Aerostar S.A.

Quarterly Report • Nov 14, 2016

Quarterly Report as on 30.09.2016

In accordance with Annex 30A to the Regulation no 1/2006 with subsequent modifications regarding the issuers and operations with securities

Date of the report: 30.09.2016

Name of the Company: S.C. AEROSTAR S.A. BACAU

Registered Headoffice: str.Condorilor nr 9

Telephone No: 0234-575.070

Sole Registration Number with Bacau Trade Register Office: 950531

Number in Bacau Trade Register: J04/1137/1991

Social capital, subscribed and paid: 48.728.784 lei

Regular market for trading issued securities: BUCHAREST STOCK EXCHANGE (symbol "ARS")

INTRODUCTION

The purpose of this interim financial report of the Board of Directors of AEROSTAR S.A. Bacau is to inform the investors regarding the modifications in the position and performance of the company, which took place in the time period January-September 2016.

In accordance to usual practice, the financial statements prepared as on 30 September 2016 are not accompanied by the report of the independent financial auditor.

The individual financial statements prepared for 30 September 2016 were audited by the internal auditor of the company AEROSTAR S.A. Bacau.

MAIN EVENTS IN THE TIME PERIOD JANUARY-SEPTEMBER 2016

Highlights Relevant Data for 9 months 2016

	MU	30.09.2016	30.09.2015
Registered Capital	thousand lei	48.729	48.729
Turnover	thousand lei	240.127	202.032
 Export Sales	thousand lei	193.335	174.396
Expenses for Investments	thousand lei	13.732	15.000
Actual Number of Employees, of which:	no	2.060	1.979
 Own employees	no.	1.785	1.718
 Employees from temporary labour agent	no.	275	261
Total Gross Profit	thousand lei	57.243	40.571
Net Profit	thousand lei	48.334	33.525

"AEROSTAR" SHARE

Stock Exchange Symbol "ARS"	30.09.2016	30.09.2015
Number of shares	152.277.450	152.277.450
Market value per share at the end of the period (lei) *)	3,09	2,91
Stock Exchange Capitalization (lei)	470.537.321	443.127.380
Trading price in the timeperiod (minimum level/ maximum level ) (lei)	2,24 / 3,22	1,675 / 3,25

*)source: Bucharest Stock Exchange Monthly Bulletin

AEROSTAR is a pole of economic development in Romania

AEROSTAR's position as a pole of industrial and technological development in aviation and defence has been consolidating in intensive processes of growth and development, as part of a complex set of actions for feed-back and adaptation to a very competitive market.

AEROSTAR's Customers are in the upper part of the hierarchy of large global companies in world top 100 of the aviation and defence industry.

The strengths of AEROSTAR as a supplier in the global chains of supply of the industry were recognized by awards of international recognition, granted by the Customers, for quality, on time delivery, competitive prices.

In accordance with the classification of activities in the national economy, the main object of activity is manufacturing of aircraft and spaceships- CAEN code 3030.

The main field of activity is aviation manufacturing but the company is also active on the maintenance market for commercial aircraft and aero and ground defence systems.

Aerostar kept its positioning as number 1 in Romania for its object of activity.

• Number 1 in aviation manufacturing
• Number 1 in maintenance of commercial aircraft
• Number 1 for the solutions supplied in the field of defence systems (aero and ground).

The sales made by the company in the time period January- September 2016 were in amount of 240.127 thousand lei.

From this turnover, the company sold products and services on the domestic market of 46.792 thousand lei, and the equivalent of 193.335 thousand lei for export.

On domestic and foreign markets (comparison)- as percent in total sales

INVESTMENTS

The expenses for investments made during January-September 2016 were in total of 13.732 thousand lei, fully funded by Aerostar.

From this amount, 13.191 thousand lei was spent for the acquisition of technogical equipment, hardware, measurement and control equipment, for installations, internal transport vehicles, the amount of 349 thousand lei for the acquisition of software licenses and 192 thousand lei for the development of the production management IT system.

AEROSTAR AS AN EMPLOYER

As on 30 September 2016 there was an actual number of 2060 employees in total, growing with 81 employees compared to 30 September 2015.

From among them, 275 employees are made available by AIRPRO CONSULT S.R.L., which operates on the market as a temporary labour agent.

As to their qualification and background, the situation is the following:

• o University graduates: 525
• o High school and post high school: 601
• o Vocational school or on-job qualification: 659

The union membership during January-September period 2016 was an average of 79,3%.

Other aspects related to human resources:

• Average employment duration in AEROSTAR S.A. → 15 years;

• Average age of employees in AEROSTAR S.A. → 47 years;

• Number of employees on the threshold of retirement by the year end 2016 → 57;

• Non-discrimination in employment as well as at work;
• Provide optimal conditions for health and safety for all the employees, as well as in case of emergency situations.

During the first 9 months of the year 2016 an aggregate number of 3.118 employees of the company attended various internal professional training courses (approvals for different types of activity) or external courses (specialization, professional enhancement, post-university courses), with priority objective to cover the training needs in areas of interest for the execution of the production activities.

Also, expenses were made for:

• Professional training for employees, in amount of 679 thousand lei;
• Various health and safety expenses, in amount of 1.769 thousand lei.

Special event which took place in April 2016

In April 2016, on the occasion of the 63rd anniversary of the company foundation (17.04.1953), an "Open Gates Day" event was organized at AEROSTAR S.A.", which was attended by some one thousand visitors.

QUALITY AND ENVIRONMENT

Aspects related to the Quality and Environment Management System

During the first nine months of this year, Aerostar 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, and by AEROQ for the continued 9001 certification.

Also,during the first half of this year, the company DQS performed the surveillance audit for the Quality Management System, based on the AS9100 standard specific for the production of civil aviation parts; the Quality Management System was also recertified in accordance with AQAP2110.

As regards the environment, two inspections from the Environment Guard Authority were made, as well as the validation audit for the number of greenhouse efect gas certificates related to the year 2015. Such certificates were handed-over to provide the conformance with the applicable legislation.

In the timeperiod 29.08 ÷ 01.09.2016 the auditing team of DQS performed the recertification audit on the Environment Management System which provided the continued certification to Aerostar.

Also, the procedure was initiated to review the Integrated Environment Authorization and the Water Management Authorization following the new investment related to the tartaric-sulphuric anodization line and the water based painting line.

PAYMENT METHOD AND DISTRIBUTION PERIOD FOR THE DIVIDENDS DISTRIBUTED FROM THE PROFIT OF THE YEAR 2015

On 30 August 2016, an AEROSTAR press release informed the shareholders of the company as to the following data:

The payment coordinates for the dividends from the profit of the year 2015:

• a) The gross dividend per share is 0,084 lei, from which the tax on dividends is withheld at origin, at the rate applicable on the payment date in accordance to law; the costs related to the payment are deducted from the value of the net dividend;
• b) The "ex date" was set for the date of 31.08.2016 according to the resolution of the Ordinary GMS held on 21.04.2016;
• c) The shareholders entitled to receive dividends distributed from the net profit of the financial year 2015 are as recorded in the consolidated register of the shareholders on the date of 01.09.2016 – the Record Date (approved by the Ordinary GMS held on 21.04.2016);
• d) The dividends distributed from the profit of the financial year 2015 were paid to the shareholders starting with the date of 21.09.2016 – Payment Date (approved by the Ordinary GMS held on 21.04.2016).

As well as the fact that:

The payment of the dividends is made through Depozitarul Central.

The payment of the dividends through Depozitarul Central:

• 1. In case of a shareholder who has an account opened with an intermediary participating in the clearing-settlement and register system of the Depozitarul Central, the payment of dividends is made through Depozitarul Central and the participants in the clearing-settlement and register system of Depozitarul Central
• 1. In case of a shareholder who does not have an account opened with an intermediary participating to the clearing-settlement and register system of Depozitarul Central, the payment of dividends is made by Depozitarul Central through CEC Bank S.A. (the payment agent appointed by AEROSTAR).
• 1. In case of a shareholder who does not have an account opened with an intermediary participating to the clearing-settlement and register system of Depozitarul Central, the payment of dividends is made by Depozitarul Central through CEC Bank S.A. (the payment agent appointed by AEROSTAR).

FINANCIAL POSITION AND PERFORMANCE OF THE COMPANY AEROSTAR IN THE TIME PERIOD JANUARY – SEPTEMBER 2016

Financial Position (thousand lei)

	30 September	31 December
	2016	2015
ASSETS
Immobilized Assets
Tangible Immobilizations	144.678	142.278
Intangible Immobilizations	1.865	2.006
Real Estate Investments	6.012	6.248
Financial Immobilizations	205	212
Total Immobilized Assets	152.760	150.744
Circulating Assets
Inventories	62.479	43.562
Commercial Receivables and other receivables	52.299	57.194
Cash and cash equivalents	108.834	101.299
Total circulating assets	223.612	202.055
Receivables ref the tax on deferred profit	5.755	6.546
Expenses in advance	759	434
Total Assets	382.886	359.779
COMPANY OWN CAPITALS AND DEBTS
Capital and reserves
Registered Capital	48.729	48.729
Current result	48.334	52.268
Result carried forward	57.413	57.382
Other reserves	57.992	34.773
Debts regarding deferred tax recognized on
account of own capitals	10.854	9.884
Distribution of the period profit for the legal
reserve	(6.261)	(21.517)
Total Company Capitals	217.061	181.519
Long Term Debts
Subsidies for investments	15.471	16.875
Revenues registered in advance	35	0
Total Long Term Debts	15.506	16.875
Long Term Provisions	68.904	70.086
Current Debts
Commercial Debts	31.926	34.497
Debt on current profit	1.752	1.970
Other current debts	7.318	14.222
Total current debts	40.996	50.689
Provisions on short term	40.419	40.610

Financial Position (continued)

	30 September	31 December
	2016	2015
Total provisions	109.323	110.696
Total debts	56.502	67.564
Total company capitals, debts and provisions	382.886	359.779

Performance achieved

	30 September	30 September
	2016	2015
Revenues from Sales Other revenues	240.127 2.690	202.032 1.315
Revenues related to the costs of inventories of products and production in progress
	16.180	23.349
Revenues from production of immobilzations	997	530
Total Revenues from Operations	259.994	227.226
Expenses
Expenses with materials	(90.196)	(86.347)
Expenses with employees benefits	(72.046)	(63.764)
Expenses with amortization of immobilizations	(11.731)	(9.204)
Influence of adjustments related to current assets	(26)	(1.662)
Influence of adjustments related to provisions	1.373	(4.813)
Expenses related to external services	(27.833)	(19.437)
Other expenses	(1.641)	(1.543)
Total Expenses from Operations	(202.100)	(186.770)
Profit from Operations	57.894	40.456
Financial Revenues	4.103	8.102
Financial Expenses	(4.754)	(7.987)
Financial Result	(651)	115
Profit before tax	57.243	40.571
Tax on current profit and deferred	(8.909)	(7.046)
Net Profit of the period	48.334	33.525

GRIGORE FILIP DORU DAMASCHIN

General Director, Financial Director,

Annex 30B

ECONOMIC & FINANCIAL INDICATORS

Indicator	Calculation Method	Result
1.Current Liquidity Indicator	Current Assets/ Current Debts	5,59
2.Endebtness Ratio Indicator	Capital loaned/ Company capital x 100	0
3.Rotation speed of client debits (days)	Clients average balance/ Turnover x 270	55
4.Rotation speed of immobilized assets	Turnover/ Immobilized Assets	1,57

General Director, Financial Director, GRIGORE FILIP DORU DAMASCHIN

AEROSTAR S.A. INDIVIDUAL STATEMENT OF PROFIT OR LOSS FOR 30 SEPTEMBER 2016 (all amounts are in thousands lei, unless specified otherwise)

	Note	30 September 2016	30 September 2015
Revenues from sales	14	240.127	202.032
Other revenues	14	2.690	1.315
Revenues related to inventories of finished products and production in progress	14	16.180	23.349
Revenues from production of immobilizations	14	997	530
Total Revenues from Operations		259.994	227.226
Expenses
Expenses with materials	15	(90.196)	(86.347)
Expenses with benefits for employees	15	(72.046)	(63.764)
Expenses with amortization of immobilizations	15	(11.731)	(9.204)
Influence of adjustments related to current assets		(26)	(1.662)
Influence of adjustments related to provisions	15	1.373	(4.813)
Expenses related to external services	15	(27.833)	(19.437)
Other expenses	15	(1.641)	(1.543)
Total Expenses with Operations		(202.100)	(186.770)
Profit from Operations		57.894	40.456
Financial Revenues	16	4.103	8.102
Financial Expenses	16	(4.754)	(7.987)
Financial Result		(651)	115
Profit before tax		57.243	40.571
Tax on current profit and deferred	7	(8.909)	(7.046)
Net Profit of the period		48.334	33.525

General Director

Financial Director

Grigore Filip Doru Damaschin

AEROSTAR S.A. INDIVIDUAL STATEMENT OF THE FINANCIAL POSITION FOR 30 SEPTEMBER 2016 (all amounts are in thousands lei, unless specified otherwise)

	Note	30 September 2016	31 December 2015
ACTIVE
Immobilized Assets
Tangible Immobilizations	4;3	144.678	142.278
Intangible Immobilizations	5;3	1.865	2.006
Real Estate Investments	4;3	6.012	6.248
Financial Immobilizations	6;3	205	212
Total Immobilized Assets		152.760	150.744
Circulating Assets
Inventories	8;3	62.479	43.562
Commercial receivables and other receivables	9;10	52.299	57.194
Cash and cash equivalents	12;3	108.834	101.299
Total Circulating Assets		223.612	202.055
Receivables related to tax on deferred profit	7;3	5.755	6.546
Expenses in advance		759	434
Total Assets		382.886	359.779
COMPANY CAPITALS AND DEBTS
Capital and reserves
Registered Capital	13	48.729	48.729
Current Result		48.334	52.268
Result carried forward	13;3	57.414	57.382
Other reserves	14;3	57.992	34.773
Debts related to tax on deferred profit
recognized on account of company capitals
	7	10.854	9.884
Profit Distribution for legal reserve Total Company Capitals		(6.261) 217.062	(21.517) 181.519
Long term debts
Subsidies for investments	20;3	15.471	16.875
Revenues registered in advance	11	35	0
Total Long Term Debts		15.506	16.875
Long Term Provisions	17;3	68.904	70.086
Current Debts
Commercial Debts	11	31.926	34.497
Debt with tax on current profit	11	1.752	1.970
Other current debts	11	7.317	14.222
Total Current Debts		40.995	50.689
Provisions on short term	17;3	40.419	40.610
Total provisions		109.323	110.696
Total Debts		56.501	67.564
Total Company Capitals, debts and provisions		382.886	359.779

General Director

Financial Director

Grigore Filip Doru Damaschin

AEROSTAR S.A. INDIVIDUAL STATEMENT OF OTHER ELEMENTS OF THE GLOBAL RESULT FOR 30 SEPTEMBERI 2016 (all amounts are in thousands lei, unless specified otherwise)

	30 September 2016	30 September 2015
Net Profit of the financial year	48.334	33.525
Other elements of the global result	-	-
Total global result of the period	48.334	33.525

General Director

Financial Director Grigore Filip Doru Damaschin

AEROSTAR S.A. BACAU STATEMENT OF THE TREASURY CASH FLOWS (direct method) FOR 30 SEPTEMBER 2016 (all amounts are in thousands lei, unless specified otherwise)

	Note	30 September 2016	30 September 2015
TREASURY CASH FLOWS FROM OPERATIONS
Received from customers Taxes and excises recovered from the State Budget Payments for suppliers and employees	9	246.799 4.344 (173.582)	207.671 3.938 (165.392)
Payment of taxes, contributions and dues to State Budget		(37.739)	(33.389)
Payment of tax on profit		(8.336)	(10.291)
NET CASH FROM OPERATIONS		31.486	2.537
TREASURY CASH FLOWS FROM INVESTMENTS
Received from non-reimbursable funds Interest received from loans granted Interest received from bank deposits set-up Dividends collected Received from sales of tangible immobilizations Installments received from loans granted Payments for the acquisition of tangible and intangible immobilizations NET CASH USED IN INVESTMENTS TREASURY CASH FLOWS FROM FINANCING OPERATIONS	20	4.671 5 406 231 5 3 (16.712) (11.391)	3.396 12 975 112 0 303 (17.650) (12.852)
Dividends recovered Dividends paid		88 (12.380)	0 (20)
NET CASH USED IN FINANCING ACTIVITIES		(12.292)	(20)
Net increase of cash and cash equivalents		7.803	(10.335)
Cash and cash equivalents at beginning of the period		101.299	92.427
Effect of currency exchange rates variation on cash and cash equivalents		(268)	(2)
Cash and cash equivalents at the end of the period	12	108.834	82.090

General Director Financial Director GRIGORE FILIP DORU DAMASCHIN