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FERRONORDIC ANNUAL REPORT 2022
Corporate
governance
Formal
annual reportThe shareSustainabilityIntroduction
Market outlook
& operations
and negative publicity. Notwithstanding such procedures, corruption and unethical
behaviour can have adverse negative effect on the Group’s operations, earnings
and financial position.
Environmental risks
Environmental legislation may impose obligations or fines on property owners
and business operators that violate certain standards or cause certain harm to
the environment. Ferronordic strives to be a leader in terms of sustainability and
minimising its ecological footprint. No guarantees can however be given that the
Group’s properties do not contain undetected pollution or that authorities could
claim that its operations conflict with licenses or environmental regulations. New
and changing regulation could result in the Group’s properties (or properties that
have previously been owned or operated by the Group) being subjected to stricter
audits than previously. Ferronordic may become subject of claims for damages
regarding environmental liability. An unfavourable outcome of such proceedings
may result in civil, administrative or criminal law liability for the Group or its execu-
tives. Changes to laws and their application regarding the environment, health and
safety may entail costs and obligations and have adverse negative effect on the
Group’s operations, earnings and financial position.
Tax system
For information on risks associated with the German and Kazakh tax systems,
please see Note 25, Contingencies.
Variations in economic activity
The Group’s products are to a large extent used in connection with construction,
logistics and industrial operations. An economic downturn or reduced industrial
activity could lead to a significant reduction in demand for the Group’s products.
Furthermore, the Group’s markets are affected by changes in the price
of commodities as well as the market for extraction and processing of natural
resources. Declining commodity prices or a weaker market for natural resources
could therefore have an adverse effect on the Group’s operations.
The Group’s business could also be adversely affected (either temporarily
or in the long term) by a decline in customers’ expenditure and investment levels,
unfavourable credit conditions that negatively affect end customers’ financing
opportunities, reduced consumption levels, reduced investments in infrastructure
projects and increased costs for building materials. Downturns in the consumption,
construction and industrial sectors as a result of the above-mentioned or other
factors may have an adverse impact on the Group’s business, earnings and finan-
cial position. Demand for spare parts and service is less sensitive to the economic
cycle than new trucks and machine sales.
During the outbreak of the Covid-19 pandemic, authorities issued recommen-
dations and regulations to restrict mobility and social contacts to limit the spread
of the virus. Such restrictions had an adverse effect on the Group’s business.
Companies, including Ferronordic’s suppliers, competitors and customers, took
measures to adapt to an uncertain business environment. Extensive vaccination
programs reduced such risks, but one cannot exclude the risk of new outbreaks
and further disruptions on the supply or demand side of the Group’s business.
Capacity utilisation
The Group has continuously expanded its network and infrastructure. An unfore-
seen decline in capacity utilisation, e.g., as a result of economic downturn, discon-
tinuation of certain products etc., generally results in decreased sales which in the
short term cannot be offset by a corresponding cost reduction.
The collaboration with Volvo
Sales of Volvo products accounts for the absolute majority of Ferronordic’s sales.
Ferronordic is thus highly dependent on maintaining good relations with the Volvo
Group. A deterioration in such relations could have a significant adverse effect on
Ferronordic’s business.
Dependence on suppliers
The Group is dependent on strategic decisions taken by its suppliers, including
the launch of new products or the discontinuation of existing products, which could
affect the Group’s product range and sales. In the transition to a zero-emission
transport system, Ferronordic will to an extent depend on its partners ability to
deliver products that will contribute to this transformation.
Dependence on key employees
The Group is dependent on its ability to identify, recruit and retain qualified exec-
utives and other key employees. The Group’s ability to recruit and retain qualified
personnel is dependent on a number of external factors. Should key employees
leave the Group due to retirement, acceptance of employment with a competitor or
for any other reason, this may result in a loss of important know-how and experience
which may be difficult to replace, and which may delay or adversely impact the
Group’s ability to implement its business plan and strategy. Inability to recruit or re-
tain such executives and other key employees could thus have an adverse impact
on the Group’s business, result and financial position.
Price risk
The prices that Ferronordic pays for products from Volvo and other suppliers are
important for the Group’s profitability and competitiveness. Too high prices may
result in loss of sales, lost market share and/or significantly decreased profitability.
The Group strives to manage this price risk by, together with its suppliers, contin-
uously monitoring the development of price positioning and market shares, and
continuously adjusting the prices that the Group pays for machines and parts.
Insurance coverage
The insurance market in Kazakhstan is underdeveloped. Several types of insur-
ance that are common in other countries are not available or cannot be procured at
a reasonable cost. The Group holds insurance against some, but not all, risks rel-
evant to its operations. Hence, there is a risk that loss of assets or claims against
the Group may not be covered by the Group’s insurance.
Financial risks
For information about financial risks, please see Note 22, Financial instruments
and risk management.
Material disputes
No material disputes took place during the year.
Formal annual report
Directors’ report
Risks and uncertainties
Financial reports
Notes
Board signatures
Auditor’s report