Mobarakeh Steel Company Annual Report (2014
Transcription
Mobarakeh Steel Company Annual Report (2014
In the name of God P roduced by: T h e C o rp o ra te P l anni ng and Investment D epartment i n C ooperati on w i th th e Publ i c R el ati ons D epartment Table of Contents Financial Highlights ..................................................................................................................................5 Message of the Managing Director ............................................................................................................6 Board of Directors ................................................................................................................................7 Report of the Board of Directors ................................................................................................................8 Senior Managers ......................................................................................................................................9 Our Capital ...........................................................................................................................................10 Our Shareholders ..................................................................................................................................11 Organizational Chart ...............................................................................................................................12 A Glance at the Global Steel Production Performance ............................................................................14 Introducing Mobarakeh Steel Company (MSC) ...............................................................................15 Profile .....................................................................................................................................................16 Mission ...................................................................................................................................................16 Vision .....................................................................................................................................................16 Organizational Values ............................................................................................................................16 Performance ........................................................................................................................................19 Production Performance ..........................................................................................................................20 Exports ................................................................................................................................................... 23 Quality Control ...................................................................................................................................... 24 Expansion Projects ................................................................................................................................26 Management Information System ...........................................................................................................29 Technology .............................................................................................................................................30 Human Resources ..................................................................................................................................31 Safety & Occupational Health ..............................................................................................................32 Corporate Social Responsibilities & Environmental Concerns ...............................................................34 Club History ............................................................................................................................................38 Organizational Excellence .......................................................................................................................40 MSC Excellence Road Map ...................................................................................................................41 Certificates & Awards ............................................................................................................................42 Financial Performance ............................................................................................................................45 Financial Ratios .....................................................................................................................................45 Sales Performance.................................................................................................................................47 Shares Performance ..............................................................................................................................48 Risk Management ..................................................................................................................................48 Investments ............................................................................................................................................49 Financial Statements ...........................................................................................................................51 Financial Highlights Net Sales Long-term Investments million IRR million IRR 105،000،000 95،000،000 85،000،000 75،000،000 65،000،000 55،000،000 45،000،000 35،000،000 25،000،000 15،000،000 5،000،000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2013-2014 2013-2014 2014-2015 Gross Profit Capital million IRR million IRR 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2014-2015 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 2013-2014 2014-2015 2013-2014 Financial Dept 2014-2015 Total Assets million IRR million IRR 180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2013-2014 2014-2015 2013-2014 The Iranian fiscal year ends on 20 March. The rate of exchange was $1 / IRR27,994 at the end of the period. 2014-2015 Managing Director’s Statement Dear shareholders: I am delighted to present the annual report and financial statements of Mobarakeh Steel Company (MSC) for fiscal year ended in March 20th, 2015. During the reporting fiscal year, Iran’s economy experienced relative calm and stability, partly due to some external factors. The government was successful in bringing inflation under control and there was also a certain degree of success in controlling liquidity. The oil sector, which is the main source of Iran’s hard currency earnings, enjoyed relative growth. However, in spite of the growing signs of recovery, recession is not yet over and the sanctions against Iran remained enforced. Yet, despite such economic challenges, I am pleased to announce that MSC has performed exceptionally well during the reporting fiscal year. Although our net profits decreased from IRR30,887 billion in 201314 to IRR23,760 billion in the following year due to weak steel market demand, however, sales volume experienced an increase of 2.6% reaching 5.8 million tons and our sales revenues rose from IRR97,278 billion in 2013-14, to IRR101,999 billion during the following period. Exports also enjoyed a staggering rise of 45% in comparison with the previous year, reaching 1.48 million tons during the reporting fiscal year. These are only some indicators that clearly reflect upon our strong and healthy performance during the reporting fiscal year. Being able to demonstrate such strong performance in light of the challenges imposed by the ongoing recession and the sanctions enforced against Iran, is arguably a major accomplishment. Thanks to our profound knowledge of the domestic market, our sound long-term strategies as well as our capability to adapt to turbulent economic developments, we have been able to overcome the aforementioned challenges. I have no doubt that once the sanctions are lifted in the near future, we shall be able to demonstrate an even healthier performance. To conclude, I would like to take this opportunity to thank our valued customers and our shareholders for their faith in our abilities. And last but not least, I shall also thank my dedicated and hardworking colleagues who support me in achieving company goals. Dr. Bahram Sobhani Annual Report 2014-2015 7 Board of Directors Dr.Mehdi Karbasian Chairman Representing Yazd Province Investment Company Mr. Hamidreza Azimiyan Board Member Representing Kerman Province Investment Company Dr. Bahram Sobhani Deputy Chairman & Managing Director Representing IMIDRO Mr. Mohammadreza Ayatollahi Board Member Representing Sadr Tamin Investment Company Dr. Gholam Hossein Taghi Nattaj Malek Shah Board Member Representing Mehr-e Eghtesad-e Iranian Investment Company 8 Mobarakeh Steel Company Report of the Board of Directors During the reporting fiscal period, by adopting combined strategies, effectively managing its expenses, implementing improvement projects, utilizing a portion of the expansion projects, the Mobarakeh Steel Company was able to successfully sustain its position within the domestic and global markets. Some of our important achievements during 2014-15 are as follows: • Sustaining our domestic market share. • Boosting crude steel production levels by 4% in comparison with the previous year. • Increasing sales revenues by 9.4% in comparison with MSC’s plans and by 11% in compared to the previous year. • Increasing the production volume of special and high quality products by 42%. • Exporting approximately 1.574 million tons of steel – a 45% boost in comparison with the previous year. • Achieving consecutive records within all production lines and in product transportation. • Increasing pellet production by 1%, sponge iron production by 9%, slab production by 2%, hot coil production by 3% and cold coil production by 7% compared to the prior year. • Reducing energy consumption levels of electric arc furnaces by 600 kilo watts per one ton of melt. • Reducing water consumption according to plan and in comparison with the consumption levels in the previous year. • Transporting over 11.2 million tons of iron ore and pellets, demonstrating a 17% increase in comparison with the 2013-14 period. • Improving employee the Quality of Working Life (QWL) and job satisfaction levels from 63.2% to 69.2%. • Reducing accident repetition instances from 2.966% to 1.191%. • Reducing accident severity from 0.077 to 0.012. • Launching operations on furnaces 2, 7 while continuing operation on furnace 8 for the purpose of expanding the under roof capacity to 7.2 million tons/annum. • Completing operations on launching the quality steel production project (RH-TOP Unit). • Completing operations on Module B of Shahid Kharrazi Direct Reduction Unit. • Launching car dumper 2. • Launching several new projects including energy and fluids expansion projects such as the Saba Man-made Lake, wastewater treatment facilities as well as expansion of the power network within the MSC and Saba Steel sites. • Launching an under roof 110 ton crane. • Launching LF6. • Finalizing the improvement projects of furnaces 2 and 7 in the Steelmaking Unit. • Launching the briquette making at the Direct Reduction Unit. • Constructing a dumping area for the Stacking & Reclaiming Unit. • Replacing the instrumentation systems of furnaces 1 and 2 with an emphasis on localization. • Adjusting sheet lines 3 and 4 at the Cold Rolling Unit. • Obtaining the main requirements of equipment, parts and raw material, etc.) in spite of the severe international sanctions enforced against Iran. • Applying engineering processes in order to localise the manufacturing of parts. • Obtaining approximately 75% of the required spare parts and machinery via domestic suppliers and manufacturers as a step towards localisation. • Developing technological infrastructure and integrated information system IS-SUITE by 83% • Designing and manufacturing the special S315MC, HE360D and SPFC390 steels to be used as strengthening parts at the auto industry. • Designing and manufacturing Grade DC05 used for vehicle body parts. • Designing and manufacturing Grade S500MC used for manufacturing trailer chacies used by Bahman Group. • Designing and manufacturing Grade SAE1030 steels applied for special purposes. • Designing and manufacturing Grade TPC200 high enduring cold rolled sheets used by the building construction industry. • Registering a capital increase by 39% from IRR36,000 billion to IRR50,000 billion. Annual Report 2014-2015 9 • Obtaining the Asian Superior Knowledge Organizations’ Award (MAKE) during the 1390 (2011-12) - 1392 (2013-14) periods. • Cooperating with over 90 scientific and research societies both on provincial and national levels. • Creating and maintaining 1,600 square meters of green space by growing low water consuming vegetation. • Transferring the technical know-how for manufacturing 1,172 thousand tons of slab to Hormozgan Steel Company. Senior Managers F. Arzani Technology Deputy M. Arbabzadeh Operation Deputy A. H. Naderi Economic & Finance Deputy M. Nikfar Human Resources & Organizing Deputy M. Tavalaiyan Purchasing Deputy M. Akbari Sales & Marketing Deputy A.Saeedbakhsh Projects Execution Deputy 10 Mobarakeh Steel Company Our Capital Capital Increase Trend 60,000,000 40,000,000 20,000,000 Feb 2015 Jan 2014 Jun 2011 Feb 2006 Jun 2005 May 2005 0 Jan 2003 The following line chart demonstrates this company’s capital increases since 2001. million IRR Apr 2001 The capital of Mobarakeh Steel Company (MSC) was initially only IRR10 million, yet the mentioned capital has increased on several occasions since that time, reflecting upon the growth of this company over the years. The capital of MSC, currently stands at IRR50,000,000 million. Annual Report 2014-2015 11 Our Shareholders The MSC is mainly owned by large corporations with a strong financial backing. The following pie chart demonstrates our shareholder composition. Provincial Investment Co.: 30.19% IMIDRO: 17.20% Mehr Eghtesad Iranian Investment Co.: 13.66% Social Security Investment Co. (Public J.S): 10.21% Bank Refah Kargaran: 4.33% Bank Tejarat: 2.79% Goharan Omid Development Management Co.: 2.54% Banks’ Personnel Pension Fund: 2.18% Villagers Social Insurance Fund Institute: 1.79% Civil Pension Fund: 1.69% Personnel Preferential Shares: 1.53% Social Security Organization: 0.80% Other Shareholders: 11.09% 12 Mobarakeh Steel Company Organizational Chart Annual Report 2014-2015 13 14 Mobarakeh Steel Company A Glance at the Global Steel Production Performance The following chart reflects upon the global steel production levels since 2005. Global Steel Production million tons 2,000 1,500 1,000 500 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 0 Note: Global crude steel production reached 1,637 million tons in 2014, of which Iran’s share was 14.3 million tons. The following pie chart demonstrates the production share of major crude steel manufacturers within the globe. Countries’ Quota from Crude Steel Production in 2014-15 China: 50% Japan: 7% India: 5% South Korea: 4% European Union: 10% Africa: 1% America Continent: 14% Iran: 1% Middle East excluding Iran: 1% CIS: 7% Introducing Mobarakeh Steel Company (MSC) 16 Mobarakeh Steel Company Profile Mission Historical Background Esfahan’s Mobarakeh Steel Company which is located in the historic city of Esfahan, produces all kinds of flat steel products ranging in thickness from 0.18mm to 16mm. Its annual capacity is 5 million tons of steel products. This complex has been utilized in 1993 with the charter capital of IRR10 million and currently with a 50,000 billion Rial capital and 14,746 employees, it is one of the most powerful industrial units of the Country. The Italimpianti Company has carried out the initial design of the Complex. Playing a pivotal role in the Iranian industrial economic and social development upgrading the steelmaking technology as a world class organization. The production of hot rolled products in 1386 (2007-08) was over 5 million tons. This achievement was due to the increase in the ability of the personnel in operating the machinery, as well as precise planning and on time logistics. The production of cold rolled products in 1386 (2007-08) was approximately 1.5 million tons. This means that not only supplying the domestic requirements, but also pave the way for exports or supplying the downstream requirements of this product Currently, the Company products are as follows: hot rolled products, cold rolled products, coated products such as; galvanized, tinned and pre-painted products. Pioneering in the Iranian steel industry by maintaining a minimum 45% share in the domestic steel production output, as an organization with excellence in economic production, quality, technology, indigenization, and continious presence in the world market. Following achieving the nominal production levels, the MSC decided to further increase production its output in order to answer to the ever increasing domestic and international market demands. This was to be achieved by optimising the use of existing machinery and equipment and implementing expansion projects which were financed by sales revenues and financial facilities. The first phase of expansion projects commenced in 1385 (200607) following the merger of the SABA CSP and the MSC. This increased the company’s nominal production levels to 4.9 million tons/annum and by the implementation of several other expansion projects such as: • Phase 1 Under Roof Expansion Project • Phase 2 Under Roof Expansion Project (Shahid Kharrazi) • Saba Steel Expansion Project • Hormozgan Steel Company production levels Once the aforementioned expansion projects are implemented, MSC is expected to reach the capacity of 10.5 million tons/annum by 1394 (2015-16). Vision Organizational Values At Mobarakeh Steel Company, our main values include: 1) Islamic and humane values. 2) Safeguarding the interests of our colleagues, customers and other beneficiaries. 3) Carrying out safe, high quality and on time work. 4) Continuous excellence and adjusting the consumption model. 5) Encouraging earning and innovation, organisational participation as well as teamwork. Performance 20 Mobarakeh Steel Company Production Performance During the reporting fiscal period, we manufactured 5,845 thousand tons of finished products. The following bar chart provides details of our production performance in the past two years: Production Thousand Tons 4500 4000 2014-15 2013-14 3500 3000 2500 2000 1500 1000 500 0 Hot Products (including saba) Cold Products Coated Products Other Products Annual Report 2014-2015 21 Products Flow Diagram in 2014-15 All figures are in thousand tons 22 Mobarakeh Steel Company Annual Report 2014-2015 23 Exports Mobarakeh Steel Company began to export its products from the very beginning of the commencement of its operations. Furthermore, while penetrating the international markets, the MSC aims to acquire its required hard currency for financing our expansion projects and the purchasing of spare parts and machinery, from export revenues. The following line chart demonstrates MSC’s export performance during the reported period: 1,475 Exports 2014-15 2013-14 612 2012-13 523 2011-12 2010-11 2009-10 2008-09 2007-08 314 405 658 738 1,019 thousand tons Note: During the reporting fiscal period the MSC exports increased by staggering 45% in comparison with the previous year. The following list outlines the countries which have so far received our products: • Belgium • France • Spain Georgia • • Italy Armenia• • Iraq Jordan • • Kuwait Qatar • • UAE • Oman Saudi Arabia • 24 Mobarakeh Steel Company Quality Control Products Quality Control In addition to the inspection of the products produced by the complex and analytical report for various areas of production, inspection of scrap iron inflow to the complex, participation in determination of acceptance range for raw material required by the iron production, etc. The significant activities of the quality control in 2007/08 were as follows: 1. Preparation of procedures, training and participation in commissioning the mechanized systems in steel production and continuous rolling area 2. Use of mechanized system in steel production and continuous rolling area 3. Systematic transfer of information from the hot rolling quality control monitoring to the through-process 4. Cooperation and coordination in production of API special products, DQ quality galvanized sheets and other special products 5. Preparation and compilation of complete atlas of acid wash products defects 6. Implementation and use of administration automation system in quality control units Annual Report 2014-2015 25 Achievements Some of our achievements so far in reference to product quality include: • Obtaining the first rank in the National Productivity & Organizational Excellence Simin Award as well as the first rank in the National Quality Award for the galvanized products; • Obtaining the ISO14001:2004 Environmental Management System Certificate from the DNV Company for the Saba Steel Making and Continuous Rolling Units; • Organizing successful internal and external audits on the OHSAS 18001:2006, ISO114001:2004, ISO9001:2008, ISO10015 Quality Management and Professional Hygiene and Environmental Certificates without any significant discrepancies as well as renewing the said certificates for another year and for the very first time, obtaining the ISO14001:2004 Environmental Management Certificate for Saba Steel Making and Continuous Rolling Units; • Implementing a domestic customer oriented system which focuses on active customer accountability processes, has improved the management of accountability toward domestic customers. This system has mechanized the process of customer identification and definition of 4,050 indexes within 150 units/process and manages customer satisfaction; • Obtaining the first rank in the National Productivity & Organizational Excellence Simin Award for the eighth consecutive year; • Obtaining the Two Star Eshtehard Award for the galvanized products. 26 Mobarakeh Steel Company Expansion Projects Annual Report 2014-2015 27 Objectives In order to respond to its rapidly developing industries and to the ever increasing domestic demand for steel products, Iran needs to expand its steel production output. Expansion Projects The MSC has a number of expansion projects which should ultimately help this company reach the aforementioned objectives. The main expansion projects of MSC are as follows: Based on MSC’s integrated plan for 2025, company expansions shall occur within two phase. Production targets of 12.5 million tons/ annum shall be reached in the first phase and 18 million tons/annum in the second phase. Steel Making Expansion Project Once completed this project should increase the current melt production by 1.8 million tons/ annum. Hence, production capacity of moulten steel shall reach 7.2 million tons/annum. Hence, as Iran’s largest producer of flat steel products, the MSC’s main objective for investing in a number of expansion projects is to contribute toward government’s plans for boosting the Country’s steel production output. Other objectives for engaging into the above expansion projects include: In short, this project aims to: • Increasing profitability • Implementing the strategies of the Ministry of Mines & Industry • Boosting our compatibility within the domestic and international markets • Increasing Iran’s market share of final products • Optimization of our potentials • Increasing product variety • Increasing liquidity • Increase production capacity • Improve product quality by constructing a degassing station • Create added value in steel products • Assert a stronger market presence due to offering better quality products • Take advantage of the existing infrastructure Energy & Fluids Project The main objective of this project includes providing services to the main expansion projects of the MSC. These services are gas supply, oxygen production, mechanization of transportation systems, electrical power network, fluids supply network etc. SABA Steel Making & Continuous Rolling Expansion Project This project is expected to increase the current production capacity of the SABA Steel Making Unit by an additional 900 thousand tons/annum. Hence, total production capacity should reach 1.6 million tons/annum. This project aims to: • Improve product quality and production quantity • Assert a stronger market presence • Complete the sheet production process by using the continious rolling method 28 Mobarakeh Steel Company Sangan Expansion Project This project has a 5 million ton/annum capacity and includes pelletizing and concentrate units. This project also aims to complete the current production chain. Sefid Dasht Steel Making Project Located 70 km from the town of Mobarakeh, this project which is to be implemented via MSC, shall have an annual capacity of 800 thosand tons. The main objective of this project is to boost production capacity of crude steel within two groups of MSC, which currently has a 65% stake in this project. Investing in Novin Electrode Ardekan Company This plant which is currently under construction, is to supply Iranian steel manufacturers, shall manufacture graphite electrode. Its capaity is to reach 30 thousand tons/annum and has the potential of further expansion, reaching a 45 thousand tons/annum capacity. Future Expansion Projects •Constructing a Hot Rolling Unit (in MSC) •Expanding Hormozgan Steel Company capacity from 1.5 million tons/annum to 3 million tons/ annum. •Constructing a Peletizing Unit in Hormozgan Steel Company Annual Report 2014-2015 29 Management Information System At Mobarakeh Steel Company, Management Information System (MIS) was introduced from the very beginning at the design stage and along with the installation of industrial equipment. MIS covers main company processes such as sales, product design, production operations and planning, laboratories, warehousing, product delivery as well as support processes such as product management and purchasing accounting, finance, human resources, maintenance and repair, technical control and management systems. The sheer dependency of the main and support processes of the Company on MIS, has emphasized the vital importance of such systems and the key role they play on the operation of the organization in general. These systems which are founded upon a reliable and secure infrastructure which includes, the computer centre and hardware, are at the disposal of the users. The general specifications of MSC’s MIS are stated below: • • • • • • • Integration Knowledge based Online Accessibility Reliability Full coverage of company processes Security on difference layers During the past decade, MIS has place on high on its agenda upgrading and expanding its information system infrastructure both in terms of hardware and software. Some such measures include: 1. Expanding & upgrading information systems: here, the old systems are redesigned and having taken advantage of the latest technologies, information systems are designed to cover previously nonexistent processes such as: customer relations management, supplier relations management, management support systems (including strategic, process and knowledge managements, etc.). 2. Developing IT infrastructure: here, the hardware systems including the mainframe and data centre are upgraded. 3. Expanding integrated network: this network, which is accessible to all MSC users, has been designed in accordance with the latest technical design standards. 4. Installing management reporting infrastructure: having adopted OLAP and Data Warehouse, this system enables the user to analyze data and provide analytical and management reports. 5. Installing electronic organization software: this software has been designed and installed in response to correspondence requirements. This system is capable of supporting forms and processes. 6. Installing information security management system: this system which conforms to ISO27001 has been installed, in order to ensure of data security and integrity. Processes such as risk management, IT assets, continuous business management, user accessibility management, etc. are also covered by this system. Achievements Main achievements during the reporting financial period include: 1. Developing integrated IT systems in 70 projects in the numerous fields such as product realization, production planning and control, sales and customer management, investments and finance, technology and development, strategy and organizational transition, corporate social responsibilities, as well as information technology. 2. Installing modern human resource, purchasing and supplier management systems. 3. Fully utilizing the Data Centre. 4. Expanding the IT infrastructure in Oracle for the purpose of upgrading the integrated IT systems. 5. Developing the ESB for the purpose of supporting modern system networks with the existing data infrastructure. 6. Expanding the network infrastructure and its related services. Our Future Plans Some of our plans for the future include: 1. Completing the IT systems infrastructure and installing new systems within all process sectors. 2. Designing, developing and installing the Oracle BPMS infrastructure in order to support the processing systems. 3. Expanding the MPLS network in order to support external communications. 4. Installing an IT services management system based on ITIL. 5. Expanding the existing data centre in order to boost its processing and storage capabilities. 6. Carrying out research on introducing a support site. 7. Designing and installing a process terminal and responding to SOC. 8. Designing and introducing a network operation centre (NOC) 30 Mobarakeh Steel Company Technology Current Technologies Applied by the MSC The MSC currently uses the direct reduction route (Midrex) and electric arc furnaces, continuous casting and converting into hot and cold rolled products, galvanized, pre-painted and tinned sheets through using iron ore. in management and upgrading technology, we have placed the Integrated Technology management System on our agenda and have developed our Technology Management Model, within the stages of identification, selection, launch, protection and learning. Initial Technology Suppliers Italimpianti, Kobe Steel, Ilva and other European companies along with Iran Engineering International Company (IRITEC) and the companies and contractors which produce construction equipment and metal skeletons and install internal equipment, are among the companies that provide the MSC with its supply requirements. Some of the main measures taken during the reporting period in reference with upgrading existing technologies include: The Production Lines The production lines of flat steel products including raw material storage yard, lime calcinations plant, direct reduction plant, steel making treatment lines (VOD-DH) continuous casting, slab finishing, CSP (Saba), hot rolling mill, hot finishing mill, pickling line, galvanizing lines, painting, and tinning line, all take advantage of the above technology and suppliers. Strategies Adopted & Measures taken Regarding the Application & Upgrading Technology At Mobarakeh Steel Company, we take advantage of the latest, up-to-date technologies in order to remain an agile organization and to retain our market share in the increasing competitive global and domestic steel markets. Thus, technology is used as a means to reduce production time span, further optimise personnel performance, improve product quality, reduce overhead costs, achieve longer machinery life span, and optimise energy consumption as well as market flexibility. In order to identify the best technologies to serve the above-mentioned purposes we take advantage of various methods such as Technology Trend, consulting, self-declaration of manufacturers, visiting specialized exhibitions, core research, etc. In selecting new technologies, we assess the economic and technical impacts of any given technology on our projects. A particular technology is only selected if it is found to be useful in upgrading and improving the statuesque. In addition, in order to improve our performance • Launching the de-sulfurising system at the melt section of the Steelmaking Unit. • Launching a RH-TOP station at the Steelmaking Unit, in order to manufacture high quality steels. • Establishing the cold slag processing system and molten slag processing system within the Steelmaking Unit. • Expanding and upgrading the technology and IT infrastructure by replacing the Adabas and Natural infrastructure with Oracle. • Applying virtual technologies at the Data Centre in order to optimise the use of hardware and software. • Upgrading MSC’s network and internet security. • Launching ladle furnace 3. • Automating car dumper 2. • Installing new thermal recuperates in order to store more energy within mega modules. • Installing a visual sizing system upon the discs as a means to improve the current sizing system. • Installing a grinding machine in order to enhance the quality of sheets. • Replacing the H16 Hydraulic Coiler System with the Immolation System as a means to improve equipment performance. • Installing the Coating Gage which is a sheet thickness measuring system within the Galvanize Unit. • Upgrading the Pelletizing Automation from S5 to PCS7, in order to enhance process control and to further improve quality. • Using Lance KT on the furnace bodies to inject oxygen in order to improve melt quality. Annual Report 2014-2015 31 Human Resources At Mobarakeh Steel Company, we consider our human resources as our most important of assets. Hence, we pay a special attention in the selection of suitable staff with the right qualifications. The following pie chart demonstrates the composition of our personnel by academic background. 32 Mobarakeh Steel Company Education Levels of Personnel Ph.D & Masters Degree: 166 Below High School Diploma 3,637 Technician: 949 High School Diploma: 8,792 Bachelors Degree: 1,389 Training In order to ensure human resource development, we constantly invest on the training of our staff. This helps enhance their existing knowledge and to keep them up-todate with the latest developments in their specialized fields of activity, which ultimately boosts organizational productivity. Hence, during the reporting period alone, we provided 1,019,836 man/hours of training to our staff. Other Human Resource Related Measures taken during the Reported Period Some of the main measures taken by this company in reference with human resource development and productivity during the previous year include: • Planning and implementing long-term travelling programs of the employees. • Organising a commendation ceremony of the retired employees of the MSC. • Establishing a sports affairs research committee for the purpose of improving the health of the employees by ingraining sports among the them and making sports related affairs an matter. • Implementing a sports requirement measurement of the employees and rendering applicable solutions. • Signing a contract with sport centres within the province. • Organising sports tournaments among employees. Safety & Occupational Health Safety At Mobarakeh Steel Company we aim to safeguard our personnel’s health against illnesses in general and work-related accidents and we believe that this objective can only be achieved by promoting a safety culture, where there is an enhanced awareness safety procedure among employees, where compliance to safety regulations becomes a part of their everyday lives and where the organization is able Annual Report 2014-2015 33 to rapidly and effectively respond to emergency situations. The MSC’s Safety & Firefighting Unit aims to carry out its duty towards enhancing personnel safety by implementing four main approaches: 1. Safety and risk management: here, the OHSAS 18001 Safety Management & Professional Hygiene System, where all potential hazards and dangers at the workplace are identified and assessed and safety inspections on event evaluations, drafting of safety instructions, trainings and responding to emergencies, personal safety gear, auditing and assessing employee safety performance is carried out. Furthermore, in order to assist the contractors improve their safety performance; they are informed of and are required to comply MSC’s HSE Plan prior to their work commencement. They are then audited every three months. 2. Event management: this approach entails accident registration and analysis, were all accidents are registered and analysed in order to prevent their reoccurrence. 3. Rapid emergency response: all production units are equipped with automatic fire alarm and fire extinguishing systems. 4. Training, improving safety awareness and promoting a safety culture: in this context, a safety training committee has been established. This committee is responsible for creating an employee safety profile. Furthermore, in order to promote a safety culture, numerous training sessions seminars and meetings are organized and brochures are distributed among employees and safety instructions are posted on notice boards throughout the Company. Occupational Health Occupational health is responsible for preventing and diagnosing occupational diseases, carrying out first aid for emergency patients, and if necessary, transferring them to specialized health centres as well as identifying and reducing pollutants of the working environment. The main activities of this department are divided into three main categories, namely: 1. Medical Surveillance: By providing periodical examinations, in order to diagnose occupational diseases and to identify physical and mental state of employees (Fitness to Work). 2. Medical Treatment: Offering emergency medical treatment for work related injury. The objective here is to offer the necessary initial treatment prior to the transfer of patients to the specialized health centre. 3. Industrial Hygiene Activities: These activities, which are carried out by the Professional Health Centre, include identifying and measuring the damaging effects of the working environment on people. Other activities of the Professional Health Centre include supervising medical insurance services offered to employees. This centre carried out the following tasks during the reporting period: •Launching a Preventative Unit which is one of a kind and an example to be followed by Iran’s other industrial units. •Introducing new para-clinic systems as a means to improve the quality of periodical medical examinations and tests. •Upgrading the paperless software. •Participating in the maintenance and development of the OHSAS 18001 Safety Management & Professional Hygiene System and ISO9001, etc. •Upgrading the employee health awareness system. 34 Mobarakeh Steel Company Corporate Social Responsibilities & Environmental Concerns We firmly believe that all profit making entities especially large corporations have a moral duty toward societies from which they emerge and flourish. Thus, we aim to create a balance between our corporate missions and project objectives, while respecting social and environmental issues. This we intend to achieve by committing ourselves towards preserving the environment and providing financial assistance toward social entities. The table below demonstrates our performance in terms of offering financial aid to charities and other social entities during the reported period: MSC’s Donations to Society by Sector (IRR) Cultural 52,381,818,883 Social 26,966,100,000 Hygiene 3,350,000,000 Charities 570,000,000 Civil 21,510,000,000 Education 1,300,000,000 Religious 2,030,000,000 In addition to the aforementioned donations the MSC has contributed towards the construction of the following projects: • • • • Intercity Red Crescent relief station. Esfahan Grand Payer Hall. A cemetery dedicated to martyrs. Water treatment facilities for Mabarakeh and Lanjan towns. • Renovation of Mohammad Rasoulallah Hospital emergency section. • Mobarakeh-Baharestan Metro. • Renovation of Esfahan-Shiraz Highway Police Station. Annual Report 2014-2015 35 36 Mobarakeh Steel Company Our Environmental Performance As a socially responsible entity, we aim to minimise the discharge of pollutants into the environment and to recycle industrial waste as much as possible. We also aim to minimise energy consumption, whilst at the same time, create new green spaces both within our immediate, surrounding environment and within the whole province. to installing the Energy Management System. In order to achieve the above objectives, audits have been carried out within all production and support units. These audits have helped identify points where energy is wasted. In addition, energy consumption management trainings sessions have been given to personnel at all levels. Energy Saving Measures As mentioned earlier, we constantly strive to reduce our energy consumption levels which lead to the discharge of less pollution into the environment. In this context, we established the Energy High Committee in 1377 (1998-99) which is a policy making body in identifying reliable means of energy supply, reducing energy consumption in comparison with our competitors in order to help preserve the environment, to reducing finished costs and Such energy saving measures have been categorised and prioritised. The first priority is the implementation of low cost projects that introduce new methods which lead to the optimization of energy consumption. The second priority is medium cost projects that help reduce energy consumption and finally, high cost projects requiring change of processes or machinery. The following charts demonstrate our performance with regard to energy consumption reduction in the previous few years: Pelletizing Unit’s Electrical Power Consumption Performance Electrical Power National Standard 36.55 2012-13 32.28 36.00 2011-12 2014-15 34.16 2010-11 33.68 35.31 2009-10 2013-14 36.60 2008-09 37.85 2006-07 34.83 39.14 2005-06 2007-08 39.57 2004-05 42.32 2003-04 43.58 2002-03 2001-02 KWH / Ton 50.75 50 Pelletzing Unit’s Thermal Energy Consumption Performance 13.25 2014-15 Thermal Energy National Standard 14.32 16.68 2012-13 2013-14 16.5 2011-12 14.16 16.46 2008-09 2010-11 16.44 2007-08 14.80 16.87 2006-07 2009-10 16.55 2005-06 18.33 2004-05 21.92 2003-04 18.83 2002-03 24.01 2001-02 NCM / Ton 25.21 Annual Report 2014-2015 37 Hot Rolling Unit’s Electrical Power Consumption Performance 80.6 78.2 79.4 78.9 78.4 76.0 77.6 78.0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Note: These charts clearly show that our energy consumption levels are well below national standards and this trend is ongoing. Main Environmental Achievements during the Reporting Period • Obtaining a certificate for participating in climate change program issued by the Global Steel Society. • Effectively reducing consumption whilst minimising waste. In this regard, we are looking for means to recycle our slag waste and selling it in the market. • Being recognised by the Environmental Protection Organisation as the Clean Industry. • Due to the scarcity of water, we have managed to treat our industrial waste water in full. The result of which, is extracting less from the local river, whilst increasing production. • Constructing a new industrial water treatment facility in the Steel Making and Saba Rolling Unit. • In fulfilling its environmental commitments, the MSC had signed a recycling contract under the supervision of the Environmental Organization in 2012. This contract was enforced during the reporting period. • Investing in and designing 12 new dust collectors as a means to further reduce the emission of dust into the atmosphere. • Providing IRR1,200 billion in funding towards a sewage treatment project which is enforced with all of the local cities and towns. Electrical Power National Standard 80.1 94.8 2004-05 2006-07 101.9 2003-04 82.0 105.1 2002-03 2005-06 113.9 NCM / Ton 2001-02 105 38 Mobarakeh Steel Company Club History Annual Report 2014-2015 39 In 1953, a club by the name of “Shahin” was founded in Esfahan by the late Mahmoud Hariri. In 1967, due to the liquidation of the Central Club in Tehran, the Club which became the top sport clubs in the city of Isfahan changed its title to Sepahan. As of 1379 (2000/01), this club was supported by the Sepahan Cement factory and its title was once again altered into Siman Sepahan Cultural & Sports Club. Breaking Records! By earning the championship title for the third consecutive year in 2012, Foulad Sepahan Football Team (eleventh national premiere football league competitions) has broken a new record in Iran’s football history. In addition, this club has won 9 championship during last 12 years and becoming the top Iranian team in the league. Following large-scale lobbyings by the provincial authorities and the agreement reached with the Mobarakeh Steel Company, it was decided in the year 2000, that the existing and well organized Foulad Mobarakeh Cultural & Sport Club became the sponsor of the above mentioned Siman Sepahan Cultural & Sports Club and continued its sports activities under the new name of Foulad Mobarakeh Sepahan Sport & Cultural Club. Club Football Team Honours •The club was introduced as the model of Iran: 2000 •The best Iranian club in “the Best” festival: 2002 •Champion of Iran Pro League: 2003, 2010 •Champion of Iran knockout Cup: 2004, 2006, 2007 •Runner up of Asian Champions League : 2007 •The 1st Iranian club qualified Participating in FIFA Club World Cup TM : 2007 •Vice champion of Iran Pro league: 2008 •Honorable for 7 times of attendance in Asian Champion league: 2003, 2011 •Taking the 52nd place in FIFA Club Ranking:2007 By 1390 (2001-12), this club had already become involved in numerous sports activities including football, handball, footstall, karate, chess, swimming for men and women, basketball, judo, shooting for veterans and the disabled, volleyball, taekwondo, table tennis, gymnastics, wrestling, athletics, mountain climbing and karate for men as well as badminton. It is noteworthy that this club was awarded the title of the Premiere Club in the year 2000 by the Physical Education Organization of the Islamic Republic of Iran and two years later, this club became recognized as the elite club by the sports societies and the press, at the Elite Festival. In 1382(2003/04), this club became the very first township club to win the third professional league football championship in Iran and two years later; this club became the premiere club of Iran in handball, not to mention that this club has 13 championship leagues in its portfolio. Furthermore, in 2011, it earned the championship title in the world clubs competitions in Turkey. In addition, in 2007, due to its outstanding performance in football, for the very first time in Iran’s football history, this club took part in the world clubs competitions. Moreover, between 2003 and 2012, this team took part in the Asian Championship League nine times. This club is proud that during 2010 and 2011, to have won the premiere championship league in Iran, while in the 2012 season this team became Iran’s champion, becoming the first club that has successfully won three championship titles, and breaking a record in this regard and finally the club won the 2013-14 premiere championship league of Iran for a fifth time. Sistership and Sports Relationship Contract with: 1. Internatzionale Milan – Italy 2. Kawasaki Frontale – Japan 3. Gamba Osaka - Japan 4. Bunyodkar – Uzbekistan 5. Pakhtakor - Uzbekistan 6. Al Sharjah – UAE 7. Kayserspor – Turkey 8. Al Ahed – Lebanon 9. Al Arabi – Kuwait 10. Jonac – Nigeria 11. Al Mina – Iraq Quality Guarantees Certificates: and Management 1. ISO 9001 : 2008 •For activities such as: Rendering Sports Services to real and legal persons and organizing men and women champion teams in different age groups and approved sport fields 2. ISO 10015 : 1999 •For activities such as: Rendering Sports Services to real and legal persons and organizing men and women champion teams in different age groups and approved sport fields 3. BS OHSAS 18001 : 2007 •Applies a management system in line with the above standard for the scope of : Providing Cultural, Sport, Championship and Pleasure Services 40 Mobarakeh Steel Company Organizational Excellence From the initial time of its design, by seeking to become even better than the celebrated steel companies around the world, the Mobarakeh Steel Company was established based on a systematic outlook and the establishment of the Management Information System (MIS). In 1372 (1993-94), for the purpose of solving operational problems, Operating Plan Improvement Projects System was implemented. Furthermore, in 1373 (1994-95), for the purpose of democratizing the organization, creating a communication channel between the organization and the employees, the suggestions regime was set up in the following years, where numerous improvements were made as a consequence of the useful suggestions made by the employees. Later, by establishing the quality management system (ISO9001:1994) in 1374 (1995-96) and its review in 1382 (2003-04) (ISO9001:2000) the structure of management processes with the objective a providing customer satisfaction was established and all necessary directions and instructions were defined within the framework of this system. In 1375 (1996-97), the research and development (R&D) system with the objective of developing practical and customer-oriented research was established. This, which created the basis of wide-scale research within the MSC, was made possible by creating links with over 68 scientific, research and university centres. For the purpose of developing group work and with the objective of developing group participation of the employees, the QCC was established in 1376 (1997-98). Over 200 improvement groups within various subjects and various problems of the organization were established, mainly on operational levels. The establishment of these groups came following the enforcement of the comprehensive productive net regime in 1380 (2001-02), along with the autonomous net groups. Hence, over 500 improvement groups were organized and systematic improvement and utilization of production lines were placed on their agenda. In 1378 (1999-00), for the purpose of creating integration between the systems and various management regimes and management participation and well as the structure of revolution regime (process structure) some 17 revolution committees were created and their number was increased to 20 in 1382 (2003-04). Furthermore, by taking advantage of the Hoshin Planning Model, the strategies and objectives of MSC over 2 one year and 5 year periods were drafted and defined. These objectives and strategies are reviewed every year and these strategies were reviewed in 1384 (2005-06) and 1386 (2007-08) by using the strategically planning theoretical models. The MSC has taken part in the competition of the National Organisational Prize of Excellence and Efficiency, which is based on the EFQM Model, since its introduction in 1382 (2003-04), and ever since, this company has managed to rank first and as the first company in the country, to win the Finalist Award in 1384 (2005-06). Furthermore, the MSC won the first excellence prize of the Muslim countries (Mecca Award) which was introduced in 1386 (2007-08). In addition, the MSC has taken advantage of a number of systems which have helped a great deal on its journey toward excellence. These systems include: the Environmental Management System (ISO14001) in 1376 (1997-98), the Safety and Hygiene Management System (OHSAS18001) in 1385 (2006-07), Training Management System (ISO10015) in 1384 (2005-06), Human Resources Development System (PDS) in 1385 (2006-07), Laboratory and Calibration System (ISO17025) in 1384 (2005/06), Standard Corresponding with European Products (CEMarking) in 1386 (2007-08), etc. MSC Excellence Road Map 42 Mobarakeh Steel Company Certificates & Awards Measures taken for Obtaining Standards This Company is proud to have obtained the following certificates and awards: •The Company holds ISO9001/2000 certificate, ISO14000 certificate and Iran Standard Sign for its products •The Company holds the Iranian Standard Certificate for its coated products •The MSC holds product Certification from SGS Company •The Company extended this certification to its coated products (galvanized, per-painted & tin-plate) and for the products used in marine industries the Company succeeded in obtaining Product Certificate from DNV Company Testing and Calibration Laboratories Standard ISO/IGO - 17025 : 2009 The Awards Won by the Company •National Prize of Quality, Iranian National Standard, Establishment of Quality Management System, Environment and SGS Product Certificate awarded by Switzerland •Golden Table and medal of America and Europe, French international Trade Medal Paris Certificate of MAKE Award (2015) National Quality Unit Award (2011) First Rank Certificate in Basic Metals(2012) Annual Report 2014-2015 43 Trophy of Celebrating the Best Research & Development Units (2014) National Iranian Quality Award (2005) Top Provincial Unit (2011 ) Trophy of National Training & Development Excellence Model (2015) Trophy of Export (2014) Golden National Productivity & Organizational Excellence Award (2013) Crystal Trophy of Iran Financial Management Awards (2011) Trophy of National Empowerment Ceremony (2011) Consumer Rights Recognition License & Award (2014) Consumer Rights Recognition License and Award (2011) Trophy of MAKE Awards (2011) 44 Mobarakeh Steel Company Annual Report 2014-2015 45 FINANCIAL PERFORMANCE Financial Ratios 0.49 0.12 0.10 2013-14 2014-15 2.60 1.5 2.04 2.07 2.32 2.16 2.16 0.74 2012-13 2013-14 0.57 0.70 1.31 2011-12 2014-15 2011-12 2012-13 2013-14 0.53 0.51 1.07 1.10 0.52 0.53 The following charts reflect the MSC’s leverage ratios: 1.14 Liability Ratio Liability to Shareholders’ Equity 1.10 Leverage Ratios MSC leverage ratios are less than those of its competitors. This means that MSC’s financial risk exposure is less than its competitors. 2012-13 Turnover of Assets Turnover of Fixed Assets Turnover of Inventories 0.55 The following charts demonstrate our activity ratios: 1 1.03 0.94 2011-12 Activity Ratios Activity ratios are less than average within Iran’s steel industry. This is due to the fact that a considerable portion of MSC’s current assets are in its two expansion projects which have not yet been utilised as yet. Thus, during the reporting period, whilst assets increased by 20%, sales experienced a 5% increase only. Therefore, once these projects are utilised, activity ratios shall improve considerably. 1.11 Current Ratio Quick Ratio 0.10 Liquidity Ratios Although our liquidity ratio declined during the 2014-15 period, overall performance in the past five years is favourable. The following charts demonstrate our liquidity ratios in the previous five years: 2014-15 46 Mobarakeh Steel Company Profitability Ratios As can be seen in the following table and chart, profitability ratios have experienced a declining trend during the past three years. This is due to the rising costs of energy, raw material and wages on the one hand, and the falling global steel prices on the other. However, despite this declining trend, the MSC is nevertheless is performing better than its competitors in this regard. Profitability Average Industry Year 2011-12 2012-13 2013-14 2014-15 Gross Profit Margin 32.41% 38.74% 42% 31.6% 26.50% Operating Profit Margin 25.41% 35.32% 40.78% 27.7% 21.95% Net Profit Margin 21.11% 28.38% 32% 23.2% 17.68% Return on Assets 11.65% 19.88% 54.23% 13.2% 12.08% Return on Shareholders’ Equity 23.75% 42.16% 49.42% 28.3% 27.67% (million IRR) 6,514 3,384 2,693 2013-14 2014-15 2013-14 2014-15 2013-14 2014-15 MSC’s & Steel Industry’s Net Profit Margin Trend MSC Steel Industry 32% 28.38% 25.90% 23.20% 24.83% 21.11% 17.68% 2014-15 2013-14 2012-13 13.38% 2011-12 6,917 Sales Per Capita (million IRR) 12,217 Fixed Assets Per Capita (million IRR) 9,957 Assets Per Capita Annual Report 2014-2015 47 Sales Performance Prior to the establishment of the Tehran Metal Exchange (TME) in 1382 (2003-04), the MSC supplied its products to its customers directly. However, since 1382 (2003-04) MSC’s products are partly marketed through the TME channel. During the reporting period 8.7% of MSC’s sales took place through the TME, 77% via the clearing room (matching method) and 15.2% were sold directly. All of the above transactions took place under a license issued by the TME on 1382/11/11 (31.01.2004). During the reported fiscal period, our total sales levels value increased by 2.6%. The following table and chart provide greater detail in of our sales performance. For the Year Ended 20.03.2015 Product Domestic Market Company’s Share in Domestic Market Exports Domestic Market Company’ Share in Domestic Market IRR million IRR million IRR million IRR million Exports IRR million IRR million Hot 115,363,795 47,482,620 41.1% 17,281,797 113,477,898 53,320,659 47.0% 10,351,909 Cold 45,513,884 27,194,570 59.8% 1,901,766 32,996,936 22,602,642 68.5% 1,832,549 Coated 38,332,705 7,114,594 18.6% 401,926 35,443,625 7,797,743 22.0% 343,818 Semi Final 35,431,810 621,971 1.8% 0 35,793,298 1,029,203 2.9% 0 234,642,193 82,413,755 35.1% 19,585,489 217,711,757 84,750,247 38.9% 12,528,276 Total Total Sales Percent For the Year Ended 20.03.2014 101,999,244 Sales 621,971 Semi Final 7,516,520 Coated Cold Hot 29,096,336 64,764,417 (million IRR) 97,278,523 IRR million 48 Mobarakeh Steel Company Shares Performance On 1385/12/7 (26.02.2007) the MSC became the 435th listed company in the Tehran Stock Exchange (TSC) and its shares were for the first time floated on the TSC on 1385/12/20 (11.03.2007). The following table demonstrates MSC’s shares performance in the previous four years: Year Ended No. of Traded Shares Value of Traded Shares )million IRR( No. of Transaction Days End of the Fiscal Year Market Value )million IRR( Price of Each Share )IRR( Capital )million IRR( 20.03.2011 2,119,175,427 5,541,588 182 43,023,400 2,723 15,800,000 19.03.2012 2,311,052,310 6,948,491 233 76,574,400 2,968 25,800,000 20.03.2013 4,096,816,478 16,081,117 223 110,914,200 4,299 25,800,000 20.03.2014 4,603,181,501 19,940,386 237 155,628,000 4,323 36,000,000 20.03.2015 1,987,553,831 6,652,669 224 96,000,000 1,920 50,000,000 Information Disclosure & Shares Liquidity The following table demonstrates MSC’s ranking in terms of shares liquidity and information disclosure for the reported fiscal period: • • • • • Description 2014-15, 2013-14, 2012-13 Information Disclosure Ranking 62, 215, 114 No. of Transaction Days 224, 237, 223 Ratio of Transactions Volume to Total Shares of the Company 3.97%, 12.78%, 15.87% Risk Management Based on European Excellence Quality Management Model approaches (EFQM) and also in accordance with the new ISO 9000:2015 standard, which refers to establishing a Risk Management System in view of the steel industry business environment the MSC has designed and implemented a Risk Management System based on ISO 31000. In this regard, training courses have been held and process identification, assessment and responding to different risks of 2015-16 objective have been implemented through 123 Transform Committees and the report has been presented to the Steering Committee. Hence, the most important risks are as follows: 1- Decrease of steel products prices in global market and domestic markets. 2- Decrease of oil and iron ore prices. 4- Falling sales volume in domestic and export markets. 5- Failure to implement expansion projects on time. 6- Limitations in funding expansion projects in time. Annual Report 2014-2015 49 3,857,197 2014-15 2013-14 931,774 2011-12 2010-11 The following chart shows that our investment returns in the listed companies enjoyed an 8% growth in comparison with the previous year. Furthermore, our long-term investment returns had a positive impact on our EPS by IRR77. 497,702 In order to maximise our profitability, we constantly dedicate a portion of our revenues towards investments in lucrative economic sectors and in the shares of both Tehran Stock Exchange (TSE) listed and unlisted companies. 1,427,044 3,585,482 Investm ent R etur ns on TS E Listed Companies (IRR million) 2012-13 Investments 50 Mobarakeh Steel Company Our subsidiary companies are as follows: MSC Group Investment in Affiliated Companeis Investment in Subsidiary Companeis Investment in Subsidiary Companies: Hormozgan Steel Co. Chahar Mahal va Bakhtiari Sefid Dasht Steel Co. Chahar Mahal va Bakhtiari Automative Sheet Co. Foolad Sang Mining & Industrial Co. Ownership Stake (%) 100 Investment in Affiliated Companies: Metals & Minings Developing Investment Co. Investment in Other Companies Ownership Stake (%) 19.29 Investment in Other Companies: Chadormaloo Industrial & Mining Co. Gole Gohar Industrial & Mining Co. Ownership Stake (%) 10.40 64.99 Metil Steel Co. 66.30 Tuka Foolad Investment Co. 25 Iran Mercantile Exchange Co. 0.67 98.87 Ardekan Novin Electrode Co. 31 Esfahan Health Services Co. 0.88 Kashan Amir-Kabir Steel Co. 52.57 Construction & Erection Equipment Supply Co. International Systems Engineeiring & Automation Co. (IRISA) 68.17 Tara Steel Co. Mobarakeh Steel Engineering Co. Sang va Ahan-e Foolad-e Sangan Co. Felez Tadarok Co. 70 99 99.6 99.6 Foolad Sepahan Sports Club 95 Sepahan Novin Cultural & Sports Co. 95 Tuka Beton Co. 32.16 37.68 25 9.94 Esfahan Subway Co. 10 Iran Energy Exchange co. 0 Financial Statements 52 Mobarakeh Steel Company Islamic Republic of Iran Ministry of Economic Affairs & Finance Audit Organization Independent Auditor’s and Legal Inspector’s Report To: Annual Ordinary General Meeting of Mobarakeh Steel Company (Public Joint Stock) Report on the Financial Statements Introduction 1. We have audited the accompanying consolidated financial statements of the Mobarakeh Steel Company (Public Joint Stock) including the balance sheets as at 20 March, 2015, and the related statements of income and cash flows for the year then ended, together with the explanatory notes 1 to 37 attached herewith. Responsibility of the Board of Directors for the Financial Statements 2. The Company’s Board of Directors is responsible for preparation and fair presentation of these financial statements in accordance with the Iranian financial reporting standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the Auditor and Legal Inspector 3. Our responsibility is to express an opinion on these financial statements based on our audit, and in accordance with the Iranian auditing standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion on the financial statements. As legal inspector, we are also responsible to report to the ordinary general meeting of shareholders matters of noncompliance with legal requirements as stipulated in the Commercial Code as Amended and the provisions of Company’s Articles of Association and other necessary issues. Opinion 4. In our opinion the financial statements mentioned above, present fairly the financial position of the Group and the Mobarakeh Steel Company (Public Joint Stock) on 20 March, 2015, as well as the results of the Group’s and the Company’s operations and cash flows for the fiscal year then ended, in all material respects, in accordance with the Iranian accounting standards. Emphasis on Matter 5 . Our opinion is not qualified regarding the following paragraphs: 5.1. As stated in explanatory note 14.2 the corporate tax for the 2013-14 financial period ended has been identified as IRR7,312 billion. However, since the Company has appealed against this, it has only paid IRR4,377 billion. In addition, the corporate tax for the 2014-15 period has been reflected in the accounts whilst considering the declared profits and lawful tax exceptions. Furthermore, based on the letters of Value Added Tax (VAT) Deputy and the Esfahan Province Environmental Protection Department, the Mobarakeh Steel Company (Public Joint Stock) was included in the list of polluting companies as of 1393/10/01 (22.12.2014), for which no provision has been calculated and reflected in the accounts (note 34.3 of the financial statements). Determining the necessary provision in this regard is dependent upon the final verdict of the tax authorities. Our opinion has not been qualified due to the effects of this paragraph. Annual Report 2014-2015 53 Report on Other Statutory and Regulatory Requirements Report on other Duties of the Legal Inspector 6. The cases where legal requirements set forth by the Commercial Code as Amended have not been complied include: 6.1. Article 240 of the Commercial Code which refers to the payments of prior years’ dividend within 8 months of the ratification of the ordinary general assembly of the shareholders. 6.2. In executing Article 142 of the Commercial Code as Amended, the following measures of the board of directors in reference with the duties of the ordinary annual general assembly of the shareholders have not been finalised. •Elimination of discrepancies between the account in between the MSC and IMIDRO. •Transfer of title deeds of the building of the Esfahan office which is located in Sa’adatabad Street and the land located in Bandar Abbas Port, at the Special Economic Zone, the land of Saba Steel Company which is located at the site of the Esfahan Steel Company. •Sale of the shares of Hygiene & Service as well as Tamco companies whose fields of activity is not related to the Company fields of activity and are not a part of the Company plans and strategies. •Settlement of government claims (in reference to the notes of the Budget Act) prior to handing over a portion of the shares of the Parent Company to the private sector (mentioned via Iran’s Expense Deputy and Treasury). •Preparation of the consolidated financial statements of all companies (affiliated and subsidiary) liable to consolidation and submitting to the shareholders, the impacts of consolidation of cases which have not been consolidated in full. •Collecting the debts of Mobarakeh Steel Housing Cooperative which amounts to IRR312 billion. 7. In some cases where there has been a monopoly, lack of time or following the trend of previous years etc. purchasing has taken place under the conditions of mahdoud or tarke tashrifat. In this regard, we are not certain that purchasing have taken place under the best conditions (due to the lack of comparative rates from various sources). 8. During the reporting financial period, no contract has been signed with Gole Gohar Company for purchasing raw material (iron ore and pellets) and the amounts reflected in the accounts relating to buying raw material, have been calculated and all payments have been reflated in the accounts as prepayments in accordance with the trend in the previous years and the selling rate of Khouzestan Steel Company’s slab at the Tehran Metal Exchange (13.6% during the reporting fiscal period). 9. In some cases, auxiliary items (electrodes) reflected in the suppliers’ invoices) SGL, GI and HEG Companies) exceed the quantity received by the Company or its warehouse. The reason for this discrepancy is not clear. In addition, the list of goods in transit has been temporarily received but due to the lack of documents has not been reflected in the system and has not been submitted to this organisation. 10. We have reviewed the transactions as stated in the explanatory note 35.3 carried out during the reported fiscal period, which we have been informed of, by the board of directors as all the transactions liable to Article 129 of the Commercial Code as Amended. The mentioned transactions have taken place in compliance with the mentioned article which refers to obtaining a license from the board of directors and the beneficiary director not taking part in the voting process. With the exception of the following instances which taken under special conditions, the mentioned transactions have taken place on the basis of ordinary relations between the Group Companies. • South Hormozgan Steel Company (Public Joint Stock) – sale of raw material at finished cost and failure to collect debt. • Mobarakeh Steel Employee Consumption Cooperative – failure to enforce a tender for restaurant and transport contract. • Metil Steel Company – sale of Sani Kaveh Iron & Steel Company, whilst not collecting a portion of remaining debt. • Iran Zob Company – purchasing aluminium ingot prior to complying with the procedures as set forth in the Transactions Instruction. 11. The Board of Directors’ report regarding company’s activity and general condition referred by Article 232 of the Commercial Code as Amended, that was prepared for presentation the General Assembly was reviewed there was no evidence pointing to any significant distortion information presented by the Board. 54 Mobarakeh Steel Company Report on other Duties of the Legal Inspector 12. The rules and regulations as set forth by the Commodities & Exchange Organization have not been complied in the following instances: a. Executive instructions on information disclosure of the companies listed at the Securities & Exchange Organization: Instruction Article Number Clause 4, Article 7 Clause 10, Article 7 Article 10 Description Submitting the 6 month, mid-term financial statements at maximum 75 days following the end of the period. Submitting the audited 6 month, mid-term consolidated financial statements at maximum 60 days following the end of the 6 month period. Submitting the minutes of the ordinary general assembly at a maximum period of 10 days following the meeting to the Companies Registration Department and its disclosure one week following its registration. b. Disciplinary instruction of listed publishers at the Securities & Exchange Organization: Article 8 Submitting the methods and details of stages of implementation of the expansion projects to the Securities & Exchange Organization together with the opinion of the auditor once every months and at a maximum period of 60 days following the end of the 6 month period. 13. In executing Article 33 of Combating Money Laundering Executive Instruction via the auditors compliance of the mentioned act and its related executive instructions has been reviewed by this institution in accordance with the framework of checklists as notified by the related authorities and accounting standards. In this regard, with the exception of non-compliance of some of the contents of Combating Money Laundering Act its executive instruction and its related instruction (including training of employees so that they become familiar with the mentioned act, introducing the Money Laundering Combating Department to the related secretariat, fully stating the national identification or economic code in the forms and contracts) we did not encounter any significant event of noncompliance with the mentioned regulations. Audit Organization 15 Tir 1394 (06.07.2015) Naser Diyanati Jamshid Danesh 8,841,523 6 7 8 Inventory Prepayments Maintained Assets for Sales 190,865,334 95,389,625 3,084,621 67,293,158 Current Liabilities: Liabilities & Shareholders’ Equity 159,192,316 Total Liabilities & Shareholders’ Equity Total Shareholders’ Equity 23 190,865,334 87,809,973 1,019,940 86,790,033 Minority Interest 31,433,542 Total Rights related to Shareholders of the Parent Company 446,262 4,910,822 (593) 50,000,000 103,055,361 10,105,195 4,803,113 5,261,391 40,691 92,950,166 5,892,776 53,013,209 15,659,948 4,152,273 14,231,960 Million IRR 20.03.2015 Retained Earnings 21 22 Legal Reserve 20 19 Other Reserves of the Subsidiary Companies Shares of the Parent Company in Ownership Capital (50,000,000,000 IRR1000 share, fully paid) 69,399,318 Shareholders’ Equity: 13,209 Total Liabilities 53,303,369 Total Non-current Liabilities 16 18 3,242,801 Provision for Employees’ Work Termination Benefits 13 17 16 15 14 13 Note 11,040,580 Long-term Financial Facilities 1,799,359 Long-term Payables Non-current Liabilities: 89,792,998 Total Current Liabilities 24,708 11,252,755 Advances Received 42,097,779 Financial Facilities 26,072,444 Payable Dividend 2,048,265 Tax Payable 8,297,047 Trade & Non-trade Payables (Revised) 20.03.2014 Million IRR The explanatory notes are an integral part of the financial statements. Total Assets Total Non-current Assets 11 12 Fixed Tangible Assets Other Assets 3,463,331 19,661,528 9 10 Long-term Investments 1,886,987 95,475,709 73,118 22,033,092 5 Goodwill & Intangible Assets Long-term Receivables Non-current Assets: Total Current Assets 56,399,460 5 Trade & Non-trade Receivables 2,373,774 3 4 5,754,742 Million IRR 20.03.2015 Cash Note Short-term Investments Current Assets: Assets Esfahan Mobarakeh Steel Co., (Public Joint Stock) Consolidated Balance Sheet As at March 20th, 2015 159,192,316 73,727,231 1,077,644 72,649,587 32,536,838 446,262 3,667,080 (593) 36,000,000 85,465,085 8,647,429 3,179,374 5,390,723 77,332 76,817,656 3,187,170 39,886,777 13,588,032 4,846,438 15,309,239 (Revised) 20.03.2014 Million IRR 56 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Consolidated Profit (Loss) Statement For the Year Ended March 20th, 2015 (Revised) 2013-14 2014-15 Note Million IRR Million IRR Million IRR Operating Revenues 24 122,040,518 111,353,479 Cost of Operating Revenues 25 (87,435,474) (67,366,880) Gross Profit 34,605,044 Sales, General & Administrative Expenses 26 (6,342,734) Other Operating Items 27 584,793 Operating Profit 43,986,599 (5,416,221) 2,763,323 (5,757,941) (2,652,898) 28,847,103) 41,333,701 Financial Expenses 28 (9,142,800) (6,842,358) Other Non-operating Revenues & Expenses 29 6,121,270 3,311,688 (3,021,530 (3,530,670) 25,825,573 37,803,031 2,934,128 25,840 Operating Profit before Tax 28,759,701 37,828,871 Income Tax (3,249,979) (4,782,292) Net Profit 25,509,722 33,046,579 103,695 113,347 25,406,027 32,933,232 542 773 Profit before Considering Group’s Quota from Profit of Affiliated Companies Group’s Quota from Profit of Affiliated Companies 9-1-1 Minority Interest from Net Profit Net Profit related to Shareholders of the Parent Company Base Profit of Each Share: 30 Operating – IRR Non-operating – IRR (5) (47) 537 726 25,509,722 33,046,579 Base Profit of Each Share – IRR Flow of Consolidated Accumulated Profit Account Net Profit Retained Profit at the beginning of the Year 32,593,065 24,612,269 - (1,213,915) 32,593,065 23,398,354 Ratified Dividend (23,760,000) (16,770,000) Capital Increase (1,500,000) (6,000,000) Prior Years’ Adjustments Retained Profit at the beginning of the Year (Adjusted) 7,333,065 628,354 Allocable Profit 32,842,787 33,674,933 Legal Reserve (1,258,519) (1,081,868) Retained Profit at the End of the Year 31,584,268 32,593,065 Minority Interest from Retained Profit 150,726 56,227 31,433,542 32,536,838 Retained Profit related to Shareholders of the Parent Company Since the comprehensive income statement is limited to the profit for the period and prior years’ adjustments, the comprehensive income statement is not presented. The explanatory notes are an integral part of the financial statements. Annual Report 2014-2015 57 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Consolidated Cash Flows Statement For the Year Ended March 20th, 2015 (Revised) 2013-14 2014-15 Note Million IRR Million IRR Million IRR Operating Activities: Net Cash Inflow from Operating Activities 32 24,712,088 13,489,758 Return on Investments & Paid Profit for Financing: Received Profit for Investments Deposits 905,740 Dividend Received Paid Profit for Financial Facilities Dividend Paid to Minority Shareholders Dividend Paid to Shareholders of the Parent Company Net Cash Outflow from Return on Investments & Paid Profit for Financing 671,895 289,431 3,065,242 (6,783,609) (5,543,308) (42,943) (6,681) (9,233,343) (8,508,600) (14,864,724) (10,321,452) (3,954,217) (4,164,275) Income Tax: Income Tax Paid Investment Activities: Received Amounts from Sales of Fixed Tangible Assets Paid Amounts for Increase in Fixed Tangible Assets 94,933 122,925 (16,802,871) (6,495,374) Paid Amounts for Increase in Intangible Assets (327,302) (274) Paid Amounts for Other Assets (166,412) (1,438) - 107,011 (325,509) - (1,924,017) (1,326,065) Received Amounts for Sales of Long-term Investments Paid Amounts for Acquiring Short-term Investments Paid Amounts for Acquiring Long-term Investments Net Cash Outflow from Investment Activities (19,451,178) (7,593,215) Net Cash Outflow before Financing Activities (13,558,031) (8,589,184) Financing Activities Amounts Received from Capital Increase of the Parent Company Paid Amounts for Acquiring Shares of the Parent Company by the Subsidiary Company Financial Facilities Received Repayment of Origin of Financial Facilities Received 88,202 46,549 - (31) 135,568,124 77,793,887 (124,443,911) (65,904,926) Net Cash Inflow from Financing Activities 11,212,415 11,935,479 Net Increase (Decrease) in Cash (2,345,616) 3,346,295 8,297,047 4,535,508 Cash Balance at the beginning of the Year Effect of Foreign Exchange Rates Changes (196,689) 415,244 Cash Balance at the End of the Year 5,754,742 8,297,047 12,411,798 4,153,451 Non-cash Transactions 33 The explanatory notes are an integral part of the financial statements. 4 5 6 7 Short-term Investments Trade & Non-trade Receivables Inventory Prepayments 9 10 11 12 Long-term Investments Goodwill & Intangible Assets Fixed Tangible Assets Other Assets 180,164,197 90,239,047 2,905,000 49,903,667 468,209 35,075,184 1,886,987 89,925,150 7,769,867 46,430,011 29,836,851 2,295,220 3,593,201 Million IRR 20.03.2015 Current Liabilities: Liabilities & Shareholders’ Equity 22 37 Other Reserves Retained Earnings 148,673,339 Total Liabilities & Shareholders’ Equity Total Shareholders’ Equity 21 19 18 16 17 16 15 14 13 Note Legal Reserve 69,649,769 Capital (50,000,000,000 IRR1000 share, fully paid) - Shareholders’ Equity: 40,256,365 Total Liabilities 467,653 Total Non-current Liabilities 27,231,176 Provision for Employees’ Work Termination Benefits 1,694,575 Long-term Financial Facilities Non-current Liabilities: 79,023,570 Total Current Liabilities 10,867,046 Advances Received 33,466,939 Financial Facilities 26,219,767 Payable Dividend 1,735,265 Tax Payable 6,734,553 Trade & Non-trade Payables (Revised) 20.03.2014 Million IRR The explanatory notes are an integral part of the financial statements. Total Assets Total Non-current Assets 5 Long-term Receivables Non-current Assets: Total Current Assets 3 Note Cash Current Assets: Assets Esfahan Mobarakeh Steel Co., (Public Joint Stock) Balance Sheet As at March 20th, 2015 180,164,197 84,165,560 28,931,261 446,262 4,788,037 50,000,000 95,998,637 6,904,429 4,629,895 2,274,534 89,094,208 5,859,689 46,257,120 15,467,219 3,991,074 17,519,106 Million IRR 20.03.2015 148,673,339 71,664,829 31,618,567 446,262 3,600,000 36,000,000 77,008,510 6,340,426 3,045,647 3,294,779 70,668,084 3,012,340 37,021,132 13,585,592 4,376,987 12,672,033 (Revised) 20.03.2014 Million IRR Annual Report 2014-2015 59 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Profit (Loss) Statement For the Year Ended March 20th, 2015 Note 2014-15 Million IRR Million IRR (Revised) 2013-14 Million IRR Operating Revenues 24 101,999,244 97,278,523 Cost of Operating Revenues 25 (69,696,950) (56,201,638) 32,302,294 41,076,885 Gross Profit Sales, General & Administrative Expenses 26 (5,849,147) (5,021,132) Other Operating Items 27 732,135 3,456,013 Operating Profit (5,117,012) (1,565,119) 27,185,282 39,511,766 Financial Expenses 28 (7,910,993) (6,319,767) Other Non-operating Revenues & Expenses 29 7,562,256 2,072,243 (348,737) (4,247,524) Operating Profit before Tax 26,836,545 35,264,242 Income Tax (3,075,814) (4,376,767) Net Profit 23,760,731 30,887,475 509 745 (7) (64) 502 681 23,760,731 30,887,475 Base Profit of Each Share: 30 Operating – IRR Non-operating – IRR Base Profit of Each Share – IRR Flow of Accumulated Profit Account Net Profit Retained Profit at the beginning of the Year 31,618,567 25,259,130 - (738,038) 31,618,567 24,521,092 Ratified Dividend (23,760,000) (16,770,000) Capital Increase (1,500,000) (6,000,000) Prior Years’ Adjustments Retained Profit at the beginning of the Year (Adjusted) 6,358,567 1,751,092 Allocable Profit 30,119,298 32,638,567 Legal Reserve (1,188,037) (1,020,000) Retained Profit at the End of the Year 28,931,261 31,618,567 Since the comprehensive income statement is limited to the profit for the period and prior years’ adjustments, the comprehensive income statement is not presented. The explanatory notes are an integral part of the financial statements. 60 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Cash Flows Statement For the Year Ended March 20th, 2015 (Revised) 2013-14 2014-15 Note Million IRR Million IRR Million IRR Operating Activities: Net Cash Inflow from Operating Activities 32 Return on Investments & Paid Profit for Financing: Received Profit from Short-term Investment Deposit Received Profit from Investment in Shares of Other Companies 22,793,931 19,386,530 725,188 550,906 32,760 3,189 Paid Profit for Financial Facilities (6,454,259) (5,299,914) Paid Dividend (9,466,575) (8,512,886) Net Cash Outflow from Return on Investments & Paid Profit from Financing (15,162,886) (13,258,705) (3,461,625) (4,540,446) Income Tax: Income Tax Paid Investment Activities: Paid Amounts for Purchase of Fixed Tangible Assets Paid Amounts for Purchase of Intangible Assets Received Amounts from Sales of Fixed Tangible Assets Received Amounts from Sales of Long-term Investments Paid Amounts for Acquiring Short-term Investments Paid Amounts for Acquiring Long-term Investments (11,159,685) (7,991,549) (6,564) (87) 53,327 121,615 - 816,857 (559,955) - (2,789,496) (1,233,086) Net Cash Outflow from Investment Activities (14,462,373) (8,286,250) Net Cash Outflow before Financing Activities (10,292,953) (6,698,871) Financing Activities: Amounts Received from Capital Increase Financial Facilities Received Repayment of Origin of Financial Facilities Received Net Cash Inflow from Financing Activities 88,202 46,549 130,513,568 76,814,335 (123,253,480) (67,388,910) 7,348,290 9,471,974 (2,944,663) 2,773,103 Cash Balance at the beginning of the Year 6,734,553 3,566,255 Effect of Foreign Exchange Rates Changes (196,689) 395,195 3,593,201 6,734,553 12,411,798 4,153,451 Net Increase (Decrease) in Cash Cash Balance at the End of the Year Non-cash transactions 33 The explanatory notes are an integral part of the financial statements. Annual Report 2014-2015 61 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 1. History of Activities 1.1. Generalities Based on the minute of the Extra Ordinary General Assembly dated 1383/02/21 (10.05.2004) became of public joint stock company and was subsequently listed at the Tehran Stock Exchange on 1385/12/07 (26.02.2007). The address of company headquarters is at: Sa’adatabad St., Azadi Sq., Esfahan and the address where the Company’s main operations tale place is at: 74 km South-West Esfahan. 1.2. Main Activities The activities of the company in accordance with the Article 3 of its Articles of Association are as follow: A) Utilization of a steel making complex located 74 km from Esfahan city B) Carrying out any kind of productive activity, trading, including domestic and international which is directly or indirectly related to the activities of the company C) Entering into partnerships and investment in other companies by establishing new companies or subscribing to purchase shares of new companies or purchasing or subscribing to the shares of existing companies D) Preparing and publishing scientific, technical and research bulletins as well as carrying out research and advertising in relation to the activities of the company E) Assisting the cultural, educational and sports institutions F) Exploration and exploitation of metal and non-metal mines including iron ore and dolomite, required by the steel industry as well as sorting iron ore and producing concentrate and pellets. G) Carrying out any other activities which may serve the objectives of the Company 1.3. Employment Status The number of company employees at the end of the year is as follows: Group Permanent Employees Parent Company 2014-15 2013-14 2014-15 2013-14 Persons Persons Persons Persons 4,454 4,935 7,221 7,106 Direct Contract Employees 10,514 10,216 10,292 9,998 Total Personnel of Service Companies 17,735 17,322 14,746 14,933 5,363 5,156 3,663 3,536 23,098 22,478 18,409 18,469 2. Summary of Accounting Procedures 2.1. Basis for Preparation of the Financial Statements The financial statements are mainly prepared on the basis of finished cost and in the following case, current values have been applied: - Fixed tangible assets based on revaluation method (Note 2-8-2). 62 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 2.2. Basis for consolidation 2.2.1. The consolidated financial statements are composed of items of the MSC’s financial statements (PJC) and South Hormozgan Steel (joint stock) Mobarakeh Steel Engineering, Technical, International Systems & Automation (IRSIA), Kaveh Tehran Industries, Esfahan Mabarakeh Steel Sang Mining & Industrial, Sangan Sang va Iron Steel, Tadarok Metal as well as Amir Kabir Kashan Steel companies, following the deduction of internal group transactions and account balances and unrealized profit and loss resulting from the mentioned transactions. 2.2.2. The results of operations of subsidiary companies which have been acquired during the reporting period, are reflected in the consolidated profit and loss statement of the date of their effective take over by the Parent Company and the result of operations of subsidiary companies which have been sold are reflected in the consolidated profit and loss statement until date of their transfer. 2.2.3. Shares acquired by the subsidiary companies are booked in the accounts at cost price and are reflected in the consolidated balance sheet as reducers of shareholders equity under the heading of “shares of the Parent Company owned by subsidiary companies”. 2.2.4. The consolidated financial statements are prepared with homogeneous accounting procedures in reference with transactions and other similar events which take place under similar circumstances. 2.3. Inventory of Materials and Goods 2.3.1. Every single item and the similar groups within the inventories of materials and goods will be evaluated by the “least cost price and net sales value”. In case the cost price is more than the net sales value, the difference of which will be recognized as a reserve for a decrease in inventory value. Cost price of inventories is calculated by using the following methods: Method of Cost Price Calculation Raw Materials Weighted Average Auxiliary Materials Weighted Average Spare Parts Weighted Average Materials for Repair & Maintenance Weighted Average In-process Goods Average Cost Price in View of Finishing Percentages Finished Goods Weighted Average Annual Report 2014-2015 63 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 2.4. Investments Description Group Consolidated Parent Company Evaluation Method: Long-term Investments: Investment in Subsidiary Companies Liable to Consolidation (Liable to Consolidation) Investment in Affiliated Companies Equity Method Other Long-term Investments Cost (less: Retained Investment Devaluation) Cost (less: Retained Investment Devaluation) Cost (less: Retained Investment Devaluation) Cost (less: Retained Investment Devaluation) Minimum Cost & Net Sales Value of Total Investments Minimum Cost & Net Sales Value of Each Investment Minimum Cost & Net Sales Value of Total Investments Minimum Cost & Net Sales Value of Each Investment Current Investments: Investments Rapidly Transacted in the Market Other Current Investments Income Recognition Method: At the Time of Profit Ratification by the Shareholders’ General Assembly Investment in Subsidiary Companies Liable to Consolidation of Investee Company (until the Date of Approval of the Financial Statements) At the Time of Profit Ratification by the Shareholders’ General Assembly Investment in Affiliated Companies Equity Method of Investee Company (until the Date of Approval of the Financial Statements) At the Time of Profit Ratification by At the Time of Profit Ratification by Other Long-term & Current the Shareholders’ General Assembly the Shareholders’ General Assembly Investments in Shares of Companies of Investee Company (until the date of Investee Company (until the date of Balance Sheet) of Balance Sheet) 2.5. Assets Retained for Sale 2.5.1. Noncurrent assets whose book value is recycled mainly from sale, not use are classified under the heading of “Assets Retained for Sale”. Such conditions are only recognized when noncurrent assets are to be sold quickly where they are ready and are likely to be sold and a considerable part of the management is committed to selling noncurrent assets in such a manner that sale is carried out within a one year period as of classification date (with the exception of cases which are beyond the authority of the management). 2.5.2. Noncurrent assets retained for sale are measured at “minimum book value and net sales value”. 2.6. Goodwill Acquisition type of business units and accounting procedure is based on the purchasing method. Excess cost price of investments in subsidiary companies which is liable to consolidation and is dependent upon the group’s share from the recognizable net asset value at the time of acquisition is recognized as goodwill and is depreciated within a 20 year period via the straight line method. Goodwill resulting from the acquisition of subsidiary companies is reflected in the consolidated balance sheet as long-term investment book value. 64 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 2.7. Intangible Assets 2.7.1. Intangible assets are measured and reflected in the accounts based on cost price. 2.7.2. Depreciation of intangible assets is determined by their useful life, are calculated having taken into consideration the consumption model of future expected economic interests and based on rates and the following methods: Asset Depreciation Rate Depreciation Method Technical Knowledge 20 Year Direct Line Software 5 Year Direct Line 2.8. Fixed Tangible Assets 2.8.1. With the exception of the case mentioned in clause 2.8.3, fixed tangible assets are recorded in the accounts on the basis of cost price. Renovation and structural repair expenditures that would significantly increase the capacity or fundamentally improve the quality of output or useful life of the assets are considered as capital expenditure and depreciated over the useful life of the assets. Minor maintenance and repair expenses are taken into account as current expense at the time of occurrence and included in the profit and loss account for the year. 2.8.2. The fixed tangible assets of the company by the end of 2001, have been in accordance with Article 62 of the Third Economic, Social and Cultural Development Plan Act of the Islamic Republic of Iran and according to the bylaw of the said Article, been revalued and have been reflected in the company books in 2002 and in 2002 transferred to capital account and registered into companies’ registration office in 1381/11/09 29.01.2003. 2.8.3. The depreciation of the fixed tangible assets is calculated, taking into consideration the consumption model of future expected economic interests and in view of the useful life of the said assets (taking into consideration the depreciation bylaw, relating to the Article 151 of the Direct Taxation Act ratified in February 1988 and its subsequent amendments) are based on the rates and procedures mentioned in the following table: Depreciation Method Declining Depreciation Rate 10% & 8% ,7% Declining 8% Declining 25% Buildings Production Machineries Furnaces & Accessories & Construction & Road Construction Machineries Cranes Tools Direct Years 4 Declining 15% Direct Years 10 Data Processing System Direct Years 10 Telecommunication Equipment & Devices Declining 30% & 35% ,25% Direct Years 10 Declining 12% Direct Years 5 Mobile Compressors Motor Vehicles Furniture & Equipment Installation Computer Software Annual Report 2014-2015 65 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 2.8.3.1. Depreciation of fixed tangible assets is calculated from the date when the depreciable asset is ready to be brought into operation and it is at the disposal of the company and in case the depreciable asset is at the disposal of the company during the month, then it will not be calculated in the related month. In cases where each of the depreciable assets ready to be utilized, are not used, due to holidays or any other reason, the rate of depreciation is calculated at 30% of depreciation dated 1381.12.28 19.03.2003 is reflected in the above table. 2.8.3.2. According to the circular 74876 dated 19.03.2003 of Tax Affairs Organization, depreciation of revaluated fixed assets is calculated based on twice of the length of time or half of the rates as indicated in Article 151 of Direct Taxation Act. 2.8.4. Depreciation of fixed assets which have been bought for the purpose of renovation, replacement or completion is calculated based on Article 150 of Direct Taxation Act and based on half of the time or two times of the rates of Article 151 table. 2.9. Provisions 2.9.1. Provision for Employees Work Termination Benefit Provision for employees’ work termination benefit were calculated and recorded into accounts on the basis of one month latest salary and continuous benefits for each year of service. 2.9.2. Provision for Employees Leave Buyback Provision for purchase leave, which is 9 days of each year, is reflected in the accounts based on the latest wages and out of headquarters allowances. 2.10. Operating Income 2.10.1. Operating income measured at fair value against amounts received or receivable and following the deductions resulting from reimbursements or discounts. 2.10.2. Operating income from sales of goods is identified at the time of delivery. 2.10.3. Operating income from services rendered is identified at the time service. 2.11. Financial Expenses With the exception of those which are directly related to the acquisition of “eligible assets” financial expenses at the time of occurrence are identified as expenses. 2.12. Forex 2.12.1. Monetary items in foreign currency are exchanged at the official exchange rate on balance sheet date and nonmonetary items which have been registered at historical cost depending on currency type, are exchanged on transaction date. The differences resulting from the exchange of monetary items are reflected in the accounts in the following manner: i. The differences in foreign currency dues relating to “eligible assets” are recorded at cost price. ii. In other cases, they are identified as income or expense of the period at the time of occurrence and are recorded in the profit and loss account. 66 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 3. Cash Group Cash at Banks Cash at Hand & Petty Cash Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 5,389,310 8,111,872 3,239,728 6,551,540 365,432 185,175 353,473 183,013 5,754,742 8,297,047 3,593,201 6,734,553 3.1. Cash at banks at the date of balance sheet is as follows: Group Cash at Banks – Rials Cash at Banks – Foreign Exchange Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 2,391,974 6,727,081 368,605 5,283,474 2,997,336 1,384,791 2,871,123 1,268,066 5,389,310 8,111,872 3,239,728 6,551,540 3.1.1. Balance of foreign exchange accounts of the Parent Company (include; €83,238,087 – US$5,913,511 and AED25,643,253) at the end of the year have been exchanged based on the rate of the Central Bank of the Islamic republic of Iran with the rate of €1 / IRR30,156 - $1 / IRR27,994 and 1 AED / IRR7,622. 4. Short-term Investments 2014-15 2013-14 Million IRR Million IRR Group: Short-term Banking Investment Deposits – IRR Short-term Banking Investment Deposits – Foreign Exchange 880,000 1,019,930 1,493,774 1,028,335 2,373,774 2,048,265 880,000 706,940 1,415,220 1,028,325 2,295,220 1,735,265 Parent Company: Short-term Banking Investment Deposits – IRR Short-term Banking Investment Deposits – Foreign Exchange Annual Report 2014-2015 67 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 5. Trade & Non-trade Receivables 5.1. Short-term receivables 2014-15 2013-14 Rials Foreign Currency Total Provision for Doubtful Debts Million IRR Million IRR Million IRR Million IRR Net Net Million IRR Million IRR Group: Trade: Notes Receivable: Other Clients 3,563,372 - 3,563,372 - 3,563,372 1,279,483 3,563,372 - 3,563,372 - 3,563,372 1,279,483 42,325 52,354 (166,646) 11,103,750 15,037,365 Accounts Receivable: Related Parties (Note 35-2) Other Clients 42,325 42,325 11,270,396 11,270,396 11,312,721 - 11,312,721 (166,646) 11,146,075 15,089,719 14,876,093 - 14,876,093 (166,646) 14,709,447 16,369,202 - - - - 1,484 462,969 - 462,969 - 462,969 354,321 Temporary Deposits 64,556 - 64,556 - 64,556 2,768 Dividend Receivable 1,984,610 - 1,984,610 - 1,984,610 2,578,477 964,663 - 964,663 - 964,663 4,613,356 1,450,102 Non-trade: Notes Receivable: Personnel (Loan & Allowances) Short-term Credit Account – Other People Related Parties (Note 35-2) Others 709,427 - 709,427 - 709,427 3,141,146 - 3,141,146 (3,726) 3,137,420 702,834 7,327,371 - 7,327,371 (3,726) 7,323,645 9,703,242 22,203,464 - 22,203,464 (170,372) 22,033,092 26,072,444 Parent Company: Trade: Notes Receivable: Other Clients 3,259,850 - 3,259,850 - 3,259,850 1,241,360 3,259,850 - 3,259,850 - 3,259,850 1,241,360 Accounts Receivable: Related Parties (Note 35-4) 2,004,435 37,201 2,041,636 - 2,041,636 1,643,599 Other Clients 9,666,360 2,574,997 12,241,357 (158,324) 12,083,033 13,762,452 11,670,795 2,612,198 14,282,993 (158,324) 14,124,669 15,406,051 14,930,645 2,612,198 17,542,843 (158,324) 17,384,519 16,647,411 312,461 Non-trade: Personnel (Loan & Allowances) 417,377 - 417,377 - 417,377 Temporary Deposits 2,858 - 2,858 - 2,858 2,768 Dividend Receivable 2,127,631 - 2,127,631 - 2,127,631 2,578,477 257,576 - 257,576 - 257,576 459,288 Short-term Credit Account – Other People Related Parties (Note 35-4) 6,703,110 95,715 6,798,825 - 6,798,825 1,975,416 Others 1,002,779 1,845,286 2,848,065 - 2,848,065 4,243,946 10,511,331 1,941,001 12,452,332 - 12,452,332 9,572,356 25,441,976 4,553,199 29,995,175 (158,324) 29,836,851 26,219,767 68 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 5.2. Long-term receivables 2014-15 2013-14 Million IRR Million IRR Group: Non-trade: Personnel (Loan & Allowances) 1,886,987 1,799,359 1,886,987 1,694,575 Parent Company: Non-trade: Personnel (Loan & Allowances) 6. Inventories Cost Price Million IRR 2014-15 Provision for Value Decrease Million IRR 2013-14 Net Net Million IRR Million IRR Group: Produced Goods Goods under Completion Raw Materials & Packaging Parts & Spare Parts Consumption & Auxiliary Materials Operating Parts Inventory of Scrap Other Inventories Goods in Transit 6,600,232 - 6,600,232 7,704,494 7,329,141 - 7,329,141 3,602,133 20,930,291 - 20,930,291 12,931,246 1,355,092 (356,010) 999,082 7,254,451 9,208,395 - 9,208,395 6,581,919 9,590,354 - 9,590,354 988,781 795,706 - 795,706 608,353 1,864 - 1,864 2,429 55,811,075 (356,010) 55,455,065 39,673,806 944,395 - 944,395 2,423,973 56,755,470 (356,010) 56,399,460 42,097,779 2,912,756 - 2,912,756 3,456,884 Parent Company: Produced Goods Goods under Completion Raw Materials & Packaging Parts & Spare Parts Consumption & Auxiliary Materials Operating Parts Goods in Transit 7,320,781 - 7,320,781 3,595,386 17,212,449 - 17,212,449 10,306,832 8,166,010 (356,010) 7,810,000 6,486,717 8,874,538 - 8,874,538 6,208,366 1,355,092 - 1,355,092 988,781 45,841,626 (356,010) 45,485,616 31,042,966 944,395 - 944,395 2,423,973 46,786,021 (356,010) 46,430,011 33,466,939 Annual Report 2014-2015 69 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 6.1. Inventory of raw material, packaging finished goods and spare parts of the Group have been insured against fire, flood and earthquake for up to IRR6,487,500 million and the Parent Company for up to IRR5,000,000 million (it is noteworthy that based on the ratification of the Ordinary General Assembly dated 1393/04/29 (20.07.2014) authority of insurance coverage has been handed over to the Board of Directors which based on the minute number 81/2/061 dated 1394/04/14 (05.07.2015) has approved the aforementioned insurance coverages). 6.2. increase of raw material and packaging inventory is mainly due to the increase in the volume of iron ore, pellets and ferromanganese until the end of the fiscal period. 6.3. Inventory of good in process includes spare parts and raw material. 7. Prepayments Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR Orders: Orders of Raw Materials 221,511 1,599,848 146,423 1,599,436 1,158,275 1,489,208 466,124 1,277,553 1,379,786 3,089,056 612,547 2,876,989 Domestic Suppliers 3,930,942 3,191,108 3,651,639 3,070,149 Foreign Suppliers 3,505,681 4,919,908 3,505,681 4,919,908 25,114 52,683 - - 7,461,737 8,163,699 7,157,320 7,990,057 8,841,523 11,252,755 7,769,867 10,867,046 Orders of Parts & Spare Parts Prepayments: Others 8. Assets held for Sales & Debts related to Assets held for Sales Group Land Buildings Assets held for Sales 2014-15 2013-14 Million IRR Million IRR 73,118 151 - 24,557 73,118 24,708 8.1. Non-current assets for sales related to Tajrish land of Felez Tadarok Co. 70 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 9. Long-term Investments 2014-15 2013-14 Million IRR Million IRR Group: Investment in Subsidiary Companies 18,742 18,742 Investment in Affiliated Companies (Note 9-1-1) 6,415,684 2,402,133 Investment in Other Companies 8,788,993 7,463,548 15,223,419 9,884,423 3,188,342 342 7,527 108,575 1,242,240 1,047,240 19,661,528 11,040,580 16,918,707 16,053,193 Investment in Affiliated Companies 4,950,142 2,680,093 Investment in Other Companies 8,788,993 7,463,548 30,657,842 26,196,834 Investment Prepayment (Note 9-4) 3,188,342 342 Long-term Investment Banking Deposit 1,229,000 1,034,000 35,075,184 27,231,176 Investment in Shares of Companies (Note 9-1) Investment Prepayment (Note 9-4) Others Long-term Investment Banking Deposit Parent Company: Investment in Subsidiary Companies Investment in Shares of Companies (Note 9-1) Non- TSE Non- TSE Sepahan Mobarake Steel Cultural & Sports Club Co. Sepahan Novin Cultural & Sports Co. Non- TSE Non- TSE Non- TSE Novin Electrode Ardakan Co. Providing & Installing Constructional Machineries Co. (Tamco) Toka Beton Co. 22,500 Bourse Energy Co. 21,000 Non-TSE Agreement Base Market Esfahan Regional Metro Co. 118,000 Non-TSE 3,028,500 1,789,224,829 1,777,791,698 75,000 2,265,440 310 643,199 152,501,681 3,086,413,593 95 95 15,780 No. of Shares Esfahan Industries Treatment & Hygiene Services Co. Sahami Bourse Kalaye Iran Co. TSE Gole Gohar Mining & Industrial Co. Agreement Base Market TSE Chador Malu Mining & Industrial Co. Investment in Other Companies: Non- TSE TSE Toka Foulad Investment Co. Metil Steel Co. TSE Mines & Metals Development Investment Co. Investment in Affiliated Companies: Non- TSE Listed Companies Tara Steel Co. – Ltd. Investment in Subsidiary Companies: Group: 9.1. Investment in shares of companies 95 95 70 0 10 0.88 0.67 9.94 10.40 25 37.68 39 32.16 25.00 19.29 Percent - 8,788,993 15,223,419 - - - - 23 2,100 590 1,478 4,916,999 - - 6,415,684 3,867,803 - - - - - 15,528 40,569 125,894 439,622 562,465 - - 18,742 5,231,606 - - 10 95 - Million IRR Million IRR 18,637 Retained Value Decrease Cost Price / Equity Method 2014-15 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 15,223,419 8,788,993 23 2,100 590 1,478 4,916,999 3,867,803 6,415,684 15,528 40,569 125,894 439,622 562,465 5,231,606 18,742 10 95 18,637 Million IRR Book Value 21,311,829 12,709,589 23 2,100 590 1,478 6,602,240 6,103,158 8,583,498 8,709 20,842 35,356 387,993 714,008 7,416,590 18,742 10 95 18,637 Million IRR Market Value 9,865,680 7,463,548 8 2,100 590 1,478 4,121,787 3,337,585 2,402,133 22,192 38,619 - 122,998 73,384 2,144,940 18,742 10 95 18,637 Million IRR Book Value 31,338,323 19,627,665 8 2,100 590 1,478 10,141,933 9,481,556 11,691,916 8,709 20,842 - 36,298 179,871 11,446,196 18,742 10 95 18,637 Million IRR Market Value 2013-14 119,631,503 Non-TSE Non-TSE Non-TSE Non-TSE Sang va Ahan-e Foulad-e Sangan Co. Felez Tadarok Co. Foolad Sepahan Sports Club Sepahan Novin Cultural & Sports Co. Non-TSE Non-TSE Tuka Beton Co. 22,500 Agreement Base Market Iran Energy Exchange Co. 21,000 Non-TSE Esfahan Subway Co. 118,000 Non-TSE Esfahan Health Services Co. 3,028,500 1,789,224,829 1,777,791,698 Agreement Base Market TSE Gole Gohar Industrial & Mining Co. 75,000 2,265,440 310 152,501,681 643,199 3,086,413,593 95 996 990,000 15,780 Iran Mercentile Exchange Co. TSE Chadormaloo Industrial & Mining Co. Investment in Other Companies: Non-TSE Ardekan Novin Electrode Co. TSE Non-TSE Construction & Erection Equipment Supply Co. Tuka Foolad Investment Co. Metil Steel Co. Metals & Minings Developing Investment Co. TSE 95 Non-TSE Mobarakeh Steel Engineering Co. Investment in Affiliated Companies: 996 Non-TSE Tara Steel Co. – Ltd. - Non-TSE Sani’e Kaveh Tehran Co. 1,533,750 Non-TSE 225,528,007 International Systems Engineeiring & Automation Co. (IRISA) TSE Non-TSE Foolad Sang Mining & Industrial Co. Kashan Amir-Kabir Steel Co. 464,115,705 649,900 Non-TSE Non-TSE Chahar Mahal & Bakhtiari Sefid Dasht Steel Co. 14,999,999,996 w14,999,999,996 No. of Shares Over the Counter Listed Companies Chahar Mahal va Bakhtiari Automative Sheet Co. Hormozgan Steel Co. Investment in Subsidiary Companies: Parent Company: 9.1. Investment in shares of companies – Continued 100 0 10 0.88 0.67 9.94 10.40 25 37.68 31 25 32.16 19.29 95 95 99.6 99.6 99 70 - 68.17 52.57 98.87 66.30 64.99 Percent 6,499 - 8,788,993 - 30,657,842 - 8,788,993 30,657,842 2,100 590 1,478 4,916,999 3,867,803 23 - - - - 4,950,142 8,709 20,842 117,418 562,465 387,993 3,852,715 16,918,707 10 95 10 10 990 18,637 - 52,656 1,220,954 304,328 314,518 6,499 15,000,000 Million IRR Book Value - 23 2,100 590 1,478 4,916,999 - 3,867,803 - 8,709 - - - - 4,950,142 20,842 117,418 562,465 387,993 - - 16,918,707 3,852,715 - - - - - - - - - - - 10 95 10 10 990 18,637 - 52,656 1,220,954 304,328 314,518 - Million IRR Million IRR 15,000,000 Retained Value Decrease Cost Price / Equity Method 2014-15 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 39,462,627 12,709,589 23 2,100 590 1,478 6,602,239 6,103,159 8,583,498 8,709 20,842 35,356 714,008 387,993 7,416,590 18,169,540 10 95 10 10 990 18,637 - 52,656 2,471,787 304,328 314,518 6,499 15,000,000 Million IRR Market Value 26,196,834 7,463,548 8 2,100 590 1,478 4,121,787 3,337,585 2,680,093 8,709 20,842 - 73,384 36,298 2,540,860 16,053,193 10 95 10 10 990 18,637 50,647 52,656 625,810 304,328 15,000,000 Million IRR Book Value 47,578,342 19,627,665 8 2,100 590 1,478 10,141,933 9,481,556 11,691,916 8,709 20,842 - 179,871 36,298 11,446,196 16,258,761 10 95 10 10 990 18,637 50,647 52,656 831,378 304,328 0 0 15,000,000 Million IRR Market Value 2013-14 Annual Report 2014-2015 73 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 9.1.1. Group’s investment in affiliated companies Quota from Net Total Assets Million IRR Balance at the beginning of the Year 2,402,133 Acquired during the Year 2,259,749 Quota from Profit of Affiliated Companies during the Year 2,934,128 Dividend Received or Receivable during the Year (1,180,326) 6,415,684 - Increase in profit quota of affiliated companies during the year is related to income recognition from investment with equity method in Mines & Metals Development Investment Co. for 201314 and before. 74 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 9.2. Details of the Group’s affiliated and subsidiary companies are as follows: Percent of Investment Location 2014-15 Group 2013-14 Parent Company Major Activity Parent Company Group Subsidiary Companies: South Hormozgan Steel Co. Iran 100.00 100.00 100.00 100.00 Steel Making Iran 64.99 64.99 - - Steel Making Iran 66.30 66.30 - - Galvanized Plate Iran 98.87 98.87 98.87 98.87 Lime Metil Steel Co. Iran 56.58 32.16 56.58 32.16 Investment Amir Kabir Kashan Steel Co. Iran 52.57 52.57 36.56 36.56 Galvanized Plate Systems & Automation International Co. (IRISA) Iran 68.17 68.17 68.17 68.17 IT Services Germany 100.00 70.00 100.00 70.00 Trade Mobarakeh Steel Technical & Engineering Co. Iran 100.00 99.00 100.00 99.00 Sangan Steel Iron & Stone Co. Iran 100.00 99.60 100.00 99.60 Pelletizing Iran 100.00 99.60 100.00 99.60 Trading Scrap Iran 100.00 95.00 100.00 95.00 Sports – Cultural Iran 100.00 95.00 100.00 95.00 Sports – Cultural Mines & Metals Development Investment Co. Iran 19.29 19.29 19.15 19.15 Investment Toka Foulad Investment Co. Iran 35.00 25.00 35.00 18.25 Investment Sefid Dasht Chahar Mahal va Bakhtiari Steel Co. Chahar Mahal va Bakhtiari Automobile Sheets Co. Foulad Sang Mobarakeh Esfahan Mining & Industrial Co. Tara Steel Co. – Ltd. Felez Tadarok Esfahan Mobarakeh Steel Co. Sepahan Mobarake Steel Cultural & Sports Club Sepahan Novin Cultural & Sports Co. Engineering Services Affiliated Companies: Novin Electrode Ardakan Co. Iran 39.00 31.00 - Providing & Installing Constructional Machineries Co. (Tamco) - Electrode Iran 41.94 37.68 41.94 Provision 37.68 & Repair of Machineries Toka Beton Co. Iran 72.50 25.00 72.50 25.00 Concrete Iran 10.40 10.40 10.40 10.40 Exploiting Iron ore Iran 9.94 9.94 9.94 9.94 Exploiting Iron ore Other Companies: Chador Malu Mining & Industrial Co. Gole Gohar Mining & Industrial Co. Sahami Bourse Kalaye Iran Co. Iran 1.90 0.67 2.00 6.67 Trade Esfahan Industries Treatment & Hygiene Services Co. Iran 0.88 0.88 0.88 0.88 Hygiene Services Esfahan Regional Metro Co. Iran 10.00 10.00 10.00 10.00 Transportation Services Annual Report 2014-2015 75 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 9.3. The Parent Company acquired 63.3% of the shares of Charmahal Bakhtiuyari Sheet Company (Joint Stock) with voting rights on 1393/04/01 22.06.2014. The cost price of this acquisition is stated below: Million IRR Fixed Tangible Assets 5,363,472 Intangible Assets 2,602 Investment 41,417 Inventory 519,550 Receivables 455,932 Orders & Prepayments 294,031 Cash 84,558 Payables (5,854,593) Advances Received (448,375) Provision for Employees’ Work Termination Benefits (7,289) Minority Interest (152,090) Net Recognizable Assets 299,215 Goodwill 15,304 Gross of Cash Paid 314,519 Acquired Cash (84,558) Net Cash Outflow 229,961 9.4. The amount of IRR3,188,000 million of investment prepayments are related to handing over a cheque for the value of assets of Charmahal Bakhtiyari Sepid Dasht Steel Project. Since the Company jointly owns 65% of the mentioned company with IMIDRO, the cost price is shared between the two stakeholders. 10. Goodwill & Intangible Assets Group Note Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR Goodwill 10-1 1,879,087 1,635,627 - - Intangible Assets 10-2 1,584,244 1,607,174 468,209 467,653 3,463,331 3,242,801 468,209 467,653 76 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 10.1. Goodwill relating to excess cost price of acquired assets of South Hormozgan, Mobarakeh Esfahan Foulad Sang Mining & Industrial, Amir Kabir Kashan Steel as well as Charmahal Bakhtiyari Vehicle Sheet Companies is in net fair value and shall be depreciated via the direct line method over the next 20 years. Group Cost Price at the beginning of the Year 2014-15 2013-14 Million IRR Million IRR 1,911,041 Acquired Goodwill during the Year 1,911,041 344,224 - Cost Price at the End of the Year 2,255,265 1,911,041 Accumulated Depreciation at the beginning of the year (275,414) (181,291) Depreciation of the Year (100,764) (94,123) Accumulated Depreciation at the End of the Year (376,178) (275,414) Book Value 1,879,087 1,635,627 10.2. Intangible assets (Amounts in Million IRR) Accumulated Depreciation & Retained Value Decrease Cost Price Balance at the beginning of the Year Depreciation & Values Decrease 16,579 7,983 1,348 9,331 7,248 Balance at the End of the Year Increase Book Value Balance at the beginning of the Year Balance at the End of the Year 2014-15 2013-14 Group: Technical Know-how Computer Software 16,579 Industrial Royalty 550,937 - 550,937 46,500 31,000 77,500 473,437 508,916 General Services Royalty 1,101,608 - 1,101,608 18 8 26 1,101,582 1,096,539 1,977 1,719 Other Intangible Assets 1,977 1,977 1,671,101 1,671,101 54,501 32,356 86,857 1,584,244 1,607,174 Parent Company: Industrial Royalty 120,000 - 120,000 46,500 6,000 52,500 67,500 73,500 General Services Royalty 394,171 6,564 400,735 18 8 26 400,709 394,153 514,171 6,564 520,735 46,518 6,008 52,526 468,209 467,653 Prepayments & Capital Orders Capital Items held with Warehouse Assets under Completion 2,985,528 208,917 12,803,160 16,259,729 95,946 18,801,920 72,260,726 9,608,715 3,456,569 22,869 8,269 2,195 2,570,707 13,135 766,183 73,211 Increase 9,958,034 8,747,940 53,458,806 548,001 Furniture & Fixtures Total 258,752 2,108,393 Equipment Motor Vehicles 24,457,630 Machineries 56,144 24,711,340 Building & Installation Tools 1,318,546 Balance at the beginning of the Year Land 11.1. Group 11. Fixed Tangible Assets - (2,857) - - - - (2,857) (114) (512) (101) (969) - (1,161) Sold Cost Price 1,439,138 (2,182,177) (250,978) (3,081,048) 1,149,849 3,621,315 98,814 36,015 26,094 2,948,750 53,198 725,533 (267,089) Transfers & Other Changes 89,956,736 29,422,903 53,885 9,862,514 19,506,504 60,533,833 669,570 302,524 2,136,581 29,976,118 122,477 26,201,895 1,124,668 Balance at the End of the Year 18,957,357 135 135 - - 18,957,222 276,531 170,863 1,147,083 9,422,658 29,160 7,910,927 - Balance at the beginning of the Year 3,708,153 - - - - 3,708,153 49,343 39,269 107,390 1,653,121 22,830 1,836,200 - Depreciation & Values Decrease - (1,932) - - - - (1,932) (48) (440) (79) (439) - (926) Sold - 22,663,578 135 135 - - 22,663,443 325,826 209,692 1,254,394 11,075,340 51,990 9,746,201 Balance at the End of the Year Accumulated Depreciation & Retained Value Decrease Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 67,293,158 29,422,768 53,750 9,862,514 19,506,504 37,870,390 343,744 92,832 882,187 18,900,778 70,487 16,455,694 1,124,668 2014-15 53,303,369 18,801,785 95,811 9,958,034 8,747,940 34,501,584 271,470 87,889 961,310 15,034,972 26,984 16,800,413 1,318,546 2013-14 Book Value (Amounts in Million IRR) 11,854,361 12,104,090 17,015,478 57,147,407 - (997) - - - (997) (30) (171) (101) (34) - (661) Sold Cost Price - (1,527,044) (2,916,286) 1,389,242 1,527,044 57,755 35,958 26,093 909,690 216,342 280,893 313 Transfers & Other Changes 69,250,500 27,342,795 8,319,946 19,022,849 41,907,705 493,429 271,097 2,116,675 24,494,381 6,538,367 7,452,691 541,065 Balance at the End of the Year 16,891,042 - - - 16,891,042 255,382 159,292 1,132,629 9,310,588 2,859,768 3,173,382 - Balance at the beginning of the Year 2,456,478 - - - 2,456,478 32,803 34,296 105,437 1,316,976 519,982 446,984 - Depreciation & Values Decrease - (687) - - - (687) (28) (145) (79) (33) - (401) Sold - 19,346,833 - - 19,346,833 288,157 193,443 1,237,987 10,627,531 3,379,750 3,619,965 Balance at the End of the Year Accumulated Depreciation & Retained Value Decrease 49,903,667 27,342,795 8,319,946 19,022,849 22,560,872 205,272 77,654 878,688 13,866,850 3,158,617 3,832,726 541,065 2014-15 40,256,365 17,015,478 8,488,948 8,526,530 23,240,887 179,018 76,018 958,054 14,273,705 3,301,466 3,945,144 507,483 2013-14 Book Value (Amounts in Million IRR) 11.3. Fixed tangible assets of the Group and the Parent Company have insurance coverage against fire, flood and earthquake for up to IRR104,592,000 million and IRR85,000,000 million respectively. 2,747,284 8,488,948 Prepayments & Capital Orders 9,107,077 249,729 8,526,530 40,131,929 1,304 - - 432 160,791 53,933 33,269 Increase Assets under Completion Total 434,400 2,090,683 Equipment Furniture & Fixtures 23,584,293 Machineries 235,310 6,161,234 Installation Motor Vehicles 7,118,526 507,483 Balance at the beginning of the Year Building Land 11.2. Parent Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 Annual Report 2014-2015 79 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 11.4. Assets under completion of the Parent Company Percent of Completion 2014-15 Development Projects up to 5.4 Million Tons 2013-14 99.9 Rendering Service to Development Projects 61.74 Establishing 3 Units of Mega Module & 2 Units of Lime 95.08 Estimation of Utilization Date Estimation of Completion Expenses 2014-15 2013-14 Million IRR Million IRR Million IRR Effect of the Project on Operation 139,785 2,674,601 2,219,830 Production Increase 578,016 1,921,100 825,223 Production Increase 86,565 905,285 631,422 Production Increase 12,570,741 3,390,918 - Production Increase 2,370,201 3,726,093 1,899,862 Production Increase 99.36 Utilized 71.66 Retained Expenses Until the End of 2015-16 Until the 90.994 Middle of 2016-17 31.5 14.95 Until the End of 2016-17 81.07 76.28 End of 2015-16 94.8 90.18 Until the End of 2015-16 53,122 365,432 309,776 Production Increase Development Projects up to 7.2 Million Tons 85.78 65.6 Until the End of 2015-16 296,478 1,813,647 789,413 Production Increase Hot Rolling Unit Projects 93.96 92.56 Utilized 39,086 97,800 87,281 Production Increase Steel Making Unit Projects 86.87 58.54 26,277 96,787 73,110 Production Increase Establishing Fifth Casting Machine 74.25 Until the 14.14 Middle of 2016-17 1,160,713 940,027 67,865 Production Increase Iron Making Unit Projects 94.06 89.79 64,200 22,137 18,976 Production Increase 77 92,791 24,587 Production Increase - 14,461 14,461 Decrease in Pollutants 9,532,260 2,961,770 1,564,725 26,917,521 19,022,849 8,526,531 Sangan Development Projects Saba Steel Development Projects Cold Rolling Unit Projects Until the End of 2015-16 Until the End of 2015-16 Pre-painted Sheets & Tinned Unit Projects Environmental Projects Others 11.4.1. Of the financial expenses, the amount of IRR1,817,683 million was allocated towards projects under completion (eligible), during the reporting financial period. In addition, during the previous years, nothing was allocated to such projects. 12. Other Assets Group Banking Deposited Funds Other Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 2,905,000 - 2,905,000 - 179,621 13,209 - - 3,084,621 13,209 2,905,000 - 12.1. Since it is not possible to make any withdrawals until the loans have been settled, the amount of IRR2,905,000 million has been reflected in the mentioned account for the purpose of receiving loans and facilities. 80 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 13. Trade & Non-trade Payables 13.1. Short-term payables 2014-15 Total Million IRR Group: Trade: Notes Payable: Other People Accounts Payable: Related Parties (Note 35-2) Other People Non-trade: Notes Payable Insurance Premium Payables Retention Deposit Provision for Grants in Aids to Cultural & Welfare Organizations & Institutes Expenses Payables Provision for Personnel Leave Buyback Economic Affairs & Finance Department Related Parties (Note 35-2) Others Parent Company: Trade: Accounts Payable: Related Parties (Note 35-4) Other People Non-trade: Notes Payable Insurance Premium Payables Retention Deposit Provision for Grants in Aids to Cultural & Welfare Organizations & Institutes Expenses Payables Provision for Personnel Leave Buyback Economic Affairs & Finance Department Related Parties (Note 35-2) Others 2013-14 Total Million IRR 10,000 10,000 - 305,060 1,012,449 1,317,509 1,327,509 451,568 7,437,669 7,889,237 7,889,237 4,483,910 1,445,188 2,613,186 1,214,287 1,122,616 2,539,763 211,356 138,965 850,801 446,186 508,820 22,916 2,322,088 12,904,451 14,231,960 1,350,043 333,702 672,334 40,783 7,509 7,420,002 15,309,239 3,611,520 4,235,267 7,846,787 7,846,787 2,690,232 4,432,152 7,122,384 7,122,384 4,478,137 1,375,631 1,690,545 1,160,468 990,776 1,119,390 211,356 138,965 788,676 433,502 467,797 20,061 206,614 9,672,319 17,519,106 764,517 333,702 794,647 9,882 237,302 5,549,649 12,672,033 Annual Report 2014-2015 81 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 13.1.1. Notes payable in the amount of IRR4,478,137 million includes notes held by IMIDRO for purchasing the Sepid Dasht Steel Project, Esfahan Province Gas Company for consumed gas, Chamber of Commerce for 31/1000 presence in the mentioned chamber. 13.2. Long-term payables 2014-15 2013-14 Total Total Million IRR Million IRR Group: Non-trade: Notes Payable Others - 77,332 40,691 - 40,691 77,332 14. Tax Payable 2014-15 2013-14 Provision Notes Payable Total Provision Notes Payable Total Million IRR Million IRR Million IRR Million IRR Million IRR Million IRR Group 3,237,273 915,000 4,152,273 3,796,438 1,050,000 4,846,438 Parent Company 3,076,074 915,000 3,991,074 3,326,987 1,050,000 4,376,987 6,313,347 1,830,000 8,143,347 7,123,425 2,100,000 9,223,425 14.1. Flow of the Group’s payable tax account is as follows: Group 2014-15 2013-14 Million IRR Million IRR Balance at the beginning of the Year 4,846,438 5,024,583 Provision for Tax Performance of the Year 3,342,027 2,641,102 (64,963) 1,372,113 (3,954,217) (4,164,275) 4,169,285 4,873,523 (17,012) (27,085) 4,152,273 4,846,438 Adjustment of Provision Performance of Previous Years Paid during the Year Tax Prepayments 35,264,243 26,836,545 2013-14 2014-15 19,843,959 29,565,141 24,281,418 Million IRR 3,075,814 4,376,767 3,164,581 Million IRR Declared - 7,312,158 3,600,127 Million IRR Recognized 2014-15 - 3,461,624 3,600,127 Million IRR Paid - - (154) 4,376,987 3,991,074 4,377,141 3,991,331 (257) - 4,377,141 Million IRR Payable Balance 3,075,814 915,517 Million IRR Payable Balance (Revised) 2013-14 Not Surveyed Under Survey Finalized & Settled in Installment Recognition Method 14.2.3. Corporate tax for the 2014-15 period has been reflected in the accounts having taken into account, the declared profit and the lawful tax exemptions. 14.2.2. Corporate tax for the 2013 period in the amount of IRR7,312,158 million has been identified and the Company has been notified accordingly. This amount exceeds the taxes paid and taxes payable (including notes payable) in the amount of IRR2,935,534 million and since the Company has appealed against the method of identification, no provision has been reflected in the accounts in this regard. - - 3,600,127 Million IRR Definite Tax 14.2.1. All corporate taxes until the end of the 2012 period have been finalized and settled. Less: Tax Prepayment 23,221,372 Million IRR Declared Profit Income Liable (Loss) to Tax 2012-13 Fiscal Year 14.2. Summary of payable tax provision of the Parent Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 Annual Report 2014-2015 83 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 15. Payable Dividend 2014-15 2013-14 Million IRR Million IRR Parent Company Years before 2012-13 922,740 1,313,304 2012-13 4,267,874 12,272,288 2013-14 10,276,605 - 15,467,219 13,585,592 192,729 2,440 15,659,948 13,588,032 Group Subsidiary Companies – Owned by Minority 15.1. Cash profit of each share in 2013-14 was IRR660 and in 2012-13 it was IRR650. 16. Financial Facilities 2014-15 Group: Facilities Received Parent Company: Facilities Received 2013-14 Current Long-term Total Current Long-term Total Million IRR Million IRR Million IRR Million IRR Million IRR Million IRR 53,013,209 5,261,391 58,274,600 39,886,777 5,390,723 45,277,500 46,257,120 2,274,534 48,531,654 37,021,132 3,294,779 40,315,911 53,013,209 50,170,041 50,654,018 2,359,191 2,843,168 2,843,168 (5,261,391) 2,359,191 47,810,850 Current Portion Interest, Commission & Deferred Penalties (5,261,391) Long-term Portion 55,915,409 53,072,241 2,843,168 (4,829,186) (4,829,186) 60,744,595 Interest & Commission of Future Years 2,843,168 57,901,427 Banks 39,886,777 58,094 39,828,683 (5,390,723) 45,219,406 (3,753,657) 48,973,063 Million IRR Million IRR Million IRR Million IRR Total Foreign Currency IRR Total 2013-14 2014-15 Group 16.1.1. Based on facility providers 16.1. Financial facilities received based on different basis: 43,413,952 1,456,734 41,957,218 (2,274,534) 44,231,752 (4,631,559) 48,863,311 Million IRR IRR Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 2,843,168 2,843,168 2,843,168 2,843,168 Million IRR Foreign Currency 2014-15 46,257,120 1,456,734 44,800,386 (2,274,534) 47,074,920 (4,631,559) 51,706,479 Million IRR Total Parent Company 37,021,132 1,229,050 35,792,082 (3,294,779) 39,086,861 (3,750,444) 42,837,305 Million IRR Total 2013-14 Annual Report 2014-2015 85 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 16.1.2. Based on profit and commission rate Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 25% & Above 38,803,516 17,570,543 34,431,825 15,187,669 20% to 25% 10,898,932 22,369,295 9,175,760 19,335,627 15% to 20% 741,383 445,803 624,167 385,344 10% to 15% 2,094,474 259,708 - 224,487 Foreign Currency Loan 3,377,104 4,574,057 2,843,168 3,953,734 55,915,409 45,219,406 47,074,920 39,086,861 16.1.3. Based on payment schedule Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 2014-15 52,538,305 41,533,734 44,231,751 35,771,574 2015-16 675,421 733,033 568,634 658,956 2016-17 718,136 737,718 568,634 658,956 2017-18 632,706 728,348 568,634 658,956 2018-19 1,244,054 795,398 568,634 658,956 106,787 691,175 568,633 679,463 55,915,409 45,219,406 47,074,920 39,086,861 2019-20 & after 16.1.4. Based on type of collateral 2014-15 Parent Company 2013-14 Million IRR Million IRR Group Cheque & Promissory Note 24,057,169 19,557,169 Binding Agreement 31,858,240 27,517,751 55,915,409 47,074,920 86 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 17. Advances Received Group Note Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR Advances Received from Clients: Related Parties 35-4 Other Clients - - 19,084 72,070 5,892,776 3,187,170 5,840,605 2,940,270 5,892,776 3,187,170 5,859,689 3,012,340 18. Provision for Employees Work Termination Benefits & Savings Group 2014-15 Balance at the beginning of the Year Paid during the Year Provided Provision Balance at the End of the Year Work Termination Benefit Savings Million IRR 2013-14 Total Work Termination Benefit Savings Total Million IRR Million IRR Million IRR Million IRR Million IRR 2,407,136 770,740 3,177,876 1,958,595 572,107 2,530,702 (667,837) (63,080) (730,917) (287,533) (46,823) (334,356) 2,060,295 295,859 2,356,154 737,572 245,456 983,028 3,799,594 1,003,519 4,803,113 2,408,634 770,740 3,179,374 Parent Company 2014-15 Balance at the beginning of the Year Paid during the Year Provided Provision Balance at the End of the Year 2013-14 Work Termination Benefit Savings Total Work Termination Benefit Savings Total Million IRR Million IRR Million IRR Million IRR Million IRR Million IRR 2,278,561 767,086 3,045,647 1,874,274 568,132 2,442,406 (347,215) (70,964) (418,179) (277,330) (46,498) (323,828) 1,695,030 307,397 2,002,427 681,617 245,452 927,069 3,626,376 1,003,519 4,629,895 2,278,561 767,086 3,045,647 Annual Report 2014-2015 87 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 19. Capital The capital of Mobarakeh Steel Co. (Public Joint Stock) at 20.03.2015 amounted to IRR50,000 billion includes 50 billion ordinary shares with name IRR1,000 each which have been fully paid. The combination of shareholders at the date of balance sheet is as follows: Description 2014-15 No. of Shares Iranian Mines & Mining Industries Development & Renovation Organization Mehr Eghtesad Iranian Investment Co. Social Security Investment Co. Bank Refah Kargaran Tehran Province Investment Co. Goharan Omid Management Development Co. Bank Tejarat Khorasan Razavi Province Investment Co. Fars Province Investment Co. Banks’ Personnel Savings & Disability Pension Fund Esfahan Province Investment Co. Khouzestan Province Investment Co. Villagers’ Social Insurance Fund Institute Eastern Azarbaijan Province Investment Co. Civil Pension Fund Privatization Organization – Power of Attorney Mazandaran Province Investment Co. Kerman Province Investment Co. Gilan Province Investment Co. Western Azarbaijan Province Investment Co. Sistan & Balouchestan Province Investment Co. Other Shareholders 2013-14 % of Shares No. of Shares % of Shares 8,597,951,507 17.20 6,190,525,096 17.20 6,831,773,313 13.66 4,147,119,455 11.52 5,104,681,270 10.21 3,193,639,433 8.87 2,166,628,808 4.33 972,295,132 2.70 1,535,338,994 3.07 1,105,444,077 3.07 1,269,251,101 2.54 1,046,511,614 2.91 1,395,033,530 2.79 1,007,424,143 2.80 1,225,506,217 2.45 882,364,477 2.45 1,039,192,612 2.08 748,218,681 2.08 1,089,963,039 2.18 761,932,233 2.12 947,471,193 1.89 682,179,260 1.89 927,492,654 1.85 667,794,712 1.85 895,562,722 1.79 652,128,161 1.81 782,876,188 1.57 563,670,856 1.57 844,341,609 1.69 549,659,123 1.53 762,756,970 1.53 662,498,202 1.84 730,378,746 1.46 525,872,698 1.46 712,037,420 1.42 512,666,943 1.42 658,971,030 1.32 474,459,143 1.32 570,653,824 1.14 410,870,754 1.14 550,823,440 1.10 396,592,877 1.10 11,361,313,813 22.72 9,846,132,930 27.35 100 36,000,000,000 100.00 50,000,000,000 88 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 During 2014-15, the company’s capital has been increased from IRR36,000,000 million to IRR50,000,000 (38.88%) from retained profit, dues and cash of shareholders. This capital increase has been registered on 1393/12/21 (12.03.2015). 20. Shares of the Parent Company in Ownership of Subsidiary Companies 2014-15 % of Ownership International Systems & Automation Co. – IRISA No. of Shares 2013-14 Cost Price Million IRR 262,783 Cost Price Million IRR 593 593 21. Legal Reserve In complying with Articles 140 and 238 of the Commercial Code of 1968 as Amended the amount of IRR4,910,822 million has been transferred from allocable profit of the Parent and Affiliated Companies to legal reserve. Based on the above-mentioned articles allocating a portion of the profit and loss reserve is compulsory until the balance of the aforementioned reserve reaches 10% of company capital. Legal reserve may not be transferred to capital and is not distributable among shareholders until such time as the company is liquidated. 22. Other Reserves 2014-15 2013-14 Million IRR Million IRR Parent Company: Capital Reserve 446,262 446,262 23. Minority Interest Group Capital 2014-15 2013-14 Million IRR Million IRR 479,932 309,189 27,967 28,781 Surplus Revaluation of Assets 596,512 542,936 Retained Profit (Loss) (84,471) 196,738 1,019,940 1,077,644 Legal Reserve & Other Reserves Annual Report 2014-2015 89 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 24. Operating Revenues Group Net Sales Rendered Services Parent Company 2014-15 2013-14 2014-15 2013-14 Million IRR Million IRR Million IRR Million IRR 121,656,494 110,745,488 101,999,244 97,278,523 384,024 607,991 - - 122,040,518 111,353,479 101,999,244 97,278,523 24.1. Net sales 2014-15 Tons 2013-14 Million IRR Tons Million IRR Group: Domestic: Hot Products Cold Products Coated Products Other 1,124,852 61,281,636 1,165,672 63,505,486 12,006 290,440 23,422,692 1,951 23,430,385 9,806,049 304,586 10,283,648 203,216 966,205 13,703 65,154 1,630,514 95,476,582 1,485,912 97,284,673 Hot Products 234,989 20,737,835 127,738 11,272,919 Cold Products 130,247 1,901,766 125,507 1,832,549 Export: Coated Products Net Sales 2,472 3,540,311 248 355,347 367,708 26,179,912 253,493 13,460,815 1,998,222 121,656,494 1,739,405 110,745,488 2014-15 Tons 2013-14 Million IRR Tons Million IRR Parent Company: Domestic: Hot Products 2,764,177 47,482,620 3,224,181 53,555,732 Cold Products 1,340,440 27,194,570 1,167,273 22,602,643 265,768 7,114,594 283,510 7,797,743 41,528 621,971 55,711 794,130 4,411,913 82,413,755 4,730,675 84,750,248 1,332,778 17,281,797 859,737 10,351,909 119,522 1,901,766 101,029 1,452,781 23,007 401,926 48,618 723,585 1,475,307 19,585,489 1,009,384 12,528,275 5,887,220 101,999,244 5,740,059 97,278,523 Coated Products Other Export: Hot Products Cold Products Coated Products Net Sales 90 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 24.2. Service income in the amount of IRR384,024 is mainly related to support services and installing systems, industrial automation, engineering and consulting services rendered to Automation & Systems International Engineering Services (IRISA) and Fouldad Mobarakeh Technical & Engineering Companies. 24.3. Export sales of the Parent Company based on product and foreign currency are as follows: Euro Hot Coil IRR Amount Million IRR Foreign Currency Tons US Dollar 1,216,689 306,424,810 Dirham 14,674,829 708,194,971 15,564,274 Hot Plate 116,089 1,879,242 50,502,864 44,660,701 1,717,523 Cold Coil 101,709 22,972,096 12,871,679 66,843,152 1,627,412 Galvanized Coil Cold Plate Acid Pickling Coil Cold Hard Coil 12,282 - 9,395,964 - 247,632 8,633 - 5,536,478 - 146,368 10,725 3,273,883 - 5,715,836 154,594 9,180 - - 18,407,420 127,686 92,981,814 843,822,080 19,585,489 1,475,307 334,550,031 24.4. Comparison table of operating revenues and cost price of operating revenues of the Parent Company Operating Revenues Cost Price of Operating Revenues Gross Profit Million IRR Million IRR Million IRR Percentage of Gross Profit to Operating Profit Million IRR Net Sales: Hot Products 64,764,417 46,549,834 18,214,583 Cols Products 29,096,336 17,618,992 11,477,344 39% 7,516,520 4,902,109 2,614,411 35% Coated Products Other Total 28% 621,971 626,015 (4,044) -1% 101,999,244 69,696,950 32,302,294 32% Annual Report 2014-2015 91 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 25. Cost Price of Operating Revenues 2014-15 2013-14 Sales Rendered Services Total Sales Rendered Services Total Million IRR Million IRR Million IRR Million IRR Million IRR Million IRR Group: Direct Consumable Materials Direct Wage 55,029,506 90,234 55,119,740 54,506,856 120,559 54,627,415 7,334,671 311,203 7,645,874 5,887,200 216,807 6,104,007 1,490,005 - 1,490,005 1,086,358 - 1,086,358 Production Overhead: Indirect Wage Indirect Material 10,195,344 1,537 10,196,881 9,214,453 2,324 9,216,777 Depreciation 3,484,440 4,130 3,488,570 3,041,817 1,265 3,043,082 Energy 9,041,838 - 9,041,838 5,780,190 - 5,780,190 Others 3,666,532 144,847 3,811,379 3,613,808 155,642 3,769,450 90,242,336 551,951 90,794,287 83,130,682 496,597 83,627,279 Un-absorbed Expenses (391,192) (124,204) (9,752) (133,956) Total Production Expenses 89,851,144 551,951 90,403,095 83,006,478 486,845 83,493,323 (Increase) Decrease in Under Construction Inventories (3,727,008) - (3,727,008) (1,555,733) (90,747) (1,646,480) Cost Price of Production 86,124,136 551,951 86,676,087 81,450,745 396,098 81,846,843 1,104,262 (344,875) 759,387 (14,479,963) - (14,479,963) 87,228,398 207,076 87,435,474 66,970,782 396,098 67,366,880 42,395,751 - 42,395,751 36,386,449 - 36,386,449 7,118,041 - 7,118,041 5,717,941 - 5,717,941 667,609 - 667,609 515,960 - 515,960 Indirect Material 9,163,998 - 9,163,998 5,706,143 - 5,706,143 Depreciation 2,390,862 - 2,390,862 2,142,969 - 2,142,969 Energy 8,119,314 - 8,119,314 4,932,921 - 4,932,921 Other 3,053,511 - 3,053,511 3,816,483 - 3,816,483 72,909,086 - 72,909,086 59,218,866 - 59,218,866 (30,868) - (30,868) (14,102) - (14,102) (Increase) Decrease in Finished Inventories Cost Price of Operating Revenues (391,192) Parent Company: Direct Consumable Materials Direct Wage Production Overhead: Indirect Wage Un-absorbed Expenses Total Production Expenses 72,878,218 - 72,878,218 59,204,764 - 59,204,764 (Increase) Decrease in Under Construction Inventories (3,725,395) - (3,725,395) (1,554,340) - (1,554,340) Cost Price of Production 69,152,823 - 69,152,823 57,650,424 - 57,650,424 544,127 - 544,127 (1,448,786) - (1,448,786) 69,696,950 - 69,696,950 56,201,638 - 56,201,638 (Increase) Decrease in Finished Inventories Cost Price of Operating Revenues Indirect material increase is due to the rising foreign material prices and energy consumption which is then due to increasing production levels and rising energy prices. 92 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 25.1. During the 2014 reporting fiscal period, the Parent Company purchased raw material in the amount of IRR45,635,190 million (prior year IRR35,453,372 million). Major suppliers of raw materials (more than 10%) based on the Country and purchasing amount are as follows: Parent Company Type of Raw Materials Country 2014-15 2013-14 Million IRR % to Total Purchase of the Year Million IRR % to Total Purchase of the Year Iran 18,042,115 40% 15,191,380 43% Pellet Iran & Bahrain 14,816,134 32% 8,028,186 23% Scrap Iran 4,327,117 9% 4,899,506 14% Sponge Iron Iran 463,186 1% 2,174,354 6% 7,986,638 18% 5,159,946 14% Iron Ore Others - 25.2. Comparison of production of the Parent Company in 2014-15 with nominal capacity and operational capacity is as follows: Measuring Unit Nominal Capacity Actual Operational Production Capacity of 2014-15 Actual Production of 2013-14 Steel Products Group Slab Thousand Tons 6,150 6,154 6,252 6,100 Hot Coil Thousand Tons 5,900 5,905 6,015 5,864 Cold Coil Thousand Tons 1,550 1,425 1,431 1,338 Tinned Thousand Tons 100 81 81 105 Galvanized Thousand Tons 200 206 209 201 Pre-painted Thousand Tons 100 118 119 130 Annual Report 2014-2015 93 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 26. Sales, Administrative & General Expenses Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls Wages, Salaries & Allowances 1,916,429 1,520,877 1,721,994 1,113,214 Transportation 2,440,308 - 2,421,150 1,989,618 Commissioning & Sales Commission 301,431 2,242,396 301,431 354,824 Depreciation 235,463 227,518 66,670 41,352 1,449,103 1,425,430 1,337,902 1,522,124 6,342,734 5,416,221 5,849,147 5,021,132 Others The reason for increase in wages and salaries expenses mainly related to increase in number of personnel employed in staff units. 27. Other Operating Items Group Sales of Scrap Profit of Credit Sales to Clients Un-absorbed Expenses in Production Profit from Exchanging Forex Operating Assets & Liabilities Adjusting Provision for Work Termination Benefits Goodwill Depreciation Others Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls 618,506 - 413,032 684,701 31,917 157,392 24,800 157,257 (391,192) (133,956) (30,868) (14,102) 787,452 2,628,156 786,917 2,628,157 (461,746) - (461,746) - (100,764) (94,123) - - 100,620 205,854 - - 584,793 2,763,323 732,135 3,456,013 Adjustment of work termination benefit is due to the changing method of calculation and work termination benefits of hard working conditions. 94 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 28. Financial Expenses Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls Profit & Commission of Financial Facilities Received from Banks 8,862,493 6,388,144 7,630,833 6,013,062 Other Banking Commissions 280,307 454,214 280,160 306,705 9,142,800 6,842,358 7,910,993 6,319,767 29. Other Non-operating Incomes & Expenses Group Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls Profit (Loss) from Sales of Fixed Tangible Assets Profit from Sales of Raw Materials, Parts & Surplus Inventories Profit from Banking Investment Deposits 94,008 118,119 53,017 117,227 2,377,038 1,007,378 2,395,511 111,920 905,740 671,895 725,188 550,906 Dividend 2,716,575 3,608,349 4,402,947 3,666,157 147,550 300,075 322,645 261,927 4,024 5,561 4,024 5,561 168,568 - - - (828,069) - (828,069) - 685,725 (2,737,743) 304,391 (2,685,388) 44,277 21,932 36,219 21,932 (194,166) 316,122 146,383 22,001 6,121,270 3,311,688 7,562,256 2,072,243 Profit from Sales Investments Funds Earned form Personnel Mission in Other Organizations & Services Rendered Income from Assigning Subsidiary Units Adjusting Performance Tax Provision & Salary of 201213 based on Final Paper Profit (Loss) from Exchanging Non-operating Assets & Liabilities Income from Rent Others Annual Report 2014-2015 95 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 30. Basis for Calculation of Base Profit (Loss) of Each Share Group Parent Company 2014-15 (Revised) 2013-14 2014-15 (Revised) 2013-14 Million Rls Million Rls Million Rls Million Rls Profit from Operation under Progress – Operating 28,847,103 41,333,701 27,185,282 39,511,766 Tax Effect (3,242,153) (6,136,056) (3,075,814) (5,718,811) 30,527 (116,369) - - 25,635,477 35,081,276 24,109,468 33,792,955 (87,402) (3,504,830) (348,737) (4,247,524) (7,826) 1,353,764 - 1,342,044 (134,222) 3,022 - - (229,450) (2,148,044) (348,737) (2,905,480) Net Profit 28,759,701 37,828,871 26,836,545 35,264,242 Tax Effect (3,249,979) (4,782,292) (3,075,814) (4,376,767) (103,695) (113,347) - - 25,406,027 32,933,232 23,760,731 30,887,475 Minority Interest from Profit from Operation under Progress – Operating Loss from Operation under Progress – Non-operating Tax Effect Minority Interest from Profit (Loss) from Operation under Progress – Non-operating Minority Interest from Net Profit 30.1. Weighted average of ordinary shares for calculation of base profit of each share is as follows: Group Weighted Average of Ordinary Shares Weighted Average of Shares of the Parent Company in Ownership of Subsidiary Companies (IRISA) Weighted Average of Ordinary Shares Adjusted at the End of the Year Parent Company 2014-15 2013-14 2014-15 2013-14 No. (Thousand Shares) No. (Thousand Shares) No. (Thousand Shares) No. (Thousand Shares) 47,326,338 45,374,945 47,326,338 45,374,945 (263) (263) - - 47,326,075 45,374,682 47,326,338 45,374,945 96 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 30.1.1. Information related to calculation of weighted average of shares is as follows: A) Weighted Average of Ordinary Shares: Ordinary Shares before Issuance Right of Purchasing Shares Shares of the Parent Company in Ownership of Subsidiary Companies Bonus Shares Issuance of Priority for Purchasing Shares 36,000,000,000 262,783 1,500,000,000 12,500,000,000 Price of Priority for Purchasing Shares 1,000 Market Price of each Share Right before Priority Issuance Date 3,362 Adjusted Market Price (Considering Bonus Shares) of each Share Right before Priority Issuance Date 3,227 Theoretical Market Price of each Share Right after Priority Issuance Date 2,671 Adjustment Factor 1.21 Ratification Date of Priority Issuance 03.08.2014 Termination Date of Endorsement 17.10.2014 Registration Date of Capital Increase 11.03.2015 Weighted Average of Ordinary Shares of 2013-14 – After Considering Bonus Shares Adjusted Weighted Average of Ordinary Shares for Calculation of Base Profit of 2013-14 Adjusted Weighted Average of Ordinary Shares for Calculation of Base Profit of 2014-15 37,499,737,217 45,374,944,816 47,326,337,962 31. Classification Adjustments In order to show a clear picture of the Group and the Parent Company’s financial position and operation results, all comparative items have been adjusted and revised. Therefore, comparative items do not necessarily correspond with the financial statements of the previous financial period. Annual Report 2014-2015 97 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 32. Reconciliation Statement of Operating Profit Group Operating Profit Depreciation Expenses of Fixed Tangible & Intangible Assets Goodwill Depreciation Expenses Net Increase in Provision for Employees’ Work Termination Benefit & Savings (Increase) in Operating Accounts Receivable (Increase) Decrease in Inventories Decrease (Increase) in Orders & Prepayments Increase (Decrease) in Operating Accounts Payable Increase (Decrease) in Advances Received from Clients Net Other Non-operating Incomes & Expenses Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls 28,847,103 41,333,701 27,185,282 39,511,766 3,714,161 3,175,393 2,462,486 2,184,494 100,764 94,123 - - 1,623,739 709,401 1,584,247 670,525 2,262,980 (9,081,221) (4,688,178) (7,138,591) (14,301,681) (17,079,217) (12,963,072) (12,655,947) 2,421,305 (2,753,060) 3,097,077 (928,724) (4,446,326) (1,965,446) 1,514,669 274,212 2,705,606 (1,936,755) 2,847,351 (1,843,748) 1,784,437 992,839 1,754,069 (687,457) 24,712,088 13,489,758 22,793,931 19,386,530 98 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 33. Non-cash Transactions Group Capital Increase from Settled Dues of Shareholders Parent Company 2014-15 2013-14 2014-15 2013-14 Million Rls Million Rls Million Rls Million Rls 12,411,798 4,153,451 12,411,798 4,153,451 34. Commitments & Contingent Liabilities & Contingent Assets 34.1. Capital commitments from implementing ratified and conducted contracts at the date of balance sheet are as follows: Group 2014-15 Million Rls Building Parent Company 2014-15 Million Rls 15,823,632 15,823,632 Production Machineries 1,101,221 1,101,221 Equipment 2,053,056 2,053,056 155,583 - 19,133,492 18,977,909 Others 34.2. Contingent liabilities are as follows: Group Parent Company Million Rls Million Rls Contingent Liability Subject of Article 235 of Commercial Code as Amended: Other Guarantees 1,711,604 157,647 1,711,604 157,647 34.3. According to a letter numbered 93/38774 dated 1391/08/17 (07.11.2012) issued by the Esfahan Environmental Protection Agency, the Mobarakeh Steel Company was listed as a polluting company in the list of polluting industries as of 1393/10/01 (22.12.2014). Annual Report 2014-2015 99 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 35. Transactions with Related Parties 35.1. Transactions of the Group with related parties during 2014-15: (Amounts in Million IRR) Description Affiliated Party Tara Steel Subsidiary Companies Sports & Cultural Type of Affiliation Board Member & Subsidiary Board Member & Subsidiary Total Esfahan Steel Khouzestan Steel Eastern Iran Iron Ore (Sangan) Central Iron Ore (Choghart) Ascotec Sales of Goods & Services 154,070 - 292,000 - 446,070 - 596,175 570,764 - - - - 3,303,176 - 130,246 - Gole Gohar Board Member 5,527,231 - Chador Malou Board Member 8,249,249 - 385,259 - - - 1,013,041 - 1,553,478 - Special Relations 298,147 3,224 Special Relations - 610 IRASCO IRITEC Other Related Parties Common Board Member Common Board Member Common Board Member Common Board Member Common Board Member Purchase of Goods & Services Sirjan Iranian Steel Zarand Kerman Steel Consumption Cooperation Housing Cooperation Common Board Member Common Board Member Common Board Member Common Board Member Toka Nasouz Board Member 145,373 - Toka Rail Board Member 2,740,267 - Toka Tadarok Board Member 3,897,469 - Atieh Naghsh Jahan Special Relations - - Pension Fund Special Relations - - Sepehr Kavir Steel Major Purchaser of Products - 904,224 SITCO Board Member 408 - Espadan Control Index Board Member - 11,924 Total 27,839,520 1,490,746 Grand Total 28,285,590 1,490,746 Grand Total - Group Companies Other Related Parties - Sepahan Novin - Mehr Eghtesad - - Eastern Iran Iron Ore (Sangan) Central Iron Ore (Choghart) - 5,123 Atieh Naghsh Jahan Pension Fund Sepehr Kavir Steel Total 42,325 12,493 - - Toka Tadarok - - Toka Rail Espadan Control Index - Toka Nasouz SITCO - Housing Cooperation - Consumption Cooperation - Sirjan Iranian Steel - - Zarand Kerman Steel - IRITEC - Chador Malou IRASCO - Gole Gohar 7,370 - Khouzestan Steel Ascotec - Esfahan Steel - - Social Security Organization Total - - Justice Share IMIDRO - - Metal Mines Development Total - TAMCO 29,832 - - 29,832 Trade Receivables Metil Steel Sports & Cultural Tara Steel Related Party Total Shareholders with Considerable Influence Subsidiary Companies Description 709,427 243,345 - - - - - - - - - - - - - 204,868 - - 38,477 - - - - 193,618 - - - 193,618 - - - 272,464 - - - 272,464 Non-trade Receivables 112,000 112,000 - - - - - - - - 112,000 - - - - - - - - - - - - - - - - - - - - - - - - - Paid Facilities 35.2. Balance of final account of Group’s related parties 2,431,163 2,057,623 - - - - - 291,852 - - - - - - - - - 1,352,903 380,881 - - 31,987 - - - - - - - - - 373,540 - 300,532 - 73,008 Prepayments - - 305,060 304,781 - - - - 9,356 - 50,924 26,228 - 53,248 - 5,241 - - 65,500 - - - - - 94,284 - - - - - - - - 279 - 279 Trade Payables - 22,916 12,678 81 2,774 - 9,823 - - - - - - - - - - - - - - - - - - - - - - - - - 10,238 - - 10,238 Non-trade Payables Advances Received - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,557,463 - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,197,929 1,191,467 6,462 359,534 - 355,059 - 4,475 Dividend Receivable Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 - - - - - - 11,323,211 - - - - - - - - - - - - - - - - - - - - - - 11,322,989 791,581 1,129,178 5,474,621 3,927,609 222 222 Dividend Payable 4,852,378 2,425,461 - - 5,123 - - 291,852 - - 112,000 - - - - 204,868 - 1,352,903 426,728 - - 31,987 - 193,618 - - - 193,618 1,197,929 1,191,467 6,462 1,035,370 - 655,591 - 379,779 Claim Net 2014-15 - 11,651,187 317,459 81 2,774 - 9,823 9,356 - 50,924 26,228 - 53,248 - 5,241 - - 65,500 - - - - - 94,284 11,322,989 791,581 1,129,178 5,474,621 3,927,609 222 222 - 10,517 - 279 10,238 Debt Net 4,291,980 2,112,264 - - - - - - - - 199,691 40,301 100,122 - 614,556 672,792 - 257,706 131,695 - - 95,401 - 158,375 - - - 158,375 1,294,457 1,294,457 - 726,884 10 - - 726,874 Claim Debt - 199 - 199 359 - 279 80 - 7,908,280 2,634,218 295 2,366 - 6,930 - - 434,637 10,070 - - - 141,759 - - 1,163,948 - - 635,481 29,821 - 208,911 5,273,504 1,387,452 3,886,052 2013-14 (Amounts in Million IRR) Annual Report 2014-2015 101 Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 35.3. Transactions of the Parent Company with related parties during 2014-15 (Amounts in Million IRR) Description Affiliated Party Hormozgan Steel IRISA Foulad Sang Mobarakeh Steel Engineering (Mehrgi) Tara Steel Sports & Cultural Subsidiary Companies Sanie’e Kaveh Felez Tadarok Amir Kabir Kashan Automobile Plate Metil Steel Sangan Steel Sepahan Novin Sefid Dasht Steel Type of Affiliation Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Board Member & Subsidiary Total Total Liable to Article 129 Purchase of Goods & Services Sales of Goods & Services 1,304,830 3,388,542 91,636 - 110,142 - 62,555 - 154,070 - 292,000 - - 1,331,197 94,913 - - 1,411,776 12,359 2,838,445 - - - 720 - - - 29,052 2,122,505 8,999,732 Toka Foulad Baord Member 38,635 - Toka Beton Baord Member 25,781 - TAMCO Baord Member - - Metal Mines Development Baord Member - - 64,416 - 102 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 (Amounts in Million IRR) Description Affiliated Party Esfahan Steel Khouzestan Steel Eastern Iran Iron Ore (Sangan) Central Iron Ore (Choghart) Ascotec Type of Affiliation Common Board Member Common Board Member Common Board Member Common Board Member Common Board Member Purchase of Goods & Services Sales of Goods & Services 596,175 570,764 - - - - 3,303,176 - 130,246 - Gole Gohar Board Member 5,527,231 - Chador Malou Board Member 8,249,249 - 385,259 - - - 1,013,041 - 1,553,478 - 298,147 3,224 - 610 Common Board Member Common Board IRITEC Member Sirjan Iranian Common Board Steel Member Zarand Kerman Common Board Steel Member Consumption Special Cooperation Relations Housing Special Cooperation Relations IRASCO Other Related Parties Liable to Article 129 Toka Nasouz Board Member 145,373 - Toka Rail Board Member 2,740,267 - Toka Tadarok Board Member 3,897,469 - Atieh Naghsh Jahan Special Relations Special Relations - - - - Total 27,839,111 574,598 Grand Total 30,026,032 9,574,330 Pension Fund Grand Total Group Companies IMIDRO Justice Share Social Security Organization Mehr Eghtesad TAMCO Metal Mines Development Hormozgan Steel IRISA Foulad Sang Mobarakeh Steel Engineering (Mehrgi) Tara Steel Sports & Cultural Sanie’e Kaveh Felez Tadarok Amir Kabir Kashan Automobile Plate Metil Steel Sangan Steel Sepahan Novin Sefid Dasht Steel Related Party Esfahan Steel Khouzestan Steel Eastern Iran Iron Ore (Sangan) Central Iron Ore (Choghart) Ascotec Gole Gohar Chador Malou IRASCO IRITEC Other Related Sirjan Iranian Parties Steel Zarand Kerman Steel Consumption Cooperation Housing Cooperation Toka Nasouz Toka Rail Toka Tadarok Atieh Naghsh Jahan Pension Fund Total Total Shareholders with Considerable Influence Total Total Subsidiary Companies Description 243,345 6,798,825 - - - 7,370 2,041,636 - - - - - - 38,477 204,868 - - - - - - 7,370 - - 193,618 - - 112,000 112,000 - - 112,000 - - - - - - - - - - 193,618 - - - - - - - - - - - - - Paid Facilities - - 443,258 6,361,862 - 81,977 - - 2,034,266 - 5,138 1,330,796 - - - 272,464 29,832 265,278 9,519 - 172 - 59 - - 408,360 - 5,549,275 Non-trade Receivables - Trade Receivables - 2,057,623 2,431,163 - 291,852 - - - - 380,881 1,352,903 - - - 31,987 - - - - 373,540 - - - - - 83,147 - 73,008 - 217,385 Prepayments 35.4. Balance of final account of the Parent Company’s related parties 2,304,781 3,611,520 9,356 26,228 160,924 - - 53,248 263,356 5,241 115,856 - 1,126,467 449,821 - 94,284 - - - 1,306,739 - - 279 - - - - - - 41,029 23,169 - 1,242,262 Trade Payables - - - - 9,823 9,823 20,061 - - - - - - - - - - - - - - 10,238 - - - - - - 10,238 Non-trade Payables - - - - - 740 19,084 - - - - - - 34 - - - 706 - - - 18,344 - - - 100 5,626 12,618 - Advances Received 2,116,006 - - - - - - - - - - - - 1,197,929 - 1,191,467 918,077 6,462 - 355,059 435 - - 7,905 149,912 2,086 - 4,475 12,522 14,376 77,947 293,360 Dividend Receivable - 0 0 11,323,385 - - - - - - - - - - 791,581 11,322,989 - 1,129,178 222 3,927,609 5,474,621 222 174 - - - - - - - - - 174 - Dividend Payable 2,420,338 13,499,630 - 291,852 112,000 - - - 426,728 1,352,903 204,868 - - - 31,987 193,618 - - 1,197,929 193,618 - 1,191,467 9,687,745 6,462 443,258 355,059 82,412 - 1,335,934 273,183 558,444 85,233 - 379,779 22,041 14,435 295,332 5,842,635 Claim 2014-15 Net 9,823 2,315,344 14,974,050 9,356 26,228 160,924 - - 53,248 263,356 5,241 115,856 34 1,126,467 449,821 - 791,581 11,322,989 94,990 1,129,178 222 3,927,609 5,474,621 222 1,335,495 - - 279 - 100 5,626 12,618 - 10,238 - 41,029 23,343 - 1,242,262 Debt 2,112,264 6,692,977 199,691 40,301 100,122 672,792 614,556 131,695 257,706 95,401 158,375 1,294,457 158,375 1,294,457 3,127,881 - 59,137 10 - 464,936 519,277 435,341 726,874 330,684 591,622 Claim 2013-14 Net 6,930 2,631,557 7,962,672 10,070 434,637 141,759 1,163,948 635,481 29,821 1,387,452 5,273,504 208,911 3,886,052 199 57,412 199 - 279 - 80 19,285 37,768 Debt (Amounts in Million IRR) 104 Mobarakeh Steel Company Esfahan Mobarakeh Steel Co., (Public Joint Stock) Notes to the Financial Statements For the Year Ended March 20th, 2015 35.5. With the exception of the following cases, transactions with subsidiary companies were not significantly different. 35.5.1 Raw material including pellets, ferro-manganese and lime has been sold to the South Hormozgan Steel Company at cost price. 36. Retained Earnings at the End of the Year Allocations of retained earnings at the end of the year of the following items are subject to the approval of Ordinary General Assembly of Shareholders. Total Amount Each Share Million IRR IRR Legal Duties (Based on Article 90 of Trade Amendment Act): Distribution of at Least 10% of Net Profit of 2014-15 Suggestion of the Board of Director: Proposed Dividend of the Board of Directors (50% of Net Profit of 2014-15) 2,376,073 48 11,880,366 238 37. Foreign Currency Situation Foreign currency assets and liabilities and foreign currency commitments at the end of the year are as follows: Note US Dollar Emirates Dirham Euro Parent Company: Cash 3 5,913,511 83,238,087 25,643,253 Trade & Non-trade Receivables Total Foreign Currency Monetary Assets Financial Facilities Total Foreign Currency Monetary Liabilities Net Foreign Currency Monetary Assets (Liabilities) Net Foreign Currency Monetary Assets (Liabilities) at 20.03.2014 Foreign Currency Capital Commitments 5 71,808,364 5,145,565 35,699,599 77,721,875 88,383,652 61,342,852 - 94,282,007 - - 94,282,007 - 77,721,875 (5,898,355) 61,342,852 51,451,124 19,872,040 714,145,630 - 236,407,003 - 16 37.1. Earned foreign currency from export and foreign currency required for import and other payments during the year is as follows: Group US Dollar Sales & Services Rendered Other Receives Euro Parent Company Dirham US Dollar Euro Dirham 233,317,433 300,783,767 1,221,656,419 92,981,814 334,550,031 843,822,080 703,625 331,752 7,117,901 667,779 274,862 5,968,945 Purchase of Raw Materials 500,449,259 79,391,532 99,267,711 474,193,150 61,504,180 99,115,147 Other Payments 17,233,422 92,801,496 293,997,834 11,338,860 78,097,794 234,997,619