ANNUAL REPORT FOR FINANCIAL YEAR 2021
1
SANTIERUL NAVAL ORSOVA S.A.
ANNUAL REPORT FOR FINANCIAL YEAR 2021
CONTENTS PAGE
Annual report of the board of directors 2 – 35
Remuneration report 36 - 42
Statement of compliance with the Bucharest stock exchange corporate governance code 43 - 48
Statement of Financial Position 49 - 50
Statement of Comprehensive Income 51 - 52
Statement of Changes in Equity 53
Statement of Cash Flows 54 – 55
Notes to Separate Financial Statements 57 – 119
Statement 120
Independent Auditors Report 121 -128
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________________________________________________________________________
ANNUAL REPORT OF THE BOARD OF DIRECTORS ACCORDING TO LAW NO. 24/2017
AND THE ASF REGULATION NO. 5/2018 concerning the issuers of financial instruments and
market operations AND OF THE MFP ORDER NO. 2844/12.12.2016 FOR THE FINANCIAL
YEAR CONCLUDED ON 31.12.2021
Date of the Report: 7 th of March 2022
- Name of the trading company: ŞANTIERUL NAVAL ORŞOVA S.A.;
-
- Registered office: 4, TUFĂRI Street, ORŞOVA, MEHEDINŢI County;
- Telephone/fax:0252/362399 0252/360648;
- Single registration code issued by the Trade Register: RO 1614734;
- Registered number with the Trade Register: J25/150/03.04.1991;
- Regulated market where the issued securities are traded: it is a company whose shares are traded on a regulated market, respectively it is listed in the Bucharest Stock Exchange, symbol: SNO
- Subscribed and paid in share capital: 28,557,297.5 Lei
- Class, type, number and core values of securities issued by the company:11.422.919 common shares, nominative, of 2.5 Lei each;
- The company is registered with ASF– Securities Record Office with Certificate no. 111/02.03.1998, updated on 06.10.2008 further to the increase in share capital as a result of the merger.
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ŞANTIERUL NAVAL ORŞOVA S.A. Nr. RC J25/150/1991 CIF: RO 1614734 Capital social: - subscris 28.557.297,5 lei - varsat 28.557.297,5 lei Str. Tufări, nr. 4, Orşova, 225200, Mehedinţi Tel.: 0252/362.399; 0252/361.885; Fax: 0252/360.648 E-mail:
mircea.sperdea@snorsova.ro
;
marketing@snorsova.ro
Codul LEI (Legal Entity Identifier): 254900UXAJ8TPIKLXG79 Cod IBAN: RO96RNCB0181022634120001- B.C.R. Orşova Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova
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ANNUAL REPORT OF THE BOARD DIRECTORS FOR FINANCIAL YEAR 2021
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1. ANALYSIS OF THE COMPANY’S ACTIVITY
1.1. Description of the company’s core business
a) Description of the company’s core business
The main activity of "Şantierul Naval Orşova" S.A. consists in the construction of river ships (CAEN code rev.2: 3011 “Construction of ships and floating structures”). This activity represented 92,47% of the 2021 turnover, most of the ships being exclusively designed for intra-community supplies.
Although in the previous years, at Agigea Branch, the activity which highly contributed to the turnover consisted in renting the ships, especially barges, during the year 2021, the most significant activity for the branch’s turnover was that of repair work of river/marine ships (71,03%). The income from the barges’ rental represented 16,43% out of the 2021 turnover (26,60% during 2020). The branch’s turnover has known a slight increase since the previous year, by 5,05% which also caused an increase in its total turnover by 0,1% (from 6,6% during 2020 to 6,7% during 2021).
b) Stipulation of the set up date of Șantierul Naval Orșova SA
The company was set up under Government Decision No. 19/10.01.1991, by converting and taking over the patrimony of the former Orsova Shipyard from the Ministry of Transports and Telecommunications.
The company is registered with the Trade Register under no. J25/150/1991.
In 1998, it became a privately-owned company, with domestic and foreign capital through the sale of the shares held by the former FPS ( State Owned Property Fund ).
c) Description of any merger or significant reorganization of the company, its subsidiaries or controlled companies during the financial year
There were no such events in 2021.
The only merger since the company’s set up until the present days took place in 2008. It is about a merge by absorption between Şantierul Naval Orşova SA, Mehedinţi County the absorbing company - and S.C. Servicii Construcţii Maritime SA Agigea, Constanţa County the absorbed company. Following this merge, the headquarters remained in Orşova and the former company in Agigea became a branch of Şantierul Naval Orşova SA. Occasioned by this, the social capital of the company increased from 21.643.150 lei to 28.557.297,5 lei, and the number of the shares increased from 8.657.260 to 11.422.919 shares, each share having a nominal value of 2.5 lei/share. The social capital and the number of shares have remained the same from the fusion until the date of the present report.
d) Description of assets acquisitions and/or sales:
Acquisitions and sales of assets are described in section 5.4 of this report and in the NOTES to the financial statements for 2021, which are attached to this report.
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e) Description of the main results of the company’s activity assessment:
1.1.1. General assessment elements for the period under review (year 2021):
total income, out of which: 75.533.784 lei
Agigea Branch 5.104.612 lei
total costs 75.022.945 lei
out of which Agigea Branch 7.269.944 lei
gross profit, out of which: 510.839 lei
Agigea Branch -2.165.332 lei
Orsova headquarters 2.676.171 lei
market share held:
the production obtained at the headquarters addresses the market share of intra- community river ships, where the company holds a share of approximately 1 - 2%;
the rental of ships (barges) through the branch was done during the last part of the year, within the country where the share is approximately 4%;
as of 31.12.2021, the company’s available funds in accounts amounted to 17.452.475 Lei, out of which:
3.094.120 lei in the Lei account
14.347.867 lei in the foreign currency accounts
6.254 lei , petty cash
4.234 lei other values, in petty cash
The main characteristics of the year 2021, compared with the previous years, could be shortly synthesized by:
- Maintenance of a relatively low demand on the river vessel construction market, on which our company performs activity, even if a price growth was felt for the vessels sale, that was a consequence of raw materials price increase on one hand and of services, on the other hand. Even under these conditions, the company succeeded in having covered the entire production capacity for the year 2021 and also to preserve an increased level of efficiency to the head-office.
- A decrease in the activity from Agigea Branch in comparison to the previous years was noticed subsequently to the rental of the 3 barges out of 5 type vessels, that the company owns at this branch. The income from the ships’ repairing activities became predominant over the branch’s turnover yet not sufficient to cover the operating costs.
- Our good name which our company has on the shipbuilder market in Europe, highly contributed to obtaining new orders.
- The activity of the year 2021 was carried out in the epidemic context of the COVID-19 pandemic.
More information and comments regarding these indicators and the company’s activity are presented under 4 point of the present report and in the NOTES to the financial statements, which are attached to this report.
1.1.2 The assessment of the technical level of the trading company
The work scope of the company is diverse, the two head-offices having different purposes, yet complementary for achieving the scope. Thus, the activities carried out consist in: the construction and
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delivery of river ships, in the intra-community area (head-office in Orsova), rental of their own barges in the intra and extra-community area and repair of the ships belonging to third parties (Agigea branch). For the construction of ships, the company is equipped with the technical means, the necessary specialists for this type of constructions. Thus, endowments, technical culture, organizational system, specific technological fluxes for shipbuilding, allow the execution and delivery of inland and maritime vessels of different types and high complexity,
Șantierul Naval Orșova makes available for its clients a wide range of products. At present, it is possible to build any type of river ship for transport of goods (containers, fuel transport tanker, chemical products, food products, pharmaceutical) yet also the building of coaster vessels and passenger vessels.
Company management team manifested and manifest a continuously preoccupation for production process modernization through the acquisition of most modern tools specifically for shipbuilding. Being aware that the company should maintain an appropriate equipment level in according to the actual requests, major investments were done , for the acquisition of modern machinery, tools and equipment specific to shipbuilding. Training courses were done, qualified employees were selected, experience share within the country and abroad, yet also modernization of the already existing installations both at the head-office in Or șova and also at the branch in Agigea. Likewise, competitive equipment specific to shipyards has been imported, respectively (electric cranes 80+25to, board cutting machines with numerical control, painting and blasting equipment, welding sources in gas protective environments) and IT equipment, together with the necessary licenses and programs for a good operation.
If during the years 2013 and 2014 was carried out the modernization and capacity increase for launching and lifting of Orsova’s slipway, and at present there are in progress of completion of the modernization/repairing works for Agigea`s slipway, which was started 4 years ago and is about to be completed during the year 2022 (initially this action should have been completed during the year 2019, but this could not have been achieved because of objective reasons with reference to the delayed delivery of the 14 new wedge bogies which should replace the old ones, namely locking the slipway with the second coaster, respectively with the ships brought to repairing).
In the year 2021, for the head-office in Orșova, several welding machines, effective and automate were procured, as well as an OMNICUT cutting machine, two VTB-18000 air-heaters, an air dryer, an under-pressure pump and a belt saw, IT equipment. Likewise, the process of repair and modernization of the transport and lifting equipment carried on, the blasting station and the vertical quay were modernized.
At Agigea branch they proceeded with the repair and modernization of the launching slipway, 3 WELDYCAR bogies were procured together with two hydraulic pumps, an electrical forklift and two HYSTER forklifts, two welding equipments. As well, a container barrack was modernized into a storage place.
The long and fruitful collaboration with partners from the Netherlands may be attributed to the fact that the company, had been aiming at meeting their requirements, especially, by rigorously observing the quality standards imposed. Special care was given to the execution of the touch up work, especially in the esthetical areas.
The implemented quality system is able to cope with the most modern requirements, and the company is certified by Lloyd Register Quality Assurance. The company has obtained during the year 2019 also the Quality System Certification in compliance with the new standard DIN ISO 9001:2015 (the certificate no. 10186440 field “ Construction and repair of ships and boats”).
SANTIERUL NAVAL ORSOVA SA has at its disposal:
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- A Quality Manual – revision 4/12.01.2015
- Procedures : - Documents control – revision 1/03.03.2011
Registration Control – revision 1/27.05.2014
Control of non-conform product – revision 2/ 12.01.2018
Corrective actions – revision 2/12.01.2015
Preventive actions – revision 2/12.01.2015
- Working instructions
Purchased material/products’ acceptance
Release from storages – revision 1/13.10.2012
Testing the product provided by the Client – revision 1/13.01.2012
Maintenance of the equipments– revision 1/08.11.2012
The favourable technical situation of Orşova Shipyard represents the premises for long-lasting progress and is given by the following facts:
good locations for both the headquarters in Orşova (town situated on the Danube’s bank) and the Agigea Branch (Constanţa harbour);
adjustment to the market demands is highly possible, the medium-sized shipyard opens the perspective of business diversity;
pollution is at normal levels, (pollution does not constitute any disturbing factor);
range of external deliveries and services is beyond 95% from the turnover;
personnel structure is balanced and correlated with the requirements of the technological process; we have noticed, though, an increase of medium age of personnel, in parallel;
endowment with specific fixed assets is to an acceptable level, comparable to other competing shipyards; in this respect and many years ago, the company has started an investment programme aimed, on one hand, at increasing the weight of active fixed assets, and on the other hand at replacing obsolete fixed assets with more efficient ones that can lead to enhanced productivity; by means of this strategy, the company intended to ensure increased flexibility and efficiency of fixed assets and bringing them to a technical and technological level that would allow global alignment and building of products that meet the standards required by foreign partners;
procurement of ships mean the conclusion of direct contract agreements with the shipyards equipping the ship hulls or with European seafarers;
for shipbuilding, there is a certain stability of intra-community clients (from Netherlands, Belgium, Germany, Austria);
The year 2021 did not bring any major modifications regarding the shipbuilding requests for marine/inland vessels, these being at a medium level, even most recent information from the ship market shows that the present situation will be preserved also during the year 2022, and also during the years to come. This is the reason why we consider that a strategy for future should be realistically analyzed, in order to can find continuously- prices and financing policies to ensure the continuity of the activity under performance and competiveness terms.
1.1.3 Assessment of the technical supply activity (domestic sources, foreign sources imports).
In the year 2021, there were some major changes in terms of main supply sources of raw materials and materials, yet it was insignificant. As in the previous years, the equipment was mainly bought from
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domestic ISO certified suppliers according to the European norms and standards. Still, when after analyzing the quality-cost ratio, it turned to be more favourable to the import or intra-community procurement, the company chose that version; we especially refer to the ship plates, stainless steel plates, pipes, profiles. In terms of intra-community acquisitions, we mainly talk about those materials that are not produced in Romania or for which the clients have imposed a certain quality standard; such materials are laminated parts and paints for river/marine ships. Also, according to the handover conditions, the transport of ships to Germany/Netherlands was mainly done on the segment Orsova- Regensburg, and on the route Regensburg-Rotterdam with non-resident intra-community services providers (CLASSIC CHARTER GMBH GERMANY , VIGILIA TRADING BV THE NETHERLANDS) .
Material inventories were always at an optimum level, which ensured business continuity, hence there were no interruptions in the manufacturing process due to lack of raw materials and materials.
The main domestic suppliers of raw materials and materials, according to the value of the supplies and to their importance were:
LIBERTY GALATI: for medium and thick plates;
DUCTIL Buzău: welding consumables;
LINDE GAZ Timişoara: technical gases
S.C. PENTAGON SRL TECUCI: grinding stones
NIMFA COM SRL BUC.: pipes and various profiles
MAIRON S.A. GALATI various profiles
TRIVALENT RM. VALCEA pipes and various profiles
NORDEX TG. JIU safety gloves and glasses, filters
EURONERA DISTRIBUTION gloves, screens, safety goggles, filters
Just as during the previous years, the main foreign supplier of materials:
JULIUS HANDELS GMBH from Austria for profiles and pipes,
OUTOKUMPU STAINLESS, for naval plates
NELF MARINE PAINTS
Even if they were at a lower level than in previous years, collaboration with sub contractors continued also in the year 2021. These collaborations were necessary for the progress of the activity, referring to hull painting, steel construction, hull equipments, hull transport, etc. Among the collaboration companies we are mentioning the most important:
- MANELI SERV ship painting;
- GRIMEX SRL TARGU JIU ship equipment parts and metal constructions
- ELECTROSCOICA MAR SRL metallic structures
- ECO STEEL SOLUTION SRL for the ships’ repair activity
- BERG BANAT zinc coating
1.1.4 Assessment of sales activity
Turnover knows an increase of approx. 4,06 %, from the previous year. It is to be mentioned that while the income from the ships’ construction activity increased by approx. 4,16 %, the income from the
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ships’ renting activity decreased by 35,10% and the income from the ships’ repairing activity have known an increase by 14,17% from the year 2020. The turnover was realized, and specially, due to the external deliveries and services: intra community for the vessel built in Orsova and extra community for incomes resulted from renting the ships and repair of ships, from Agigea Branch.
All 7 vessels finalized and delivered from Orsova in 2021 were scoped to be delivered to the West-European market, among which there was the second coastal ship out of the two which constituted the litigation with the company VEKA.
Please see below a comparative statement of intra-community supplies and Romania, for the last three years, expressed in percentage of total ship delivered (according to IFRS 8):
CLIENT / BENEFICIARY
YEAR
2019
YEAR
2020
YEAR
2021
RensenDriessenShipbuilding B.V. (NL)
71,36%
64,53%
67,76%
VEKA Shipbuildng B.V. (NL)
-
18,32%
17,88%
Vos Kaiser GmbH (DE)
12,27%
-
-
Vos Interceptor (NL)
ZanenShipbuilding B.V. (NL)
-
16,10%
17,15%
-
-
-
TEAMCO BV
ASTO B.V.
-
-
-
-
14,02%
0,34%
TOTAL
100%
100%
100%
According to the above mentioned information, the company Rensen Driessen continued also in 2021 to detain the first position regarding the amount of the deliveries.
The contractual payment terms were ensured either through advance payments from 10% up to 75% and payment of the difference through letter of credits.
For the future, just as during the previous years, the main concern of the board and executive management is to find solutions for concluding contracts at prices that would ensure development in cost-effective conditions and with guaranteeing the price payment. This is also due to the fact that under the new foreign conditions on the market in which we operate, rapid and unexpected changes can always occur from one day to another.
Under the new market conditions, competition in this activity field is quite tough, because most orders come from the European Community and business partners are more demanding in terms of quality work. The company has a technical and technological level that meets these requirements and we believe it is able to win more contracts compared to its competitors.
The company’s main competitors in terms of shipbuilding and repair works are the following, just as in the previous years:
- Domestic – all shipyards
- Abroad especially shipyards in China and Korea, and then Poland, Serbia, Turkey, Slovakia, Czech Republic and Ukraine.
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1.1.5 Assessment of aspects related to employees / company staff
Lack of personnel continues to manifest also in the year 2021, yet only to a small extent, all steps taken at executive level by recruiting new skilled workers in the trades of welders and locksmiths who will replace those who left, especially because of retirement. Related to the company’s staff, we may conclude the following:
- on one hand, it is registered an aging phenomenon of the staff, which will continue also in the next period;
- on the other hand, it is registered a decrease of qualified staff number, especially on the main works (welders and locksmiths) this fact forced and forcing us to outsource some steel construction works, fact which will not be present concurrency at the hiring.
- Not on the last place it is a growth of working force fluctuation.
Nevertheless, during the year 2021, the number of staff increased by 4,01% in comparison to the year 2020.
The average number of employees throughout 2021 is 359 employees compared to 374 employees in the previous year. As of 31.12.2021, the number of employees was of 361, out of which 314 at the headquarters in Orşova and 47 at the Agigea Branch.
Out of the total number, as of 31.12.2021, the situation per activity sectors is as following:
359 – industrial activity
1 – canteen activity
1 – medical activity
The structure is as following:
45 – technical, financial, professional and administrative staff, out of which:
o 38 – employees in Orsova (out of which 32 with higher studies);
o 7 – employees in Agigea (out of which 5 with higher studies).
5 foremen, out of which 5 in Orsova;
311 workers, out of which:
o 271 employees in Orsova;
o 40 employees in Agigea.
Personnel structure in terms of gender is as follows:
men – 309 persons (325 in the previous year);
women - 52 persons (51 in the previous year).
During the year 2021, a number of 56 new employees and 77 releases were registered; the latter were released through: retirements, dismissals for reasons of employee’s character, expiry of the individual labour contract and with agreement from the parties, the latter being the most common cause.
A permanent preoccupation of the company’s management was to improve the skills of its employees, following that this activity becomes a permanent one also in the next period, according to the provisions in the Labour Code.
At the level of the company, there are legally, two unions formed.
Out of the total of employees, approximately 76% are members of a union, and