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The Merger see page [91]. Reasons for the Merger see page []. Each of SeaChange and Triller considered various reasons for seeking the merger. For example, SeaChange considered, among other things:.
The SeaChange board also considered the following potential risks and negative factors relating to the merger:. SeaChange will lose the autonomy and local strategic decision-making capabilities associated with being an independent entity;.
Material U. Federal Income Tax Considerations see page []. Overview of the Merger Agreement. Merger Consideration see page []. If an election is not made or is not properly made with respect to any shares of SeaChange common stock, then such shares of SeaChange common stock shall be deemed to have elected to receive the Stock Consideration. Treatment of Triller Service Provider Units see page []. Treatment of Triller Options and Warrants see page [].
Treatment of Triller Convertible Notes see page []. Election Procedures see page []. You will be able to specify on the election form:. If you do not submit an election form prior to the election deadline, you will be deemed to have indicated that you are making an election to receive the Stock Consideration. Conditions to the Completion of the Merger see page []. No Shop see page []. Each of SeaChange and Triller agreed that during the period commencing on the execution date of the Merger Agreement and ending on the earlier of the consummation of the merger or the termination of the Merger Agreement, except.
Termination see page []. Either SeaChange or Triller may terminate the Merger Agreement under certain circumstances, which would prevent the merger from being consummated. Termination Fee and Expenses see page []. Buyer Senior Notes see page []. The notes will bear interest at an annual rate of 5. In addition, upon the occurrence of certain events, the notes will convert, or may be converted, into shares of Class A common stock of TrillerVerz at a specified conversion rate, subject to adjustment for certain events.
Nasdaq Listing see page []. Management Following the Merger see page []. From and after the effective time, the board of directors of the combined company will be composed of seven members, with all members to be designated by Triller. At the effective time, SeaChange executive officers, Messrs.
In addition, the executive officers and the non-employee directors of SeaChange will also receive accelerated vesting of their current outstanding equity awards at the effective time.
Directors will receive cash compensation and equity award grants for their services to the surviving company. Executive officers will continue to receive cash compensation in accordance with their current compensation packages and will be eligible to receive equity awards. Support Agreement see page []. Pursuant to the Support Agreement, the Company Stockholder agreed to i vote all of its SeaChange common shares in favor of the approval of the Buyer Stockholder Matters as defined in the Merger Agreement and adoption of the Merger Agreement and against, among other things, any acquisition proposal or acquisition transaction and ii not to exercise or assert any appraisal rights under Section of the DGCL in connection with the merger.
On January 31, , the Support Agreement terminated. Rights Agreement Amendment see page []. The Rights Agreement Amendment, among other things, permits the execution of the Merger Agreement and exempts the performance and consummation of the transactions contemplated by the Merger Agreement, including the merger, and the Support Agreement, without triggering the provisions of the Rights Agreement.
Immediately prior to the effective time, all outstanding rights under the Rights Agreement will expire and cease to be exercisable. Our financial advisor, Scura Partners, delivered a written opinion, dated January 28, , to our board of directors to the effect that, as of the date of the opinion and based upon and subject to the assumptions, conditions and limitations set forth in the opinion, i the Merger Consideration as a whole was fair from a financial view to the holders of SeaChange common stock, and ii the Stock Consideration was fair from a financial view to the holders of SeaChange common stock.
We urge you to read the opinion carefully in its entirety. Risk Factors see page [25]. Both Triller and SeaChange are subject to various risks associated with their businesses and their industries. These risks include, but are not limited to:. Risks Related to the Merger. Triller unitholders and SeaChange stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.
The historical audited and unaudited pro forma condensed combined financial information may not be representative of results after the merger. Risks Related to SeaChange. If SeaChange fails to respond to rapidly changing technologies related to multiscreen video, its business, financial condition and results of operations would be materially adversely affected.
Risks Related to the Notes. TrillerVerz and its subsidiaries may still be able to incur substantially more indebtedness, which could further exacerbate the risks associated with its leverage and the ownership of the notes.
The indenture that will govern the notes offered hereby will impose significant operating and financial restrictions on us and our restricted subsidiaries, which may prevent us from capitalizing on business opportunities. The collateral may not be sufficient to secure the obligations under the notes.
We may be unable to repay or repurchase the notes at maturity. The limited and automatic conversion features of the notes could result in holders of notes receiving less than the value of Class A common stock into which the notes would otherwise be convertible. Risks Related to Triller. Triller must increase the scale and efficiency of its technology infrastructure to support its growth.
Triller may not be successful in its efforts to further monetize its streaming platform, which may harm its business. A security incident may allow unauthorized access to its systems, networks or the data of users on the Triller app, harm its reputation, create additional liability and harm its financial results. Defects in, or the loss of access to, software or services from third parties could increase its costs and adversely affect the quality of Triller.
Triller may pay upfront expenses when planning live events and if these arrangements do not perform as it expects, its business, results of operations and financial condition may be harmed. Triller has a limited operating history, which makes it difficult to forecast its revenue and evaluate its business and future prospects.
Triller has incurred losses each year since its inception, Triller expects its operating expenses to increase, and it may not become profitable in the future. Triller depends on the continued service of the members of its executive management and other key employees, the loss or diminished performance of whom could adversely affect its business.
Governmental and Regulatory Approvals see page []. In addition, the completion of the merger is subject to antitrust review in the United States. Anticipated Accounting Treatment see page []. The total purchase price to acquire SeaChange will be allocated to the fair value of the assets acquired and assumed liabilities of SeaChange.
Any excess amounts after allocating the consideration to identifiable tangible and intangible assets acquired and liabilities assumed will be recorded as goodwill.
Appraisal Rights. Comparison of Stockholder Rights see page []. The rights of stockholders of SeaChange are currently, and will continue to be, governed by the DGCL, the certificate of incorporation and the bylaws of SeaChange effective at the closing of the merger. You should not place undue reliance on these statements.
These forward-looking statements include, without limitation, statements that reflect our current beliefs, expectations, assumptions, estimates and projections about Triller, SeaChange, the merger and our industry. We disclaim any undertaking to publicly update or revise any forward-looking statements to reflect any change in our expectations with regard thereto or any changes in events, conditions or circumstances on which such statements are based.
We believe that these factors include those related to:. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than is described. Except as may be required by law, neither SeaChange nor Triller undertakes any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The alleged omissions generally relate to i certain financial projections, ii certain valuation analyses performed by Scura Partners, and iii potential conflicts of interest. Nothing in the supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein.
To the contrary, SeaChange specifically denies all allegations in the demands that any additional disclosure is or was required. SeaChange believes that the allegations in the demands are without merit. The governmental agencies from which SeaChange and Triller are seeking certain approvals related to these closing conditions have broad discretion in administering the applicable governing regulations.
SeaChange and Triller can provide no assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied or waived, if applicable , and, if all required consents and approvals are obtained and all closing conditions are satisfied or waived, if applicable , and they can provide no assurance as to the terms, conditions and timing of such consents and approvals or the timing of the completion of the merger.
Any delay in completing the merger could cause SeaChange and Triller not to realize some or all of the benefits that they expect to achieve if the merger is successfully completed within the expected timeframe. The merger is subject to the satisfaction of various closing conditions, and neither Triller nor SeaChange can guarantee that the merger will be successfully consummated.
In the event that the merger is not consummated for any reason, Triller and SeaChange will be subject to many risks, including the costs related to the merger, such as legal, accounting and advisory fees, which must be paid even if the merger is not consummated, and, potentially, the payment of a termination fee under certain circumstances. Triller and SeaChange also could be subject to litigation related to any failure to consummate the merger or related to any enforcement proceeding commenced against Triller or SeaChange to perform their respective obligations under the Merger Agreement.
Finally, if the Merger Agreement is terminated, Triller or SeaChange may be unable to find another party willing to engage in a similar transaction on terms as favorable as those set forth in the Merger Agreement, or at all. Further, because the stockholders of SeaChange will not be able to change their election after the election deadline, they may receive per share merger consideration that is worth less than the other per share merger consideration they could have elected, even if the per share merger consideration they elected to receive is worth more at the election deadline than the per share merger consideration they actually receive.
Current SeaChange stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management. SeaChange stockholders currently have the right to vote for their respective directors and on other matters affecting SeaChange.
As a result of these reduced ownership percentages, former SeaChange stockholders will have less influence on the management and policies of the combined company than they now have with respect to SeaChange.
SeaChange and Triller could acquire additional products, technologies or businesses, or enter into joint venture arrangements, to complement or expand each of its business, or engage in divestitures. As part of its strategy for growth, each SeaChange and Triller may continue to explore acquisitions, divestitures, or strategic collaborations, which may not be completed or may not be ultimately beneficial to it.
Acquisitions or divestitures may pose risks to its operations, including:. Additionally, in connection with any acquisitions or investments SeaChange could:. Future acquisitions may be difficult to integrate, disrupt its business, dilute stockholder or unitholder value or divert management attention. The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire Triller or SeaChange.
Until the effective time of the merger, with certain exceptions, the Merger Agreement prohibits Triller and SeaChange from entering into or soliciting any acquisition proposal or offer for a merger or other business combination with any other party. These provisions could discourage other companies from trying to acquire Triller or SeaChange unless those other companies are willing to offer significantly greater value.
Triller or SeaChange has no corresponding right to terminate the merger agreement with respect to a superior acquisition proposal for Triller or SeaChange. Certain officers and directors of Triller and SeaChange participate in arrangements that provide them with interests in the merger that are different from those of other shareholders, including in some cases, their continued service as a director of the combined company, severance benefits under the terms of their existing employment agreements, acceleration of vesting or preferential treatment with respect to equity awards held by executive officers and continued indemnification of directors and officers.
These interests, among others, may influence the officers and directors of Triller and SeaChange to support or approve the merger and the issuance of shares of SeaChange common stock in the merger. If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Triller unitholders and SeaChange stockholders will have experienced substantial dilution of their.
Significant management attention and resources will be required to integrate the two companies. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.
It is also exempt from the requirement to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section b of the Sarbanes-Oxley Act. The combined company cannot predict if investors will find it common stock less attractive because it may rely on these exemptions.
If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock prices may be more volatile. If Triller fails to maintain an effective system of disclosure controls and internal control over financial reporting, its ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired. The Sarbanes-Oxley Act requires, among other things, that Triller maintain effective disclosure controls and procedures and internal control over financial reporting.
Triller is continuing to develop and refine its disclosure controls and other procedures that are designed to ensure that information required to be disclosed by it in the reports that Triller will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to its principal executive and financial officers.
Triller is also continuing to improve its internal control over financial reporting. For example, as Triller has prepared to become a public company, it has worked to improve the controls around its key accounting processes and its quarterly close process, Triller has implemented a number of new systems to supplement its systems as part of its control environment, and Triller has hired additional accounting and finance personnel to help it implement these processes and controls.
In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Triller has expended, and anticipate that it will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, Triller may experience material weaknesses in its controls. Any failure to accurately report and present its non-GAAP financial measures and key metrics could cause investors to lose confidence in its reported financial and other information, which would likely have a negative effect on the trading price of its common stock.
Its current controls and any new controls that Triller develops may become inadequate because of changes in conditions in its business. Further, weaknesses in its disclosure controls and internal control over financial reporting may be discovered in the future.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm its results of operations or cause it to fail to meet its reporting obligations and may result in a restatement of its consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of its internal control over financial reporting that Triller will eventually be required to include in its periodic reports that will be filed with the SEC.
Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in its reported financial and other information, which would likely have a negative effect on the trading price of its common stock. In addition, if it is unable to continue to meet these requirements, Triller may not be able to remain listed on the Nasdaq.
Triller is not currently required to comply with the SEC rules that implement Section of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of its internal control over financial reporting for that purpose. As a public company, Triller will be required to provide an annual management report on the effectiveness of its internal control over financial reporting commencing with its second annual report on Form K.
Its independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm its business, results of operations, and financial condition and could cause a decline in the price of its common stock.
Two shareholders will have majority control over all stockholder decisions because they will control a substantial majority of its voting stock. The Class A common stock issued in the merger will have one vote per share, and shares of Class B common stock will lose voting rights when such shares convert into Class A common stock as such shares are sold. As a result, these two directors, and potentially either one of them alone, will have the ability to control the outcome of all matters submitted to its stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of its assets.
This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of its assets that its other stockholders support. If either directorship with it is terminated, they will continue to have the ability to exercise the same significant voting power and potentially control the outcome of all matters submitted to its stockholders for approval. As stockholders, even if they are controlling stockholders, they are entitled to vote their shares, and.
Upon the completion of the merger, two of its directors, directly or through entities they control, will own or have voting control over a majority of the outstanding shares of its common stock. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. If completed, the merger may not achieve its intended results, and Triller and SeaChange may be unable to successfully integrate their operations.
Triller and SeaChange entered into the Merger Agreement with the expectation that the merger will result in various benefits.
Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether the businesses of Triller and SeaChange can be integrated in an efficient and effective manner. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization.
One of the purposes of the proposed Reverse Stock Split is to increase the per-share market price of SeaChange common stock in order to comply with the continued listing requirements of Nasdaq.
It cannot be assured,. Thus, while the stock price of the combined company might meet the continued listing requirements of Nasdaq, it cannot be assured that it will continue to do so. A reduction in spending by customers would adversely affect its business, financial condition and operating results.
Spending for these systems and services is cyclical and can be curtailed or deferred on short notice.
SeaChange continues to have limited visibility into the capital spending plans of its current and prospective customers. As a result, it is difficult to forecast revenue and operating results. SeaChange has devoted, and will continue to devote, considerable resources, including the allocation of capital expenditures to growing its SaaS service offering revenue over the next several years.
There can be no assurance that SeaChange will meet its revenue targets for this service and if SeaChange fails to achieve its revenue goals, its growth and operating results will be materially adversely affected. SeaChange may be unsuccessful in its efforts to become a company that primarily provides software solutions.
If SeaChange is unable to successfully compete in its marketplace, its financial condition and operating results may be adversely affected. SeaChange currently competes against companies offering video software solutions and has increasingly seen competition from integrated end-to-end solutions and a large number of OTT players.
Due to the rapidly evolving markets in which SeaChange competes, new competitors with greater market presence and financial resources than it has may further intensify competition. They may be in better position to withstand any significant reduction in capital spending by customers in its markets and may not be as susceptible to downturns in a particular market.
Although SeaChange believes that it has certain technological and other advantages over its competitors, realizing and maintaining these advantages will require a continued high level of investment by SeaChange in research and product development, marketing and customer service and support. In the future, SeaChange may not have sufficient resources to continue to make these investments or to make the technological advances necessary to compete successfully with its existing competitors or with new competitors.
If SeaChange is unable to compete effectively, its business, prospects, financial condition and operating results would be materially adversely affected. If SeaChange fails to respond to rapidly changing technologies related to multiscreen video, its business, financial condition and results of operations would be materially adversely affected because the competitive advantage of its products and services relative to those of its competitors would decrease. In the future, SeaChange may not be successful in enhancing its video products or developing and marketing new products which satisfy customer needs or achieve market acceptance.
In addition, there may be services, products or technologies developed by others that render its products or technologies uncompetitive, unmarketable or obsolete, or announcements of currently planned or other new product offerings either by SeaChange or its competitors that cause customers to defer or fail to purchase its existing solutions.
SeaChange has taken and continues to take measures to address the variability in the market for its products and services, which could have long-term negative effects on its business or impact its ability to adequately address a rapid increase in customer demand.
SeaChange has taken and continues to take measures to address the variability in the market for its products and services, including due to the impact of worldwide economic cycles, to increase average revenue per unit of its sales and to reduce its operating expenses, rationalize capital expenditure and minimize customer turnover.
SeaChange cannot ensure that the measures it has taken will not impair its ability to effectively develop and market products and services, to remain competitive in the industries in which it competes, to operate effectively, to operate profitably during slowdowns or to effectively meet a rapid increase in customer demand.
Historically, a significant portion of our revenue in any given fiscal period has been derived from substantial orders placed by these large organizations.
SeaChange believes that a significant amount of its revenue will continue to be derived from a limited number of large customers in the future. Even if subscriptions are renewed, they may not be renewed on the same or on more profitable terms. As a result, its ability to retain its existing customers and grow depends, in part, on subscription renewals. Framework subscription model was introduced in fiscal and, as such, it does not have historical renewal data to rely on to help it predict its future renewal rates, and SeaChange will not have relevant renewal data for a number of years.
SeaChange has historically derived a substantial portion of its revenue from purchase orders that have exceeded one million dollars in value. Because of these factors, in some future quarter its operating results may be below guidance that SeaChange may issue or the expectations of public market analysts and investors, either of which may adversely affect the market price of its common stock.
In February , SeaChange began providing its products and services to customers on the basis of its value based selling approach, under which customers would license its products and services. If SeaChange does not correctly understand the magnitude of expenses it will incur in connection with these new agreements, its operating results would be materially affected.
Based upon all of the foregoing, SeaChange believes that its quarterly revenue and operating results are likely to vary significantly in the future, that period-to-period comparisons of its results of operations are not necessarily meaningful and that these comparisons should not be relied upon as indications of future performance.
Increasingly, SeaChange is seeing competition from integrated end-to-end solutions and a large number of OTT players, each of which may reduce the demand for or average selling prices of its products and services and adversely affect its business, financial condition and results of operations. SeaChange enters into fixed-price contracts, which could subject it to losses if it has cost overruns. While firm fixed-price contracts enable SeaChange to benefit from performance improvements, cost reductions and efficiencies, they also subject SeaChange to the risk of reduced margins or incurring losses if it is unable to achieve estimated costs and revenue.
If its estimated costs exceed its estimated price, SeaChange will recognize a loss, which can significantly affect its reported results. Fixed-price development contracts are generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs. If SeaChange fails to meet the terms specified in those contracts, its related margin could be reduced. In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect its financial condition.
There can be no assurance that the provision in its financial statements for estimated product warranty expense will be sufficient. SeaChange cannot ensure you that its efforts to reduce its risk through warranty disclaimers will effectively limit its liability. Any significant occurrence of warranty expense in excess of estimates could have a material adverse effect on its operating results, financial condition and cash flow.
Further, SeaChange provides maintenance support to its customers and allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over that warranty period related to both the warranty obligation and the maintenance support agreement.
SeaChange cannot be sure that the cost of such maintenance support will be adequately provided for in its financial statements and any additional maintenance expenses could likewise have a material adverse effect on its operating results, financial condition and cash flow. If its software products contain serious errors or defects, then SeaChange may lose revenue and market acceptance and may incur costs to defend or settle claims.
These errors and defects could result in product liability, services level agreement claims or warranty claims. SeaChange has experienced turnover in its senior management, which could result in operational and administrative inefficiencies and could hinder the execution of its growth strategy. SeaChange has recently experienced turnover in its senior management.
Pons resigned as. To increase strategic focus and operational efficiency, SeaChange has implemented restructuring programs. SeaChange also transferred its technical support services to its Poland location in fiscal in an effort to further reduce cost. As a result of these restructuring efforts, the total number of employees significantly decreased.
SeaChange may incur additional restructuring costs or not realize the expected benefits of these new initiatives. Further, SeaChange could experience delays, business disruptions, decreased productivity, unanticipated employee turnover and increased litigation-related costs in connection with past and future restructuring and other efficiency improvement activities, and there can be no assurance that its estimates of the savings achievable by restructuring will be realized.
Campaigns by significant investors to effect changes at publicly-traded companies continue to be prevalent. If a proxy contest were to be pursued by a stockholder, it could result in substantial expense to SeaChange, consume significant attention of its management and Board of Directors, and disrupt its business. Robert Pons and Mr. Jeffrey Tuder to the Board. Tuder resigned from the Board on May 14, Similar to a proxy contest, this could result in substantial expense to SeaChange, consume significant attention of its management and Board of Directors, and disrupt its business.
SeaChange operates in highly competitive environments and projections of future operating results and cash flows may vary materially from actual results. SeaChange may be required to record a significant noncash charge to its consolidated statements of operations. SeaChange may fail to achieve its financial forecasts due to inaccurate sales forecasts or other factors. Sales personnel monitor the status of all proposals and estimate when a customer will make a purchase decision and the dollar amount of the sale.
These estimates are aggregated periodically to generate a sales pipeline. A reduction in the conversion rate, or in the pipeline itself, could cause SeaChange to plan or budget incorrectly and adversely affect its business or results of operations.
In particular, a slowdown in capital spending or economic conditions generally can unexpectedly reduce the conversion rate in particular periods as purchasing decisions are delayed, reduced in amounts or cancelled. Governments in affected regions have implemented and may continue to implement safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures.
Organizations, businesses and individuals are taking additional steps to avoid or reduce the chances of infection, including limiting travel and working from home. Due to the ongoing pandemic, it has modified numerous aspects of its operations, including employee travel, employee work locations, virtualization or cancellation of customer and employee events, remote sales, implementation, and support activities.
Although well intended, these modifications may delay or reduce sales and harm productivity and collaboration. During a period of reduced revenue, SeaChange may need to increase borrowing, which would increase its indebtedness. Although SeaChange is unable to predict the precise impact of COVID on its business, its mobile communications business, in particular, depends to a large extent on travel and the willingness of customers to enter into or renew contracts with SeaChange.
SeaChange anticipates that governmental, individual, business and other organizational measures to limit the spread of the virus will adversely affect its revenues, results of operations and financial condition, perhaps materially.
SeaChange may be unable to locate replacement materials, components or other supplies, and ongoing delays could reduce sales and adversely affect its revenues and results of operations. In addition, fiscal and policy interventions by national governments in response to certain economic conditions, including general inflation or currency volatility, in the locations where SeaChange does business could have knock-on effects such as increasing interest rates, which could have a negative impact on its business by increasing its operating costs and its borrowing costs as well as decreasing the capital available for its customers to purchase its products and services.
If SeaChange is not able to obtain necessary licenses, services or distribution rights for third-party technology at acceptable prices, or at all, its products could become obsolete or SeaChange may not be able to deliver certain product offerings. SeaChange has incorporated third-party licensed technology into its current products and its product lines.
From time to time, SeaChange may be required to license additional technology or obtain services from third parties to develop new products or product enhancements or to provide specific solutions. Third-party providers may not be available or continue to be available to SeaChange on commercially reasonable terms.
The inability to maintain or re-license any third-party products required in its current products or to obtain any new third-party licenses and services necessary to develop new products and product enhancements or provide specific solutions could require SeaChange to obtain substitute technology of lower quality or performance standards or at greater cost. Such inabilities could delay or prevent SeaChange from making these products or services, which could seriously harm the competitiveness of its solutions.
Such open source software is generally licensed by its authors or other third parties under open source licenses. Although SeaChange monitors its use of open source closely, the terms of many open source licenses have not been interpreted by U.
In addition, if SeaChange fails to comply with these licenses, it may be subject to certain conditions,. If an author or other third party that distributes such open source software were to allege that it had not complied with the conditions of one or more of these licenses, SeaChange could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of its services that contain the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of its services.
SeaChange uses third-party data center hosting facilities for customers buying its SaaS product offering, and SeaChange uses enterprise cloud computing providers in connection with certain other aspects of its business, including cloud-based data processing, storage and other services. In the case of data center hosting facilities, while SeaChange controls the actual computer and storage systems upon which its software runs, and deploy them to the data center hosting facilities, SeaChange does not control the operation or availability of these facilities.
SeaChange similarly does not have control over the operation or availability of enterprise cloud computing providers that it uses. SeaChange does not control the operation of any of these facilities, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Even with the disaster recovery arrangements, its service could be interrupted.
Third-party delays could adversely affect its future financial operating results. SeaChange sells its products in accordance with its standard product specifications. There can be instances where its products are integrated into a larger solution with other third-party products, the delivery of which is controlled by third-party providers. SeaChange relies on other companies to provide products and to perform some of the services that it provides to its customers.
In addition, if one or more of the products on which SeaChange depends on becomes unavailable or is available only at very high. In some instances, SeaChange depends upon a single source of supply. It may also result in its inability to comply with SEC regulations in a timely manner. For example, in the first quarter of fiscal , SeaChange experienced a ransomware attack on its information technology system.
SeaChange operates in a relatively new and rapidly developing market, which makes it difficult to evaluate its business and future prospects.
SeaChange has encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:. If SeaChange does not manage these risks successfully, its business will be harmed. If SeaChange fails to develop and consistently deliver innovative technologies and services in response to changes in the technology and entertainment industries, its business could decline.
SeaChange will need to continue to expend considerable resources on research and. Despite its efforts, SeaChange may not be able to consistently develop and effectively market new products, technologies and services that adequately or competitively address the needs of the changing marketplace.
In addition, it may not correctly identify new or changing market trends at an early enough stage to capitalize on market opportunities. These markets continue to develop as commercial markets, both within and outside North America. In addition to the potential size of these markets and the timing of their development being uncertain, so too is the technological manner in which they will develop. The success of the multiscreen video market is contingent on content providers permitting their content to be licensed for use in this market.
Content providers may, due to concerns regarding either or both marketing and illegal duplication of the content, limit the extent to which they provide content to their subscribers. Consolidations in the markets SeaChange serves could result in delays or reductions in purchases of products, which would have a material adverse effect on its business.
The markets SeaChange serves have historically experienced, and continue to experience, the consolidation of many industry participants. When consolidations occur, it is possible that the acquirer will not continue using the same suppliers, possibly resulting in an immediate or future elimination of sales opportunities for SeaChange or its competitors. Even if sales are not reduced, consolidation can also result in pressure from customers for lower prices or better terms, reflecting the increase in the total volume of products purchased or the elimination of a price differential between the acquiring customer and the company acquired.
Consolidations also could result in delays in purchasing decisions by the affected companies prior to completion of the transaction and by the merged businesses. There is no assurance that the current cost of Internet connectivity and network access will not rise with the increasing popularity of online media services.
SeaChange relies on third-party service providers for its principal connections to the Internet and network access, and to deliver media to consumers.
As demand for online media increases, there can be no assurance that Internet and network service providers will continue to price their network access services on reasonable terms. The distribution of online media requires delivery of digital content files and providers of network access and distribution may change their business models and increase their prices significantly, which could slow the widespread adoption of such services. SeaChange has been and, in the future, could become subject to litigation regarding intellectual property rights, which could seriously harm its business and require SeaChange to incur significant legal costs to defend its intellectual property rights.
The industry in which SeaChange operates is characterized by vigorous protection and pursuit of intellectual property rights or positions, which on occasion, have resulted in significant and often protracted litigation.
SeaChange has from time to time received, and may in the future receive, communications from third parties asserting infringements on patent or other intellectual property rights covering its products or processes.
SeaChange has received certain claims for indemnification from customers but has not been made party to any litigation involving intellectual property infringement claims as a result.
These claims and any resulting lawsuit, if successful, could subject SeaChange to significant liability for damages and invalidation of its proprietary rights. This possibility of multiple damages serves to increase the incentive for plaintiffs to bring such litigation.
Although SeaChange carries general liability and intellectual property liability insurance, its insurance may not cover potential claims of this type or may not be adequate to indemnify it for all liability that may be imposed. In addition, any potential intellectual property litigation also could force SeaChange to stop selling, incorporating or using the products that use the infringed intellectual property or obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, although this license may not be available on reasonable terms, or at all, or redesign those products that use the infringed intellectual property.
If SeaChange is forced to take any of the foregoing actions, its business may be seriously harmed. Risks Related to Regulatory Matters. The telecommunications and media industries are subject to extensive regulation which may limit the growth of its business, both in the U. Video service providers are subject to extensive government regulation by the Federal Communications Commission and other federal, state and international regulatory agencies.
Currently, few laws or regulations apply directly to access to or commerce on the Internet. With more business being conducted over the Internet, there have been calls for more stringent copyright protection, tax, consumer protection, cybersecurity, data localization and content restriction laws, both in the U.
SeaChange could be materially, adversely affected by regulation of the Internet and Internet commerce in any country where it operates. Such regulations could include matters such as net neutrality. Further, governments may regulate or restrict the sales, licensing, distribution, and export or import of certain technologies to certain countries.
The GDPR has extraterritorial effect and imposes a mandatory duty on businesses. The GDPR also grants individuals the right to erasure commonly referred to as the right to be forgotten , which may put a burden on SeaChange to erase records upon request.
Other jurisdictions, including certain U. In addition, some countries have or are considering legislation requiring local storage and processing of data that, if enacted, could increase the cost and complexity of offering its products, software and services or maintaining its business operations in those jurisdictions. SeaChange is subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials to obtain or keep business.
The FCPA also requires companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of a company. The FCPA and similar laws in other countries can impose civil and criminal penalties for violations. If SeaChange does not properly implement practices and controls with respect to compliance with the FCPA and similar laws, or if SeaChange fails to enforce those practices and controls properly, it may be subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on its business activities, all of which could harm its reputation, business and financial condition.
SeaChange may have additional tax liabilities, which could have a material and adverse impact on its financial condition and results of operations. SeaChange is subject to income taxes in both the U.
Significant judgment is required in determining its worldwide provision for income taxes. In the ordinary course of its business, there are many transactions and calculations where the ultimate tax determination is uncertain. SeaChange is regularly under audit by various tax jurisdictions. Although SeaChange believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from its historical income tax provisions and accruals.
In addition, SeaChange is subject to sales, use and similar taxes in many countries, jurisdictions and provinces, including those states in the U. These taxing regimes are complex. For example, in the U. Similarly, each state and local taxing authority has its own rules regarding the applicability of sales tax by customer or product type. The number of shares of common stock that SeaChange will issue in connection with the merger is expected to be sufficient, taking into account prior or future shifts in our ownership over a three-year period, to cause SeaChange to undergo an ownership change.
As a result, if SeaChange earns net taxable income, its ability to use its pre-change net operating loss carryforwards to offset U. The Tax Act, among other things, includes changes to U. In addition, NOLs arising in tax years ending after December 31, can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, will not be subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, will continue to have a two-year carryback and twenty-year carryforward period.
As SeaChange maintains a full valuation allowance against its U. NOLs, these changes will not impact its balance sheet as of December 31, SeaChange faces significant risks to its business when it engages in the outsourcing of engineering work, including outsourcing of software work overseas, which, if not properly managed, could result in the loss of valuable intellectual property and increased costs due to inefficient and poor work product, which could harm its business, including its financial results, reputation, and brand.
SeaChange may, from time-to-time, outsource engineering work related to the design and development of its products, typically to save money and gain access to additional engineering resources. SeaChange has worked, and expects to work in the future, with companies located in jurisdictions outside of the U.
SeaChange has limited experience in the outsourcing of engineering and other work to third parties located internationally that operate under different laws and regulations than those in the U. If SeaChange are unable to properly manage and oversee the outsourcing of this engineering and other work related to its products, SeaChange could suffer the loss of valuable intellectual property, or the loss of the ability to claim such intellectual property, including patents and trade names.
North America and in Asia demand remained stable compared to Estimated consumption of board, pulp, sawn softwood, and paper in Tonnes, million. North America. Asia and Oceania. Consumer board. Corrugated board billion m 2 1. Chemical market pulp. Sawn softwood million m 3. Uncoated magazine paper. Coated magazine paper. Coated fine paper.
Uncoated fine paper 2. Unaudited 3. Production and external deliveries. Board deliveries, 1, tonnes. Board production, 1, tonnes. Corrugated packaging European deliveries, million m 2. Corrugated packaging European production, million m 2. Market pulp deliveries, 1, tonnes. Wood product deliveries, 1, m 3. Wood deliveries, 1, m 3.
Paper deliveries, 1, tonnes. Paper production, 1, tonnes. This was. Corrugated packaging European deliveries increased by 47 million m 2. Market pulp deliveries increased by 52, tonnes, or. Wood product deliveries increased by. Wood deliveries increased , m 3 or 5. Finland and Sweden. Paper deliveries totalled 2,, tonnes, down , tonnes, or 7. Sales increased by Structural changes decreased sales by EUR million, with the main. Clearly higher sales prices and higher total volumes. The operational EBIT margin of Variable costs were EUR million higher, mainly due to higher wood, paper for recycling PfR and energy c osts.
Fixed costs. The net foreign exchange rate. Capital gain from forest land sales in Hylt e in Sweden increased the operational. Earnings per share increased by EUR 1. The positive impact comes mainly from the increase in fair valuation in Stora Enso owned forests in. Sweden, mainly driven by increased standing stock volume estimate as well as higher market prices. There is also a positive net effect of. Tangible and intangible asset impairments amounted to EUR 57 million and there were no impairment reversals.
The IAC relate mainly to the restructuring in the Paper. Year Ended 31 December. Operational EBIT. Operational items. EUR million. Packaging Materials. Packaging Solutions. Wood Products. Net financial items. Profit before Tax. Income tax expense. Net Profit. The most common IAC are capital gains and losses, impairments. Items affecting comparability are normally disclosed individually if they exceed one cent per share. Fair valuations and non-operational items include CO 2 emission rights, non-operational fair valuation changes of biological assets, adjustments for differences between fair value.
The adjustments for differences between fair value and. Unaudited 4. Items affecting comparability, fair valuations and non-operational items. Impairments and impairment reversals. Restructuring costs excluding impairments. Acquisitions and disposals. Items affecting comparability. Fair valuations and non-operational items. Segment share of operative assets, operative liabilities and operating capital.
Operative Assets. Operative Liabilities. Operating Capital. Other and eliminations. Key figures. Sales, EUR million. Operational EBIT margin. Operating margin IFRS. Return on equity ROE. Operational ROCE. Operational ROCE excl. Forest division. Dividend and distribution per share 1 , EUR. Payout ratio, excluding FV.
Payout ratio IFRS. Dividend and distribution yield, R share. Equity per share, EUR. Market capitalisation 31 Dec, EUR million. Number of shares 31 Dec thousands. Trading volume A shares thousands. Trading volume R shares thousands. Average number of shares, basic thousands. Average number of shares, diluted thousands.
Net interest expenses, at EUR million,. Other net financial expenses, at EUR 22 million, were EUR 13 million higher than a year ago, mainly due to the early repayment of. The net foreign exchange impact in respect of cash equivalents, interest-bearing assets and liabilities and. The net tax charge totalled EUR million, equivalent to an effective tax rate of Note 9 Income taxes, of the consolidated financial statements. Earnings per share excluding fair valuations were EUR 1.
Operational return on capital employed was Unaudited 5. Breakdown of Capital Employed change. Capital Employed. Capital expenditure excluding investments in biological assets less depreciation. Investments in biological assets less depletion of capitalised silviculture costs.
Impairments and reversal of impairments. Fair valuation of forest assets. Unlisted securities mainly PVO. Equity accounted investments. Net liabilities in defined benefit plans.
Operative working capital and other interest-free items, net. Net tax liabilities. Translation difference. Other changes. Cash flow from operations was EUR 1, 1, million and cash flow after investing activities was EUR 1, m illion. Trade payables increased by EUR million and thus had a positive impact on working capital.
Payments related to the. Operative cash flow. Other adjustments. Change in working capital. Cash Flow from Operations. Cash spent on fixed and biological assets.
Acquisitions of equity accounted investments. Cash Flow after Investing Activities. At the end of the year, Group net interest-bearing liabilities were EUR 2, 2, million. The decrease in net interest-bearing liabilities. Cash and cash equivalents net of bank. The ratio of. In December Stora Enso successfully signed a EUR million revolving credit facility linked to sustainability targets.
The previous EUR million revolving credit facility was cancelled. The fair valuation of. EUR 91 million. Rating agency. Valid from. Fitch Ratings. BBB- stable. Unaudited 6. Packaging Materials division. The Packaging Materials division aims to lead the development of circular packaging, providing premium packaging materials based on. Addressing the needs of today's eco-conscious consumers, Stora Enso helps customers replace fossil-based.
A wide. Operational ROOC. Cash flow from operations. Cash flow after investing activities. Strong market demand was supported by production records in all. The ramp-up of the Oulu containerboard production was successful and ahead of schedule. Personnel costs increased fixed costs. Packaging Solutions division. The Packaging Solutions division develops and sells premium fiber-based packaging products and services.
The portfolio includes converting corrugated board and cartonboard, and converting new materials such as formed fiber and. The revenue from innovation and service led businesses almost doubled during the year. Examples of these businesses are. Operational EBIT for traditional businesses increased.
Fixed costs increased due to higher. Biomaterials division. The Biomaterials division meets the growing demand for bio-based solutions to replace fossil-based and hazardous materials.
Enso uses all fractions of biomass, like lignin, to develop new solutions. Our work to replace fossil-based materials includes novel. Our pulp offering encompasses a wide. Pulp deliveries, 1, tonnes. The market was favourable and supported by a very high operating efficiency.
Operational EBIT was negatively impacted by higher logistics costs. Foreign exchange rates had a negative impact on operational EBIT. During the first quarter of , Stora Enso permanently closed its US-based Virdia operations, which were acquired in and.
Unaudited 7. Wood Products division. The Wood Products division is one of the largest sawnwood producers in Europe and a leading provider of sustainable wood-based. The growing Building Solutions business offers building concepts to support low-carbon. Stora Enso develops digital tools to simplify the design and construction of building projects with.
In addition, we offer applications for windows, doors and packaging industries, as well as pellets for sustainable heating solutions. Wood products deliveries, 1 m 3. The classic sawn market was especially good and building solutions business continued to enjoy the.
Higher log prices and. The Forest division creates value through sustainable forest management, competitive wood supply and innovation. Forests are the. Tornator, whose forest assets are mainly located in Finland. Russian operations and B2B customers. Stora Enso is one of the biggest private forest owners in the world. Wood deliveries, 1 m 3. Operational fair value change of biological assets. Hylte in Sweden. Paper division. Stora Enso is one of the major paper producers in Europe, with an established customer base and a wide product portfolio for print and.
Customers benefit from Stora Enso's selection of paper grades made from recycled and virgin fiber, our technical and. Cash flow after investing activities to sales. Paper deliveries, 1 tonnes. Paper production, 1 tonnes. T he impact of the V eitsiluoto and Kvarnsveden site closures and the Oulu.
Paper prices also. The Sachsen site was divested in August and Stora Enso. In particular, energy and paper for recycling PfR costs were significantly higher. Fixed costs were. Full year cash flow after investing activities was negative EUR 77 million due to negative result and significant closure costs related to.
Cash flow from retained business turned positive in the fourth quarter of Unaudited 8. Sales of the segment Other at EUR 1, million increased from previous year mainly due to higher internal sales of energy and.
Additions to fixed and biological assets including internal costs capitalised in totalled EUR million. The total amount. In January, the conversion of the Oulu paper site in Finland for production of packaging board was completed. The project began in. May following a decision to invest EUR million, and it was completed within the budget frame. In June, an investment of EUR 21 million was announced to improve the competitiveness and environmental performance of the. Anjala-Ingerois paper and board production sites.
The project will be completed during the third quarter of The Group is also. The pilot facility for producing bio-based carbon materials from lignin began operations in July, following the EUR 10 million.
Applications include electric vehicles and consumer electronics as well as large-scale energy storage systems. In July, Stora Enso and Tetra Pak announced a partnership to provide circular solutions to significantly improve recycling of beverage.
Tetra Pak will build another line that will separate and recover polymers and aluminium. The recycled fibers will be. Both lines will be operational at the beginning of With the completion of the feasibility study, Stora Enso decided not to go ahead with the originally planned pulp capacity. A EUR 23 million investment announced in December, will increase flexibility in production at the Varkaus packaging board mill and.
The investment will be completed by the end of Stora Enso is conducting a pre-feasibility study regarding the conversion of the second idle former paper line at its Oulu site in Finland.
The pre-feasibility study will be completed in early The other main projects ongoing at the end of were the investment in new production line for cross laminated timber CLT at.
Stora Enso defines innovation as the process of translating ideas into new value. Research and development work is a basic. Stora Enso's innovation and growth focus is on the development of sustainable packaging applications to replace plastic-based.
Intellectual property IP is an important tool to protect and secure Stora Enso's development of innovative products, the way we work. During , Stora Enso continued to refine its patent portfolio, with priority founding patent applications.
Over pat ents were granted worldwide during the year. Requirements of non-financial information reporting according to the Finnish Accounting Act are reported below. The scope of the. Business model. Sustainability is deeply embedded in our business strategy and. A description of Stora Enso's business model can be found at the beginning of the Report of Board of. Sustainability governance. Leadership Team GLT. The CEO carries the ultimate responsibility for the successful implementation of the sustainability strategy.
Unaudited 9. The Committee met four times in At the same time, the Code of Conduct and. These documents are available at storaenso. Covid pandemic. The global pandemic has underscored the importance of our work on the social agenda. During the year, Stora Enso continued to. The following official. In addition, remote.
Hybrid working has become a part of many. Read more on our adaption to the global pandemic and work on social agenda in the. Sustainability reporting section, under the chapters Safety and Employees. Environmental matters. Sustainable forestry and biodiversity. Key policy: Wood and fiber sourcing, and land management policy. Stora Enso is, a s part of setting ambitious biodiversity goals and new sustainability targets in , committed to achieving a net-positive. The company uses its own forest in Sweden as a platform for continuously developing new biodiversity management practices to.
Measures to be developed, tested and. Stora Enso has initiated a holistic and adaptive Biodiversity Monitoring Programme, which. Currently, Stora Enso follows its progress in sustainable forestry with a key performance indicator KPI that measures the proportion.
At the end of. The majority of. For more details, see the Note In , the total amount of wood including roundwood and wood chips delivered to our mills was Climate change.
Key policy: Energy and carbon policy. Stora Enso updated its science-based targets in to reduce absolute scope 1 and 2 greenhouse gas GHG emissions from. In , Stora Enso also committed to a target. During , the emissions decreased slightly, partly due to less fossil-intensive electricity purchased for sites in Finland.
The scope 3 emissions increased partly due to recovered production during In , our total water withdrawal was 60 m 3 per saleable tonne. During the recent years, the. The amount of water required at. Social and employee matters. Key policies: Minimum HR requirements. On 31 December , there were 22, 23, employees in the Group. The average number of employees in was 23, ,.
Unaudited Historical figures recalculated for comparability. For more. Technical recyclability is defined by international standards and tests when. The recyclability of corrugated packaging is estimated in reporting and will be confirmed by further testing.
In , Stora Enso closed down the Kvarnsveden and Veitsiluoto sites due to structurally declining. Read more in the chapter Employees in the Sustainability reporting section. Personnel expenses totalled EUR 1, 1, million or Wages and salaries were EUR 1, million, pension. At the end of , the Group's top four countries in respect to the number of employees were Finland, Sweden, China, and Poland.
Personnel turnover in was Illness-related absenteeism amounted to 3. The Group's wages in relation to minimum wages and approach to living wages are described in the chapter Employees. Remuneration to the Board of Directors and key management is described in Note 7 of the consolidated financial statements. Key policy: Health and Safety policy. The milestone for was 4. In October , Stora Enso. The incident and the root. The learnings from this tragic event will be acted upon to prevent such.
The milestone for was not achieved. Sustainable sourcing. Guangxi, China. Stora Enso leases 77, hectares of land in Guangxi province China, of which 53, hectares is leased from state-owned forest farms. Parts of the land leased by Stora Enso have been occupied for up to ten years for the purpose of growing crops and trees on a small.
In some cases, the occupiers are claiming rights to the land based on historical land ownership documents that have been.
Recovery of occupied land continued in , with 6, hectares. Bahia, Brazil. In Bahia, Brazil, work continued on a Sustainable Settlement Initiative launched in to provide farming land and educational support. In , Veracel signed a new agreement with the social landless. At the end of , hectares or 0. At the end of , the total land area owned by Veracel was , hectares, of which 82, hectares are used for growing.
Approximately half of Veracel's lands are dedicated to protecting local biodiversity by restoring and. Respect for human rights. Key policy: Human Rights policy. Human rights are embedded in the day-to-day business activities.
While Stora Enso considers all human rights to be important, and. In Stora Enso identified 24 human rights-related development actions in Group function processes. Twenty-two of the actions were. In preparation for the upcoming EU directive on mandatory. Anti-corruption and bribery matters. A total of 86 in potential non-compliance cases were reported in In recent years there has been a steady increase in the.
A total of 98 84 3 investigations of potential non-compliance were completed, which also included open cases from previous.
Remediation plans have been or. EU Taxonomy. The European Commission presented a new growth strategy in , the European Green Deal with the aim to reduce net greenhouse. The aim is to scale up sustainable investments and redirect capital flows. Stora Enso supports the ambitious goals set by the EU Taxonomy.
The current legislation focuses on economic activities with a. When it comes to the forest-based value chain, the current scope of. The EU Taxonomy is still developing, and it is important to note that the current legislation does not cover all sustainable activities on. In driving the transition to zero carbon emissions, the emphasis is on the most carbon intensive industries, as well as on. As a forest company, Stora Enso is, not at the core of the current legislation and therefore only has few.
Since the forest industry and its main products are largely out of the scope of the EU. Taxonomy, the Taxonomy eligible KPI figures are low. Greenhouse Gas GHG emissions and the climate impacts beyond legislative requirements of the climate taxonomy and the EU.
Taxonomy in general. As the legislation is still developing and is expected to expand into other areas relevant to our products and. The reporting preparation was overseen by a.
Accounting principles. One of the main goals of EU Taxonomy is to prevent 'green washing'. Stora Enso respects this and has taken a conservative. Although the figures are reported based on eligibility, the alignment criteria are already considered in cases where the assessment.
EU Taxonomy requires companies to comment on how double counting has been avoided in the taxonomy-eligible economic activities. Stora Enso has made allocations based on cost. Turnover includes the external sales of taxonomy eligible activities.
Nordic forest nurseries, external sales of bio-based electricity and heat, turnover from certain wooden elements and components for. Capital expenditure. Eligible capital expenditure relates to turnover generating and taxonomy eligible assets and economic activities, or projects where. Taxonomy eligible capital expenditure allocations numerator are determined based on the external turnover generation.
The energy. All investments related to. See the Investments and capital. Operating expenditure. Eligible operating expenditure relates to turnover generating and taxonomy eligible assets and economic activities, and includes all direct. The salary costs of employees who perform repairs,. Taxonomy eligible operating.
The energy related operating expenditure. Taxonomy eligible activities. Forest management. External turnover, capital expenditure and. Conservation forestry. Manufacture of batteries. External turnover expected within the next few years. Manufacture of energy efficiency equipment for buildings. External turnover expected within the.
Construction, extension, and operation of wastewater collection and treatment. Proportion of taxonomy eligible activities. Taxonomy eligible. Taxonomy non-eligible. Turnover 1. Environmental investments and liabilities. These investments were mainly to improve the quality. These costs. Provisions for environmental remediation amounted to EUR 75 91 million at 31 December , details of which are in Note 22 ,.
Other Provisions, of the consolidated financial statements. There are currently no active or pending legal claims concerning. Payments related to environmental. Our approach to risk management. Risk is an integral element of business and corporate governance, and it is characterised by both threats and opportunities, which may. Stora Enso is committed to ensuring that systematic, holistic and proactive management of risks and.
Through consistent application of dynamic risk analysis and scenario planning, we enhance opportunities and. Risk governance. Stora Enso defines risk as the effect of uncertainty on our ability to meet organisational values, objectives and goals.
The Group Risk and. Internal Control Policy, which is approved by the Board of Directors, sets out the overall approach to governance and the management of. Board retains the ultimate responsibility for the overall risk management process and for determining predominantly through Group.
The Board has established a Financial and Audit Committee to provide support to the Board in monitoring the adequacy of the risk. This oversight scope.
Each division and Group. The Internal Audit unit evaluates the effectiveness and efficiency of the Stora Enso risk. Risk management process. Risk management is embedded in all decision-making processes, with holistic risk assessments conducted also as part of all significant.
In connection with the annual strategy process, business divisions and group service and support functions. Specific guidance regarding the risk management process is. Business entities and functions identify the sources of risk events including changes in circumstances and their causes and potential. Risk analysis involves developing an understanding of the risk to provide an input for risk evaluation. The purpose of risk evaluation is. Risks are assessed in. The effectiveness of existing risk reduction is.
Pre-defined impact scales consider financial, safety and reputational impacts, on both a. Risk treatment involves selecting one or more risk management option, such as avoidance, reduction, sharing or retention.
Following the annual baseline assessment, prioritised and emerging risks, as well as the corresponding risk mitigation and business. Despite the measures taken to manage risks and mitigate the impact of risks, and while some of the risks remain beyond the direct. Main risks. Macroeconomy, geopolitics, and currency rates. Stora Enso operates in more than 30 countries and changes in global economic conditions, such as sharp market corrections and foreign. In , the. However, the risk of setbacks or delays remain, due to new virus variants and possible vaccine hesitancy.
Stora Enso is exposed to several financial market risks that the Group is responsible for managing under policies approved by the. Board of Directors. The objective is to achieve cost-effective funding in Group companies and manage financial risks by using financial. The main exposures for the Group, besides currency risk, are interest rate risk, funding risk,. Financial risks are discussed in detail in Note 24 , Financial risk management.
Mitigation measures and opportunities. Stora Enso has a diversified portfolio of businesses which mitigates exposure to any one country or product segment.
The external. The compliance to the Board-approved risk appetite is closely monitored and cash flow. Currency translation risk is reduced by funding assets, whenever economically possible, in the same currency as the. The divisions regularly monitor their order flows and other leading indicators, where available, so that they may respond quickly to. In the event of a significant deterioration in general economic condition and in main leading.
Competition and market demand. The packaging, pulp, paper and wood products industries are mature, capital intensive and highly competitive. Customer demand is influenced by the general economic conditions and inventory levels and affects product price levels.
Product prices,. Changes in prices differ. The ability to respond to changes in product demand and consumer preferences and to develop new products on a competitive and. The risks related to factors such as. Stora Enso, as one of the biggest private forest owners in the world, also benefits from a strategic renewable resource base. Group's expertise in wood and wood based renewable materials is focused on responding to changing customer and consumer. Products based on renewable materials with a low carbon footprint help customers and society at.
Securing access to. Reliance on outside suppliers for. There is also an increased risk of disturbances in the. Composition of costs in Operative costs.
Logistics and commissions. Manufacturing costs. Chemicals and fillers. Total costs and sales. Total operative costs and sales in EUR million. Equity accounted investments EAI , operational. In many areas Stora Enso is dependent on suppliers and their ability to deliver a product or a service at the right time and of the right.
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