulated in equity are transferred to profit or loss as part of the gain or
loss on disposal.
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Part of the financial statements
Information about subsidiaries
The consolidated financial statements of the Group include:
Name Principal activities Country of incorporation Dec Dec
Oy Orthex Group Ab Producing and marketing of household products Fin land - %
Oy Orthex Finland Ab Producing and marketing of household products Fin land % %
Orthex Sweden Holding Ab Producing and marketing of household products Sweden % %
Orthex Sweden Ab Producing and marketing of household products Sweden % %
Orthex Kitchen Ab Producing and marketing of household products Sweden % %
Orthex Norway AS Producing and marketing of household products Norway % %
Orthex Denmark A/S Producing and marketing of household products Denmark % %
Gastromax Limited Producing and marketing of household products UK % %
Orthex Germany GmbH Producing and marketing of household products Germany % %
Orthex France SARL Producing and marketing of household products France % %
Smartstore Ab Producing and marketing of household products Sweden % %
During the financial year , Oy Orthex Group Ab has been merged to the parent company Ort he x Co rp or atio n. Group ownership is presented in the table
above in percentages.
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Part of the financial statements
2. Net sales
Segment information
Orthex Group is a Nordic producer of household products that make everyday
life easier for the consumer. Orthex Group has customers in 40 countries and
on four continents. It has three factories of its own and it launches a variety
of functional products every year.
The profitability of the Group is followed by the Chief operating decision
maker that is the CEO supported by the Group Executive Management on
the aggregated level of the Group for which financial information is available.
The reports followed by the management are consistent with Orthex’s
consolidated IFRS figures. Due to the management structure and how the
business is operated and managed, the Group as a whole is determined to be
one operating segment that is also the reportable segment.
Accounting policy
Orthex applies the IFRS 15 Revenue from Contracts with Customers standard.
The principle is that sales are recognised at an amount that reflects the
consideration, which Orthex expects to receive in exchange for transferring
goods or services to a customer. Sales are recognised when the control of
goods or services is transferred to a customer. Control is transferred at one
point in time.
Sale of household products
Orthex’s revenue mainly consists of selling of household products to major
retailers that sell Orthex’s products to consumers. Each product sold by
Orthex as part of an order is a distinct performance obligation and the
products have similar terms of sale. Orthex does not provide any services
relating to the products sold.
In addition to the sales to retailers, Orthex has an online store from where
orthex sells its products directly to consumers. However, the sales volumes
through the online store have been limited and therefore considered
immaterial and not presented separately.
Revenue from the sales of household products is recognised at a point
in time based on the delivery terms when the control of the products is
transferred to the customer i.e. when the performance obligation is satisfied.
The revenue recognised reflects the consideration to which Orthex expects to
be entitled to. Net sales is adjusted for exchange rate differences of foreign-
currency denominated sales and volume rebates provided for the customers.
The normal payment terms are 15 to 60 days upon delivery.
Net sales of EUR 9.2 million were derived from a single customer in 2021. No
other single customer represented more than 10 per cent or more of Orthex’s
total net sales for the years ended 31 Dec 2021 or 2020.
Variable consideration: Volume rebates
Variable consideration consists of volume rebates and cash discounts.
The sales prices are based on price lists but Orthex provides retrospective
volume rebates for certain retailers that are based on growth in sales
volumes. Volume rebates are calculated based on expected annual purchase
volumes from the customer. The amount of volume rebates is estimated
at the beginning of the year and adjusted at each reporting date. Orthex
estimates the amount of variable payments using the expected value
method. Orthex applies the requirements on constraining estimates
of variable consideration in order to determine the amount recognised
as revenue.
Contract balances
Orthex records a trade receivable when Orthex’s right to payment is
unconditional (i.e. only the passage of time is required before payment of the
consideration is due). Relating to trade receivables, refer to Note 11 and 14.
The contracts with retailers do not include a right to return for any unsold
products and therefore, no refund liabilities are recorded. Due to small sales
volumes, the customer returns from the online store purchases have also
been minimal.
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Part of the financial statements
Accounting estimates and judgements
Orthex has applied management judgement relating to timing of revenue
recognition and estimating the amount of variable consideration. The
timing of the revenue recognition is based on the delivery terms of the
products to the customer. For certain delivery terms Orthex is required to
make assumptions of the timing when control of the goods is transferred
to the customer. In addition, the amount of volume rebates included as an
adjustment to net sales requires estimation before the uncertainty relating to
the amount to be recognised is resolved.
The disaggregation of revenue by geography in the table below is based on
the locations of the customers.
Net sales by geography
EUR thousand
Rest of Europe , ,
Rest of the world , ,
Total , ,
Net sales by product category
EUR thousand
Storage , ,
Kitchen , ,
Home & Yard , ,
Plant Care , ,
Total , ,
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Part of the financial statements
3. Other operating income
EUR thousand
Government grants
Royalty income
Net gain on disposal of property, plant and
equipment
Other
Total
Accounting treatment of government grants due to COVID-19
As a response to the COVID-19 pandemic, governments around the world
implemented support measures to help businesses and economies. Orthex
received EUR 65 thousand in 2020 as government grants due to COVID-19.
These are shown as other operating income in statement of income. In
2021, Orthex did not receive any government grants due to COVID-19. Other
government grants consist mainly of state subsidies due to increased sick
leaves. Government grants received are not subject to repayment terms.
4. Operating expenses
Operating expenses by nature
EUR thousand
Materials and supplies , ,
Change in inventory -, -
External services , ,
Marketing , ,
Employee benefits , ,
Depreciation, amortisation and impairment , ,
Other expenses , ,
Total , ,
Depreciation, amortisation and impairment by asset class
EUR thousand
Buildings
Machinery and equipment , ,
Right-of-use assets , ,
Other intangible assets
Total , ,
Fees paid to companies’ auditors
EUR thousand
Audit fees
Non-audit services
Total
The appointed auditor for 2021 and 2020 was Ernst & Young Oy.
5. Employee benefits
Personnel expenses
EUR thousand
Included in cost of sales:
Wages and salaries , ,
Social security costs , ,
Pension costs ,
Included in selling and marketing expenses:
Wages and salaries , ,
Social security costs
Pension costs
Included in cost of administrative expenses:
Wages and salaries , ,
Social security costs
Pension costs
Total , ,
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Part of the financial statements
Personnel (FTE) in average
Headcount by function
Production
Warehouse
Sales
Administration
Marketing
Total
Management and Board remuneration
The top management comprises the Management Team. The remuneration
paid based on the work performed consists of the following. The amounts
disclosed in the table are the amounts paid during the reporting period
related to key management personnel.
Compensation of key management personnel of the Group,
excluding the CEO
EUR thousand
Salaries and fees ,
Pension costs
Total , ,
Current termination provisions in Management Team members’ contracts
have a period of notice of 4 months. A member of the Management Team
is entitled to severance pay equivalent to 4 months’ salary due to the
termination of the management contract. The Group has no other long-term
benefits related to key management personnel.
The non-executive directors do not receive pension entitlements from
the Group.
Salaries and remunerations paid to CEO
EUR thousand
Salaries and fees
Pension costs
Total
Current termination provisions in the CEO’s director contract have a period
of notice of 6 months and is entitled to compensation, for termination of the
director contract, corresponding to 6 months’ salary.
Salaries and remunerations paid to the Board of Directors
EUR thousand
Sanna Suvanto-Harsaae
)
-
Satu Huber
)
-
Ari Jokelainen
)
-
Juuso Kivinen
)
Jens-Peter Poulsen
)
-
Thomas Sandvall
)
Matti Virtanen
)
Total
)
Member of the Board as of Dec . Chair of the Board as of March .
)
Member of the Board as of Dec
)
Member of the Board as of Feb
)
Member of the Board. Chair of the Board until March .
)
Member of the Board as of August
)
Member of the Board until March
)
Member of the Board until March
Pension liabilities
Orthex Group provide pension benefits in accordance with local statutory
regulation. The current plans mainly consist of defined contribution based
plans. The contributions payable under defined contribution based plans are
recognised as expenses in the income statement for the period to which the
payments relate. In defined contribution based plans, Orthex does not have
a legal or constructive obligation to pay further contributions, in case the
payment recipient is unable to pay the retirement benefits.
In Sweden Orthex group has a pension plan classified as a defined benefit
based plan. For this plan, Orthex may incur obligations after the payment of
the contribution. Pension liabilities represent the present value of future cash
flows from the benefits payable and the liability recognised on the balance
sheet are pension liabilities at the closing. The present value of pension
liabilities has been calculated using the projected unit credit method (PUC).
Pension liabilities are recognised based on external actuarial calculations as
of 31 Dec 2021 and 31 Dec 2020.
The cost of providing pensions is charged to the income statement as to
spread the service cost over the service lives of employees. The net interest
is presented in financial items and the rest of the income statement effect as
pension cost. The discount rate assumed in calculating the present value of
pension liabilities is the market yield of high-quality corporate bonds. Their
maturity substantially corresponds to the maturity of the pension liability.
Actuarial gains and losses are recognised in comprehensive income in the
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Part of the financial statements
income statement. When the benefits of a plan are changed or when a plan
is curtailed, the resulting change in benefit that relates to past service or
the gain or loss related to a curtailment is recognised immediately in profit
or loss.
Critical accounting estimates and judgements, assumptions
used to determine future pension obligations
The present value of the pension liabilities is based on actuarial calculations
that use several assumptions. Any changes in these assumptions will impact
the carrying amount of pension liabilities.
Pension liabilities
EUR thousand Dec Dec
Pension liabilities , ,
Total , ,
Net pension liabilities recognised in the income statement
EUR thousand
Current service cost - -
Interest cost on benefit obligation - -
Pension payments
Total - -
Movements in the obligation
EUR thousand
Obligation at Jan , ,
Amounts recognised in profit and loss
Service cost, benefits earned during the year
Interest expense (+) / income (-)
Pension payments - -
Amounts recognised in other
comprehensive income
Translation differences -
Actuarial losses (+) / gains (-)
Obligation at Dec , ,
Principal actuarial assumptions
% Dec Dec
Discount Rate .% .%
Salary increase .% .%
Income base amount .% .%
Inflation .% .%
Key assumptions and sensitivity analyses
The cost of the defined benefit pension plan and the present value of
pension liabilities are determined using actuarial valuations. An actuarial
valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount
rate, future salary increases, mortality rates and future pension increases.
Due to the complexities involved in the valuation and its long-term nature,
pension liabilities are highly sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. Changes in the
general level of interest rates and the market yield of high-quality bonds
have an impact on the present value of pension liabilities. When the level of
interest rates decreases, the present value of pension liabilities increases.
The discount rate is set by referencing the yield on mortgage bonds and the
duration of pension liabilities which is 19 years.
The mortality assumptions are based on publicly available mortality tables for
Sweden. Those mortality tables tend to change only at intervals in response
to demographic changes. Future salary increases and pension increases are
based on expected future inflation rates for the respective countries.
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Part of the financial statements
The sensitivity of pension liabilities to changes in the principal assumptions
Actuarial assumptions Change in assumption Impact on pension liabilities increase Impact on pension liabilities decrease
Discount rate ( %) +/- .% -
Salary increase (%) +/- .% -
Inflation (%) +/- .% -
Discount rate ( %) +/- .% -
Salary increase (%) +/- .% -
Inflation (%) +/- .% -
The sensitivity analyses above have been determined based on a method
that extrapolates the impact on pension liabilities as a result of reasonable
changes in key assumptions occurring at the end of the reporting period.
The sensitivity analyses are based on a change in a significant assumption,
keeping all other assumptions constant. The sensitivity analyses may not be
representative of an actual change in pension liabilities as it is unlikely that
changes in assumptions would occur in isolation of one another.
The Group expects to contribute EUR 189 thousand to its defined benefit
pension plans in 2022.
6. Financial income and expenses
EUR thousand
Dividends received from other investments -
Gains from changes in the fair value of
derivative instruments -
Other financial income -
Total financial income
Interest on debts and borrowings - -,
Interest expense on lease liabilities - -
Losses from changes in the fair value of
derivative instruments
- -
Exchange rate differences related to
financial items
- -
Other financial expenses - -
Total financial expenses -, -,
Total financial income and expenses -, -,
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Part of the financial statements
7. Income taxes
Current income tax
Orthex’s income tax expense consists of current and deferred taxes. The
current tax expense is calculated using the tax rates that are enacted or
substantively enacted at the reporting date in the countries where Orthex
operates. The current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation authorities.
The major components of income tax expense for the years ended 31
Dec 2021 and 31 Dec 2020 are:
Consolidated income statement
EUR thousand
Current income tax charge -, -,
Taxes from previous years - -
Change in deferred taxes - -
Total -, -,
Consolidated statement of other comprehensive income
EUR thousand
Deferred taxes related to items
recognised in OCI during the year:
Remeasurement of net loss/(gain) on
actuarial gains and losses
Total
Reconciliation of taxes calculated at the Finnish tax rate
EUR thousand
Profit before taxes , ,
Tax calculated at nominal Finnish tax rate of
% (: %)
-, -,
Tax rates in foreign jurisdictions - -
Tax exempt income
Non-deductible expenses - -
Other -
At the effective income tax rate of
.% (: .%)
-, -,
Taxes in income statement -, -,
Deferred taxes
Deferred tax assets and deferred tax liabilities are differences between the
tax bases of assets and liabilities and their carrying amounts. Deferred tax
assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realised or the liability is settled, based on tax
rates that have been enacted or substantively enacted at the reporting date.
Orthex records a deferred tax liability for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences
and any unused tax losses carried forward to the extent that it is deemed
probable that they can be utilised against future taxable profit. Deferred tax
assets are reviewed at each reporting date. In case it is no longer probable
that sufficient taxable profit will be available for the deferred tax asset to be
utilised, the carrying amount of deferred tax asset is reduced.
Deferred tax relating to items recognised outside profit or loss is recognised
in correlation to the underlying transaction either in OCI or directly in equity.
Orthex offsets deferred tax assets and deferred liabilities if and only if it has a
legally enforceable right to set off current tax assets and current tax liabilities
and the deferred tax assets and deferred tax liabilities relate to income taxes
levied by the same tax authority. Orthex has offset deferred taxes related to
IFRS 16 fixed assets and lease liabilities.
Accounting estimates and judgements
Management judgement is applied in determining the deferred tax assets
as Orthex is required to make estimations about future taxable profit, the
recoverability of the tax losses carried forward and potential changes to tax
laws in the countries where Orthex operates.
At Dec 2021, Orthex has no tax losses carried forward or deferred tax assets
relating to taxable losses. A deferred tax asset amounting to EUR 370
thousand (2020: EUR 424 thousand) is recorded relating to interest expenses
carried forward.
In addition to the above, the most significant temporary differences arise
from leases, timing difference of depreciations in the financial statements
and taxation, defined benefit pension plans and transaction costs on
external loans.
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Part of the financial statements
Deferred taxes 2021
EUR thousand
Balance at the beginning
of the period Jan
Charged to income
statement Charged to OCI
Balance at the end of the
period Dec
Deferred tax assets
Interest expenses carried forward -
Pension liabilities
Leases
Other
Total , ,
EUR thousand
Balance at the beginning
of the period Jan
Charged to income
statement Charged to OCI
Balance at the end of the
period Dec
Deferred tax liabilities
Tangible and intangible assets
Other -
Total -
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Part of the financial statements
Deferred taxes 2020
EUR thousand
Balance at the beginning
of the period Jan
Charged to income
statement Charged to OCI
Balance at the end of the
period Dec
Deferred tax assets
Tax losses carried forward - -
Interest expenses carried forward -
Pension liabilities -
Leases
Other
Total , - ,
EUR thousand
Balance at the beginning
of the period Jan
Charged to income
statement Charged to OCI
Balance at the end of the
period Dec
Deferred tax liabilities
Tangible and intangible assets
Other
Total -
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Part of the financial statements
8. Intangible assets
Orthex’s intangible assets with finite useful lives includes software. Initially,
intangible assets are measured at cost. After the initial recognition,
intangible assets are recorded at cost less any accumulated amortisation and
accumulated impairment losses.
Orthex’s intangible assets with finite useful lives are amortised on a straight-
line basis over their expected useful lives and assessed for impairment
whenever there is an indication that the intangible asset may be impaired.
The amortisation expense on intangible assets with finite useful lives is
recognised in the statement of profit or loss in the expense category that is
consistent with the function of the intangible assets.
The expected useful lives and residual values are evaluated at least at the
end of each reporting period.
The expected useful lives for the asset classes are as follows:
Software 3-10 years
In case any intangible assets are derecognised upon disposal, any gain or loss
resulting from the derecognition of the asset is included in the statement of
profit or loss.
Research and development costs
Research costs are expensed as they incur. Development costs are
capitalised when the criteria in IAS 38 is met. Orthex has not capitalised any
development costs since the capitalisation criteria has not been met.
Orthex’s intangible assets with an indefinite useful life consist of
goodwill. The accounting policies for impairment of goodwill have been
described below.
Reconciliation of beginning and ending balances by classes of intangible assets
EUR thousand Goodwill Other intangible assets Total
Acquisition cost
Balance at Jan , ,
Additions
Translation differences
Balance at Dec , ,
Additions
Disposals - -
Transfers
Translation differences - -
Balance at Dec , , ,
Accumulated amortisation and impairment
Balance at Jan -
Amortisation and impairment
Translation differences
Balance at Dec -
Amortisation and impairment
Disposals - -
Balance at Dec -
Carrying amount Jan , ,
Carrying amount Dec , ,
Carrying amount Dec , ,
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Part of the financial statements
Goodwill
Goodwill is not amortised but it is tested for impairment annually and
whenever there is an indication of impairment. Goodwill is measured at initial
cost less any accumulated impairment losses. The majority of the goodwill at
the time of transition in the Group’s balance sheet arose in connection with
the formation of the Group in 2015.
Goodwill is reviewed for impairment annually or more frequently if events
or changes in circumstances indicate that the goodwill may be impaired.
The carrying amount of a cash-generating unit that includes goodwill is
compared to the recoverable amount, which is the higher of value in use and
fair value less costs to sell.
For impairment testing purposes, goodwill is allocated to two cash-
generating units, Finland and Nordics. The recoverable amount is the higher
of CGU’s fair value less costs of disposal and its value in use. The recoverable
amount is compared with its carrying amount to determine potential
impairment. In case the carrying value of goodwill exceeds the recoverable
amount, an impairment is recognised in the income statement.
Previously recognised impairment losses on goodwill are not reversed in
future periods.
The value in use calculation is based on a DCF model. The recoverable
amounts of CGU’s are based on value in use calculations, where the
estimated future cash flows of CGUs are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset.
The cash flows are determined using a 5-year cash flow forecasts, which are
based on Orthex’s business plan that is based on Orthex’s past experience as
well as future expected market trends. The projected cash flows have been
updated to reflect the budgeted demand for products.
Impairment losses are recognised in the statement of profit or loss in
expense categories consistent with the function of the impaired asset.
Orthex has performed its annual impairment test for 31 Dec 2021 and 31 Dec
2020. Based on the impairment calculations made, there was no indication of
impairment of goodwill for the above mentioned periods.
Carrying amount of goodwill
EUR thousand Dec Dec
Finland , ,
Nordics , ,
Total , ,
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Part of the financial statements
9. Property, plant and equipment
Property, plant and equipment are recorded at historical cost less
accumulated depreciations and impairment losses, if applicable. Subsequent
improvement costs are included in the carrying amount of the asset or
recognised as a separate asset only when the future economic benefits
associated with the cost are probable and the cost can be measured reliably.
Maintenance and repair costs are expensed as incurred.
Depreciation is calculated on a straight-line basis over the expected useful
lives of the assets. Land and water areas are not depreciated due to indefinite
useful lives. The estimated useful lives of the tangible assets are as follows:
- Buildings: 25-40 years
- Machinery and equipment: 5-15 years
- Production moulds: 5-15 years
- Other tangible assets: 3-5 years
Expected useful lives are reviewed at each financial year end and in case
there is a significant difference to the previous estimates, the useful lives are
adjusted accordingly. Orthex has not recorded any impairment losses relating
to property, plant and equipment.
Any gain or loss arising in derecognition of an asset is included in the
statement of profit or loss when the asset is derecognised.
Accounting estimates and judgements
The key assumptions used for the value in use calculations are profitability
growth rate, discount rates (pre-tax WACC) and long-term growth rate.
Key parameters used in impairment calculations
Dec Dec
% Finland Nordics Finland Nordics
Profitability growth rate . . . .
Discount rate, pre-tax . . . .
Long-term growth rate . . . .
Profitability growth rate - The assumptions relating to profitability growth
rate (average EBITDA growth over the 5 years forecast period) are based
on organic growth under normal market situation, general development
in household product market and long-term estimates made by the
Group management.
Discount rate - Orthex uses the pre-tax WACC as a discount factor in the
calculations. The discount rate reflects the total cost of equity and debt while
taking into consideration the specific risks related to the assets.
Long-term growth rate - The cash flows beyond the five-year period are
estimated by extrapolating the cash flow estimates using a growth factor
which is in line with the target inflation of the European Central Bank.
Sensitivity analyses
The Group has assessed the sensitivity of the impairment testing to the
effect of the most critical assumptions used in the calculation. The Group
has tested the sensitivity of the calculation with respect to the discount rate,
profitability growth rate and long-term growth rate that are determined as
the key variables used in impairment testing.
When assessing the recoverable amounts of cash generating units,
management believes that no reasonably possible change in any of the key
variables used would lead to a situation where the recoverable amount of the
units would fall below their carrying amount.
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Part of the financial statements
Reconciliation of beginning and ending balances by classes of assets
EUR thousand Land and water areas Buildings Machinery and equipment Construction in progress Other tangible assets Total
Acquisition cost
.. , , , ,
Additions , ,
Disposals - -
Transfers , -, -
Translation differences , ,
Balance at Dec , , , ,
Additions , , ,
Disposals -, -,
Transfers , -, -
Translation differences - - - -
Balance at Dec , , , ,
Accumulated depreciation and impairment
Balance at Jan - , , - ,
Depreciation and impairment , ,
Disposals - -
Translation differences , ,
Balance at Dec - , , - ,
Depreciation and impairment , ,
Disposals -, -,
Translation differences - - -
Balance at Dec - , , - ,
Carrying amount .. , , , ,
Carrying amount .. , , , ,
Carrying amount .. , , , ,
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Part of the financial statements
10. Leases
Orthex’s leased assets mainly comprise of manufacturing plants, office
premises and machinery and equipment. At contract inception, Orthex
determines whether the contract is, or contains, a lease. A contract is
determined to be a lease contract if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for
consideration. A right-of-use asset and a lease liability corresponding
to the present value of the future lease payments are recognised in the
consolidated statement of financial position at the commencement date of
the lease.
Lease liabilities
At the commencement date of the lease, Orthex recognises lease liabilities
measured at the present value of the future lease payments to be made
over the lease term. When calculating the present value of the future lease
payments, the interest rate implicit in the lease is applied if readily available.
In most of Orthex’s lease contracts the interest rate implicit in the lease is not
available. In such cases, Orthex uses its incremental borrowing rate which
reflects the rate that at which Orthex could borrow an amount similar to the
value of the right-of-use asset, in the same currency, over the same term,
and with similar collateral. The incremental borrowing rate comprises the
risk free reference rate, credit spread and country and currency premium
if applicable.
At the commencement date of the lease, the measurement of the lease
liability includes fixed lease payments and potential expected payments
under residual guarantees. The Group is exposed to potential future
increases in variable lease payments based on an index or rate, which are
not included in the lease liability until they take effect. When adjustments
to lease payments based on an index or rate take effect, the lease liability
is reassessed and adjusted against the right-of-use asset. Penalties for
terminating the lease are included if the lease term reflects the exercise of a
termination option.
The lease term is defined as the period when the lease is non-cancellable.
The lease term includes periods covered by an option to extend the lease,
if Orthex is reasonably certain to exercise that option, and periods covered
by an option to terminate the lease, if Orthex is reasonably certain not to
exercise the option to terminate the lease. Orthex has some lease contracts
for which the lease term is cancellable with only a short notification period.
For the open-ended lease contracts, Orthex estimates the lease term based
on the importance of the asset to Orthex’s operations considering the
location and the availability of suitable alternatives and costs relating to
termination of the lease such as negotiation and relocation costs.
The carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease payments or a
change in the assessment of an option to purchase the underlying asset.
Measurement and recognition of right-of-use assets
Right-of-use assets are measured at cost which comprises the amount of the
lease liability and the lease payments made at or before the commencement
of the lease.
The right-of-use assets are subsequently measured at cost less accumulated
depreciation and impairment. The depreciation starts at the commencement
date of the lease and the right-of-use assets are depreciated on a straight-
line basis over the shorter period of lease term and useful life of the
underlying asset. The right-of-use asset is remeasured with a corresponding
remeasurement of the lease liability.
Orthex applies the recognition exemption provided for leases for which the
underlaying asset is of low value. The assessment whether Orthex applies
the exemption is made on a lease-by-lease basis. Lease payments for leases
of low value assets are expensed in the income statement on a straight-line
basis. Lease payments for leases of low value assets have not had a material
impact on Orthex’s results. Orthex does not have short-term leases for which
the lease term is 12 months or less.
Accounting estimates and judgements
The most significant management judgements relate to evaluating the
lease term for leases that include options to extend the lease or options to
terminate the lease and to leases for which the lease term is open-ended.
Management estimates the lease term for the contracts using future
outlooks of the business as well as contract specific facts and circumstances.
Additionally, management judgment is also applied in determining the
incremental borrowing rate.
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Part of the financial statements
Carrying amounts of right-to-use assets recognised and movements during the period
EUR thousand Buildings Machinery and equipment Total
As at Jan , ,
Additions and revaluations
Disposals - - -
Depreciation and impairment -, - -,
Translation differences
As at Dec , ,
Additions and revaluations
Disposals - - -
Depreciation and impairment -, - -,
Translation differences - - -
As at Dec , ,
Carrying amounts of lease liabilities and movements during the period
EUR thousand
As at Jan , ,
Additions and revaluations
Disposals - -
Accretion of interest
Payments -, -,
Translation differences -
As at Dec , ,
Current lease liabilities , ,
Non-current lease liabilities , ,
The maturity analysis of lease liabilities is disclosed in Note 11.
Amounts recognised in the consolidated income statement
EUR thousand
Depreciation and impairment of right-of-use
assets
-, -,
Interest expenses from lease liabilities - -
Total amount recognised in profit or loss -, -,
Orthex’s total cash outflow from leases amounted to EUR 1,945 thousand in
2021 and EUR 1,894 thousand in 2020.
Orthex has no more off-balance sheet leases due to implementing IFRS 16.
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Part of the financial statements
11. Financial assets and financial liabilities
Orthex recognises financial instruments based on their characteristics and
classifies them to different categories as defined below. Financial instrument
is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Financial assets
Financial assets are initially recognised at fair value at trade date. At initial
recognition Orthex classifies financial assets as subsequently measured at
amortised cost, fair value through profit or loss, and fair value through other
comprehensive income (OCI).
The subsequent classification is dependent on the contractual cash flow
characteristics of the financial asset and the group’s business model for
managing them.
Financial assets at amortised cost
Orthex recognises financial assets at amortised cost if the business model of
holding the assets is solely collecting contractual cash flows from payments
of principal and interest at specified dates.
Financial assets at amortised cost are initially recognised and measured
at fair value plus related transaction costs. The financial assets are
subsequently measured by using the effective interest rate (EIR) method.
These assets are subject to impairment. Any gains and losses thereof are
recognised in the statement of profit or loss when the asset is derecognised,
modified or impaired.
For Orthex the financial assets at amortised cost are the most significant
category of financial assets. The category includes trade receivables, for
which the expected credit losses are assessed as impairment. The expected
credit losses are described below in the credit risk section.
Financial assets at fair value through profit or loss
Orthex recognises financial assets at fair value through profit or loss when
the assets are held for trading or are mandatorily required to be measured at
fair value. Additionally, Orthex recognises at fair value through profit or loss
when the financial assets are initially designated upon initial recognition to
be measured at fair value through profit or loss. These financial assets are
classified as held for trading if the assets are acquired for sole purpose of
receiving cash flows from the asset sales.
Any gains or losses recognised from the net changes in the fair value of these
financial assets are recognised in the statement of profit or loss.
Orthex classifies derivative instruments to be measured at fair value through
profit or loss at inception.
Financial assets at fair value through other comprehensive
income (OCI)
Financial assets at fair value through other comprehensive income include
investments to equity instruments. Gains and losses on these financial
assets are never recycled to profit or loss. Dividends are recognised as other
income in the statement of profit or loss when the right of payment has
been established.
Upon the initial recognition Orthex may make an irrevocable election to
classify an equity investment as equity instrument designated at fair value
through other comprehensive income in accordance with IAS 32, when the
assets are not held for trading. Any change in the fair value of the asset and
possible dividends are recognised in the other comprehensive income in the
statement of comprehensive income.
Financial assets designated at fair value through OCI are not subject
impairment assessment.
Orthex does not have any instruments designated at fair value through OCI.
Impairment and expected credit losses (ECL)
Orthex estimates the expected credit losses from their short-term receivables
such as trade receivables and accrued revenues at each reporting date.
Orthex recognises the expected credit loss allowance as impairment from
these assets, which is defined as the difference between the contractual
cash flows and the expected cash flows Orthex expects to receive.
Orthex applies a simplified approach method for the assessment of the
expected credit loss impairment. Orthex uses the lifetime expected credit
losses as a credit loss allowance. Any receivable, which is considered to be
more than 90 days past due are considered to be defaulted and impaired and
are written off from the receivable balance.
Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise
cash at banks and on hand and short-term deposits with a maturity of three
months or less, which are subject to an insignificant risk of changes in value.
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Part of the financial statements
All of the Orthex’s bank accounts are in well established low risk banks to
reduce the risk in relation to the insolvency issues from banks.
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits, as defined above, net
of outstanding bank overdrafts as they are considered an integral part of the
Group’s cash management.
Available cash and liquidity position
EUR thousand Dec Dec
Cash and cash equivalents , ,
Total cash & cash equivalents , ,
Cash at banks earns interest at floating rates based on daily bank
deposit rates.
At 31 Dec 2021, the Group had available EUR 7.0 million (31 Dec 2020:
EUR 7.0 million) of undrawn committed borrowing facilities.
Financial liabilities
Financial liabilities are recognised at fair value at trade date and are classified
to be subsequently measured at either amortised cost or at fair value through
profit or loss.
The subsequent measurement designation is based on the obligations arising
from the contractual nature of the financial liability.
Financial liabilities at amortised cost
Orthex classifies financial liabilities to be measured at amortised cost when
the financial liabilities involve contractual obligations for payments and
are not held for trading. The financial liabilities are initially recognised at
fair value less any related transaction costs. After initial recognition, these
liabilities are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
This category is most relevant to Orthex and it includes interest-bearing loans
and borrowings, and group’s trade and other payables.
Financial liabilities at fair value through profit or loss
Orthex classifies financial liabilities at fair value through profit or loss when
the financial liabilities are held for trading, or when the financial liability is
designated upon initial recognition to be measured at fair value through
profit or loss. Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated at the initial date of recognition,
and only if the criteria in IFRS 9 are satisfied.
Orthex classifies derivative instruments, which are not designated as hedging
instruments, to be measured at fair value through profit or loss at inception.
Derecognition of financial instruments
Orthex derecognises financial instruments when, and only when the
contractual rights or responsibilities arising from contractual obligations are
discharged, cancelled, or they expire.
In the case of the financial assets, a transfer of rights or impairment of assets
qualifies for derecognition of the asset.
In case of a financial liability, when an existing financial liability is replaced
by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original liability and
the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit or loss.
Offsetting financial instruments
Orthex does not offset financial instruments.
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Part of the financial statements
Tabular presentation of financial instruments by classification 31 Dec 2021
Financial assets
EUR thousand Note Fair value through profit and loss Fair value through OCI At amortised cost Book value
Dec
Current financial assets
Trade receivables 1, ,
Cash and cash equivalents , ,
Derivative financial instruments
Total - , ,
Total financial assets - , ,
Financial liabilities
EUR thousand Note Fair value through profit and loss Fair value through OCI At amortised cost Book value
Dec
Non-current financial liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Total - - , ,
Current financial liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Trade payables , ,
Total - - , ,
Total financial liabilities - - , ,
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Part of the financial statements
Tabular presentation of financial instruments by classification 31 Dec 2020
Financial assets
EUR thousand Note Fair value through profit and loss Fair value through OCI At amortised cost Book value
Dec
Current financial assets
Trade receivables , ,
Cash and cash equivalents , ,
Total - - , ,
Total financial assets - - , ,
Financial liabilities
EUR thousand Note Fair value through profit and loss Fair value through OCI At amortised cost Book value
Dec
Non-current financial liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Total - - , ,
Current financial liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Trade payables , ,
Derivative financial instruments
Total - , ,
Total financial liabilities - , ,
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Part of the financial statements
Derivatives
Derivatives not designated as hedging instruments reflect the negative
change in fair value of those foreign exchange forward contracts that are not
designated in hedge relationships, but are, nevertheless, intended to reduce
the level of foreign currency risk for expected sales and purchases.
Orthex utilises the derivative for hedging purposes, but does not apply
hedge accounting.
Financial risk management
Orthex’s Financial risk management involves a combination of responsive
actions the management is actively seeking to ensure sound financial
operations and stability. This note explains Orthex’s exposure to financial
risks and how these risks could affect Orthex’s future financial performance.
The Group’s overall financial risk management focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the
Group’s financial performance.
The Group’s financial risks can be classified into two separate categories.
Orthex is affected by market risks and other risks including credit risk and
liquidity risk. The management analyses the Group’s risk position periodically
at each reporting date and takes collective measures to counter these
assessed risk exposures.
Risk concentrations
Orthex analyses the financial risks and risk concentrations related to its
operations. Risk concentrations identified as a result of this assessment are
described in connection with the descriptions of market and credit risks.
Sensitivity analysis
As part of the risk assessment the management has performed sensitivity
analysis on relevant market risks, such as interest rate risk and foreign
exchange risk. Calculation methods and assumptions used for sensitivity
analysis are further explained in the detailed sensitivity analysis sections
alongside interest rate risk and foreign exchange risk assessments.
Derivative financial instruments may be used to hedge certain risk exposures.
The Group’s financial risk management is carried out by the finance
department in accordance with the Group Treasury Policy, which is approved
by the Board of Directors.
Market Risks
Interest rate risk
The Group’s bank loans comprise of long-term floating rate loans and
interest-bearing credit limit facilities. Due to the Euribor-tied loans, Orthex is
subject to the cash flow risk arising from floating rate loans. To manage the
interest rate risk, Orthex may use interest rate swaps, as needed, in order to
reduce the cash flow risk arising from floating rate loans. With this course of
action, Orthex might aim to limit the impact of interest rate volatility in the
Group’s financial expenses to acceptable levels. Interest rates of bank loans
were 1.9%—2.6% at the end of 2021 and 2.2%—3.0% at the end of 2020.
Interest rate sensitivity
Based on the sensitivity analysis, if interest rates had been 1.0 percentage
points higher with all other variables held constant, the recalculated post-tax
profit for the period and equity would have been EUR 0.3 million smaller in
2021 and EUR 0.3 million smaller in 2020. Interest rate sensitivity has been
calculated by shifting the interest curve by 1.0 percentage points (due to low
market interest environment the lower scenario has not been presented).
The interest position includes all external variable rate loans and interest
rate swaps.
Foreign exchange risk
Orthex Group operates in several countries. Orthex is mainly exposed to
transaction risk and translation risk associated with the Swedish krona, the
Norwegian krona, the Danish krona, the US dollar and the British pound
sterling. Transaction risk associated with subsidiaries outside the euro area
consists primarily of trade receivables and trade payables from subsidiaries
arising in the operational business of the Group companies. Orthex
hedges transaction risks with currency derivatives, in accordance with its
Treasury Policy.
Translation risk arises, when the parent company’s investments to
subsidiaries outside euro area are converted into euros. The Group’s net
investment to units outside the euro area consist mainly of the investments
in subsidiaries in Sweden. Translation risk is currently not hedged.
The currency position resulting from the financial instruments in accordance
with IFRS 7 consists of trade receivables, trade payables and cash and cash
equivalents. The net currency risk has been taken into account in the table
if the transaction currency is other than the company’s functional currency.
The table takes into account the currencies to which the company is
significantly exposed.
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Part of the financial statements
The Group’s net currency position at 31 December
The net currency position resulting from the financial instruments in
accordance with IFRS
EUR thousand
EUR-SEK , ,
EUR-NOK , ,
EUR-USD
Foreign exchange rate sensitivity
Changes in consolidation exchange rates affect company’s income
statement and cash flow statement. As approximately 62% of company’s
revenues and 50% of costs occur in functional currencies other than euro,
the translation risk is significant for the company. A change of 10% in the
annual average foreign exchange rates would have caused a 6.2% (6.3%)
change in 2021 consolidated sales and 5.1% (5.6%) reverse changes in costs
in the consolidated sales in euros. The translation risk is not hedged as a
rule as company’s business consists of continuous operations in various
currency areas. However USD purchases of Orthex Kitchen Ab are partially
hedged against SEK. The most significant translation risk exposures in the
subsidiaries are in the Swedish krona, the Norwegian krona, the Danish
krona, the US dollar and the British pound sterling.
Commodity price risk
The Group is exposed to variations in prices of raw materials and of supplies.
Orthex’s raw materials purchases consist mainly of various types of plastic
materials. The market value for virgin plastic and the underlying inputs cause
changes on the acquired plastic materials pricing.
Commodity price risk sensitivity
A 10 per cent change upwards or downwards in virgin plastic prices would
have effects, before taxes, of EUR +/– 2.4 million to income statement in
year 2021 (2020: EUR +/–1.6 million). Commodity risks are not managed
using financial derivative instruments.
Sensitivity analysis
Sensitivity of financial instruments to market risks (before taxes)
in accordance with IFRS
EUR thousand
Income
statement Equity
Income
statement Equity
+/- % virgin plastic prices -, -, -, -,
+/- % change in EUR/SEK exchange rate , ,
+/- % change in EUR/NOK exchange rate
+/- % change in EUR/USD exchange rate
+ % points parallel shift in interest rates - - - -
+10% increase in EUR/SEK exchange rate would have an EUR 1,037 thousand effect in income statement.
At the end of 2021, the total Group floating rate liability position consists of floating rate liabilities EUR 27.0 million (2020: EUR 30.0 million).
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Part of the financial statements
.Other Risks
Credit risk
Orthex’s credit risk exposure is mainly related to client payment behaviour.
Orthex estimates the expected credit losses from their current receivables
such as trade receivables and accrued revenues at each reporting date.
Orthex recognises the expected credit loss allowance as impairment from
these assets, which is defined as the difference between the contractual
cash flows and the expected cash flows Orthex expects to receive.
Details regarding the expected credit loss assessment include:
- Analysis of receivables held in different portfolios.
- Analysis of receivables are prepared based on customer characteristics.
- An ECL analysis using both historical credit losses and an estimation on
future credit losses (forward-looking parameters).
- Default probability-% per group, based on historical information on the
aging of the receivables and forward-looking parameters.
The decision-making criteria used by management to measure
the ECL includes:
1. Historically Orthex has minimal amount of bad debt.
2. Major clients are big retailers and credit risk relating to the retailers
is minimal.
3. In export sales Orthex uses credit collaterals to minimize the credit risk.
4. Average order amounts are small and Orthex has the ability to react quickly
whenever there are signals from clients’ liquidity problems.
Orthex’s customers are major retailers with solid credit ratings. Orthex
monitors the credit ratings relating to its largest clients continuously. The risk
for credit loss relating to the major retailers is considered to be low. For other
clients Orthex has credit collateral to manage the credit risk relating to the
purchases made by those customers.
The management uses historical outlook to assess the expected credit losses
in addition to the current economic outlooks and client specific analysis.
The maximum exposure to credit risk is the carrying amount of accounts
receivables. In Orthex’s business, the average size of a single purchase order
is small giving Orthex the ability to react to clients’ liquidity problems quickly.
Orthex applies a simplified approach method for the assessment of the
expected credit loss impairment. Orthex uses the lifetime expected credit
losses as a credit loss allowance. Any receivable, which is considered to be
more than 90 days past due are considered to be defaulted and impaired and
are written off from the receivable balance.
Orthex does not have any major risk concentrations regarding group’s
receivables and the trading partners are all well established companies
with historically stabile payment behaviour towards business transactions
with Orthex.
Trade receivables consist mainly of receivables from customers. Impairment
losses of trade receivables recognised in profit or loss amounted to
EUR 13.9 thousand during the year 2021. In 2020 impairment losses of
trade receivables were EUR 4.6 thousand. The maturity distribution of trade
receivables has been presented in Note 14.
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Part of the financial statements
Liquidity risk
Management of liquidity risk aims to ensure that Orthex can meet its cash
outflows and other financial obligations. Orthex’s financing requirement is
covered by both optimising of operating activities and external financing in
order to ensure that Orthex has continually sufficient liquidity or has access
to committed credit facilities. Liquidity risks are monitored and managed
centrally in the Group’s finance department.
Maturity analysis
The maturity of financial liabilities is monitored regularly. As of 31 Dec 2021,
Orthex had cash and cash equivalents of EUR 14.3 million (31 Dec 2020:
EUR 5.3 million). In addition, Orthex had access to unused credit facilities
and bank overdrafts of EUR 7.0 million as of 31 Dec 2021 (31 Dec 2020:
EUR 7.0 million). In 2020, Orthex entered into a 3+1+1-year credit facility
agreement of EUR 37.0 million with Nordea Bank Corporation. The credit
facility agreement includes a 3+1+1-year term loan of EUR 30.0 million and
a revolving credit facility of EUR 7.0 million. If the conditions specified in the
credit facility agreement are met, the company may extend the agreement
by 1 + 1 year.
At 31 Dec 2021, EUR 30.0 million of the term-loan was in use. The term loan
is currently repaid in bi-annual installments of EUR 1.5 million. Loans from
the financial institutions include the following covenants: net debt / adjusted
EBITDA and adjusted EBITDA / net financial charges. At 31 Dec 2020 the
financial covenants were: net debt / adjusted EBITDA, capital expenditure
and adjusted EBITDA / net financial charges. The terms of loans from
financial institutions also include indicators related to sustainability, which
are related to the energy consumption of production and the percentage of
scrap. The covenant terms have been complied with in both years.
The interest margin is variable and depends on the ratio of net debt and
adjusted EBITDA. Orthex has given business mortgages amounting to
EUR 53.5 million as of 31 Dec 2021 as a security for the loans from financial
institutions. According to specific terms and conditions of the bank loan
agreements, the most significant transactions require a prior written approval
by the financial institution, including ordinary terms and conditions protecting
the creditor.
Interest-bearing liabilities
EUR thousand Dec Dec
Non-current interest-bearing liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Pension liabilities , ,
Total non-current interest-bearing
liabilities
, ,
Current interest-bearing liabilities
Loans from credit institutions , ,
Lease liabilities , ,
Total current interest-bearing
liabilities
, ,
Total interest-bearing liabilities , ,
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Part of the financial statements
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
Maturity distribution table
Dec
EUR thousand Later Total
Loans from credit institutions , , ,
Interest
Lease liabilities , , , , , , ,
Trade payables , ,
Total , , , , , , ,
Dec
EUR thousand Later Total
Loans from credit institutions , , , ,
Interest ,
Lease liabilities , , , , , , ,
Trade payables , ,
Derivative financial instruments
Total , , , , , , ,
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Part of the financial statements
Changes in liabilities arising from financing activities
EUR thousand Jan
Lease
Changes Cash flows
Translation
differences Other
Total
Dec
Non-current loans from credit institutions , -, ,
Non-current lease liabilities , - -, ,
Current loans from credit institutions , -, , ,
Current lease liabilities , -, - , ,
Total , -, - ,
EUR thousand Jan
Lease
Changes Cash flows
Translation
differences Other
Total
Dec
Non-current loans from credit institutions , , - ,
Convertible loans , -, -
Non-current lease liabilities , - ,
Current loans from credit institutions , ,
Current lease liabilities , -, , ,
Total , -, ,
Fair value measurement
The Group measures financial instruments such as derivatives at fair value
at each balance sheet date. Fair value related disclosures for financial
instruments and non-financial assets that are measured at fair value or
where fair values are disclosed in this note. Aside from this note, additional
fair value related disclosures, including the valuation methods, significant
estimates and assumptions are also provided in Note 9.
Orthex measures fair value for its financial instruments based on the most
similar possible alternative that resembles the underlying instrument. The
fair value of a financial instrument is the best estimate of the price on the
markets that would be received when an asset is sold or paid when a liability
is transferred between participants at a measurement date. It is assumed
that the transaction is either performed in a principal market or through
other market maker, which would give the best available price for the
financial instrument.
Orthex uses valuation techniques for the fair value measurement, which are
most accurate for the circumstances and for which sufficient data is easily
and readily available, maximising the use of observable data and minimising
the use of unobservable inputs.
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Part of the financial statements
Capital management
Capital structure is assessed regularly by the Board of Directors and
managed operationally by the CFO. Capital structure management in Orthex
comprises both equity and interest-bearing debt. As of 31 Dec 2021, the
equity attributable to shareholders was EUR 31.8 million (31 Dec 2020:
EUR 17.0 million) and the amount of interest-bearing liabilities as of 31 Dec
2021 were EUR 40.2 million (31 Dec 2020: EUR 44.1 million). The objectives
are to safeguard the ongoing business operations and to optimise the
cost of capital. In order to achieve this overall objective, the Group’s capital
management, amongst other things, aims to ensure that it meets financial
covenants attached to the interest-bearing loans and borrowings that define
capital structure requirements. Breaches in meeting the financial covenants
would permit the bank to immediately call loans and borrowings. There have
been no breaches of the financial covenants of any interest-bearing loans
and borrowing in the current or previous period.
To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
The Group monitors capital using the equity ratio, which is counted as total
equity / total assets.
EUR thousand Dec Dec
Equity , ,
Balance sheet total , ,
Equity ratio .% .%
No changes were made in the objectives, policies or processes for managing
capital during the years ended 31 Dec 2021 and 31 Dec 2020.
12. Fair value hierarchy
All the assets and liabilities for which the fair value is measured and disclosed
are categorised on three levels of fair value hierarchy.
Level 1
Financial instruments on level 1 are quoted on public and active markets for
similar instruments. The prices are instantly available and the valuation does
not require judgements.
- Orthex does not have financial instruments on level 1.
Level 2
Financial instruments on level 2 are not directly observable, but the valuation
technique uses the lowest level inputs in the valuation estimates, which are
readily available on a public market or through other market makers.
This category includes:
- Loans from credit institutions
- Derivative instruments
Level 3
Financial instruments on level 3 require valuation techniques where
the lowest level valuation inputs are not available directly, and are thus
unobservable. The measurement require independent consideration and
judgements from the management. The valuation techniques, related inputs
and assumptions for Level 3 fair value instruments are explained in detail
alongside the tabular presentation of the fair values.
- Orthex does not have financial instruments on level 3.
For financial instruments that are measured at fair value on a recurring basis,
Orthex determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each
reporting date.
For the purpose of fair value disclosures, the Group has determined classes
of assets and liabilities on the basis of the nature, characteristics and
risks of the asset or liability and the level of the fair value hierarchy, as
explained above.
Fair-value related disclosures for financial instruments and non-financial
assets that are measured at fair value or where fair values are disclosed, are
summarised in addition to this note in Note 11.
Fair value measurement hierarchy
The following tables provide the fair value measurement hierarchy of the
Group’s assets and liabilities:
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Part of the financial statements
Fair value measurement hierarchy for assets as at 31 Dec 2021
EUR thousand Level Level Level
Financial assets measured at fair value:
Derivative financial instruments:
Foreign exchange forward contracts
Fair value measurement hierarchy for liabilities as at 31 Dec 2021
EUR thousand Level Level Level
Financial liabilities for which fair values are disclosed:
Interest-bearing loans and borrowings:
Loans from credit institutions ,
Lease liabilities ,
There have been no transfers between Level and Level during .
Fair value measurement hierarchy for liabilities as at 31 Dec 2020
EUR thousand Level Level Level
Financial liabilities measured at fair value:
Derivative financial instruments:
Foreign exchange forward contracts
EUR thousand Level Level Level
Financial liabilities for which fair values are disclosed:
Interest-bearing loans and borrowings:
Loans from credit institutions ,
Lease liabilities ,
There were no transfers between Level and Level during .
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Part of the financial statements
13. Inventories
Inventories are valued at the lower of cost and net realisable value. Costs
incurred in bringing each product to its present location and condition are
accounted for, as follows:
- Raw materials: purchase cost on a first-in/first-out basis
- Finished goods and work in progress: cost of direct materials and labour
and a proportion of manufacturing overheads based on the normal
operating capacity
Net realisable value is the estimated selling price in the ordinary course
of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
EUR thousand Dec Dec
Raw materials , ,
Work in progress
Finished goods , ,
Net realisable value allowance - -
Total , ,
14. Trade and other receivables
EUR thousand
Dec
Dec
Trade receivables , ,
Other receivables
Prepaid expenses and accrued income ,
Total , ,
Ageing analysis of trade receivables
EUR thousand
Dec
Dec
Not past due , ,
Past due - days ,
Past due over days
Impairment losses - -
Total , ,
The realised impairment losses recognised on trade receivables during the
year 2021 amounted to EUR 0 thousand (2020: EUR 4 thousand).
The loss allowance for trade receivables is based on the ageing of the
accounts receivable. Historically the amount of overdue trade receivables
have been low and the amount of overdue receivables have not materially
increased due to COVID-19. The aim is to minimise credit risks by active credit
management and using credit collaterals. The expected loss rate for all trade
receivables is 0.3%.
Credit risks of trade receivables have been presented in Note 11.
15. Trade and other payables
EUR thousand
Dec
Dec
Trade payables , ,
Other payables , ,
Accrued expenses and deferred income:
Interest payables -
Wages, salaries and social costs , ,
Customer rebates and commissions , ,
Other , ,
Total , ,
Terms and conditions of the above payables:
- Trade payables are non-interest bearing and are normally settled on 30 to
60 -day terms
- Other payables are non-interest bearing and have an average term of six
months
- Interest related to loan is normally settled semi-annually throughout the
financial year
For explanations on the Group’s liquidity risk management processes, refer
to Note 11.
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107
Part of the financial statements
16. Share capital and reserves
Number of outstanding
shares
Number of treasury
shares Number of shares total
Share capital, EUR
thousand
Treasury shares, EUR
thousand
Invested unrestricted equity
fund, EUR thousand
As at Jan , , , - ,
Transactions with owners:
Capital return from the invested unrestricted equity fund
*
-,
Directed issue of treasury shares , -, -
As at Dec , , , - ,
As at Jan , , , - ,
Transactions with owners:
Increase in share capital -
Cancellation of treasury shares -, -, -
Share issue ,, ,, ,
Personnel offering , ,
Expenses related to the share issue -
Discount related to the personnel share issue
As at Dec ,, - ,, - ,
*
, euros per share
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108
Part of the financial statements
Earnings per share
The basic (and diluted) earnings per share is calculated by dividing the result
for the financial year attributable to the parent company’s shareholders by
weighted average number of shares outstanding during the financial year.
Earnings per share, basic (and diluted)
Net profit attributable to eaquity owners of
the parent company, EUR thousand , ,
Weighted average number of shares ,, ,,
Earnings per share, basic (and diluted),
EUR . .
Dividend and profit distribution
The Board of Directors of Orthex Corporation proposes to the Annual General
Meeting on 6 April 2022 that shareholders will be paid a capital return of
EUR 0.18 per share to be distributed from the invested unrestricted equity
reserve totalling approximately EUR 3.2 million and that no dividend will be
paid for the financial year ended 31 December 2021.
Shares and share capital
On 28 Feb 2021, the shareholders of the company decided with a unanimous
decision to change the form of the company to a public limited liability
company and to implement an increase in share capital by a capital increase
to meet the required EUR 80,000 limit for a public limited liability company
through a fund increase.
In connection with the listing, the company carried out an offering which
consisted of a public offering which increased the amount of shares,
including cancellation of treasury shares, by 17,358,854 shares in March 2021.
The company has single share class and each share has one vote at the
Annual General Meeting and equal rights to dividend and other distribution of
assets. The shares have no nominal value. All shares issued have been paid
in full.
Invested unrestricted equity fund
Invested unrestricted equity fund consists of other investments similar to
equity and the subscription price of shares to the extent that it has not been
recorded in share capital according to specific resolution. According to the
current Finnish Companies Act subscription price of new shares is recognised
in the share capital, unless it has not been according to Issuance Resolution
fully or partly recognised in the invested unrestricted equity fund.
In connection with the listing, the company carried out an offering which
consisted of a public offering in Finland, an institutional offering to
institutional investors in Finland and in accordance with applicable laws,
internationally; and personnel offering to employees of the group. With the
share issue, the company raised gross proceeds of approximately EUR 10,000
thousand that was recognised to the invested unrestricted equity reserve.
In 2021, the company’s fees and expenses related to the listing amounted
to EUR 2,281 thousand, of which EUR 857 thousand was recognised as
expenses in connection with the offering against the funds received in the
invested unrestricted equity fund less deferred tax of EUR 171 thousand.
The Group’s personnel subscribed 156,236 shares in the personnel offering.
The subscription price of EUR 6.14 per share was 10% lower than the
subscription price for other shares subscribed in connection with the listing.
The discount given to the personnel, EUR 106 thousand, has been accounted
for under IFRS as share-based payments and it has been fully recorded as
personnel expenses.
Treasury shares
Own equity instruments that are reacquired (treasury shares) are recognised
at cost and deducted from equity. No gain or loss is recognised in profit
or loss on the purchase, sale, issue or cancellation of the Group’s own
equity instruments. Any difference between the carrying amount and the
consideration, if reissued, is recognised in the unrestricted equity fund. At 31
Dec 2021, the company did not own any treasury shares.
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109
Part of the financial statements
17. Related party disclosures
Note 1 provides information about the Group’s structure, including details
of the subsidiaries. The following table provides the total amount of
transactions that have been entered into with related parties for the
relevant financial year. Orthex’s related parties include the company’s Board
of Directors and their family members, the CEO and his family members,
significant shareholders, and members of the Management Team and their
family members. Until March 2021, the Group was controlled by Sponsor Fund
IV with a total ownership of 74.0 per cent of the parent company’s shares.
In connection with the listing, Conficap Oy became the largest shareholder
with a 12.5 per cent ownership. At 31 Dec 2021, Conficap Oy continued as the
largest shareholder with a 14.0 per cent ownership. At the end of the financial
year the CEO owned 11.5 per cent of the Group’s parent company’s shares.
EUR thousand
Return of invested
unrestricted equity Purchase of shares
Purchases of goods
and services
Entity that controls the group:
Sponsor Fund IV -, - -
Members of the Board of Directors and CEO:
Orthex Corporation - - -
- -
Key management personnel of the Group:
Members of Group Management Team - - -
Issued shares
In Feb 2020, the parent company issued 1,100 treasury shares held by the
company, deviating from the shareholders’ pre-emptive subscription right
in accordance with the terms of the share issue. The share issue was made
to commit the company’s key personnel. There were thus weighty financial
reasons as referred to in Chapter 9, Section 4, Subsection 1 of the Companies
Act to deviate from the shareholders’ pre-emptive subscription rights. The
share issue was carried out in accordance with the shareholders’ agreement
on the same valuation principle as the previous investments made by
the controlling shareholder and other key personnel. No expense for this
arrangement has been recognised in the consolidated financial statements.
Management remuneration
Remuneration to the members of the Board of Directors, the CEO and other
members of the Management team is presented in Note 5.
Other material business transactions
Orthex did not have other material business transactions with its related
parties than those presented above.
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110
Part of the financial statements
18. Collaterals, commitments and
contingent assets and liabilities
This Note presents information on items not included in calculations when
preparing the financial statements.
EUR thousand Dec Dec
Guarantees and mortgages given on
own behalf:
Enterprise mortgages , ,
Property mortgages , ,
Other guarantees
Total , ,
Contingent liabilities
Orthex Group was subject to a tax audit of Orthex Corporation regarding
the financial years 2020 and 2021. Orthex Corporation received in February
2022 a tax audit report from the Finnish tax auhorities. The tax audit
report included subsequent taxes and tax increases amounting to a total
of EUR 0.3 million, relating to the VAT deductibility of IPO related costs. The
company disagrees with the interpretation made in the tax audit and has
filed a claim for adjustment.
19. Subsequent events
On 28 January 2022, Orthex Corporation disclosed the Shareholders’
Nomination Board’s proposals to the Annual General Meeting 2022 regarding
the composition and remuneration of the Board of Directors.
The Shareholders’ Nomination Board proposes that the Board of Directors
would consist of five (5) members and that Sanna Suvanto-Harsaae, Satu
Huber and Jens-Peter Poulsen would be re-elected to the Board and that
Markus Hellström and Jyrki Mäki-Kala elected as new members to the Board,
all for a term of office ending at the end of the next Annual General Meeting.
Ari Jokelainen and Juuso Kivinen were no longer available for re-election to
the Board.
All director nominees have given their consent to the election and are
independent of the company and of the major shareholders of the company.
Further information on the director nominees is available on the corporate
website https://investors.orthexgroup.com/.
The Shareholders’ Nomination Board proposes that the remuneration of
the members of the Board of Directors remains the same and that the
Chair of the Board of Directors be paid a monthly fee of EUR 4,000 and
other members of the Board of Directors a monthly fee of EUR 2,000.
The Nomination Board further proposes that reasonable travel and other
expenses related to the Board work be reimbursed in accordance with the
company’s travel rules.
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111
Part of the financial statements
Parent company financial statements, FAS
Parent company income statement
EUR Note
Jan - Dec
Jan - Dec
Other operating income ,. ,.
Administrative expenses -,,. -,.
Operating result -,,. -,.
Financial income and expenses -,. -,.
Profit (loss) before appropriations and taxes -,,. -,.
Appropriations
Group contribution ,,. ,,.
Income taxes -,. -,.
Profit (loss) for the period -,. ,,.
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112
Part of the financial statements
Parent company balance sheet
EUR Note Dec Dec
ASSETS
NON-CURRENT ASSETS
Investments
Holdings in subsidiaries ,,. ,,.
Receivables from subsidiaries ,,. ,,.
Investments total ,,. ,,.
NON-CURRENT ASSETS TOTAL ,,. ,,.
CURRENT ASSETS
Short-term receivables
Trade receivables from subsidiaries - ,.
Receivables from subsidiaries ,,. ,,.
Prepayments and accrued income ,. ,.
Short-term receivables total ,,. ,,.
Cash and cash equivalents ,. ,.
CURRENT ASSETS TOTAL ,,. ,,.
ASSETS TOTAL ,,. ,,.
EUR Note Dec Dec
SHAREHOLDERS’ EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital ,. ,.
Invested unrestricted equity fund ,,. ,,.
Retained earnings -,. -,,.
Profit (loss) for the period -,. ,,.
SHAREHOLDERS’ EQUITY TOTAL ,,. ,,.
LIABILITIES
Long-term liabilities
Loans from credit institutions ,,. ,,.
Long-term liabilities total ,,. ,,.
Short-term liabilities
Loans from credit institutions ,,. ,,.
Trade payables ,. ,.
Other payables ,. ,,.
Accruals and deferred income ,. ,.
Short-term liabilities total ,,. ,,.
LIABILITIES TOTAL ,,. ,,.
SHAREHOLDERS’ EQUITY AND LIABILITIES TOTAL ,,. ,,.
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113
Part of the financial statements
Parent company statement of cash flows
EUR Note Jan - Dec Jan - Dec
Cash flows from operating activities
Profit before appropriations and tax -,,. -,.
Adjustments:
Financial income and expenses ,. ,.
Other adjustments . .
Cash flows before changes in working capital -,,. -,.
Changes in working capital
Decrease (+) / increase (–) in trade and other receivables -,. ,.
Decrease (–) / increase (+) in trade and other payables ,. ,.
Cash flows from operating activities before financial
items and taxes
-,,. ,.
Interests and other financing expenses paid -,,. -,,.
Income taxes paid -,. -
Net cash flows from operating activities -,,. -,.
Cash flows from investing activities
Loans granted to subsidiaries - -,,.
Repayment of long-term loans ,. -
Repayment of short-term loans ,,. -
Net cash flows from investing activities ,,. -,,.
EUR Note Jan - Dec Jan - Dec
Cash flows from financing activities
Proceeds from share issue ,,. -
Proceeds from long-term loans - ,,.
Repayment of long-term loans - -,,.
Proceeds from short-term loans - ,,.
Repayment of short-term loans -,,. -
Group contributions received ,,. -
Repayment of investment in unrestricted equity fund - -,,.
Directed issue of own shares - ,.
Net cash flows from financing activities ,,. ,,.
Net change in cash and cash equivalents -,. -,.
Cash and cash equivalents transferred from merger ,. -
Cash and cash equivalents at January ,. ,.
Cash and cash equivalents at December ,. ,.
Annual Report 2021
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114
Part of the financial statements
Notes to the parent
company financial
statements
1. Parent company accounting principles
The financial statements of Orthex Corporation have been prepared in
accordance with the Finnish Accounting Act and Ordinance and other
statutes regulating the preparation of financial statements (Finnish
Accounting Standards, FAS). The financial statements are presented in euros.
The preparation of financial statements in conformity with regulations in
force and generally accepted accounting principles requires management
to make estimates and assumptions that affect the valuation of assets and
liabilities and reported amounts of revenues and expenses. Actual results
could differ from those estimates.
Transactions in foreign currencies
Transactions in foreign currencies are recorded at the rates of exchange
prevailing at the date of the transaction. At the end of the reporting period
balances in foreign currencies are translated using the exchange rate
prevailing at the end of the reporting period. Foreign exchange derivatives
are recognized at market values and changes in market values are recognized
in the income statement.
Income taxes
Income taxes consist of the aggregate current tax expense based on the
Finnish tax rules and adjustments to prior year taxes. The parent company
does not account for deferred taxes as a stand-alone entity.
Receivables
Receivables are valued at the lower of book value and recoverable value.
Appropriations
Appropriations in the parent company balance sheet consist of received
group contributions.
2. Personnel costs and number of
employees
Personnel costs, book value
EUR
Wages and salaries ,. ,.
Pension costs ,. ,.
Other personnel costs ,. ,.
Total ,. ,.
CEO and Board remuneration, book value
EUR
CEO ,. ,.
Board of Directors ,. ,.
Number of employees
Average (FTE)
Total
The CEO and CFO of Orthex Group work in Orthex Corporation.
3. Fees paid to company’s auditors
EUR
Audit fees ,. ,.
Other ,. ,.
Total ,. ,.
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115
Part of the financial statements
4. Financial income and expenses
EUR
Interest and financial income from
group companies ,. ,.
Other interest and financial income
from others . -
Total financial income ,. ,.
Interest and financial expenses to
others
-,,. -,.
Total financial expenses -, ,. -,.
Total financial income and expenses -,. -,.
5. Appropriations
EUR
Group contribution received ,,. ,,.
Total ,,. ,,.
7. Investments
EUR Holdings in subsidiaries Receivables from subsidiaries Total
Acquisition cost
Balance at Jan ,,. ,,. ,,.
Additions - ,,. ,,.
Balance at Dec ,,. ,,. ,,.
Additions ,,. - ,,.
Additions from merger ,,. - ,,.
Decreases -,,. -,,. -,,.
Balance at Dec ,,. ,,. ,,.
Shares in subsidiaries
Number of shares Domicile % of share capital Book value, EUR
Oy Orthex Finland Ab , Helsinki ,,.
Total, Dec ,,.
During the financial year 2021, Oy Orthex Group Ab has been merged to the parent company Orthex Corporation.
6. Income taxes
EUR
Current year taxes - -,.
Taxes from previous years -,. -
Total -,. -,.
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116
Part of the financial statements
8. Shareholders’ equity
EUR
Share capital, Jan ,. ,.
Increase in share capital ,. -
Share capital, Dec ,. ,.
Invested unrestricted equity fund, Jan ,,. ,,.
Capital return from the invested unrestricted equity fund - -,,.
Directed issue of treasury shares - ,.
Increase in share capital -,. -
Share issue ,,. -
Invested unrestricted equity fund, Dec ,,. ,,.
Retained earnings, Jan -,. -,,.
Retained earnings, Dec -,. -,,.
Profit (loss) for the period -,. ,,.
Distributable earnings, Dec ,,. ,,.
Shareholders’ equity total, Dec ,,. ,,.
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117
Part of the financial statements
9. Long-term liabilities
EUR Dec Dec
Loans from credit institutions:
Payable in the next months ,,. ,,.
Payable between one and five years ,,. ,,.
10. Liabilities to subsidiaries
EUR Dec Dec
Other short-term liabilities to
subsidiaries
- ,,.
Total - ,,.
11. Accruals and deferred income
EUR Dec Dec
Interests - ,.
Wages, salaries and social costs ,. ,.
Other ,. ,.
Total ,. ,.
12. Contingencies and pledged assets
EUR Dec Dec
Pledges given on behalf of Group
companies:
Enterprise mortgages ,,. ,,.
Property mortgages ,,. ,,.
Total ,,. ,,.
The company has a credit limit of EUR 7,000,000.00, of which
EUR 1,000,000.00 has been allocated to Oy Orthex Finland Ab and
EUR 878,023.08 to Orthex Sweden AB.
Contingent liabilities
Orthex Group was subject to a tax audit of Orthex Corporation regarding
the financial years 2020 and 2021. Orthex Corporation received in February
2022 a tax audit report from the Finnish tax auhorities. The tax audit
report included subsequent taxes and tax increases amounting to a total
of EUR 0.3 million, relating to the VAT deductibility of IPO related costs. The
company disagrees with the interpretation made in the tax audit and has
filed a claim for adjustment.
13. Company shares
The company has 17,758,854 shares. The company’s share capital is
EUR 80,000.00. Each share entitles its holder to one vote at the Annual
General Meeting.
Annual Report 2021
118
ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Signatures for Board of Directors’ report and financial statements
Espoo, March
Sanna Suvanto-Harsaae, Chair Satu Huber Ari Jokelainen
Juuso Kivinen Jens-Peter Poulsen
Auditor’s note
Our auditor’s report has been issued today.
Espoo, 8 March 2022
Ernst & Young Oy
Authorised Public Accountant Firm
Johanna Winqvist-Ilkka
Authorised Public Accountant
Annual Report 2021
119
ANNUAL REVIEW SUSTAINABILITY GOVERNANCE FINANCIAL REVIEW
Auditor’s report
To the Annual General Meeting of Orthex Oyj
Report on the Audit of the
Financial Statements
Opinion
We have audited the financial statements of Orthex Oyj (business identity
code 2727990-2) for the year ended 31 December 2021. The financial
statements comprise the consolidated balance sheet, income statement,
statement of comprehensive income, statement of changes in equity,
statement of cash flows and notes, including a summary of significant
accounting policies, as well as the parent company’s balance sheet,
income statement, statement of cash flows and notes.
In our opinion
• the consolidated financial statements give a true and fair view of the
group’s financial position as well as its financial performance and its cash
flows in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU.
• the financial statements give a true and fair view of the parent company’s
financial performance and financial position in accordance with the laws
and regulations governing the preparation of financial statements in
Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Board
of Directors.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland.
Our responsibilities under good auditing practice are further described in the
Auditor’s Responsibilities for the Audit of Financial Statements section of
our report.
We are independent of the parent company and of the group companies
in accordance with the ethical requirements that are applicable in Finland
and are relevant to our audit, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that
we have provided to the parent company and group companies are in
compliance with laws and regulations applicable in Finland regarding these
services, and we have not provided any prohibited non-audit services
referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services
that we have provided have been disclosed in note 4 to the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
We have fulfilled the responsibilities described in the Auditor’s responsibilities
for the audit of the financial statements section of our report, including in
relation to these matters. Accordingly, our audit included the performance
of procedures designed to respond to our assessment of the risks of
material misstatement of the financial statements. The results of our audit
procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying
financial statements.
We have also addressed the risk of management override of internal controls.
This includes consideration of whether there was evidence of management
bias that represented a risk of material misstatement due to fraud.
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Key Audit Matter How our audit addressed the Key Audit Matter
Valuation of goodwill
We refer to note to the consolidated financial statements.
The value of goodwill at the date of the financial statements amounted to . million euros, representing . % of
the group’s total assets and . % of the group’s equity.
Valuation of goodwill is based on management’s estimates about the value-in-use calculations of the group’s cash
generating units.
There are a number of underlying assumptions used to determine the value-in-use of a cash generating unit, including
the development of revenue and profitability and the discount rate applied to cash flows estimates. The results of
value-in-use calculations may vary significantly when the underlying assumptions are changed. Changes in the above-
mentioned individual assumptions may result in an impairment of goodwill.
Valuation of goodwill was a key audit matter because the assessment process requires significant management
judgements and forecasts to be made, because it is based on assumptions related to market and economic conditions
extending far into the future and because the amount of goodwill is material to the consolidated financial statements.
This matter was also a significant risk of material misstatement as defined by EU Regulation No /, point (c) of
Article ().
Our audit procedures to address the risk of material misstatement regarding valuation of goodwill
included among others:
• involving our valuation specialists to assist us in assessing the appropriateness of the methodologies, impairment
calculations and underlying assumptions applied by management in the impairment testing;
• testing the mathematical accuracy of the impairment calculations;
• comparing the key assumptions applied by management in the impairment testing to approved budgets and
forecasts, information available in external sources and our independently calculated industry averages such as for
the weighted average cost of capital used in discounting cash flows;
• comparing the outcome of the impairment test to the market capitalization of Orthex Oyj; and
• comparing the principles applied by management in the impairment testing to the requirements set out in the
standard IAS Impairment of Assets.
We also assessed the appropriateness of the disclosures regarding impairment testing made in the notes to the
consolidated financial statements.
Revenue recognition
We refer to note to the consolidated financial statements.
According to the accounting policy presented in the consolidated financial statements, revenue from the sales of goods
is recognized at the point in time when control of the goods is transferred to the customer. Cash and volume discounts
granted to customers are taken into account when determining the amount of revenue recognized.
The revenue of Orthex Group is mainly generated from sales of household products to retailers.
There are multiple varying contractual terms across the group’s markets regarding the above-mentioned discounts
which could lead to misstatement of revenue, either due to fraud or error. The group focuses on revenue as a key
performance measure which could create an incentive for revenue to be recognized prematurely. Due to these
circumstances, revenue recognition was determined to be a key audit matter.
This matter was also a significant risk of material misstatement as defined by EU Regulation No /, point (c) of
Article ().
Our audit procedures to address the risk of material misstatement regarding revenue recognition
included among others:
• assessing the compliance of the group’s accounting policies over revenue recognition, including those related to
discounts, with the applicable accounting standards;
• analyzing a sample of contracts with customers and comparing the terms determined in them to the terms used in
the group’s calculations regarding discounts;
• testing the mathematical accuracy of the group’s calculations of discounts and assessing the adequacy of liabilities
recognized based on those calculations;
• testing the accuracy of revenue recognition by performing both analytical procedures and tests of details on a
transaction level before and after the date of the financial statements; and
• analyzing the timing of revenue recognition based on delivery lead times.
We also assessed the appropriateness of the disclosures regarding revenue recognition made in the notes to the
consolidated financial statements.
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Tilintarkastuksen kannalta keskeinen seikka Miten seikkaa käsiteltiin tilintarkastuksessa
Valuation of inventories
We refer to note to the consolidated financial statements.
The value of inventories at the date of the financial statements amounted to . million euros, representing . % of
the group’s total assets and . % of the group’s equity.
Inventories are valued at the lower of cost or net realizable value. Inventories are presented net of an impairment loss
allowance recognized for slow-moving or obsolete inventories or for inventories that have an otherwise lower net
realizable value than cost.
Valuation of inventories was a key audit matter because the carrying value of inventories is material to the
consolidated financial statements and because valuation of inventories involves management’s judgment and
estimates in order to determine the amount of slow-moving or obsolete inventories as well as the net realizable value
of inventories.
Our audit procedures included among others:
• assessing the group’s accounting policies over inventory valuation and comparing them to the applicable accounting
standards;
• comparing unit values of selected inventory items to sales prices;
• testing exceptional inventory values using data analysis;
• assessing the assumptions applied and the calculations prepared by management regarding slow-moving or
obsolete inventories and the expected demand and net realizable value of inventory items; and
• testing the mathematical accuracy of the impairment loss allowance calculations prepared by management and
assessing the adequacy of the allowances recognized.
We also assessed the appropriateness of the disclosures regarding valuation of inventories made in the notes to the
consolidated financial statements.
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Responsibilities of the Board of Directors and the
Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the
preparation of consolidated financial statements that give a true and fair
view in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU, and of financial statements that give a true and fair view
in accordance with the laws and regulations governing the preparation of
financial statements in Finland and comply with statutory requirements. The
Board of Directors and the Managing Director are also responsible for such
internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the Board of Directors and the
Managing Director are responsible for assessing the parent company’s and
the group’s ability to continue as going concern, disclosing, as applicable,
matters relating to going concern and using the going concern basis of
accounting. The financial statements are prepared using the going concern
basis of accounting unless there is an intention to liquidate the parent
company or the group or cease operations, or there is no realistic alternative
but to do so.
Auditor’s Responsibilities for the Audit of the
Financial Statements
Our objectives are to obtain reasonable assurance on whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with good auditing practice will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise
professional judgment and maintain professional skepticism throughout the
audit. We also:
• Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the parent
company’s or the group’s internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made
by management.
• Conclude on the appropriateness of the Board of Directors’ and the
Managing Director’s use of the going concern basis of accounting and
based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on
the parent company’s or the group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date
of our auditor’s report. However, future events or conditions may cause the
parent company or the group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events so that the financial
statements give a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
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We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we
have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit of
the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of
such communication.
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting on May
7, 2009 and our appointment represents a total period of uninterrupted
engagement of 13 years. Orthex Oyj has been a public interest entity since
March 25, 2021.
Other information
The Board of Directors and the Managing Director are responsible for the
other information. The other information comprises the report of the Board
of Directors and the information included in the Annual Report, but does not
include the financial statements and our auditor’s report thereon. We have
obtained the report of the Board of Directors prior to the date of this auditor’s
report, and the Annual Report is expected to be made available to us after
that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility
is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated. With respect to report of the Board of Directors,
our responsibility also includes considering whether the report of the Board
of Directors has been prepared in accordance with the applicable laws and
regulations.
In our opinion, the information in the report of the Board of Directors is
consistent with the information in the financial statements and the report of
the Board of Directors has been prepared in accordance with the applicable
laws and regulations.
If, based on the work we have performed on the other information that we
obtained prior to the date of this auditor’s report, we conclude that there is
a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Helsinki, March 8, 2022
Ernst & Young Oy
Authorized Public Accountant Firm
Johanna Winqvist-Ilkka
Authorized Public Accountant
