a n n u a l r e p o r t 2004 - KU Leuven1)eng.pdf · from Ecotube NV for 4 months and from Van...

2 0 0 4a n n u a l r e p o r t

T a b l e o f c o n t e n t s0

Table of contents

1 Key figures 2004 4

2 The VPK Packaging Group activity cycle 6

3 Strategy 7

4 VPK Packaging Group in Europe 8

5 Group structure 9

6 Profile 10

7 Letter to the shareholders 13

8 Annual report of the Board of Directors 17

9 VPK Packaging Solutions 20

10 Summary of activities by segment 22

11 Co-ordination 36

12 Highlights 2004 - Events and prospects 2005 36

13 The VPK Packaging Group’s share 38

14 Consolidated key figures per share 39

15 Management and supervision - Corporate Governance 40

16 External communication 47

17 Social report 48

18 Social reponsibility 50

19 Quality and food security policy 51

20 Environmental policy 52

21 Logistics 56

22 Business process reengineering 57

Financial summary 59

VPK Packaging Group - Annual Report 20043

OPERATING INCOME (in mio EUR)

NET PROFIT (in mio EUR) NET FINANCIAL DEBT (in mio EUR)

COMBINED TURNOVER533 mio EUR - 100% Ondulys

VOLUMES

K e y f i g u r e s 2 0 0 41

Others 1%

Trade 9%

Raw materials 22%

Packaging 68%

Recovered paper 11%

Paper 43%

Corrugated board

+ solid board 35%

Tubes/cores 6%

Trade 5%

0

50

100

150

200

250

300

350

400

2002 2003(IFRS)

2004(IFRS)

0

5

10

15

20

25

30

2002 2003(IFRS)

2004(IFRS)

0

5

10

15

20

25

30

35

2002 2003(IFRS)

2004(IFRS)

EBITDA (in mio EUR) SOLVENCY RATIO (in %)

0

10

20

30

40

50

60

70

80

2002 2003(IFRS)

2004(IFRS)

0

10

20

30

40

50

60

2002 2003(IFRS)

2004(IFRS)

EBIT (in mio EUR) EVOLUTION OF INVESTMENTS* (in mio EUR)

0

5

10

15

20

25

30

35

40

2002 2003(IFRS)

2004(IFRS)

0

10

20

30

40

50

2002 2003 2004 2005E


Changes in the scope of consolidation: 2004 figures include the results of activities acquired from Deva Cores (UK) for 12 months, from Ecotube NV for 4 months and from Van Assche BVBA for 3 months. The results of Frano Packaging NV were not included.

(1) EBITDA = operating profit + depreciation + write-downs + provisions(2) EBIT = operating profit, i.e. result before financial result and tax(3) Net cash flow = net profit + depreciation + write-downs + provisions

in mio euro in mio euro

IFRS-data 31.12.04 31.12.03 Change (restated) (in %)

Net turnover 390.77 384.25 1.7Operating income 397.57 388.15 2.4

Operational cash flow (EBITDA) (1) 54.69 60.92 -10.2Operational cash flow (as % of operating income) 13.76 15.70 Operating profit (EBIT) (2) 29.96 36.97 -19.0Operating profit (as % of operating income) 7.53 9.53 Net financing costs -0.30 -2.45 Result before tax 29.82 35.02 -14.8Result according to equity method - - Tax 7.44 8.06 Profit 22.39 26.95 -16.9Group’s share in profit 22.39 26.95 Net cash flow (3) 47.12 50.90 -7.4 Balance sheet total 366.05 365.86 Shareholders’ equity 217.15 202.28 7.4Solvency ratio (in %) 59.32 55.29 Number of shares on 31-12 8,763,000 8,763,000 Ordinary profit per share (in EUR) 2.55 3.08 Net cash flow per share (in EUR) 5.38 5.81


C o n s o l i d a t e d k e y f i g u r e s 2 0 0 4 1

Recovered paper 11%

Paper 43%

Corrugated board

+ solid board 35%

Tubes/cores 6%

Trade 5%

T h e V P K P a c k a g i n g G r o u p a c t i v i t y c y c l e

Paper recovery and paper production for packaging purposes

Our paper recovery division collects paper, which is then sorted into different grades and sold to group or third-party recovered paper processing plants.

Within the group we use recovered paper and board to produce paper (corrugated paper, lining paper and tube board) which is used as the basis for the production of packaging.

Production of packaging

This division produces four complementary products: packaging made of corrugated board, solid board, board tubes and edge protectors. 85% of the raw material for this packaging consists of recycled fibre, and the packaging itself is ultimately 100% recyclable.

Trade

Here we act as an ideal logistical partner, responding to specific supply chain management needs on the part of our customers. In the markets in which we operate, we offer the com-plete range of packaging products and services.

2


VPK Packaging Group is a leading West European packaging group, who develops and produces innovative, protective and logistically effective packaging products using a maxi-mum proportion of recycled fibres.

Through our integration we control the whole chain, from recovered paper, through paper recycling and production, to high-quality printed cardboard transit packaging.

The trade in and distribution of this packaging to specialised niches is the last link in our integration chain.

Internal growth and international expansion

We are conscious of the need for internal growth, even when the economy is weak. A sub-stantial investment budget has once again been earmarked for 2004, to ensure our ability to respond in optimal fashion - effectively, flexibly and competitively - to our customers’ packaging requirements.

In terms of our acquisition policy, we will remain on the look-out for opportunities which are in line with the group1s basic activities, have a favourable geographical position and generate direct value for the Group through the generation of profit and synergy effects. We will also be paying particularly close attention to the avenues opened up to us in the new EU Member States. Our strong financial structure and profitability remain important advantages in this connection.

Human capital

We undertake to continue to focus on the creation of a stimulating working atmosphere for our employees and offer them career opportunities that allow them to develop their entrepreneurship and creativity to the full.

Strong financial structure

We aim to achieve a level of profitability that will allow us to achieve our objectives in a financially independent way. We ensure that we constantly create capital gains for our shareholders on their invested funds and pay out a suitable remuneration on their capital each year.

Sustainable enterprise

We attach considerable importance to ethical and ecological enterprise, exemplified in our environmental policy among other areas, and we see high-quality, forward-looking management as a high priority and a social requirement; this is reflected in our corporate governance policy.

VPK Packaging GroupVPK Packaging Solutions

S t r a t e g y3


V P K P a c k a g i n g G r o u p i n E u r o p e4


recovered paper

paper

corrugated board

solid board

tubes/cores - edge protectors

trade & services

8

VPK Packaging Group is organised as independently operating business units, based on three core activities.

1. the processing and production of raw materials (paper recycling and paper production)2. the production of packaging (corrugated board, solid board, tubes/cores and edge protectors) 3. trade

The business units are headed by a business unit mana-ger who, together with his team and within certain bud-gets, has complete responsibility for his profit and loss account.

Budgets are set every year at group level for target returns, investments and intercompany deliveries.

recovered paper• Doopa (merged with BVBA Recyclage Van Assche) (B)• O.K. Recycling (D)

paper• Oudegem Papier (B)• Rigid Paper (UK)

corrugated board - Belgium• VPK Packaging

corrugated board - Netherlands • VPK Packaging

corrugated board - France • Ondulys• Ondulys Tailleur• Ondulys Industrie• Ondulys Andelle• Ondulys Roye • Ondulys Gheysens• Ondulys Liane

corrugated board - United Kingdom • Rigid Containers

corrugated board - Poland • Ondulys Polska

solid board• VPK Packaging (B)

tubes/cores - edge protectors• Alltube (B)• Davrain (F)• Depauw (B)• Deva Cores (UK)• Ecotube (B)• Fionia (DK)• Holland-Almelo (NL)

trade & services• Handelsmaatschappij Ons Belang (NL)• Twinpack (fusie met Maasbach) (NL)• Ondulys Références (F)• VPK Services (B)

G r o u p s t r u c t u r e5


VPK Packaging Group is a rapidly growing, integrated industrial group, with a strong base in the West European market and active in the cardboard transit packaging sector.

In 2004, with 2,600 employees, we achieved a consolidated turnover of 390,77 million euro which is an increase of 1,7% in comparison with 2003.

Our strong financial structure, our favourable investment strategy and the defensive nature of our business, linked to our determination to continue growing, are the key factors that allow us to look to the future with confidence. We now have 24 production sites and 5 trade and service companies throughout the Benelux, France, the UK and Germany.

Locally collected recovered paper is processed in our own paper factories into new paper which in turn becomes a valuable raw material for packaging such as corrugated board, solid board and tubes. It is vital in production to take into account the strictest specifi-cations of our customers so that we can talk unconditionally about high-quality, service-oriented products.

To summarise, waste (recovered paper) becomes a raw material (paper) and paper becomes valuable packaging with a high service-providing value.

6


P r o f i l e

6


Our Recovered Paper division is an important player in the Belgian and German recovered paper recycling markets. Because of this and at the same time environmentally-friendly business process, the supply of a proportion of our raw materials is assured. We purchase the remainder of our raw materials outside our group. The recovered paper that is not sold within our group is sold as a raw material to external paper factories that produce newsprint and magazine paper. Our two sites at Roeselare and Aalst and our joint venture in Germany handled 106,000 tonnes last year.

Our Paper division, Oudegem Papier, is a European leader specialising in the production of paper for packaging on the basis of recovered paper. In 2004 our three specialised paper machines produced 342,000 tonnes of corrugated paper, liner paper and tubes and cores paper.

Rigid Paper, situated near York in the United Kingdom, produced 68,500 tonnes of paper for the corrugated board industry in 2004;

Our Packaging division produces high-quality, service-oriented packaging and designs, creates and produces new packaging on a constant basis to offer the ideal solution for our customers’ logistical needs. We currently manufacture corrugated board, solid board, tubes and edge protectors at 20 customer- oriented sites in the Benelux, France, the UK, Denmark and Poland.

In 2004 the total volume of packaging amounted to 410,000 tonnes.

Our Trade and Services division pursues a niche strategy and specialises, among other things, in the supply of packaging to flower and flower bulb exporters, packaging for poul-try and eggs and packaging for the meat industry besides fast deliveries on demand and small-run standard boxes.We have built up strong positions in the Benelux and France and we provide the supply chain management for customers in specific sectors.

Our innovative attitude, our carefully planned investment and acquisition policy and our dynamic employees all guarantee the continuation of our existing growth and profitability.

P r o f i l e


Pierre Macharis - Jean-Paul Macharis

Madame, Sir,Dear Shareholders,

Like 2003, 2004 was characterised by an adverse economic climate. Demand for packaging fell in every country where we are active, and profit margins came under severe pressure as a result. Delocalisations drove our customers to regions characterised by lower production costs; energy costs rose considerably.

Thanks to the strength of our balance sheet, we succeeded in maintaining our chosen strategy and our international expansion, and we are satisfied with our results.

The group’s turnover climbed 1.7% to €390.7m. This increase is mainly due to internal growth. 2004 also saw the group claiming a place among the top ten European suppliers of protective cardboard packaging.

The level of investment in 2004 was 8.5% higher than in 2003 (€29.1m). Intangible investments (€1.9m) mainly related to the continued implementation of the ERP system from SAP with a view to simplifying business processes, increasing customer ser-vice and reinforcing cost controls.The investment in tangible assets mainly related to the construction of a new corrugated board plant in Selby (UK), with the aim of raising capacity there and gaining the use of a hypermodern, state of the art processing unit that meets the most stringent safety and environmental requirements.

The financial result improved to €– 0.3m in 2004, thanks to the continued decrease in net financial debts and the low interest rates. Shareholders’ equity (before profit distribution) rose to €217.15m or 59.3% of the total assets. Net financial debts fell again to €16.9m, producing a gearing ratio (net financial debts/shareholders’ equity) of 7.8 % (8.8 % in 2003). Our financial structure thus remains very solid.

In 2004 we again stressed the need for an efficient environmental policy. Despite our pioneering role in the field of rational energy use, we have been obliged to adapt our in-vestment policy. The implementation of the Kyoto Protocol could give rise to considerable competitive distortions with our neighbouring countries.

L e t t e r t o t h e s h a r e h o l d e r s7


Oudegem Papier NV has undertaken to make the necessary investments so that we can retain our position among the world’s most energy-efficient businesses. Thus at Oudegem, approval has been given for investment in the construction of a biogas generator, which will produce green electricity. We are also looking at how energy can be produced from the non-recyclable fraction of the used paper stream.

Economic prospects for 2005 remain uncertain in all the countries where we are active, making reliable forecasting very difficult. What is clear is that a long-term state of overcapacity has arisen in paper production, that raw material and energy prices will continue to rise, and that, as a result, margins will come under severe pressure. Moreover, with 10 new Member States joining the EU, we are expecting a new spate of relocations. For the future, we are maintaining our strategy as a service-oriented group which creates packaging solutions for its customers with increasing added value in economically prosperous regions of Europe. We will continue to focus on both internal and external growth. As far as the latter is concerned, particular attention will focus on the new EU Member States. Thus we will already have the use of two operating sites in Poland in 2005.Our strong financial structure and profitability remain important advantages in this con-nection.

In January 2005, our holding in the French Ondulys group was increased from 50% to 95%. The Ondulys group has a consolidated turnover of €120m and 800 employees. Ondulys has four full-scale corrugated board factories (Lille, Paris, Rouen and Lisieux) and three corrugated board processing plants. In Poland, Ondulys has developed a corrugated board processing business near Warsaw. This transaction confirms VPK Packaging Group’s strategic choice to reinforce its pre-sence close to its customers, so that it can give them better, faster service.

7


L e t t e r t o t h e s h a r e h o l d e r s

7


Twinpack, VPK Packaging Group’s specialist trading arm, wants to start up a distribution business in the West of Poland in order to distribute packaging products in the specifi c markets where it is already active. To this end, Twinpack will invest in property and proces-sing machines.

External growth, with the Ondulys group transaction, the start-up of a new corrugated board plant in Selby (UK), scheduled for June 2005, and the Polish investments, should increase VPK Packaging Group’s annual turnover to €470m in 2005.

We are convinced that we can count on our employees, who have the requisite know-how and talent combined with loyal dedication and dynamism to build further on the balanced development and profi table growth of VPK Packaging Group. Together we are taking on a host of challenges successfully, and creating value for our customers, employees and shareholders.

Jean-Paul Macharis Pierre Macharis Chairman of the Board of Directors Chairman of the Management Committee and CEO

L e t t e r t o t h e s h a r e h o l d e r s


A n n u a l r e p o r t o f t h e B o a r d o f D i r e c t o r s8


ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE CONSOLI-DATED ANNUAL ACCOUNTS OF VPK PACKAGING GROUP FOR 2004 Dear Shareholders,

We have pleasure in presenting our report on the consolidated annual ac-counts of VPK Packaging Group for 2004.

As a listed group we are required to report in accordance with International Finan-cial Reporting Standards (IFRS) as from the financial year 2005 at the latest. The consolidated annual accounts for 2004 and the corresponding figures for 2003 already comply with these standards. The application of these new accounting standards primarily affects the valuation of tangible fixed assets, provisions for pensions and technical reserves, and latent tax liabilities. They have had a po-sitive effect on both shareholders’ equity and the results.

After three years of disappointing per-formances, the Western European eco-nomy gradually recovered in 2004. The Belgian economy in particular performed fairly well, thanks to growth in private con-sumption. Despite the improved state of the economy, our margins remain under severe pressure, due to overcapacity in both the raw materials (paper) sector and the finished products sector. Additionally, energy costs, which represent 15 to 20% of the cost price of paper production, climbed sharply, partly due to a flood of energy taxes.

The average rate of the pound sterling recovered slightly (+1.9%) compared with its average rate in 2003. Our mar-ket share increased in each of the coun-tries where we are active, apart from France.With the access of ten new countries to the EU, the first signs of delocalisation were clearly in evidence. We have map-ped out a strategy to respond to this trend, and have taken the first concrete steps to serve our customers in these countries. We continue to search actively for opportunities to develop a realistic representation structure for these new markets in the short and mid-to-long term.

Consolidated turnover increased by 1.7% to €390.8m. If one adjusts for changes in the scope of consolidation, turnover rose by 1.5%. Added value increased by just 0.5%, illustrating the pressure on margins already mentioned. Due to a rise in costs, operational cash flow fell by 10.2%, the operating result by 19.0% and the net profit by 16.9%. Shareholders’ equity rose to €217.2m before profit distribution, producing a solvency ratio of 59.3%. Over half the assets are thus financed out of share-holders’ equity. Net financial debts fell once again by almost 5% to €16.9m. The liquidity rate remains at 1.7, indica-ting a very solid financial structure.On 31 December 2004, the group held a total of 255,802 of its own shares in its portfolio. In line with IFRS standards, the cost price of these shares is now set off against shareholders’ equity rather than being treated as cash investments.

On 31 December 2004 we sold our 50% stake in Frano Packaging NV be-cause insufficient synergies could be achieved with the rest of the group. A gain was recorded on this sale. During the first quarter of 2005, Frano repaid all its debts to the group, apart from one leasing contract.

After the end of the financial year, we reached an agreement with our partners in the Ondulys group (France) regarding the takeover of virtually all their shares; at present, we hold 95% of this group’s shares in our portfolio. This gave us control of Ondulys, enabling us to inte-grate it fully into VPK Packaging Group. We are expecting that this will have a significant impact on our results from 2006 onwards. As a result, VPK Pac-kaging Group now occupies a firm place among the top 10 European suppliers of protective transport packaging.

In the area of research and develop-ment, VPK is working with the Univer-sity of Ghent on a breakthrough in the solution of one of the most problematic phenomena in the paper industry: the build-up of calcium in process water. Calcium obstructs water systems and causes discharge volumes to gradually decrease, until the calcium level reaches the point where pipes can be complete-ly blocked and machines stop working. Following successful laboratory tests, the unique process that has been de-veloped has confirmed its promising re-sults in the pilot plant that has now been constructed.

Although we make sporadic use of fi-nancial instruments in the field of cur-rency and interest rate hedging, the

nature and extent of such transactions are not material for assessing the group’s financial state. The contracts concerned are always intended to limit or exclude risk, rather than to adopt speculative po-sitions. As far as coverage of credit risk goes, VPK Services assumes this risk in factoring agreements with subsidiaries. VPK Services has in turn partially reinsu-red itself by concluding a credit insurance policy for a number of entities.

The asset total has scarcely changed. €29.1m was invested in intangible and tangible assets, about 8% more than in 2003. Intangible investments (€1.9m) mainly relate to the continued imple-mentation of the ERP system. The investment in tangible assets mainly related to the construction of a new cor-rugated board plant in Selby (UK), with the aim of raising capacity there and gaining the use of a hypermodern, state of the art processing unit that meets the most stringent safety and environmen-tal requirements, as well as the require-ments set by our customers in the food industry. The investments were financed entirely out of cash flow.

The €1.2m increase in stocks is large-ly attributable to the stock of finished products at the packaging departments, which use stock for sales purposes. Trade receivables rose slightly by €1.3m, which is entirely in line with the increase in turnover. Other receivables increased by €1.6m, mainly at Rigid.

As mentioned earlier, consolidated turn-over increased by 1.7% to €390.8m. This increase is mainly due to the growth in corrugated board activities in Belgium, the Netherlands and the UK, in solid board

8


A n n u a l r e p o r t o f t h e B o a r d o f D i r e c t o r s

and in tubes. Deva Cores was consolida-ted for the whole year.

The financial result came to €-0.3m. As a result of IFRS rules, goodwill is no longer depreciated; during the year-end proce-dures, consideration is given to whether goodwill still on the books (i.e. €15.4m) should be reduced “impairment test”. This was not the case in 2004.

Turning to the results of the various busi-ness units, we can see an improvement in the results at the paper department in Belgium, albeit to a level that is still far from satisfactory. The other depart-ments’ results remained the same or deteriorated.

We are not expecting things to improve in our sector in 2005: we believe that the overcapacity in our sector will not immediately disappear in the course of the year. Energy costs are also unlikely to fall to the level of two years ago.

However, we remain faithful to our tried and tested strategy as a service-orien-ted group which creates packaging solutions for its customers featuring ever higher added value, in economi-cally prosperous regions in Europe. As mentioned, we will continue to focus on both internal and external growth, and the new EU Member States will be a particular focus of attention. Thus recently, after the end of the financial year, we purchased a building near

Poznan (Poland) with a view to deve-loping a logistics centre there. Thanks in part to our solid financial structure and profitability, we are able to pursue this expansion policy in complete con-fidence.

We would like to thank all group person-nel members for their dedication and their contribution to the results, in diffi-cult market conditions. We are as grate-ful as ever to our shareholders for their confidence in the leadership and future of our group.

The Board of Directors

8


A n n u a l r e p o r t o f t h e B o a r d o f D i r e c t o r s

The packaging sector in which we ope-rate is an industrial service sector, in which all producers strive to provide the best possible service to their customers in the areas of product development, service and quality.

Within this diversified packaging mar-ket, paper and cardboard packaging have the greatest advantages due to their wide range of applications, their lightweight, versatility, hygiene, cost ef-ficiency etc. and also their promotional power based on the use of printing and their favourable impact on the environ-ment. The last factor is incontrovertibly due to the fact that paper and cardboard packaging is an inexhaustible renewable raw material for new packaging.

We are clearly responding to this trend.

Packaging of goods in paper or card-board, as we have already mentioned,

has promotional value for customers and also offers protection during trans-portation and the logistical process. It is within this combination, together with additional advantages such as strength, marketing and communication, infor-mation supply and just-in-time delivery, that we are constantly innovating and seeking for new products for new applications.

We, who are mainly active in the card-board transit packaging sector, offer our customers the opportunity to combine the benefits summarised above.

We are convinced of the crucial impor-tance of the protective function of our packaging, as a result of which it is pos-sible to ensure that the quality of goods is maintained during transportation. We promote the use of our packaging as display packaging through our high-

9


V P K P a c k a g i n g S o l u t i o n s

20

quality printing, as a result of which our packaging fulfils a marketing purpose.Our packaging (particularly our consu-mer packaging) is also used to diversify a product and make it appealing.For customers the product and the packaging is often a single coherent whole and their buying behaviour is in-fluenced by the packaging.Through our packaging on which we have printed promotional information about the contents, our customers can, in turn, communicate with their custo-mers.The environmental friendliness of our packaging is more than evident since it can be recycled again and again into new packaging once it has fulfilled its function as set out above. What is more, it is initially produced from more than 85% recycled raw materials.

But that’s not all.

VPK Packaging Group has developed from a product-oriented organisation to a service organisation in which a great deal of attention is paid to customers’ specific needs in the field of packing, printing, supply chain optimisation, JIT deliveries, Vendor Managed Inventories (VMI), Col-laborative Planning, Forecasting and Replenishment (CPFR),...The full range of services offered to the customer is combined in the VPK Packing Solutions® concept.

More specifically, in the area of supply chain optimisation we have invested in an application we call FLI® (Forward Logistic Integration). The basic principle is quite simple: by exchanging information about planning and stocks, we can optimise our custo-mers’ stock management and our own production costs, creating a win-win situation for both parties. This optimisation involves fine-tuning orders, production and stock levels to one another. The advantages are clearly apparent from the fall in the demand for working capital, the reduction in the need for storage capacity, the increased stock rotation, the improvement in delivery reliability and administrative simplifica-tions.These advantages are continually eva-luated and measured, and any required adjustments made on the basis of the results.Each customer is treated individually, with the ideal solution being worked out in each specific case. We are convinced that our experience and our successful implementations mean that we can and will continue to make a difference for our customers.

9


V P K P a c k a g i n g S o l u t i o n s

450,000 tonnes of recovered paper

were used by VPK Packaging Group

as raw material to manufacture paper

for packaging purposes in 2004

10


S u m m a r y o f a c t i v i t i e s p e r s e g m e n t

0

30

60

90

120

150

2002 2003 2004

Evolution of volumes Doopa NV(000 tonnes)

10.1.1 recovered paper

Our recovered paper division collects paper which is then sorted into various qualities and

sold to the recovered paper processing industry.

We have three sites in Belgium (Roeselare, Dendermonde and Aalst) and one in Germany

(Diedorf). Our recycled paper capacity is 200,000 tonnes; we buy the rest on the market.

Recovered paper prices remained stable but at a high level in 2004. This was mainly due

to the lower volume of recovered paper available on the market as a result of the adverse

state of the economy and the increase in international demand.

In 2004 the joint venture O.K. Oudegem Kühl Recycling GmbH, which was set up between

VPK Packaging Group and Rolf Kühl, a large German recycling business, again contribu-

ted to the supply of recovered paper for Oudegem Papier.

SITES

Doopa NV - Roeselare (B) - Aalst (B) - Dendermonde (B)Recovery company

Doopatrans NV - Roeselare (B) Service company

O.K. Oudegem-Kühl Recycling GmbH - Diedorf (D) Recovery company

10.1


T r e a t m e n t a n d p r o d u c t i o n o f r a w m a t e r i a l s

10OVERZICHT ACTIVITEITEN

2. productie van verpakkingen

In 2004, 412,000 tonnes of paper

were produced by

VPK Packaging Group

Evolution of volumes(000 tonnes)



0

100

200

300

400

500

2002 2003 2004

10.1

10.1.2 paper

At Oudegem Papier and Rigid Paper, paper for packaging purposes is manufactured from

recovered paper and cardboard. The paper produced for packaging purposes is partly

used in the production of our own cardboard packaging and partly sold to other paper

processing companies.

The volume produced at Oudegem Papier was 342,000 tonnes (compared with 336,000

tonnes in 2003) and the volume produced by Rigid Paper was 70,000 tonnes (compared

with 68,500 tonnes in 2003).

Paper prices were under pressure as a result of overcapacity on the paper production

market, and margins fell due to sharp increases in the cost of energy, consumables and

raw materials.

Competitive position

At its site in Dendermonde, Oudegem Papier has three highly specialised paper machines

with a total capacity of 360,000 tonnes.

Paper machine 1 specialises in the production of raw materials for the solid board industry

and the tubewinding industry. It underwent a conversion in 2002 which increased its capa-

city by 20,000 tonnes up to 70,000 tonnes a year, and improved the quality of the paper.

Paper machine 6 produces ‘Testliner’ (the brown outer layer used on a corrugated or solid

board box) and paper machine 7 concentrates on ‘Wellenstof’ (the corrugated sheet within a

corrugated board complex). Paper machine 7, which came into use in 1996, has a capacity

of 150,000 tonnes per year.

SITESOudegem Papier NV Dendermonde (B) Paper factoryCapacity 360,000 tonnes

Rigid Paper LtdSelby (UK)Paper factoryCapacity 70,000 tonnes


T r e a t m e n t a n d p r o d u c t i o n o f r a w m a t e r i a l s





Four complementary products:

corrugated board, solid board,

tubes and edge protectors.

Raw material: 85% recycled fi bres

Product: 100% recyclable

Corrugated board is our most

important fi nished cardboard product.

295,000 tonnes of corrugated board

was produced in 2004.

0

50

100

150

200

250

300

2002 2003 2004


10.2

10.2.1 corrugated board

Corrugated board is made by joining together different paper types, whereby the middle

layer of paper is shaped in a wave pattern. Corrugated board meets the most varied de-

mands from the market: stackability, resistance to shock, differences in climate, printability

etc.

In many cases corrugated board is still the most suitable packaging due to its low cost and

the limited cost of creating new packaging.

Corrugated board is the ideal medium for promotional communication.

We continue to invest substantially in research, in the implementation of new printing tech-

niques and in new production applications. Our own design and print department provides

a service tailored to our customers. Our ultimate aim is to offer the ideal solution for all our

customers’ packaging needs, within the context of their logistical needs.

In order to ensure the successful achievement of this objective, the following investments

were made.

The expansion project at the Aalst site has provided 12,000 m2 of additional operating

space. A new Agnati corrugated board machine was installed, resulting in a productivity

increase and the achievement of a high standard of packaging. The plant’s finishing capa-

city was also expanded by the installation of two flat die-cutting machines and a folding

and gluing machine.

These machines will enable VPK Packaging to increase its market share in high-quality

printed and complex-design cardboard transport packaging, trays and displays.

The corrugated board department in Oudegem started using the group’s new rotary die-

cutting line at the end of 2003. This line is 80 metres long and consists of the die-cutting

machine itself, printing units, turntables, two breakers, a stacking facility and a fully auto-

matic palletiser.


P r o d u c t i o n o f p a c k a g i n g

Four complementary products:

corrugated board, solid board,

tubes and edge protectors.

Raw material: 85% recycled fibres

Product: 100% recyclable

Corrugated board is our most

important finished cardboard product.

295,000 tonnes of corrugated board

was produced in 2004.





SITES

9 corrugated board factories

VPK Packaging NVDendermonde (B)Aalst (B)

VPK Packaging BVRaamsdonksveer (NL)

Ondulys SA - Lille (F)

Ondulys Tailleur - Parijs (F)

Ondulys Andelle Fleury-sur-Andelle (F)

Ondulys Industrie - Lisieux (F)

Rigid Containers LtdSelby (York) (UK)Desborough (Northampton) (UK)

4 corrugated board-processing factories

Ondulys Roye - Roye (F)

Ondulys Liane - Boulogne (F)

Ondulys GheysensTourcoing (F)

Ondulys- Polska (PL)

10.1

10.2.1 corrugated board

In the UK too, we started on the expansion of our corrugated board factory at Rigid Con-

tainers. A new factory will come into use in Selby in June 2005. This should enable us to

meet the requirements imposed by the food industry on packaging suppliers in terms of

food security and hygiene. The site’s capacity will also be more than doubled as a result.

In Warsaw, Poland, we made a successful start on a ship-to-line project for the packaging

of television sets via our subsidiary Ondulys Polska. This investment should mean that we

are also able to supply our customers in Central Europe optimally.

Competitive position

We are maintaining our strategy, which in concrete terms consists of raising the service we

provide to our customers through total logistical packaging concepts, high-quality printing

and development of new products. This total service provision to customers is bundled in

the VPK Packaging Solutions® concept, which has further strengthened VPK Packaging

Group’s market position.

Sites

We have nine integrated corrugated board factories in Benelux, France and the United

Kingdom, where paper is processed into packaging. We also have three corrugated board

processing factories in France, where externally sourced corrugated sheets are processed

into more tailor-made packaging.

We have a production capacity of 320,000 tonnes for corrugated board.



4 corrugated board-processing factories

Ondulys Roye - Roye (F)

Ondulys Liane - Boulogne (F)

Ondulys GheysensTourcoing (F)

Ondulys- Polska (PL)



Our solid board division has taken its

place alongside corrugated board.

There is a constant interchange between

solid board and corrugated board.

Ultimately our aim is to work with our

customers to produce the packaging that

is best suited for them, taking their

specifi c needs into account.




0

10

20

30

40

50

2002 2003 2004

10.2

10.2.2 solid board

Solid board is suitable for use in damp conditions such as packaging for poultry, meat,

vegetables and other food products and flowers. The moisture resistance of solid board is

due to the process used in manufacturing it, with three or four layers of paper glued together

with waterproof adhesive. If required, the level of resistance to moisture can be further enhan-

ced through extra treatments of one or more layers.

The high printing quality (up to six colours) offers benefits in terms of the promotional and

communication characteristics of the packaging.

We are aiming at four segments of the market: the meat, chicken, vegetable and flower

sectors, and we are active in 12 European countries.

With our own design office, the solid board division is able to respond quickly and appro-

priately to the constantly changing needs of a rapidly evolving market. Our vertical inte-

gration guarantees the division’s independence from the raw materials market, resulting in

highly reliable deliveries for our customers.

SITE

VPK Packaging NVDendermonde (B)





Our tubes division offers a

complete range of tubes

and cores.

It also supplies edge

protectors.Evolution of volumes(000 tonnes)



0

10

20

30

40

50

2002 2003 2004

10.2

10.2.3 Tubes/cores and edge protectors

Parallel-wound tubes are used to roll up textiles and floor coverings. Spiral-wound tubes

are more technically complex and are used for applications in the paper, film, textiles and

aluminium sectors and for highly diversified industrial applications.

The edge protectors are used for corner protection in the agro sector and in industry to

improve the protection of products which are stacked on pallets.

The commercialisation of the upper end of the tube market with smooth cores for the foil

industry, cores with barrier material for the food industry and cores with a soft, recyclable

felt layer for the steel industry was successfully continued in 2004.

Since 2003 VPK Packaging Group has held a 30% stake in Fionia Emballage 2003 A/S

(DK). Fionia, which is the market leader in Denmark, processes approximately 4,500 ton-

nes of paper per year and produces tubes and edge protectors in the vicinity of Nyborg.

Fionia provides an ideal base from which to supply Denmark, northern Germany and southern

Sweden.

Deva Cores Limited in Mold, close to Manchester (UK), produces approximately 5,000

tonnes of high-quality tubes and cores per year and was acquired in 2003.

These investments have resulted in the further expansion of the group’s tubes division.

The group’s six plants today have a total capacity of 60,000 tonnes. From these produc-

tion units, the major markets in Europe, i.e. the UK, Scandinavia, Germany, France and

Benelux, are supplied.

The tubes division also has a research and development team, based in Belgium, which

develops new applications and products.

SITES

Alltube NVDeerlijk (B)

Depauw NVHarelbeke (B)

C.I. Holland-Almelo BVWierden (NL)

Davrain SA Leers (F)



Fionia Emballage 2003 A/S Ferritslev (DK)

Deva Cores Mold (UK)

Ecotube NV (B)Menen





10.3

Our trade division acts as an ideal logistical partner responding to the specific needs of our

customers and hence creating higher added value.

Handelsmaatschappij Ons Belang (NL) specialises in packaging for flowers, bulbs and

plants. Twinpack in Barneveld (NL) specialises in the packaging trade for poultry and eggs.

Following its merger in 2004 with Maasbach from Krimpen aan den IJssel Twinpack has

been the market leader in the meat packaging trade.

Via Ondulys, we operate from Paris, Roye and Lille in France. Our activities are being

further streamlined in order to ensure our customers the best possible service.

SITES

Handelsmaatschappij Ons Belang BV Noordwijkerhout (NL)

Twinpack BV Barneveld (NL)

Ondulys Références SASParijs (F)


T r a d e

12

C o - o r d i n a t i o n

This company was set up in 1998 with the goal of ensuring the coordination, development and centralisation of a number of activities, both in Belgium and abroad, purely for the benefit of the companies of VPK Packaging Group as a whole.

The activities coordinated and/or cen-tralised are basically financial manage-ment and the coverage of risks arising

from fluctuations in exchange and inte-rest rates.

In order to develop its activity as “ban-ker to the group”, the capital of VPK Services has been increased to 118,5 million euro in March 2005.

VPK Services provides complete business financing for all wholly owned subsidiaries, as well as the recovery and insurance of trade debts.

11

2 0 0 4 H i g h l i g h t s

January 2004Implementation of ERP system

In 2004, the ERP system was implemen-ted at the financial departments at Rigid Group and Oudegem Papier.

March 2004Legal merger between Maasbach Verpakkingen BV and Twinpack BV

Maasbach Verpakkingen BV ceased to exist as a result of a legal merger. The acquiring company was Twinpack BV in Barneveld.

April 2004New edge protector machine for the tubes division Davrain, our tube factory in France, pur-chased a new edge protector machine

that is identical to its existing machine, thereby doubling its capacity.

August 2004Acquisition of Ecotube NV by Alltube NV

September 2004Acquisition of BVBA Recyclage Van Assche by Doopa NV

Oktober 2004Conversion of paper machine 7 in order to raise productivity.

December 2004Sale of 50% holding in Frano Packaging NV


VPK Services

12


2 0 0 4 H i g h l i g h t s

EVENTS AFTER 31 DECEMBER 2004

January 2005

Purchase of land and a building loca-ted near Warschau (PL) by Ondulys Polska in order to develop a corruga-ted board activity and a logistic part-nership.

February 2005

Holding in Ondulys increased to 95% In February 2005, VPK Packaging Group increased its holding in the French Ondu-lys Group to 95%.

March 2005

Legal merger between BVBA Recy-clage Van Assche and Doopa NVBVBA Recyclage Van Assche (B) ceases to exist as a result of a legal merger. The acquiring company is Doopa NV in Roe-selare.

March 2005

Relocation to the Corporate Center in Aalst (Villalaan 16, 9320 Erembo-degem - Aalst), where the central and administrative departments are based.

PROSPECTS FOR 2005

Economic prospects for 2005 remain uncertain in all the countries where we are active, making reliable forecasting very difficult. What is clear is that a long-term state of overcapacity has arisen in paper pro-duction, that raw material and energy prices will continue to rise, and that, as a result, margins will come under severe pressure. Moreover, with 10 new member states joining the EU, we are expecting a fresh spate of relocations. For the future, we are maintaining our strategy as a service-oriented group which creates packaging solutions for its customers with increasing added value in economically prosperous regions in Europe. We will continue to focus on both inter-nal and external growth. As far as the latter is concerned, our particular atten-tion will focus on the new EU member states. Our solid financial structure and profita-bility remain important assets in an en-vironment where tough competition will inevitably lead to a consolidation of the market. We shall continue to respond to our cus-tomers’ increasing demand for service, quality and expansion in 2005.

37

Listing

On 9 April 1999, VPK Packaging Group shares were listed at €29.00 in the double fi xing segment of the Cash Market at the Brussels Stock Exchange.Since 24 March 2000, VPK Packaging Group shares have been listed in the continuous segment.

The Brussels Stock Exchange and VPK Packaging Group’s share price in 2004

VPK shares peaked at €29.00 on 4 March, but fell back to €24.00 on June 2004. It subsequently rose slightly and continued to hover between €24.50 and €25.50 during the fi nal months of 2004.The closing price at the end of Decem-ber 2004 (€24.90) was 2.4% lower than at the end of December 2003 (€25.50).

The group’s market capitalisation on 31 December 2004 was €218m, compa-red with €223m at the end of 2003.

Dividend

We aim to pursue a dividend policy that refl ects a sound fi nancial policy within our group and also offers appropriate remuneration to our shareholders, in comparison with the other companies quoted on Euronext Brussels.

It will be proposed at the General Meeting on 27 May 2005 to pay out a gross divi-dend of €0.51 per share for the fi nancial year 2004, i.e. €0.3825 net for ordinary shares (after deducting 25% securi-ties withholding tax) and €0.4335 net for VVPR shares (after deducting 15% secu-rities withholding tax).This represents an increase of 10.9% on 2003.

Purchase of own shares

The total number of redeemed shares on 31 December 2003 was 171,253. During 2004, the group purchased 84,549 of its own shares, in accordance with the provisions of the articles of asso-ciation and company law. The total number of redeemed shares on 31 December 2004 was 255,802.

These shares may be used as a source of fi nancing for the purchase of interests outside the scope of consolidation, or may be transferred to the personnel as part of the implementation of the war-rant scheme.

13


T h e V P K P a c k a g i n g G r o u p s h a r e

14

In EUR per share IFRS IFRS

2004 2003 Evolution (restated) in % EBITDA (1) 6,24 6,95 -10,2%EBIT (2) 3,42 4,22 -19,0%Shareholders’ equity 24,78 23,08 7,4%Profit before tax 3,40 4,00 -14,8%Group’s share in consolidated profit per share 2,55 3,08 -16,9% Net cash flow (3) 5,38 5,81 -7,4% Gross dividend 0,51 0,46 10,9%Net dividend per ordinary share 0,3825 0,3450 10,9%Net dividend per WPR share 0,4335 0,3910 10,9%Pay out ratio 20,0% 15,0% 33,4% Maximum rate 29,00 26,40 9,8%Minimum share price 24,00 20,91 14,8%Share price at end of December 24,90 25,50 -2,4% Share price (31/12) /net profit 9,8 8,3 Share price (31/12) /net cash flow 4,6 4,4 Average number of shares traded per month 24.807 12.527 Number of shares traded per year 297.686 150.326 Number of shares x 1,000 8.763 8.763 Market capitalisation at end of December in €m 218,2 223,5

(1) = operating profit + depreciation + write-downs + provisions

(2) = operating profit, i.e. result before financial result, tax and extraordinary result

(3) = net profit + depreciation + write-downs + provisions


C o n s o l i d a t e d k e y f i g u r e s p e r s h a r e

39

I. Management and supervision

Board of directors

Chairman and Managing Director Jean-Paul Macharis

Managing Director Chairman of Management Committee,CEO Pierre Macharis

Directors NV Main Holding permanently represented by Luc Geuten BVBA ACPY Management Consultants permanently represented by Bruno Accou BVBA DIMACOR (*) permanently represented by Carl Verstraelen BVBA Jozef Schoonjans permanently represented by Jozef Schoonjans

Daniel Forget

Dirk Meeus

Denis Zenner (*)

Management Committee

Pierre Macharis Chairman of the Management Committee, CEO Group co-ordination and strategy Co-ordination of Corrugated Board France and Cores/Edge protector Business Units Jean-Paul Macharis Group co-ordination, sales and investments for corrugated board Co-ordination of Corrugated Board Belgium and the Netherlands Busi- ness Units BVBA Jozef Schoonjans met vaste vertegenwoordiger Jozef Schoonjans Group financial director Co-ordination of Trade Unit BVBA 2B permanently represented by Guy Hanssens Investment projects, energy, environment, safety Co-ordination of Paper and Corrugated Board UK Business Units

BVBA Vanhee permanently repre-sented by Johan Vanhee IT, logistics, supply chain management Co-ordination of Solid Board Business Unit

Statutory auditor Grant Thornton, Lippens & Rabaey BVCV, Belgian Member Firm Grant Thornton International, represented by Mr Stefaan Rabaey

15


M a n a g e m e n t a n d s u p e r v i s i o n

* To be proposed for appointment at the annual general meeting on 27 May 2005

15

II. Corporate Governance

Corporate Governance Code In view of ensuring the interest of its shareholders and more generally of all stakeholders, VPK Packaging Group continuously seeks to optimize the ma-nagement, administration and control-ling of its operations. Furthermore, VPK Packaging Group communicates on a regular basis with the press, the financial analysts, the shareholders and the public in general, by way of press releases on its financial results, the distribution of the Annual Report via the VPK Packaging Group’s website and on an ad hoc basis.

On 9 December 2004, the final version of the Corporate Governance Code for Belgian listed companies, better known as the Lippens Code, was issued.

The code, which came into force on 1 January 2005, does not contain legal-ly binding rules, but rather consists of principles, provisions and guidelines on the basis of which Belgian listed com-panies are managed and supervised. The code’s authority predominantly derives from the fact that it is complied with and implemented by Belgian listed companies.

The code does not formulate any objec-tives neither does it supply yardsticks for checking whether a business has sound corporate governance or not.

The code is also not intended as an end in its own right; rather, it is a means of achieving a good corporate governance model in which an equilibrium is forged between entrepreneurship and controls, and between effective performance and conformity with the code.

It is VPK Packaging Group’s general in-tention to comply with the Code’s prin-ciples, taking into account VPK‘s Pac-kaging Group specific necessities. Any deviation from the Code shall be com-municated in VPK Packaging Group’s Annual Report for the 2005 annual accounts.

In its session on 17 March 2005, the Board of Directors of VPK Packaging Group NV established the following ca-lendar with regard to corporate gover-nance:

2005Specific agenda point on corporate go-vernance for information and delibera-tion for shareholders at the ordinary ge-neral meeting on 27 May 2005

Preparation by the Board of Directors, and this in co-operation with the Manage-ment Committee, of a VPK Packaging Group Corporate Governance Charter, that will explain the structure and policy of VPK Packaging Group on corporate go-vernance.

2006Publication of the Corporate Governan-ce Charter on the website; the Charter will come into force on 1 January 2006 and will provide information about the group’s structure and its policy on cor-porate governance

Inclusion of a special chapter in the Board’s annual report on the subject of corporate governance, providing in-formation about corporate governance practices during 2005 and any departu-res from the code.


C o r p o r a t e g o v e r n a n c e

Corporate governance – sustainable enterprise

For the VPK Packaging Group, corpo-rate governance is also equated with sustainable enterprise. This means the balanced development and growth of a business in terms of its economic, social and environmental performance. We want to meet this challenge, and as a business we strive to achieve the fol-lowing: we bring products to the market that meet the real needs of our custo-mers, we accept our responsibilities to-wards society and the environment, we offer our shareholders economic suc-cess and we offer our personnel a safe and healthy working environment and opportunities for growth.

A concrete example of this is the ongoing optimisation of our production process, which is a step towards doing business in a way that is more sustainable both economically and ecologically. Training courses for our employees also serve both the ecological and social aspects of sustainable enterprise.

We are also convinced that there must be a balance in our policy and strategy between the values expected by the various stakeholders in return for what they provide: the capital provided by our shareholders, the knowledge and skills offered by our employees, the turnover provided by our customers, the speed of development of the horizontal value chain that is offered by our partners and the environment – society’s contribution – in which VPK Packaging Group can continue its growth. All our stakeholders expect to receive fair value in return for what they provide, and we see it as our duty to ensure that they get it.

Sustainable enterprise also means that all stakeholders should be informed and that this information should be up-to-date, reliable, correct and transparent.

Sustainable enterprise is also linked to the legal responsibility that is borne by the Board of Directors: this comprises statutory responsibilities as well as audit, financial and environmental responsibili-ties, social, fiscal and para-fiscal obliga-tions etc.For example we fully subscribe to the principle of prudential management, striving to act in the most appropriate manner in every possible circumstance and situation.

It is important that our Directors should have the right attitude. In addition to the four executive directors, three non-executive independent directors also sit on our Board of Directors. Our directors are carefully recruited for their experience and specialities but also for their integrity, propriety and reliability.In order to reinforce the Board of Direc-tors, a proposal will be made to the an-nual general meeting on 27 May 2005 to appoint M. Denis Zenner and BVBA DIMACOR, permanently represented by M. Carl Verstraelen, as directors; their term of office will end at the annual ge-neral meeting in 2009.

Last but not least, for us sustainable en-terprise also means pursuing an efficient environmental policy.Our clear ecological approach is evident first and foremost from our production process: the production of paper and packaging on the basis of recovered paper and the production of lower sub-stance paper. Thanks to the production of lower substance paper it is possible

15



15

to manufacture lighter packaging and as a result there will ultimately be less packaging waste.

The optimisation of our internal produc-tion flows also forms part of our efficient environmental approach.We are constantly looking for ways of reducing our energy consumption and ways of scoring significantly better than the legal standards that are imposed upon us in areas such as discharges and flue gas emissions, so that our net impact on the environment is constantly shrinking.

III. Board of Directors

1. COMPOSITION

Executive Directors (representatives of the key shareholders)

Jean-Paul Macharis (°1955) Chairman of the Board of Directors and managing director

Pierre Macharis (°1962) Managing director, chairman of the Management Committee

BVBA Jozef Schoonjans permanently represented by Jozef Schoonjans, (°1951) Director

Daniel Forget (°1941) a French national, general manager of the Ondulys GroupDirector

Non-executive Directors

NV Main Holding permanently represented by Luc Geuten (°1943)CEO and joint-chairman of Mitiska NV Independent director

BVBA DIMACOR (*) permanently represented by Carl Verstraelen (°1952), managing director, former CEO of Amylum (actually known as Tate & Lyle) and former CFO of LHOIST GroupIndependent director

BVBA ACPY Management Consultants permanently represented by Bruno Accou (°1961)CEO and chairman of the Management Committee of BAM (Beheersmaat-schappij Antwerpen Mobiel)Independent director

Dirk Meeus (°1966) Partner Allen & OveryIndependent Director

Denis Zenner (°1976) (*) Director

(*) To be proposed for appointment at the annual

general meeting on 27 May 2005

In accordance with Article 20 of the co-ordinated articles of association, the Board of Directors includes at least three members who do not need to be shareholders. Their mandate may not exceed six years. Outgoing directors may be reappointed.



2. POWERSIn accordance with Article 20 of the co-ordinated articles of association, the Board of Directors has the most exten-sive powers to transact all dealings that are necessary for or conducive to the fulfilment of the company’s objectives.

Among other things, and apart from what is legally required, this includes:

discussing and, where appropriate, approving strategic plans, expansion plans and budgets;appointing and dismissing members of the Management Committee and super-vising its work;deciding on accounting principles;discussing and, where applicable, approving acquisitions. 3. ACTIVITIES The Board of Directors meets regularly and at least four times per year.In 2004, meetings were held on 18 March, 17 June, 14 September and 14 December.The directors receive the agenda prior to each meeting, as well as any infor-mation required about the topics to be dealt with.In accordance with Article 18 of the co-ordinated articles of association, the Board of Directors takes decisions based on a majority of the votes cast.In 2004, all decisions were taken unani-mously.In accordance with Article 19 of the co-ordinated articles of association, the deliberations of the Board of Directors are recorded in minutes that are signed by the members present.

4. ADVISORY COMMITTEES SET UP BY THE BOARD OF DIRECTORSWe have decided to continue with the Special Committee for Monitoring the Warrant Plan and the Appointments and Remuneration Committee, and not to set up any new committees for the time being. This decision was prompted by the wish to retain the current efficiency in decision-making, taking account of the size of the company and the relatively limited scope of the Board of Directors.

4.1. Special Committee for Monitoring the Warrant Plan

In February 1999, the General Meeting decided to create a warrant plan for the benefit of senior executives, managers and members of the Board of Directors.As a result of this, warrants may be allo-cated that entitle the holder to subscribe to a maximum of 100,000 shares, repre-senting a maximum of 1.13% of the issued share capital.The aim of this plan was to encourage the input and motivation of managers in the long term and to increase and perpetuate the profitability of the VPK Packaging Group.The special committee did not allocate any new warrants in 2004.

Composition and activitiesThe Special Committee for Monitoring the Warrant Plan consists of two mem-bers:- Jean-Paul Macharis- Pierre MacharisIt meets at least once a year.

15



15

Powers to designate those who are eligible for allocation; to define the number of warrants;to define the conditions under which al-locations are made in a warrant plan.

4.2. Appointments and Remuneration Committee

Composition and activitiesThe Appointments and Remuneration Committee consists of four members: Members Jean-Paul Macharis Pierre Macharis BVBA Jozef Schoonjans, permanently represented by Jozef Schoonjans BVBA ACPY Management Consultants, permanently represented by Bruno Accou

It meets at least once a year.

Powersto recommend new directors to the Board of Directors; to make recommendations to the Board of Directors regarding the com-position of the Management Commit-tee; to determine the remuneration of the Directors and Auditors, Members of the Management Committee and Business Unit Managers;general remuneration policy.

As we assume that sustainable enterpri-se also means that all stakeholders are kept informed as closely as possible, we regard it as vital that our website also contributes to this goal.

We have informed the Banking, Finance- and Inssurance Commission that we wish to use our website to distribute financial information.

IV. Management Committee

The transfer of powers by the Board of Directors to the Management Committee - approved by the Board of Directors on 24 March 2003 - was ratified by the Ex-traordinary General Meeting on 30 May 2003.

In concrete terms, the following areas now fall within the powers of the Management Committee:devising the strategy and long-term objectives which are presented to the Board of Directors for its approval;implementing the strategy (translating it into plans, objectives and budgets); monitoring budgets and managing invest-ment plans;supervising and coordinating the various activities and subsidiaries within the group; managing the internal audit function; co-ordinating the Business Unit Mana-gers;identifying and realising group synergies;developing new activities within the group’s core businesses; proposing acquisitions to the Board of Directors.



On 17 March 2005, the Board of Direc-tors, in accordance with the general rules regarding the Management Committee and on the basis of its supervision of the Management Committee’s main activi-ties up to 31 December 2004, granted its discharge to the members of the Manage-ment Committee.

V. Day-to-day management

In accordance with the stipulations of Article 23 of the co-ordinated articles of association, the Board of Directors has transferred the day-to-day management of the company to Jean-Paul Macharis and Pierre Macharis, who both have the title of Managing Director.

In accordance with the stipulations of Article 23 of the co-ordinated articles of association, Business Unit Managers have been appointed as being respon-sible for their Business Unit according to the profit centre model. They have, wor-king within certain budgets, full respon-sibility for their profit and loss account, together with their employees.Each year the budgets are determined at group level in relation to profitability targets, investments and intra-group supplies.

VI. Remuneration

The Executive Directors, as well as the main executives are remunerated for their management functions with a fixed salary and a variable bonus, based on individual performance on the financial results of VPK Packaging Group and its subsidiaries.

For 2004, the overall gross remuneration of the members of the Board of Direc-tors and the Management Committee, including the fixed and variable remu-neration for their activities as executives at VPK Packaging Group and its sub-sidiaries, amounted to 1.459.970 EUR in total, of which the fixed part totalled 1.109.970 EUR and the variable part 350.000 EUR. The share of non execu-tive Directors amounted to 28.000 EUR in total for all of them.

No advances, loans or guarantees have been offered by VPK Packaging Group to the Directors, executives or advisory bodies. VII. Protocol for preventing the misuse of insider knowledge

To prevent privileged information being used unlawfully by directors, shareholders, management members or employees (‘in-siders’), and to prevent the impression of such unlawful use being created, the Board of Directors of VPK Packaging Group developed a protocol in 1999 de-signed to prevent the misuse of insider knowledge.This protocol is aimed at protecting the market, ensuring compliance with statu-tory requirements and safeguarding the reputation of the VPK Packaging Group.In addition to a number of restrictions on the trading of financial instruments in VPK Packaging Group where insiders have privileged information that is not (yet) available to the public, there are also a number of preventive measures and guidelines designed to safeguard the confidential nature of privileged infor-mation.

15



16

15

Every ‘insider’ who falls under this descrip-tion signed this protocol in 2004.

VIII. Auditor

Grant Thornton, Lippens & Rabaey BVCV, Belgian Member Firm of Grant Thornton International, represented by Mr Stefaan Rabaey, whose registered office is at 9000 Gent Lievekaai 21, will be nominated by the Board of Directors at the annual general meeting on 27 May 2005 for reappointment as statu-tory auditor for a three-year term ending at the annual general meeting in 2008.

In 2004 an amount of 32.055,00 EUR has been paid as fees, of which an amount of 19.205,00 EUR was in con-nection of his legal controlling duties and 12.850,00 EUR was in connection to special tasks that were outside the scope of his legal controlling duties.



E x t e r n a l c o m m u n i c a t i o n

We believe that sustainable enterprise also means that all stakeholders should be kept as closely informed as possible, and we therefore regard it as vital that our website should also contribute to this goal.

We have informed the Banking and Finance Commission that we wish to use our website to distribute financial information and that we will comply with all associated requirements.

Vacancies are advertised on our web-site and are updated regularly.

Many outsiders make use of the oppor-tunity to ‘contact our CEO’.

www.vpk.be

2004

We believe that our continued success as an independent group is assured, thanks to the motivation of all group employees, who achieve ever greater things every day in their effort to develop new products, conquer new markets, increase productivity and raise quality standards.The main new development in 2004 was that we welcomed our first Polish employees into VPK Packaging Group as a result of the start-up of Ondulys Polska in Zyrardow, near Warsaw.

In Oudegem (Dendermonde), where VPK Packaging Group’s registered office is located, among other bodies all ge-neral group services were based until February 2005. Apart from the person-nel department, these services have been located in Aalst since 1 March

2005, where they take care of general management, financial and treasury management, risk management, bud-geting, MIS, investment monitoring and corporate affairs management.

Safety on the workfloor remains a priority Improvements to occupational safety at the Oudegem and Aalst sites continued in 2004. The development and imple-mentation of a number of guidelines re-sulted in a reduction in the number of accidents, whether leading to time off work or otherwise.The accident rate is now among the best in the sector in Belgium.

17


S o c i a l r e p o r t

17

For 2005 we want to pursue this trend further at the very least, but we also have the following additional objectives:

to devise a smoking policy for our Oude-gem and Aalst sites

to set up a ‘development platform’ for training and education.

For our other VPK Packaging Group sites, 2004 was an important year in which the impulse was provided to achieve a structured safety policy.

This policy consists of two pillars:

attention to fire safety, enshrined in our property conservation approach

the establishment of a group structure for occupational safety.

‘Property conservation focuses on the physical protection of our buildings in the first instance, but effective day-to-day property management is no less im-portant. A suitable organisation needs to ensure that this is objectively achievable, in a manner compatible with the local approach.

Individual sites retain their own way of doing things, but VPK Packaging Group has overall responsibility for achieving visible results. To this end, a group safety manual was compiled in 2004 which assembles the know-how of our approach in practical form. The information we have obtained during the implementation of this manual will set the main themes of group policy in the years ahead. In this way, our abiding priority focus on the safety of our employees is safeguarded.

Training

A new priority joins safety in 2005: trai-ning. To remain competitive within the extremely tough Western European market, the quality of everyone’s work must be raised. 2005 will therefore see the introduction of a highly structured approach to training and development.


S o c i a l r e p o r t

We wish to help financially alleviate the lot of those less fortunate than oursel-ves. In 2004, the Group donated a total of €150,000 to some 30 organisations in Belgium and abroad.

Our structural sponsorship of the Na-tional Foundation for Teaching Entre-preneurship (NFTE) continued. Through the support of this organisation, disad-vantaged young people in the Brussels region receive basic training in econo-mic thinking and entrepreneurship. The intention is that this will enable them to make a new start both socially and in terms of their career.

In 2003, we entered into a long-term partnership with Peter Maasbach, the former owner of the trading company of the same name, who is running a project to combat poverty in Belarus.

At the start of 2005, we donated a sum equivalent to the cost of the New Year’s Reception for our personnel to two organisations which will use the mo-ney to help the victims of the tsunami disaster in South-East Asia.

18


S o c i a l r e s p o n s i b i l i t y

19

Quality is one of the main pillars of VPK Packaging Group

VPK Packaging and Oudegem Papier held ISO 9002 certification from 1994 to 2003. Partly as a result of the imple-mentation of ISO 9002, we have suc-ceeded in satisfying our customers’ expectations more closely.

In 2003 VPK Packaging and Oude-gem Papier comfortably obtained ISO-9001 certification (version 2000). ISO 9001 standards are maintained by mutually supporting enhancement programmes which are fully in confor-mity with ISO standards but include an extra VPK Packaging touch based on information from customer satisfaction surveys.

One of the key points for 2005 is the development of a comprehensive trai-ning programme for ISO 9001 and BRC-IOP, but also to cover all other training needs.

Our other businesses within the Group have also obtained the necessary cer-tification.

Food security

The Royal Decree on food security was published in the Belgisch Staatsblad at the end of 2003. Its provisions con-cerning self-monitoring and traceability came into force on 1 January 2005.

VPK Packaging Group regards sup-plying its customers and partners with packaging that is safe for food as a cru-cial and morally responsible area of po-licy implementation.

In early March 2005, VPK Packaging NV obtained BRC-IOP certification for its production sites at Erembodegem (Aalst) and Oudegem (Dendermonde).This certification confirms that both pro-duction sites comply with international food security standards in the produc-tion of packaging material made from corrugated board and solid board.We are also working actively on obtai-ning similar certification for the Tubes and Edge Protectors business unit.

VPK Packaging Group also intends to implement international food safety standards at its production sites in the UK, the Netherlands and France.


Q u a l i t y a n d f o o d s e c u r i t y p o l i c y

The directors and management of VPK Packaging Group are convinced that sustainable enterprise through an environ-mentally-oriented approach is vital. Environment issues are in any case at the top of the economic and political agenda, as the Kyoto Protocol demon-strates.

It is also necessary to maintain a constant search for a balance between industry, economics and employment on the one hand and an environmentally aware policy on the other hand.To that end we intend to accept our res-ponsibilities towards our shareholders, our personnel and also our society. This will lead to the creation of an environment

that allows us to engage in sustainable enterprise.There are many elements in our produc-tion process that contribute towards a better environment.

1. Raw materials

The raw material that we use is all locally collected recovered paper.In 2004 Oudegem Papier used 400,000 tonnes of recovered paper to manufac-ture paper for packaging purposes. This corresponds to approximately half the paper collected in Flanders.It is important to point out that recovered paper is a raw material that can be reused many times.

OVERZICHT ACTIVITEITEN2. productie van verpakkingen

20


E n v i r o n m e n t a l p o l i c y

20

2. Water

Water plays a crucial part in the produc-tion of paper. In 2004 Oudegem Papier pumped ap-proximately 1,000,000 m3 of water from the Dender for the purposes of its pro-duction. Thanks to the use of BAT (best available technology), we have ensured that our water consumption per tonne of paper produced is amongst the lowest in the world.The water purifi cation system in Oude-gem is one of the most effi cient in the sector and uses the most advanced techniques to keep the burden on the environment to a minimum.

Until 1999 the biological purifi cation sy-stem for the water used at Oudegem Pa-per consisted solely of a mesophyll anaerobic system (= water purifi ca-tion process in which micro-organisms break down organic compounds in the absence of oxygen at a temperature of 37°C) followed by an active sludge system (= aerobic water purifi cation process in which micro-organisms break down organic components using oxygen). The mesophyll anaerobic system is housed in a UASB® (Upfl ow Anaerobic Sludge Blanket) reactor.

In 2000 we extended the existing water purifi cation system to include a circula-tion system which is used to clean our internal water circuits rather than to treat effl uent water. The circulation purifi cation system consists of a pre-acidifi cation tank, an anaerobic IC®(Internal Circulation) reactor and an aeration tank.

3. Production of biogas (green energy)

We produce bio-energy (energy from ma-terial of organic origin). Through anaerobic fermentation the bio-degradable material is broken down by bacteria and conver-ted into biogas.This gas becomes a supplementary fuel for our own steam production, replacing fossil fuels to an extent.Biogas accounts for 6% of the steam requirement in Oudegem.

4. Energy and CO2 emissions

In general terms, the Kyoto Protocol stipulates that emissions of green-house gases in Belgium must be 7.5% lower in the period 2008-2012 than they were in 1990. This target has been translated in prac-tice into a maximum permitted quantity of emissions (known as emission rights).

1. The question arose in this connec-tion of how this emissions reduction should be passed on to energy-inten-sive companies.

A decision was made to use objec-tive standards and, in particular the benchmarking system. Energy-in-tensive companies have signed up to the benchmarking agreement and undertaken to raise their energy effi -ciency to world-class levels - or keep them there - by 2012. The rationale for benchmarking is that it is pointless to hold leading businesses back and hence cause them to relocate in order to produce the same product using more energy.

In return for the efforts made by com-



panies, the Flemish government has guaranteed that it will not impose any additional measures on companies in terms of rational energy utilisation or CO2. This applies in particular to taxes and emissions limits.

Oudegem Papier is also a signatory to the benchmarking agreement and its energy effi ciency has been audited by a recognised benchmark consultant from Finland - Jaacko Poyry Consul-ting. The results of the audit show that Oudegem Papier today ranks as a world-class company. The challenge for us will be to remain in that class.

The energy supply in many companies is obtained in the traditional way: elec-tricity is generated in a power station with an energy effi ciency of 40% and delivered to the companies via the grid, while heat is generated in boilers on location.

It is both ecologically and economi-cally preferable, however, to produce both heat and electricity at the same time, which we then call a combined heat and power system, with an ener-gy effi ciency of 85%.

We have chosen to install a combined heat and power generating system together with Electrabel consisting of two gas turbines and two heat ex-change boilers. Each of the gas turbi-nes drives an alternator, generating 14 MW of electricity which serves as an energy source to drive the machines.

The heat-exchange boilers recover the residual heat from the fl ue gases from the gas turbines, and steam is

produced as a result. This steam is used during the production process to dry the paper.

The advantage is that, in a manner of speaking, a single installation makes two sources available to us.

The high-pressure coal boiler also produces steam. This steam reduces in the steam turbine and drives the generator, as a result of which 9 MW of electricity is generated.

2. The federal government will also make up the difference between the Kyoto target for Belgium (135.27 million ton-nes of CO2 equivalent) and the targets imposed on the regions (137.73 mil-lion tonnes of CO2 equivalent) by pur-chasing emission rights on the inter-national market.

Thus emission rights for 2.46 million tonnes of CO2 equivalent per year will be purchased during the period 2008-2012.

We are delighted about this, and are convinced that the so-called fl exibi-lity mechanisms should be used to the full. The CO2 reduction should fi rst be achieved as a matter of prio-rity in those areas where it makes the most economic and fi nancial sense. It is therefore vitally important for the necessary steps to be taken to give concrete form to the application of the fl exibility mechanisms: the Joint Imple-mentation (JI) and Clean Development Mechanism (CDM).

20



3. We are also convinced that the imple-mentation of the Kyoto Protocol will have signifi cant effects on our com-petitive position. Calculations have shown that Belgium will be required to bear 12.5% of Europe’s total bill under the Kyoto Protocol, although its gross domestic product amounts to less than 4% of European GDP.

This enormously inconsistent imple-mentation will give rise to considera-ble competitive distortions within the EU.

The Flemish government (the emis-sion rights allocated to Belgium are distributed among the three regions) must not go its own way in an isolated fashion, and should fi rst consider the economic impact of all measures be-fore it implements them.

All of these points apply despite the pioneering role the VPK Packaging Group has always played in the area of rational energy use.

5. Air

If we compare our fl ue gas emissions in 2004 with the norm, it is clear that all boilers remain well below the licen-sing norm. Even the tougher emissions norms that will be imposed on us starting in 2008 will not cause any problems.

6. Waste management

The waste originating from the production process is separated into combustible and non-combustible fractions. Both fractions are currently disposed of at landfi ll sites. VPK is currently researching the possi-bility of making use of the combustible fraction for energy purposes. Waste materials such as iron, stainless steel and building waste are collected separately in containers and removed by approved processors. The cardboard waste originating from the packaging departments is re-used as a raw material in the production of paper for packaging purposes in our own paper factories.

7. Research and development

Process water, derived mainly from the Dender, is reused several times before it is discharged via the water purifi ca-tion system. We strive to keep our ope-rations as closed as possible. This means minimising discharges, restricting the introduction of fresh water and reusing as much as possible. The limiting fac-tor in this strategy is the high level of calcium in the water. The dissolving of paper in water causes a number of fi ller materials, including calcium, to end up in the water. At certain concentrations, this calcium is deposited in pipes and pumps, ultimately causing problems. In 1998, we joined a consortium together with a number of European partners to tackle the problem of circuit closure. One of the achievements of this project is the IC reactor mentioned earlier.


E n v i r o n m e n t a l p o l i c y20

55

We fully subscribe to the growing im-portance of logistical services to our customers, and aim to carry on profiling ourselves as an outstanding service or-ganisation. Logistics and Supply Chain Management are also an important link in the business-to-business relationship, particularly in the fast-moving consumer goods market. In this typical make-to-order (customer specific) environment we believe we can distinguish ourselves from our competitors - suppliers of high-quality packaging in corrugated board and solid board - in this way.Both internal and integral logistical pro-jects are being implemented or are run-ning and these will help us to reinforce our strategic partnerships with our cus-tomers.

In this context we are involved in busi-ness-to-business (B2B) supply chain optimisations with our customers. This process is known among our customers

as the FLI® model (‘Forward Logistic In-tegration’), and its aim is to create ad-ded value in the supply chain between customer and supplier in the form of cost savings in terms of stock value, calculation of optimum production and ordering amounts and avoidance of specific service costs (cost-to-serve). Through logistics integration projects of this kind we are demonstrating that, through a constructive partnership with our customers, the initial aims of added value can be achieved alongside the packaging product itself, which is the central theme of VPK Packaging Solu-tions®.

We appreciate the strategic importance of this approach to the market and we are actively engaged in an extensive Business Process Re-engineering pro-ject which will be implemented in all our departments.

21


L o g i s t i c s

22

We began work in 2001 on an exten-sive Business Process Re-engineering project in order to prepare ourselves for the new challenges of the coming de-cades.2004 was another milestone year in this context.

The ERP package which was chosen to facilitate this BPR project was SAP.

The focus of this project is sixfold:

Uniformisation, rationalisation, streamli-ning and simplification of data, procedu-res, business processes, administration and reporting with a view to achieving even more consistently professional standards among our employees.

Conformity to external requirements: as a listed company we recognise our ex-ternal obligations towards our sharehol-ders (International Financial Reporting Standards (IFRS)).

Our customers and customer service: as a service organisation we appreciate the added value of an excellent level of service, in addition to the added value of the packaging product itself for our customers. With a stable backbone for FLI®, as well as creating a competitive advantage for our Business Units, we above all create the added value we want for our customers.

The new economy is also a significant challenge and opportunity for the future in this market segment.

As a ‘lean and mean’ organisation, more complete cost-efficiency and cost

control is vitally important to us. In the BPR project the group financial proces-ses will, above all, be further streamlined and optimised.

In view of the considerable initial invest-ment in this BPR project of €8m, spread over 5 years, we have made a clear choice to implement this project throughout the group. All Business Units are running through the same process in order to exploit group synergies not only in terms of con-tent but also in terms of project cost.

In 2002, the BPR project was succes-sfully implemented in our tubes depart-ments.In April 2003, the implementation of the ERP system at the group’s financial de-partment in Belgium and at our biggest trading company, Ons Belang in Noord-wijkerhout (NL), was completed.In 2004, the ERP system was imple-mented at the financial departments at Rigid Group and Oudegem Papier.

In 2005, implementations are planned for the Belgian packaging divisions of Solid Board (Q2) and Corrugated Board (Q4). Following the complete acquisition of the Ondulys group, we decided it would be helpful to immediately integrate the latter’s financial services in our central ERP. This implementation is being pre-pared for Q3 2005. We are also preparing the implemen-tations for the Dutch trading business Twinpack and the Dutch packaging divi-sion in Raamsdonksveer. Both of these are scheduled for 2006.


B u s i n e s s p r o c e s s r e e n g i n e e r i n g

Date post:	04-Jul-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

a n n u a l r e p o r t 2004 - KU Leuven1)eng.pdf · from Ecotube NV for 4 months and from Van...

Documents