We are exposed to risks and uncertainties that may have an impact on our future performance and financial results, as well as on our ability to meet certain social and environmental objectives.
Further details of our risk management framework and approach is set out in the report of the DLC audit committee under Corporate governance. The table below provides selected measures to highlight our performance in these areas. There have been no significant changes to our risk profile during 2013.
Our most significant strategic risks include:
capital expenditure in 2013
The industry in which we operate is highly competitive and selling prices are subject to significant volatility. New capacity additions are usually in large increments which, combined with product substitution (e.g. electronic alternatives and alternative packaging solutions) and increasing environmental considerations, have a significant impact on the supply-demand balance and hence on market prices.
We monitor industry developments in terms of changes in capacity as well as trends and developments in our own product markets and potential substitutes.
Our strategic focus on low-cost production and growing markets, with consistent investment in our operating capacity ensures that we remain competitive.
We invest in research and development activities to improve existing processes and to identify new markets and new products.
We operate in a number of geographical locations in countries with differing political, economic and legal systems. In less developed regions, political upheaval, changes in laws, nationalisation or expropriation of assets could have a material impact on our operations in those locations.
We continue to actively monitor and adapt to changes in the environment in which we operate.
We engage in regular formal and informal interaction with the authorities to ensure we remain abreast of changes and new developments.
We perform thorough country risk assessments and our return requirements on investments are adjusted to take country risk into consideration.
Our geographical diversity and decentralised management structure, utilising local resources in countries in which we operate, reduces our exposure to any specific jurisdiction.
The Boards have established limits on exposure to any particular geographic environment and new investments are subject to rigorous strategic and commercial evaluation.
We operate large facilities, often in remote locations. The ongoing safety of our people and sustainable operation of our facilities is critical to the success of our Group.
Our management system provides ongoing monitoring of all operations to ensure they meet the requisite standards and performance requirements.
We have adequate insurance in place to cover material property damage, business interruption and liability risks.
A structured maintenance programme is in place under the auspices of the Group technical director.
Emergency preparedness and response procedures are in place and subject to periodic drills.
Own wood up to 54%
of total requirements
Paper for recycling and wood accounts for approximately one-third of our input costs. We are committed to acquiring fibre from sustainable sources and avoiding the use of any illegal or controversial supply.
We constantly monitor international market prices and, where appropriate, have cost pass through mechanisms in place with customers.
We have built a strong forestry management team in Russia and South Africa to actively monitor environmental influences impacting our owned sources of fibre.
Our relatively high levels of vertical integration and access to our own 100% FSC™ certified wood in Russia and South Africa serve to mitigate this risk.
All of our mills have chain-of-custody certificates in place ensuring that wood procured is from non-controversial sources.
Energy and related input costs comprise approximately onethird of our variable costs. Increasing energy costs, and the consequential impact thereof on both chemical and transport costs, may impact our profit margins.
We monitor our energy usage levels, emission levels and usage of renewable energy.
We benchmark our energy costs against external sources.
We continue to invest in our energy infrastructure at our key operating facilities in order to improve our energy efficiency and electricity self-sufficiency as well as to reduce our environmental footprint.