Directors` Report on activities of the ALUMETAL S.A. Capital Group

Transcription

THE ALUMETAL S.A. CAPITAL GROUP
Directors’ Report on activities of the ALUMETAL S.A. Capital Group for the year 2014
2014
Directors’ Report
on activities of the ALUMETAL S.A. Capital Group
Kęty, 11 March 2015
I.
Issuer corporate data ...........................................................................................................3
1. Description of organization of the ALUMETAL S.A. Capital Group .......................................... 3
2. Changes in the organizational structure of the ALUMETAL S.A. Capital Group ...................... 7
3. Organizational and equity relations of ALUMETAL S.A. and principles of management at the
ALUMETAL S.A. Capital Group ................................................................................................ 7
II.
Corporate governance........................................................................................................ 11
1. Shareholding structure .......................................................................................................... 11
2. Blocks of shares held by members of Management and Supervisory Boards....................... 12
3. Authorities of ALUMETAL S.A. ............................................................................................... 13
III.
Information on products of the ALUMETAL S.A. Capital Group ............................................ 22
1. Operating segments of the ALUMETAL S.A. Capital Group ................................................... 22
IV.
Assessment of financial position of the ALUMETAL S.A. Capital Group ................................ 26
1. Basis of preparing financial statements and information on the entity authorised to audit
financial statements ............................................................................................................. 26
2. Market situation .................................................................................................................... 26
3. Financial results and financial position of the ALUMETAL S.A. Group .................................. 31
4. Financial ratios ....................................................................................................................... 41
5. Significant events in 2014 ...................................................................................................... 42
6. Significant events after the reporting date............................................................................ 46
V.
Realised investments and development work ..................................................................... 47
1. Information on major research and development achievements ......................................... 47
2. Structure of main capital deposits or main capital investments made in the Issuer capital
group in the financial year .................................................................................................... 48
VI.
Human capital management .............................................................................................. 51
1. Recruitment policy ................................................................................................................. 51
VII.
Quality, environmental protection and labour hygiene and safety ...................................... 54
1. Quality .................................................................................................................................... 54
2. Environmental protection ...................................................................................................... 54
3. Labour hygiene and safety ..................................................................................................... 54
VIII. Loans and borrowings, and other financial agreements....................................................... 55
1. Loan and other agreements with banks ................................................................................ 55
2. Loans granted ........................................................................................................................ 56
IX.
Contingent assets and contingent liabilities, sureties and guarantees and off-balance sheet
liabilities ............................................................................................................................ 57
1. Litigation proceedings............................................................................................................ 57
2. Sureties and guarantees ........................................................................................................ 57
3. Contingent liabilities .............................................................................................................. 57
1
X.
Financial risk management objectives and policies ............................................................. 58
1. Interest rate risk..................................................................................................................... 58
2. Foreign currency risk.............................................................................................................. 58
3. Commodity price risk ............................................................................................................. 58
4. Credit risk ............................................................................................................................... 59
5. Liquidity risk ........................................................................................................................... 59
XI.
Risk factors with possible impact on the financial results of the ALUMETAL S.A. Capital Group60
1. Geopolitical and macroeconomic situation in Europe........................................................... 60
2. Situation of automotive industry ........................................................................................... 60
3. Relation between purchase prices of raw materials and alloy selling prices ........................ 60
4. Limited availability of raw materials scrap in Europe ............................................................ 61
5. Higher competition on the market of secondary aluminium alloys ...................................... 61
6. Financial-tax matters ............................................................................................................. 62
7. Other accidental, unfavourable one-of events ...................................................................... 62
XII.
Internal control system and risk management .................................................................... 62
XIII. Standpoint of the Management as regards forecast results of the ALUMETAL S.A. Capital
Group ................................................................................................................................ 63
2
I.
Issuer corporate data
1.
Description of organization of the ALUMETAL S.A. Capital Group
As at 31 December 2014, the oganization of the ALUMETAL S.A. Capital Group is as follows:
A.
Issuer corporate data
Name and legal form:
Registered office:
Telephone number:
Fax number:
Website:
E-mail address:
KRS:
Statistical number, REGON:
Tax identification number, NIP:
ALUMETAL Spółka Akcyjna [joint stock company]
ul. Kościuszki 111, 32-650 Kęty
+48 (33) 47 07 100
+48 (33) 47 07 101
www.alumetal.pl
[email protected]
0000177577
357081298
5492040001
ALUMETAL S.A. (hereinafter: the ,,Company”, ,,Issuer”) was incorporated in 1999 and entered in the
Register of Entrepreneurs on 19 October 2001 as limited liability company (spółka z ograniczoną
odpowiedzialnością) operating under the name „ALUMETAL” sp. z o.o. On the basis of resolution of
the Annual General Meeting of „ALUMETAL” sp. z o.o. of 5 September2003, the Company was
transformed into a joint stock company ALUMETAL S.A. The transformation was registered with the
competent registry court on 28 October 2003.
ALUMETAL Spółka Akcyjna is registered in the Register of Entrepreneurs maintained by the District
Court for Kraków-Śródmieście in Cracow, XII Economic Department of the National Court Register,
Entry No. KRS 0000177577.
The Company was incorporated for an indefinite period of time
The Company operates based on the provisions of the Code of Commercial Companies and other
legal regulations binding the commercial-law companies, as well as based on the provisions of its
Statutes and of other internal regulations.
The Company’s scope of business is defined in § 4 of its Statutes, being in particular:
Head office and holding operations, except for financial holdings (PKD 70.10.Z).
The issued capital of the Company amounts to PLN 1,507,744 and is divided into 15,077,440 shares
with a nominal value of PLN 0.10 each, of which:
9,800,570 shares are ordinary bearer shares, series A;
1,507,440 shares are ordinary bearer shares, series B;
3,769,430 shares are ordinary bearer shares, series C.
The shares are not preference shares as regards voting right, right to dividend or distribution of
assets in the case of liquidation of the Company.
3
The Management Board of the Stock Exchange in Warsaw (WSE) passed on 11 July 2014 a Resolution
No. 802/2014 on admittance to public trading on the main market of the WSE of the ALUMETAL
S.A.’s shares, series A, B and C. Following that, the Management Board of the WSE, based on the
Resolution No. 811/2014 of 16 July 2014, resolved that as of 17 July 2014 the Company’s ordinary
(bearer) shares will be introduced to public trading in the ordinary procedure, and on that date the
first quotation of the Company took place.
As at 31 December 2014 and 31 December 2013, the composition of the Management Board of
ALUMETAL S.A. was as follows:
Mr. Szymon Adamczyk
Mr. Krzysztof Błasiak
Mr. Przemysław Grzybek
B.
-
President of the Management Board
Vice-president of the Management Board
Member of the Management Board.
Subsidiary companies
Presented below is the information on subsidiary companies, which are direct subsidiaries of the
Company.
ALUMETAL Poland sp. z o.o.
The Company holds 100% shares in the issued capital of ALUMETAL Poland sp. z o.o., which give it
the right to exercise 100% votes at the shareholders’ meeting of this company.
Corporate information:
Registered office:
Issued capital:
Main scope of business activities:
ALUMETAL Poland spółka z ograniczoną odpowiedzialnością
[limited liability company]
ul. Przemysłowa 8, 67-100 Nowa Sól
PLN 164,981,300
Production of aluminium casting alloys, master alloys and
aluminium for steel deoxidation.
T + S sp. z o.o.
The Company holds 100% shares in the issued capital of T+S sp. z o.o., which give it the right to
exercise 100% votes at the shareholders’ meeting of this company.
Registered office:
Issued capital:
T + S spółka z ograniczoną odpowiedzialnością [limited
liability company]
PLN 350,000
Production of fluxes and salts, which are supplementary
materials in the casting industry.
4
ALUMETAL Kęty sp. z o.o.
The Company holds 100% shares in the issued capital of ALUMETAL Kęty sp. z o.o., which give it the
right to exercise 100% votes at the shareholders’ meeting of this company. At the date of the
preparation of the financial statements, ALUMETAL Kęty sp. z o.o. did not commence operating
activities, and the Company considers disposal of all shares in this entity. ALUMETAL Kęty sp. z o.o. is
not subject to consolidation.
Registered office:
Issued capital:
ALUMETAL Kęty spółka z ograniczoną odpowiedzialnością
[limited liability company]
PLN 5,000
No operating activities conducted
ALUMETAL Group Hungary Kft.
ALUMETAL Group Hungary Kft. was incorporated on 11 July 2014. The Company holds 100% shares in
the issued capital of ALUMETAL Group Hungary Kft., which give it the right to exercise 100% votes at
the shareholders’ meeting of this company. ALUMETAL Group Hungary Kft. was included in the 2014
consolidated financial statements of the Group.
Registered office:
Issued capital:
2900 Komárom, Honfoglalás u.16., Hungary
HUF 53,000,000 (equivalent of PLN 707,312)
Casting of light metals
Trade ALUMETAL Czech s.o.
During the reporting period, included in the Alumetal Group was Trade ALUMETAL Czech s.r.o.
(Czech-law based entity) with its registered office in Trinec (Czech Republic). In 2014, Trade
ALUMETAL Czech s.r.o. did not conduct operating activities due to the liquidation process in
progress. On 11 September 2014, the process of liquidation of Trade Alumetal Czech s.r.o. was
completed by removing this entity from the Czech Register of Business Entities.
5
C.
Organizational structure of the ALUMETAL S.A. Capital Group
As at 31 December 2014, the organizational structure of the Alumetal Group was as follows:
ALUMETAL S.A.
100%
100%
ALUMETAL
Poland sp. z o.o.
100%
ALUMETAL
Kęty sp. z o.o.
T+S sp. z o.o.
100%
ALUMETAL
Group Hungary Kft.
% share held by ALUMETAL S.A.
in the issued capital
31 Dec 2014
31 Dec 2013
T + S sp. z o.o.
ALUMETAL Kęty sp. z o.o.
Trade ALUMETAL Czech s.r.o.
Nowa Sól,
Poland
Kęty, Poland
Kęty, Poland
Trinec, Czech
Republic
Production
Komarom,
Hungary
Production (currently
in the investment
phase)
Production
No operating activities
Liquidated on
11 September 2014
100%
100%
100%
100%
100%
100%
-
100%
100%
-
ALUMETAL S.A. is the holding company rendering management, trading and marketing,
development-investment, IT and accounting-financial services to other entities of the ALUMETAL S.A.
Capital Group (hereinafter the „Alumetal Group”, or the „Group”). Only the foreign entity is serviced
by a company from its mother country.
ALUMETAL Poland sp. z o.o. is the main production company of the Group that manufactures the
two main products for the main operating segments: aluminium casting alloys and master alloys.
ALUMETAL Poland sp. z o.o. owns the three production plants of the Group, which are located in
Kęty (Małopolskie Voivodship), Nowa Sól (Lubuskie Voivodship) and Gorzyce (Podkarpackie
Voivodship).
T+S sp. z o.o. renders auxiliary services which consist in the production of fluxes and salts which are
used mainly by the Alumetal Group, but which are also sold to the external clients in the smelting
and casting industries.
ALUMETAL Kęty sp. z o.o. did not conduct operating activities in the reporting period.
ALUMETAL Group Hungary Kft. is a Hungarian-law based company, incorporated to realize the
investments of the Alumetal Group in Hungary.
6
In the reporting period, none of the companies of the Alumetal Group had self-reporting
organizational units within the meaning of article 5 point 4 of the Act of 2 July 2004 on freedom of
economic activity.
As at the date of the preparation of the annual consolidated financial statements, the following
entities were consolidated:
 ALUMETAL S.A.,
 ALUMETAL Poland sp. z o.o.,
 T+S sp. z o.o., and
 ALUMETAL Group Hungary Kft.
ALUMETAL Kęty sp. z o.o. is not subject to consolidation.
2.
Changes in the organizational structure of the ALUMETAL S.A. Capital Group
Presented below are the most significant changes in the organizational structure of the Group, which
did not, however, have any material impact on the activities of the Alumetal Group in the reporting
period:
A.
Incorporation of ALUMETAL Group Hungary Kft.
The Hungarian-law based company was incorporated on 11 July 2014 to realize the strategic and
development plans of the ALUMETAL Group in Hungary. The incorporation of the ALUMETAL Group
Hungary Kft. facilitates development of the production capacity of the Alumetal Group owing to the
commencement of production activities in Hungary, which are planned for 4Q 2016. The Company
informed about this business event in its Share Issue Prospectus and in its current report
No. 17/2014. As at the date of the publication of this Directors’ Report, the newly incorporated entity
is in the investment phase.
B.
Liquidation of Trade ALUMETAL Czech s.o.
On 11 September 2014, the process of liquidation of Trade Alumetal Czech s.r.o. (Czech-law based
entity) was completed by removing this entity from the Czech Register of Business Entities.
3.
Organizational and equity relations of ALUMETAL S.A. and principles of
management at the ALUMETAL S.A. Capital Group
For many years, the Group has been managed from the level of the parent company, ALUMETAL S.A.,
which as of 1 January 2014, i.e. after Group reorganization, has remained solely a holding entity.
The Issuer is related, by its organizational structure and equity, to the subsidiary companies making
up the Alumetal Group in the manner described above, while observing the principles of the
fulfilment of the mandate of board member at all Group entities by the persons making up the
Management Board of ALUMETAL S.A. The exception to this principle is the ALUMETAL Group
Hungary Kft., as it has been described below.
The Issuer is also related by equity to IPOPEMA 30 Fundusz Inwestycyjny Zamknięty Aktywów
Niepublicznych (IPOPEMA 30 Closed-end Investment Fund of Non-public Assets), which holds
7
6,031,120 shares of ALUMETAL S.A., which give it the right to 40% share in the issued capital of the
Company.
In the reporting period, apart from the investments in the group of related entities, no other equity
investments were made by the Group.
In connection with the admittance of shares of ALUMETAL S.A. to trading on the main market
operated by the Warsaw Stock Exchange, the requirement has materialised relating to the change of
the principles of management of Issuer enterprise and its capital group, following dematerialization
of the shares of the Company. In accordance with Resolution No. 605/14 of the Management Board
of the Central Securities Depository of Poland (KDPW) of 3 July 2014, on 7 July 2014, registration took
place in the Central Securities Depository of Poland of 8,376,500 shares and on 14 July 2014 –
registration of 6,700,940 shares (dematerialisation), about which the Issuer informed in its current
report No. 4/2014 dated 14 July 2014.
The organizational changes that took place in the reporting period and related to the development of
the Group and dematerialization of the Company’s shares are presented below:
A.
Changes in the principles of management of the ALUMETAL S.A. Capital Group
During the reporting period, a change was made to the principles of the fulfilment of the mandate of
board member at all Group entities by the persons making up the Management Board of ALUMETAL
S.A. as a result of incorporation of ALUMETAL Group Hungary Kft., where the persons authorized to
manage and represent the company are the employees of ALUMETAL S.A. – Mr. Andrzej Słupski and
Mr. Józef Młocek.
This change was the effect of Hungarian legal requirements and was equally necessitated by the
need to realise the main investment project of the Alumetal Group in the reporting period i.e. the
project called Construction of the Production Plant in Hungary (“Budowa Zakładu na Węgrzech”),
about which the Company informed in its current report No. 17/2014 dated 10 October 2014. The
purpose of this investment project is to acquire a property and construct a production plant with
planned commencement of operations in 4Q 2016. This investment project will be financed from
own funds originating from operating activities of the Alumetal Group, bank loans and Hungarian
public aid, under which ALUMETAL Group Hungary Kft. will receive financial compensation in the
amount of 35% of the incurred qualified investment expenditure.
On 29 December 2014, Mr. Andrzej Słupski resigned as Management Board Member of ALUMETAL
Poland sp. z o.o. with effect as of 31 December 2014. The Company, as the sole shareholder of
ALUMETAL Poland sp. z o.o. and T+S sp. z o.o., appointed Mr. Tomasz Klis as a new member of the
Management Board of ALUMETAL Poland sp. z o.o. and T+S sp. z o.o., and designated him as the
Operational Director of ALUMETAL Poland sp. z o.o., which is related to the execution of the tasks in
the area of production processes at the Kęty, Nowa Sól and Gorzyce production plants. Mr. Tomasz
Klis started to fulfil the above functions as of 1 January 2015.
8
B.
Changes in the manner of appointment and removal of Management Board members
Until the date of dematerialisation of the Company’s shares, pursuant to the provisions of § 12
section 1, 3 and 4 of the Company’s Statutes, members of the Company’s Management Board were
appointed and removed in accordance with the policies described below.
The shareholder, Mr. Grzegorz Stulgis, was entitled to appoint and remove one member of the
Management Board by way of a written statement about appointment or removal of the given Board
member, with effect as of the moment of delivery of such statement to the Company. In addition,
the shareholder, ALU HOLDINGS S.a.r.l., was entitled to both determine the number of Management
Board members (from one to five persons elected for a common term of office) and to appoint and
remove the remaining Board members (including President of the Management Board) by way of
a written statement about appointment or removal of the given Board member, with effect as of the
moment of delivery of such statement to the Company.
Where the shareholder, Mr. Grzegorz Stulgis, or ALU HOLDINGS S.a.r.l. did not use their right within
30 days of the expiry of the mandate of a Board member appointed by them, the authorization to
appoint or remove a Board member would be conferred on the Supervisory Board with the proviso
that the entitled shareholder retained the right to simultaneously remove a Board member
appointed by the Supervisory Board and appoint own Board member in accordance with the policies
described above.
As of the date of dematerialisation of the Company’s shares, in accordance with § 12 section 5 of the
Company’s Statutes, the Company’s Management Board is appointed for a common 3-year term of
office by the Supervisory Board, which determines the number of Management Board members from
one to five persons and appoints President and Vice-president of the Management Board, and which
may delegate its members to temporarily perform duties of Management Board members. Removal
of Management Board Members is executed in accordance with the provisions of the Code of
Commercial Companies.
C.
Changes in the manner of appointment and removal of Supervisory Board members
Until the date of dematerialisation of the Company’s shares, pursuant to the provisions of § 16
section 1 and 2 of the Company’s Statutes, members of the Company’s Supervisory Board were
appointed and removed in accordance with the policies described below.
The shareholder, Mr. Grzegorz Stulgis, was entitled to appoint and remove one member of the
Supervisory Board by way of a written statement about appointment or removal of the given
Supervisory Board member, with effect as of the moment of delivery of such statement to the
Company. In addition, the shareholder ALU HOLDINGS S.a.r.l., was entitled to appoint and remove
the remaining Supervisory Board members and to determine the number of Supervisory Board
members (from one to five persons elected for a common term of office) by way of a written
statement with effect as of the moment of delivery of such statement to the Company.
Where the entitled shareholders, Mr. Grzegorz Stulgis or ALU HOLDINGS S.a.r.l., did not use their
right within 30 days of the expiry of the mandate of a Supervisory Board member appointed by them,
the authorization to appoint or remove Supervisory Board members would be conferred on the
Annual General Meeting of ALUMETAL S.A.
9
As of the date of dematerialisation of the Company’s shares, in accordance with § 16 section 3 and 4
of the Company’s Statutes, the Supervisory Board of the Company may be composed of 5-7 members
appointed for a common, 3-year term of office, and the right to determine the exact number of
Supervisory Board Members, and to appoint or remove them was conferred on the Annual General
Meeting of ALUMETAL S.A. in accordance with the policies described below.
In accordance with § 21 section 2 of the Company’s Statutes, each shareholder of the Company has
the right to propose Candidates for Supervisory Board members to be elected by the Annual General
Meeting. Candidates for Supervisory Board members must be proposed not later than 7 days before
the date of the Annual General Meeting. Candidate proposal notification should include candidate
curriculum vitae and his written consent to stand for the position of Supervisory Board Member and,
if required by the Commission Recommendation of 15 February 2005 on the role of non-executive or
supervisory directors of listed companies and on the committees of the (supervisory) board,
a Candidate’s statement on the fulfilment of independence criteria, and indicate the number of
shares and the number of votes held by the shareholder or shareholders proposing the given
Candidate. At the Annual General Meeting, Candidates proposed by the shareholders representing
the greatest number of votes are voted first. The above rules do not apply where Supervisory Board
members are elected by a vote in separate groups in the manner specified in article 385 § 3 and 7 of
the Code of Commercial Companies. Where Candidates are not proposed in the manner specified
above, Supervisory Board Members are appointed by the Annual General Meeting of the Company,
as set forth in the Code of Commercial Companies.
In accordance with § 21 section 2 of the Company’s Statutes, Regulations of Annual General Meeting
may additionally provide for a detailed procedure for election of Supervisory Board members, while
observing the provisions of the Company’s Statutes and the provisions of the Code of Commercial
Companies. In accordance with § 15 of Regulations of Annual General Meeting, in the wording
determined by Resolution No. 3 of 2 September 2014 of the Extraordinary Annual General Meeting,
Annual General Meeting appoints and removes Members of the Supervisory Board in a secret ballot,
by an absolute majority of votes, in accordance with the policies set forth in the Company’s Statutes.
10
II.
Corporate governance
ALUMETAL S.A. has conducted business in accordance with Polish laws and the Company’s Statutes
whose uniform text was registered based on a decision of the District Court for Kraków-Śródmieście,
XII Economic Department, in Cracow on 6 June 2014. Pursuant to the provisions of § 11 section 2
point 6 of the Company’s Statutes, any change thereto requires separate resolution of the Annual
General Meeting, as provided in the Code of Commercial Companies.
1.
A.
Shareholding structure
Shareholders of ALUMETAL S.A. with material blocks of shares
As at 31 December 2014, the Company had below information on the shareholders holding, directly
or indirectly through subsidiary companies, at least 5% of the total number of votes at the Annual
General Meeting of ALUMETAL S.A.
shareholders holding, directly or indirectly through subsidiary companies, at least 5% of the total number of
votes at the Annual General Meeting of ALUMETAL S.A. as at 31 December 2014
No. of
% of votes at the
Shareholder
% of issued capital
No. of votes
shares
AGM
Grzegorz Stulgis, directly or through
6.031.130
40,00
6.031.130
40,00
IPOPEMA 30 FIZAN
Aviva Otwarty Fundusz Emerytalny
1.506.000
9,99
1.506.000
9,99
Aviva BZ WBK
ING Otwarty Fundusz Emerytalny
1.140.650
7,57
1.140.650
7,57
Other shareholders
6.399.660
42,44
6.399.660
42,44
Total
15.077.440
100,00
15.077.440
100,00
Since the date of the last current report, the Company has not received any information on the
changes in the ownership of material blocks of shares.
In addition, the Company hereby informs that ALUMETAL S.A. does not offer shares with the
attached special control rights.
During the reporting period, the Company did not receive any information on the agreements that
could in the future affect its current shareholding structure. The Company operates solely the
Incentive Scheme, adopted based on the Resolution No. 5 of the Extraordinary Annual General
Meeting of ALUMETAL S.A. of 28 May 2014, which was described in more detail in point II.3.F. of this
Directors’ Report and in the Consolidated financial statements of ALUMETAL S.A. for 2014.
B.
Re-acquisition of own shares and share issuance
In the reporting period, the Company neither issued shares, nor re-acquired own shares.
11
2.
Blocks of shares held by members of Management and Supervisory Boards
The tables below show information on the number of shares held by members of Issuer’s
Management and Supervisory Boards:
Shares in ALUMETAL S.A. held by members of Issuer’s Management and Supervisory Boards
as at 31 December 2014
No. of
% of votes at the
Shareholder
% of issued capital
No. of votes
shares
AGM
Grzegorz Stulgis, directly or
6,031,130
40.00
6,031,130
40.00
through IPOPEMA 30 FIZAN
Frans Bijlhouver
0
0
0
0
Marek Kacprowicz
0
0
0
0
Tomasz Pasiewicz
0
0
0
0
Emil Ślązak
0
0
0
0
Krzysztof Błasiak
334,910
2.22
334,910
2.22
Szymon Adamczyk
223,270
1.48
223,270
1.48
Przemysław Grzybek
111,630
0.74
111,630
0.74
Shares in ALUMETAL S.A. held by members of Issuer’s Management and Supervisory Boards
as at 31 December 2013
No. of
% of votes at the
Shareholder
% of issued capital
No. of votes
shares
AGM
Grzegorz Stulgis, directly or
6,031,130
40.00
6,031,130
40.00
through IPOPEMA 30 FIZAN
Frans Bijlhouver
0
0
0
0
Paweł Boksa
0
0
0
0
Paweł Gieryński
0
0
0
0
Krzysztof Błasiak
334,910
2.22
334,910
2.22
Szymon Adamczyk
223,270
1.48
223,270
1.48
Przemysław Grzybek
111,630
0.74
111,630
0.74
Since the date of submission of previous current report, the Company has not received any
information on the changes in the ownership of shares held by the members of Management and
Supervisory Boards.
12
3.
A.
Authorities of ALUMETAL S.A.
Annual General Meeting
The Annual General Meeting operates based on the Company’s Statutes in the wording adopted
based on the Resolution No. 6 of 28 May 2014 of the Extraordinary Annual General Meeting of
ALUMETAL S.A. On 2 September 2014, pursuant to the provisions of Resolution No. 3 of the
Extraordinary Annual General Meeting of ALUMETAL S.A., Regulations of Annual General Meetings of
ALUMETAL S.A. were adopted. The provisions of the above Regulations do not materially differ from
the respective provisions of the Code of Commercial Companies.
On 26 March 2014, the Ordinary Annual General Meeting passed resolutions regarding the following
matters:












adoption of meeting agenda,
approval of Directors’ Report of ALUMETAL S.A. with its registered office in Kęty for the
period from 1 January 2013 to 31 December 2013,
authorization of the financial statements of ALUMETAL S.A. for the period from 1 January
2013 to 31 December 2013,
approval of Directors’ Report of the Alumetal Group for the period from 1 January 2013 to
31 December 2013,
authorization of the consolidated financial statements of the Alumetal Group for the period
from 1 January 2013 to 31 December 2013,
appropriation of profit of ALUMETAL S.A. for the financial year from 1 January 2013 to
31 December 2013
acknowledgment of the fulfilment of duties by Members of the Management Board of
ALUMETAL S.A. in 2013,
approval of the report of the Supervisory Board of ALUMETAL S.A. for 2013,
acknowledgment of the fulfilment of duties by Members of the Supervisory Board of
ALUMETAL S.A. in 2013,
split of the Company’s shares by reducing nominal value of one share and increasing the
number of shares, without reducing Company’s issued capital, and in the matter of
amendments to the Company’s Statutes,
dematerialisation of the Company’s shares and application for admittance to public trading
and introducing Company’s shares to public trading on a regulated market operated by the
Warsaw Stock Exchange,
approval of the preparation of the financial statements of the Company and of the
consolidated financial statements of its capital group in accordance with International
Accounting Standards, International Financial Reporting Standards and the related
Interpretations issued in the form of regulations of the European Commission.
On 28 May 2014, the Extraordinary Annual General Meeting passed resolutions in the following
matters:

13





approval of Work Regulations of the Company’s Supervisory Board,
award of remuneration to the Members of the Supervisory Board of the Company,
amendments to the Resolution No. 6 of the Ordinary Annual General Meeting of the
Company dated 26 March 2014 on appropriation of profit of ALUMETAL S.A. for the financial
year from 1 January 2013 to 31 December 2013,
conditional increase in the issued capital of the Company and in the matter of issuance of
subscription warrants, excluding the rights issue relating to the shares issued under
conditional capital increase and to subscription warrants, and in the matter of amendments
to the Company’s Statutes,
amendments to the Company’s Statutes and adoption of the uniform text of the Company’s
Statutes.
As a result of the adopted resolutions, the Annual General Meeting authorized, among other things,
the 2013 financial statements referred to above, acknowledged the fulfilment of duties by the
Members of the Company’s Management and Supervisory Boards in 2013, and appropriated the net
profit of the Company in the amount of PLN 24,404,066.91 in the following manner:
a) PLN 21,108,416.00 to dividend, paid in two equal instalments on 2 June 2014 and 1 July
2014,
b) the remaining amount of PLN 3,295,650.91 – to reserve capital.
On 2 September 2014, the Extraordinary Annual General Meeting passed resolutions in the following
matters:





adoption of Regulations of Annual General Meetings,
determining the number of Supervisory Board members,
appointing Mr. Tomasz Pasiewicz as Member of the Supervisory Board,
appointing Mr. Emil Ślązak as Member of the Supervisory Board.
At the same time, the Company hereby informs that during the Annual General Meetings of
ALUMETAL S.A. no restrictions exist on exercising voting rights.
B.
Supervisory Board
As at 31 December 2014, the composition of the Supervisory Board of ALUMETAL S.A. was as follows:
Mr. Grzegorz Stulgis
Mr. Frans Bijlhouwer
Mr. Paweł Gieryński
Mr. Paweł Boksa
– Chairman of the Supervisory Board,
– Member of the Supervisory Board,
– Member of the Supervisory Board.
On 27 June 2014, the Company received from ALU HOLDINGS S.a.r.l. a written notification about
appointment of Mr. Marek Kacprowicz as Member of the Supervisory Board with effect from 1 July
2014.
14
On 28 August 2014, Mr. Paweł Gieryński and Mr. Paweł Boksa notified the Company about their
resignation as Supervisory Board Members. The provided documents indicated that the resignations
will be effective as of 1 September 2014. The provided notifications did not explain reasons behind
such decision.
On 2 September 2014, the Extraordinary Annual General Meeting determined the composition of the
Supervisory Board at five persons and appointed Mr. Tomasz Pasiewicz and Mr. Emil Ślązak as
Members of the Supervisory Board.
After the above changes, as at 31 December 2014, the Supervisory Board of ALUMETAL S.A. was
composed of the following persons:
Mr. Grzegorz Stulgis
Mr. Frans Bijlhouwer
Mr. Marek Kacprowicz
Mr. Tomasz Pasiewicz
Mr. Emil Ślązak `
– Chairman of the Supervisory Board,
– Member of the Supervisory Board.
The Company hereby informs that in the period from 31 December 2014 to the date of the
publication of this Directors’ Report, the above composition of the Supervisory Board did not change.
In addition, the Company hereby informs that in the reporting period there were no committees of
the Supervisory Board. In accordance with the provisions of § 17 section 1 and 2 of the Company’s
Statutes, in the wording established by Resolution No. 6 of the Annual General Meeting of 28 May
2014, the Supervisory Board is authorized to establish an audit committee composed of at least 3 of
its members, with the proviso that at least one member of the audit committee fulfilled the criteria
of independence within the meaning of article 86 section 5 of the Act on certified auditors, and held
appropriate accounting or auditing qualifications. If, however, the Supervisory Board is composed of
not more than 5 persons, it may execute the tasks of the audit committee on its own. Given the fact
that pursuant to the provisions of § 16 section 3 of the Company’s Statutes, the Supervisory Board –
since the date of dematerialisation of the Company’s shares within the meaning of the Act on trading
in financial instruments – was composed of 5 persons, the audit committee was not established; the
Company informed about this fact in its EBI report No.1/2014 of 22 July 2014 in accordance with the
Rule III.8 of the Code of Best Practice for WSE Listed Companies, which was adopted by the
Resolution No. 19/1307/2012of the Supervisory Board of the WSE on 21 November 2012.
The Supervisory Board exercises permanent supervision over the activities of the Company in all
aspects of its business.
The Supervisory Board acts based on the Work Regulations of the Supervisory Board adopted by the
Supervisory Board and authorized by Annual General Meeting; current contents of these Regulations
are available on the Company’s website under: Investor relations /Corporate
Governance/Supervisory Board.
The Supervisory Board holds its meetings at least once in a quarter.
Resolutions of the Supervisory Board are adopted by an absolute majority of votes. In the case of
a voting tie, the casting vote is that of the Chairman of the Supervisory Board.
15
Until the date of dematerialisation of the Company’s shares, resolution in each of the matters
indicated in § 20 section 3 point 3) and point 5) to point 7) of the Company’s Statutes was validly
passed only if the Supervisory Board Member appointed by Mr. Grzegorz Stulgis voted, in exercising
his personal authorization/ privilege referred to in § 16 section 2 letter a) of the Company’s Statutes,
for passing such resolution.
The principles of appointment and removal of Members of the Company’s Supervisory Board were
described in point I.3.C of this Directors’ Report.
C.
Management Board
As at 31 December 2013 and 31 December 2014, the composition of the Management Board of
ALUMETAL S.A. was as follows
Mr. Szymon Adamczyk – President of the Management Board
Mr. Krzysztof Błasiak
– Vice-president of the Management Board
Mr. Przemysław Grzybek – Member of the Management Board.
The Company hereby informs that in the period from 31 December 2014 to the date of the
publication of this Directors’ Report, the above composition of the Management Board did not
change.
The Management Board manages the Company’s affairs and represents the Company before third
parties. The Management Board is authorized to manage all affairs of the Company which are not
within the competence of the Annual General Meeting or Supervisory Board. Resolutions of the
Management Board are adopted by an absolute majority of votes. In the case of a voting tie, the
casting vote is that of the President of the Management Board.
The scope of rights and obligations of the Management Board as well as its manner of operation is
defined by Work Regulations of the Management Board which were authorized by the Management
Board; current contents of these Regulations are available on the Company’s website under: Investor
relations /Corporate Governance/Management Board.
The Management Board of the Company is not authorized to take decisions on share issue or share
re-acquisition.
In the reporting period, no agreements were concluded between the Company and the members of
the Management Board regarding compensation for their resignation or removal for no important
reason, or where their removal was justified by Company’s merger through acquisition.
The principles of appointment and removal of the Members of the Company’s Management Board
were described in point I.3.B of this Directors’ Report.
D.
Special powers and restrictions on transfer of ownership right to the shares of ALUMETAL
S.A. and exercising voting right
In accordance with information provided in the Share Issue Prospectus (point E.5 page 27) and the
Updating Communique No. 1, IPOPEMA 30 FIZAN, Mr. Grzegorz Stulgis, Mr. Szymon Adamczyk, Mr.
Krzysztof Błasiak, Mr. Przemysław Grzybek, ALU HOLDINGS S.a.r.l. Abris CEE Mid-Market Fund and
the Company assumed a contractual obligation not to initiate, without written permission of
16
UniCredit CAIB Poland S.A., activities consisting in offering, selling, encumbering or otherwise
disposing of shares, series A, B or C, of ALUMETAL S.A. over the period of 360 days from their first
quotation on the main market of the WSE (17 July 2014). This obligation relates also to refraining
from declaring issuance, offering or disposal, or the intent to take such actions, or initiating actions
leading to, or possibly leading to issuance, offering or disposal of shares of ALUMETAL S.A., series A,
B or C, or appropriate share options (securities exchangeable for such shares) or enabling securing –
through exercising securities-attached rights – of other rights facilitating acquisition of said shares,
other securities or financial instruments, the value of which is determined directly or indirectly by
reference to the price of the above securities, being the base instrument, inclusive of share swaps,
forward contracts and options. Abris CEE Mid-Market Fund serves as the underwriter (guarantor) of
the liabilities of ALU HOLDINGS S.a.r.l. related to marketability restrictions of the above shares.
The above restrictions do not have any impact on exercising shareholder voting right.
E.
Remuneration of the members of Management and Supervisory Boards
Remuneration of Supervisory Board Members
Total remuneration paid
Grzegorz Stulgis
Frans Bijlhouwer
Paweł Boksa
Paweł Gieryński
Marek Kacprowicz
Tomasz Pasiewicz
Emil Ślązak
Chairman of the Supervisory Board
Member of the Supervisory Board
Remuneration of Management Board Members
Management Board of the parent and subsidiary companies
Short-term employee benefits (payroll and surcharges), total
President of the Management Board,
Szymon Adamczyk
CEO
Vice-president of the Management
Krzysztof Błasiak
Board, Operational & Development
Director
Member of the Management Board,
Przemysław Grzybek
Financial Director
Member of the Management Board,
Mariusz Wiatr
COO*
Year ended
31 December 2014
70,000.00
18,000.00
12,000.00
6,000.00
6,000.00
12,000.00
8,000.00
8,000.00
Year ended
31 December 2013
0.00
-
Year ended
31 December 2014
Year ended
31 December 2013
3,016,796.25
2,139,055.30
1,239,191.48
802,811.16
1,223,303.92
838,134.79
554,300.85
362,065.66
-
136,043.69
*Mr. Mariusz Wiatr ceased to perform the function of the Member of Management Board of Alumetal SA as of 1 September 2013
In the reporting period, Members of the Company’s Management Board were covered by the
operated share incentive schemes described below.
17
F.
Incentive Programs
Program I
In 2014, the management and executives of the Alumetal Group companies were entitled to
additional cash benefits from the main shareholder, who under IPO (Initial Public Offering) sold the
entire amount of held shares. The Program was settled in August 2014 and terminated. The cost of
this Program and the value of capital arising from this incentive scheme for individual reporting dates
were presented below.
Program II
The Extraordinary Annual General Meeting of the Company authorized on 28 May 2014 – based on
the Resolution No. 5 - a new incentive scheme for the years 2014-2016 dedicated to management
and executives (Eligible Persons). The assumptions of the new incentive scheme provide for
a conditional increase in the Company’s issued capital through the issue of free-of-charge and nontransferable three tranches of subscription warrants (series A, B and C) and the matching three
tranches of new shares of the Company (series D, E and F) with a total nominal value not exceeding
PLN 45,231, of which:



up to 150,770 subscription warrants, series A, which will entitle their holders to take up not
more than 150,770 shares, series D, of the Company during the period from the date of
authorization of the Group’s consolidated financial statements for the year ended
31 December 2014 to 31 December 2018;
up to 150,770 subscription warrants, series B, which will entitle their holders to take up not
more than 150,770 shares, series E, of the Company during the period from the date of
31 December 2015 to 31 December 2018;
up to 150,770 subscription warrants, series C, which will entitle their holders to take up not
more than 150,770 shares, series F, of the Company during the period from the date of
31 December 2016 to 31 December 2018.
The issue of the subscription warrants will be dedicated to the members of the Management Board
and to the key executives appointed by the Management Board and authorized by the Supervisory
Board. The Eligible Persons will be able to exercise their right to take up shares in the Company on
the condition of the fulfilment of certain conditions, and especially on the condition of being in the
employment relationship or other similar relationship being the basis for rendering services to the
Company or to the Subsidiary Companies from the first date of listing of shares on the Warsaw Stock
Exchange to the date directly preceding the date of exercising the rights under the subscription
warrants of the given series.
In addition, exercising the right under the subscription warrants will be possible on the condition of
achieving an appropriate growth of EBITDA per Company share; achieving appropriate growth in the
ratio of net profit per share, appropriate rate of return on the Company’s shares during the period
from the first date of shares quotation on the regulated market maintained by the Warsaw Stock
Exchange in relation to the dynamics of WIG index changes. The issue price of the shares included in
18
the new incentive scheme will equate the final unit selling price of the Company’s shares to
Individual Investors in the First Offering reduced by certain appropriate percentage ratio.
Detailed policies of this incentive scheme were described in the regulations of the share incentive
scheme adopted by the Supervisory Board by Resolution No. 4 of 12 December 2014. Since in
October 2014, an allocation was made of the number of shares to individual persons and a list of
eligible employees was prepared, the Company valued this share incentive scheme as at
31 December 2014 in accordance with IFRS 2 Share-based payment.
Presented below is the cost of the program for the subsequent years and the value of capital under
the incentive scheme at consecutive reporting dates.
Value of capital and cost of incentive
program
Capital under incentive Program I
Capital under incentive Program II
Cost of Program I
Cost of Program II
G.
Year ended
31 December 2014
1,330,630.00
223,099.28
1,330,630.00
Year ended
31 December 2013
1,317,847.33
449,896.33
-
Rules of best practice and corporate governance
Since 17 July 2014, ALUMETAL S.A., as the company listed on the Warsaw Stock Exchange, has been
subject to the obligation to apply the rules of best practice and corporate governance defined in the
document called Code of Best Practice for WSE Listed Companies („Dobre Praktyki Spółek
Notowanych na GPW”) which is an appendix to the resolution of the WSE Board No. 19/1307/2012 of
21 November 2012 „Best Practice”. The contents of Best Practice are available on the official website
of the Warsaw Stock Exchange devoted to this issue: www.corp-gov.gpw.pl.
The Management Board of the Company filed a Statement regarding application at ALUMETAL S.A. of
corporate governance rules in 2014. This Statement is available on the Internet website of the
Company, and pursuant to the provisions of part II point 2.13 of the Code of Best Practice included in
the published annual report, part of which is this Directors’ Report.
The following Rules (Recommendations) for Best Practice for Listed Companies were not complied
with by the Company in the reporting period:

Recommendation 1 – to the extent it relates to ensuring communication with investors
and analysts, using also new methods of Internet communication.
In accordance with the provisions of the Company’s Statutes, participation in the Annual
General Meeting through the use of electronic means of communication will be ensured
only if the announcement about convening a General Annual Meeting will include
information on the possibility of shareholder participation through the use of electronic
means of communication.

Recommendation 5 – to the extent it relates to the Company’s having Remuneration
Regulations and the Rules for its Determining.
19
The Company does not have Remuneration Regulations. The Rules for awarding
remuneration to the members of the Company’s Supervisory Board were determined in
the Resolution No. 3 of the Extraordinary Annual General Meeting of the Company of
28 May 2014 on remuneration of the Members of the Supervisory Board. Members of the
Management Board of ALUMETAL S.A. receive remuneration specified in their
employment contracts.

Recommendation 9 – to the extent it relates to securing by the Company of a balanced
share of females and males in fulfilling management and oversight functions. The
Company does provide for the balanced share of females and males in its Management
and Supervisory Boards. The Company has conducted a policy, whereby employment is
offered to competent and creative persons with appropriate professional experience and
education, and hence sex is not a decisive factor in the offering of employment at the
Company.

Recommendation 12 – as regards obligation to ensure that the shareholders are able to,
personally or through a proxy, exercise their voting right during the course of the annual
general meeting, outside the place of the meeting, using the means of electronic
communication.
In accordance with the provisions of the Company’s Statutes, participation in the Annual
General Meeting through the use of electronic means of communication will be ensured
only if the announcement about convening a General Annual Meeting will include
information on the possibility of shareholder participation through the use of electronic
means of communication.

Rule included in part II point 2 of the Code of Best Practice to the extent it relates to
ensuring that the Company operates its Internet website also in the English language in
the full scope indicated in part II point 1 of the Code of Best Practice for economic
reasons. In the reporting period, the Company published in the English language only
main corporate documentation and curricula vitae of the members of the Company’s
corporate bodies.

Rule included in part II point 1.9a of the Code of Best Practice to the extent it relates to
ensuring that the Company operates its internet website and posts there the course of
the annual general meeting in the audio and video form, for economic reasons. In the
opinion of the Company’s Management Board, the cost of technical registration of the
course of annual general meetings in the audio or video form is not justified due to the
shareholding structure during the reporting period.

Rule included in part III point 8 of the Code of Best Practice to the extent it relates to the
functioning of the committees of the Supervisory Board, whose tasks and functioning
should be regulated by Appendix I to the Commission Recommendation of 15 February
2005 on the role of non-executive or supervisory directors of listed companies and on the
committees of the (supervisory) board. In the reporting period, the Company’s
20
Supervisory Board operated neither Nomination Committee, nor Remuneration or Audit
Committees. In accordance with the provisions of the Statutes of the Company, its
Supervisory Board appoints an audit committee composed of at least 3 (three) of its
members, including at least one member of the audit committee fulfilling the
independence criteria within the meaning of article 86 section 5 of the Act on certified
auditors and holding appropriate accounting or auditing qualifications. If, however, the
Supervisory Board is composed of not more than five persons, it may execute the tasks of
the audit committee on its own. Given the fact that pursuant to § 16 section 3 of the
Company’s Statutes, the Supervisory Board – from the date of Company’s shares
dematerialization, within the meaning of the Act on trading in financial documents - was
composed of five persons, the Audit Committee was not established.

Rule included in part IV point 10 of the Code of Best Practice, whereby the company
should ensure that its shareholders have the possibility to participate in the annual
general meeting with the use of electronic means of communication consisting in:
transmission of the session of annual general meeting in real time, during which the
shareholders can take the floor while being physically present in a place other than the
place of the meeting. Pursuant to the provisions of § 9 section 4 of the Company’s
Statutes, participation in the Annual General Meeting through the use of electronic means
of communication will be ensured only if the announcement about convening a General
Annual Meeting will include information on the possibility of shareholder participation
through the use of electronic means of communication.
The Company informed the public about non-application of the Rules of the Code of Best Practice
included in parts II, III and IV in its current reports EBI 1/2014 and EBI 2/2014.
21
III.
Information on products of the ALUMETAL S.A. Capital Group
1.
Operating segments of the ALUMETAL S.A. Capital Group
For management purposes, the Group was divided into operating segments identified based on the
type of goods produced and services rendered. The following operating segments were identified:
A.
Aluminium casting alloys
The main output of the production process of the Group are aluminium casting alloys produced in
the form of one-notch ingots (aluminiowe stopy odlewnicze produkowane w postaci gąsek
dwudzielnych) (of 6–8 kg) and two-notch ingots (of approx. 13 kg) in the Nowa Sól, Kęty and Gorzyce
production plants. In 2014, total production capacity of these three production plants of the Group
was 158.0 thousand tons (in 2013 – 141.5 thousand tons). Apart from solid cast alloys, the Alumetal
Group delivers alloys in the form of liquid metal.
Chemical composition of aluminium casting alloys is adjusted to individual customer needs and
complies with the currently valid global, European and Polish standards.
Casting alloys are delivered mainly to the clients of the motor industry (more than 90% of the volume
sold), but also to other industry segments i.e. construction, machine, smelting and other.
B.
Master alloys
Master alloys are produced in the Gorzyce production plant; the production capacity of this plant is
7 thousand tons. Master alloys are produced in the form of waffle plates (wafers) (of approx. 12 kg),
which may be steel- or aluminium- strapped into bundles.
Chemical composition of master alloys is adjusted to individual client needs and complies with the
currently valid norms: PN-EN 575 and BN-82/0831-01.
Master alloys are mainly delivered to the widely defined smelting and casting industries, to the
producers of metal sheets and alloys for further forming processes, as well as to the producers of
secondary alloys (stop wtórny).
C.
Fluxes and salts
The Alumetal Group, through the T+S sp z o.o. company, produces in the Kęty production plant
auxiliary materials used in the smelting and casting industries, including fluxes (topniki), aluminium
refiners (rafinatory), quenching salts (sole hartownicze), modifiers (modyfikatory), insulating casting
powders (zasypki izolacyjne) and casting binders (spoiwa odlewnicze). In the years 2013-2014, the
production capacity of the Kęty production plant was 7 thousand tons per year.
The auxiliary materials are used in the production by Group companies of both aluminium cast alloys
and master alloys; these are delivered to the external clients operating in the smelting and casting
industries dealing with cast steel (staliwo), cast iron, copper and aluminium.
22
D.
Other
The by-products of the production activities of the Group are all sorts of wastes, including scrap from
the preparation/ sorting phase of raw materials (in particular, steel scrap, zinc scrap, non-ferrous
metal scrap and magnesium scrap), fine-grained aluminium scobs and swarf (frakcje drobne wiórów)
and aluminium dross (zgary). The by-products of the Group are sold on the market and represent
an additional source of revenue. Included in the Other segment are also revenues from the sale of
raw materials and wastes, goods for resale and services.
Segment results are monitored by the Company’s Management Board at the level of gross sales and
operating profit before administrative expenses.
Detailed data are presented below.
23
The tables below present segment results for individual years, as required by IFRS 8:
2014
Total volume (tons), of which:
- inter-segment sales
Of which:
Volume of goods (tons), of which:
Volume of raw materials, waste and services (tons), of which:
Volume of goods for resale (tons), of which:
Sales of finished goods, raw materials, goods for resale and
services, of which:
Cost of sales
Gross profit on sales
Selling expenses
Operating profit (before administrative expenses)
% margin
Administrative expenses
Other operating expenses/ income
Depreciation/ amortization
EBITDA*
% margin
Finance income/ costs
Profit before tax
Income tax expense
Net profit for the year
Casting alloys
Master alloys
Flux and salts
Intermediary
services – purchase
of scrap raw
materials
Other
Consolidation
exclusions and
IFRS
adjustments
Unallocated
items
-
Total
151 570
-
6 222
1 844
2 634
2 393
-
30 168
6 058
-
-10 294
-10 294
180 301
-
151 570
-
6 222
1 844
-
2 546
2 393
62
26
-
-
2 215
2 215
27 338
3 838
615
4
-
-6 451
-6 451
-3 838
-3 838
-4
-4
156 103
23 561
637
-
1 153 974 730.85
54 589 788.66
5 834 967.80
-
68 104 100.28
-
-47 195 780.07 1 235 307 807.52
-
14 111 327.58
5 006 369.11
-
28 078 083.38
-
-47 195 780.07
-1 058 935 506.72
-49 625 134.56
-3 449 827.00
-
-63 920 148.83
-
44 590 603.57
95 039 224.13
-20 228 590.14
74 810 633.99
6.5%
4 964 654.10
-576 890.46
4 387 763.64
8.0%
2 385 140.80
-169 544.72
2 215 596.08
38.0%
-
4 183 951.45
-176 881.76
4 007 069.69
5.9%
-21 047 700.97
-3 974 568.32
18 556 754.29
-2 605 176.50
138 054.55
-2 467 121.95
1 045 159.95
-2 726.30
807 643.15
2 251 663.18
-772 096.72
-
-1 685 679.77
133 585.08
-
-1 131 340
013.54
103 967 793.98
-21 013 852.53
82 953 941.45
6.7%
-20 002 541.02
-3 977 294.62
19 364 397.44
78 338 503.25
6.3%
565 983.41
59 540 089.22
-638 511.64
58 901 577.58
24
2013
Total volume (tons), of which:
Of which:
Volume of goods (tons), of which:
Volume of raw materials, waste and services (tons), of which:
Volume of goods for resale (tons), of which:
- re-sale of the Group’s goods
Sales of finished goods, raw materials and wastes, goods for
resale and services, of which:
Cost of sales
Gross profit on sales
Selling expenses
Operating profit (before administrative expenses)
% margin
Administrative expenses
Other operating expenses/ income
Depreciation/ amortization
EBITDA*
% margin
Finance income/ costs
Profit before tax
Income tax expense
Net profit for the year
Casting alloys
Master alloys
Flux and salts
Intermediary
services – purchase
of scrap raw
materials
Other
Consolidation
exclusions and
IFRS
adjustments
Unallocated
items
Total
124 002
71
4 251
1 466
2 462
2 308
662
662
22 486
3 347
–
–
-7 854
-7 854
146 009
–
124 002
71
–
–
–
–
–
4 251
1 466
–
–
–
–
–
2 424
2 308
20
–
18
–
–
–
–
–
–
662
662
–
1 991
1 990
20 354
1 357
141
–
70
–
–
–
–
–
–
–
-5 764
-5 835
-1 358
-1 357
-732
-662
-70
126 904
–
19 016
–
89
–
–
956 388 719,60
36 963 848,41
5 056 236,25
2 685 474,97
53 031 322,85
–
528 829,12
-901 030 413,65
55 358 305,95
-14 589 756,75
40 768 549,20
4,3%
12 496 036,63
-34 152 697,68
2 811 150,73
-404 514,79
2 406 635,94
6,5%
4 507 311,70
-3 306 769,84
1 749 466,41
-148 924,98
1 600 541,43
31,7%
2 685 474,97
-2 676 171,97
9 303,00
–
9 303,00
0,3%
18 622 089,33
-48 540 875,71
4 490 447,14
-81 742,11
4 408 705,03
8,3%
–
–
–
–
–
–
-13 017 858,34
1 468 240,27
15 930 513,26
–
–
15 030 667,73
–
786 560,68
–
-38 839 741,70 1 015 285 860,38
-38 839 741,75
36 879 768,16
-1 959 973,54
-157 239,10
-2 117 212,64
–
170 855,92
1 355 768,32
1 013 195,80
–
–
-15 629 188,68
–
-164 228,78
–
–
-952 827 160,69
62 458 699,69
-15 382 177,73
47 076 521,96
4,6%
-12 847 002,42
2 824 008,59
16 943 709,06
53 997 237,19
5,3%
-598 520,95
36 455 007,18
622 331,90
35 832 675,28
* EBITDA was calculated by adjusting the gross profit for finance income and finance costs and depreciation
25
IV.
Assessment of financial position of the ALUMETAL S.A. Capital Group
1.
Basis of preparing financial statements and information on the entity authorised to
audit financial statements
The consolidated financial statements for 2014 as well as the comparative data for the prior financial
year have been prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and the related interpretations issued in the form of regulations
of the European Commission.
The entity authorised to audit the financial statements and the consolidated financial statements is
Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością spółka komandytowa, with its
registered office in Rondo ONZ, 01-124 Warsaw, based on the agreement dated 8 August 2014.
The table below shows remuneration of the entity authorised to audit financial statements, paid or
payable for the year ended 31 December 2014 and 31 December 2013, by type of services:
Year ended
Year ended
31 December 2014*
31 December 2013*
Statutory audit of consolidated financial statements
105 000.00
85 500.00
Review of interim financial statements
100 000.00
n/a
IPO-related work
542 000.00
n/a
Total
747 000.00
85 500.00
Type of service
* relates to Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp.k.
2.
A.
Market situation
Sales market
2014 saw a steady raising trend on the automotive market in Europe both on the side of motor
vehicles production and registration.
The production of motor vehicles in the European Union increased by 4.5% to the level of 17 million
pieces (source: OICA), the production in Germany increased by 3.3% to the level of 5.9 million pieces,
while in the CEE 5 - by 3.8% to the level of 3.46 million pieces. The share of Germany and CEE5 in the
production of all motor vehicles in the EU in 2014 was 55%.
Registration of motor vehicles in the European Union saw a raising trend in each quarter of the prior
year compared to the corresponding period of the preceding year. In 2014, sales of motor vehicles in
the EU increased by 5.9% compared to the prior year (source: ACEA), of which the increase in the
passenger vehicles was 5.6%, and of the commercial vehicles – 7.6%.
The clients of the Alumetal Group recorded an approx. 5% higher demand for secondary aluminium
casting alloys in 2014, compared to 2013.
Changes in quarterly registrations of new vehicles in 2014
and 2013 and in global amounts in 2014 and 2013
5,9%
16 000 000
14 000 000
12 000 000
CV
10 000 000
PC
8 000 000
6 000 000
9%
5%
6%
4%
4 000 000
2 000 000
-
1q'13 1q'14 2q'13 2q'14 3q'13 3q'14 4q'13 4q'14
2013
2014
The demand for new cars translated directly into higher production and sales levels in the Alumetal
Group. Having analyzed the situation of the automotive market in recent years, it is possible to
assume a conservative increase of at least 2 – 3% in the motor vehicles production and registration in
the following year. In the analyzed period, sales to motor industry clients accounted for 92% of the
Group’s total sales.
Sales in 2014 of finished goods of the Alumetal Group, by industry
Other
8%
Automotive
industry
92%
27
In analyzing the ratio of market prices in the form of spread between standard prices of casting alloys
(alloy 226) and the price of adequate scrap raw material used for the production of such alloys, it can
be observed that in the first half of 2014 an increase was recorded, compared to the discussed
difference (spread) for 2013, while in the second half of 2014, the said spread remained stable
(source: Metal Bulletin). The chart below shows the movements that have taken place in the
analyzed spread since 2008. The analysis of the chart shows that the situation on the market of
casting alloys has stabilized. After relatively weak period in the second half of 2012 and first half of
2013, since the mid of 2013 the EU sector of motor vehicles registration and production bounced
back in terms of sales, and this had material impact on the improvement of production margins of
aluminium alloys and their stabilization.
Benchmark margin (EUR/t)
600
500
400
300
200
100
01-2008
04-2008
07-2008
10-2008
01-2009
04-2009
07-2009
10-2009
01-2010
04-2010
07-2010
10-2010
01-2011
04-2011
07-2011
10-2011
01-2012
04-2012
07-2012
10-2012
01-2013
04-2013
07-2013
10-2013
01-2014
04-2014
07-2014
10-2014
0
In 2014, the Alumetal Group realised sales revenues of PLN 1,235.3 thousand. The achieved result
was 22% higher than that realised in 2013. The 2014 sales structure has changed owing to an
increase in the share of exports in total sales (higher sales to the existing and new clients). In the
whole 2014, the share of exports in total sales was 62%, compared to 48% in the prior year. This
increase in the share of exports in total sales results from the already held high share in the domestic
market and the execution of the strategy of client portfolio diversification.
The Alumetal Group sales
structure, by geographical area
2014
2013
Poland
Abroad
38%
62%
52%
48%
Further development plans of the Alumetal Group caused intensification of business activities in the
area of securing new sales markets. In 2014, the Alumetal Group acquired 45 new clients, including
the clients for both the Group’s aluminium products (41) and for chemical products (4).
The below charts show the geographical structure of the Group’s sales for the years 2014 and 2013
(data as per delivery location of Group clients).
28
Geographical structure of sales in 2014
Hungary
5%
Other countries
12%
Poland
41%
Holland
6%
Czech Republic
9%
Germany
27%
Geographical structure of sales in 2013
Holland
5%
Other countries
9%
Hungary
7%
Czech
Republic
7%
Poland
53%
Germany
19%
In 2014, the Group realised sales in excess of 10% of total annual sales to each of the following
entities:



the Grupa Volkswagen Group – 19%,
the Nemak Group – 17%,
the Federal-Mogul Group– 11%.
None of the above clients was related by capital or organizational structure to the Alumetal Group.
29
B.
Supply market
In 2014, the Alumetal Group purchased 177,075 tons of aluminium scrap (“Al scrap”), which means
an 18.3% increase compared to the prior year. In 2014, cooperation was commenced with 55 new
suppliers.
In the period from December 2013 to November 2014, exports of materials scrap from the European
Union amounted to 962 thousand tons. The main exports markets were China with exports of 330
thousand tons (a 17% decrease on an annualised basis) and India with 282 thousand tons (a 55%
increase compared to the prior year) of exports. The share of China and India in the exports of the
European Union accounts for 64% of total exports, and remained on a similar level for several years.
The import of raw materials scrap by the European Union was 374 thousand tons, which was 9%
more than in the prior year.
Since 2013 Poland has been a net importer of aluminium scrap. In 2014 (November 2013 –October
2014), Poland imported 217 thousand tons of Al scrap, which is 25% more than in the prior year. At
the same time, exports of Al scrap from Poland increased by 15% y/y to the level of 170 thousand
tons.
The portfolio of Group suppliers is diversified (with more than 350 entities), and none of the
suppliers in this portfolio realized in 2014 supplies with a total value exceeding 10% of total sales
revenues.
In 2014, no transactions were recorded with one supplier with a value exceeding 10% of total annual
sales revenues.
30
3.
Financial results and financial position of the ALUMETAL S.A. Group
The table below shows summarized consolidated data of the Alumetal Group for 2014 and the
comparative data for 2013.
SELECTED FINANCIAL DATA
DATA REGARDING CONSOLIDATED IFRS FINANCIAL STATEMENTS
In PLN thousand
ITEMS OF THE STATEMENT OF COMPREHENSIVE INCOME
& STATEMENT OF CASH FLOWS
Volume of sold goods – in tons
12 -month
12 -month
period of 2014 period of 2013
12 -month
period of
2014
In EUR thousand
12 -month
period of
2013
156 103
126 904
156 103
126 904
1 235 308
1 015 286
294 872
241 103
Operating profit
58 974
37 054
14 077
8 799
EBITDA
78 338
53 997
18 700
12 823
502
425
120
101
Profit before tax
59 540
36 455
14 212
8 657
Net profit
58 902
35 833
14 060
8 509
Net cash flow from operating activities
58 509
36 463
13 966
8 659
Net cash flow from investing activities
-9 668
-33 198
-2 308
-7 884
Net cash flow from financing activities
-29 258
-8 574
-6 984
-2 036
19 584
-5 308
4 675
-1 261
Basic net earnings per share attributable to equity holders
of the parent (in PLN / EUR)
3.91
2.38
0.93
0.56
Diluted net earnings per share attributable to equity
holders of the parent (in PLN / EUR)
3.79
2.38
0.91
0.56
Net sales
EBITDA – unit in PLN/ ton
Total net cash flow
ITEMS OF THE STATEMENT OF FINANCIAL POSITION
31.12.2014
31.12.2013
31.12.2014
31.12.2013
Total assets
535 873
482 941
125 724
116 450
Non-current assets
202 208
210 484
47 441
50 753
Current assets
333 665
272 456
78 283
65 696
Shareholders’ equity
324 793
285 455
76 201
68 831
1 508
1 508
354
364
20 970
32 833
4 920
7 917
190 110
164 653
44 603
39 702
15 077 440
15 077 440
15 077 440
15 077 440
Basic carrying amount per share ( in PLN / EUR)
21.54
18.93
5.05
4.57
Diluted carrying amount per share ( in PLN / EUR)
20.91
18.93
4.91
4.57
1.95***
1.40**
0.46***
0.34**
Issued capital
Non-current liabilities
Current liabilities
Number of shares *
Declared or paid dividend per share (in PLN / EUR)
31
* On 26 March 2014, the Ordinary Annual General Meeting of the Company resolved to split all shares of the Company by
way of:
- reducing nominal value of each share from the current price of PLN 1 (in words: one zloty) to 10 groszy (in words: ten
groszy) each and increasing the number of shares making up the issued capital to the total of 15,077,440 (in words: fifteen
million seventy seven thousand four hundred forty) shares, and
- exchanging 1 (in words: one) share of the Company with a nominal value of PLN 1 (in words: one zloty) to 10 (in words:
ten) shares with a nominal value of 10 groszy (in words: ten groszy) each.
** Based on the Resolution of 26 March 2014, amended by Resolution of 28 May 2014, the Annual General Meeting of the
Company authorized payment of dividend from the 2013 net profit in the amount of PLN 21,108,416.00 in two equal
instalments with the payment date set at 2 June 2014 and 1 July 2014. From the presentation point of view, this business
event was presented in the column of the 2013 data.
*** Dividend planned and proposed by the Management Board calculated by the number of shares of ALUMETAL S.A.
existing at the date of the preparation of financial statements.
The above financial data for 2014 and 2013 were translated into EUR in the following manner:
- items of assets and liabilities – at the average NBP exchange rate prevailing as at 31 December 2014 i.e. EUR/PLN 4.2623,
and 31 December 2013 i.e. EUR/PLN 4.1472
- items of other comprehensive income and statement of cash flow – at the exchange rate being the mathematical average
of the NBP exchange rates prevailing at the last days of the month: 01.01.2014-31.12.2014, i.e. EUR/PLN 4.1893 and
01.01.2013-31.12.2013 i.e. EUR/PLN 4.2110
Due to the fact that sales of the Casting alloys account for approx. 94% of totals sales revenues of the
Group in 2014, it is this particular segment that decides about the overall results of the Group.
Nevertheless the results of other segments (Master alloys, Flux and salts and Other) are also positive,
and detailed information on the profitability of each segment was included in point III.1 of this
Directors’ Report.
In 2014, owing to the improvement in the situation of the automotive industry and material increase
in the production capacity of the Alumetal Group (activation of the second production line in the
Nowa Sól production plant in July 2013 with a monthly production capacity of 3 thousand tons), the
volume of the Group’s sales materially increased i.e. by 23% compared to the prior year. The
recorded sales levels showed equal distribution in individual quarters despite the fact that 3Q and 4Q
are usually the periods of lower sales, due to the annual leave season in the majority of plants of the
automotive industry in 3Q and due to Christmas holidays in 4Q.
32
Quarterly sales volumes (tons)
40,0
39,2
37,2
40,0
39,7
45,0
33,8
35,0
30,0
25,0
20,0
15,0
10,0
5,0
0,0
4Q'13
1Q'14
2Q'14
3Q'14
4Q'14
In 2014, the volume of sales of the Alumetal group increased by 23% compared to the prior year i.e.
to the level of 156 thousand tons. Compared to 2011, the increase of sales volume was 77%.
Annual sales volumes (tons)
156,1
180,0
160,0
140,0
120,0
100,0
80,0
60,0
40,0
20,0
-
126,9
99,4
88,1
2011
2012
2013
2014
Due to lower quotations on the London Metal Exchange, the average selling price slightly decreased,
and caused that sales revenues increased by 22%, which marks a slightly lower increase than the
increase in sales volume thus reaching the highest ever level in the history of the Alumetal Group i.e.
PLN 1,235.3 million. The chart below shows annualized sales revenues in the period 2011 – 2014.
33
Annual sales (PLN million)
1 235.3
1 400
1 015.3
1 200
811.7
844.6
1 000
800
600
400
200
2011
2012
2013
2014
The chart below shows the EBITDA earnings, which in absolute values amounted in 2014 to a total of
PLN 78.3 million and was 45% higher compared to 2013. The main factors which had positive impact
on these good results were the following:
 favourable relation between selling prices of alloys and purchase prices of scrap that lasted
throughout the entire year,
 23% increase in sales volume,
 lower unit cost of production arising from better distribution of fixed costs, which – in turn –
resulted from higher production volumes.
EBITDA (PLN million)
78.3
80,0
70,0
60,0
50,0
40,0
30,0
20,0
10,0
-
63.0
54.0
52.9
2011
2012
2013
2014
34
The unit EBITDA earnings in 2014 was PLN 502/ton and was 18% higher compared to 2013.
Unit EBITDA earnings (PLN/ton)
715
800
700
532
502
600
425
500
400
300
200
100
0
2011
2012
2013
2014
Annualised 2014 net profit hit the record high level in the history of the Group and was PLN 58.9
million, which means that was 65% higher compared to 2013.
Net profit (PLN million)
58.9
70,0
60,0
50,0
44.0
34.4
40,0
35.8
30,0
20,0
10,0
2011
2012
2013
2014
35
The following one-off events described in point IV.5 of this Directors’ Report had impact on the
results of the Alumetal Group in 2014:
One-off event
Valuation of share options and
annual bonus for achieving
materially higher than budgeted
results
Incurred IPO costs
Reversal of VAT provision
Creation/ reversal of provision for
Cimos d.d.
Impact on EBITDA
Interest on returned VAT
Income tax
Impact on net profit
1Q 2014
-347
2Q 2014
-597
1 106
3Q 2014
66
-281
2014
-2 169
-2 169
-546
-1 490
1 106
-9 757
-347
4Q 2014
-9 248
884
1 967
-6 398
2 439
-7 318
-546
270
104
-442
-463
-193
-9 871
884
1 674
-7 314
The adjusted EBITDA earnings for the entire 2014 hit the record level in the history of the Group of
PLN 88.2 million, which means that it was 63% higher compared to the prior year.
EBITDA, net of one-off events (PLN million)
88.2
100,0
80,0
78.3
63.0
60,0
52.9
54.0
2012
2013
40,0
20,0
2011
2014
On a unit basis, the adjusted EBITDA earnings amounted to PLN 565/ton and was 33% higher than in
2013.
36
Unit-based EBITDA, net of one-off events (PLN/ton)
715
800
565
700
532
600
502
425
500
400
300
200
100
0
2011
2012
2013
2014
Annualised 2014 net profit, adjusted by one-off events, amounted to PLN 66.2 million and was 85%
higher compared to 2013
Net profit, net of one-off events (PLN million)
58.9
70,0
66.2
60,0
50,0
44.0
40,0
34.4
35.8
2012
2013
30,0
20,0
10,0
2011
2014
In connection with the completion of the construction of the production plant in Nowa Sól, the
balance of investment expenditure materially decreased. In 2014, investment expenditure amounted
to PLN 10.8 million and was 68% lower than in 2013.
37
Capex (PLN million)
70,0
64.2
60,0
38.6
50,0
33.5
40,0
30,0
10.8
20,0
10,0
2011
2012
2013
2014
The decreasing investment expenditure coupled with very good EBITDA earnings are the main factors
that will facilitate further reduction of interest debt in 2014, despite payment of dividend in the
amount of PLN 21 million and despite growing need for working capital financing. At the end of 2014,
the net debt fell to the level of approx. PLN 45 million, while the ratio Net debt/EBITDA to a record
low of 0.6.
Net debt
120,0
1,8
2,0
1,8
100,0
1,4
1,6
1,3
1,4
80,0
1,2
60,0
0,6
112,1
40,0
1,0
0,8
72,1
0,6
70,2
45,4
20,0
Net netto
debt
Dług
Dług
Net debt/
EBIDTA
netto/EBITDA
0,4
0,2
0,0
0,0
2011
2012
2013
2014
38
Cash flow from operating activities vs EBITDA (PLN million)
35,0
30.6
28.9
30,0
22.4
22.8
25,0
19.8
19.0
18.7
20,0
12.2
15,0
13.4
10,0
5,0
0,0
-5,0
4Q'13
EBITDA
1Q'14
2Q'14
mlnmillion
PLN
InwPLN
-1.2
3Q'14
4Q'14
Cashflow
flow operacyjny
from operating
activities
Cash
w mln
PLN in PLN million
In 2014, the difference between EBITDA and cash flow from operating activities amounted to
PLN 19.8 million. The main factors that contributed to the conversion of EBITDA to cash flow from
operating activities were as follows:
 higher need for working capital financing, mainly due to higher sales volume and price
increases,
 increase in the balance of raw materials scrap and stocks of finished goods in connection with
the higher than average levels of assumed sales in the first weeks of 2015,
 low effective income tax rate.
39
Cash flow from operating activities vs EBITDA (PLN million)
90,0
78,3
80,0
63.0
70,0
60.9
60,0
52.9
58.5
54.0
50,0
36.5
40,0
30,0
17.2
20,0
10,0
2011
EBITDA
2012
Inw
PLN
million
mln
PLN
2013
2014
Cashflow
flowoperacyjny
from operating
activities
Cash
w mln
PLN in PLN million
*
In 2014, the Alumetal Group recorded a record low effective income tax rate due to the following
reasons:
 utilisation of tax shield of the Gorzyce and Nowa Sól production plants operating in special
economic zones,
 the recorded one-off, high tax cost in the form of irrecoverable and defaulted receivables
from Cimos d.d. related in whole to the sales realized by Kęty production plant which is not
located in a special economic zone.
Effective income tax rate
14,0%
12.3%
12,0%
10,0%
7.8%
8,0%
6,0%
4,0%
1.7%
2,0%
1.1%
0,0%
2011
2012
2013
2014
40
4.
Financial ratios
The table below shows the listing of the most significant financial ratios that facilitate comprehensive
assessment of the profitability, efficiency of operations, liquidity position and indebtedness of the
Group.
These ratios demonstrate stable efficiency of the operations of the Group at the level of EBITDA
margin and the net margin, both in the short- and long-term perspective.
Apart from sales profitability, the ratios of return on assets and return on equity were also
satisfactory. Liquidity I ratio remained at a stable satisfactory level, while Working Capital Days ratio
has systematically decreased.
The structure of the Group’s assets is dominated by relatively liquid assets such as receivables and
inventories, while the structure of liabilities – by trade liabilities that pre-dominate interest liabilities.
Debt ratios show low levels of Group’s indebtedness, as well as its great potential to finance further
development and to realize the adopted dividend policy.
Financial ratio
Ratio description
2014
2013
2012
EBITDA margin
EBITDA/Net sales
6.3%
5.3%
6.3%
Net profit margin
Net profit/Net sales
4.8%
3.5%
4.1%
Return on assets (ROA) (%)
Net profit/Total assets
11.0%
7.4%
8.0%
Return on equity (ROE) (%)
Net profit/Shareholders’ equity
at the beginning of the period
20.6%
14.4%
16.1%
Liquidity I
Total current assets/Current
liabilities
1.8
1.7
1.7
Working Capital Days
Inventory days + Debtors days –
Creditors days
60 days
66 days
74 days
Stability of financing (%)
(Shareholders’ equity + Noncurrent liabilities)/Total equity
and liabilities
64.5%
65.9%
67.5%
Debt ratio (%)
(Total equity and liabilities –
Shareholders equity)/Total
assets
39.4%
40.9%
42.4%
Net debt/EBITDA
(Bank loans and borrowings –
cash)/EBITDA
0.6
1.3
1.4
The overall satisfactory financial position resulting from the fact that the earned margins are stable,
the balance of interest liabilities is low, the working capital ratio is high, and the financial liquidity is
good, causes that the perspective of the Group for timely discharging of its liabilities is safe. The
above assessment of the financial position was confirmed by an external institution i.e. the
EuroRating sp. z o.o. rating agency, which on 28 January 2015 awarded ALUMETAL S.A. the BBB
investment level credit rating. The EuroRating sp. z o.o. rating agency is registered as the rating
agency in the European Union (in accordance with Regulation (EC) No. 1060/2009 of the European
41
Parliament and of the Council of 16 September 2009 on credit rating agencies) and is under direct
supervision of the European Securities and Markets Authority (ESMA). Thus the EuroRating sp. z o.o.
agency holds the ECAI status (i.e. External Credit Assessment Institution – pursuant to the provisions
of 4 section 1 point 98 of Regulation (EC) No. 575/2013 of the European Parliament and of the
Council of 26 June 2013 on prudential requirements for credit institutions and investment firms). The
assessment awarded by rating agencies defines the financial credibility and ability of an enterprise to
settle its short- and long-term liabilities in the perspective of up to 3 years.
The assessment of the Alumetal Group accounted for its business specificity, Group development
plans and the realized dividend policy, and covered the potential threat factors to the Group’s
business arising from the relatively high market cyclicality and client concentration, considerable
fluctuations in the employed working capital, planned increase in the balance of loans and
borrowings and possible temporary business profitability decrease. All these factors and threats did
not stop the rating agency from assessing the perspective of ALUMETAL S.A. as stable.
5.
A.
Significant events in 2014
Initial Public Offering of ALUMETAL S.A. and change in the greatest shareholding
The Management Board of the Warsaw Stock Exchange passed on 11 July 2014 Resolution
No. 802/2014 on admittance to public trading on the Main Market of the Warsaw Stock Exchange of
the shares of ALUMETAL S.A., series A, B and C. Following that, based on the Resolution
No. 811/2014 of 16 July 2014, the Management Board of the Warsaw Stock Exchange resolved to
introduce ordinary bearer (registered) shares of ALUMETAL S.A to public trading as of 17 July 2014 in
accordance with the ordinary procedure, and on that date the first quotation of the Company took
place.
B.
Commencement of the project called Construction of the Production Plant in Hungary
In the first half of 2014, steps were taken to commence the production of aluminium casting alloys in
Hungary. The activities realised during the course of project realization were as follows:

1 October 2014 – authorization by the Supervisory Board of project business plan with the
below parameters:
- investment expenditure – up to PLN 120 million,
- approx. 60 thousand tons of production capacity to be achieved in one phase,
- commencement of production in 4Q 2016,
 9 October 2014 – order was signed for the design of the production plant,
 10 October 2014 – preliminary agreement was signed on the purchase of land plot,
 10 October 2014 – binding proposal was delivered by the Hungarian government on granting
public aid (in the amount of up to 35% of qualified investment expenditure).
At the reporting date, the issued capital of the newly incorporated company was HUF 53,000,000
(equivalent of PLN 707,312).
42
C.
Corporate recovery proceedings of the client, CIMOS d.d., and repayment o 25% of debt
in 2014
On 26 May 2014, Alumetal S.A. received a letter from Cimos d.d. informing about non-signing of
a Master Restructuring Agreement, as a result of which, on 3 June 2014, the District Court in Koper,
Slovenia, initiated corporate recovery proceedings of Cimos d.d. and set the date for debt reporting
at 3 July 2014. Cimos d.d. signed a term sheet (wstępne porozumienie) with the banks and clients
regarding their participation in the restructuring on 1 August 2014, and on 5 August 2014, the
Company received a letter with a proposal to settle liabilities of this entity towards the Company by
way of the repayment of 25% of liabilities in October 2014, and the repayment of 30% of liabilities in
the form of 8 half-yearly instalments as of October 2015, and to cancel the remaining 45% of total
liabilities amount.
Having in mind the status of these proceedings, including the lack of sufficient documentation for the
assessment of realizability of said proposal of CIMOS d.d., and, in consequence, the recoverability of
trade receivables reported by the Alumetal S.A. Group, at the reporting date, the Company’s
Management Board decided to recognize an impairment write-down against receivables in the full
amount, which was included in the results for the first half of 2014.
On 15 October 2014, the Company received a letter from CIMOS d.d. confirming the intent to repay
in November 2014 the amount of 25% of liabilities of this entity towards the Company within up to
5 days from the date of authorization of the corporate recovery program by the District Court in
Koper (Slovenia). The financial restructuring plan was filed with the District Court in Koper on 3
November 2014.
On 3 December 2014, the Company recorded payment to its bank account of EUR 616,104.02. On 4
December 2014, the Company informed in its current report No. 20/2014 about the transfer by
Cimos of cash in the amount of 25% of overdue receivables. In consequence, the Group reversed in
the Q4 2014 results the impairment write-down against said receivables in the amount equating the
amount of received cash payment.
In accordance with the information received to date, the receipt of the above payment and
execution by Cimos d.d. of further restructuring activities may point to the intention of Cimos to
settle its liabilities towards the Company in the manner specified in the proposal described above.
Until the date of the authorization of the financial statements, the Company has not received any
new information on the recovery proceedings of Cimos d.d.
D.
Termination of tax proceedings with the Tax Office in Cracow and reversal of VAT
provision
In the years 2011-2012, ALUMETAL S.A. received unfavourable decisions from the Tax Office in
Cracow as regards its right to deduct VAT on purchases of scrap made in the periods (i) from January
to November 2006 and (ii) from December 2006 to December 2007.
In 2011, the Company paid the amount of the past due VAT for the period from January to November
2006 in the amount of approx. PLN 1,527 thousand. The Management Board appealed against the
decision of the Tax Office in Cracow. As a result of the conducted tax proceedings, in February 2013
the Company received a favourable decision of the Voivodship Administrative Court overruling the
decision of the Tax Office in Cracow (expiry of limitation period applicable to tax liabilities for the
period from January to November 2006). The adjudicated amount of PLN 1,729 thousand being the
VAT principal together with interest was returned to the Company in March 2014 (and recognized in
the statement of comprehensive income for 2013). In May 2014, the Company was returned the
43
amount of PLN 189 thousand being the VAT principal together with interest relating to the period
October-November 2006.
With respect to the period December 2006 - December 2007, the matter – following overruling the
decision by the Director of the Tax Chamber in Cracow – was returned for further proceedings before
the appropriate body of the 1st instance i.e. the Tax Office in Cracow. In July 2014, the Tax Office in
Cracow informed the Company in writing that no irregularities were found and discontinued the
proceedings with respect to the period October, November 2006 and to the period from December
2006 to December 2007, and discontinued the proceedings with respect to the period from January
to September 2006. As at 30 June 2014, the Company reversed the provision of PLN 1,829 thousand.
Currently, neither the Company nor its subsidiary companies is the party to any other material tax
proceedings.
E.
Obtaining new SEZ licenses entitling to income tax relief
In the reporting period, the following licenses were obtained:


F.
License No. 247 in the Kostrzyńsko-Słubicka SEZ to realize the project called Construction of
wastes treatment facility, purchase and retrofitting of equipment for the supply of liquid
metal, purchase of auxiliary equipment and transport vehicles, and plant retrofitting
(“Budowa linii do przerobu odpadów, zakup i doposażenie urządzeń do realizacji dostaw
ciekłego metalu, zakup urządzeń pomocniczych i pojazdów transportowych
oraz doposażenie zakładu”). The completion of the investment project is scheduled for the
years 2014 – 2017. Minimum investment expenditure – PLN 12 million, and maximum
expenditure – PLN 18 million.
License No. 260 in the Tarnobrzeska SEZ to realize the project called Development of the
existing plant through the purchase and installation of equipment for scrap treatment and
furnace de-dusting facilities, and purchase or modernization of machines and equipment
required for proper production functioning, including melting and holding furnaces
(“Rozbudowa istniejącego przedsiębiorstwa poprzez: zakup i instalację urządzeń
do uprzydatniania złomów i odpylni na piecach oraz zakup lub modernizację maszyn
i urządzeń niezbędnych do prawidłowego funkcjonowania produkcji w tym pieców
topielnych i ostojowych”). The completion of the investment project is scheduled for the
years 2014 – 2021. Minimum investment expenditure – PLN 12 million, and maximum
expenditure – PLN 18 million.
Resignation of two Members of the Supervisory Board
On 28 August 2014, Mr. Paweł Gieryński and Mr. Paweł Boksa delivered their resignation as
Supervisory Board Members. The provided documents indicated that the resignations will be
effective as of 1 September 2014. The notifications did not include explanation for such decision.
G.
Appointment of new Members of the Supervisory Board
On 27 June 2014, the Company received from ALU HOLDINGS S.a.r.l. a written notification about
appointment of Mr. Marek Kacprowicz as Supervisory Board Member with effect from 1 July 2014.
On 2 September 2014, the Extraordinary Annual General Meeting appointed Mr. Tomasz Pasiewicz
and Mr. Emil Ślązak as Members of the Supervisory Board.
44
H.
Extension of loan agreements for another year
In 2Q 2014, the Alumetal Group extended for another year its agreements with ING Bank Śląski S.A.,
BPH S.A. and Bank Handlowy w Warszawie S.A. concerning short-term bank loans (detailed listing of
loan agreements is presented in point VIII.1.).
I.
Expiry of factoring agreement with Bank BPH S.A.
The factoring agreement with Bank BPH S.A. on non-recourse (full) factoring of Euro- and Polish
zloty-based receivables with a value of PLN 15 million and the validity date of 29 September 2014
expired.
J.
Signing factoring agreement with Bank UniCredit Luxembourg S.A.
A factoring agreement was signed on 15 September 2014 with Bank UniCredit Luxembourg S.A. on
full factoring of Euro-based receivables from one of the clients of the Alumetal Group i.e. at the risk
of this client and with no recourse to the Alumetal Group, and with no limit (limited in practice by the
scale of cooperation with the given client).
K.
Concluding material contracts with the Volkswagen Group
On 17 November 2014, ALUMETAL Poland sp. z o.o. concluded with a company belonging to the
Volkswagen Group another contract for the delivery of aluminium alloys with a value – if calculated
together with the contracts between the Alumetal Group and the entities of the Volkswagen Group
for the period from the date of admittance of the Issuer’s shares to public trading to the date of this
contract - exceeding 10% of sales revenues of the Alumetal Group for the period of the last four
reporting quarters, and amounted to PLN 121,440,655.85 (in words: one hundred twenty one million
four hundred forty thousand six hundred fifty five zloty and eighty five groszy). Detailed information
on the above contracts and on the composition of the Volkswagen Group were included in the
current report No. 19/2014 of ALUMETAL S.A. The contracts referred to above represented
continuation of business relations described by ALUMETAL S.A. in its Share Issue Prospectus.
L.
Agreements between shareholders
During the reporting period, the Company did not receive any information on the agreements
between shareholders that could be material to the business operations of the Alumetal Group.
M. Related party transactions
During the reporting period, neither the Issuer not its subsidiary companies entered into material
related party transactions on the terms and conditions other than the arm’s length basis.
45
6.
A.
Significant events after the reporting date
Increase in the issued capital of ALUMETAL Group Hungary Kft.
On 28 January 2015, ALUMETAL S.A. acting as the sole shareholder of ALUMETAL Group Hungary Kft.,
resolved to increase the issued capital of this entity to the amount of HUF 4,800,000.00 successively
to 31 December 2016. As at the date of the preparation of this Directors’ Report, the paid in capital
of ALUMETAL Group Hungary Kft. amounted to HUF 130,000,000 (PLN 1,756,052).
B.
Concluding material contracts with the Nemak Group
On 2 March 2015, ALUMETAL Poland sp. z o.o. concluded with the Spanish-law based company,
Nemak Exterior S.L. with its registered office in Madrid, Spain, another contract for the delivery of
aluminium alloys with a value – if calculated together with the contracts between the Alumetal
Group and the entities of the Nemak Group for the period from the date of admittance of the
Issuer’s shares to public trading to the date of this contract - exceeding 10% of sales revenues of the
Alumetal Group for the period of the last four reporting quarters, and amounted to PLN 120,006,747
(in words: one hundred twenty million six thousand seven hundred forty seven zloty zero groszy).
The contracts referred to above represented continuation of business relations described by
ALUMETAL S.A. in its Share Issue Prospectus. Detailed information on the above contracts and on the
composition of the Nemak Group were included in the current report No. 4/2015 of ALUMETAL S.A.
C.
Concluding material contracts with the Volkswagen Group
On 5 March 2015, the value of contracts concluded by ALUMETAL Poland sp. z o.o. with the entities
of the Volkswagen Group once again exceeded 10% of sales revenues of the Alumetal Group for the
period of the last four reporting quarters and amounted to PLN 139,285,847.64 (in words: one
hundred thirty nine million two hundred eighty five thousand eight hundred forty seven zloty sixty
four groszy). ALUMETAL S.A. informed about this fact on 5 March 2015 in its current report
No. 5/2015.
D.
Concluding material contracts with the Federal Mogul Group
On 5 March 2015, ALUMETAL Poland sp. z o.o. concluded with the companies belonging to the
Federal Mogul Group contracts for the delivery of aluminium alloys and for the purchase of
aluminium chips, the value of which could exceeded 10% of sales revenues of the Alumetal Group for
the period of the last four reporting quarters with an estimated amount of PLN 206,456,000 (in
words: two hundred six million four hundred fifty six thousand zloty). The contracts referred to
above represented continuation of business relations described by ALUMETAL S.A. in its Share Issue
Prospectus. Detailed information on the above contracts and on the composition of the Federal
Mogul Group were included in the current report No. 6/2015.
46
V.
Realised investments and development work
1.
Information on major research and development achievements
In 2014, the value of investment expenditure incurred for the purchase of property, plant and
equipment and intangible assets in the Alumetal Group was as follows:
Total expenditure
01.01.2014 - 31.12.2014
01.01. 2013 – 31.12.2013
(PLN thousand)
10,778.49
33,529.16
The investment projects carried out in 2014 related to the tasks in the following areas:




investments in the area of metal management,
investments in the area of product development,
investments under the project called Construction of the production plant in Hungary
(“Budowa Zakładu na Węgrzech”),
replacement - retrofitting type investment projects.
The most significant work related to the project called Construction of the production plant in
Hungary, carried out in 2014 were as follows





company incorporation and its legal-accounting servicing,
preliminary agreement for the purchase of a plot of land,
design of the production plant – completed Phase I (concept and plan of land development),
Phase II (construction permit) – in the process,
development of preliminary environmental report,
obtaining public aid (finance) for the construction of production plant in Hungary.
The realised investment expenditure were financed from the own funds of the Alumetal Group, while
the planned investment expenditure will be financed by own funds, Hungarian public aid and by the
investment loan. The Group does not expect any difficulties with financing of its further development
due to, among other things, the following:






current low level of interest debt of the Group,
good, stable operational profitability of the Group,
positive experience as regards participation of banks in financing Group’s development (incl.
with respect to investment loans)
readiness and pro-active approach of the current or potential bank-partners to continue or
commence cooperation with the Group ,
possibility to obtain cash subsidy in the form of prepayments as early as at the stage of
an investment process,
possibility to amend current dividend policy in the future in the event of deteriorated
financial results or material increase in the Company’s debt,
47


capability to release relatively high financial resources from working capital in a relatively
short-period of time by limiting production volumes (low operational gearing ratio),
low effective income tax rate over the period of at least several consecutive years due to
income tax reliefs used.
2.
Structure of main capital deposits or main capital investments made in the Issuer
capital group in the financial year
The main capital investment made by the Alumetal Group in 2014 was incorporation on 11 July 2014
of a Hungarian-law based company, ALUMETAL Group Hungary Kft. with the issued capital at the
reporting date of HUF 53,000,000 (in words: fifty three million Hungarian forints), which is the
equivalent of PLN 707,312 (in words: seven hundred seven thousand three hundred twelve zloty).
2.1. Development directions of the ALUMETAL S.A. Capital Group
The objective of the Group is to build value for the shareholders by increasing sales volume of
Group’s products and maximizing the Group’s profitability with simultaneous maintenance of the
Company’s dividend capacity.
The elements of the strategy of the Group that are to ensure the achievement of the above
objectives cover:
A.
Increase in sales volume of the products of ALUMETAL S.A. Capital Group
The strategic objective of the Group is to realize systematic growth in sales volumes from approx.
127 thousand tons in 2013 to approx. 210 thousand tons in 2018, which translates into expected
increase in the share of the European market of secondary aluminium casting alloys from 5% in 2013
to 7.5% in 2018.
The key activities that are to contribute to the increase in the sales volume of the Group cover:
 higher use of existing production capacities of the three production plants of the Group,
 increase in the efficiency (productivity) of the current production capacities,
 business development through product offer extension,
 increase in sales of products with higher added value,
 development of production capacities, among others, through the commencement of
production in a new production plant in Hungary as of 4Q 2016.
As at the date of the preparation of this Directors’ Report, the real aggregate production capacity of
the three production plants of the Group amount to 165 thousand tons a year. To maximize
utilisation of the existing production capacity at each of the three plants, the Group intends to
continue to intensify collaboration with current clients by increasing volumes of secondary alloys
currently sold to these clients and by profiting from the expected higher demand for secondary
aluminium alloys in the forthcoming years, and [intends] to attract new clients. These activities are to
also ensure seamless utilisation of the production capacity of the newly constructed production plant
in Hungary by securing production and sales orders. At the same time, the Group has systematically
worked, with positive effect, on productivity increase of the operated production lines.
48
In addition, the Group intends to focus on product offer extension and increase in sales volumes of
the products with higher added value. The Group plans to start delivery of aluminium alloys in the
liquid form from the Nowa Sól production plant in the first half of 2015. The Group also plans to
further increase sales of master alloys in the form of waffle plates (wafers). In addition, in the next
years, the Group also plans the investment consisting in increasing production capacities in the area
of production of master alloys, as well as extension of product offer in this segment.
The Group is currently in the process of realization of an investment project consisting in the start up
of a new production plant with a target production capacity of approx. 60 thousand tons through
the greenfield-type investment project in Hungary, which will serve as the platform to extend the
scale of business operations of the Group in the CEE markets, on which the Group has already been
present, and through winning of new markets.
The new business will be based on the technology and experience of the Nowa Sól plant. The project
will be realised in one phase and the commencement of the production is scheduled for 4Q 2016.
The estimated investment expenditure will amount to approx. PLN 120 million, the majority of which
is – according to the plans – scheduled to be incurred in 2016. As at the date of the preparation of
this Directors’ Report, the execution of this project has been carried out in accordance with the
underlying business plan.
B.
Maximization of the profitability of the ALUMETAL S.A. Capital Group
As part of its business strategy, the Group intends to focus on the improvement of its profitability
measured using the ratio of EBITDA earnings per 1 ton of sold goods through the following activities:

development of the preparation system and further optimization of raw materials
management in the production process (metal management) and maximization of metal
yield,
 product offer optimization (e.g. through higher sales of master alloys),
 streamlining unit production cost through the increase of production output of operated
production lines.
As part of metal management development at the Nowa Sól production plant, a project of even
deeper processing of certain scrap metals was implemented to facilitate recovery of useful/valuable
scrap from the wastes from raw materials preparation process. In addition, higher production at the
Nowa Sól production plant will improve the overall Group profitability owing to better
customizability of metal management system operated at the Nowa Sól plant, which is the most
advanced system used by the producers of secondary alloys in Europe. In addition, plans exist to
purchase the equipment necessary for scrap metals treatment so as to extend the range of
purchased metals scrap, which – in turn- will help increase metal yield and reduce input unit cost.
The Group intends to maintain its cost efficiency by optimizing production costs, including the costs
of energy and transport. Positive contribution to maintaining costs efficiency should have further
increase in the production volume, which is expected to reduce the share of fixed costs in the costs
of production. As in prior years, the Group plans to invest in Hungary in relatively large and modern
furnaces with high production capacity and efficiency (with low energy consumption and less
intensive use of labour).
49
2.2. Financing development of the ALUMETAL S.A. Capital Group
Owing to high operating cash flows, the Alumetal Group is able to finance its development from own
financial resources, while being able to simultaneously realize the adopted dividend policy. As
presented in the table listing the financial ratios in point IV.4 of this Directors’ Report, the financial
stability ratio remains at the safe level of approx. 65%, while the debt ratio at approx. 40%. The ratio
of Net debt/EBITDA, which is the most significant ratio from the point of view of loan and credit
agreements, fell in the last 3 years from 1.8 at the end of 2011 to 0.6 at the end of 2014. Given the
fact that in the loan agreements this covenant is set at the level of 3.0, the achieved ratio indicates
that the Group has considerable potential to finance its further development and realize at the same
time the provisions of the adopted dividend policy.
The planned sources for Group development financing are mainly the retained net profits,
investment loan and public aid available to the Group, both in the case of the Hungarian project and
in the case of investments in Polish production plants located in special economic zones (SEZ) under
the already held SEZ licenses. The Group will continue to use current financial surplus, short-term
loans and solutions available under factoring agreements as the source for working capital financing.
50
VI.
Human capital management
1.
Recruitment policy
In 2014, the recruitment policy of the Alumetal Group focused on ensuring the optimum level of
employment appropriate to the execution of business objectives of the Group, and was based on the
two key aspects: internal and external recruitment.
Internal recruitment consisted in vertical or horizontal promotion of employees. Management
promotions (vertical promotions) consisted in promoting employees upwards in the posts hierarchy,
by extending the scope of accountability and increasing teams of subordinated employees of a newly
promoted person. Specialist promotions (horizontal promotion) consisted in developing employee
qualifications, experience and specialist knowledge of the given discipline.
Employee career path assumes employee professional development from relatively simple posts
involving performance of tasks according to the provided instructions through to the posts entailing
higher level of responsibility and self-reliance. In 2014, the Alumetal Group continued with its
external recruitment policy aimed at attracting top class specialists, whose knowledge and
competences, when coupled with the experience of the current employees, will ensure the best
possible realization of business processes of the Group.
1.1. Structure of employment
As at 31 December 2014, the Alumetal Group had 542 employees. Included in this number were 10
temporary employees. In 2014, the employment level raised by 5% compared to the prior year.
Company
31 December 2014
31 December 2013 ***
ALUMETAL S.A.
40
38
495
474
T+S sp. z o.o.
7
6
0
0
542*
518**
Total
* As at 31 December 2014, the Group additionally used services of 10 Temporary Employees
** As at 31 December 20134, the Group additionally used services of 11 Temporary Employees
*** For comparability purposes, data as at 31 December 2013 were presented in the post-reorganization format of the Alumetal Group
51
Employment level at the Alumetal Group companies (persons)
495
500
474
400
300
200
100
40
38
7
6
0
0
0
Alumetal SA
Alumetal Poland
sp. Z o.o.
TS sp. z o.o.
31 December 2014
Employees
Alumetal Group
Hungary Kft.
31 December 2013
31 December 2014
31 December 2013
444*
427**
98
91
542*
518**
Blue-collar employees - 78%
White-collar employees - 22%
Total
* As at 31 December 2014, the Group additionally used services of 10 Temporary Employees
** As at 31 December 20134, the Group additionally used services of 11 Temporary Employees
Level of employment at the Alumetal Group, by blue- and whitecollar employees (persons)
600
500
400
300
200
100
0
31 December 2014
Blue-collar employees
31 December 2013
White-collar employees
52
1.2. Communication
The Group places great emphasis on soft skills development i.e. in the area of communication. The
Group ensured that its internal and external communication is clear, adequate and transparent,
while emphasizing the importance of such values as trust, openness, cooperation and loyalty.
1.3. Professional development and training
The activities in the area of professional development and training concentrated on the
strengthening of employee competences with a view to executing the Group’s strategy and shaping
its organizational culture. Group development depends on work quality and qualifications of its
employees.
The Group takes steps to ensure that professional staff is hired and professional qualifications of the
current employees are developed. Training sessions are conducted by both internal trainers and by
carefully selected external training entities.
Depending on the length of service, occupied position, needs and strategy of the Group and the plans
of individual departments, Group employees participate in:






adaptation training – part of the program is a one-day training during which employees with
longer period of service at the Group share their knowledge on the matters related to the
functioning and working at the Group. The new employee receives material information on
employee-related matters, learns about binding rules and regulations, about used systems
and used basic technologies,
all-Group projects – in the form of, for example, training relating to communication and
client servicing or management skills,
individual specialist training– in the form of, for example, training relating to project or
finance management, or issues resulting from labour law requirements,
computer training – in the form of applications required to perform work in certain
departments (e.g. Microsoft Excel),
language training (English language),
training enhancing qualifications and permissions of blue-collar employees.
1.4. Awards
The human capital policy and practice of the Group were appreciated by an independent
organization. To this end, basic allowances, additional employee benefits, conditions of service
(working conditions), availability of training, employee career development path and management of
Group organizational culture were assessed by this organization.
As a result of this assessment, in 2014 the Group was awarded the prize of Reliable Employer
of Lesser Poland 2014 („Solidny Pracodawca Małopolski 2014”). The promotional competition
Reliable Employer ("Solidny Pracodawca") has been organized for many years and has worked
towards enhancing work satisfaction and bonding employees with their employer. This prestigious
award has been granted in the nationwide and regional categories. The awarded entities strengthen
their image of the reliable employer, exemplify the importance of the policy of investment in human
capital and transformation of this policy into achieved financial results and market position.
53
VII.
Quality, environmental protection and labour hygiene and safety
1.
Quality
Approximately 90% of the production of Alumetal Group is delivered to the automotive industry. The
high quality requirements of this industry determine the necessity for the ongoing enhancement and
improvement of a broadly understood quality of Group products. The confirmation of client qualityrelated expectations materialized in the renewed in 2014 certification of quality management
system, compliant with the ISO/TS 16494:2009 norm in the Kęty and Gorzyce production plants, and
quality certification of the Nowa Sól production plant. High quality of the products of Alumetal Group
was also confirmed by its clients; 13 client-performed audits were carried out in 2014 and all ended
with positive results.
2.
Environmental protection
In November 2014, all production plants of the Alumetal Group successfully completed recertification of the Environmental Protection Management System according to the ISO 14001:2004
norm, which confirmed the concern of the Alumetal Group for natural environment. The conducted
environmental protection activities and implemented improvement plans rooted in the operated
system of environmental protection management result in a consistent improvement of the
environmental conditions both in the production plants and in their surroundings. In the last quarter
of 2014, all production plants of the Group received changed decisions concerning the integrated
permission defined in article 3 point 29) in connection with article 181 section 1 of the Environmental
Protection Act of 27 April 2001, following the most recent amendments to this regulation dated
11 July 2014.
3.
Labour hygiene and safety
In November 2014, all production plants of the Alumetal Group successfully completed recertification of the System of Management of Labour Hygiene and Safety according to the norm
BS OHSAS 18001:2007. The conducted activities under the approved enhancement plans contributed
to better work safety and improved employee working conditions. Programs dedicated to individual
employee groups were systematically implemented during the whole year with a view to further
increasing employee awareness of safety at work. In all production plants, working clothes and
headgear were exchanged for the employees working with liquid metals (the working clothes meet
the norm EN ISO 11612).
In 2014, seven work accidents occurred in the plants of the Alumetal Group, none of a serious
character.
54
VIII. Loans and borrowings, and other financial agreements
1.
Loan and other agreements with banks
Interest-bearing loans and borrowings and liabilities under lease and hirepurchase agreements
31 December 2014
31 December 2013
Limit utilised
Limit utilised
Currency*
Maturity
date
36 000
000.00***
PLN*
23.06.2015
14 887 249.93
21 706 207.16
28 000
000.00****
PLN*
26.06.2015
4 526 519.02
19 532 871.18
21 000 000.00
PLN*
22.05.2015
16 513 273.84
11 361 053.44
9 500
000.00**
EUR*
31.12.2015
7 273 962.35
7 134 491.51
–
43 201 005.14
59 734 623.29
30.06.2016
3 636 956.72
10 701 713.12
46 837 961.86
70 436 336.41
Available limit
Overdraft facility:
Aggregate limit facility for several Group companies at ING
Bank Śląski S.A. with an interest rate based on 1M LIBOR
(USD) + margin, 1M WIBOR (PLN) + margin, 1M EURORIBOR
(EUR) + margin
Aggregate limit facility for several Group companies at BPH
S.A. with an interest rate based on 1M LIBOR (USD) + margin,
1M WIBOR (PLN) + margin, 1M EURORIBOR (EUR) + margin
Aggregate limit facility for several Group companies at Bank
Handlowy w Warszawie S.A. with an interest rate based on
1M LIBOR (USD) + margin, 1M WIBOR (PLN) + margin, 1M
EURORIBOR (EUR) + margin
Short-term portion of the investment loan issued by ING Bank
Śląski S.A. in the amount of EUR 9,500 thousand, with an
interest rate based on 1M WIBOR + margin, 1M EURORIBOR +
margin
Total short-term portion
Long-term portion of the investment loan issued by ING Bank
Śląski S.A. in the amount of EUR 9,500 thousand, with an
interest rate based on 1M WIBOR + margin, 1M EURORIBOR +
margin
Total
–
9 500
000.00**
–
EUR*
– –
–
* the „currency” means solely the currency of the limit and thus may differ from loan currency
** the total limit for the short- and long-term portion of the investment loan is EUR 9,500,000.00
*** as part of the loan agreement, the available limit was formally increased by PLN 3,600,000.00 to the amount of PLN
39,600,000.00 as a mechanism hedging the Bank against fluctuations in the EUR/PLN and USD/PLN exchange rates and
against origination of past due loan liability
**** as part of the loan agreement, the available limit is increased by the limit for financial market transactions by the
amount of PLN 1,400,000.00 to the amount of PLN 29,400,000.00
55
2.
Loans granted
In the reporting period, ALUMETAL S.A. and its subsidiary did not grant any loans, except for the
increase from PLN 15 thousand to PLN 20 thousand of the amount of a short-term loan to the
subsidiary company, ALUMETAL Kęty sp. z o.o., issued in Polish zloty and bearing interest rate of
1M WIBOR. Loan maturity date was set at 31 December 2015.
56
IX.
Contingent assets and contingent liabilities, sureties and guarantees
and off-balance sheet liabilities
1.
Litigation proceedings
As at 31 December 2014, neither the Company nor any of its subsidiary companies was a party to
litigation proceedings with a value equating or exceeding, in whole or in part, 10% of the issued
capital of the Company.
2.
Sureties and guarantees
At the end of the reporting period, ALUMETAL S.A. had a valid guarantee in respect of the investment
loan with a value of PLN 10,910,919.07 issued to the subsidiary, ALUMETAL Poland sp. z o.o.
3.
Contingent liabilities
Based on a contract with the National Fund for Environmental Protection and Water Management
(Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej) on financial compensation under the
operational program Infrastructure and Environment 2007-2013 („Infrastruktura i Środowisko 20072013”) for the execution of the investment project called Construction of a plant for the scrap and
aluminium waste processing and production of casting alloys – Phase I (,,Budowa zakładu przerobu
złomów, odpadów aluminiowych i produkcji stopów odlewniczych – etap I”) with a value of
PLN 20,000,000.00, ALUMETAL Poland sp. z o.o. is required to fulfil contractual obligations
(covenants), including those relating to project durability over the entire term of the project defined
in the contract. The security for the fulfilment of the obligations under project financial
compensation contract (umowa o dofinansowanie projektu) is an in blanco promissory note.
Apart from the contingent liability referred to above, neither the Company nor any of its subsidiary
companies reported other contingent liabilities with a value equating or exceeding, in whole or in
part, 10% of the issued capital of the Company.
57
X.
Financial risk management objectives and policies
The financial risk management objectives and policies cover risk areas listed below:
1.
Interest rate risk
The Alumetal Group is exposed to interest rate risk following utilisation of the financial instruments
used to finance operating activities: short- and long-term loans, factoring services on own receivables
and short-term (overnight) deposits.
The Alumetal Group does not hedge against interest rate risk because the instruments used are, in
the majority of cases, of short-term character. On the other hand, the long-term financial
instruments hedging against interest rate risk are based, to a great extent, on the expectations and
forecasts, which under the specific market circumstances in the analyzed reporting period did not
encourage the use of those instruments, and therefore also long-term hedging instruments were not
used to hedge against interest rate risk.
2. Foreign currency risk
The Alumetal Group is exposed to foreign currency risk in connection with the transactions of current
operations. Such exposure arises from the sale or purchase transactions made in the currencies other
than its measurement currency. The Alumetal Capital Group has widely used the so-called natural
hedge mechanism, as sale transactions in foreign currencies have been largely balanced by purchase
transactions. Nevertheless, as a result of the occasional lack of balance between these two types of
business transactions, foreign currency risk is generated. The Group regularly monitors its long EUR
currency position, and its short USD position, and systematically concludes hedging transactions, in
accordance with its hedge accounting policy and using the accepted types of derivative financial
instruments. In practice, the Group uses mainly forward contracts, and only in the periods of great
volatility of exchange rates, the Group applies the zero-cost option strategies as a tool which is more
flexible than basic forward contracts.
The applied strategy of hedge accounting includes also certain additional elements of natural
hedging mechanism i.e. the fact that the Group uses long- and short-term foreign currency loans and
borrowings, and the fact that a large portion of the PLN-based purchase and sale transactions is
indirectly affected by the EUR/PLN quotations.
The main principle of the Group’s hedge accounting strategy is the policy of not entering into
speculative transactions. The concluded forward contracts serve solely to limit the risk resulting from
operating activities and to stabilize the financial results.
3. Commodity price risk
Selling prices are directly or indirectly related to the quotations on the London Metal Exchange
(“LME”) (Londyńska Giełda Metali). The quotations with the most significant effect are the
quotations of pure aluminium (LME HG) and aluminium alloys (LME AA), while the quotations of
several other metals such as nickel or copper are of lesser importance. The correlation of these
quotations with the prices of goods of the Alumetal Group, although relatively strong, is not full,
58
especially in a short period of time. In addition, the mechanism of natural hedging is applied in this
area as the prices of purchase of raw materials, which account for approx. 85% of the production
costs, are also correlated with the LME quotations, particularly in a long term. For these reasons, the
Group does not use any instruments hedging against fluctuations in the LME’s quotations of raw
materials.
4. Credit risk
The credit risk of the Alumetal Group arises from the concluded trading contracts and the possibility
of negative effects of business partner insolvency, partial non-payment or default payments of the
amounts due. The policy of the Group in this area assumes verification of client financial standing,
monitoring of this standing and the ongoing analysis of timeliness of trade debtor payments through
the proactive approach of debt recovery team. Unreliable clients or clients without good financial
capacity are required to provide additional security to be able to trade on credit terms, or
cooperation with such clients is discontinued. The relatively wide and diversified client portfolio and
very good financial standing of the Group mitigate the risk of credit exposure, despite the fact that
no insurance is taken out for the Group’s receivables.
5. Liquidity risk
The Group is exposed to the risk of possible liquidity problems, mainly in case of default payment or
non-recovery of significant debt balances. The challenge for the Group is also its capacity to ensure
appropriate finance for further development i.e. ensuring the funds required to finance the
investment expenditure or the need for higher working capital due to growing sales. Significant
short-term price increases may also result in a demand for higher working capital balance. If coupled
with materially lower financial results, the Group could suffer from difficulties in securing
appropriate amounts of external borrowings. However, for many years now, the Group has used
multi-currency overdraft facility lines which fully match its financial liquidity requirements. To this
end, the Group has used services of several banks by taking out short- and long-term loans and
borrowings in those banks, and using their factoring services. The above instruments and reported
good financial results cause that despite the Group’s intensive development (bringing high
investment expenditure and higher demand for working capital financing), the risk of the loss of
financial liquidity does not occur.
59
XI.
Risk factors with possible impact on the financial results of the
ALUMETAL S.A. Capital Group
In the opinion of the Management Board of the ALUMETAL S.A., the most significant factors that may
have impact on the financial results of the Group are:
1.
Geopolitical and macroeconomic situation in Europe
The activities of the Group are affected by macroeconomic conditions relating to Polish, German,
Central European and European economy, economic policy of individual governments, tax systems,
GDP, unemployment rate, interest rates, currency exchange rates, inflation rate, consumption levels,
investment expenditure and the amount of budget deficit. Fluctuations in the market prices of
secondary aluminium alloys have direct impact on the prices of Group products and, to a limited
extent, on the margins earned. Market prices of secondary aluminium alloys depend on the supply
and demand as well as on other factors, on which the Group has no or limited influence, such as
general macroeconomic conditions, situation in the industry sectors that are the key consumers of
secondary aluminium alloys, prices of original aluminium and prices of aluminium scrap.
Deterioration of general economic conditions in Europe, and especially in Poland, Germany or in the
Central Europe may have adverse impact on the activities, financial position, financial results or
business perspectives of the Alumetal Group.
The indirect impact on the results of the Alumetal Group may also be that of the geopolitical
situation.
2.
Situation of automotive industry
Group structure of consumers of secondary aluminium casting alloys is strongly focused on the
automotive industry. In consequence, business activities of the Group are sensitive to trend changes
in the automotive industry. The economic situation of automotive industry depends on general
economic conditions, including on the level of consumer appetite and expenditure for motor
vehicles. During economic recession or during the periods of low economic growth, it is the
automotive industry that usually suffers from shrinking business. In the period from 2007 to the mid
of 2013, the EU saw a declining trend in motor vehicles production and sale. Despite considerable
recovery of the automotive industry since the mid of 2013, one may not, however, exclude the
possibility of raising trend reversal, which could have unfavourable impact on demand volumes or
margin levels realized by manufacturers of secondary aluminium casting alloys.
3.
Relation between purchase prices of raw materials and alloy selling prices
In principle, the prices of secondary aluminium casting alloys which are the key product of the Group
are strongly related to the long-term quotations of aluminium (LME HG) or aluminium alloys (LME
AA) on the London Metal Exchange. However, in the short-term this correlation may be subject to
fluctuations and thus may not fully reflect the long-term trends.
The key item of operating expenses of the Group is the cost of purchase of raw materials. The main
raw material used in the production of Group’s products is aluminium scrap. In addition, the Group
uses pure raw materials, inclusive of non-alloyed aluminium for recasting in the form of ingots,
cathode nickel, manganese, titanium and magnesium. Scrap and pure raw materials account for the
largest part of the cost of production (85-90%).
60
The prices of secondary aluminium casting alloys, aluminium scrap and of other raw materials used
by the Group in the production process are subject to material fluctuations and depend on a number
of factors outside the control of the Alumetal Group, including on general economic conditions,
supply and demand for metals as a raw material and for semi-finished goods made of those raw
materials on the European or global markets. Increase in prices of aluminium scrap may not be
accompanied by the corresponding increase in prices of alloys produced by the Alumetal Group,
which – in turn – may translate into lower margins realized on sold goods and into deteriorated
financial results of the Group. Similar risk may take place in the circumstances of reduced prices of
alloys not accompanied by the corresponding reduction in the prices of aluminium scrap.
4.
Limited availability of raw materials scrap in Europe
The main raw material used in the process of production is aluminium scrap (Al scrap). The Group
purchases aluminium scrap mainly from the entities trading in aluminium scrap, trade intermediaries
and from producers of aluminium goods (as post-production waste). Despite the fact that the Group
uses diversified database of external suppliers of aluminium scrap, one may not completely exclude
the possibility of the occurrence of a limited availability of this raw material in the future. Al scrap
availability and prices depend on the number of factors outside the control of the Alumetal Group,
including on the amount of Al scrap available on the market, demand for the Al scrap by secondary
aluminium producers, volume of exports of metals scrap from Europe to other continents, especially
to Asia, differences in prices quoted in Europe and in other continents, or on unfavourable weather
conditions hindering scrap collection. Lower availability of scrap metals on the European market,
higher exports of scrap metals from Europe to other continents or higher regional demand may
result in a limited availability or higher prices of aluminium scrap.
5.
Higher competition on the market of secondary aluminium alloys
Emergence of new entities or stronger market position of present competitors - secondary
aluminium alloys producers, or a potential increase of production capacity or development plans of
domestic or international competitors of the Group may result in higher market competition. It
cannot be certain that in the future, competitors will not intensify development of their business and
will not conduct aggressive product and price policy against present or potential suppliers and
customers of the Alumetal Group.
In accordance with the information published by Spanish Befesa, a new production plant with
a declared production capacity of 90,000 tons per year commenced production in Germany in
December 2014.
The above factors may have considerable unfavourable impact on the financial results of the
Alumetal Group in the future.
61
6.
Financial-tax matters
Among the financial-tax matters with a direct impact on Group results, known at the date of the
preparation of this Directors’ Report are the following:


fulfilment by CIMOS d.d. of its declaration to pay 30% of liabilities towards the Group in the
form of 8 half-yearly instalments, starting from October 2015,
effective execution of the project of Construction of a new production plant in Hungary
(„Budowa nowego zakładu produkcyjnego na Węgrzech”), which will facilitate utilisaton of
Hungarian public aid in the amount of up to 35% of the incurred qualified expenditure, which
– in turn – will help maintain low effective income tax rate in the long-term perspective,
despite further expansion of business.
7.
Other accidental, unfavourable one-of events
Other accidental, unfavourable one-off events may also have material unfavourable impact on the
financial results of the Alumetal Group.
XII.
Internal control system and risk management
The Management Board of the parent is responsible for the internal control system of the entire
Group and for its efficiency during the process of preparation of periodic reports, separate and
consolidated accounts, prepared and published in accordance with the Decree of the Minister of
Finance dated 19 February 2009 on current and periodic information published by issuers of
securities and on the conditions for recognition as equivalent the information required by laws of
non-EU member states (the “Decree on current and periodic information”).
The supervision function over financial statements and periodic reports preparation process is
carried out mainly by the finance division of the Group i.e. by the Financial Director of ALUMETAL
S.A. – Member of the Management Board (CFO).
The main method to ensure efficiency of the internal control and risk management systems with
respect to the process of separate and consolidated accounts preparation is that of ensuring
adequacy, truth and fairness, and correctness of the financial information disclosed in periodic
reports and in financial accounts, and that of ensuring confidential information safety.
The internal control and risk management systems system operated by the Group in the process of
financial reporting were created mainly owing to the following:


operating a Group-wide, authorised and uniform (consistent) accounting policy,
clear segregation of duties, and well-defined work organization and supervision in the
financial reporting process, as provided in the procedures, instructions and regulations, and
included in the following documents:
- Warehouse instructions,
- Instructions on hard close and financial statements close process (FSCP),
- Instructions on registration of data in the integrated IT management system,
- Physical count instructions,
- Regulations on circularization of confidential information,
- Procedures for preparation of periodic reports,
- Internal ESPI regulations,
62





application of integrated IT management system which considerably limits the risk of data
inconsistency and irregularity (minimization of technical-type risk),
results and control reports analysis by Group’s internal specialists at individual stages of
reports preparation (minimization of substantial-type risk),
financial results and financial ratios analysis at each level of business by appropriate control
units, at the level of a subsidiary and the parent,
regular cooperation with financial-accounting, tax and legal advisors to ensure correct
(consistent with binding accounting policies and legal regulations) recognition and disclosure
of individual business operations and business events in periodic reports and annual
accounts,
audit of financial statements by a certified auditor.
The Supervisory Board has the capacity to appoint certified auditors of the Company, and in fulfilling
the tasks of the audit committee, the Supervisory Board:





supervises internal organizational unit responsible for internal audit,
monitors financial reporting processes,
monitors efficiency of internal control, internal audit and risk management systems,
oversees performance of financial audit activities,
monitors independence of a certified auditor and the entity authorised to audit financial
statements, including in the event of rendering to the Company services other than attest
services.
XIII. Standpoint of the Management as regards forecast results of the
ALUMETAL S.A. Capital Group
The Management Board of the Company has decided not to publish any forecast results of the
Company or of the entire capital group.
______________
Szymon Adamczyk
President of the Management Board
_________________
Krzysztof Błasiak
Vice-president of the Management Board
_________________
Przemysław Grzybek
Board Member
63

Directors` Report on activities of the ALUMETAL S.A. Capital Group

Transcription

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