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FERRONORDIC ANNUAL REPORT 2023
Corporate
governance
Formal
annual reportThe shareSustainabilityIntroduction
Market outlook
& operations
Ferronordic adheres to the Group’s code of conduct and to strict standards of
business ethics. The Group has procedures to counter risks of corruption, cases
of illegal activity, demands from corrupt officials, allegations that the Group or its
management has been involved in corruption or illegal activities and biased articles
and negative publicity. Notwithstanding such procedures, corruption and unethical
behaviour can have adverse negative effect on the Group’s operations, earnings
and financial position.
Ferronordic has extensive know-your-customer procedures. Ferronordic’s
sales contracts prohibits unethical use of the equipment and trucks and resale
to sanctioned markets. Ferronordic’s machines are also required to carry GPS
trackers. Many of Ferronordic’s machines are covered by service contracts, which
means that Ferronordic regularly maintains the machines at the sites of the cus-
tomers.
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
in minimising its ecological footprint. The Group considers that its product range
is leading in terms of safety, recycling and pollution and that stricter regulation
tends to favor the market position of the Group’s products. Accidents, waste and
discharges of pollutants can however happen. No guarantees can 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 exec-
utives. 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. For more information on
environmental risks, please refer also to the Sustainability report on p. 51.
Tax system
For information on risks associated with the US, German and Kazakh tax systems,
please see Note 10.
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 does
not hedge this indirect exposure to commodity prices.
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, unfavour-
able 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 financial 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 and residual value
The Group has continuously expanded its network and infrastructure. An un-
foreseen decline in capacity utilisation, e.g., as a result of economic downturn,
discontinuation of certain products etc., generally results in decreased sales which
in the short term cannot be offset by a corresponding cost reduction. The Group
also has a meaningful fleet of machines and trucks for rental. The utilisation of this
fleet could decline if economic activity, consumption or industrial activity declines.
By owning machines and trucks for rental or contracting services, the Group is also
exposed to residual value, referring to risk on the value of a machine or truck at
the end of rental period or use in contracting services. Such risks can be greater
in times of technological disruption, for example with the development of electric
transport with changes in battery technology.
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 and be competitive in a
low-emission economy.
Formal annual report
Directors’ report
Risks and uncertainties
Financial reports
Notes
Board signatures
Auditor’s report