Annual report 2016.pdf
Short Description
APU company`s annual report of 2016...
Description
Mongolia, Ulaanbaatar 17040, Khan-Uul district, Chinggis Avenue 48. Phone:11-344837
COMPANY COMPAN Y PROFILE
BUSINESS ACTIVITIES
CORPORATEGOVERNANCE
S US US TA TA IN IN AB AB IL IL IT IT Y
F IN IN AN AN CI CI AL AL R EP EP OR OR TI TI NG NG
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Mission and values Greetings from the Chairman of the Board of Directors Greetings from the CEO Business in brief
Strategy Market and the current state Operations New and renewed brands
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Board of Directors Remuneration and promotion Corporate governance code implementationprogram Share portfolio Dividend policy Executive management team Risk management
Sustainability policy Human resource policy Corporate Social Responsibilityand Projects
Financial statement Independentt Auditors’ Independen Report
DEFINITION OF TERMINOLOGIES
COMPANY PROFILE
COMPANY PROFILE
ENTREPRENEURIAL SPIRIT:
By producing superior products that celebrate natural richness, APU contributes to the enhancement of Mongolia’s future prosperity and its place on the world stage
We champion teamwork, collaboration and creativity at all levels, encouraging and rewarding our people to become and deliver their very best.
OPENNESS:
We are driven by a commitment to complete transparency, sharing our goals to inspire and engage those we serve
ORIGINALITY:
We bring flair and imagination to every challenge, always seeking smarter ways to enrich and sup¬port the partners and commu ni¬ties we work with.
INTEGRITY:
We uphold the virtues of honesty and moral discipline in everything we do, embracing our responsibility to preserve Mongolia’s natural rich ness and drive higher standards in economic, social and environmental development.
COMPANY PROFILE
Regulations on “Appropriating alcohol licenses by the state” were approved by the V meeting of the Central Committee of the Mongolian People’s Party and VII meeting of the People’s Government. Thus the rst vodka factory with 14 employees was opened in Ulaanbaatar city.
With the help of Czech experts started producing beer.
COMPANY PROFILE
The Soviet Union assisted to complete construction work, equipment and network installation of the Vodka and beer factory,implemented the calibration and test work. The factory was commissioned by the MPR Government Act dated December 31, 1972.
Brewery cooling, pressured gas equipment was installed; a mechanized conveyer belt with bottling capacity of 3000 bottles of beer per hour was put into operation, made technological progress.
Carbonated sweet beverage and Janchivlan mineral water bottling station were newly established
By the resolution number 10 of the Council of MPR Ministers, dated January12, in 1973 the Vodka and beer factory was renamed to Ulaanbaatar Vodka and beer factory.
On the 50th anniversary of the People’s revolution, the MPR government awarded the Vodka and beer factory with an “Honorary certicate” for well-organized production and service activities, and successfully fullling assigned responsibilities.
Vodka and beer factory was restructured to APU JSC, 51% of total shares remained under state control, and 49% was traded on the stock exchange.
Since 1976, 5 years in a row the Vodka and beer factory was named the National leading producer and awarded with the state highest medal of “Golden Star”. Celebrating the event of the Mongolian astronaut ying rst time to the space, the premium vodka “Bolor” was introduced to the customers.
Beer factory facilities, networks and technology were completely renovated; a factory with packaging capacity of 20.0 million liters of beer per year was put into operation. The rst Mongolian dark beer “Khar Khorum” in glass bottle and premium beer “Golden Gobi” was launched on the market. Also “Eruul” vodka brand wasintroduced.
In November, 51% of state owned shares were auctioned and transferred fully to private investors, being the rst to open the process of privatization of Mongolianfactories and enterprises.
APU JSC established a milk and fruit juice factory, also introduced the “Pure Milk” brand along with fully automatedtetra-pack line. Updated successfully “Eruul” and “Altan Turuu” vodka brands.
Old building of Water and soft drink factory, lines, equipment and technologywere fully renovated, a plant with a bottling capacity of 4.5–5.0 million liters of 0.33, 0.5, 1.5, 2 L plastic bottles per year was put into operation. “APU Pure water” brand was delivered to consumers.
Superpremium “Soyombo” vodka was introduced to the market.
A modern distillery plant “Natur Agro” equipped with German equipment and technology, with computerized control system was accepted by the state inspection commission. “Fusion” beer brand and children’s juice beverage “Frutta” were introduced to the consumer market
A new brewery with advanced new technologies and standards was put into operationbringing the total capacity to 100 million liters per year; fully automated “APU logistics” center with advancedwarehouse technologieswas established. “Orgiluun”carbonated water is introduced to the Mongolian market. Well known by Mongolians “Borgio” beer was completelyupdated.
A brand new dairy plant with processing equipmentsupplied by the world leading German GIA (GEA) Company is put into operation. On its 90th anniversary,APU updates its corporate identity and redenes its vision: Absolute, Pure, Unique.
The “New Wave” brand program is launched,introducing to the market brands such as Bliss (fruit avored beer), vodkas including VELVET, EDEN, ARKHI EXPORT /40 years/, Taiga /4 types/ and Okhi.
COMPANY PROFILE
COMPANY PROFILE
ABSOLUTE. Fiduciary duties and responsibilities
Absolute, Pure, Unique In the traditional nomadic culture and philosophy of Mongolia sky is the symbol of pure inin nity, the whole world is believed to be a unique combination of wild nature, time and mind. Together, these 2 exceptional features keep absolute pure qualities for years. By the MonMongolian tradition to honor “The Best” we proudly deliver to you the trinity of “Absolute, pure, unique”. We made this belief our business philosophy and we strive to improve everything we do. We will always work to improve the business, products and services designed for our customers and community.
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Leader in human and social development.
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Educating the market and our partners in our mission.
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Financial stability, transparency and sustainable performance.
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One of the most attractive employers in Mongolia.
PURE.
Products, culture and beliefs •
Mongolia’s global brand ambassador
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Open to the world, creating partnerships with world-class businesses
UNIQUE.
Ethical conduct and respect for our environment
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APU Company
Annual report 2016
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Continuous manufacturing improvement through clean technologies.
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The highest standards in corporate transparency and product safety
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Unique expertise in community participation.
APU Company
Annual report 2016
9.
COMPANY PROFILE
COMPANY PROFILE
Chairman of the Board of Directors
CEO OF APU COMPANY
BATSAIKHAN Purev
Dear shareholders,
It is the time of the year when we traditionally rereport to our shareholders on th e results of our last year’s work. The year of 2016 was a difcult; the unfavorable macroeconomic situation of MonMongolia persisted; the national currency continued its steep devaluation trend and the total conconsumer market shrunk. APU Company worked with determination to fulfulll its obligations and to overcome the challengchallenges faced, introducing new vodka and beer brands to the markets and implementing cost saving initiatives. However, the more than 20% devaluadevaluation of the tugrug to USD currency exchange rate since the beginning of 2016 led to a signicant decline of the net prot compared to the p revious year. Nevertheless, we made a decision to uphold our continued tradition to distribute dividends to our esteemed shareholders. The Government of Mongolia has announced that in 2017 several taxes will be increased and there will be cuts in certain types of social welwel fare. Analysts are highlighting that this year the economic situation will be the most challengchallenging; the economic growth is at the lowest point; we can expect to see revival not earlier than in 2018-2019. We are now faced with a challenge to “tighten our belts” and optimize our inter inter-nal resources to overcome the difculties. APU Company, the leading manufacturer, top tax paypayer and one of the oldest and most valued listed companies of Mongolia, will continue its efforts to grow and develop. While the short-term focus
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APU Company
Annual report 2016
is on saving costs, retaining jobs and helping the employees with their social issues, the long-term goal to continually increase the value of the comcompany will never lose its priority. We believe that hardship is a force that creates new opportunities. We will be continuing our tratra dition to always seek, generate and lead innovainnovation, create new products and open new markets. Dear shareholders, esteemed partners and loyloyal customers, with all the above we would like to express our condence that with your valuable support APU Company will overcome these temtemporary difculties and advance to a new era of development and prosperity
ERDENEBILEG Tseveenjav
Dear shareholders, customers, partner organizations, and colleagues. I am pleased to extend my warm greetings to all of you.
The year of 2016 has been a tough one for Mongolian enterprises presenting hard challenges that came along with socio-political changes, continued nancial crisis and economic instability. However, it is worth noting that APU Company has successfully maintained its leadership status in the sector, contributing great efforts to the national development together with the other major producers. Specically, for the purpose of increasing protability through productivity, the company introduced new and refreshed brands to the market and invested in the personal growth of its workforce, continuing the “Tuguldur” project, complying with international standards and maintaining stable employment. It is my pleasure to inform you that we produced a total of 92 million liters of 162 SKUs, including VELVET, EDEN, ARKHI EXPORT /40 year/, Taiga /4 flavors/, Okhi, and “D” vitamin enriched milk, conducted sales of MNT 327 billion, paid MNT 127 billion to the state budget and ensured normal continuity of business operations while implementing a comprehensive long-term investment program.
Focusing on increasing efciency and improving productivity, APU Company is planning to produce 94 million liters of 124 SKUs, and conduct sales of MNT 339 billion in 2017. A total of USD16 million shall be paid to international banking and nancial institutions, efforts will continue to increase exports, sustainable business operations shall be maintained and goals and objectives shall be achieved in the framework of the overall corporate and business strategies. I would like to express my sincere gratitude to our shareholders, customers and partners for always supporting our business. We pledge to continue our efforts to maintain growth and development, run eco-friendly operations, invest in human resources and fulll our corporate social responsibilities.
The year-end share price showed an increase of 3 percent as compared to that of the beginning of the year (after taking into account the effect of share split), and we repaid a total of USD 16 mil lion to international banking and nancial institutions, and 3 billion MNT was invested into our production facility upgrade and maintenance.
* Gross revenue included VAT and Excise tax
APU Company
Annual report 2016
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COMPANY PROFILE
COMPANY PROFILE
2016 OVERVIEW
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APU Company
Annual report 2016
APU Company
Annual report 2016
13.
COMPANY PROFILE
COMPANY PROFILE
THE RESULTS OF 2016 ARE THE OUTCOMES OF EFFECTIVE REALIZATION OF OUR STRATEGIC POLICIES AND ACCURACY OF OUR OPERATIONS.
2015
9 2,850
94 ,5 33
-2%
tho us.l iter
8 8,445
90,6 06
- 2%
Net sales revenu es
mln. tug
20 8,055 20
210,1 11
- 1%
Operational pro t
mln.t ug
36 ,152
34,2 04
6%
Net pro t
mln.tu g
2,883 2,
10,6 70
-7 3 %
Total assets
mln.tu g
291 ,070
305,6 72 72
-5 %
Total liabilities
mln.tu g
147 ,884
1 60,1 78
-8 %
To ta ta l o wn wn er er s’ s’ e qu qu it y
m ln .t ug ug
1 43 43 ,1 85 85
1 45 45 ,4 94 94
- 2% 2%
To ta ta l o wn wn er er s’ s’ e qu qu it y a nd nd l ia bi bi li titi es es
m ln .t ug ug
2 91 91 ,0 70 70
3 05 05 ,6 72 72
- 5% 5%
Production volume NET SALES REVENUES
OPERATIONAL PROFIT
NET PROFIT
(Billion tugrug)
(Billion tugrug)
(Billion tugrug)
9 6 1
4 9 1
8 9 1
0 1 2
8 0 2
7 3
4 3
4 2
6 3
PROFIT & LOSS
3 2
BALANCE SHEET
2 1 1 1 5
12 13 14 15 16
12 13 14 15 16
SALES VOLUMES
SKUs
(Million liters)
(SKU)
5 9
9 9
2 8
1 9
8 8
) 0 1 (
3
12 13 14 15 16
WORKFORCE
4 9
7 0 1
6 3 1
2 6 1
3 8
Change %
2016
th ous.l iter
Sales volume
CASH FLOW
Cash flo ws ws from operating activities
ml n. n.tu g
47 ,757
40,30 8
18 %
C as as h f lo ws ws f ro ro m i nv nv es es titi ng ng a ct ct iv it ie s
m ln .t.t ug ug
( 2, 2, 96 96 5) 5)
( 4, 4, 68 68 9) 9)
- 37 37 %
C as ash f lo ws ws f ro ro m n an an ci ci ng ng a ct ct iv it ie s
ml n. n. tu tu g
( 35 35 ,1 32 32 )
( 38 38 ,8 62 62 )
- 10 10 %
Net increase/decrease in cash and cash equivalents
ml n.tu g
9 ,660
(3,2 43)
-3 9 8 %
Excise tax
ml n.tu g
90 ,420
90,79 0
0%
VAT
ml n.tu g
19 ,1 19
19,27 4
-1 %
Other
mln .tu g
TAX PAYMENT 8 9 9 7 9 8
3 5 9
3 8 8
7 1 8
Total
17 ,4 22
14,59 9
19 %
126 ,9 61
1 24,66 2
2%
2,9 77 2,
5,02 1
-4 1 %
CAPEX
Total cap ex
12 13 14 15 16
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APU Company
Annual report 2016
12 13 14 15 16
mln .tu g
12 13 14 15 16
APU Company
Annual report 2016
15.
COMPANY PROFILE
BUSINESS ACTIVITIES
In 2016, APU Company has contributed 127 billion MNT to the State budg et of which 90 billion MNT was excise tax p ayment and 19 billion MNT was VAT payment.
BUSINESS ACTIVITIES
billion tugrug
billion tugrug
billion tugrug
MONGOLIAN STATE BUDGET REVENUES
EXCISE TAX REVENUES
VALUE ADDED TAX REVENUES
Yearlyelectricity consumption of households
HOUSEHOLDS /62% of total households/
Food consumption
Annual salary of public servants
HOUSEHOLDS /5% of total households/
STAFFS /17% of total staff/
WHAT CAN BE DONE WITH TOTAL TAXES PAID BY APU COMPANY IN 2016?
Providing better schoolenvironment to students STUDENTS /13% of total students/
Mining rehabilitation expense HE LAND /land for 54 thousand households/
Length of concrete roads KM /Road from UB to Darkhan-Uul aimag/
Source: Government decree number 336, budget benchmark assessments, National Statistic Ofce of Mongolia, Ministry of Environment and Tourism
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APU Company
Annual report 2016
APU Company
Annual report 2016
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BUSINESSACTIVITIES
BUSINESS ACTIVITIES
In 2016, we prioritized the following objectives:
INCREASE RETURNS ON INVESTMENT
MAINTAIN MARKET SHARE
STANDARDIZE BUSINESS PROCESSES
IMPROVE INFORMATION FLOWS
The following strategies were compiled in order to achieve the above objectives
Efciency at all levels for increased protability. Maintaining and expanding market share for sales revenue growth.
Adopting a unied time saving, lowcost and high-efciency production system through process-oriented manmanagement structure with proper stafng and organization. Encouraging eco-friendly production and utilizations cost savings through re-use and recycling.
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APU Company
Annual report 2016
Maintaining sustainability through dedetermining a comprehensive brand policy and monitoring the implementation. Matching brands to consumer needs through use of marketing techniques with multiple alternatives in accordance with the brand policy documents.
Increasing productivity through an enabling corporate culture and continuous learning environment. Improving information flows to achieve betbetter leadership, enhanced lateral and vertical collaboration, and alignment with corporate objectives.
APU Company
Annual report 2016
19.
BUSINESSACTIVITIES
BUSINESSACTIVITIES
In terms of health benets, the trend of consuming liquid milk daily and constantly is extending at all levels, and folfol lowing this trend, production and supply of such products is also increasing. By 2025, the market capacity for milk and dairy products is likely to increase by 25 percent, reaching 208 billion liters and average annual milk consumption per person by 12 percent, reaching 13 liters as compared to 2016. In recent years, the international market for flavored milk with low fat and supsup plements is expanding rapidly, while the growth of liquid milk market is declining and tend to stabilize, however it still re tains the majority share of the overall market. Milk and dairy market in Mongolia declined by 7 percent in 2015, whereas it went up by 1 percent in 2016 where over all market share reached 43,586 thous.liters. This growth in dairy market is closely related to the changes in consump tion structure of Mongolian consumers resulting in transition by Mongolian customers from traditional dairy consumption to processed and packed product consumption. In recent years, market share of imported liquid milk has decreased and supply of liquid milk produced domestically has inincreased, supplying liquid milk almost 100 percent domesdomestically. APU Company introduced “Tsever suu” brand to the market in 2006, and began to take up growing share in the market upon the launch of its new dairy plant in 2014. By producing a total of 32 kinds of dairy products, our company covers 24 percent of milk market and 19 percent of yoghurt and tarag market of Mongolia as of 2016.
APU Company introduced “Tsever suu” brand to the market in 2006, and began to take up majority share in the market upon its launch of new dairy plant in 2014. By producing a total of 32 kinds of dairy products, our company covers 24 percent of milk market and 19 percent of yoghurt and tarag market of Mongolia as of 2016.
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APU Company
Annual report 2016
The world beer sales were 188.3 billion liters in 2015 atdue to socio-economic socio-economic changes and consumer attitude, and increased by 0.2 percent reaching 188.6 billion liters in 2016. Consumption of beer tends to be stable globally. In 2016, Mongolian beer market reached physically 100.3 million liters, decreasing by 3.0 percent as comcom pared to that of the previous year. Beer consumption per person was 37.1 liters a year as of 2013, whilst it dropped down by nearly 13 percent, reaching 32.2 liters in 2016. The growth of vodka market is still globally stagnant due to economic conditions and consumers’ conconsumption changes. This global change also affects the Mongolian vodka market. In 2016, Mongolian vodka market reached 24.41 million liters, declining by 1.3 percent as comcompared to that of the previous year and the percentage of market decline is expected to be stable. Mongolian consumers are likely to choose cheap or expensive vodka instead of medium priced ones in connection with the Mongolian economic situation, purchasing power of consumers and consumption behavior. APU Company produced a total of 64 SKUs of 17 brands as of 2016, taking up 51 percent of the marmar ket share.
As the domestic beer production capacity, product development, marketing and PR, as well as domestic product quality improves signicantly, the space for foreign brands and importers is shrinking. According to the performance of 2016, import products constitute 20 percent of the Mongolian beer market, decreasing by 43 percent as compared to that of 2013.
The world carbonated water market grows by an average 1.4 percent annually, reaching 235.6 billion liters, juice market by 2 percent reaching 85.6 billion liters, and water market by 3.7 percent, reaching 282.7 billion liters. CarCarbonated drinks account for over 30 percent of beveragbeverages sold globally, however consumption of bottled water, sports and functional beverages, energy drinks, and fresh natural juice tends to increase in line with the growth speed in recent years. The Mongolian carbonated drinks market reached 157.8 liters in 2016, increasing by 16.9 percent while the packed juice market declined by 10.4 percent, reaching 59 million liters, and the bottled water market went up by 3.9 perpercent, counting to 65.6 million liters as compared to those of the previous year. Import products account for 9.8 percent of the carboncarbon ated drinks market, 25 percent of the juice market, and about 1 percent of the bottled water market in Mongolia. As of 2016, APU Company produced 27 SKUs of 6 brands, supplying 2.8 percent of the carbonated drinks market, 3.4 percent of the juice market, and 6.2 percent of the bottled water market.
Due to consumption behavior and purchasing power of consumers, the consumption of cheap or expensive beer increases whilst the market for mid-priced ones stagnates or shrinks. APU Company produced a total of 39 SKUs of 12 brands as of 2016, taking up 57 percent of the beer market share.
APU Company
Annual report 2016
21.
BUSINESSACTIVITIES
BUSINESS ACTIVITIES
06 Due to our company is responsible for food safety and high quality man agement on all processes from plan ning and R&D, a product to receiving raw materials, producing, sales, de livering and storing nished products, we can lead our industry to running eco-friendlyoperation.
COSTUMERS
01
03
PLANNING
PRODUCTION
AND R&D
All factories are equipped with modern technologies and equipment meeting International standards. We are proud to lead the industry in terms of saving energy, water and heat, as well as reducing waste
Financial Net sales income: 208 MNT billion Tax payment: 127 MNT billion Total dividends: 742 MNT million
05 SALES
We aim to use global advanced technologies, know-how, global trends and innovation products in our market research and development adapting them to Mongolian conditions by our talented employees and engineers.
Resource consumption “Energy efcient” Asian model organization Water saving: 11,544m3 Steam and heat saving: 14.5%
We deliver our products through over 7000 wholesale and retail stores covering 21 provinces, and export overseas while fully ensuring product quality to the end customers. We promote responsible drinking to consumers and carry out our sales in accordance with international and national laws.
Financial Shareholders’equity,assets, borrowing and investment
Human capital Total number of employees: 817 Employee support: 1,5 MNT billion Number of foreign trainings: 46 Number of domestic trainings: 346 5 factories and one fully automatic warehouse which were built in accordance with Internationalstandards SKU: 162
Naturalresource Water, energy, land and natural productivity Human capital Employees, health and safety environment, code of conduct Manufactured Buildings, properties and equipment Social Social communities Intellectual Brands, R&D, innovation, processes and corporate reputation
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APU Company
02 SUPPLIERS
Annual report 2016
We comply with sustainable operation standards and are certied for
FSSC 22000:2010, ISO 9001:2008 and 14001. Partnering with over 140 local and International suppliers, we offer safe and high-quality products to our customers.
04
Social initiatives Pure Tuul campaign Trafc safety video campaign “Hamag Mongol” campaign to preserve and promote Mongolian cultural heritage
QUALITY MANAGEMENT We follow food safety and quality management processes at all levels from planning and R&D, receipt of raw materials, production, sales, delivery and storage of nished products. We lead the industry’s initiatives to adopt eco-friendlyoperations.
Awards TOP-100Company ALUFOIL TROPHY-2016, Award in the Marketing & Design category by closure WORLD VODKA AWARDS-2016 Arkhi Export Limited Edition Vodka /Gold Winner/ Chinggis Khan Vodka /Silver Winner/ THE BEST ANNUAL REPORTING AWARD OF MONGOLIA
APU Company
Annual report 2016
23.
BUSINESS ACTIVITIES
The annual capacity is 45 million liters, and the plant can process daily 150 tons of fresh milk.
BUSINESS ACTIVITIES
In response to the stable increase in de mand for dairy products and juice in CapCapital city of Mongolia, APU company made an investment to build a fully automated dairy plant in 2014. The factory is complicompliant with European Union milk pro¬cessing factory standards with cutting-edge techtechnology and processing equipment from GEA, Germany - a leading global producer of technology in dairy industry, as well as Tetra Pak, Ecolean and Elopak lling lines from Sweden. The annual capacity is 45 million liters, and the plant can process daily 150 tons of fresh milk.
Starting April 2016, Maamuu brand is exported to Hong Kong market and is sold in Wellcome, Park&shop and Vanguard chain stores. APU Company focuses on health and well-bewell-being of consumers and product quality, and is the rst company, which analyzes approved antibiantibiotics amount in raw milk in its own laboratory.
Capacity to produce 75 million liters of beer per year
Our company aims for developing new and ininnovative products that meet Mongolian conconsumers’ needs fully. For this purpose, brands such as Maamuu, Deej, Sain and Tsever suu were produced and introduced to not only MonMongolian consumers but also to the world market.
The foundation for APU’s brewing capacicapacity was laid in 1927 with the help of Czech specialists. Today, the company operates a state-ofthe-art, fully automated brewery supplied by leading German manufacturers with a capacity to produce 75 million liters of beer per year, all fully in accordance with the 600-year old “Bavarian Beer Purity Law”.
Bliss, fruity and low alcohol beer, was intro duced newly to the market within the objective of introducing the “New Wave” to the market in 2016. As the market leader, APU Company brings in world trend innovations adapted to Mongolian consumers’ needs.
Certied and meeting fully the ISO 22000 standard of Food Safety Management syssystems, the dairy factory purchases fresh cow milk from over 300 Mongolian farmers.
Total bottling capacity is 9 thousand bottles per hour.
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APU Company
Fully automated high quality equipment by leading German, Austrian and Italian manman ufacturers enables the plant to produce 20 million liters per annum. Total bottling capacity is 9 thousand bottles per hour. Pure spirit, the main ingredient in vodka, is dis¬tilled in-house from organic local wheat using a state-of-the-art German technolotechnology. APU Company directs its brand develdevel-
Annual report 2016
opment and innovation towards brand products that meet consumers’ needs, demands and consumption features. In 2009, APU company commissioned the “NA“NATUR-AGRO” spirit plant, which is fully equipped with advanced German technology and the plant produces world-leading quality “Alpha” grade spirit, ensuring APU’s sustainable operoperations.
The uniqueness of APU’s carbonated drinks comes from the extracts of indigenous berries and medicinal plants
APU soft drinks plant is equipped with auautomated bottling, blowing and capping lines manufactured by top Austrian, German and Italian producers and is fully compliant with European food safety standards. The uniqueness of APU’s carbonated drinks comes from the extracts of indigenous berberries and medicinal plants, including RhodiRhodiola, Rosaceae, Paeonia anomala and LicoLicorice. Combined with the purity of the water ltered through 4-layer German Gruenbeck technology gives, it provides for an unforunforgettable drinking experience.
In collaboration with KRONES Company from Germany, the PET bottling line project was imimplemented in 2012, increasing 4 times the plant capacity. Our plant has two lines from Sigma and Krones companies, of which Sigma line has a capacity of producing 3000 bottled products per hour in PET and bottles of 1.5 liter, 0.5 liter, and 0.33 liter. Krones packing line has a capaccapacity of producing 5500-12000 bottled products per hour depending on bottle volume and packs beer, water, soft drinks and juices in PET and bottles of 0.5 liter, 1.0 liter, 1.5 liters, 2.0 liters, and 2.5 liters.
APU Company
Annual report 2016
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BUSINESSACTIVITIES
BUSINESS ACTIVITIES
QUALITY CONTROL APU company is the rst Mongolian company that introduced the ISO 9001 Quality management syssystem, ISO 14001 Environmental management syssystem, and FSSC 22000 Food safety management system together. Our Quality management and concontrol department is responsible for conducting tests, analyzes, experiments, quality control and vericaverication, and monitoring on all processes from designing a product to receiving and inspecting raw materials, storing, producing and distributing nished products.
Adhering to standards, procedures, regulations, analyanalysis methodologies, normative technical documents and ISO/IEC 17025 standards approved by the international standardization organization, our certied laboratory is in charge of properly and accurately conducting sensosensory tests, microbiological, physical and chemical analyses on primary and secondary raw materials, semi-processed and nished products from all 5 production lines of APU company in accordance with certications, and maintainmaintaining control over each technological stage to make sure the quality products meet standard requirements. The certied laboratory complies with general requirements on capacity of international laboratories of MNS ISO-17025:2007 stanstandard, and is equipped with high-sensibility equipment with to-date nano-technology from leading international laboratory equipment suppliers from USA, Germany, Austria, Korea and Russia. Besides maintaining internal control over productions, our laboratory is the major research base that cooperates with VLB and Weihenstephan Institute from Germany, Interlab and FGNBU VNIIPBT Institute from Russia, Mongolian reresearch institutes and universities in research areas.
We maintain the following 4 principles in our quality policy:
To provide customers with premium quality products and services that fully comply with legal requirements, consumer expectaexpectations and food safety standards.
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APU Company
To develop all stages of food production in line with FSSC22000: 2010 and ISO 9001:2008 standard requirements and maintain constant improvement.
Annual report 2016
Internal control laboratory of APU Company adheres to the following policy:
To become the leading beverage producer through ininvestment into human resource developdevelopment, equipment and technology.
To verify results by conducting internal and external audits on food safety and quality management systems.
Our distinctive features are: •
Compliant with international ISO standards
•
Employs food safety and technology expertise teams
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Unied quality management system
•
Full compliance with legal requirements
•
Maintains process-based quality monitoring control.
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To comply with IEC/ISO 17025 standards on laboratory quality management systems and ensure constant improvement.
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To continually invest into staff development, equipment and technology improvement, and ensure consumer satisfaction.
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To maintain independence and autonomy.
APU Company
Annual report 2016
27.
BUSINESSACTIVITIES
D VITAMIN-ENRICHED MILK:
Vitamin D content: 50 IU per 100 gr (int’l measuring unit) Fat: 1.5%, Packing: 0.5 l
BUSINESS ACTIVITIES
ОKHI
Alc: 38%, Packaging: 0.5 l, 0.75 l
TAIGA
Summer: Alc: 35%, packaging - 0.5 l, 0.75 l Autumn, Spring Alc: 38%, packaging -0.5 l, 0.75 l Winter: Alc: 39%, packaging -0.5 l, 0.75 l
D VITAMIN-ENRICHED MILK: In 2016 we produced “Sain” milk with purepack packing of 0.5 l that is enriched with vitamin D particularly important for human immune system and healthy bone structure. Enriched with vitamin D that improves calcium di gestion, the heat-processed milk can be consumed directly, fat component is 1.5%.
APU Company “bringing all the flavors of the Mother nature” is delivering Okhi brand to its customers who make knowledgeable, informative and smart choic es, have their own vision of the world and lifestyle.
Gifting to our customers natural vodka Taiga with special ingredients, extracts of fruits grown in Mon golian soil and preserving features of 4 seasons.
EDEN
VELVET
ARKHI
“SAIN” YOGURT
“SAIN” BIFIDO YOGURT
Fat: 2.5%, Packing: 0.45 l
Fat: 2.5%, Packing: 0.9 l
Fat: 2.5%, Packing: 0.45 l
SAIN”STRAWBERRY,BLACK CURRANT AND FOR FOR-ESTBERRY YOGURT: Strawberry,black currant and forestberry flavored “Sain” n ” yogurt brand notonly conveythe softtasteof berries,but alsoareenriched withBulgaricus,Str.Thermophilusprobiotics usprobiotics.In 2016 when updating theproduct we reduced thesugar contentand highlightedthefruittaste.
SAIN”BIFIDOYOGURT“Sain”bidoyogurtisrichwith Bidobacterium,L. AcidophilusandStr. thermophiles probiotics whichsupport gastrointestinal functions, andhelp prevent digestivesystem ivesystem diseases.Experts recommendconsumingit afterdinner.
“SAIN”SOURCREAM:“Sain”sourcreamis produced by fermentingpremiumfresh cowmilk, theproduct hadalreadywonthe customers’appreciation. ation.
NIISLEL
ULAANBAATAR
BOLOR LIMITED EDITION
Alc: 36%, Packaging: 0.7 l, 1 l
Alc: 38%, Packaging: 0.7 l, 1 l
Alc: 39.5%, Packaging: 0.75 l
Alc: 5%, Bottle packaging: 0.45 l 0.45 l bottle, 0.5 l cans and 2.5 l PET bottle packing
Alc: 38%, Packaging: 0.75l, 0.5l, 0,1l
APU Company launched “EDEN” brand, or “Taste that tunes the senses”, for anyone who sees the world with their own sense, who appreciates arts and culture, stays true to their goals and dreams.
“VELVET” brand is the expression of the elegant evening style when young people spend time with fun and is dedicated to condent, full of energy ladies and gentlemen who desire inno vation.
ARKHI EXPORT 2016 is the 40th anniversary of ARKHI brand launch to the market, celebrating this event an updated ARKHI EXPORT, the pre mium level, unique product is presented to the customers.
Niislel brand was rst launched in 1972, later in 2010 it was reissued again, and in 2016 it was delivered to consumers after a complete design update. Niislel brand gives you the taste of fresh beer. The beer is delivered to customers in 0.45 l bottle, 0.5 l cans and 2.5 l PET bottle packing.
“Ulaanbaatar” brand label was released to the market with added elements of modern mini malism design.
PRIME
BLISS
“SAIN” SOUR CREAM
Lager
Friut beer
“MAAMUU” BRAND
Alc: 4.6%, Bottle packaging: 0.45 l
Alc: 4.6%, Bottle packaging: 0.33 l Cans packing: 0.5 l
PRIME lager beer which starts a new page in beer industry history of Mongolia is brewed from the PREMIUM MALTS barley malt. Although it has soft drinking texture, it provides the authen tic beer taste.
Bliss fruity beer that was introduced to market in 2016 gives you a unique combination of soft, delicate and rich fruity taste. Try the perfect com bination of Grapefruit Pine apple, Mango, Peach and Lime Lemon fruits.
Children’s “Maamuu” brand apples and multifruit juices were designed and updated accord ing to kids’ preferences. Also it was made more suitable for children to drink by reducing the car bohydrate content in the product, specically the amount of sugar. Our fun and smart Maamuus became dressier.
Alc: 38%, Packaging: 0.75l, 0,1l
“Bolor” limited edition 1l and 0.75 l with silver, modern, new and colorful label is released.
Fat: 2.5%, Packing: 0.2 l
28.
APU Company
Annual report 2016
APU Company
Annual report 2016
29.
Corporate governance
BUSINESS ACTIVITIES
GOVERNANCE
30.
APU Company
Annual report 2016
APU Company
Annual report 2016
31.
Corporate governance
Corporate governance
APU Company has 3,785 shareholders and is a publicly listed company registered in Category I by the Mongolian stock exchange.
Board of Directors (BoD) of АPU Company comprises of 9 members representing the Shareholders’ meeting; it is responsible for guiding and supervising the company operations and activities. BoD shall respect the interests of the Company, its afliated bodies and shareholders when implementing its functions.
The highest governing authority of the company is the Shareholders’ meeting. The Board of DirecDirectors with 9 members, elected by the Shareholders’ meeting, exercises the governing authority between shareholders’ meetings, and the day-to-day activities of the company are managed by the Chief executive ofcer, appointed by the Board of Directors.
The functions of BoD include determining and enforcing the business strategy of АPU Company, ensuring effective operations of internal audit and risk management systems, making sure the nancial records and reporting systems comply with legislation, ensuring the company operations adhere to social accountability principles and interests of shareholders are ensured.
APU Company operates in compliance with the Law on Company of Mongolia, Law on Securities marmarket, other relevant legislations and the Corporate governance code of Mongolia.
BoD reviews and discusses the business strategy, risk management, internal audit, nancial recording and reporting system activities of APU Company at least once a year, and makes necessary decisions. Allocation of functions among the BoD is determined by relevant BoD regulations and procedures and these documents are uploaded to the company’s website. The Shareholders’ meeting makes decisions on electing, re-electing or terminating the term of BoD members. BoD is elected for a term of 3 years and may be re-elected. The Board Secretary is in charge of day-to-day activities of the BoD and manages the BoD secretariat activities. The Board Secretary is the ofcial entitled to manage the issues related to corporate gover nance.
1-to-10 stock split was effected by the decision of the Shareholder meeting, resulting in 742,877,000 total issued common shares with a nominal price per share of 10 mungu;
APU Company shares have been upgraded to Category I in the Mongolian Stock Exchange registration based on its trading volumes, marmarket capitalization and other relevant criteria;
“2015 Annual report of APU Company” awarded the rst prize in the First National concon test “The best annual report”, organized among public and private stock companies by the Financial Regulatory ComCommission.
The BoD met 4 times in 2016 and the average meeting quorum was 88.6%.
* Detailed survey on securities holders as of March 9, 2017 by MCSD.
32.
APU Company
Annual report 2016
APU Company
Annual report 2016
33.
Corporate governance
Corporate governance
S. Gromov
BoD has 9 members, of which 3 are independent directors: Batsaikhan Purev (Chairman of BoD), Batchimeg Purev, Batbayar Burentogtokh, Sergey Gromov, Hugo Barrett, Kharon Khamkhoev, Alexander Sivaev (Independent), Unenbat Jigjid (Independent), and Erdene Sosorbaram (Independent).
BoD members’ occupation and work experience:
Educational background in Engineering 1992-1994: Manager at “Raznoimport” LLC of Russia 1994-2000: London Branch Manager of “Trans-World Aluminum” Company 2001-2016: Chairman of Board of Directors of Chingis Khaan Bank 2013-Present: Board Member of APU JSC 2004-Present: Chairman of Board of Directors of Mongol daatgal LLC
P.Batsaikhan Educational background in Engineering. 1993-1996:: CEO of Shunkhlai LLC 1993-1996 1997-2008:: CEO of Shunkhlai Group 1997-2008 2002-2004:: Chairman of Board of Directors of APU JSC 2002-2004 2004-2008:: CEO of APU JSC 2004-2008 2008-Present: 2008-Prese nt: President of Shunkhlai Group and Chairman of Board of Directors of APU JSC
H. Barret Educational background in Economy. 1990-1992: Manager at Blue Door Management LLC 1992-1995: Manager at Trans-World Metals LLC 1995-Present: CEO of Orion Resources LLC 2013-Present: Board Member of APU JSC
P.Batchimeg Educational Background in Pedagology. Lecturer and Senior Lecturer at Russian Language Pedagological University and Police Academy; Ofcer at Ministry of Education, Culture and Sciences. 2004-2007: CEO of APU Impex LLC 2007-Present: CEO of APU Trading LLC 2005-Present: Board Member of APU JSC
Kh. Khamkhoev Educational background in Engineering Economy. 1990-1992: Deputy Director of “Lion” LLP 1992-1994: Manager of Kazakhstan Branch Ofce of “BrAZ” factory 1994-2000: Deputy Manager of Beijing Branch Ofce of “BrAZ” factory 2000-Present: CEO of Orion International LLC 2015-Present: Board Member of APU JSC
B.Batbayar Educational background in Economy. 1994-1996: Lecturer at the School of Economics, NUM 1999-2001:: Commercial Banking Consultant, Economic Policy Support Project 1999-2001 2002-2012:: Senior Specialist at European Bank for Reconstruction and Devel 2002-2012 opment 2012-Present: 2012-Prese nt: Chief Financial Ofcer of Shunkhlai Group 2013-Present: Board Member of APU JSC
A. Sivaev Educational background in Law and Economy. 2001-2005: Department Head and Chief Financial Ofcer at subsidiaries of “Russkii Aluminum” company 2005-Present: Chief Financial Ofcer and CEO at “Krasnii Yar” LLC 2015-Present: Board Member of APU JSC
J.Unenbat Educational background in Economy. 1990-2000:: Economist, Department Head and Governor of Bank of Mongolia 1990-2000 1996-2000:: Representative of Asian Development Bank to Mongolia 1996-2000 2000-2006:: CEO of Mongolian Bankers’ Association 2000-2006 2009-2015: CEO of Corporate Governance Development Center 2015-Present: 2015-Prese nt: CEO and Secretary of Mongolian Banker’s Association 2013-Present: Board Member of APU JSC
34.
APU Company
Annual report 2016
S. Erdene Educational background in Law. 1990-1993: Ofcer at Selenge Police Department 1993-2000: Ofcer and Department Head at Chingeltei District Police Department 2000-Present: CEO and Chairman of Board of Directors of EDKS LLC 2013-Present: Chairman of Board of Directors of Narta LLC 2014-Present: Chairman of Board of Directors of Narta Construction LLC 2015-Present: Board Member of APU JSC
APU Company
Annual report 2016
35.
Corporate governance
BoD has 3 committees: Audit Committee, Remuneration Committee and Nomination Committee. The compositions of the Committees are as follows:
1. Audit committee: J.Unenbat (Director of Committee), B.Batbayar, S.Erdene Function of the Committee: To ensure the company’s nancial recording and reporting meet interna tional standards, and to oversee internal audit and risk management activities, nancial reporting and the overall corporate nancial-economic state of affairs.
Corporate governance
Regular meetings of the Board of Directors of APU JSC take place on a quarterly basis and irregular meetings and ad-hoc voting are held when deemed necessary. The decisions are made on two-third majority basis. Furthermore, principles specied in the Company Law of Mongolia such as unanimous agreement on major transactions (decision by shareholders’ meeting in case of non-consensus) and abstention by conflict-of-interest directors, apply.
2. Remuneration Committee: S.Gromov (Director of Committee), S.Erdene, J.Unenbat.
Operational Rules of the Board of Directors specically lay out the processes to make and present pro posals to the Board of Directors and decision-making thereof.
Function of the Committee: To approve and oversee the policy on remuneration and appointment for BoD members, executives and staff of the company, determine maximum limit for remuneration of BoD members and executives, and to develop proposals on providing promotion and remuneration within determined limits.
No decisions associated with major transactions were made by the Board in 2016. The list of afliated persons and persons with conflict of interests are renewed on annual basis and delivered to the Finan cial Regulatory Committee and Mongolian Stock Exchange.
3. Nomination Committee: P.Batsaikhan (Director of Committee), S.Erdene, А.Sivaev.
As of 2016, the following aliated persons were identied:
Function of the Committee: To determine requirements on nominations to ordinary and independent BoD members, to provide evaluation whether or not the requirements are meet, to arrange selection and appointment of BoD and executive body, and to assess performance of BoD and executive man agement.
General policy of the Company
Immediate parent and other Shareholders 1. Tuul International Co., Ltd. 2. WIT Alliance Ltd 3. Zennor International Ltd 4. Golomt bank LLC Subsidiary company 1. Grand LLC 2. Chingis Khan International Limited
APU Company maintains the following principles in its remuneration and promotion system: •
To attracthighly qualied expertise employees through market market competitive remuneration and pro promotion system, and to focus on retention of such employees;
•
To promote employees to higher positions and enable conditions for continuous learning, to provide assistance and support for studying abroad or in the country, and to grant study scholarships in order to ensure proper career management of staff and employees;
•
To evaluate performance performance of each employee rationally, and to provide promotion as per performance;
•
To raise social development fund for the purpose of solving particular social issues of employees, and to provide benets and support from the fund;
•
To conduct annual payroll surveys, and to increase salary amount in harmony with the labor mar market conditions, macro-economic status and inflation rate.
* Other related parties which had no transactions with the Company are excluded from the related party list.
36.
APU Company
Annual report 2016
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
APU Trading LLC Depod LLC Shunkhlai Trading LLC Shunkhlai LLC Shunkhlai Group LLC Hyundai Motors Mongolia LLC Kia Motors Mongolia LLC Media Group LLC Public Media LLC Amilan.E LLC NTV Broadcasting LLC JSB Mining LLC Power Unit LLC Suntrans Mongolia LLC Suntrans LLC International Medical Center LLC Capital Group LLC Ulaanbaatar Spirit LLC JSB Capital LLC Skytel LLC Nature Agro LLC Wan Trade Trade LLC Great Empire LLC Skymedia Corporation LLC Mongol Daatgal LLC Chingis Khaan Bank LLC Blue Sky Cashmere LLC
APU Company
Annual report 2016
37.
Corporate governance
APU Company is implementing a “Corporate governance code implementation program”, approved by the Board of Directors, in order to gradually align the company operations and activities with principles and concepts of the “Corporate governance code of Mongolia”, ratied by the Decree No.162 of the Financial Regulatory Commission on the 7th of May 2014. Within the framework of this program, the documents relevant to the internal governance procedures of the company were identied, and the program is to be implemented in 2 phases. The rst phase involves policies, regulations and procedures approved previously and which are valid at present, and in the second phase the schedule for approving policies, regulations and procedures that need to be adopted in the future was determined.
Documents, approved in the frst phase include: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Dividend policy Board of Directors operating regulations Internal regulations on Board Secretary Secretary Audit Committee charter Remuneration Committee charter Nomination Committee charter Internal regulation on information disclosure by securities issuer Shareholders’ meeting regulations CEO operational guidelines.
Legal grounds for approving documents the APU Company “Risk management policy” and “Internal audit policy” by the Board of Directors have been developed in 2016.
Corporate governance
In 1992, 49 percent of Arkhi and Pivo Factory Complex was privatized into APU JSC and in 2001 the remaining 51 percent was auctioned into private ownership. APU Company received the renewed State Registration Certicate in 2005 and it was registered as a public company at the State Registration Ofce. Three years after that in 2008 when the share price reached MNT 54,000, a decision was made to split the shares. Thus on the 15th of July 2008, the stock was split one to 100 resulting in a spike of the share price of 15 percent, reaching MNT 621 from MNT 540. On 22nd of April 2016, the d ecision to split the share one to 10 times was made to improve convertibility, enhance market price, and accelerate stock trading. As a result the share price went up by 12 percent, reaching MNT 444 from MNT 397. As compared to that of 2015, the weighted average closing price of APU Company shares was 374, increased by 5 percent in 2016.
2/03/16
4/22/16
It was decided to alloallo cate dividends of MNT 70 per unit share.
It was decided to divide unit share 10 times.
Documents to be approved within the second phase in 2017 include: 1. 2. 3. 4. 5.
Insider trading regulations Stakeholder grievance procedures Corporate Code of Conduct Remuneration policy Succession policy
The Program is being implemented as scheduled.
/Share split reflected/ Source: Mongolian Stock Exchange
38.
APU Company
Annual report 2016
APU Company
Annual report 2016
39.
Corporate governance
Corporategovernance
Since its privatization in 2005, APU company has been implementing a consistent dividend policy to ensure proper return on investment by the shareholders. The decision on allocating dividends is one of the main indicators of the company’s nancial and op erational results. Shares with dividend rights
Dividend declared per share
Total dividend /mln.tug/
Dividend yield, %
2005
742,877
130
2006
742,877
60
45
538
400
2.80%
10 10
743
2.30%
97
2007
742,877
2008
74,287,700
2009
74,167,019
20
1,483
3. 2 0 %
2010
74,167,019
40
2,967
2. 0 0 %
2011
74,167,019
60
4,450
1.40%
2012
74,167,019
70
5,192
1. 8 0 %
2013
74,167,019
90
6,675
2. 2 0 %
2014
74,167,019
0
-
2015
74,167,019
70
5,192
2016
741,670,190
1
The Management board, comprising of members in charge of advising and assisting the CEO for mak ing decisions, operates under the CEO. The Board is chaired by the CEO, and comprises of 6 members including Chief op erations ofcer, Chief nancial ofcer, Administration and HR Director, Project Director and Corporate communications and Innovation Director.
742
1. 8 0 %
0.25%
ERDENEBILEG
ARIUNAA
TUVSHIN
TSEVEENJAV
DANDAROVA
Chief Executive Ofcer
Corporate Communications and Innovation Director
BANZRAGCH Chief Financial Ofcer
ENKHBILEG
MENDBAYAR
NARANZUN
GONCHIG Chief Operating Ofcer
AVIRMED Project Director
BADRUUGAN Administration and Human Resourse Director
Average /dividend yield/ 1.97% APU company has been continuously paying dividends to shareholders since 2005 to date, pursuant to its the dividend principles. For 2016, the company decided to allocate dividend of MNT 1 per unit share, and the decision was published in February 2017. The average dividend yield provided by APU company to its shareholders historically is approximately 1.9% percent, which is the average amount provided by global beverage manufacturers.
Dividend Yield % An heu ser-Bu sch I nb ev SA
3. 2 2 %
HEI NEKEN (NV)
1. 49 %
SABMill er PLC (B RW1 .DE) Carlsberg B
1. 6 % 1 . 46%
Source: Dividend ranking & nance.yahoo.com
40.
APU Company
Annual report 2016
APU Company
Annual report 2016
41.
Corporate governance
Corporate governance
Aligning its operations and activities with the concepts and principles of the Corporate governance code, and carrying out the Program for effectively implementing the Corporate governance code, APU company has been continually working to develop its comprehensive Risk management, Internal audit and Internal control policy systems.
Risk profle Food industry relates to human health and safety directly and every company in this industry is required to follow international and domestic standards. APU company is the rst Mongolian company that inintroduced ISO 9001 Quality management system, ISO 14001 Environmental manmanagement system, and FSSC 22000 Food safety management systems together. Our Quality management and control dedepartment is responsible for conducting tests, analyses, experiments, quality concontrol and verication, and monitoring on all processes from designing a product to re re-ceiving raw materials, storing, producing and distributing nished products.
Risk mitigation APU Company strives to take a holistic approach in its risk assessment process so that not only the present and explicit risks are evaluated, but also their underlyunderly ing causes, future impacts and outcomes. As a result, proper approaches to mitigate such risks can be formulated.
RISK MAPPING
2016
2017
Currencyrate growth 5
N
Government pol icy changes /Tax increase/
4
Economic slowdown 3
t c a P M i 1
1
2
3
4
Defnition: After the Parliamentary elections of 2016, a Parliament dominated by one party has been established and a new so-called “professional” Government was formed. The Government in tends to enroll in the “Extended Fund Facility” program of the International Monetary Fund (IMF). In connection to this program, it is planning to take several actions to increase budget revenues by increasing social insurance premiums and excise tax on alcoholic beverages. Potentialimpact: Increasing excise tax rate is likely to impact the net sales income of the company and is a high level risk that affects not only our company but also other companies in the same industry. Mitigation: It would be hard to take responsive actions against such external risks. It is problematic to pass on the full tax liability increase to the consumer. Therefore, Therefore, in addition to changes in pricing policy, efforts to optimize costs and introduce new, high-margin product categories are required.
2
2
Government policy changes /Tax growth/
5
to less-volatile currencies for imports which cannot be replaced by local suppliers. There is a lack of currency hedging products on the Mongolian nancial market, and the company will continue to work with nancial service providers to nd suitable solutions.
Economic slowdown Defnition: Due to a slowdown in the economic development, nationwide unemployment has increased and household income has declined, resulting in less spending on consumer products. Statistical data shows that household spending for food and non-food items has gone down by 10 percent and 11 percent in 2016 y.o.y. Potential impact: Economic slowdown is the main risk that may result in decline of the company’s sales as household spending for alcoholic and non-alcoholic beverages decreases.
APU Company ensures high quality and Mitigation: APU standards in its production, goods and services, and it aims to manage this risk by focusing to provide high quality products and services to consumers.
Currency devaluation Defnition: According to main macro-economic indicators, Mongolian economy has shown no improvements in 2016, the tugrug exchange rate against foreign currencies has continued to decline, and the average USD rate increased by 9 percent (the maximum increase was 24 percent). Potentialimpact: Continuous tugrug devaluation is a high level risk that impacts directly on the com pany’s nancial results by affecting procurement costs and causing major non-operational losses related to the signicant foregn currency nominated debt on the balance sheet. Mitigation: In order to mitigate the currency risks related to procurement activities, the company works to increase its local sourcing as well as shift
42.
APU Company
Annual report 2016
APU Company
Annual report 2016
43.
SUSTAINABILITY
SUSTAINABILITY
We strive towards effectively maintaining SOCIAL, ECONOMIC and ENVIRONMENTAL sustainability by creating values across all aspect of our operations.
SUSTAINABILITY
44.
APU Company
Annual report 2016
•
Deliver efciency to stakeholders
•
•
Increase efciency and create values by improving productivity
Strictly comply with food safety and quality standards
•
Contribute to promoting national culture and supporting human development- and eco-friendly production
•
Operate on fair and transparent competition principles
•
Encourage responsible consumption
•
Contribute to improving consumer education
•
Comply with legislations and ethical stan stan-dards
•
Respect equality and fairness
•
National entrepreneur
•
Increase efciency by decreasing expenses
•
Adhere to national and international standards and Mongolian legislations on environment.
•
Conduct eco-friendly manufacturing
•
Reduce environmental pollution and focus on recycling waste
•
Save energy
•
Improve operations regularly and collaborate openly with shareholders, consumers, cuscustomers and employees.
•
In 2016, APU Company paid 127 billion tugrugs in taxes to the Mongolian state budget.
•
Despite economic slowdown and prot decline in 2016, it was decided to distribute 742 million MNT in dividends to the shareholders.
•
On the 22nd of April 2016, the decision to split shares 1-to-10 was announced to improve share share liquidity and accelerate stock trading.
APU Company
Annual report 2016
45.
SUSTAINABILITY
SUSTAINABILITY
We aim to conduct production and manufacturing operations in environment friendly way by applying eco-friendly equipment, technology and standards, taking into account possible impacts from our operations on the environment. Minimizing the adverse impact on the environment is a responsibility of every employee.
Working for APU Company, a leading beverage manufacturer recognized in Mongolia as well as internationally, opens many opportunities for self-development and provides competitive salary and other conditions. It is reliable employer and implementer of best technology and solutions from around the world, and all employees are a part of a skilled and creative community thriving in a safe and comfort able environment. APU Company’s HUMAN RESOURCES POLICY stands for being satised with the success and accomplishments of own work, and working together toward development for all.
ENERGY EFFICIENCY
HUMAN RESOURCE POLICY IMPLEMENTATION
APU Company was selected from 7 Mongolian companies that competed for the 2015-2016 Energy efcient model organization project, organized among its member countries by the Asian productivity organization. The project was implemented over the course of 2015-2017, and APU Company has bebecome the ASIAN ENERGY EFFICIENT MODEL ORGANIZATION by achieving the objectives of efcient use and recycling of steam, water, heat and electricity.
WATER SAVING:
АPU company carried out a “Good attitude, Good communications, Good people” campaign among its employees in 2016. 392 specialized and on-the-job training sessions were successfully organized to improve professional skills. •
Situation-based leadership” training for top managers
•
“Good attitude, Good communications, Good people” training training for mid-level managers, including technical and engineering staff
Waste water resulted from production processes, is re-used for watering the premises, roads, streets and green areas, saving a total of 11,544 m 3 clean water per year.
STEAM, HEAT AND COOLING: Water from steam condensation is used for heating plant premises and warehouse buildings, reducing central heat consumption by 14.5% percent.
According to the corporate culture survey among the employees, the following categories have shown improvement in 2016: new ideas and creative attitude by 5.2%, planning effectiveness by 4.5%, communications and collaboration by 4.1%. The company achieved 100 percent performance for its Collective agreement with the Labor Union, providing MNT 1,495,504,662.00 for various employee support:
Human development is the foundation for the nation’s growth and prosperity. We invest in arts and sports to promote Mongolia internationally, put our efforts into education of our future – the young generation, promote Mongolian traditions and customs, and take active part in social campaigns and industry initiatives.
46.
Towards employees:
Towards the public:
•
Education and training programs
•
•
“Positive mind” campaign
•
Financial incentives for productivity and development initiatives
•
•
Promotion of arts, traditional culture and customs within the framework of Tuguldur project
Sponsorship of arts, sports and cultural events
•
Support for young athletes, sponsorship of international competition participation costs.
APU Company
Annual report 2016
Various activities and events in collaboration with government and non-government organizations
• • • •
Pensions and benets MNT 33,681,159 Other support MNT 49,297,405 Award and incentives MNT 72,427,840 Daily meal and health service MNT 1,340,098,258
•
For convenience and work/life balance of employees, the food canteen has been redecorated, and the menu updated to improve nutrition and choice of meals provided to employees free of charge For employees who work in hard conditions, milk, yoghurt and curd (during winter) is provided daily All employees are provided proper Personal protective equipment to ensure occupational health and safety APU hospital delivers emergency and rst aid services, general out-patient diagnostics and treatment, and organizes health education and awareness activities. Regularly, 20-25 employees get healthcare service a day.
• • •
APU Company
Annual report 2016
47.
SUSTAINABILITY
SUSTAINABILITY
As a result of the project aiming to improve corporate culture, employee relations and inter-departmental collaboration have improved markedly. The focus of the next stage of the project is to enhance planning efciency, encourage creativitiy and facilitate mutual learning and knowledge sharing. Activities implemented within framework of the projects are:
Family trip: A traditional event being organized since 2015 to introduce and promote the company’s operations to the employees’ family members.
“Pure Tuul campaign-2016” Within the objective to promote environmenenvironmentally-friendly production and to call other factories and communities to come together under the slogan to keep Tuul River clean we organized the “Pure Tuul Campaign” for the 2nd year. 300 company employees took part in cleaning 28 hectares of land along the river Tuul. We encouraged group companies to join the initiative and over 50 employees of Shunkhlai, Depod LLC worked together with the Save Tuul River Basin and Queen Tuul groups.
APU Olympics: With the goal to support active lifestyle through sports, to build team spirit and propro mote unity, we have organized the annual APU Olympics. The event theme was special by reflecting the features of the “RIO 2016” OlymOlym pics and honoring the APU company athlete D.Otgondalai, Bronze medal winner in the Rio Olympics 2016.
Success and attitude We organized a “Success and Attitude” training where professional trainers have suggested many ways that can be used for enhancing your own success and fostering a positive attitude in the workplace.
“One household-one tree”
During the “National tree planting day” under the slogan “Together for green Mongolia” APU employees were enrolled in a 2-day training to implement the One household one tree campaign. 250 employees participarticipated and each planted 5-10 trees.
Water to be treasured: As a result of this initiative, “Grey” water is ready for re-use after being analyzed and relevant collaborations are extended with specialized organizations on its use for city greening and other purposes.
Campaign for good idea In order to promote ideas, new solutions and iniini tiatives, a “Good idea” campaign was organized among all workers. Many progressive ideas have been collected with some under implementation now.
48.
APU Company
Annual report 2016
APU Company
Annual report 2016
49.
SUSTAINABILITY TY
SUSTAINABILITY TY
“Mongols with Deel” event Sponsorship of the “Asian championship” youth chess tournament With the goal of supporting youth personal development we sponsored the chess tournament in which 2000 children took part. The ofcial tournatournament brand was the “Maamuu” brand.
Trac safety promotion Within the corporate social responsibility to prevent accidents and to raise public awareness on the dangers of drunk driving, APU Company together with the Trafc Police Department prepared 3 video commercials that were broadbroadcasted through social networks and television channels.
APU company employees widely participated in the nationwide “Mongols with Deel” event aiming to give respect to the cultural heritage of Mongols and spread awareness and apappreciation of traditional Mongolian clothing. International visitors and over 2,500 citizens atat tended the parade in which 39 APU employees demonstrating diverse ethnic fashion choices.
Together in hardship APU Company supports local industry and puts emphasis to assist SMEs. In the winter of 2016, the company purchased lamb wool cloths from 50 women entrepreneurs from vulnerable groups to deliver to herders in rural areas hit by harsh weather conditions.
FC ULAANBAATAR Football team
World milk day
Since 2016, APU Company signed a cooperation agreement with FC Ulaanbaatar football team. The purpose is to introduce the youth to sports, to motivate them for success in team sports on international level.
Milk and dairy product manufacturers introintroduced their products to the public, organized activities such as tastings, promotions and a parade. A total of 14 milk producers participated in this event and more than 1,000 people visited.
POSITIVE MIND
International horse-head ddle festival Promoting the awareness of Mongolian cultural heritage, APU Company sponsored the Fifth ininternational horse-head ddle festival. The festival was a major event attended by more than 200 artists from 18 countries including the United States, Germany, Russia and China.
Together with the JCI Mongolia organization, APU Company joined the movement to introduce the “Positive Mind” training to students both locally and overseas.
Rio medalist D.OTGONDALAI APU Company has always supported boxing and shooting sports. The company sponsors b oxer D.Otgondalai, International Sports Master, the Asian Games champion, and Olympic bronze medalist from the “RIO 2016” XXXI summer Olympics. At his arrival back to the country APU Company’s management welcomed and honored him by presenting the keys to a new apartment.
50.
APU Company
Annual report 2016
APU Company
Annual report 2016
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FINANCIAL STATEMENT
FINANCIAL STATEMENTS
Mongolian National Chamber of Commerce and Industry
Asian Productivity Organization
Soyombo, Arkhi, Ulaanbaatar Corporate Governance Development Center, Financial RegulaRegulatory Commission, State Property Committee, and Mongolian Stock Exchange
Arkhi Export Limited Edition Vodka /Gold Winner/ Chinggis Khan Vodka /Silver Winner/
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APU Company
Annual report 2016
Award in the Marketing & Design category of the competition: ‘Snap on’ closure called Sunrise, for spirits, which combines an aluminum shell and plastic non-rellable tments, with a highly visible tear off, tamper evident band.
APU Company
Annual report 2016
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APU Company
Annual report 2016
FINANCIAL STATEMENT
APU Company
Annual report 2016
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APU Company
Annual report 2016
FINANCIAL STATEMENT
APU Company
Annual report 2016
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APU Company
Annual report 2016
FINANCIAL STATEMENT
APU Company
Annual report 2016
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APU Company
Annual report 2016
FINANCIAL STATEMENT
APU Company
Annual report 2016
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