ANNUAL REPORT FOR 2020
1
SANTIERUL NAVAL ORSOVA S.A.
ANNUAL REPORT FOR 2020
CONTENTS PAGE
Annual report of the board of directors 2 – 31
Statement of compliance with the Bucharest stock exchange corporate governance code 32 - 37
Statement of Financial Position 38 - 39
Statement of Comprehensive Income 40 - 41
Statement of Changes in Equity 42
Statement of Cash Flows 43 – 44
Notes to Separate Financial Statements 46 – 107
Statement 108
ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR FINANCIAL YEAR 2020
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___________________________________________________________________________________________________________
ANNUAL REPORT OF THE BOARD OF DIRECTORS ACCORDING TO LAW NO. 24/2017 AND
THE ASF REGULATION NO. 5/2018 concerning the issuers of financial instruments and market
operations AND OF THE MFP ORDER NO. 2844/12.12.2016 FOR THE FINANCIAL YEAR
CONCLUDED ON 31.12.2020
Date of the Report: 25 th of February 2021
- Name of the trading company: ŞANTIERUL NAVAL ORŞOVA S.A.;
- Registered office: 4, TUFĂRI Street, ORŞOVA, MEHEDINŢI County;
- Telephone/fax:0252/362399 0252/360648;
- Single registration code issued by the Trade Register: RO 1614734;
- Registered number with the Trade Register: J25/150/03.04.1991;
- Regulated market where the issued securities are traded: it is a company whose shares are traded on a regulated market, respectively it is listed in the Bucharest Stock Exchange, symbol: SNO
- Subscribed and paid in share capital: 28,557,297.5 Lei
- Class, type, number and core values of securities issued by the company:11.422.919 common shares, nominative, of 2.5 Lei each;
- The company is registered with ASF– Securities Record Office with Certificate no. 111/02.03.1998, updated on 06.10.2008 further to the increase in share capital as a result of the merger.
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ŞANTIERUL NAVAL ORŞOVA S.A. Nr. RC J25/150/1991 CIF: RO 1614734 Capital social: - subscris 28.557.297,5 lei - varsat 28.557.297,5 lei Str. Tufări, nr. 4, Orşova, 225200, Mehedinţi Tel.: 0252/362.399; 0252/361.885; Fax: 0252/360.648 E-mail:
mircea.sperdea@snorsova.ro
;
marketing@snorsova.ro
Codul LEI (Legal Entity Identifier): 254900UXAJ8TPIKLXG79 Cod IBAN: RO96RNCB0181022634120001- B.C.R. Orşova Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova
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ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR FINANCIAL YEAR 2020
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1. ANALYSIS OF THE COMPANY’S ACTIVITY
1.1. Description of the company’s core business
a) Description of the company’s core business
The main activity of "Şantierul Naval Orşova" S.A. consists in the construction of river ships (CAEN code rev.2: 3011 “Construction of ships and floating structures”). This activity represented 92,38% of the 2020 turnover, most of the ships being exclusively designed for intra-community supplies.
Although in the previous years, at Agigea Branch, the activity which highly contributed to the turnover consisted in renting the ships, especially barges, during the year 2020, the most significant activity for the branch’s turnover was that of repair work of river/marine ships (58,49%). The branch’s turnover has known decrease since the previous year, by 54,24% which also caused a decrease in its total turnover by 9% (from 15,6% during 2019 to 6,6% during 2020).
b) Stipulation of the set up date of Șantierul Naval Orșova SA
The company was set up under Government Decision No. 19/10.01.1991, by converting and taking over the patrimony of the former Orsova Shipyard from the Ministry of Transports and Telecommunications.
The company is registered with the Trade Register under no. J25/150/1991.
In 1998, it became a privately-owned company, with domestic and foreign capital through the sale of the shares held by the former FPS ( State Owned Property Fund ).
c) Description of any merger or significant reorganization of the company, its subsidiaries or controlled companies during the financial year
There were no such events in 2020.
The only merger since the company’s set up until the present days took place in 2008. It is about a merge by absorption between Şantierul Naval Orşova SA, Mehedinţi County the absorbing company - and S.C. Servicii Construcţii Maritime SA Agigea, Constanţa County the absorbed company. Following this merge, the headquarters remained in Orşova and the former company in Agigea became a branch of Şantierul Naval Orşova SA. Occasioned by this, the social capital of the company increased from 21.643.150 lei to 28.557.297,5 lei, and the number of the shares increased from 8.657.260 to 11.422.919 shares, each share having a nominal value of 2.5 lei/share. The social capital and the number of shares have remained the same from the fusion until the date of the present report.
d) Description of assets acquisitions and/or sales:
Acquisitions and sales of assets are described in section 4.4 of this report and in the NOTES to the financial statements for 2020, which are attached to this report.
e) Description of the main results of the company’s activity assessment:
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1.1.1. General assessment elements for the period under review (year 2020):
total income, out of which: 73.660.173 lei
Agigea Branch 4.889.418 lei
total costs 68.614.757 lei
out of which Agigea Branch 6.501.961 lei
gross profit/loss, out of which: 5.045.416 lei
Agigea Branch -1.612.543 lei
Orsova headquarter 6.657.959 lei
market share held:
the production obtained at the headquarters addresses the market share of intra-community river ships, where the company holds a share of approximately 1 - 2%;
the rental of ships (barges) through the branch was done especially outside the intra-community area, where the share is below 1%;
as of 31.12.2020, the company’s available funds in accounts amounted to 34.682.882 Lei, out of which:
5.154.290 lei in the Lei account
29.514.514 lei in the foreign currency accounts
8.802 lei , petty cash
5.276 lei other values, in petty cash
The main characteristics of the year 2020, compared with the previous years, could be shortly synthesized by:
- Maintenance of a relatively low demand on the river vessel construction market, on which our company performs activity, even if a price growth was felt for the vessels sale, that was a consequence of raw materials price increase on one hand and of services, on the other hand. Even under these conditions, the company succeeded in having covered the entire production capacity for the year 2020 and also to preserve a level of efficiency comparable to the previous year.
- A decrease in the activity from Agigea Branch in comparison to the previous year was noticed, on one side subsequently to the rental of the 5 barge type vessels, that the company owns at this branch, only during the first three months of the year. This influenced also the operational incomes realized by the branch which have known a decrease by 54,24% in comparison to the previous year, as shown.
- Our good name which our company has on the shipbuilder market in Europe, highly contributed to obtaining new orders.
- The activity of the year 2020 was carried out in the epidemic context of the COVID-19 pandemic.
- During the period 31.08.2020-30.10.2020, the company was extensively inspected by the fiscal authorities that scoped to:
- check the validity and conformity of the fiscal statements and / or of the relevant operations for the fiscal inspection, the accuracy and exactness of having fulfilled the obligations related to the settlement of the taxation basis and of the main financial obligations concerning:
a) Value added tax – during the period 01.01.2015-30.06.2020
b) Tax per profit- during the period 01.01.2015-30.12.2019
c) Specific tax – during the period 01.01.2017-31.12.2019;
- checking the consideration of the fiscal and accounting provisions;
- checking other relevant aspects such as taxation, if consideration was taken for applying the financial and accounting legislation;
Subsequently to this inspection, the company recorded from the correction of the accounting errors, the amount of 35.406 lei and, because the inspection also involved the previous years, this will be debited at the end of the year 2020 into the debit account 1174 “The result reported, coming from the correction of the
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accounting errors”. This amount will be considered to be paid from the current annual profit or from the future years.
More information and comments regarding these indicators and the company’s activity are presented under 4 point of the present report and in the NOTES to the financial statements, which are attached to this report.
1.1.2 The assessment of the technical level of the trading company
The work scope of the company is diverse, the two head-offices having different purposes, yet complementary for achieving the scope. Thus, the activities carried out consist in: the construction and delivery of river ships, in the intra-community area (head-office in Orsova), rental of their own barges in the intra and extra-community area and repair of the ships belonging to third parties (Agigea branch). For the construction of ships, the company is equipped with the technical means, the necessary specialists for this type of constructions. Thus, endowments, technical culture, organizational system, specific technological fluxes for shipbuilding, allow the execution and delivery of inland and maritime vessels of different types and high complexity,
Șantierul Naval Orșova makes available for its clients a wide range of products. At present, it is possible to build any type of river ship for transport of goods (containers, combustible transport tanker, chemical products, food products, pharmaceutical) yet also the building of coaster vessels and passenger vessels.
Company management team manifested and manifest a continuously preoccupation for production process modernization through the acquisition of most modern tools specifically for shipbuilding. Being aware that the company should maintain an appropriate equipment level in according to the actual requests, major investments were done , for the acquisition of modern machinery, tools and equipment specific to shipbuilding. Training courses were done, qualified employees were selected, experience share within the country and abroad, yet also modernization of the already existing installations both at the head-office in Or ș ova and also at the branch in Agigea. Likewise, competitive equipment specific to shipyards has been imported, respectively (electric cranes 80+50to, board cutting machines with numerical control, painting and blasting equipment, welding sources in gas protective environments) and IT equipment, together with the necessary licenses and programs for a good operation.
If during the years 2013 and 2014 was carried out the modernization and capacity increase for launching and lifting of Orsova’s slipway, and at present there are in progress of completion of the modernization/repairing works for Agigea`s slipway, which was started 3 years ago and is about to be completed during the year 2021 (initially this action should have been completed during the year 2019, but this could not have been achieved because of objective reasons with reference to the delayed delivery of the 14 new wedge bogies which should replace the old ones, namely locking the slipway with the second coaster)..
In the year 2020, for the head-office in Orșova, several welding machines, effective and automate were procured, as well as a 5 to Gantry crane, ultrasound radiological and flaw meter, adjustment wedges and Mogy bogies, IT equipment. Likewise, the process of repair and modernization of the auto-cranes MDK 50 to, of the stackers and of other transport and lifting equipment carried on.
At Agigea branch they proceeded with the repair and modernization of the launching slipway, 5 wedge bogies were commissioned, a plasma cutting machine and a pump F11 were procured.
The long and fruitful collaboration with partners from the Netherlands may be attributed to the fact that the company, had been aiming at meeting their requirements, especially, by rigorously observing the quality standards imposed.
The implemented quality system is able to cope with the most modern requirements, and the company is certified by Lloyd Register Quality Assurance. The company has obtained during the year 2019 also the Quality System Certification in compliance with the new standard DIN ISO 9001:2015 (the certificate no. 10186440 field Construction and repair of ships and boats”).
SANTIERUL NAVAL ORSOVA SA has at its disposal:
- A Quality Manual – revision 4/12.01.2015
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- Procedures : - Documents control – revision 1/03.03.2011
Registration Control – revision 1/27.05.2014
Control of non-conform product – revision 2/ 12.01.2018
Corrective actions – revision 2/12.01.2015
Preventive actions – revision 2/12.01.2015
- Working instructions
Purchased material/products’ acceptance
Release from storages – revision 1/13.10.2012
Testing the product provided by the Client – revision 1/13.01.2012
Maintenance of the equipments– revision 1/08.11.2012
The favourable technical situation of Orşova Shipyard is given by the following facts:
good locations for both the headquarters in Orşova (where Danube enters the country) and the Agigea Branch (Constanţa harbour);
adjustment to the market demands is highly possible, the medium-sized shipyard opens the perspective of business diversity;
pollution is at normal levels, (pollution does not constitute any disturbing factor);
range of external deliveries and services is beyond 95% from the turnover;
personnel structure is balanced and correlated with the requirements of the technological process; we have noticed, though, a growth of medium age of personnel, in parallel;
endowment with specific fixed assets is to an acceptable level, comparable to other competing shipyards; in this respect and many years ago, the company has started an investment programme aimed, on one hand, at increasing the weight of active fixed assets, and on the other hand at replacing obsolete fixed assets with more efficient ones that can lead to enhanced productivity; by means of this strategy, the company intended to ensure increased flexibility and efficiency of fixed assets and bringing them to a technical and technological level that would allow global alignment and building of products that meet the standards required by foreign partners;
procurement of ships mean the conclusion of direct contract agreements with the shipyards equipping the ship hulls or with European seafarers;
for shipbuilding, there is a certain stability of intra-community clients (from Netherlands, Belgium, Germany, Austria), which demonstrates the company’s seriousness;
The year 2020 did not bring any major modifications regarding the shipbuilding requests for marine/inland vessels, these being at a medium level, even most recent information from the ship market shows that the present situation will be preserved also during the year 2021, and also during the years to come. This is the reason why we consider that a strategy for future should be realistically analyzed, in order to can find continuously- prices and financing policies to ensure the continuity of the activity under performance and competiveness terms.
1.1.3 Assessment of the technical supply activity (domestic sources, foreign sources imports).
In the year 2020, there were some changes in terms of main supply sources of raw materials and materials, yet it was insignificant. As in the previous years, the equipment was mainly bought from domestic ISO certified suppliers according to the European norms and standards. Still, when after analyzing the quality-cost ratio, it turned to be more favourable to the import or intra-community procurement, the company chose that version; we especially refer to the ship plates, stainless steel plates, pipes, profiles. In terms of intra-community acquisitions, we mainly talk about those materials that are not produced in Romania or for which the clients have imposed a certain quality standard; such materials are laminated parts and paints for river/marine ships. Also, according to
ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR FINANCIAL YEAR 2020
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the handover conditions, the transport of ships to Germany/Netherlands was mainly done in a combined manner, namely on the segment Orsova-Regensburg, and on the route Regensburg-Rotterdam with non-resident services providers (DUWVAARTONDERNEMING JOSON BV THE NETHERLANDS, CLASSIC CHARTER GMBH – GERMANY , VIGILIA TRADING BV – THE NETHERLANDS) .
Material inventories were always at an optimum level, which ensured business continuity, hence there were no interruptions in the manufacturing process due to lack of raw materials and materials.
The main domestic suppliers of raw materials and materials, according to the value of the supplies and to their importance were:
LIBERTY GALATI which is the new description of ARCELOR MITTAL STEEL Galati, that changed its name due to the replacement of the shareholder owning the company’s control : for medium and thick plates;
S.C. DUCTIL Buzău: welding consumables;
S.C. LINDE GAZ Timişoara: technical gases
S.C. PENTAGON SRL TECUCI: grinding stones
S.C. NIMFA COM SRL BUC.: pipes and various profiles
S.C. MAIRON S.A. GALATI variousprofiles
S.C. COS SA TARGOVISTE profiles and laminated
TRIVALENT RM. VALCEA pipes and various profiles
NORDEX TG. JIU safety gloves and glasses, filters
EURONERA DISTRIBUTION gloves, screens, safety goggles, filters
Just as during the previous years, the main foreign supplier of materials :
JULIUS HANDELS GMBH from Austria for profiles and pipes,
MET INVEST – Ukraine, for ship plates
OZKAN DENIR
NELF MARINE PAINTS
Even if they were at a lower level than in previous year, collaboration with sub contractors continued also in the year 2020. These collaborations were necessary for the progress of the activity, referring to hull painting, steel construction, hull equipments, hull transport, etc. Among the collaboration companies we are mentioning the most important:
- MANELI SERV ship painting;
- S.C. GRIMEX SRL TARGU JIU ship equipment parts and metal constructions
- ELECTROSCOICA MAR SRL metallic structures
- S.C. KRAFT SHIPBUILDING SRL Dr. Tr. Severin – for metal constructions
- BERG BANAT zinc coating
1.1.4 Assessment of sales activity
Turnover knows a decrease of approx. 7,36 %, from the previous year. It is to be mentioned that while the income from the ships’ construction activity increased by approx. 19,8 %, the income from the ships’ renting activity decreased by 72% and the level of rentals cashed for the barges was to approx. 45,31% from the year 2019). The turnover was realized, and specially, because of the external deliveries and services: intra community for the vessel built in Orsova and extra community for incomes resulted from renting the ships from Agigea Branch.
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All 6 vessels finalized and delivered from Orsova in 2020 were scoped to be delivered to the West- European market, among which there was also a PASSENGER ship built for the first time by the company, yet also the first coastal ship out of the two which constituted the litigation with the company VEKA.
Please see below a comparative statement of intra-community supplies and Romania, for the last three years, expressed in percentage of total ship delivered (according to IFRS 8):
CLIENT / BENEFICIARY
YEAR
2018
YEAR
2019
YEAR
2020
RensenDriessenShipbuilding B.V. (NL)
72,6%
71,63%
64,53%
VEKA Shipbuildng B.V. (NL)
-
-
18,32%
Vos Kaiser GmbH (DE)
-
12,27%
-
Vos Interceptor (NL)
ZanenShipbuilding B.V. (NL)
-
-
-
16,10%
17,15%
-
Concordia Damen Shipbuilding BV
27,4%
-
-
TOTAL
100%
100%
100%
According to the above mentioned information, the company Rensen Driessen continued also in 2020 to detain the first position regarding the amount of the deliveries.
The contractual payment terms were ensured either through irrevocable letters of credit 100% or by advance payments of up to 10% and payment of the difference through letter of credits.
For the future, just as during the previous years, the main concern of the board and executive management is to find solutions for concluding contracts at prices that would ensure development in cost-effective conditions and with guaranteeing the price payment by means of irrevocable guarantee letters. This is also due to the fact that under the new foreign conditions on the market in which we operate, rapid and unexpected changes can always occur from one day to another.
Under the new market conditions, competition in this activity field is quite tough, because most orders come from the European Community and business partners are more demanding in terms of quality work. The company has a technical and technological level that meets these requirements and we believe it is able to win more contracts compared to its competitors.
The company’s main competitors in terms of shipbuilding and repair works are the following, just as in the previous years:
- Domestic – all shipyards
- Abroad especially shipyards in China and Korea, and then Poland, Serbia, Turkey, Slovakia, Czech Republic and Ukraine.
1.1.5 Assessment of aspects related to employees / company staff
Lack of personnel continues to manifest also in the year 2020, yet only to a small extent, all steps taken at executive level by recruiting new skilled workers in the trades of welders and locksmiths who will replace those who left, especially because of retirement. Related to the company’s staff, we may conclude the following:
- on one hand, it is registered an aging phenomenon of the staff, which will continue also in the next period;
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- on the other hand, it is registered a decrease of qualified staff number, especially on the main works (welders and locksmiths) this fact forced and forcing us to outsource some metal construction works, fact which will not be present concurrency at the hiring.
- Not on the last place it is a growth of working force fluctuation.
Nevertheless, during the year 2020, the number of staff increased by 5,06% in comparison to the year 2019.
The average number of employees throughout 2020 is 374 employees compared to 356 employees in the previous year. As of 31.12.2020, the number of employees was of 376, out of which 343 at the headquarters in Orşova and 33 at the Agigea Branch.
Out of the total number, as of 31.12.2020, the situation per activity sectors is as following:
374 – industrial activity
1 – canteen activity
1 – medical activity
The structure is as following:
45 – technical, financial, professional and administrative staff, out of which:
o 38 – employees in Orsova (out of which 32 with higher studies);
o 7 – employees in Agigea (out of which 5 with higher studies).
6 foremen, out of which 6 in Orsova;
325 workers, out of which:
o 299 employees in Orsova;
o 26 employees in Agigea.
Personnel structure in terms of gender is as follows:
men – 325 persons (332 in the previous year);
women - 51 persons (54 in the previous year).
During the year 2020, a number of 49 new employees and 53 releases were registered; the latter were released through: retirements, dismissals for reasons of employee’s character, expiry of the individual labour contract and with agreement from the parties, the latter being the most common cause.
A permanent preoccupation of the company’s management was to improve the skills of its employees, following that this activity becomes a permanent one also in the next period, according to the provisions in the Labour Code.
At the level of the company, there are legally, two unions formed.
Out of the total of employees, approximately 95% are members of a union, and the relations between the administration and the employees on good terms.
Other aspects concerning the employees/the company’s staff have been shown in the NOTES to the financial situations which are integer part of the present report.
1.1.6 Assessment of the impact of the company’s core business on environment
As a whole of actions, documents or programmes that identify, describe and assess the potential material effects on environment, the environmental policy of SC Santierul Naval Orsova SA is closely related to both the company’s economic policy and compliance with the principles of the European Directives on environment protection (EC Directive 2002/42/EC, SEA Directive 2001/42/CE and Habitats Directive 92/43/EC, Directive 2004/35/CE concerning the responsibility for the prejudice brought to the environment and DRM Directive), given that the entire company’s activity is developed in an area protected by law, in the area of the National Park “The Iron Gates”, focusing on the following main directions:
- integration of environmental considerations in the development and adoption of the company’s plans and programmes;
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- better use of primary resources of raw materials and energy, hence minimising waste, waste water, air and water pollution, and decrease of costs per product tonne;
- continuous improvement of environmental issues, especially the material ones, according to the environment management programmes, action plans (integrant part of the environmental permit) with targets, objectives, timelines and responsibilities;
- increase education related to environment protection by providing the organisational frame and implementing projects on waste water disposal, waste storage (especially hazardous ones), soil protection;
- compliance with Romanian environment legislation and alignment to the European Union’s Directives;
- mitigation of impact of the company’s core business on environment;
The company has a monitoring system for all environment factors by specialised institutes and companies, based on firm contracts.
It worths mentioning the maintenance of insignificant impact on the environment in activity of heating and hot water supplying for the company’s employees, following the conservation from 01.09.2010 of heating plant. The heating of our company (administrative centre and locker rooms) being done presently helped by 8 (eight) water heating power plants,