ANNUAL REPORT ON THE ACTIVITY - Alcomet AD€¦ · Web viewThe analysis of the structure of the Statement of financial position for the reporting period shows a trend of 41%

ANNUAL REPORT ON THE ACTIVITY OF “АLCOMET” АD for 2011

SHUMENMarch 5, 2012

This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing

The present Management Report is prepared according to the requirements of Art. 247 of the Commercial Act, Art.33 paragraphs 1 and 2 of the Accountancy Act, Art. 31, 32 and 100n of the Public Offering of Securities Act and Ordinance No 2 of the Financial Supervision Commission for the prospects in public offering and admission to trading on the regulated securities’ market and for disclosure of information by public companies and other issuers of securities.

1

ALCOMET AD

COMPANY’S PROFILE AND DEVELOPMENT PROSPECTIVES

1. General information

Alcomet AD (the Company) is a joint-stock company, registered under company file №41 from 1999 of the Shumen District court.

Alcomet AD is a public company according to the Public Offering of Securities Act and is registered in Bulgaria in compliance with the Commercial Act, the seat and head office of the Company is in the city of Shumen, Second industrial zone.

The main activity of the Company is production of aluminum extruded and rolled products, trade with these products on domestic and international markets and rendering of services.

The share capital amounts to 17 952 959 BGN, distributed in 17 952 959 voting shares with a nominal value of 1 BGN each.

The shareholders’ structure of the Company includes 81 entities that possess 98.43% of the share capital and 2 612 individuals with 1.57% of the share capital. The shareholders owning more than 1% of the Company’s shares are presented in the table below:

"Аlumetal" АD 73.25%"FAF Metal Sanayii VE Ticaret" AS 16.86%"Аllianz Bulgaria" Pension Fund 2.44%

Essential contracts leading to actions changing the Company’s control at public offering as well as agreements between the Company, the Supervisory Board and the Managing Board for compensation upon leaving or dismissal concerning auction offering are not concluded.

During the reported period there are no transactions with related parties, as well as there are no unusual events occurred, which could substantially influence the Company’s financial position or results.

The present Management Report of “ALCOMET” AD is prepared according to the requirements of Art. 100n, paragraph 4, item 2 of the Public Offering of Securities Act.

Alcomet AD has a two-tier system of management – Supervisory board and Managing board. The Supervisory board consists of 7 members and the Managing board is of 6 members.

Members of the Supervisory board, the Managing board, and the senior management do not own Company’s shares.

The Company is represented and managed by two Executive Directors - Huseyin Yorucu and Huseyin Umut Ince.

The report contains analysis and commentary on the financial statements, based on the the Company’s management point of view, intended for use by shareholders and investors to help them to form their assessments of the Company’s position and prospects.

The forecasts and assessments made, may differ from the real future financial results.

This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing 2

ALCOMET AD

2. Operating results

In 2011 there are no unusual or sporadic events, transactions or substantial economic changes, which significantly affect the Company’s sales.

The main production raw material is aluminum in the shape of primary aluminum, secondary aluminum, scrap, extrusions and coils. During 2011 for production use are supplied the following raw materials:

Raw material (tons)Type of raw material 2011 2010

primary aluminum 43 783 44 047secondary aluminum 4 895 4 893scrap 976 898coils 3 034 19extrusions 5 095 2 874Total 57 783 52 731

The increased quantity of the raw material supplied in 2011 is due to the increase in the quantity of the coils and extrusions purchased.

Except the raw material, 230 tons of secondary aluminum and 215 tons of scrap were toll processed during the reporting period.

In 2011 the produced by the Casting workshop stock amounts to 64,316 tons.

Stock produced 2011 (tons)

2010 (tons)

1.Total 64 316 63 6682. Coils 46 164 45 8933. Extrusions 18 152 17 775

In 2011 the produced by the Rolling and Extrusion workshop finished goods are 52 754 tons, which is with 7.92 % more than the produced finished goods in 2010.

Finished goods 2011 (tons)

2010 (tons)

1.Total 52 754 48 8832. Rolling workshop 35 729 33 8943. Extrusion workshop 17 025 14 989

In comparison with 2010, the produced by the Rolling workshop finished goods increase with 5.41%, and the produced by the Extrusion workshop finished goods increase with 13.58%.

Although during the reporting period new facilities were not put in operation, the increase in the production is due to the improved management organization in all departments of the Company, as well as to the improved interaction between them.

As a result of investments realized from 2001 to 2011, optimization of the production process, implementation of rational management of human resources, effective marketing, improved cash flow management and optimization of supply, the Company continuously increases the quantity of the finished goods produced and realized.


ALCOMET AD

In 2011 the sold finished goods are 52 450 tons and analysis by type, markets and monthly sales are presented below:

Sales tons 2011 2010 Growth

%1.Total 52 450 48 180 + 8.862.Domestic market- rolled products- extruded products

4 4753 639

836

3 4502 683

767

+29.71+35.71+ 8.74

3.Export- rolled products- extruded products

47 97531 95316 022

44 73030 77513 955

+ 7.25+ 3.83+14.81


9,876 11,076

16,676

23,556

26,766

40,415

46,419

43,33341,188

48,883

52,754

0

10,000

20,000

30,000

40,000

50,000

60,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

( MT

)

1

4,616,030

4,643,5205,276,838

4,086,430

4,790,755

4,099,254

4,242,7354,192,833

4,228,282

4,223,4784,447,396

3,602,228

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000

1

2

3

4

5

6

7

8

9

10

11

12

( kg )

(Mon

ths

)

4

ALCOMET AD

The ratio between the sales on both markets is 91.47% to 8.53%, and the export is realized towards 23 countries.

Alcomet AD is a company, whose sales in 2011 are characterized by stability and growth, due to the proper Company’s investment and trade policy.

The following comparative data for the sales in 2011 and 2010 present the Company’s favorable development:

- Growth of sales of production by 8.86%;- 100 % use of the production capacity; - Increase in the turnover by 18.6%;- Increase of the average premium by 4.3%;- Growth of sales of rolled products by 6.38%;- Growth of sales of extruded products by 14.50%;- Increase in the domestic market sales by 29.71%; - Export sales increase by 7.25%.

Regarding export, the greatest increase is in the sales of sheets – 23%, strips – 18%, standard profiles – 31%, anodized profiles – 76%. On the domestic market incredible is the increase in the quantity of the sheets sold – 51%, household foil – 121%, profiles – 32%, special profiles – 18%, anodized profiles – 107%.

In 2011 main product for the Company are the aluminum profiles with 32% share in the total sales, followed by household foil - 26%, strips – 21%, sheets – 12%, technical foil – 6%, lubricated foil – 2%.


ALCOMET AD

The export of the Company is focused mainly towards clients from the European market, as Germany remains at the highest level – 27%, followed by Poland, - 15%, Italy – 12%, Denmark and France – each holding 7%, Austria – 5% and others.In 2011 the Company sustained its position of main supplier of household foil on the European market with market share of 18%. The present investment in a new rolling mill and in a new line for continuous casting is expected to increase the capacity of the Rolling workshop by 30%. In this respect, the strategy of the Company is to develop new rolled products in order to expand the opportunities for participation on new markets and market niches. Alloys 5754, 5005, 3005 are in process of implementation for production of sheets and strips, as well as new types of aluminum foil, finstok and a line for bar spacers for specific use.During the present year efforts were made on a project for utilization of anodized profiles for final products, such as window sills, moldings and others, mainly for the German market. The goal is department Anodizing to be supplied with orders.

3. Analysis of the Statement of Financial Position

The analysis of the structure of the Statement of financial position for the reporting period shows a trend of 41% increase in the inventories amount, due to increase of the raw materials and the work in progress.Trade and other receivables decrease by 12%. The receivables from clients and the advances granted sustain at their previous levels, and the amount of the taxes refundable is decreased by 35%. Non-current assets remain on the levels from 2010. In 2011 net investments in property, plant and equipment are at the amount of BGN 9,381 thousand.Compared to 2010, the non-current liabilities increase by 13.72%. The ZUNK liabilities decrease by 23.38%, and long-term loans received increase by 26.06%. The received new resources are used for the acquisition of non-current assets. Current assets decrease by 5.16% in comparison with 2010. Short-term bank loans decrease by 7.45%, and payables to suppliers increase by 43.14%. In 2010 a stable trend of improvement in the amounts of the net current assets was established and in 2011 these amounts turned to positive figures.


ALCOMET AD

4. Analysis of the Income Statement

For 2011 the net revenue from sales amounts to BGN 273 753 thousand, out of which the total net revenue from sales of finished goods is BGN 267 508 thousand.

The revenue from sales of finished goods analyzed by type of products is as follows:

Revenue from sales BGN’000 2011 2010 Growth %Revenue by type of products- rolled products 185 111 158 840 16.54%- extruded products 82 397 66 724 23.49%Total revenue from sales 267 508 225 564 18.60Export sales 246 126 210 439 16.96Domestic market sales 21 382 15 125 41.37

The growth of revenue from sales of finished goods is 18.60%.

The fluctuation of the average monthly sales for the years from 2004 till 2011 is as follows:


1.9622.212 2.846 3.172 3.411 3.432

4.015 4.371

8.80110.376

17.61420.552 18.330

13.374

18.797

22.293

13579

11131517192123

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Monthly Average Revenue

Sales (MT) Revenue (millions BGN)

0

50000

100000

150000

200000

250000

300000

2010 2011

48 180 52 450

225 564

267 508

Sales (MT) Revenue (*000 BGN)

`

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ALCOMET AD

This comes as a result of the following: - growth of sales of production by 9.15%;- comparatively stable price level of the raw material (aluminum) and demand increase

on the markets, basically during the first half of 2011, which led to increase of the finished goods price rates (for 2011 the average sales price is 8.76% higher, compared to 2010);

- increase of revenue from sales of extruded products and rolling products by 23.49% and 16.54%, respectively;

- export sales increase by 17% and the domestic market sales increase by 41%; - investments made by the Company and improved organization of the production

process;- improved quality of the production of Alcomet AD, according to the European

standards and the specific clients’ requirements- consistent trade and price strategy of the Company during the crisis period, intending

to retain the main Company’s clients, operating in the manufacturing industry, which led to positive reputation of Alcomet AD as a trustworthy supplier.

In 2011 the total amount of the operating expenses increased by 20.13%, compared to 2010. Materials expenses increase by 19.9% and represent 89.72% of the total operating expenses (in 2010 – also 89.71%). The analysis displays that the main factor is the cost of metal, representing 90% of the total materials expenses.

In 2011 the investments made are at the amount of BGN 9,4 million and equipment at the amount of BGN 1,2 million was brought into operation, as follows:

- a separator KAMPF SEPEMAT;- an ERP system “Microsoft Dynamic NAV”;- systems for cooling of 1300 and 1800 ton presses;- a new digital telephone exchange system;- a new waste treatment plant;- a storehouse for gas canisters;- infrastructure projects implemented;- inner - factory communications and others.

The investments made in fixed assets under construction amount to BGN 15,9 million.


0

0.5

1

1.5

2

2.5

3

( USD

)

Trend of the aluminium prices of the LME in 2011

Exchange rate of USD LME price

8

343

229

180196 189 175 166

0

50

100

150

200

250

300

350

400

2004 2005 2006 2007 2008 2009 2010 2011 2012

( m3

per t

on)

Consupmtion of natural gas per ton finished goods

2045

1447

1155 1271 1327 1259 1183

0

500

1000

1500

2000

2500

2004 2005 2006 2007 2008 2009 2010 2011 2012

( Kw

h pe

r ton

)

Consumption of electricity per ton finished goods

ALCOMET AD

On May 4, 2011 a certificate for investment class A was issued to Alcomet AD for the project “Bringing into operation of casting line No VI and a “MINO” thin strip rolling mill”.

As a result of the increased efficiency of electricity and gas use and of the implementing of new energy-saving production technologies, the nature gas and electricity consumption in comparison with 2010 was reduced, and for 2011 the nature gas consumption is 166 cubic meters per ton and the electricity consumption is 1,183 KWh per ton.

Personnel expenses increase by 19.4% due to increase of the salaries since January 1, 2011 and interest expenses increase by 9%.For the reporting period the Company’s profit after tax amounts to BGN 7 907 thousand (2010: BGN. 7 612 thousand). Profitability of sales before interest is 4.3% (2010 4.8%).


ALCOMET AD

The profit after tax of the Company for the last five years is as follows:

5. Earnings per share

Earnings per share are as follows:

2011 2010Average number of shares 17 952 959 17 952 959Profit for the period in BGN thousand 7 907 7 612Earnings per share in BGN 0.44 0.42

In 2011 the quotation of the shares of the Company was very dynamic, starting at BGN 5.80 per share, passing through a peak of BGN 7.28 per share and at the end of the year the rate was BGN 5.82 per share. During this period on the Bulgarian Stock Exchange the Company's shares were announced for “shares of the week” for three times.


3761

1117857

7612 7907

0100020003000400050006000700080009000

2007 2008 2009 2010 2011

Profit after tax by years

Profit after tax ('000 BGN)

10

ALCOMET AD

6. Related parties

Related parties of the Company are:1. Alumetal AD – Sofia – Parent company;2. FAF Metal Sanayj Ve Ticaret AS –Istanbul, Turkey – a company with significant influence over the Company through direct and indirect interest in the Company’s capital;3. Euromet EOOD - Shoumen – a subsidiary;4. FFT LIMITED – Great Britain;5. Ferroal Limited –Nassau, Bahamas – controlling the Parent company shareholder.

The adjustments regarding the consolidation of the subsidiary Euromet AD, are limited to elimination of participation in the share capital of the supsidiary against the investment in the subsidiary, amounting to BGN 5 thousand, which is completely insignificant and does not lead to other changes in the financial position of Alcomet AD. Euromet EOOD has no commercial activity, therefore the financial results from the operating activity and the cash flows of the Group Alcomet remain unchanged, as presented in the separate financial statements of Alcomet AD.

The financial statements of Alcomet AD present a loan granted to Euromet AD, which was further provided to a third party under the same terms, consequently when eliminating the intracompany account balances with the subsidiary there will be no change in the financial statements of Alcomet AD.

As a result of this, the preparation, and respectively, the publication of consolidated financial statements is meaningless and will not provide any additional information to the final user. Also, all owners of the Group are informed and agree that the Parent-company does not prepare consolidated financial statements.

Due to the above mentioned circumstances, annual and quarterly consolidated financial statements of the Group Alcomet AD are not prepared and published.

The main transactions with related parties during 2011 and 2010 are as follows

December 31, 2011

December 31, 2010

Parent companyRepayments of loans received 522 661Accrued interest on loans received 239 264Interest paid on loans received 160 158Entity with significant influence over the Company Services granted 14 14SubsidiariesInterest on loans granted to Euromet EOOD 253 253

There are no unusual terms or conditions associated with these transactions or variances from the average market prices contracted with third parties under the same conditions.


ALCOMET AD

The outstanding account receivables from related parties include:

December 31, 2011

December 31, 2010

SubsidiariesEvromet EOOD – trade receivable 5 5Evromet EOOD – loans granted 5,092 4,839Total receivables from related parties 5,097 4,844

The outstanding amounts payable to related parties are as follows:December 31,

2011December 31,

2010Controlling shareholder of the Parent companyFerroal Limited – trade loan received 1,300 1,300Parent companyAlumetal AD– trade loans received 7,657 8,101Company with significant influence over the CompanyFAF Metal 18 24Total payables to related parties 8,975 9,425

For 2011 and 2010 the remunerations of the directors and other members of the management comprise only of short-term benefits, amounting to BGN 1,944 thousand and BGN 1,121 thousand, respectively. As of December 31, 2011 and 2010 the outstanding liabilities to the key management personnel are amounting to BGN 62 thousand and BGN 89 thousand, respectively.

7. Risk analysis

The financial instruments used expose the Company to market, credit and liquidity risk.

Market risk is the risk that the fair value or the future cash flows of financial instruments may vary due to the changes in market prices and the associated market risk could be foreign currency risk, interest risk or price risk.

The Company enters into international transactions, denominated in foreign currencies. The risk related to eventual foreign currency fluctuations, concerning the USD exchange rate, is insignificant because the Company’s transactions related to purchases of raw materials and sales of finished goods are denominated mainly in EUR. The Company does not have any loans received or granted, denominated in USD, except the ZUNK loan, which is hedged. Transactions in EUR do not expose the Company to foreign currency risk as since January 1, 1999 the Bulgarian lev has been pegged to the Euro at a fixed exchange rate.

The sensitivity analysis of foreign currency risk is calculated at a change of 3 % of the USD/BGN exchange rate. The Management believes that this change is reasonably possible, based on statistical data for the dynamics in variations for the previous year. If as at December 31, 2011 the USD/BGN exchange rate had decreased with 3 %, and, with all other variables held constant, the profit after taxation would have decreased by BGN 63 thousand (2010: BGN 93 thousand), mainly as a result of exchange rate differences arising from revaluation of trade receivables and payables, denominated in USD. The profit after taxation for 2011 is more sensitive to changes in the exchange rate of the USD as compared to the


ALCOMET AD

profit for 2010, mainly due to decrease in trade payables, denominated in USD. The liabilities under the ZUNK loan are excluded from the above analysis, as they are hedged and the changes in the foreign currency rates do not affect the financial result for the respective periods.

The sales of the Company are concentrated in countries from the European Union, including Bulgaria, as almost 91% of all finished goods sales are realized in this regioun. Transactions with customers from these countries are negotiated in EUR, which basically eliminates the foreign currency risk. In addition, owing to the increasing importance of the Euro as a global currency, the Company has the opportunity to realize some of its sales in EUR outside the European Union as well, that further mitigates the foreign currency risk.

The Company is exposed to interest rate risk, because the main part of the loans received are contracted under the clauses of floating interest rate, negotiated as a base interest rate (base rate, SOFIBOR, LIBOR, EURIBOR) with a certain mark-up, which varies between 2,3 % and 4 %. In 2011 and 2010 the loans with floating interest rate are denominated in BGN and EUR.

The Company continuously monitors and analyses its main interest exposures and develops certain scenarios in regard to their optimization, including re-financing, renewal of existing loans, alternative financing (sales contracts and leaseback of assets) and estimates the impact of the interest rate fluctuations in a certain range over the financial result.

Price risk is associated with possible changes in market prices of equity instruments available for sale and finished goods, produced by the Company.

Changes in selling prices of production are mainly determined from the price variations of aluminum on the world stock markets. The Company uses forward contracts to hedge risks, associated with changes in market prices of the primary aluminum on the London Metal Exchange. Such contracts are classified as cash flow hedges as they hedge the risk of cash flows variability that is attributable to the particular price risk associated with forecasted sale and purchase transactions.

Credit risk is the risk that one party to a financial instrument is unable to pay its liabilities and thus causes financial loss to the other party. Financial assets, which potentially expose the Company to credit risk, are mainly trade receivables and interest-bearing loans granted. Primarily, the Company is exposed to credit risk in an event where its customers fail to perform their obligations. To mitigate the credit risk, the Company entered into agreements with an international and a Bulgarian insurance companies for insurance of its trade recivables. Furthermore, the policy of the Company is to enter into sales transactions with customers having favorable credit reputation, and, to use adequate collaterals in order to mitigate the risk of possible financial losses. The estimations for favorable credit reputation of the customers are based on the financial position, previous experience and other factors. Based on these estimations, credit limits are determined, which are strictly monitored.

In 2011 the Company generates 82 % of its revenue through sales to customers with over 3-year business relationships with the Company and another 15 % of the revenue to customers with over 2-year business relationships with the Company. As at December 31, 2011 the Company does not have any substantial credit exposure to any counterparty or a group of counterparties with similar characteristics. Counterparties are defined as counterparties with similar characteristics if they are related parties.


ALCOMET AD

During 2011 the Company realizes 20% of the revenue through sales to its five top customers (during 2010 – 21.3%). As at December 31, 2011 and 2010 trade receivables from these customers amount to BGN 7,201 thousand and BGN 5,671 thousand, respectively, that represent 21 % and 16% of the total amount of trade receivables.

Credit risk associated with cash at bank accounts and derivatives is minimal, owing to the fact that the Company operates only with banks having high credit reputation.

The carrying amount of financial assets, net of impairment losses reflects the credit risk, to which the Company is exposed.

Non-derivative financial assets of the Company represent long-term bank loans granted at a fixed interest rate of 11% annually.

Liquidity risk is the risk that the Company may fail to pay its financial liabilities when they fall due. The Company’s policy to mitigate the liquidity risk is to ensure enough liquid funds, which should be used to settle the financial liabilities when they become payable, including in extraordinary or unexpected circumstances. The aim of the Management is to maintain a stable balance between constant availability and flexibility of the financial resources through use of different forms of financing. The liquidity risk management is responcibility of the Managing Board and the Supervisory Board and it includes maintaining of sufficient monetary funds, successfully negotiating of adequate credit lines, preparing, analyzing and updating of cash flows forecasts.

The Company manages its capital so as to ensure its operation as a going concern and at the same time strives to maximize shareholder wealth through optimization of the debt-to-equity ratio (return on invested capital). The purpose of the Management is to support the trust of investors, creditors and market and to guarantee the Company’s future development.

The management of the Company monitors the capital structure based on the debt-to-equity ratio. The net debt comprises long-term and short-term interest bearing loans, as well as long-term and short-term finance lease liabilities, less cash.

The Management of the Company determines the amount of the capital necessary proportionally up to the risk level, which can characterize the separate activities (projects, business segments). Maintenance and correction of the equity structure is performed in close relation with the changes in the economic conditions, as well as depending on the risk level of the respective assets (projects), in which it is invested. Basic instruments, used to manage the capital structure are: issue of equity and debt instruments, sale of assets, aiming decrease in the level of obligation, debt refinancing through issuance of instruments with longer maturity, etc. All decisions for changes in this direction are based on balance of price and risk, attributable to the different sources of financing.

In accordance with the provisions of Art. 252 of the Commerce Act, the Company should maintain the amount of its net assets over the amount of its registered capital. As of December 31, 2011 and 2010 the Company complies with these requirements, as its net assets are BGN 92,556 thousand and BGN 88,118 thousand, respectively, and the amount of its registered capital is BGN 17,953 thousand.


ALCOMET AD

The Company manages its capital so as to operate as a going concern. As of December 31, 2011 the Company has positive working capital as its current assets exceed its current liabilities with BGN 3,171 thousand The Management of the Company is confident that in future it will maintain normal business activity through own financing and increase of the operation efficiency.

8. Future Company’s development

The Management believes that the Company’s management program and the investments made during the last years will have positive influence over the Company’s operation in the next year 2012.

In accordance with the published in July 2010 Company’s investment intentions, in 2012 investments at the amount of EUR 8.3 million will be realized.

At the end of 2010, implementing the published Company’s investment intentions, a contract with the Italian company “MINO” S.p.A was concluded amounting to EUR 7.5 million. The investment is intended for acquisition and installation of a new rolling mill for strip and foil, equipped with automatic system, filtering system for purifying the let off emissions in the atmosphere from oil aerosols, filtering system for the rolling oil, cooling system and noise level control system.

Additionally, the plan includes construction of a new blast furnace with a mixer, a new line for continuous casting of coils and a renovation of one of the existing lines.

The investment program is already underway and its implementation in the middle of 2012 will lead to significant changes in the machinery and equipment technical level, the capacity of the rolling production will increase by 30%, the Company’s competitive power will raise through:

- decrease in the cost of the finished goods;- guarantee of quality of the finished goods, sustainable environment protection and

achievement of healthy and safety labor conditions; - rasing the capacities of the production facilities;- raise of labor efficiency and minimization of technological losses;- decrease of electricity and nature gas consumption;- decrease in raw materials in store;- decrease in the volume of the production in process.

Negotiations on sales agreements for 2012 started in September 2011.

Till the end of 2011 efforts will be directed to alter the focus from sales of products for standard use to sales of products with specific application, basically extrusion products. This change will enable the Company to retain its positions on the European and other markets, and, at the same time, to improve its positive operating results, as these market segments are usually more stable and with lower competition.

We believe that very good opportunities for the Company exist for establishing of long-term cooperation with companies in the exterior furnishing industry, in the automobile and machinery businesses but not only concerning the extruded, but also the rolling products.


ALCOMET AD

The activity concerning the rolling production will continue to be concentrated mainly on increase of the special products share (container foil, technical foil, packaging foil, coated foil, sheets and strips for the automotive industry and interior furnishing) by concluding contracts with new potential clients.The foreseen sale revenue and financial results are sensitive towards:

- achievement of planned optimization of product’s structure;- delay in investment program fulfillment;- achievement of planned effects of investment activities: lower raw material and energy

consumption;- aluminum price rate on the stock exchange;- successful fulfillment of the anti-crisis program.

9. Human Resource Management

In 2011 the average number of employees working in Alcomet AD is 762 people, as the average annual employee turnover index is 9,2 % compared to 11,3% in 2010. For 2011 the turnover of the personnel, based on index of employees, who has left by individual decision is 3%, with maximum of 10%, so the turnover of the personnel has also decreased compared to 2010 and 2009, when it was 3,9%.

The average salary increased by 9% compared to 2010 and reaches BGN 982. The policy of the Company concerning the remunerations is in compliance with its aims, and in particular, the Company to be competitive in attracting and retaining qualified professionals, taking into account various levels of responsibility and adequate to the rapidly changing labor market.

All employees have “Labour Accident Insurance”.

Professional training of employees is one of the permanent priorities of the Company. The goal is continuous improvement of professional qualification, skills and competence of the personnel in order to achieve better results. Maintaining and improving the employees professional skills was conducted by an approved annual plan, with participation in cources, seminars, conferences and other forums in the country and abroad. There were a total of 47 trainings - inner and outer, 29 of which related to healthy and safety working conditions, environment and quality. 82 newcomers and 30 reassigned employees took introductory training aiming effective and quick integration to the organization. In 2011 training costs are at the total amount of BGN 58,815.

Conducting student training programs in Alcomet AD is determined primarily by the specific needs and goals of the Company for the respective year. Attracting young people contributes to the formation of valuable, innovative ideas and unconventional solutions of current problems. 56 people participated such student training programs - students and graduating students in the summer of 2011.

138 students from the Faculty of “Engineering Logistics and Management of Security Systems” of the Shumen Univercity “Bishop Konstantin Preslavski” participated educational and production practice in Alcomet AD, in order to study the methods of semi-continuous, continuous casting and plastic processing of metals.


ALCOMET AD

In 2011 Alcomet AD took part as a pilot plant in the project: “Development and Implementation of an information system for assessing the competence of the workforce on sectors and regions” of the Bulgarian Industrial Association for sector “Metallurgy”. As a result of Phase I of the project the Sector model for sector “Metallurgy” was completed. In 2012 pending is work on Phase II - update of the Sector model by extending its scope to include 5 new key sector positions.

10. Corporate and social responsibility

Alcomet AD is allocated in ecologically clean environment and therefore major responsibility of the Management is its preservation.

To realize this aim Alcomet AD possesses its own wastewater treatment installations. All production areas are equipped with filter installations for air purifying, oil refining and clearing of all chemicals released during the production process. A program for production waste decrease and monitoring is implementing.

The Company monitors all activities concerning the environment, prepares estimations and takes measures for fulfillment of the targets set.

To ensure healthy and harmless working environment, the Company operates in conformity with the current legal and labor legislation requirements as personnel trainings are periodically organized. Personal preventing and safety devices are available and convenient to each employee specific work. Instructions for safety and guarding techniques are prepared and posted on evident places in the workshops. A register of accidents at work is prepared and held.

Alcomet AD is certified under ISO 9001:2008; ISO 14000:2004 and OHSAS 18000:2007.

The designed system for employee and personnel motivation aims optimum efficiency of the personnel responsibilities performance and ensures balance between the Company’s aims and necessities and the employee needs and desires. Main system positions are: periodical optimization of the system of Remuneration defining and classification of positions; effective performance of the accepted strategy for professional personnel development; functioning of a system for supplementary payments; approved system for social costs as means for motivation - food vouchers, clothing, canteen, transportation from home to workplace, medical costs recovery; annual implementation of the program, concerning the balance between employees personal and professional life includes assistance to parents, having children at age to be first year students in primary school; negotiating with the municipality authorities of preferences concerning admittance to nurseries and kindergartens of children, whose parents are Company’s employees; using of flexible forms of employment for pregnant women and mothers of infant children, possibilities for paid leaves under family reasons, organizing of traditional sports holidays, children parties and other initiatives for the employees and their families. For 2011 to realize this system the Company’s expenses are over BGN 800 thousand.

In 2011 the Company again took part in the initiative, called “Manager for a day”, as 2 graduate students to spent a working day in different workshops of the Company. A scholarship program is realized by the Company and in 2011 16 individual scholarships supported the education of students in different universities in Bulgaria.


ALCOMET AD

Implementation of Trainee programs with Alcomet AD included different programs, determined most of all by the specific needs and goals of the Company for 2011:

search for potential young people with capacities and interests in a particular field, who can be included in long term trainee programs;

search for temporary substitutes of missing employees; search of people for fulfillment of surveys, inquiries, researches, program

development or other single activities.

To fulfill these intentions, Company’s representatives took part in a number of initiatives, held by universities, labor bureaus and Job Tiger.

Alcomet AD takes part in different donation programs. The Company’s policy is to give effective support to people in need, in an unobtrusive way. For 2011 the Company’s donation program is at the amount of BGN 200 thousand. The donations were distributed to scholarships for orphans, for support of sick children and elderly people, to support children and young people with disabilities from the “Kalinka” centre in the village of Vasil Drumevo, for the Shumen orphanage, to support different Christian, Muslim and community centers, kindergartens and nurseries, Shumen hospitals, as well as valuable projects in the spheres of culture and art, health, education and sports as the goal is to be in a good partnership with the civil society in the region.

In 2011 significant civil projects are: support for community centers in the region of Shumen on the project “Global Libraries”, support for the Centre for psychosocial and mental support, for the Municipal children complex and the Centre for social rehabilitation and integration of people with disabilities, equipment for seven nurseries and nine kindergardens with toys, beds, tables, chairs, flooring and game complexes, conducting the International festival for Piano and Violin “Pancho Vladigerov”, support for the International theater festival on the name of Vasil Drumev, events supporting the celebration of the 1330th anniversary of Bulgaria and the 40th anniversary of the Shumen University and others. In 2011 donations were made to support the treatment of 56 individuals, mostly children and young people.

Alcomet AD will continue to develop and implement the honorable practices of corporate social responsibility along with the commitment to be a company with modern corporate management, contributing for improvement of labor conditions, sustainable environment, education development and better city society and social growth.

Signed on behalf of Alcomet АD on March 05, 2012.

Executive Directors: Huseyin Yorucu (signed)Huseyin Ince (signed)


Documents

ANNUAL REPORT ON THE ACTIVITY - Alcomet AD€¦ · Web viewThe analysis of the structure of the Statement of financial position for the reporting period shows a trend of 41%