Governance and economic responsibility

Economic impacts

Suominen remains an economically vital company. Net sales growth, healthy profitability, strong cash flow and a solid financial position are prerequisites in the long term for meeting our financial obligations to our various stakeholders and contributing to increasing general economic well-being.

Stakeholder

Direct financial impact in 2017

 

Customers

Net sales EUR 426.0 million

Suominen’s major customers include global consumer brands and private label manufacturers.

Employees

Wages and salaries EUR 35.6 million

Suominen employed some 670 people in Europe and in North and South America in 2017.

Partners

Materials and services EUR 314.1 million

Suominen purchases raw materials and other products and services from local and international business partners.

Society

Corporate income taxes were EUR 2.5 million positive due to changes in US corporate taxation.

Suominen is a significant employer in the communities where we operate, which makes us a promoter of general well-being.

Financiers

Net financial expenses EUR -2.6 million.

 

Shareholders

Approximately EUR 5.6 million in total were paid as dividends in 2017 from the financial year 2016.

On 31 December 2017, Suominen had 4,146 shareholders.

Tax footprint

Suominen Group’s (“Suominen”) tax footprint represents the economic impact on society in the form of taxes and similar payments arising from Suominen’s operations in the countries where it operates. As a result of Suominen’s business operations Suominen has a liability to pay taxes and similar payments, as well as a liability to collect and remit taxes and similar payments that arise from the business activities of the group companies.

Suominen’s tax footprint arises from the business operations in the countries where it operates. Suominen has not entered into any arrangements aiming to change or rearrange its tax burden from what arises from normal business operations. The trading of goods between Suominen group companies is extremely limited. The group companies receiving intra-group services are charged a service fee. The pricing of the service fee is in line with the arm’s length principle.

Suominen has group companies only in those five countries – Brazil, Finland, Italy, Spain and the United States – where it has both production and sales operations. In addition, Suominen Corporation has had a small branch office in France. The office was closed in 2017, and in this report, its taxes and payments have been included in Suominen’s tax footprint in Finland. In respect of taxes and similar payments, Suominen applies the laws and regulations of each country.

The main markets of the Finnish group companies are abroad. Due to this, the export sales of these companies significantly exceed their domestic sales. No value added tax is levied on export sales. This leads to a situation where the Finnish group companies’ deductible value added tax on their purchases subject to value added tax is considerably higher than the value added tax they remit based on their taxable sales. As a result, Suominen receives a refund of value added tax in Finland.

Suominen’s tax footprint includes not only the taxes and similar payments that are group companies’ costs, but also the taxes and similar payments which the group companies collect and remit, such as indirect taxes. Deferred taxes which arise from the timing differences between taxation and accounting and are recognized in accounting are not included in the tax footprint.

In 2017, Suominen employed on average 670 people in its operations. As a result, Suominen generated a positive economic contribution to the surrounding society in the form of employees’ income taxes, as well as social security contributions both by the company and the employees. Thus, Suominen’s tax footprint includes also the collected and remitted employees’ income taxes as well as social security contributions, but the employer’s taxes are clearly separated from the employees’ taxes and payments in the report.

Suominen’s corporate income taxes are significantly affected by tax losses generated in the past in certain countries where Suominen operates. Based on local tax laws and regulations, tax losses are carried forward and deducted from the taxable profits generated in the future. At the moment, Suominen does not pay corporate income tax in Finland, as it has tax losses carried forward from past years. Suominen is subject to group tax consolidation methods in several countries based on each country’s tax laws and regulations, which effectively means that Suominen’s separate legal companies are taxed on the local consolidated taxable income. The tax laws in the United States allow also a carry back of tax losses, which means that tax losses can be allocated to taxable profits of the previous years. This may lead to corporate income tax refunds.

The corporate income taxes Suominen pays in the USA are impacted by local tax incentives, which allow companies to deduct up to 50 or 100% of the acquisition cost of the investments taken into use during the year as accelerated tax depreciations. As Suominen made a large investment in the Bethune plant in South Carolina, the combined taxable result of the American subsidiaries decreased considerably in 2017. The use of the accelerated tax depreciations decreases the taxable result of the year in which they are utilized and defers the payment of corporate income taxes into the future. The utilization of the accelerated depreciations will decrease the tax-deductible expenses of subsequent years and concurrently increase the taxable result, as well as the paid corporate income of those years.

In the USA, Suominen has received state and county incentives in the form of direct grants, cost savings and tax credits, thanks to the investment made in Bethune and the new jobs created as a result of the investment. The group companies also pay property and real estate taxes based on the land and buildings they own, as well as different fiscal payments levied, for example, on manufacturing operations. In addition, there are some levied taxes, for example in Brazil, that are based on a percentage of the company’s net sales. Suominen does not consider these as indirect taxes to be collected and remitted, but as taxes that are costs for the Group companies.

EUR thousand 2017 2016
Taxes and similar payments borne Finland Other countries Finland Other countries
Corporate income tax, tax on profit* -13 6,335 8 -6,884
Corporate income tax, tax on turnover - -786 - -533
Property taxes** -67 -591 -67 -611
Employer contributions and taxes -1,513 -9,077 -1,509 -8,690
VAT as expense -34 -7 -34 -4
Custom duties on export*** - -53 - -32
Custom duties on import*** -598 -1,706 -576 -1,132
Excise duties -110 -229 -91 -236
Other taxes and similar payments -38 -189 -24 -368
Total -2,374 -6,302 -2,293 -18,489

 

EUR thousand 2017 2016

Taxes and similar payments
collected and paid

Finland Other countires Finland Other countries
Net VAT 7,981 -4,840 7,356 -6,793
Payroll taxes and similar payments
collected and paid****
-2,652 -7,761 -2,583 -7,561
Withholding taxes on various payments -272 -119 -355 -111
Total 5,057 -12,720 4,418 -14,464

* Corporate income taxes do not include any deferred taxes. The corporate income taxes for 2017 are in total positive thanks to utilization of accelerated tax depreciations in the USA.
** Taxes on real estates.
*** Custom duties are borne by the company importing or exporting goods and not collected and/or paid on behalf of some other tax payer. For these reasons custom duties are reported as taxes borne.
**** Employer does not withhold employee withholding tax in Italy.