Quarterly Report • Nov 9, 2018
Quarterly Report
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According to Appendix 13 from Regulation no. 5/2018 Issued by the Financial Supervisory Authority (ASF)
Date of the report: 30.09.2018
Name of the issuer: AEROSTAR S.A. Bacău
Registered headquarter: 9 Condorilor St., Bacău, România
Telephone number/fax: +40234575070/ +40234572023
Individual Identification Number: RO 950531
Trade number in Bacau Trade Register: J04/1137/1991
LEI Code of identification: 315700G9KRN3B7XDBB73
Registered capital, subscribed and paid: 48.728.784 lei
Number of shares issued: 152.277.450
Nominal value: 0,32 lei / share
The regular market on which the securities/shares issued are traded:
Bucharest Stock Exchange ("ARS" indicator) – Standard Category
The report of the Board of Directorsfor the 9 months of 2018of AEROSTAR S.A. Bacau is prepared in accordance with Regulation no. 5, 2018 regarding the issuers of financial instruments and market operations, issued by the Financial Supervisory Authority on 10 May 2018 and entered into force on 11 June 2018.
According to this regulation, the report must present the analysis of the present economic-financial situation of AEROSTAR, in comparison with the similar period of the previous year; an analysis of the activity, of the events, transactions and economical changes which significantly affect the income from the basic activity, as well as the changeswhich affect the equity, the company's administration and the significant transactions.
This report contains the economic-financial indicators provided in Appendinx no. 13, letter A, the important events, the financial position and performance of the company Aerostar for 9 months 2018, as provided in Appendix 13, letter B.
The financial statements prepared on September 30th 2018 are not accompanied by the review report of the independent financial auditorof the company AEROSTAR.
The financial statements prepared on September 30th 2018 were audited by the internal auditor of the company.
In the first nine months of 2018, AEROSTAR's activity was performed in conditions of continuity and predictability, fulfilling the economic-financial objectives established in the budget provided for this period.
According to the classification of activities in the Romanian economy, Aerostar's object of activity is the manufacture of aircraft and spaceships – CAEN code 3030.
AEROSTAR continued the processes of consolidation regarding its position in the aeronautical and defence market, in the three main business lines:
| Description | Calculation method | Result |
|---|---|---|
| 1.Current liquidity indicator* | Current assets/ | 7,17 |
| Current liabilities | ||
| 2. Indebtedness indicator** | Borrowed capital/ | 0 |
| Own equity x 100 | ||
| 3. Rotation speed of the customers debits*** | Average customers balance/ |
52 |
| Turnover x 270 | ||
| 4.Rotation speed of the non-current assets**** | Turnover/ | 1,50 |
| Non-current assets |
*Offers the warranty of covering the current liabilities from current assets. The recommended value accepted is approximately 2.
** Expresses the effectiveness of the credit risk management, indicating the potential financial problems, liquidity, with influences in honouring the commitments.
*** Expresses the effectiveness ot the company in collecting its receivables, i.e. the number of days until the debtors pay their liabilities to the company.
**** Expresses the effectiveness of the non-current assets management, by examining the turnover generated by a certain quantity of non-current assets.
AEROSTAR was established in 1953 and operates in accordance with the Romanian Law. Its operations take place at its registered headquarters located in Bacau, 9 Condorilor Street, code 600302. In accordance with the Decision of the Board of Directors no. 2/14.12.2017, the opening of a secondary headquarter was approved, without legal personality (place of business) in Iasi, on Aeroportului Street, no. 25B.
Aerostar's main field of the activity is production.
Main object of activity is "manufacture of aircraft and spaceships" – CAEN code 3030.
The company was registered as a shareholding company at the Trade Register of Bacau under number J04/1137/1991 with the current name of AEROSTAR S.A. and having the individual registration code 950531, the identification code at European level (EUID): ROONRC.J04/1137/1991.
The company is listed at the Bucharest Stock Exchange under ARS code and the record of the shares and shareholders is kept, according to the law, by the Depozitarul Central S.A. Bucharest.
During January 2018 - September 2018, no new shares or participation bonds, convertible obligations, options or similar rights were registered.
From an accounting regulations point of view, the company AEROSTAR S.A. is the subsidiary of the company IAROM S.A., therefore the parent company which consolidates the financial statements of the group is IAROM S.A., having the identification code 1555301 and the registered headquarter in Bucharest, Aerogarii Boulevard, no. 39.
The consolidated financial statements of the financial year 2017 were submitted to A.N.A.F. under the registration number 150489860/ 22.08.2018. Copies of the consolidated financial statements can be obtained from the headquarter of the parent company, IAROM S.A.
The parent company will prepare and publish a set of consolidated financial statements in accordance with the applicable accounting regulations, for the financial year ended in 31.12.2018.
The company has one operating segment according to IFRS 8 and no distinct financial information is reported for different components of the entity.
Information regarding the sales on the markets are presented in detail in the Report of the Board of Directors.
The management policy is focused on maintaining a solid base of capitals, with the purpose of sustaining the continuous of the company and reaching its strategic objectives.
The company will take firm actions furthermore to assure the sustainability of the investments and the business increase.
The strategy adopted develops the main object of AEROSTAR's activityso that the majority of the turnover is in the aeronautical field. The general objective is the annual increase of the turnover and to simultaneously increase the customers' satisfaction. The specific objectives, which sustain the general objective, comprise the ongoing organic development of the company: development of the centres of excellence by continuing the modernisations, investments, the programs of continuous improvement and the development of the organizational culture.
The company capitals entirely cover the necessary funding for the production and for realization of the investments. Through its dividend policy, the Company develops its own company capitals in parallel to the increase of the sales and of the investments.
During January – September 2018, no borrowed capital was used and no cash infusion from the shareholders was made.
The value proposed by Aerostar on the marked is created in the core business, from PRODUCTION, in the aviation and defence field.
The management has adopted an integrated model of business, based on the systemic and process-basedapproach and on RISK.
The value created by the company in the value chain of the economy is supported by a divisional type organization, based on accounts management centres in the area of production, auxiliary activities and functional activities. Aerostar performs its object of activity using in an integrated way the common resources of the organization.
Starting with January 2018, AEROSTAR has operated organizational changes with the purpose of better mobilisation and use of the resources, to better exploit the market opportunities and to respond better to the requirements of the customers.
The new organizational structure operates according to the objectives established.
Synthesis of the main economic-financial data for 9 months 2018, comparedto 9 months 2017
| MU | 30.09.2018 | 30.09.2017 | |
|---|---|---|---|
| Registered capital | thousand lei |
48.729 | 48.729 |
| Turnover | thousand lei |
238.159 | 223.799 |
| - Export sales |
thousand lei |
180.790 | 182.962 |
| The effective number of employees, from which: | no. | 1.999 | 2.100 |
| - Own employees |
no. | 1.868 | 1.947 |
| - Employees attracted through temporary labour agent |
no. | 131 | 153 |
| Net profit | thousand lei |
59.820 | 26.984 |
| Cash - flow | thousand lei |
143.516 | 130.405 |
| 30.09.2018 | 30.09.2017 | |
|---|---|---|
| General liquidity | 7,17 | 6,07 |
During the first 9 months of 2018 no events or other factors affected the liquidity of AEROSTAR.
The volume of the investments performed on 9 months 2018 has doubled in comparison with the similar period of 2017:
| 30.09.2018 | 30.09.2017 | |
|---|---|---|
| Expenses for investments from company sources | ||
| (thousand lei) | 23.595 | 11.745 |
152.277.450 shares, nominative, ordinary, of equal value, paid integrally, issued in dematerialized form and recorded in the Register of Shareholders.
This is managed by Depozitarul Central S.A. Bucharest.
The issuer AEROSTAR S.A. Bacau is registered with the following data:
Individual Identification Number 950531, ISIN ROAEROACNOR5 code, ARS stock exchange symbol, the issued shares being all in the standard category.
| 30.09.2018 | 30.09.2017 | 30.09.2016 | |
|---|---|---|---|
| Number of shares | 152.277.450 | 152.277.450 | 152.277.450 |
| Nominal value per share (lei) | 0,32 | 0,32 | 0,32 |
| Equity (lei) | 295.343.358 | 227.019.817 | 217.060.598 |
| Price at the end of the period1 (lei) |
5,20 | 4,27 | 3,09 |
| Stock exchange capitalization1 (lei) |
791.842.740 | 650.224.712 | 470.537.321 |
| Maximum price1 (lei) |
5,36 | 4.55 | 3.22 |
| Minimum price1 (lei) |
4,65 | 3.25 | 2.24 |
| Result per share (lei) | 0,393 | 0,177 | 0,317 |
1) Source: Monthly newsletter issued by the Bucharest Stock Exchange
| AEROSTAR S.A. Report for 9 months 2018 |
|||
|---|---|---|---|
| MBR Indicator (market to book ratio) Stock exchange capitalization / equity) |
2,68 | 2,86 | 2,17 |
Worth to note is significant increase of the stock exchange capitalization and of the interest for the company's shares.
AEROSTAR follows the activity related to the evolution of the AEROSTAR shares on the Bucharest Stock Exchange without interfering in its operations with this activity.
The 65th anniversary since the establishment of the company highlighted the importance of the company for the development of the local community, of the aviation and defence industry and for Romania and hosted many activities and events.
The coordinates of the dividents' paymentowed to the shareholders, distributed from the profit of the year 2017 were communicated to the shareholders of the company, through a press release published on August 20th 2018, namely:
The payment of the dividends is performed through Depozitarul Central by respecting the legal provisions applicable (art. 86, paragraph 5 from Law 24/2017 and art. 177 from the ASF Regulationno. 5/2018), as it was detailed in the press release from August 20th 2018, and which can be found on the company's website www.aerostar.ro, at the section Investors Relation.
The shareholders are reminded that any data modifications in the register of the shareholders (modifications of name, address, heritage etc) shall be performed only by Depozitarul Central SA –with its headoffice in Bucharest, Sector 2, B-dul Carol I, no. 34-36, et. 3, 8 and9, tel. 021.408.58.60, 021.408.58.66, 021.408.58.19 – at the shareholder's/entitledperson's application.
Any additional information regarding the dividends's procedure can be requested at: -Depozitarul Central: e-mail: [email protected] -AEROSTAR S.A.: tel. 0234.575.070 ext. 1445 or 1647, fax 0234/572023, e-mail: [email protected]
AEROSTAR S.A. did not identifyany eventssubsequent to the reporting date which would have an impact on the financial statements for 9 months 2018.
During January – September 2018, AEROSTAR had sales in the amount of 238.159 thousand lei, from which 180.790 thousand lei, aproximately 76%, were export sales, with a high diversity of customers, in a large number of different production programs.
| AEROSTAR S.A. | |
|---|---|
| ---------------------- | -- |
Aerostar's sales footprint is significant, on a global market of large geographical extent both in the civil and defence field.
The expenses for the investments program on the first 9 months of the year are 23.595thousand lei from which the amount spent for intangible immobilization is 395.842 lei.
On 24 May 2018, Aerostar signed a contract for services for authorization, design and building of the MRO civil aviationhangar and technical annex, installations, urban improvements and fencing of the area for the working point opened in Iasi.
At this secondary headquarter, Aerostar will perform activities of civil aviation MROfor Boeing 737 and Airbus 320.
The contract was signed for a period of 18 months and the total value is 5.600.000 Euro without VAT.
The financing of this investment is made from the company's own sources.
During the nine six months of 2018, Aerostar has maintained the certifications and approvals obtained either from the certification bodies, or from customers and other regulatory authorities.
As regards quality, surveillance audits were carried out both by the Romanian Civil Aeronautical Authority for the continued Part 21G and Part 145 approvals, by AEROQ for the Recertification Audits of the Quality Management System according to the requirements of SR EN ISO 9001 Standard from 2015, according to the AQAP 2110 requirements from 2016, as well as according to the requirements of AS 9100 Standard Rev. D from 2016.
As regards the environment, two control inspections were made from the Environment Guard Authority and one from the National Administration "Apele Romane". Also, thevalidation audit forthe number of Greenhouse Gas Emissions certificates relating to the year 2017, certificates which werehanded over by assuring the conformity with the legislation in force, as well as the recertification audit for the Environment Management in accordance with SR EN ISO 14001 from 2015.
Furthermore, in the first 9 months of 2018,the monitoring of water, air and noise was performed in the entire company site, according to the regulations required by the Integrated Environment Authorization and currently the process of obtaining a new household authorization for water administration is in progress for Baza Izvoare.
On 30.09.2018 it was an effective number of 1.999 employees, from which 1868own employees and 131 employees – personnel temporary employed through the temporary work agent.
A number of 179 employees from company's own personnel are in management positions.
Other indicators at the date of 30.09.2018:
The average union membership in the company for 9 months 2018 was 74,08%.
In the first 9 months of 2018, AEROSTARpreoccupations materialized and a number of 146 young students from technical high schools "Anghel Saligny", "N.V. Karpen", "Dumitru Mangeron" and from Technologic highschool "Petru Rares" from Bacau, as well as 53 students from "Vasile Alecsandri" University from Bacau, Polytechnics University from Bucharest, University "Transilvania" from Brasov, Technical University "Gh. Asachi" Iasi, Military Technical Academy Bucharest and "Coventry"U.K. performed practice in the company.
In the first 9 months of 2018professional training courses for the employees of the companywere organized, targeting mainly the training in the areas of interest for the productionactivities:
40 courses (training programs) with external suppliers with a number of 425 attendants;
172 continuous professional training programs/internal approval.
A number of 8 internship programs were performed for young graduates with university technical studies, employees of the company.
Furthermore, an apprenticeship program for aircraft mechanics is ongoing, in which 12 apprentices are included.
The costs related to this period from the annual professional training budget was of: 724 thousand lei.
" Open Doors Day"
In April 2018, onthe occasion of the 65 years anniversary from the establishment of AEROSTAR S.A., two "Open Doors Day" events were organized, one dedicated to the highschool and college students from Bacau and the other one for the employees and their families, where 1.205 visitors participated.
AEROSTAR is exposed to many risks and uncertainties which can affect its financial performance. The business lines performed by AEROSTAR, the operational results or the financial situation, may be affected by the materialization of the risk presented further.
AEROSTAR pursues to secure the average and long-term sustainability and the reduction of the uncertainty associated with its strategic and financial objectives.
Carrying out the risk management processes provides the identification, analysis, evaluation and management of risks in order to minimize their effects down to an agreed level.
The reconfiguration of the Management System and of the Quality Management System in Aerostar in accordance with the latest editions of the standards SREN ISO 9001of 2015, AQAP 2110 of 2016, AS 9100 Rev D of 2016, SR EN ISO 14002 of 2016 place a special emphasis on therisk management.
The recertification obtained after the external audit for each of these certifications and authorizations confirms the preoccupation and goodpractice established in Aerostar for the risk management.
The operational risk is monitored through the intensive Management System implemented at all management levels and this process is sustained by the software applications used and implemented in the digitalization program.
The Legal Risk is associated to the operational risk.
Monitoring and elimination of the legal risk's effects is realised through a permanent information system regarding the legislative modifications, as well as by organizing an analysis, endorsement and approval system for the terms and conditions included in the commercial agreements.
AEROSTAR allocates and will continue to allocate investment expenses and other operational expenses in order to prevent and manage the operational risk.
We appreciate that currently there is a very low level of the operational risk in Aerostar.
In addition, AEROSTAR aims, by setting provisions for risks and related expenses, to haveits own funding availableto cover its risks of exposure.
Also, in order to minimize the operational risk, AEROSTAR annually renews, with 1 strank insurance-reinsurance companies, a civil liability insurance contract related to the main business lines (manufacturing of aircraft products and maintenance for commercial aircraft).
The financial flows and the situation of the amounts collected and amounts paid for each partener are permanently monitored and controlled, maintaing a real connection with them, as a result we appreciate that this risk is very low.
The cash and cash equivalents are placed only in 1st tier bank institutions, considered as having a high solvency.
The credit risk, including the risk of the country in which the customer operates in its activity, is managed on each business partner. When necessary, specific instruments of credit risk mitigation are requested (advance payments, letters of bank guarantee, confirmed letters of credit).
AEROSTAR has no significant exposure towards a single partner and does not register a significant concentration of the turnover on a single geographical area.
However, there is a significant exposure towards the global market of Airbus programs, a high percentage from the company's products being incorporated in Airbus aircraft.
Liquidity Risk. In this period this risk is practically inexistent.
To manage the liquidity risk, the cash flows are monitored and analysed weekly, monthly, quarterly and annually in order to establish the estimated level of net modifications of the cash. Such reviews provide the basis for the financing decisions and for the capital expenditures.
As regards the management of the liquidity risk, AEROSTAR keeps an annual cashreserve in the form of a Credit Line usable under the form of an overdraft granted by banks of 2.500.000 USD. During the reporting period, AEROSTAR did not use the Credit Line, all the activities of the Company being financed from its own sources.
AEROSTAR is exposed mainly to the price risk determined by the fluctuations of the raw material and of the materials used in the manufacturing products.
The management of this risk is realised through:
AEROSTAR is exposed to the exchange rate risk because 76% of the turnover is reported to USD and EUR, while a significant part of the operating expenses is denominated in LEI.
Thus, AEROSTAR is exposed to the risk that the exchange rate variations shall affect both its net incomes as well as its financial position, as they are expressed in LEI.
As far as the interest rate risk is concerned, due to the fact that AEROSTAR did not use the contracted Credit Line in the reported period, the incomes and cash flows are independent from the interest rate variation on the banking market.
For the following 3 months AEROSTAR does not foresee other significant risks than as managed in the current period and presented further:
Operational risk: the risk to incur losses or the failure to meet the estimated profits.
Legal risk: the risk of loss, resulting from the fines, penalties and sanctions of which AEROSTAR can be charged in case of non-application or misapplication of dispositions, legal or contractual provisions.
Credit risk: the risk of AEROSTAR to incur a financial loss as a result of the failure to meet the contractual obligations by a customer.
However, additional risks and uncertainties can exist, currently unknown or considered insignificant, but which can affect in the future the business lines performed by AEROSTAR.
The companies where AEROSTAR has capital holdings operate in accordance with the Romanian law. At 30.09.2018 AEROSTAR has the following capital participations in other companies, with no modifications compared with the prior reporting period.
| Name | Basic activity | Registered capital |
Holdings Aerostar |
|---|---|---|---|
| Airpro Consult SRL | Contracting activities, on temporary basis, of manpower |
10.000 lei | 100% |
| Foar SRL | Renting and leasing activities with other machinery, equipment and tangible goods n.c.e. |
8.000 lei | 51% |
| Aerostar Transporturi Feroviare S.A.* |
Manufacturing of lifting and handling equipment |
200.000 lei | 45,75% |
The affiliated companies do not prepare quaterly financial reports, the latest financial statements prepared and approved being for the year 2017.
| Subsidiary | Basic activity |
No. of shares |
Voting rights |
Contribution held (thousand lei) |
Financial information for the last financial year (2017) for which the financial statements of the affiliated companies were approved (thousand lei) |
||
|---|---|---|---|---|---|---|---|
| Sales | Own Equity |
Net profit |
|||||
| Airpro Consult SRL |
CAEN 7820 code |
100 | 100,00% | 10 | 9.138 | 171 | 106 |
| Foar SRL | CAEN 7739 code |
408 | 51,00% | 4 | 479 | 1.966 | 219 |
| Aerostar Transporturi Feroviare S.A.* |
cod CAEN 2822 |
9.150 | 45,75% | 92 | - | 273 | 1 |
| Total | 106 | 9.617 | 2.410 | 326 |
*The activity of the Aerostar Transporturi Feroviare SA Bacău is suspended since the year 2016.
The transactions between AEROSTAR and the affiliated parties in the period 01.01.2018 – 30.09.2018, detailed in Note 26 to the Financial Statements consisted in:
| Aquisition of goods and services | 9 months 2018 | 9 months 2017 |
|---|---|---|
| Airpro Consult SRL Bacău | 5.582 | 5.957 |
| Foar SRL Bacău | 395 | 369 |
| Total | 5.977 | 6.326 |
| SALES OF GOODS AND SERVICIES | 9 months 2018 | 9 months 2017 |
|---|---|---|
| Airpro Consult SRL Bacău | - | 4 |
| Foar SRL Bacău | 1 | 2 |
| Total | 1 | 6 |
| Balance on | Balance on | |
|---|---|---|
| LlABILITIES | 30.09.2018 | 30.09.2017 |
| Airpro Consult SRL Bacău | 569 | 561 |
| Foar SRL Bacău | 72 | 88 |
| Total | 641 | 649 |
| DIVIDENDS COLLECTED/TO COLLECT BY AEROSTAR |
9 months 2018 | 9 months 2017 |
|---|---|---|
| Dividends collected by Aerostar | ||
| Airpro Consult SRL Bacău | 90 | 97 |
| Foar SRL Bacău | - | 92 |
| Dividends to collect by Aerostar | ||
| Foar SRL Bacău | 112 | - |
| TOTAL | 202 | 189 |
The transactions with the affiliated parties in the first 9 months of 2018 consisted in:
During 01.01.2018 – 30.09.2018 no transactions were held with the company Aerostar Transporturi Feroviare SA Bacău, their activity being suspended since 2016.
| (thousand lei) | 30.09.2018 | 31.12.2017 |
|---|---|---|
| TOTAL ASSETS, of which: | 472.665 | 443.192 |
| Noncurrent assets | 158.629 | 153.686 |
| Current assets - total, of which: | 302.587 | 278.451 |
| - inventories | 91.430 | 67.925 |
| - trade receivables and other receivables | 67.641 | 46.640 |
| - cash and cash equivalent | 143.516 | 163.886 |
| Other assets elements | 11.449 | 11.055 |
| TOTAL EQUITY, ADVANCE INCOME, LIABILITIES AND PROVISIONS, of which: |
472.665 | 443.192 |
| Total liabilities | 58.022 | 52.331 |
| Total provisions | 108.422 | 125.189 |
| Subsidies for investments | 10.854 | 12.677 |
| Total equity, of which: | 295.343 | 252.967 |
| - share capital | 48.729 | 48.729 |
| - retained earnings | 58.128 | 57.524 |
| - reserves | 163.376 | 110.843 |
| - other capital items (deferred income tax recognized on equity) |
(11.695) | (7.961) |
| - profit distributed as legal reserve | (23.015) | (9.338) |
| - result of the period (profit) | 59.820 | 53.170 |
| AEROSTAR S.A. |
|---|
| (thousand lei) | 30.09.2018 | 30.09.2017 |
|---|---|---|
| TOTAL INCOME | 273.767 | 257.249 |
| Operating income, from which: | 267.726 | 253.917 |
| - Turnover | 238.159 | 223.799 |
| - Income related to the inventories of finished goods and production work in progress |
26.190 | 27.034 |
| Financial income | 6.041 | 3.332 |
| Total expenses | 208.333 | 222.591 |
| Operating expenses,from which: | (205.452) | (217.492) |
| - Material expenses | (92.076) | (92.483) |
| - Expenses with employees' benefits | (83.766) | (79.930) |
| - Expenses regarding amortization of assets | (18.708) | (17.587) |
| - Adjustments regarding currents assets | (6.808) | (11.870) |
| - Adjustments regarding provisions | 16.767 | 6.944 |
| - Expenses regarding external services | (18.648) | (20.694) |
| - Other expenses | (2.213) | (1.872) |
| Financial Expenses | (2.881) | (5.099) |
| Operating profit | 62.274 | 36.425 |
| Financial Profit / Loss | 3.160 | (1.767) |
| PROFIT BEFORE TAX | 65.434 | 34.658 |
| TAX ON CURRENT AND DEFERRED PROFIT | (5.614) | (7.674) |
| NET PROFIT OF THE PERIOD | 59.820 | 26.984 |
Aspects regarding the company capital and administration
There were no modifications which affect the equity and the administration of the company.
The company was not in the impossibility to respect its financial obligations during the period.
There are no modifications regading the rights of the shareholders. There were no major transactions completed by the company with the persons with whom the company is operating in a concerted manner or in which these persons were involved during the relevant period.
On behalf of the Board of Directors, Grigore FILIP President – General Director
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