Excerpts from the annual report 2015/16

It's all about food

Danish Crown is an international meat-processing company with a leading market position in northern Europe and global sales. We are a cooperatively held company owned by 7,600 Danish pig and cattle suppliers, who also supply our raw materials.

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By always listening to our customers and understanding their needs – and through organic growth, exports, mergers and acquisitions – we have, since the first cooperative slaughterhouse was established in 1887, achieved a unique position.

Danish Crown is a market leader in Denmark, Sweden, Poland and the UK, has significant exports to China and Japan – and has market access to a total of 136 countries.

Based on supplies of pork, veal and beef, 26,000 employees work every day to produce premium products and high-quality foods for consumers all over the world. Our focus is on processing and producing products which in every way meet the needs and wishes of consumers and of our business customers.

We are Europe's largest pork business, one of the world's largest pork exporters, Denmark's largest beef business, Europe's largest supplier of organic meat, Europe's largest meat-processing company and the leading global supplier of natural casings.

By constantly focusing on consumers and on what makes a good culinary experience, we create maximum value for our owners and our future. This is what we mean by "Dansk landbrug – kød i verdensklasse", meaning "Danish agriculture – world-class meat", as emblazoned on our transport vehicles. And that is why our international slogan reads "It's all about food".

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It's all about food

By always listening to our customers and understanding their needs – and through organic growth, exports, mergers and acquisitions – we have, since the first cooperative slaughterhouse was established in 1887, achieved a unique position.

Danish Crown is a market leader in Denmark, Sweden, Poland and the UK, has significant exports to China and Japan – and has market access to a total of 136 countries.

Based on supplies of pork, veal and beef, 26,000 employees work every day to produce premium products and high-quality foods for consumers all over the world. Our focus is on processing and producing products which in every way meet the needs and wishes of consumers and of our business customers.

We are Europe's largest pork business, one of the world's largest pork exporters, Denmark's largest beef business, Europe's largest supplier of organic meat, Europe's largest meat-processing company and the leading global supplier of natural casings.

By constantly focusing on consumers and on what makes a good culinary experience, we create maximum value for our owners and our future. This is what we mean by "Dansk landbrug – kød i verdensklasse", meaning "Danish agriculture – world-class meat", as emblazoned on our transport vehicles. And that is why our international slogan reads "It's all about food".

Jais Valeur

Group CEO

Group CEO's report

We are proud of Danish Crown and of what we contribute to society – be it in the form of tax revenues, jobs or unique culinary experiences under the slogan 'It's all about food'.

Group CEO's report

Whether seen from an internal or an external perspective, Danish Crown is a well-managed and well-invested business with a strong a commercial mindset.

We fully proved this in the course of the year. We quickly saw the new opportunities emerging in China, where the appetite for pork, especially more expensive and more processed products, is growing rapidly. This is a direct effect of the positive economic development taking place and the resulting increase in purchasing power.

At the same time, China's own production of pigs has been declining in the past year, leading to a significant increase in demand and imported products. For many pig-exporting countries, including Denmark, this has been a unique opportunity, which has helped push up prices and compensate for the loss of the Russian market, which was previously similarly important.

The process shows how important global trading and politics are for Danish Crown and our owners. As a company, we can suddenly lose important sales opportunities and earnings if political disputes, trade barriers or uncertainty about future trade agreements get in the way. Danish Crown has been well-positioned to make the most of the favourable market situation in Asia, particularly in China, not least thanks to our good relations and the organisation's strong ability to meet demand.

Also in Denmark, pork gained in popularity to play a new and strengthened role in gastronomy. More than ever before, trend-setting chefs and food experts are putting meat matured while hanging and special cuts on the menu, often with Danish Crown as the leading supplier.

As regards our cattle, we really succeeded in putting Danish Veal on the culinary agenda as a distinctive consumer product. Our slaughterhouse in Holsted, Denmark, is still Europe's most modern cattle slaughterhouse and helps ensuring our continued competitiveness and growth as a cattle slaughterhouse business in Denmark.

In a number of markets, Danish Crown has performed strongly in the eld of processed products. Tulip Food Company performed particularly well in the export markets, and our Polish subsidiary Sokołów also had a good year based on the strong position of its brand in the domestic market.

In another of Danish Crown's main markets, the UK, development has been disappointing as communicated by the company more times during the year. More factors impacted our earnings in the UK negatively. Competition between the UK retail chains has been increasingly fierce, and a referendum on the UK's future relations with the EU led to a decision to leave the EU. However, it should be mentioned that the internal challenges facing Tulip Ltd in the form of decreasing productivity and poorer performance also contributed to the decrease in earnings.

Another challenge faced by the group's processing companies during the year was an increase in raw material prices which, in the slaughter pig area alone, totalled 20 per cent. This is beneficial to the company's owners and suppliers of animals as it entails a higher payment per kg to farmers. However, increasing raw material prices also pose a challenge as the processed products will be more expensive to produce, all other factors aside. Price increases on this scale cannot be passed through to consumer prices without impacting our sales negatively.

The year has been extremely busy for everyone in the company. A lot of hard work has been put in at all levels, both in the day-to-day operations and in formulating the new strategy, which is described in detail elsewhere in this annual report. We owe special thanks to our employees for their loyal efforts and always positive approach to the challenges.

After my first year as Group CEO of Danish Crown, I would like to thank our employees, customers and owners for a fantastic welcome, for our constructive cooperation and for an, at times, outspoken, but always rewarding debate on what is the right thing to do for our company.

We are proud of Danish Crown and of what we contribute to society – be it in the form of tax revenues, jobs or unique culinary experiences under the slogan 'It's all about food'.

Jais Valeur

Group CEO

People create value

Michael Nielsen, a farmer in Slangerup, Denmark, produces conventional Antonius pigs as well as organic pigs to Friland. In this way, he wants to meet the different needs of consumers while at the same time influencing developments within Danish slaughter pig production.

Value chain

Farmer

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Farmer

The good quality of our products starts on the farm and at the slaughterhouse.

Care and respect for the animals and nature are crucial for ensuring that we can produce high-quality products and create value for our customers and for consumers – and at the end of the day for our owners.

Slaughterhouse

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Slaughterhouse

We operate some of the world's most modern and technologically advanced slaughterhouses.

The requirements regarding hygiene, animal welfare, quality, logistics and the working environment are high – and inspectors from the independent food authorities are looking over our shoulders all the time.

Food processing

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Food processing

Based on our raw materials, we create products of the same high quality as the ones prepared by consumers in their own kitchens.

Our products are sold all over the world. To the nest gourmet restaurants and to supermarket cold counters. As fresh meat and processed meat. And as ingredients for the industry.

Sales

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Sales

Danish Crown is keen to work in close partnership with the retail business and the foodservice sector, and often does so.

Whether talking about fresh meat or processed products, about our own branded products or concepts produced as private-label products for specific customers, then cooperation, customer focus and innovation always come first.

Consumer

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Consumer

Our products are enjoyed and appreciated by consumers all over the world.

It is food we produce, and food we sell to consumers worldwide. In supermarkets, in restaurants, at hotels, in canteens and at hot-dog stands, our products must stand out through their quality and value.

Farmer

The good quality of our products starts on the farm and at the slaughterhouse. Care and respect for the animals and nature are crucial for ensuring that we can produce high-quality products and create value for our customers and for consumers – and at the end of the day for our owners.

Slaughterhouse

We operate some of the world's most modern and technologically advanced slaughterhouses. The requirements regarding hygiene, animal welfare, quality, logistics and the working environment are high – and inspectors from the independent food authorities are looking over our shoulders all the time.

Food processing

Based on our raw materials, we create products of the same high quality as the ones prepared by consumers in their own kitchens. Our products are sold all over the world. To the finest gourmet restaurants and to supermarket cold counters. As fresh meat and processed meat. And as ingredients for the industry.

Sales

Danish Crown is keen to work in close partnership with the retail business and the foodservice sector, and often does so. Whether talking about fresh meat or processed products, about our own branded products or concepts produced as private-label products for specific customers, then cooperation, customer focus and innovation always come first.

Consumer

Our products are enjoyed and appreciated by consumers all over the world. It is food we produce, and food we sell to consumers worldwide. In supermarkets, in restaurants, at hotels, in canteens and at hot-dog stands, our products must stand out through their quality and value.

Internationalisation creates value

Chinese demand for pork exploded in the spring. This resulted in higher prices – and growing optimism among farmers.

In the fields around Langå, Denmark, the slaughter pig producer Einer Svane is busy sowing winter barley.

He is in a good mood, and it's not just because the sun is shining. After more than two years with pressure on slaughter pig prices, the market finally started to turn at the beginning of May, and in just 10 weeks, the payment paid to farmers for slaughter pigs increased by almost DKK 2 per kg. -

Immediately prices start to rise, I feel much calmer about everything, and the work is more fun, says Einer Svane.

The long-awaited increase in slaughter pig prices was primarily driven by massive demand from China. A growth in exports was expected.

There were indications as early as mid- 2015 of a decline in the Chinese pig population after figures were published showing a significant decrease in the number of gestating sows.

During the autumn and winter, sales to China gradually started to pick up, but everything pointed towards a slow-down after the Chinese New Year in February.

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Products

Food processing creates value

For Tulip Food Company, innovation and development are crucial to winning and maintaining market shares.

2015/16 in figures

Revenue in DKKbn

0

Cooperative members

0

No. of cooperative members in Danish Crown Group

Employees

0

No. of employees in Danish Crown Group

Share of revenue

Fresh Meat 54%

Foods 40%

Ingredients 6%

Share of EBIT

Fresh Meat 64%

Foods 27%

Ingredients 9%

Delivery: Pigs and sows

0

Pigs and sows per year in millions

Delivery: Cattle

0.
0

Cattle per year in millions

Processing

0

Processed products in thousands of tonnes

2015/16 i tal

Revenue in DKKbn

0

Cooperative members

0

No. of cooperative members in the Danish Crown Group

Employees

0

No. of employees in the Danish Crown Group

Share of revenue

Fresh Meat 54%

Foods 40%

Ingredients 6%

Share of EBIT

Fresh Meat 64%

Foods 27%

Ingredients 9%

Delivery: Pigs and sows

0

Pigs and sows per year in millions

Delivery: Cattle

0.
0

Cattle per year in millions

Processing

0

Processed products in thousands of tonnes

Good food creates value

Danish Crown's ripening rooms supply premium high-value meat products to some of Denmark's best restaurants and chefs.