Annual Report • Apr 26, 2016
Annual Report
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Bd. Iuliu Maniu Nr. 244 Sector 6 Postal Code 061126 Bucharest -Romania Tel.: (+4) 021 434 07 41 Fax: (+4) 021 434 09 21; (+4) 021 434 31 65 Trade Registry registration code J40/533/1991 Fiscal Code RO3156315 Sole Registration Code 3156315 Share capital subscribed and paid in: RON 36,944,247.50 www.turbomecanica.ro: e-mail: [email protected]
SC TURBOMECANICA SA is a Romanian open joint-stock company according to the Constitutive Act and applicable regulations, entirely privately owned, whose shares are listed on the Bucharest Stock Exchange.
It operates exclusively in the field of manufacturing and, according to the classification of activities in the national economy, its main object of activity is the Manufacturing of engines, mechanical assemblies and equipment for aircraft - NACE CODE 3030.
The Company carries out its activity in a highly competitive environment according to the widely recognized principles of corporate governance, in accordance with Romanian legislation, the legislation of the European Union and international practices, supplying on domestic and foreign markets products and services both in the field of defense and civil aviation.
The company has a long history of start-ups, it has experienced diversifications and developments, but also restructuring, falls, searches, new beginnings. However, throughout all this time, it has never stopped operating in the aviation and defense industry.
The program of technical restructuring and relocation of the technological flows, started a long time ago, and realization of the assets made available further to the reorganization of the company started to produce effects and to represent the solid basis for the company's redress in a short period of time.
The entire financial and accounting activity was based on the following principles:
The accounting of S.C. Turbomecanica S.A. is the main instrument to know, manage and control the assets, to ensure chronological and systematic registration of information, to process and store it, presenting the real status of the assets and the results obtained.
The Company manages its accounting using the double-entry method, prepares monthly, quarterly reports and at year end it presents the accounting balance sheet.
The accounting registrations are made chronologically and systematically according to the chart of accounts and the rules in force, and any asset-related operation is registered in a supporting document. In addition, the Financial and Accounting Department is organized so as to enable a high quality financial
reporting process. The roles and responsibilities are specifically defined and a control process is in place to ensure that the financial reporting is conducted accurately and correctly.
The 2015 results are included in the financial statements of the year, prepared in accordance with International Financial Reporting Standards (IFRS). Some of the elements are listed below:
| DENUMIRE | 2015 | 2014 |
|---|---|---|
| Revenues | 69,141,032 | 53,675,358 |
| Other revenues and (losses) | (14, 985, 665) | (2,363,784) |
| Variation of stocks | 2,529,251 | (162, 517) |
| Raw materials | (15, 864, 137) | (12,999,635) |
| Expenses with employees' benefits | (22, 301, 787) | (17, 977, 039) |
| Expenses with depreciation of assets | (5,445,365) | (4,376,236) |
| Net financial expenses | (3,385,665) | (4,531,530) |
| Other operating expenses | (6, 399, 707) | (6,343,691) |
| Gains / Loss on sales of assets available for sale | 115,948 | (12, 742, 291) |
| Profit/ (Loss) before tax | 3,403,905 | (7, 821, 365) |
| Tax on profit | (431, 310) | |
| Deferred income tax | 874,664 | 4,266,896 |
| Profit/ (Loss) for the year | 3,874,259 | (3,554,469) |
| Other comprehensive income, net of tax | ||
| Gains on revaluation differences | $\blacksquare$ | 3,951,110 |
| Deferred income tax | (1,058,756) | |
| Actuarial (loss) / gain on defined benefits plan | 238,668 | |
| Total other comprehensive income | 238,668 | 2,892,354 |
| Comprehensive result of the year | 4,085,927 | (662, 115) |
| NAME | 2015 | 2014 |
|---|---|---|
| Long-term assets | ||
| Tangible assets | 55,047,738 | 54,924,522 |
| Intangible assets | 8,930,542 | 10,445,422 |
| Other assets | 1,000 | |
| Total long-term assets | 63,979,280 | 65,369,944 |
| Current assets | ||
| Stocks | 23,951,055 | 29,736,898 |
| Trade receivables | 2,250,180 | 2,143,829 |
| Other receivables | 2,396,696 | 1,047,431 |
| Cash and cash equivalents | 7,118,858 | 11,903,023 |
| Assets for sale | 10,638,705 | 11,120,396 |
| Total current assets | 46,355,494 | 55,951,577 |
| Total assets | 110,334,774 | 121,321,521 |
This is a free translation from the original romanian version.
| NAME | 2015 | 2014 |
|---|---|---|
| Equity and liabilities | ||
| Capital and reserves | ||
| Capital issued | 1,024,571,055 | 1,024,571,055 |
| Reserves | 80,140,683 | 80,544,931 |
| Retained earnings | (1,068,502,598) | (1,072,992,773) |
| Total equity | 36,209,140 | 32, 123, 213 |
| Long-term liabilities | ||
| Loans | 4,905,781 | 7,997,601 |
| Deferred tax liabilities | 3,862,833 | 4,737,497 |
| Provisions | 968,649 | 1,494,810 |
| Other long-term liabilities | 3,474,291 | 5,933,564 |
| Total long-term liabilities | 13,211,554 | 20,163,472 |
| Current liabilities | ||
| Trade payables and other payables | 4,145,741 | 6,770,404 |
| Borrowings | 44,518,895 | 47,643,105 |
| Current income tax | 431,310 | |
| Provisions | 2,558,999 | 1,565,401 |
| Deferred income | 515,658 | 4,953,313 |
| Other current liabilities | 8,743,477 | 8,102,614 |
| Total current liabilities | 60,914,080 | 69,034,837 |
| Total liabilities | 74,125,634 | 89,198,309 |
| Total equity and liabilities | 110,334,774 | 121, 321, 521 |
| NAME | 2015 | 2014 |
|---|---|---|
| Number of shares | 369,442,475 | 369,442,475 |
| Nominal value per share | 0.10 | 0.10 |
| Book value per share | 0.098 | 0.08 |
| Average price per share | 0.031 | 0.03 |
| Net profit per share | 0.01 | $-0.009$ |
| Market value per share at the end of the period | 0.034 | 0.03 |
| Stock capitalization | 12,561,044 | 10,713,832 |
| NAME | 2015 | 2014 |
|---|---|---|
| Inflation | $-0.6$ | 07. ا |
| EUR average exchange rate | 4.44 | 4.44 |
| USD average exchange rate | 4.01 | 3,35 |
| GBP average exchange rate | 6,13 | 5,51 |
| NAME | 2015 | 2014 |
|---|---|---|
| Turnover, of which: | 69,141,032 | 53,675,358 |
| Benchmarks and aircraft parts | 8.787.712 | 9,919,690 |
| Engine repairs | 59.646.134 | 42,815,399 |
| Others | 707.186 | 940,269 |
The information presented above reveals that in 2015 S.C. TURBOMECANICA S.A. registered a gross profit of RON 9.75 million and a net profit of RON 3.84 million, obtained in the context in which the Company obtained total income of RON 76.7 million for which it spent RON 73.3 million.
The highest weight of such income, i.e., 90.1%, was obtained from productive activities specific to the Company's production profile.
The Company registered turnover of 69,141,032, 28.4% higher than the program approved by the GMS for 2015 and 28.9% higher than the numbers of 2014, due to the completion at the end of the year of additional orders for the Ministry of National Defense.
The gross profit obtained by the Company in relation to the turnover determines a rate of return of 4.92%, but the gross margin rate from operations, which measures the gross result from operations independently of the financial policies, investment, taxation levels and extraordinary elements, is 14.1%.
The fact that the gross margin from operations is positive proves that the Company has recovered its ability to generate profit and increase labor productivity, which constitutes a strong basis for continuously decreasing the Company's indebtedness, recovering the financial balance and distributing dividends.
The Company established the legal reserve in amount of RON 170,195 out of the net result of 2015 in amount of RON 3,847,259, and the difference will be cover the accounting loss registered in the previous year.
According to the provisions of the Accounting Law, the International Financial Reporting Standards, the Rules on the organization and conduct of assets, liabilities and equity counting, the stock counting was performed in 2015 based on Decision no. 296/22.10.2015 for the annual stock counting of fixed assets and items of inventory, on Decision no. 295/22,10,2015 for the annual stock counting of raw materials, consumables, unfinished and finished products, scraps, packaging and merchandise and Decision no. 303/26.10.2015 for the annual inventory of assets, suppliers and creditors.
The results of the annual stock counting were recorded in the Annual Stock Counting Minutes of SC TURBOMECANICA SA, registered under no. 1008/24.02.2016.
The cash and cash equivalents at banks as at December 31, 2015 were traced to the accounting documents and cash and cash equivalents in foreign currency were measured at the valid exchange rate of the NBR.
The management of cash equivalent is organized by the nature thereof by categories and storage or utilization places as follows:
Cash equivalent is accounted using the permanent inventory and control is exercised in accordance with M.O.P.F.O.no. 2861/09.10.2009.
I. In 2015, the following actions were conducted in the field of quality assurance:
To align to the reference standard requirements, the requirements of the requiatory authorities and to implement the organizational changes applied this year at TMB, the structural entities of TMB made changes to the following documents of the Quality/Environmental Management System:
they prepared/revised 42 General Procedures including Independent Annexes
In 2015, the Quality System and Organization Department acted towards constantly improving the organization and design of the Quality Management System.
In May 2015, General Electric Energy Product Europe conducted an audit at TMB to supervise the manufactured products, using as reference the product technical execution documentation. Further to the audit, General Electric Energy Product Europe found no inconsistencies, continuing the collaboration with TMB - General Electric Energy Product Europe.
In January 2015, European Aviation Safety Agency (EASA) together with the Romanian Civil Aeronautical Authority (AACR) conducted an audit at TMB to supervise the production organization of Turbomecanica S.A. in accordance with the provisions of EU Regulation no. 748/2012, Part 21, Section A, Subpart G. Further to the audit, AACR found not inconsistencles, maintaining the authorization granted by it.
In February 2015, the Romanian Civil Aeronautical Authority (AACR) conducted a spontaneous audit at TMB to supervise the production organization of Turbomecanica S.A. in accordance with the provisions of EU Regulation no. 748/2012, Part 21, Section A, Subpart G. Further to the audit, AACR found not inconsistencles, maintaining the authorization granted by it.
In June 2015, the Romanian Civil Aeronautical Authority (AACR) conducted a scheduled audit at TMB to supervise the production organization of Turbomecanica S.A. in accordance with the provisions of EU Regulation no. 748/2012, Part 21, Section A, Subpart G. Further to the audit, AACR prepared Investigation Report no. RTI-TMB-2015-SCG-P1 06.2015/15.06.2015 and found 1 inconsistency of level 2 and 2 inconsistencies of level 3 (recommendations), through Non-
compliance/recommendation reports TMB-026+TMB-028 attached to the Investigation Report mentioned above. For the inconsistencies found, TMB conducted an analysis to identity the causes of the inconsistencies, to determine the proper correction/prevention measures to remove such inconsistencies. which were accepted by AACH. For the inconsistencies found, 4 correction/preventive measures were set, which were finalized in September 2015.
In September 2015, AEROQ conducted an audit at TMB to supervise the quality management system, using as reference standard ISO 9001:2008. Further to the audit, AEROQ prepared the audit report no. 3291/24.09.2015, AEROQ found no inconsistencies, maintaining the certification granted.
In November 2015, the Romanian Civil Aeronautical Authority (AACR) conducted a scheduled audit at TMB to supervise the production organization of Turbomecanica S.A. in accordance with the provisions of EU Regulation no. 748/2012, Part 21, Section A, Subpart G. Further to the audit, AACR prepared Investigation Report no. RTI-TMB-2015-SCG-P2/16.11.2015 and found 1 inconsistency of level 3 (recommendation), through Non-compliance/recommendation report TMB-029 attached to the Investigation Report mentioned above. TMB conducted an analysis to identity the causes of the inconsistencies, to determine the proper correction/prevention measures to remove such inconsistencies, which were accepted by AACR. For the inconsistency found, 1 correction/preventive measure was set, which was finalized in December 2015.
In December 2015. AEROQ conducted an audit to certify the environmental management system at TMB in accordance with standard ISO 14001:2005. Further to the audit, AEROQ prepared the Minutes of 15.12.2015 and found not inconsistencies, granting certificate no. 811M/22.12.2015, valid until 13.09.2018.
The internal audits on the quality management system were conducted in accordance with Audit Plan PA-TMB 2015, approved by the General Director.
In 2015, 52 audits were conducted that found 19 inconsistencies for which the company established 46 correction measures, which were 83% completed, some of which were scheduled in 2016.
The internal audits on the environmental management system were conducted in accordance with Audit Plan PA-TMB 2015, approved by the General Director.
In 2015, 2 audits were conducted that found 5 inconsistencies for which the company established 5 correction measures, which were 100% completed.
The internal product audits were conducted in accordance with Audit Plan PA-TMB 2015, approved by the General Director.
In 2015, 0 audits were conducted that found 14 inconsistencies for which the company established 33 correction measures, which were 100% completed.
The internal process audits were conducted in accordance with Audit Plan PA-TMB 2015, approved by the General Director.
In 2015. 15 audits were conducted that found 20 Inconsistencies for which the company established 29 correction measures, which were 83% completed, some of which were scheduled in 2016.
The external audits at supplies were conducted in accordance with Audit Plan PA-TMB 2015, approved by the General Director as follows:
In March 2015, TMB conducted a scheduled audit at Molle industriali Conte to supervise supplies for the AgustaWestland program in accordance with the provisions of EU Regulation no. 748/2012, Part 21. Section A, Subpart G. Further to the audit, TMB prepared Audit Report no. B1.1F/27.03.2015 whereby it made 2 comments indicated 5 proposals for improvement, accepted by the supplier's representative. As no inconsistencies were found, the TMB audit team proposed to maintain supplier Molle Industriali Conte (code IT-0331) in the List of Approved Suppliers of TMB, with the status "Unconditionally accepted".
5.1 Under the general procedure PG SMQ-05 "Management analysis", the key process indicators were set, which are required to reach the strategic and quality objectives and which influence the customer satisfaction level. Such indicators are:
5.2 As regards special processes and the activity of quality laboratories, in 2015 the Company continued its policy of meeting the customers' needs, and increasing the attractiveness of the Company for potential active customers in the aeronautical industry by the following actions:
NADCAP third party accreditation of special processes
The most significant events as regards the growth of the level of attractiveness of TMB in the aeronautical industry remain the accreditations and re-accreditations from the NADCAP.
in 2015, the following special processes were re-accredited:
In April 2015, NADCAP conducted a re-accreditation audit at TMB on the non-destructive control processes at TMB according to the AC7114 requirements. Further to the audit, 1 minor inconsistency was found, which was corrected by the end of the audit. Therefore, the process received reaccreditation for 24 months (Merit Program) (certificate expiry: April 30, 2017).
in June 2015. NADCAP conducted a re-accreditation audit at TMB on the composite processes (adhesive gluing) installed at TMB according to the AC7118 requirements. The audit found no inconsistencies. Therefore, the process received re-accreditation for 24 months (Merit Program) (certificate expiry: October 31, 2017).
In June 2015, NADCAP conducted a re-accreditation audit at TMB on the surface improvement processes (cold-hammering) installed at TMB according to the AC7117 requirements. Further to the audit, 1 minor inconsistency was found, for which the required corrections and corrective/preventive actions were set, which were completed and accepted by NADCAP. Therefore, the process received reaccreditation for 24 months (Merit Program) (certificate expiry: October 31, 2017).
In June 2015, NADCAP conducted a re-accreditation audit at TMB on the chemical processing processes installed at TMB according to the AC7108 requirements. Further to the audit, 1 minor inconsistency was found, for which the required corrections and corrective/preventive actions were set, which were completed and accepted by NADCAP. Therefore, the process received re-accreditation for 24 months (Merit Program) (certificate expiry: October 31, 2017).
In October 2015, NADCAP conducted a re-accreditation audit at TMB on the heat treatment processes installed at TMB according to the AC7101 and AC7102 requirements. Further to the audit, 2 inconsistencies (1 major and 1 minor) were found, for which the required corrections and corrective/preventive actions were set, which were completed and accepted by NADCAP. Therefore, the process received re-accreditation for 18 months (Merit Program) (certificate expiry: July 31, 2017).
5.2.2.1. AgustaWestland certifications (Finmeccanica S.p.A. - Helicopters Division)
This year, all the special process and laboratory certifications previously obtained were maintained.
The requalification files were sent to the client and re-qualifications were obtained for the following processes:
magnetic non-destructive examination according to IT12/0199/02 (validity: 03.08.2018);
steel heat treatment (5025) according to IT 12/0271/02 (validity: 31.08.2018);
steel heat treatment (CEMCALIR) according to IT 12/0194/02 (validity: 29.09.2018);
roll threading according to DQP IT12/0256/02 (validity: 20.09.2018);
non-destructive examination by penetrating liquids according to DQP IT12/193/02 (validity: 11.01.2019);
verification of contact surface (Green Run Test) according to DQP 1854 (validity; 22.01.2019).
In addition, the Company sent to the customer the qualification file and obtained qualification for the following new processes:
This year, all the special process and equipment certifications previously obtained were maintained.
In 2015, 27 new benchmarks were introduced in production, part of 3 distinct assemblies for client General Electric Power and Water (GEPW) Hungary. For such benchmarks, 27 external FAI files were created, 25 of which are approved and 2 are pending approval. The files were sent to CLT. With the closing of such files, the production technological conditions and the criteria for acceptance of such benchmarks are homologated, which enables series production. (Attached the table of FAI 2015 status).
For customer Finmecanica Italy (Agusta-Westland), 4 new benchmarks were introduced in production, for which 4 FAI external files were created, 3 of which are approved, and 1 is pending approval. The file was sent to CLT. Through the integration of such benchmarks at TMB, the Company continues the assimilation of the new package of benchmarks for the Master Transmission Box for the FNM Italy helicopters. In addition, for this customer, for 26 benchmarks included in the current production, 8 internal FAI files were created (administrative changes) and 18 external FAI files due to technological changes.
In this period, 2 IAR 330 Mechanical Assemblies and 2 TURMO IV CA benchmarks were introduced in production, for which internal FAI files were created. The continuous assimilation at TMB of the various repair solutions related to benchmarks in licensed products offers extended possibilities of maintenance thereof through the repairs performed at TMB.
| GEPW Hungary | ||||
|---|---|---|---|---|
| No. | Benchmark no. | FAI no. | Status | Approval no. |
| 1 | 117E4036G005 ASSY | CQ-0221 | Approved | SQ-03244.1 |
| $\overline{2}$ | 117E4037G005 | CQ-0220 | Approved | SQ-03244.1 |
| $\overline{\mathbf{3}}$ | 154D7501P001 | CQ-0180 | Approved | SQ-03244.1 |
| 4 | 188C9446P001 | CQ-0208 | Approved | SQ-03244.1 |
| 5 | 188C9447P001 | CQ-0159 | Approved | SQ-03244.1 |
| 6 | 188C9448P001 | CQ-0207 | Approved | SQ-03244.1 |
| 7 | 237C5401P001 | CQ-0211 | Approved | SQ-03244.1 |
| 8 | 314A5157P001 | CQ-0209 | Approved | SQ-03244.1 |
| $\overline{9}$ | 314A5157P002 | CQ-0210 | Approved | SQ-03244.1 |
| 10 | 355B6447P001 | CQ-0160 | Approved | SQ-03244.1 |
| 11 | 355B6447P002 | CQ-0161 | Approved | SQ-03244.1 |
| 12 | 40988 | CQ-0206 | Approved | SQ-03244.1 |
| 13 | 40989 | CQ-0166 | Approved | SQ-03244.1 |
| 14 | 129E9007G001 ASSY | CQ-0495 | Approved | SQ-076023 |
| 15 | 129E9006G001 | CQ-0496 | Approved | SQ-076023 |
| 16 | 101E2244P001 | CQ-0497 | Approved | SQ-076023 |
| 17 | 166D1604P001 | CQ-0499 | Approved | SQ-076023 |
| 18 | 166D1604P002 | CQ-0500 | Approved | SQ-076023 |
| 19 | 166D1630G001 | CQ-0498 | Approved | SQ-076023 |
| 20 | 188C9446P002 | CQ-0501 | Approved | SQ-076023 |
| 21 | 314A5157P003 | CQ-0502 | Approved | SQ-076023 |
| 22 | 314A5157P004 | CQ-0503 | Approved | SQ-076023 |
| 23 | 201E3031G001 ASSY | CQ-0504 | Approved | SQ-076025 |
| 24 | 201E3032G002 | CQ-0505 | Approved | SQ-076025 |
| 25 | 154D7500P001 | CQ-0713 | Approved | SQ-003231 |
| 26 | 203D2114P001 | CQ-1037 | Subject to approval | |
| 27 | 117E8221E | CQ-1156 | Subject to approval |
The status of the benchmarks mentioned above is presented in the table below:
| FINMECANICCA (AGUSTA) | |||||
|---|---|---|---|---|---|
| No. | Benchmark no. | FAI no. | Status | Approval no. | |
| 1 | 109-0435-31-1 | 0380 | Approved | 109-0435-31-1_IT1212 | |
| $\overline{2}$ | 109-0435-31-1 | 0390 | Approved | 0390 | |
| 3 | 109-0442-01-123 | 0160 | Approved | 109-0442-01-123_IT1211 | |
| $\overline{4}$ | 109-0442-01-131 | 0780 | Approved | 109-0442-01-131_IT1211 | |
| 5 | 109-0442-03-105 | 0620 | Approved | 0620 | |
| 6 | 109-0442-03-105 | CQ-1280 | Approved | CQ-1280 | |
| $\overline{7}$ | 109-0443-01-103 | CQ-1282 | Approved | CQ-1282 | |
| 8 | 109-0445-02-103 | 0260 | Approved | 109-0445-02-103_IT1213 | |
| 9 | 109-0445-03-1 | 0045 | Approved | 0045 | |
| 10 | 109-0445-08-117 | Approved | 109-0445-08-117_IT1214 | ||
| 11 | 109-0445-09-1 | 0047 | Approved | 0047 | |
| 12 | 109-0403-14-1 | CQ-0289 | Approved | 109-0403-14-1_12_10/CQ-0289 | |
| 13 | 109-0403-14-3 | CQ-0668 | Approved | 109-0403-14-3_12_10/CQ-0668 | |
| 14 | 109-0403-18-1 | CQ-0425 | Approved | 109-0403-18-1_12_11/CQ-0425 | |
| 15 | 109-0403-19-1 | CQ-0426 | Approved | 109-0403-19-1_12_10/CQ-0426 | |
| 16 | 109-0405-05-1 | 0060 | Approved | 109-0405-05-1_IT1214 | |
| 17 | 109-0405-72-1 | 0050 | Approved | 109-0405-72-1_IT1211 | |
| 18 | 109-0405-72-1 | CQ-0232 | Approved | CQ-0232 | |
| 19 | 109-0406-51-103 | CQ-0344 | Approved | 109-0406-51103_12_11/CQ-0344 | |
| 20 | 109-0406-53-1 | 0050 | Approved | 109-0406-53-1_12_11 | |
| 21 | 109-0406-54-1 | 0040 | Approved | 109-0406-54-1_12_10 | |
| 22 | 109-0406-55-1 | 0050 | Approved | 109-0406-55-1_12_11 | |
| 23 | 109-0406-55-1 | CQ-1286 | Approved | CQ-1286 | |
| 24 | 109-0406-57-1 | CQ-0339 | Approved | 109-0406-57-1 12 11 | |
| 25 | 109-0406-70-1 | 0050 | Approved | 109-0406-70-1_12_11 | |
| 26 | 109-0406-72-105 | 0060 | Approved | 109-0406-72-105_12_13 | |
| 27 | 109G6320A25-101 | 1049744 | Approved | 109G6320A25-101_IT1212 | |
| 28 | 109G6320A44-101 | 0010 | Approved | 109G6320A44-101_IT1211 | |
| 29 | 109G6320A45-101 | 0010 | Approved | 109G6320A45-101 IT1211 | |
| 30 | 109-0403-04-3 | CQ-1131 | Subject to approval | ||
| SNIAS | |||||
| 1 | 330A31329921 | CQ-1174 | Approved | CQ-1174 | |
| $\overline{2}$ | 330A34411321 | CQ-1305 | Approved | CQ-1305 | |
| TURMO | |||||
| 1 | 0044130080 | CQ-1264 | Approved | CQ-1264 | |
| $\overline{2}$ | 0044130120 | CQ-1017 | Approved | CQ-1017 |
In 2015, TMB took part in Round-Robin Inter-laboratory Cross-testing Program organized at the EXOVA Toulouse - France Institute, supported by Airbus, General Electric Aero, Safrane Grup, Eurocopter, MTU and GKN. The laboratory procedures subject by TMB to cross-testing were as follows:
All the kits presented herein above and processed in TMB laboratories yielded results falling under
performance categories 1 and 2. Thus, TMB further complies with the requirements of NADCAP and customers GEAE, Rolls Royce and Finmeccanica Spa, regarding the laboratory procedures mentioned.
In 2015, TMB received 34 complaints from clients, of which:
6 from external customers (2 complaints from FINEMECCANICA (AGUSTA-WESTLAND), 3 complaints from ROLLS-ROYCE and 1 complaint from GEAE; the status thereof is presented in table 7.1 herein below:
28 from domestic customers (18 complaints from military units of the Ministry of National Defense and 10 complaints from IAR Brasov); the status thereof is presented in table 7.2 herein below.
Further to the analysis and settlement of C/N, the Company established correction and preventive measures meant to correct, strengthen or improve process performances.
| Total C/N: | 6 | Complaints |
|---|---|---|
| Client - benchmark C/N (no. of affected | ||
| pieces): | ||
| $-AW - 109 - 0403 - 14 - 3$ (1 piece) | Complaint | |
| $-AW - 109 - 0403 - 14 - 1$ (1 piece) | Complaint | |
| - RR - FW73730 (80 pieces) | 2 | Complaints |
| $-RR - V926368(27)$ pieces) | Complaint | |
| $-GEAE - 5023T70P01$ (1 pieces) | Complaint |
The status of correction and preventive measures is indicated below:
| Total ACP: | |
|---|---|
| Total C/N rejected: | |
| Tota l CPA closed: | |
| Total CPA opened: ______ |
| Total C/N: | 34 | Complaints / Notifications |
|---|---|---|
| Total C/N per category of products: | ||
| - TURMO engine | 2 | Complaints |
| - motor VIPER | 3 | Complaints |
| - ventilating level | $\overline{2}$ | 1 Complaint / 1 Notification |
| - Allison thermocouple | 2 | Complaints |
| - steering knuckle - collar | 2 | Complaints |
| - control block | 4 | Complaints |
| - VIPER engine thermocouple platform | Complaint | |
| - oil pressure transmitter | 1 | Complaint |
| - micro-pump | 1 | Complaint |
| - TGB AW | 6 | 4 Complaints / 1 Notification |
| - start-up block | 5 | Complaints |
| - rear transmission | Complaint | |
| - rear transmission tree | 1 | Complaint |
| - main transmission | 2 | Complaints |
| - other | Complaint |
This is a free translation from the original romanian version. Page 11 of 20
| Total C/N from domestic clients: | 28 |
|---|---|
| UM 01836 | |
| UM 01838 Bobocu | 2 |
| UM 01945 E Timisoara | 4 |
| UM 01961 Otopeni | 5 |
| IAR Brasov | 10 |
| Total closed C/N: | 26 |
| Total open C/N: | 8 |
In 2015, as far as nuclear protection is concerned, the Company sent to CNCAN applications and files to obtain the permits required to hold Eresco MF42 X-ray generator and 19 benchmarks of Viper engine, made from MSRR 8014 containing thorium. The following permits were obtained, valid as follows:
The permits authorize CND activities with penetrating radiation and the legal safekeeping of radioactive materials made from magnesium alloy containing between 2.5 and 4% Thorium.
Through the environmental program for 2015, TMB prepared and sent the evaluation and authorization applications and files for:
the integrated environmental permit, according to Law 273/2013 on industrial emissions and Minister Order 818/2003 on the approval of the procedure to issue the integrated environmental permit (the current permit expires at the end of 2015);
the water management permit, according to Law 107/1996 on water and Order no. 662/2006 of the Ministry of Environment and Water Management on the procedure and competences to issue the water management permit (the current permit expires at the end of 2015);
energy audit according to Law 121/2014 on energy efficiency.
TMB has obtained from the republican regulatory authorities the following permits/evaluations:
Integrated Environmental Permit no. 5/11.02.2016 for the entire company and the sector of metallic covers valid for 10 years; issued by the Bucharest Environmental Protection Agency;
Water Management Permit no. 507/B of 28.12.2015, valid for 2 years, issued by National Administration "Apele Romane".
The energy evaluation of December 2015 requested by SC TMB SA, according to order 6583/07.09.2015, conducted by SC QURTZ MATRIX SRL, whose results were favorable, and filed with SC TMB SA by delivery-receipt minutes no. 34507/28.01.2016.
To fully comply with the provisions in the permits and the energy evaluation, the Company has laid down objectives and actions, included in the Environmental Management System Program of TMB and the 2016 Investment Plan, which are in progress.
The permits mentioned above and the energy evaluation allow the legal operation of facilities, equipment and processes existing at SC TMB SA.
In 2015, there were no environment related incidents or used water or air pollution above the maximum values admitted by the legislation in force.
Upon the control conducted by the National Environmental Guard concluded by Minutes no. 229/25.06.2015, delays in preparing certain documents for the authorization were found, as well as failure to initiate the energy evaluation already previously requested. Such deficiencies were solved, and their settlement was reported to the regulatory and control authorities.
Based on Application no. 009 of 13.07.2015 for the certification, re-certification and supervision of Management System, SC TMB SA was audited by SC AEROQ SA, in order to receive accreditation for the Environment Management System according to standard SR EN ISO 14001:2005 - Environment Management System. Further to such audit, SC TMB SA was issued certificate 811M/22.12.2015, valid for 3 years until 13.09.2018.
In 2015, in accordance with the provisions of the TMB Periodical Personnel Training Plan, through specific training and certification sessions, the company provided and maintained the required competences of the 116 operators, inspector and laboratory technicians for special processes and laboratories. 33 specific trainings were actually delivered.
Through the specialized departments, the company management ensured the operation of Production, Quality Assurance, Financial - Accounting, Marketing - Sales and Human Resources.
As at December 31, 2015, TMB had a total of 404 employees.
The personnel's average age as at such date was 48.64 years, as compared to 49.5 years in 2014.
Between January and December 2015, 50 employees left the company and 135 were employed.
In 2015, the expenses with employees' benefits totaled RON 22,301,787 of which:
| $\overline{a}$ | salaries: | RON 16,667,206; |
|---|---|---|
| $\sim$ | compensatory salaries: | RON 528,176; |
| $\rightarrow$ | meal vouchers: | RON 759,452: |
| $\overline{\phantom{a}}$ | gift vouchers: | RON 211,240; |
| $\overline{\phantom{a}}$ | social security: | RON 4, 135, 713. |
The company's personnel policy regarding the education, improvement and certification of its personnel was well implemented as regards internal trainings, and the budget allocated to external trainings was increased. Trainings were delivered in accordance with the plan approved for 2015.
According to it, the company invested RON 20,733 in improving the competences and skills of the TESA personnel and the management and approximately RON 56,852 for training and certification courses outside the company.
Improvement and certification courses were delivered in the company, which totaled approximately 3,033 hours for 154 employees.
During the period under review, only 38 employees attended educational courses and various courses, qualifications/poly-qualifications totaling 2,551 hours.
The recruitment cost were RON 445 in 2015.
Personnel expenses totaled 32.26% of the turnover obtained in 2015.
64.26% of the company employees are trade union members.
Regarding the training and qualification of the personnel, the situation is as follows:
The relationship between the management and employees is regulated under the Collective Labor Agreement for 2015-2016. The social and professional environment is permanently monitored, through a communication system between social partners, which prevents conflicts, which were non-existent in 2015.
Assessment of labor protection and occupational safety
Issues that are directly and indirectly related to labor protection and security at TMB represent a priority in the Company's policy and are treated in close correlation with the priorities regarding economic growth, health and training.
Therefore, the company management is preoccupied with monitoring, providing all its employees with the best conditions to conduct the production activity, observing the safety conditions for all employees.
Thus, in 2015, the revamping of Special Processes Workshop was a priority investment.
This purpose of this activity was both to revamp the equipment, and improve working conditions, by building a modern heating installation, cleaning the entire shop-floor, and replacing the entire old metal carpentry by double glazing and heatproof panels.
In addition, the Company revamped the working premises for all TESA employees working on this shopfloor.
The Company also started the revamping of ventilations and exhaust installations, so as to ensure enhanced protection both to employees, and the environment.
The investment program for 2015 also included the modernization of the space intended for welding, both automatic and manual.
The new modernized warehouse was equipped with dining room, sanitary facilities and locker rooms for the employees working here.
Under the labor protection and security program for 2014, the company carried out all the activities required to comply with Law no. 319/2006 on Occupational Safety and Health and the application rules thereof, as well as the other acts of legislation in the field, by taking the following measures:
assessed the risks for occupational safety and health in all the working locations;
based on the risk assessment, it took preventive measures to ensure the improvement of the level of safety and health protection of its workers;
it filled in the occupational safety and health materials, according to the current legislation, which are used in delivering the periodical occupational safety and health trainings to TMB employees and it established the measures required to operate the technological processes under safe conditions;
it purchased working equipment for all TESA employees,
it provided cleaning and sanitary materials (protection creams, etc.) in compliance with the provisions of the Internal Regulations;
it completed the purchase of protection shoes for the personnel working outside the shop floors;
it purchased emergency eye cleaning solutions for the personnel working in the Galvanizing, Storing-Packaging and Painting Workshops and safety masks for the personnel working in the Nondestructive Testing Laboratory, as well as new masks according to the latest requirements in the field for welders:
for personnel whose activity is carried out in a toxic environment, it purchased an antidote consisting of powder milk and sparkling water, according to the regulations in force;
it performed maintenance and repair works on sanitary groups, locker rooms, washing areas, showers, etc., on all shop floors:
it extended the permits for the hoisting machines and pressurized installations held by TMB (in accordance with the CNCIR instructions):
it performed the mandatory annual occupational medicine investigations for employees; the Medical Supervisory Report concluded that the employees examined did not suffer from any professional illness, and none of them had to change their working locations.
In 2015, no labor accidents or professional illnesses were found at TMB.
In 2015, the foreign market represented mainly by components and subparts for aircraft engines, is making efforts to regain its stability, through the Company's re-branding and attendance in Paris Airshow and Dubai Airshow international fairs.
The re-branding process aimed at growing TMB's visibility at international level by creating a new image, based on the restructuring of the Company's website, change of logo and drawing up of promotion materials based on the Company's new image principles, which comprise the current capabilities, certifications and achievements.
Consequently, in 2015, TMB changed:
The Company's brochure The Company's leaflet The Company's website The Company's logo The Company's .ppt presentation The Company's presentation video
The materials were successfully presented at the 2015 fairs where TMB was present with its own stand to regain the attention of large companies in the field.
The participation at Paris Airshow was supported by the presence of representatives of the Ministry of National Defense who aided TMB to resume the talks with AIRBUS Helicopters and Turbomeca in view of a potential collaboration in the field of production, but also as regards the supply of TMB with benchmarks specific for repairs of gas turbine engines for aircraft and helicopter mechanical parts.
The main purpose of the participation at Dubai Airshow was to increase visibility and resume the presentation of TMB's capacities at international level.
Using the new promotion materials, TMB managed to regain the trust of GE Power & Water - Hungary, with which TMB negotiated in mid-2015 a collaboration program that took the shape of firm orders totaling EUR 3,890,350.00 (of which EUR 2,938,800.00 relates to 2016, which will be further supplemented). It is certain that the program will extend in the following years, through the execution of an LTA by the end of 2016. The program's extension aims at supplementing the heat treatment capacities, objective included in the investment plan for 2016.
It is important to notice that the Company has successfully maintained its permit granted by the Romanian Civil Aeronautical Authority for the production of products/components/equipment to fit out AW109 and AW119 helicopters - FINMECCANICA (AGUSTA WESTLAND) ITALY (according to Certificate no. RO.21G.0008/02.12.2014).
Based on such permit, TMB continued in 2015 to deliver full subsets for rear transmission for helicopters (production, mounting, trial) and will continue to develop cooperation programs with FINMECCANICA ITALIA in 2016, too.
In addition. TMB managed to consolidate and develop the relationship with AGUSTA WESTLAND -FINMECCANICA by including the Demo lots in the production process for 13 benchmarks to be assimilated in 2016.
On the domestic market, for aeronautical products. TMB is the only manufacturer and repairer in Romania of gas turbine engines for aircraft and mechanical assemblies for helicopters, its main clients being the Ministry of National Defense (S.M.F.A., S.M.F.N.), S.C. IAR S.A. Brasov and S.R.I.
The budget expenditure for 2015 were significantly influenced by global politics and in particular the political situation close to Romania determined by the crisis in Ukraine, which forced the Government to considerably increase the number of firm orders/contracts awarded to TMB to repair the aircraft owned by the Ministry of National Defense and S.R.I.
Given the circumstances, where the crisis in the area prevails and where the international political situation is not at harm's way from conflict, in 2016 the domestic market still represents an opportunity to consolidate the company's turnover, by continuing the equipment programs of the Ministry of National Defense both in terms of maintaining the existing fighting technique at optimum parameters and in particular by continuing the upgrading of helicopters with SOCAT systems, as well as the maintenance programs for the IAR 99 SOIM aircraft fleet (by bringing a considerable number of VIPER 632-41M engines equipping such aircraft to the optimum operation parameters).
TMB continues to focus to a great extent in 2016 on efficiently loading the production capacity in the field of mechanical processing along with maintaining flexibility in meeting the specific needs of each customer (such as just in time deliveries, accepting the reasonable variation of customers' needs, the existence of a reasonable back-up stock of finished products, etc.). Correlated with the policy of expanding its production of parts across the global market, a policy applied by the big companies, this strategy of the company aims at increasing the turnover in 2016 by 16.6% compared to the numbers targeted in 2015, and achieve the RON 70,000,000 target corresponding to a 12% increase of the EBITDA share compared to 2015.
Another strategy of the company is to regain its business relationship with General Electric Aircraft Engines US and its customers, as well as with Rolls-Royce, while widely developing the programs with GE Power & Water - Hungary.
In addition to the matters presented, TMB envisages for 2016 an aggressive marketing policy, including in the marketing budget for 2016 the Company's participation in six domestic and international promotional events (fairs/exhibitions) such as:
Aerospace Meetings Romania (14-16 March 2016), Black Sea Defense and Aerospace - BSDA (18-20 May 2016), ASD DAYS UK (3-4 May 2016), ILA BERLIN AIRSHOW (1-3 June 2016), FARNBOROUGH AIRSHOW (11-17 July 2016), AIRTEC MUNICH AIRSHOW (25-27 October 2016).
The Company will take this opportunity to present on the domestic and foreign market its capabilities, the programs that we wish to develop in the future, hoping that these activities will be followed by requests for offer and will take the shape of businesses beneficial for the Company both in 2016 and in the future.
Corporate governance means responsible management and control over a commercial company. Two elements are extremely important for TMB when it comes to corporate governance: increasing the confidence of investors, business partners, clients and employees in the management and control bodies of the company, as well as balancing the economic situation and then increasing the company's value. The adoption of good practices and corporate governance policies must represent for TMB strong grounds for a solid development, after a difficult and costly restructuring process.
The company's board of administration has adopted the Corporate Governance Regulation (CGR) of TMB, in compliance with Recommendation 3 of the Corporate Governance Code of the Bucharest Stock Exchange (CGC). The CGR includes the structures, responsibilities and practices provided in the CGC, which arise from the constitutive acts of TMB supplemented by the legislative provisions in force and the recommendations in the CGC.
The Corporate Governance Regulation is available on the website of TMB www.turbomecanica.ro. The implementation by TMB of the principles and recommendations of the CGC are reported in the Annex on the status of compliance with the Corporate Governance Code of the Bucharest Stock Exchange, which will be communicated to the BSE along with the Annual Report and posted on the Company's website, www.turbomecanica.ro.
In September 2015, the Bucharest Stock Exchange issued a new Corporate Governance Code. In accordance with the provisions of art. 87, paragraphs 1 and 2 of the Bucharest Stock Exchange Code, Book I - Title II issuers and Financial Instruments. TMB informed investors through the Current Report sent on 15.01.2016 on the status of the compliance with the Corporate Governance Code of the Bucharest Stock Exchange as at December 31, 2015.
In the Current Report sent on 16.01.2016, TMB complied with 23 provisions of which 4 were partly enforced.
The Company could not align entirely to 9 provisions, for which the management will decide upon and will implement the required measures in order to observe them. Please find below the provisions that were not complied with and the reason for non-compliance:
A. 1 All companies must have an internal regulation of the Board which includes reference terms and the Board's responsibilities and the Company's key management roles and which applies, among others, the General Principles in Section A.
Reason for non-compliance: TMB failed to comply with this provision since it does not have an Internal Regulation of the Board of Administration, but the Constitutive Act, the Organization and Operation Regulation and the Corporate Governance Regulation lay down the rules of organization, operation and structure of the Board of Administration.
A.2 The provisions regarding the management of conflict of interest must be included in the Board's Regulation, at any rate, the Board members must notify the Board of any conflict of interest that occurred or may occur.
Reason for non-compliance: TMB failed to comply with this provision since it does not have an Internal Regulation of the Board of Administration, but the Corporate Governance Regulation provides rules on the conflict of interest related to the members of the Board of Administration.
A. 5 Other relatively permanent professional commitments and obligations of a member of the Board, including executive and non-executive positions in the Board of non-profit companies and institutions must be disclosed to shareholders and potential investors prior to appointment and during their mandate. This requirement will be implemented in 2016 by supplementing the Corporate Governance Regulation and by the Regulation of the Board of Administration.
A.6 Any Board member must submit to the Board information on any relationship with a shareholder holding directly or indirectly more than 5% of all voting rights. This obligation refers to any relationship that may affect the member's position regarding matters by the board.
The requirement will be implemented in 2016 by supplementing the Corporate Governance Regulation and by the Regulation of the Board of Administration.
A.8 The Statement on Corporate Governance must contain information on the evaluation of the Board lead by the President or the Appointment Committee, will summarize the key measures and the resulting changes. The Company must have a policy/guideline regarding the evaluation of the Board, which includes the purpose, criteria and frequency of the evaluation process.
The requirement will be implemented in 2016.
A.9 The Statement on Corporate Governance must contain information on the number of meetings of the Board and committees during the last year, the administrators' participation (in person and in absentia) and a report of the Board and committees on their activities.
The requirement will be complied with when the statement for 2016 is prepared. i.e.. January 2017.
A.10 The Statement on Corporate Governance must contain information on the exact number of independent members in the Board of Administration or the Supervisory Committee.
The requirement will be complied with when the statement for 2016 is prepared, i.e., January 2017.
B. 3 As part of its responsibilities, the Audit Committee must conduct an annual evaluation of the internal control system.
The requirement will be implemented in 2016, upon the annual evaluation of the internal control system.
B.4. The evaluation must consider the efficacy and extent of the internal control function, the adequacy of the management reports on the internal control risk submitted to the Board's audit committee, the executive management's diligence and efficacy in settling deficiencies or weaknesses identified during internal control and the submission of relevant reports to the Board. The requirement will be implemented in 2016.
B.5 The audit committee must assess conflicts of interest in relation to the Company's and ist subsidiaries' transactions with affiliates.
The requirement will be implemented in 2016.
B.6 The audit committee must assess the efficiency of the internal control system and risk management system.
The requirement will be implemented in 2016.
B.7 The audit committee must monitor the application of the generally accepted legal standards and internal audit standards. The audit committee must receive and assess the reports of the internal audit team.
The requirement will be implemented in 2016.
B.8 Anytime the Code makes reference to reports or analyses initiated by the Audit Committee, they must be followed by periodic reports (at least annually) or ad-hoc reports which must then be submitted to the Board.
The requirement will be implemented in 2016.
B.9 No shareholder may be given preferential treatment from any shareholder in relation to transactions and agreements concluded by the company with their shareholders and affiliates.
The requirement will be implemented in 2016 by supplementing the Regulation of Corporate Governance with provisions on their shareholders and affiliates.
B.10 The Board must have a policy that would make sure that any of the Company's transactions with any of the related companies whose value is equal to or higher than 5% of the Company's net assets (according to the last financial report) is approved by the Council based on a mandatory opinion of the Board's Audit Committee and disclosed properly to shareholders and potential investors, to the extent such transactions fall under the category of events subject to reporting requirements.
This item is not applicable to TMB because the Company does not have close relations with other companies holding 5% or more of TMB's net assets.
C.1 The Company must publish on its website the remuneration policy and must include in the Annual Report a statement on the remuneration policy during the annual period under review. Reason for non-compliance: The remuneration policy of administrator and the CEO is included in the Administration Contract.
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D.2 The Company will have a policy on the annual distribution of dividends or other benefits awarded to shareholders, proposed by the CEO or the Management Board and adopted by the Board, in the form a quidelines that the Company will follow as regards the distribution of net profit.
The requirement will be implemented in the upcoming period through a regulation in this respect.
D.3 The Company will adopt a policy on forecasts, regardless whether they are made public or not. The requirement will be implemented in the upcoming period through a policy prepared in relation to the forecasts.
TMB is a commercial company operating in accordance with Company Law no. 31/1990, amended and supplemented. The company was included in the initial public offering initiated by the Government of Romania in 1995 as "Mass Privatization Program". Under this program, the Company has fulfilled the conditions to be listed on the regulated market Bucharest Stock Exchange (BSE), where it was listed on 07.10.1998.
As issuer, the Company complies with the provisions of Law no. 297/2004 on the capital market, and of the specific regulations issued by the National Securities Commission (NSC) based on such law.
TMB is managed under a monistic system by a Board of Administration (BoA), formed of 5 members elected by the general meeting of shareholders of 14.05.2012 for a 4-year term, with possibility of reelection.
| Name | Position | Year of first election |
Expiry of current mandate |
|---|---|---|---|
| Radu Viehmann | President, General Director | 2000 | 2016 |
| Dana Maria Ciorapciu | Non-executive Administrator | 2006 | 2016 |
| Emilia Manta | Non-executive Administrator | 2006 | 2016 |
| Grigore Florescu | Non-executive Administrator | 2006 | 2016 |
| Henriette Spinka | Independent Non-executive Administrator |
2008 | 2016 |
Administrators in office as at December 31, 2015
The BoA members have adopted the CGC of the BSE voluntarily, have approved the CGR, which is available in the Romanian language on the company's website www.turbomecanica.ro and report to the BSE the level of compliance with Corporate Governance Code of the Bucharest Stock Exchange. TMB has taken and will take all professional, legal and administrative measures required to align to the Corporate Governance Code of the Bucharest Stock Exchange and present such results in a transparent manner.
The powers and responsibilities of the BoA are provided in the CGR. The president of the BoA is also the Company's general director.
The BoA formed three working committees as follows: audit committee, nomination committee and remuneration committee. Most of such committees include the BoA's non-executive members.
The administrators' professional training and experience is presented in the CVs which are available on the Company's website www.turbornecanica.ro.
The administrators who also hold similar positions in other issuing companies in the country or abroad are:
Henriette Spinka - administrator at SC Anteco SA Ploiești since 2008;
| Name | Position | No. of shares | % of share capital |
|---|---|---|---|
| Radu Viehmann | President, General Director | 95,758,800 | 25,9198 |
| Dana Maria Ciorapciu | Non-executive Administrator | 56,003,876 | 15.16 |
| Emilia Manta | Non-executive Administrator | O | |
| Grigore Florescu | Non-executive Administrator | 0 | |
| Henriette Spinka | Independent Non-executive Administrator |
285,000 | 0.0771 |
The administrators' participation in the share capital of TMB as at December 31, 2015
In 2015, the BoA convened in 11 meetings, at least two meetings per quarter, which were attended by 4 to 5 of its members – and adopted decisions which enable it to fulfil its duties efficiently and effectively. Therefore, in its meetings, the BoA has analyzed the financial results obtained during the reporting period and cumulated from the beginning of the year, as well as its economic performance by reference to the budget and the similar period of the previous year.
Eng. RADU VIEHMANN
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