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SAVATECH, d.o.o.


the cradle of the Slovene rubber manufacturing Kranj, Slovenia


Annual Report Savatech ’08

6

GENERAL DATA

7

1.

Key achievements in 2008

7

2.

Company profile

8

3.

Company operation and composition, organisational scheme

8

4.

More important events and achievements of the year

9

5.

Letter from the management

11

6.

Risk management

12

BUSINESS REPORT

14

1.

Development strategy

14

2.

Characteristics of the economic environment in 2008

14

3.

Analysis of business performance

15

4.

Outlook for 2009

17

5.

Marketing and customers

17

6.

Products and services of the company Savatech

20

7.

Purchasing and suppliers

23

8.

Development and research

24

9.

Quality systems and development of business processes

25

10. EU projects

26

11. Development of information support

26

12. Investment activities

28

SUSTAINABLE DEVELOPMENT

29

1.

The development of employees

29

2.

Concern for employee health and safety at work

32

3.

Developing the social community

33

FINANCIAL REPORT

36

1.

Financial statements

36

2.

Notes to the financial statements

42

2.1. Basis for drawing the financial statements

42

2.2. Significant accounting policies

42

2.3. Financial risk management

45

2.4. Notes the individual items in the financial statements

46

2.5. Other disclosures

52

2.6. Statement by the Management

54

2.7. Independent Auditor’s Report

56

WHO’S WHO IN THE COMPANY SAVATECH, d.o.o.

57


GENERAL DATA

Net sales revenues Share of exports (%) Net profit/loss for the year Average number of employees Net sales revenues per employee Added value per employee***

2007** 2008** 96,736 96,202 74 73

€ in thousands Index 08/07 99 99

2002* 47,032 69

2003* 51,897 73

2004* 59,641 73

2005* 69,465 74

2006** 84,383 74

-2,611 718

24 690

671 682

1,004 718

1,863 779

2,215 827

306 863

14 104

66

75

87

97

108

117

111

95

12

17

23

24

27

30

28

95

*data acc. to SAS 2001 **data acc. to SAS 2006. Data is not entirely comparable. *** acc. to the SURS methodology

i

1. Key achievements in 2008 Net sales revenues (€ in thousands) 100,000

Net profit for the year (€ in thousands) 96,736

90,000

96,202

3,000 1,863

2,000

84,383

1,000

80,000 69,465

70,000

1,004 306

24

0

59,641

60,000

671

2,215

-1,000

51,897

-2,000

50,000 47,032 2002

2003

2004

2005

2006

2007

2008

-3,000 -2.611 2002

Net sales revenues per employee (€ in thousands)

2005

117 108

111

97

100

2007

27

25 20

87 66

2006

30

30

120

2008

15

23

24

2004

2005

28

17

75

60

12

10

40

5

20 0

2004

Added value per employee (€ in thousands)

140

80

2003

2002

2003

2004

2005

2006

2007

2007

0

2002

2003

2006

2007

2008 7 Annual Report Savatech ’08

40,000


2. Company profile

Firm: SAVATECH, druæba za proizvodnjo in træenje gumenotehniËnih proizvodov in pnevmatike, d.o.o. Abbreviated firm: SAVATECH, d.o.o. Head office: ©kofjeloπka cesta 6, Kranj, Slovenia. Legal organisational form: limited liability company. Registration: company was filed in the court register at District Court in Kranj, file No. 1/06910/00 according to the resolution Srg. 2001/03372 of 5 December 2001. Registration No.: 1661205. Tax No.: 13267949. Scope of operations: company is registered for the manufacture and sale of industrial rubber products Code of activity: 22.190 − manufacturing of other rubber products Share capital: €27,266,960. Ownership structure: the company Savatech is under 100% Sava d.d. ownership Data about the parent company: Sava, druæba za upravljanje in financiranje, d.d. ©kofjeloπka cesta 6, 4000 Kranj. The consolidated annual report is available in the Legal Office, Sava, d.d. Company representatives: Director: Vesna »adeæ Director: Igor Hafnar The member of the management is Worker Director Marija Rjavec. In 2008, Duπan Kveder was director of the company Savatech until 31 December 2008. Company bodies: the company bodies are the General Assembly composed of the sole partner, Sava, d.d., and the management board.

3. Company operation and composition, organisational sheme

In 2008, Savatech d.o.o. was organised in seven profit centres or programmes:

Annual Report Savatech ’08

8

• Mixing plant (manufacture of rubber compounds) • Elastomers (development and manufacture of rubber compounds) • Conveyor Belts (conveyor belts for various industrial applications) • Profiles (solid and cellular rubber profiles for the building industry) • Print (offset printing blankets for the printing industry) • Eko (products for the environmental protection and rescue actions) • Velo (tyres for scooters, motorcycles, bicycles, industrial vehicles and go-karts)

The operations of the programmes are supported by specialist services, which provide their services to other companies in the Sava Group and, to a lesser extent, to the free market. The company Savatech d.o.o. includes two representation offices, these being in Trieste and Moscow.


SAVATECH, d. o. o. Management Board MC & PR ENVIRONMENT, HEALTH & SAFETY WORKING PROCESS OPTIMISATION

PROGRAMMES

BUSINESS SERVICES

COMPANIES*

FOREIGN TRADE NETWORK*

MIXING ROOM

FINANCIAL & ACCOUNTANCY CENTRE

SAVA - GTI d. o. o.

Sava Trade (Munich)

ELASTOMERS

QUALITY AND RELIABILITY SECTOR

SAVA - Schäfer d. o. o., Kranj

Sava Trade (Prague)

CONVEYOR BELTS

PLANT ENGINEERING

SAVA ROL. d. o. o., Zagreb

Sava Trade (Warsaw)

PROFILES

LOGISTICS

SAVAPRO d. o. o., Kranj

Sava Trade (London)

OFFSET RUBBER BLANKETS

PURCHASING

SAVARUS d. o. o.**

Sava Trade (Port Orange)

ENVIRONMENTAL PROTECTION PRODUCTS

HUMAN RESOURCES

VELO

Representative office in Trieste

* In terms of ownership, the mentioned companies are subsidised to the parent company Sava d.d., whereas, in terms of management, they report to the company Savatech d.o.o. ** Savarus, d.o.o. is a subsidary of Savapro d.o.o.

Representative office in Moscow

4. More important events and achievements of the year

The company Savatech received the European good practice award in occupational health and safety In cooperation with the European Commission and the Republic of Slovenia, which then presided the European Union, the European Agency for Safety and Health at Work organised a final event of the Lighten the Load campaign on 26 February in Bilbao, Spain. In the event, which opened with the international conference about musculoskeletal disorders, the director of Savatech, Vesna »adeæ, presented endeavours and actions aiming at minimising musculoskeletal disorders in the company Savatech. This was the 8th such event in succession, but Savatech d.o.o. was the first Slovene company to receive this award. th

60 anniversary of Conveyor Belts In 2008, Savatech celebrated the 60th anniversary of the manufacture of Sava conveyor belts. On this occasion a brochure was published for distribution to business partners. Since its beginning back in 1948, the Conveyor

Belts programme has developed in a modern manufacturer, which invests all of its expertise and experiences in assurance of a flexible production of conveyor belts, their safe and long service life. During this period a wide range of belts suitable for conveying all types of load, also under most difficult conditions has been developed and offered on the market. European commissioner Danuta Hübner and Minister Ivan Æagar visited the company Savatech As a part of the European Union conference the Territorial Dialogue 2008 was held in Brdo at Kranj. On this occasion, Dr Ivan Æagar, minister for local-self-government and regional policy, and European commissioner for regional policy, Danuta Hübner, visited the company Savatech on 4 March. Cooperation in the Developed in Slovenia project In February 2008, the Slovene Engineers’ Association invited the companies with a development potential to liaise in the Developed in Slovenia project. The intent of the project is to enhance the recognisability of creativity in the technical field in Slovenia and to actively promote

9 Annual Report Savatech ’08

More important events and achievements in 2008


natural science and technical culture in Slovenia. In the framework of Innovative products by the Slovene industry, the company Savatech presented a marketable racing scooter tyre SAVA MC29 SPORTY3+. The attractive tyre tread pattern has been developed by the associates from the Velo programme in cooperation with the Academy of Fine Arts and Design in Ljubljana. Final conference of the Rubber Knowledge project In the hotel Golf in Bled a final conference of the Rubber Knowledge project was held on 1 December 2008. The representatives of larger Slovene enterprises, companies and public institutions were made acquainted with good practice cases in the EU co-funding of HR projects. We are aware of the fact that employee qualifications and expertise form a basis of a successful company and represent an invaluable source of the competitive edge, therefore we devote much attention to seeking of options and sources for additional employee training and education. A greater part of good and successful programmes was co-financed from the EU funds, which our associates presented to the conference participants.

Trade shows and Savatech in 2008 Presentation of the Conveyor Belts programme in trade shows in Russia, Italy and France At the beginning of February 2008, the representatives of Conveyor Belts visited the trade show Construction Materials 2008 in Moscow where conveyor belts were displayed in the Tehnokomplet stand, our sales agent on the Russian market. Savatech exhibited its conveyor belts in the international trade show of the construction equipment Samoter 2008, which was held in Verona from 5 to 9 March. 1,000 exhibitors appeared, among them also the leading world’s manufacturers of road construction mechanisation. From 14 to 17 October, we exhibited products and novelties by Conveyor Belts in the trade show SIM − Société de l’industrie minérale 2008 organised by the French association of mineral industry association in Limoges, France.

Annual Report Savatech ’08

10

Environmental protection and rescue products (Eko) in trade shows in Germany, France, Italy and China IFAT 2008 trade fair, held from 5 to 9 May in Munich, is the leading trade show in the area of the environmental protection worldwide. Savatech’s programme EKO - Environmental protection and rescue products put its products on display. Novelties from the environmental protection and rescue products programme were further exhibited in the trade

show IFBA 2008 from 5 to 7 June in Kassel, Germany. This trade fair is intended for products which are used in the so-called tow business − towing, transportation − devices, accident rescue equipment, and is the greatest exhibition of this type in Germany. The Eurosatory 2008 trade fair from 16 to 20 July in Paris, belongs to the largest trade show for the international defence industry. We put our rescue products such as lifting equipment, containers, tents, on display. The presentation was organised by the Slovene Chamber of Commerce and Ministry of Defence together with another eight representatives from the Slovene defence industry. In October, the representatives of Savatech’s environmental protection and rescue products − EKO, visited the international trade show Geofluid 2008 in Piacenza, Italy. EKO successfully presented a new segment of highpressure special application packers, especially suitable for geological research work, injection, mining and soil drilling. From 25 to 28 October 2008, CHINA FIRE 2008 was held in Beijing, China where Savatech’s environmental protection and rescue products programme EKO exhibited its products. This trade show is internationally renowned in the protection and rescue field. Tyres programme (Velo) in trade shows MOTO BOOM in Celje and INTERMOT in Cologne From 10 to 13 April, Velo’s scooter and motorcycle tyres programme exhibited in MOTO BOOM 2008 in Celje. This was the 8th trade show in succession, with numerous, over 32,000 visitors in four days. The tyres programme (scooter, motorcycle, go-kart, ATV) participated in the Intermot 2008 trade show in Cologne from 8 to 12 October 2008. Intermot is one of the largest motorcycle trade shows worldwide and the largest trade show in Europe besides the Milan EICMA. Savatech’s offset printing blankets for the printing industry in Drupa 2008 Under a slogan ONE WORLD − ONE DRUPA Düsseldorf transforms in the graphic metropolis of the world for a fortnight every four years. In 2008, the trade show was held from 29 May to 11 June. This year Savatech’s programme of offset printing blankets for the printing industry - Print presented a complete range of products for the first time and attracted many visitors and competitors. Events after the accounting period: There were no important events after the accounting period.


5. Letter from the management The rubber manufacturing industry is a line of business, which is closely connected with the car and construction industries. Negative cyclic movements in these two industrial sectors transferred to the rubber manufacturing too. In last quarter of 2008, negative trends were reported by all global manufacturers from this sector. Better results are reported only in sectors, in which the emerging trends in the field of energy resources, transportation related to safety and comfort, environmental protection (food, water) were taken into account early enough to be able to achieve higher added values in their respective market niches. In terms of sales, the year 2008 was a repetition of the year 2007 as the sales in the amount of €96.2 million was only 1% behind the previous year. Such stabilisation in the growth of sales followed a 13% growth rate on average during last seven years. In foreign markets, we made 17% of net sales revenues. The sale in even 90 markets worldwide helped us to balance poor results in the crisis markets. Last year our main export market was Germany again. Rubber products intended for the environmental protection and rescue actions gain in importance. The year 2008 was marked with a steep price rise in raw materials and energy resources. A fast growth of the

global economies has significantly contributed to an increase in demand. The offer could not follow such a trend, therefore prices soared. In 2008, the price of oil and natural rubber reached its historic growth. Owing to a strong competition, manufacturers could not transfer higher prices of raw materials and energy completely into selling prices, which decreased margins and profitability. The generated net profit totalling €306,000 therefore essentially deviates from the planned or generated one in the previous year. In 2008, we made large investments in the restructuring of the manufacture of conveyor belts, tyres and ecological improvements in the rubber printing blankets production. A rapidly changing working environment demands that we adapt our strategic policy. We have involved employees from various specialist and product groups in the process of strategic thinking. In 2008, we devoted a lot of attention to employee training and concern for their safety and health. In the project Family-friendly Company we emphasised our commitment to dealing with our associates in an integrated manner.

Igor Hafnar, director

Vesna »adeæ, directress Marija Rjavec, workers directress

Annual Report Savatech ’08

11


6. Risk management The risk management in the company Savatech is managed through the competence centre Risk Management at the level of the Sava Group. Within this competence centre the issues in connection with all insurances with insurance companies (assets, liability, receivables) are dealt with in a standardised manner.

and are not in favour of crediting the industrial sector. Despite poor liquidity situation in the Slovene economy we managed to ensure funds for the most important investment projects. To maintain liquidity we have limits approved on our business accounts and revolving credit lines available.

The risk management in the Sava Group is being developed in cooperation with all other competence centres and managerial teams in Group companies. All risks are listed centrally and monitored, whereas its control is managed in respective areas with regard to the type of risks. The present strategic hazards and threats can turn into strategic opportunities if potentials and an innovative approach are properly utilised at right moment.

Liquidity risk is directly connected with interest rate risk. The cost of interest rate increased considerably in 2008, especially due to a rapid growth in EURIBOR. At the end of the year the inter-bank interest rate started to decrease, but due to the fact that surcharges on EURIBOR interest rate increased, the interest rate was kept at a relatively high level.

Most risks are important for the entire Group, either as opportunities or threats. In terms of their influence on the operation, probability and frequency of their appearance, they are ranked in the strategic, financial, operating and unpredictable risks. Strategic risks Risks in relation to the ability of long-term generation of operating revenues and maintaining the value of assets belong to strategic risks. Risks of this type are connected with the competitive position of our company home and abroad. These risks are managed through a diversification of sales, development of new products and optimisation of production processes. Purchasing risks are managed through various terms in price agreements for specific materials, long-term partnerships with most important suppliers and a centralisation of purchasing within the Sava Group. We especially focus on investment risks, which we limit so as to precisely supervise the effects of investments and continually improve the procedure for the preparation and implementation of investment projects.

Annual Report Savatech ’08

12

Financial risks Credit risk is directly connected with commercial risk and presents a danger that trade receivables or receivables due from other business partners will be settled with a delay or not at all. For this purpose we devote special attention to customer solvency. To decrease exposure to this risk we make use of the customer rating system, ongoing compensations and supervision over bad payers. Most receivables are insured with a credit insurance company. Solvency risk is increased as in the present financial crisis banks tend to keep liquid money in banking channels

In 2008, we noted a higher exposure to the foreign currency risk, mainly due to the credit indebtedness in Swiss francs and the effects that the financial crisis has on currencies outside of the euro region. Operating and other risks The conformity with the legislation is examined at the level of the competence centres and companies. We improve providing information about changes in the legislation in Slovenia, while abroad our contracting partners assist us in proper conduct in the expansion of business or recovery of debts. Throughout the year we take care of our employees’ wellbeing by organising additional activities within the Family-friendly Company project, and enhancing occupational health and safety. Owing to permanent employee education and improvements in work conditions we increase work performance, employee satisfaction and motivate an innovative approach. The ever greater awareness of the environmental issues influences the operation in the rubber manufacturing industry too. We continued to introduce technology improvements to reduce the risk for accidents involving chemicals and prepared a strategy to minimise emissions of effluents in the environment. By introducing efficient precautionary measures we keep undesired impacts on the environment under the legally specified limits. We emphasise the option for utilising synergies in the Group, which we further develop through links and exchange of expertise and experiences in the competence centres of knowledge and in establishing links with companies by type of business.


getting closer to customers through a network of foreign trade representation offices London, Great Britain


BUSINESS REPORT 1. Development strategy Mission of Savatech d. o. o. We create integral solutions for various areas where industrial rubber and related products and tyres are used. Vision of Savatech, d. o. o. We will become a development partner to our key customers. The quality of our products will be comparable to the quality of products made by the best competitors. The company Savatech will be the most flexible and adaptable niche manufacturer. We will become a community of professional, creative and motivated associates who build their future through strengthening their competitive power. Savatech will be the environment-friendly company and owing to its incorporation in the global economic streams it will become one of the most financially solid pillars in the Sava Group. The key strategic orientations of Savatech d.o.o. • strategy of growth in the volume of business • development of the premises Labore in Kranj as the main (but not sole) production-logistics centre where the focus will be on high added value products • adequate development of our own foreign trade network • relocating manufacture of simple low added value products to other manufacturing sites (off-take, partnerships etc.) • active engagement in search for and introduction of new programmes • active search for possible take-overs • increase in the service providing sector The values of Savatech, d.o.o., which originate from the values of the Sava Group • business strength • integrity, ethics • professionalism and innovation • personal growth • uniqueness, dynamism

2. Characteristics of the economic environment in 2008

Annual Report Savatech ’08

14

The global industrial growth in 2008 should amount to less than 4%, meaning that the global recession dramatically decreased the economic growth; the forecasts for 2009 are even worse. In 2008, the price of raw materials substantially rose until the last quarter when it began to fall down gradually. In the second half-year, the recession affected the entire world and led to numerous additional risks such as foreign currency risk, which greatly impacted the economic situation in the world: real estate crisis in the USA and, consequently, problems in the global financial market.

The economic growth in the euro region in 2008 was estimated at 1.7% and was thus by 0.9 percentage point lower than in 2007. The GDP in Germany, our most important foreign trade network partner, increased by 1.8% in real terms. It is forecast that the rate of growth in Germany will sooth down and it should achieve only a 0.2% growth in 2009. Due to the global recession the rate of growth in the euro region members is expected to considerably decrease in the next year too. In 2009, the rate of growth in Slovenia stood at 4.1%, which resulted from a high and stable growth in exports and investments in the first half-year of 2008, while in the second half-year the rate of growth decreased. In 2008, the average inflation rate reached 5.7% at the annual level. The main factor in the inflation rise was a price rise in foodstuffs and fuels for transport and heating; these were external price shocks which besides the relation between demand and offer are influenced by the geopolitical and weather factors. The impacts of external shocks on the general price rises in the domestic market are generally of a short-term nature, but several consecutive external price shocks can maintain inflation at a high level for a longer period of time. We expect that both economic growth and inflation will soothe down in 2009. Situation in the rubber manufacturing industry In 2008, the competition in the market of industrial rubber products and tyres further grew keener and so did price pressures. In the west European countries the market developed slower, the situation was better in the East Europe, Russia and other developing countries. However, developed markets still hold the largest share in the world’s consumption of industrial rubber products. Due to recession the number of orders declined, which shows the uncertainty ruling the market. In the first three quarters of 2008, the prices of strategic raw materials, energy and packaging rose again. In last quarter the stock exchange prices started to fall down, however, that was not the case with the raw materials supply. Owing to a keen competition manufacturers could not entirely transfer higher cost of raw materials and energy into their selling prices, which influenced the reduction of margins and profitability. Manufacturers therefore concentrated on optimising purchasing and internal processes − increase in the productivity and decrease in other costs. Manufacturers started to forecast redundancies and shutting down unprofitable plants. Due to euro appreciation in comparison with other world currencies in 2008, the European manufacturers lost their competition power. The existing demand for rubber products changes and new demands appear, new markets and niches emerge. The demand for after-sale services enhanced considerably. The environmental protection standards are becoming ever stricter. Under such conditions we were able to maintain the sales only owing to a high flexibility and our rapid reaction.


Our success is driven by continual improvements in all areas. The focus on customers forms the basis of sales activities, which has its origin in more than 50 years of tradition in exports to the demanding European markets and a renowned brand name.

3. Analysis of business performance In 2008, the economic situation both in Slovenia and foreign markets was not in favour of the company Savatech. The economic environment was notably worse than expected at the preparation of the 2008 business plans. A decline in the selling market reflected in a decline in demand in Europe, which is our main selling market. Customers behave more rationally, they demand longer payment terms and keeping the store at suppliers. The prices of basic input raw materials and energy sources rose drastically. Unfavourable movements in the financial markets resulted in higher financing costs. All these reasons were of key importance for business results which were below plan. Net sales revenues (€ in thousands) 100,000

96,736

90,000

84,383 2002-2008 +13%

69,465

70,000

Financial revenues and expenses Financial expenses exceeded financial revenues by €1.2 million. Such result was due to the realised exchange rate losses (foreign currency pair EUR/USD, EUR/CHF), an increase in the interest rate for hired loans, and higher interest expenses. The highest financial expenses were exchange rate losses due to a loan hired in Swiss franc.

59,641

60,000 51,897

50,000 47,032 40,000

Operating expenses In 2008, operating expenses totalled €95 million and were 1% higher than last year. The greatest share, i.e. 77%, had costs of goods, materials and services. In comparison with 2007, the costs of goods, materials were higher by 1% and cost of services lower by 5%. Labour costs were 8% higher than in 2007. Their share in operating expenses amounted to 20%. The reason for the increase is the real growth in salaries and additional employments. Depreciation was 1% higher than last year. Operating expenses from revaluation were lower than last year. Other operating expenses amounted to €0.4 million and were 58% lower than in the previous year.

2002

2003

2004

2005

2006

2007

2008

ASSETS

€ in thousands 31/12/2008

Assets Long-term assets - tangible fixed assets - other Short-term assets - inventories - short-term financial investments - short-term operating receivables - other

Operating profit/loss In 2008, the company generated profit from operations in the amount of €1.5 million, or 50% less than in 2007. The net profit of the company totalled €306,000, or 86% less than in the previous year.

50,525 18,298 17,779 519 32,227 12,687 4 18,857 679

At 31/12/2008 the company assets totalled €50.5 million and enhanced by 2% within a year. Long-term assets had a 36.2% share in the assets structure. Tangible fixed assets increased by 15% on account of an increase in capital through equipment in the amount of €2.2 million. The capital was increased by Sava d.d.

Structure in % 100.0 36.2 35.2 1 63.8 25.1 0 37.3 1.4

31/12/2007 49,582 15,980 15,423 557 33,602 11,461 1,224 19,702 1,215

Structure in % 100.0 32.2 31.1 1.1 67.8 23.1 2.5 39.7 2.5

Index 2008/2007 102 115 115 93 96 111 160 96 56

Short-term assets decreased by 4% and at the end of the year they totalled €32.2 million. In the short-term assets structure inventories were higher than in 2007, whereas operating receivables decreased. The change in the structure is mainly due to considerably lower sales figures in the last quarter of 2008. €

15 Annual Report Savatech ’08

80,000

96,202

Sales In 2008, the company Savatech generated net sales revenues of €96.2 million by selling products, services, goods and materials. This was 1% less than last year. In the foreign market we created 73% of net sales revenues. The average growth in sales in the last seven years amounted to 13%. A detailed survey of sales results is included in the chapter Marketing and customers.


LIABILITIES € in thousands

Liabilities Capital Provisions, accruals&deferrals Long-term liabilities - financial liabilities - operating liabilities Short-term liabilities - financial liabilities - operating liabilities

31/12/2008Structure31/12/2007 in % 50,525 100.0 29,596 58.6 2,941 5.8 80 0.2 80 0.2 0 0 17,908 35.4 8,456 16.7 9,452 18.7

Owing to a successful performance the capital increased by €2.5. million, or 9%; its share in the liabilities structure stood at 58.7%.

Structure 49,582 27,093 2,900 593 593 0 18,996 6,556 12,440

Index in % 100.0 54.6 5.9 1.2 1.2 0 38.3 13.2 25.1

2008/2007 102 109 101 13 13 94 129 76

Cash flow In 2008, the company generated a negative cash flow of €535,000, which was due to a lower operating result and expenses for tangible fixed assets totalling €3.6 million.

Liabilities were 8% lower than last year and showed a change in the structure. Financial liabilities increased by 19% and had a 16.9% share in the total liabilities structure. Operating liabilities decreased by 24%; at the end of 2008 their share in the structure amounted to 18.7%.

OPERATIONS INDICATORS

Net operating result for the year in gross profit/loss in % Net operating result/gross profit/loss EBITDA margin - in % (operating profit+depreciation) gross profit/loss

5.2

6.8

28.1

29.6

1.1

8.8

Participation rate of equity in % equity/liabilities

58.6

54.6

Current ratio Short-term assets/short-term liabilities

1.8

1.8

Added value per employee - € in thousands Added value/average number of employees Net return on equity ratio Net profit for financial year/average equity less net operating results for the year

In 2008, net profit in gross proceeds amounted to only 0.3% and was by 1.9 percentage point lower than last year. In 2008, EBITDA margin amounted to 5.2% and compared to 2007 it was lower by 23%. Added value per employee totalled €28,100 in 2008, which was 5% less than in 2007. On the last day of the year 2008, net return on equity ratio amounted to 1.1, which was worse than in 2007 when it stood at 8.8. Annual Report Savatech ’08

16

31/12/08 31/12/07 0.3 2.2

Equity in liabilities had a 58.6% share; due to an increase in capital this share was lower than in 2007. Current ratio (1.8) which demonstrates short-term solvency in statistic terms, showed that the company did not have any short-term solvency problems. The company settled its liabilities to business partners within contracting terms.


4. Outlook for 2009 The year 2008 ended in changing and uncertain circumstances, and such situation has continued at the beginning of 2009 too. Trends in the world’s market and most recent forecasts for 2009 show a price decrease in input and raw materials. Due to a surplus in the production capacities and appearance of new, price-aggressive competitors the mature products are exposed to further price decrease pressures. We have prepared a range of activities and measures in order to adapt to the circumstances: • sales promotion, a selection of the production and sales programmes and a new market positioning especially in most promising markets; • managing all types of costs and their adjustment to changes in the sale;

• faster revolving of assets which are tied in the current capital; • an increase in productivity on account of employee education and process rationalisation; • Besides deterioration of solvency, the effects of the financial crisis reflect in the exchange rates fluctuations of individual foreign currencies, meaning that in 2008 we will have to focus on these risks. • The investment policy will be particularly selective and directed exclusively to the development of new products and sales activities, or to only those investments, which are most urgent for further development of the company. There are great changes within sight as every economic crisis brings along a breakdown of certain old models of thinking, making thereby a space for the introduction of new ones.

medium pressure air bags

5. Marketing and customers In the first half-year a positive growth trend in sales that we witnessed for several years continued in the company Savatech, however, in May 2008 the first signs of decline showed. The year 2008 ended with sales results, which were 1% lower than in the previous year and slightly more than 3% bellow plan. Besides certain factors, which were

characteristic of individual programmes and their markets, the worse sales result was due to a generally unfavourable global economic situation in the second half-year 2008, to which a company that generates a prevailing sales share in the foreign markets is even more sensitive. € in thousands

Net sales revenues from products Net sales revenues from materials Net sales revenues from services Net sales revenues from goods Total net sales revenues

2008 84,160 5,156 2,305 4,581 96,202

Structure in % 88 5 2 5 100

2007 86,073 4,961 2,140 3,562 96,736

Structure in % 89 5 2 4 100

Index 2008/2007 98 104 108 129 99

17 Annual Report Savatech ’08

Net sales revenues structure


Net sales revenues structure 2008 (€ in thousands) 5% 2% 5%

Net sales revenues from products Net sales revenues from materials

Net sales revenues from services Net sales revenues from goods

88 %

The sales structure remained very similar to the structure of the previous year. In 2008, 73% of net sales revenues were made in the foreign market and 27% in the domestic market. Considering sales areas, the greatest share belonged to the European Union countries where 55% of products were sold. Slovenia had 27% and the former Yugoslav countries a 4% share, while other regions had a 14% share in the sales structure.

Sales structure of Savatech d.o.o. 2008 by country Slovenia 27 % Other 22 %

In three out of six sales programmes the sales results in 2008 were worse than expected and worse than in the previous year. This happened in the Profiles programme, Offset Rubber Blankets programme - Print and Rubber Compounds programme. The remaining three programmes (Conveyor Belts, Environmental Protection Programmes- EKO, and tyres − VELO) concluded the year 2008 with sales results which were better than in the previous year and mainly above plan. With regard to the external influence, the first signs of the financial crisis were perceived in the real sector in last months of 2008, which was due to the global cooling down of the industrial sector and an increase in inventories at end consumers. High price rises in raw materials should also be pointed out. In a significant part of our range of products, our customers are closely linked with E of equipment the construction industry, manufacturers and processing industry, which during recession are the first one to face a decline in demand, cutting down investments and, consequently, a decrease in orders. Regional sales structure In 2008, the company Savatech sold its products to 90 countries worldwide. Sales structure of Savatech d.o.o. in 2008 by region Other markets 14 %

France 2 % Austria 2 % Czech Republic 2 % Russia 3 % Great Britain 3 % New Zeland 3 % Croatia 3 %

Annual Report Savatech ’08

Italy 11 %

Sales structure by subsidiaries − foreign trade network companies London 9% Florida 9% Prague 10 %

18

Poland 3 %

In 2008, the greatest share of our products was sold in the domestic market, Slovenia, which was followed by the European Union countries with Germany at the head, which for many years has been our most important market. 19% of products were sold in Germany last year, the same figure was achieved in 2007. Slightly more products than in the previous year were sold to Italy, i.e. 11% (9% in 2007). The first three countries were followed by five countries (Great Britain, Croatia, Poland, Russia and New Zealand), each having a 3% share in sales. 2% of products were sold in Austria, France and the Czech Republic each. The remaining 22% included another 79 countries worldwide where we sell our products.

Slovenia 27 %

EX YU 4%

Germany 19 %

EU 55 %

Warsaw 15 %

Munich 58 %


Through subsidised companies abroad we created net sales revenues from products of 20.1% in 2008. These are the companies under Sava d.d. ownership: Sava Trade Munich, Sava Trade Prague, Sava Trade Warsaw, Savatech Trade London and Sava Trade, Port Orange, USA. The greatest share in sales was made by Sava Trade Munich, which was followed by Sava Trade Warsaw, Sava Trade Prague, Savatech Trade London and Sava Trade, Port Orange, USA.

In 2008, the share of rubber products for the environmental protection and rescue actions increased slightly; in 2008 these products had a 10% higher share in total sales, or one percentage point more than in the year before. For the environmental protection and rescue products programme the sales year was marked with favourable economic cycle. The coverage with orders was good throughout the year. A high number of new products, which are noted for their original solutions and inventive design made a contribution to good sales results.

Market position by product group Sales structure by product group in Savatech d.o.o. in 2008

Tyres 17 %

Rubber compounds 21 %

Rubber environmental protection and rescue products 10 %

The share of the Print − offset rubber blankets for the printing industry was slightly lower in 2008, from 10% in 2007 it fell to 8%. Despite unfavourable economic movements in 2008 the offset printing blankets programme managed to maintain a relative market share in most key markets and a dominant market share in Slovenia. We renewed advertising materials and presented new niche products in the market.

Conveyor belts 25 %

Rubber offset blankets 8%

Rubber profiles 19 %

In 2008, the largest share in sales had conveyor belts with 25%, which was the case in 2007 too. We increased a share of special conveyor belts and started to market some new products. We managed to keep the position of a key development supplier in the demanding industrial areas. The second largest group was rubber compounds with 21%. In selling rubber compounds we strengthened relations with the key partners. In Slovenia, where we achieved a half-share there are potentials for further growth. We also consolidated relations and expanded the sales of compounds to customers from the European Union and ex-Yugoslav countries. Profiles had a 19% share; its sales structure changed in 2008. The sales of solid profiles decreased, while the sale of cellular rubber and combined profiles increased.

conveyor belts

19 Annual Report Savatech ’08

In the sale of tyres a relative sales share increased by 3 percentage points and thus totalled 17% (14% in 2007). With tyres we maintained or increased our market share in the developed markets of West Europe and we successfully started to supply new manufacturers of two-wheel vehicles. We upgraded our business processes with car manufacturers, which consider us a development partner.


6. Products and services of the company Savatech We manufacture and market a wide range of high-quality rubber industrial rubber products and tyres. We are noted for an innovative approach and flexibility, which enable us to meet the requirements of our customers. Rubber compounds − Elastomers programme Since 1920 the Sava Group has been developing and blending rubber compounds for rubber products, owing to which we extensive expertise and numerous experiences in this field. Compounds are either natural or synthetic rubberbased: EPDM, SBR, BR, NBR, CR, CSM, CIIR, HNBR, etc. We offer our customers: • the development and manufacture of rubber compounds of demanded properties, customer recipe or specimen; • high-quality compounds manufactured by using the state-of-the-art equipment; • adapting compounds to a specified purpose; • technology support; • measurements of physical properties and chemical analyses of rubber, compounds and other materials in the laboratory Rubber conveyor belts − Conveyor belts programme For almost 60 years conveyor belts have been manufactured in the Sava Group and during all this time we have invested all of our expertise and experience in the production of conveyor belts that meet customer demands and assure a safe and reliable operation. The production is subject to a strict and demanding supervision in all stages. Our conveyor belts are of high-tech level and continually checked in use as they are sold worldwide. The main purpose or the application area for conveyor belts is conveying of various materials between more or less distant sites. Our offer covers a wide range of conveyor belts to meet various application requirements such as through-shaped, rigid stable, sliding, reinforced RIPCHECK (with a textile ply or steel transversal reinforcement), elevator and pipe type conveyor belts. With regard to the outdoor conditions the belts are exposed to, we offer belts resistant to the increased temperature, oil and fats, high-abrasion resistant (for gypsum), hardly flammable and antistatic conveyor belts.

Annual Report Savatech ’08

20

A part of the production are white (food quality) conveyor belts, non-staining (for the timber industry), non-smooth belts from Feingrip/Supergrip to Chevron belts for inclined conveying with varied profile heights.

Furthermore, we offer a combination of the above mentioned types and are able to manufacture custom-made conveyor belts. Solid and cellular rubber profiles − Profiles programme Since 1970 we have designed and manufactured rubber profiles, a product, which is a fruit of the in-company expertise and experience. Profiles are made of quality rubber compounds, suitable for a wide range of applications and produced in accordance with all requirements as defined in the international standards ISO 9001 and ISO 14001. Besides solid and cellular rubber profiles we manufacture a combination of both too. Types of profiles are custommade and used for: • plastic, aluminium or wooden windows made by the leading European window manufacturers; • the construction, car, electrical industry, white goods and many other industrial sectors; and • other profile types complying with customer requirements and wishes. We have developed several types of quality rubber compounds resistant to mechanical, chemical and heat influences suitable for various application purposes. Offset printing blankets for the printing industry − Print programme The Print programme is a renowned European manufacturer of offset printing blankets used in the printing industry. Through its well-organised sales network it sells products and services worldwide. The quality and reliability of rubber printing blankets is achieved by using the most sophisticated technologies, innovative approach and adapting to the changed requirements by customers. The main benefits of our products originate from the blanket construction; the basis is a cord carcass that in addition to the outstanding printing characteristics assures a high operational reliability. Our products meet requirements of all important printing applications, e.g. sheet-fed printing with printing blankets using the conventional inks technology, UV technology and also spot varnishing. Recently, we have concentrated on the development of offset printing blankets for web printing as the most demanding segment in the offset printing blankets market. The third area where our printing blankets are applicable is metal decorating.


getting closer to customers through a network of foreign trade representation offices Prague, Czech Republic


Environmental protection and rescue products − EKO programme The programme EKO − environmental protection and rescue products manufactures high-quality inflatable rubber products. The exacting high-tech and innovative products as well as the equipment for the small-series production are the result of our own expertise. One of the key advantages of the EKO programme is its outstanding ability to adapt to customer requirements. As regards the purpose of use, the products are divided in four main groups: • Products for sewage − water supply niche • Products for fire-extinguishing rescue niche • Products for geological research • Environmental protection products When assessing the quality we give several criteria a careful consideration: environment-friendliness, simplicity of use, construction, safety, reliability and packaging. Tyres − Velo programme The Velo programme produces and markets a wide range of tyres for scooters, motorcycles, mopeds, go-karts, bicycles, mini moto vehicles and small industrial or farming tyres with corresponding tubes and tyres for trailers, ATV vehicles and ultra-light aeroplanes. We have capacities available for the manufacture of special purpose tyres to meet customer requirements and wishes. In collaboration with our customers and a highlytrained professional development team, new innovative products as well as a unique manner of their use have been developed.

Annual Report Savatech ’08

22

We successfully cooperate with reputed car manufacturers such as Piaggio, Aprilia, Honda, Peugeot, Tomos, and others. Our long-standing cooperation with the mentioned manufacturers only proves that they have trust in our company. Owing to continual innovation and a successful break-through in the market we have succeeded at placing our tyres in all continents of the world. Services - R&D Institute offers its customers the development of rubber compounds, cooperation in development projects and the development and optimisation of the new products construction as well as technology procedures. - Central laboratory provides its customers with physical, chemical and technological laboratory services in the field of polymers. It consists of two laboratories: physical laboratory with a prototype unite and unit for testis reinforcement, and a chemical laboratory. The central laboratory has been accredited in accordance with the standard SIST EN ISO/IEC 17025. - Design Engineering services provided by the sector of Plant Engineering, provides services of construction and design engineering of special parts of technology equipment, buildings and devices, offers improvements of process units in conformity with requirements of end users, renewal of the existing equipment as well as assembly and start-up in new manufacturing facilities. Moreover, it provides supervision over the construction works, defines project requirements for new facilities and devices, manages assembly of entire technology lines and relocates complete production processes, produces software for computer-assisted supervision of line and process unit operations.

rubber compounds


7. Purchasing and suppliers The year 2008 was marked with an escalation in raw material, energy resources and, particularly, oil prices. A rapid economic growth in certain countries, especially China, India and Russia, contributed a great deal to an increased demand. The fact is that speculative capital was redirected to the markets of raw materials, which, in turn, increased demand. Thus the offer could not follow a rising demand, which caused the prices to skyrocket, which was best visible in oil prices and natural rubber prices, which both broke a historic record.

Purchasing structure of manufacturing materials in Savatech Purchasing structure of manufacturing materials in 2008

15 %

Oil-Related Raw Materials Fabric

71 % 5% 5%

Natural Rubber Reinforcements Other

4%

Movement in oil prices in 2008 160 H

140 120 100 80 60

Bent Oil (PSEUDGABN006) Chart - a Jahr

T

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Letzer 45,30 (21.01.09) SMA (200), 95,05 Tief 38,10 (24.12.08)

40 20

SMA (38): 44,84 Hoch: 148,10(03.07.08)

The oil price rise in the purchasing chain of rubber manufacturing materials showed with a half-year delay. The same trends were noticed in the company Savatech. Such price rises were due to a poor offer of the majority of raw materials. For 2008, an extremely low availability was characteristic, as suppliers limited the purchasing quantities. We hardly managed to assure sufficient quantities of certain raw materials. The price for many important raw materials even doubled

Outlook for 2009 The present situation in the industrial sector, for which a poor liquidity and a great decline in demand, a drop in oil price, large exchange rate fluctuations, and economic measures are characteristic, will cause changes in the entire purchasing chain. The price trend for raw materials turned at the end of the year and on the basis of information we have gathered so far as well as the macroeconomic forecast we expect further price adjustments in the coming year.

Movement in oil prices in 2008

index

Movement in oil prices 2008

270 220 170 120 70

8 8 8 8 7 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

period paraffin oil BR synthetic rubber

Oil is the most important raw material in multilevel production processes, for rubber manufacturing materials such as synthetic rubber, carbon black, chemicals, process oils, fabrics and other.

23 Annual Report Savatech ’08

SRB synthetic rubber carbon black


8. Development and research Guidelines in development and research The company Savatech is the leading company in Rubber Manufacturing in the Sava Group, which includes also: Sava-GTI d.o.o. Ptuj, Sava Schäfer d.o.o. Kranj, Sava ROL d.o.o. Zagreb and the Foreign Trade Network. The owner of the company, Sava d.d., wishes to achieve a better coverage of business operation at the level of the Rubber Manufacturing division and the Sava Group, which in the long run cannot be achieved through cost cut-downs but with a new approach to the development of new products. A long-term survival of a company is only possible with a continual development of new products that have a market appeal. In the development of new products materials, the processing technology and the development of integral solutions for customers play an important role. R&D Institute R&D Institute of Savatech is registered with ARRS as a research unit in the industrial sector. With its internal development-research network in the company it is one of the mainstays of the expertise in the field of polymer materials and technologies in Slovenia. R&D Institute is equipped with the advanced R&D equipment for a virtual development of new products and laboratory equipment for chemical and physical characterisation and management of polymer materials processing. As of January 2005, the central laboratory within the R&D Institute has been accredited as an authorised laboratory in conformity with the standard SIST ISO EN 17025. The company Savatech is actively involved in associations that link the industrial sector and academic institutions. As a founding member of the Technology Network for Intelligent Polymer Materials and Related Technologies it is linked through the Centre for Experimental Mechanics of the Faculty of Mechanical Engineering, Ljubljana University, with similar foreign networks. As a founding member the company collaborates in the technology platforms Manufuture.si (applied technologies of the future), NaMat (nanomaterials, nano products and nano technologies), STTP (Slovene Textile Technology Platform) and SloKem (Slovene Chemical Platform) and development teams within the Competitiveness Council by the Government of the Republic of Slovenia.

Annual Report Savatech ’08

24

The company is member of the cluster GIZ Grozd Plasttehnika, an association with more than 50 Slovene small, medium- and large-sized companies dealing with products and services in the field of polymer materials. Through the Chemical Institute we are involved in the network of excellence Nanofun-poly within the 6th Framework Programme of the European Union in the field of functional polymers and nano-composites. The associates from R&D

Institute collaborate in the preparation and management of R&D and technology projects that are co-financed by the EU or ARRS. Development of new products, equipment, processes, services and solutions The estimated total sales of new products, which met the criteria of being regularly marketed less than three years, had a 13% share in total sales, or 1% more than in 2007 and 2% more than in 2006. In the development of new products we focused on: • new elastomer compounds; • new series of ribbed conveyor belts; • new types of seals using a virtual development tool; • new niches products for the printing industry; • launching unique solutions for ecological improvements and rescue interventions; • new dimensions of scooter and motorcycle tyres. Encourage innovation, the continual improvements process, the 20 Key project Creativity which leads to innovation is hidden in every one of us and is one of the fundamental qualities a human being has, and which has to be, similarly as talents, developed in order to give results. That is the common practice in the company Savatech; ever since the beginning the company has gathered innovative proposals. For 55 years we have been encouraging innovation in the rubber manufacturing industry in Kranj. Last year we launched an action titled Your Proposals 2008 to further promote innovations in Savatech as well as other companies of the Rubber Manufacturing division. In 2008, we further proceeded with the year-round action of developing improvements and encouraging employees, which we named the Continual Improvements Process. The 20 Keys system, which we started in 2002, was systematically improved in 2008 too. In order to pursue the performance of individual organisational units we carried out the so-called self-assessment in September 2008, and in the period October-November 2008 an audit of the system performance as part of the integrated systems audits ISO 9001, SIST ISO EN 17025, ISO 14001 OHSAS 18001 and the 20 Keys area. The goal for 2008 was accomplished.


9. Quality systems and development of business processes

One of the strategic goals of the company Savatech in the area of quality is the development and establishing a compatible and harmonised way of process management using the advanced quality systems as follows: • Introduction of new systems and maintenance of the already introduced systems (quality systems), which regulate business processes and are result-oriented in accordance with the business excellence principles (SIST EN ISO 9001, SIST ISO/TS 16949, SIST EN ISO 17025, AQAP 2131 Certificate of Conformity, CE mark for products,…) • Reduction of poor quality costs; • Introduction of mathematical models, measurement of process stability as foreseen with the 6 sigma method, • Introduction of business excellence model in the business process of Rubber Manufacturing. The mentioned activities make a significant contribution to the enhancement of competitive power of our products and services. Most of the mentioned activities were successfully implemented in 2008. The audits both by customers and certification organisation were passed: certification of processes in accordance with ISO/TS 16949 standards for the area of the Mixing Plant programme, SIST EN ISO

17025 for testing in Central Laboratory, AQAP for the programmes EKO and SIST EN ISO 9001 in all other Savatech’s programmes. As planned, we audited all suppliers. In 2008, the quality of products together with waste and claims was slightly worse than in the previous year. One of the important factors for such a result was a higher employee fluctuation; despite intensive training courses and instructing new employees in production processes, this was not enough for meeting the specified standard of good quality. We have set higher goals to be reached in the following year, which we intend to realise by means of the following activities: • Employee education − a higher emphasis, in form of workshops, mentorship; • Introduction of the information system − waste, claims distributed by reason of occurrence (4M method), searching for solutions, improvements in individual areas; • Quality manual in written form and images for product classification; • FMEA manual of possible mistakes in a particular process part, defining possible reasons for occurrence of a mistake, determining the manner for mistake prevention; • Better control over the realisation of performed activities − daily, weekly, monthly meetings with employees who are directly involved in a particular process; • Benchmarking of a product in view of quality. Stability of business processes In 2005, we commenced with the numerical evaluation of process stability, which we included in the company development strategy 2007-2011. In terms of the achieved results the stability of business processes in individual areas met the expectation in 2008.

rubber offset blanket

25 Annual Report Savatech ’08

The focus on the quality of products and services, supervision and its continual improvement remain one of the fundamental guidelines and values of the company. The quality of products and services includes all business processes: the quality in development, production, providing services in all sectors, approach to customers, business partners and associates, in short, the quality in all services, which in the final phase lead to fulfilment of customer requirements. The commitment to the quality in all areas and a professional attitude to all partners in the business process have been confirmed several times by obtaining and repeatedly certifying of all important quality standards, which we name below.


10. EU projects The competence centre EU projects operating at the level of the Sava Group acquires funding from the European Union for the companies in the Sava Group as well as for Savatech d.o.o. The basic funding areas are: environmental protection, ecology, development of new products and technologies, energy sources, social responsibility, work with employees and investments.

which we trained associates for obtaining knowledge needed in the preparation of innovative and strategically important contents from specialised areas. In this way, lifelong learning process and spreading the knowledge in the local working environment are taken care of, which results in changes in the technology and organisation and strengthen the process of associates’ innovation.

Project in progress and completed projects in the company Savatech: Within the framework of the Leonardo da Vinci programme a pilot project Rubber Knowledge − an innovative project of developing educational contents and trainers’ programme in the rubber manufacturing was underway. A two-year project, which included a consortium of 9 partners from 3 countries finished in 2008.

Under the 6th EU Framework Programme the project Safety in Motion − development of tyres and optimisation of dynamic characteristics for a three-wheel scooter Piaggio MP3 400 was carried out, in which the research and development work was co-financed. Within the European Social Funds project employee education and training were co-funded.

Within the framework of the Leonardo da Vinci programme a mobility project was held with personnel exchanges, in

11. Development of information support In accordance with the strategic policy in the IT area in the Sava Group, Savatech as well as other Sava Group companies has a standardised, centrally managed and linked information system available, which forms a good basis for the optimisation of business processes inside individual operations. In 2008, we continued with the development of information system for the management by adding new areas such as pursue of main efficiency indicators in purchasing in rubber manufacturing. We completed the started phase of introducing and building the intranet portal of the Sava Group aiming at improving the accessibility of information and improving internal communication.

By introducing a standardised help desk and information system for reporting, recording and monitoring all requirements we made a big step forward to the improved operation of the information infrastructure. For the first time we carried out a survey of proper operation of the information support by visiting all sites in the rubber manufacturing including the company Savatech. On the basis of results and received proposals for improvements we eliminated certain safety irregularities and upgraded individual application solutions.

rubber profiles

Annual Report Savatech ’08

26


getting closer to customers through a network of foreign trade representation offices Moscow, Russia


12. Investment activities In 2008, the company Savatech d.o.o. invested €3.2 million in fixed assets. Activated investments and investments in progress in 2008 (€ in thousands) Savatechd.o.o. 3,225 - Mixing Plant 536 - Elastomers 24 - Conveyor Belts 853 - Profiles 218 - Print 684 - Eko 174 - Velo 707 - Business services 28 In continuation we indicate some larger investments in the programmes. In Mixing Plant we replaced a mechanical part of the mixer and purchased a gear-wheel strainer to improve reliability and quality of elastomer compounds. Owing to investments in Conveyor Belts we followed the envisaged strategy which set out a restructured production to the manufacture of higher added-value products

and an increase the production of ribbed belts and special belts. Besides investments in the production restructuring the goal of investments was to increase the quality and reliability of products, enhance the reliability of control processes, increase productivity and decrease costs of energy and manufacturing materials. In Print, we invested in the system for the toluene regeneration aiming at lower consumption of solvents in the rubber printing blankets production below 200 tons per year, meaning that we are no longer IPPC liable. At the same time we will decrease the consumption of gas, which will influence green house gases. The second largest investment was a purchase of a new grinding line in order to decrease a bottleneck in the semi-products production. In Velo, we purchased a new tyre building-up machine, vulcanisation presses and a wire beads production line. The goal of these investments was to enhance the production. Other minor investments were oriented to improvements in quality and productivity in the production, safer work, environmental issues − a renewal of production process and rational use of energy.

tyres

Annual Report Savatech ’08

28


SUSTAINABLE DEVELOPMENT 1. The development of employees

Last year was marked with a high level of fluctuation in general as in 2008 the demand for personnel was higher due to a high economic growth. On the one hand, this movement brings great advantages in terms of new expertise and good practice from other environment, on the other hand, we need to invest more effort in training and incorporating in the working environment. Number of employees in the company Savatech in 2008 863 employees were employed on average in 2008 and compared to 2007 the number increased by 36, while the average employee number on the basis of working hours amounted to 847. In 2008, we employed 134 associates, while 128 associates left the company, which made a 14.8% fluctuation. In comparison with a year before the fluctuation was slightly higher.

Employees in Savatech from 2002 to 2008 ( State at 31. 12.) 900 750

842

847

2007

2008

804 696

687

691

2002

2003

2004

754

600 450 300 150 0

2005

2006

Almost one third or 31% of employees were in the age group 41-50 years, they were followed by the age group 31-40 years with 26%. In 2008, 52% of employees were included in the additional voluntary pension scheme. The average gross salary per employee was â‚Ź1,301.2, the salary growth index being 109 if compared to the previous year. Awards to workers with no sick leave and holiday allowance were paid.

In comparison with the previous year the sick leave rate increased by 14% in the company Savatech, the reasons for that being of a very complex nature. Besides the state of health of every individual, numerous other factors in the domestic as well as a wider environment can influence the reasons such as attitude to work, psycho-physical loads, system of values, stress and life style. We organise preventive examinations in the company: medical examinations, sports activities, we encourage a healthy way of living, assure an optimum safety at work, take care of employee satisfaction, and provide opportunities for career development. A great part of our attention and funds are earmarked for improvements in working conditions and technical solutions which, consequently, facilitate work and improve working conditions. Rewards and career advancement 434 associates received model worker awards to encourage them for further accomplishing good results, 5 associates received the worker of the company award. 3 associates from the company received the Sava worker award, which is bestowed at the level of the Sava Group. On the basis of criteria for advancements, 329 associates were advanced in 2008. Education We are aware of the fact that employee education is of significance for the future of our company. The fact is that the traditional culture of a lifelong work place belongs to the past. Moreover, the technology is changing ever faster, which demands for all age groups to permanently train in order to meet the requirements. In the future, adult education will be of fundamental importance for an individual’s progress as well as company performance. In the coming period, the company will need a new generation of personnel that will be able to face challenges of the competition, globalisation, new technologies and, last but not least, the current financial-economic situation. Therefore, we do not doubt that the professional attitude and efficiency of employees is not only the backbone of the company but its competitive edge.

29 Annual Report Savatech ’08

Savatech achieves its competitive edge by managing the personnel structure, with a suitably developed organisational capacities, competences, leading, good organisational culture and communication. We managed to acquire, develop and keep the best associates, which remains to be our strategic task in the future too.


heads. A training course Basics of Management was attended by 48 associates. The programme for the preparation of a business plan was attended by 8 associates. Specialised on-the-job training courses were carried out by individual units. In 2008, the total number of training hours amounted to 83,466 hours or 97 hours per employee.

Educational structure in Savatech d.o.o. per average number of employees in 2008

Average number

250

237 185

200

173

150 119 100 50 0

39

37

2 1

2

3

4

5

6

7

8

5

8

9

Level of education Key to levels of education: 1st level − incomplete primary school 2nd level − primary school 3rd level − up to 2 years of vocational school 4th level − at least 3 years of vocational school

5th level − secondary school 6th level − technical college* 7th level − (a) higher and (b) university education 8th level − Master’s degree/ specialisation 9th level - Doctor’s degree

In comparison with 2007 the educational structure in the company Savatech did not significantly change in 2008. 19% of employees had higher and university education, or 1% more than in the previous year; 20% of employees had secondary education; 26% had vocational education, 35% had primary education or less, which is to be attributed to the manufacturing character of the company. In Savatech, we encourage education and training of our associates, both formal and informal. In 2008, 28 associates studied part-time, out of which 7 successfully finished their study in 2008, while 8 new part-study contracts were concluded. In 2008, we carried out the Rubber Knowledge project as part of informal education, which provides a systematic approach to complementing the expertise in this specific area. Employees having vocational education or secondary education with technical specialisation need basic and specialised knowledge about the rubber manufacturing technologies in order to be familiar with the rubber processing procedures. In the formal educational system they do not obtain such specific knowledge. 18 experts in the company therefore attended specialised training courses to became active lecturers and mentors. 17 participants participated in the project, which included publishing four manuals from the rubber manufacturing technology to assist employees in obtaining this specific knowledge. Annual Report Savatech ’08

30

In 2008 too, we carried out common training courses under the wing of Akademija Sava. Special attention was devoted to the education of production and work team

Communication with employees We devote special attention to communication with employees. Informing of employees and communication is in the first place the responsibility of managers and representatives. Sava Dialogue is an in-depth, systematically conducted interview of a manager with every associate separately. It assures balance between the goals of the company (business plan) and daily tasks of an individual (goals, activities and development of an individual). It is an opportunity for a manager and associate to discuss the fulfilment of standards and goals and to complement the list of tasks with new requirements in the working process. Furthermore, it helps create or strengthen the feeling of mutual trust, understanding, support and readiness for the cooperation. In December 2008, there were workers’ meeting held, in which associates were presented strategic policy, business results, personnel reports and other important information. An important source of information are weekly information boards, Informator magazine with current news and the bulletin SavËek, In December 2008, the intranet Savanet was launched, which improves communication, supports business processes, provides a standardised access point to information, knowledge, business processes and documents as well as improves cooperation among departments. Family-friendly Company In May 2007, the Sava Group obtained the basic Familyfriendly Company certificate. At the beginning of October 2008 the Ekvilib Institution audited the first year of performing activities according to the action plan adopted after the certificate was obtained. The final conclusion was that the Family-friendly company project had been successfully carried out and that the project group had assured implementation of all planned activities such as additional day of paid leave for parents of first-formers, open days, offer of holidays and sports activities in spare time.


getting closer to customers through a network of foreign trade representation offices Munich, Germany


2. Concern for employee health and safety at work Assuring a safe and healthy working environment is a prerequisite for the success of every particular individual and company. Occupational health and safety are two of the most important values in the company Savatech. This has been proven by a systematic approach to occupational health and safety management on the basis of the international OHSAS 18001 (Occupational health and safety management systems) certificate, for the introduction of which we decided on a voluntary basis and which we obtained in 2004. We are aware of the fact that every task can present a certain level of risk to health and safety at work. Globally, the level of health and safety at work is considered one of the most obvious indicators of the quality, business reliability of a company and its social responsibility. Occupational health and safety is more than just cutting down labour costs; it enhances organisation, satisfaction at work, productivity, the feeling of social security, responsibility and loyalty to the company, its goals and development and the quality of work in general. The occupational health and safety aims at a continual improvement in comfort at work, a concept which incorporates a physical, moral and social dimension. Moreover, considerable attention is devoted to minimising the frequency of work-related injuries; we carry out precautionary measures, attend to social risks, particularly stress and risk due to the addiction to psychoactive substances. It is important to analyse new types of risks. Work-related accidents with injuries Owing to a systematic preventive operation and a systematic detection of hazardous occurrences we reduce the number of work-related accidents with injuries. The results in 2008 are presented in the table: Savatech No. of injuries with sick leave Frequency of injuries (no. of injuries with sick leave per 200,000 work hours)

Annual Report Savatech ’08

32

2004 2005 2006 2007 2008

Index 2008/2007

12

18

16

18

16

88.9

2.1

2.5

2.5

2.6

2.3

88.5

Employee healthcare We feel that it is important to pursue the state of employee health and concern for a healthy working environment. In 2008, 48% of Savatech employees underwent preliminary, periodic and specific health examinations.

Minimising occupational health and safety risks It is important to provide information about occupational health and safety on an ongoing basis. Besides the legally specified forms of theoretical and practical training for safe work upon concluding a work contract, we update our employees in the case of every change in the work place that could affect health and safety. Employees are regularly trained and their qualifications for safe work are regularly checked-up. We provide information about the safety issues through incorporating their representatives in safety teams, announcing weekly notices and instructions for safe work on special notice board, a column SreËko - Warns and Advises in the monthly bulletin of the Sava Group Informator. In 2008, 83% of Savatech employees participated in theoretical and practical courses about safety at work. Every year we launch special preventive actions such as March - A Month of Safety and October- A Month of Fire Safety to enhance the commitment of employees to the concern for their own safety and working and living environment. The goal of risk prevention is to anticipate risks and control them successfully. Creating a controlled working environment represents an improvement in the general knowledge of risks. We are all exposed to risk for accidents or health disorders. Risk combines probability and seriousness that certain accident or health disorder would appear. The level of risk depends on the risk in the working process and the level of assuring specified precautionary measures: The first phase for assuring safe work is based on providing technical measures, which include conformity of working equipment and work place with regulations and standards, elimination or minimising risks, assuring personal means of protection. The second phase addresses assuring of safe work on the basis of preliminary regulations: organising activities which have to be carried out and followed in the work process. The third phase on the path to the goal “no injuries and no health disorders” stands for the development and establishing the safety culture, for the implementation of which we carry out numerous activities. On 26 February 2008, the European Occupational Health and Safety Agency presented the European good practice award in occupational health and safety to the company Savatech, in Bilbao, Spain. More about the event in the chapter More important events.


3. Developing the social community

As in the past, a part of funds for communication with the social environment where we work and live was allocated to humanitarian action. In 2008, the company Savatech earmarked €41,300 for sponsorships and donations. Environmental protection and fire safety The environmental protection, occupational health and safety and fire safety are an inseparable and essential part of the business policy and indicate the success of the company’s operation. The achievement of goals in the occupational health and safety area is a priority task of the company. We successfully carry out the adopted Occupational Health and Safety Policy, which demands commitment and personal responsibility on the part of all employees. Our operation is harmonised with the sustainable development principles as our development goals are oriented to balancing ecological and social processes. Environmental protection We are committed and responsible to the environment. We continually adapt our operations to the requirements of the environmental legislation and strive for a continual decrease in negative impacts on the environment. Our priority goals in the area of environmental protection are: • the rational use of energy, raw materials and natural resources; • separate collection and recycling of waste to decrease the quantity of waste for disposal; • the prevention of environmental pollution; • substitution of hazardous substances with less hazardous ones; and • the training of employees. We strive for our suppliers and customers to have respect for the natural environment too.

Environmental indicators We regularly monitor environmental indicators and introduce measures to decrease the impact of our operations on the environment. We measure the following environmental indicators on a monthly basis: consumption of energy and drinking water; water and air pollution; occupation of space with deposited waste, use of hazardous substances and noise. Responsible care The Responsible Care programme is an international voluntary initiative by the chemical industry - ICCA (International Council of Chemical Associations), which was joined by the chemical industry worldwide. The Responsible Care programme is a commitment on the part of the international chemical industry to continually improve employee health and safety, minimise environmental pollution and to act openly in regard to reporting about these activities. The company Savatech d.o.o. has been included in the programme ever since its start. Achievements in the respectful and responsible environment management With regard to 2007, we decreased the consumption of electricity and natural gas in 2008. We continued the project of reducing the consumption of drinking water: we systematically detected leaks of drinking water in the system and eliminated faults as they appeared, we regularly monitored the consumption and take care of rational water consumption. Owing to the installation of individual independent cooling units the river water consumption decreased. Despite pumping water from the river Sava, the consumed quantity does not have a perceptible impact on its flow. A continual decrease in the environmental pollution with waste water is achieved with returning water back to processes, closed cooling systems and closed technology waste water circles. We carry out regular waste water monitoring. The most deserving of praise for a substantial decrease in air pollution with organic solvents was the waste treatment plant for the thermal incineration of air polluted with organic solvents in the Print programme of the company Savatech d.o.o. In the company Savatech the separate collection of waste according to type and property was introduced several years ago. Prior to transportation to an authorised waste treatment organisation the quantity of waste is weighed. Non-hazardous industrial waste is deposited, in recycling: timber, metal, paper, plastic. Hazardous waste and its

33 Annual Report Savatech ’08

Sponsorships and donations Our commitment to a close cooperation with the environment where we operate provides the basic guidelines in making decisions about sponsorships and donations. We at Savatech are aware of how important it is for the success of every individual and company to live a healthy life. Therefore we have earmarked a portion of our support to the social community, particularly to sports activities. In 2008, we supported our employees in their sports activities and certain sports associations. Since in our strategy we focus on education, we supported some schools and academic institutions.


packaging are incinerated. In last quarter 2007 we discontinued to deposit rubber waste and we transported it for incineration. The day and night levels of noise in the company Savatech were substantially decreased by installing noise barriers on several sites and a silencer. Monitoring results reveal that noise levels during the day and at night do not exceed the prescribed limits.

accident that would cause a major damage. Regular trainings and checking the qualifications of intervention teams take place, which in addition to preventive actions is an important factor in reduction of risks arising from extraordinary events. Intervention teams are regularly checked as to their capacity to intervene in extraordinary events such as fire, work-related accident, pollution.

Meeting with neighbours At the end of November 2008 the 12th traditional meeting with neighbours from the industrial complex Sava was held; it was attended by 45 residents who live nearby the company premises. The traditional meeting was organised by the companies Savatech, Sava Schäfer, Sava Tires and Veyance Technologies Europe. The main topic of the meeting was a presentation of environmental indicators of the companies operating in this premises. The representatives of individual companies presented most important investments in improvements of the ecology, working environment and investments in minimising the impacts o the environment.

Readiness and response to extraordinary events A fingerpost to improvements in preventive handling forms checking-up the ability to react in the case of extraordinary events.

Fire safety A systematic operation of safety areas demonstrated positive effects also in the fire safety area. Recently, the number of fires has decreased. In 2008, there was no fire

floating antipollution boom

Annual Report Savatech ’08

34

In October 2008, we joined the pan-Slovene preventive action October − A Month of Fire Safety. Aiming at a fast, professional and efficient measures practical training courses were organised in the company Savatech in October and November 2008; participants were trained how to use manual fire-extinguishers and take steps in the case of initial fires. At the end of October, we carried out a simulation fire safety drill with an evacuation of employees from the Print programme. After a successfully performed drill we instructed employees how to use fire-extinguishers.


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FINANCIAL REPORT 1. Financial statements Balance sheet at 31/12/2008

€ in thousands 31/12/08

31/12/07

18,298

15,980

2

2

2

2

17,779

15,423

0

0

14,701

14,408

665

720

2,413

295

1,984

287

429

8

ASSETS A. FIXED ASSETS I. INTANGIBLE FIXED ASSETS AND LONG-TERM DEFERRED COSTS AND ACCRUED REVENUES 1. Long-term industrial property rights II. TANGIBLE FIXED ASSETS 1. Land and buildings 2. Plant and machinery 3. Other equipment 4. Tangible fixed assets under construction a) Tangible fixed assets under construction and manufacture b) Advances for tangible fixed assets III. INVESTMENT PROPERTY IV. LONG-TERM FINANCIAL INVESTMENTS

0

0 13

0

0

b) Long-term loans to other entities

11

13

V. LONG-TERM OPERATING RECEIVABLES

0

0

2. Long-term loans a) Long-term loans to Group companies

VI. DEFERRED TAX RECEIVABLES B. CURRENT ASSETS

506

542

32,185

33,559

0

0

12,687

11,461

1. Material

4,631

4,190

2. Work in process

2,151

2,175

3. Products and merchandise

5,905

5,096

I. ASSETS (GROUPS FOR DISPOSAL) FOR SALE II. INVENTORIES

III. SHORT-TERM FINANCIAL INVESTMENTS

4

1,224

1. Short-term financial investments except loans

0

0

2. Short-term loans

4

1,224

a) Short-term loans to Group companies

1

1,013

b) Short-term loans to other entities

3

211

18,857

19,702

5,735

5,953

11,449

12,591

1,673

1,158

637

1,172

637

1,172

0

0

IV. SHORT-TERM OPERATING RECEIVABLES 1. Short-term operating liabilities to Group companies 2. Short-term trade receivables 3. Short-term operating receivables to other entities V. CASH 1. Cash on hand and on accounts 2. Short-term deposits C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUES ASSETS TOTAL

Annual Report Savatech ’08

0 13

11

1. Long-term financial investments except loans

36

0 11

42

43

50,525

49,582


€ in thousands 31/12/08

31/12/07

A: CAPITAL

29,596

27,093

I. CALLED-UP CAPITAL

27,267

25,070

27,267

25,070

LIABILITIES

II. CAPITAL RESERVES III. REVENUE RESERVES 1. Legal reserves IV. SURPLUS FROM REVALUATION V. RETAINED NET PROFIT OR LOSS FROM PREVIOUS PERIODS VI. NET PROFIT OR LOSS FOR THE FINANCIAL YEAR

0

0

116

101

116

101

0

0

1,922

0

291

1,922

2,891

2,886

1. Provisions for pensions and similar liabilities

1,662

1,653

2. Other provisions

1,200

1,200

B: PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES

29

33

C: LONG-TERM LIABILITIES

80

593

I. LONG-TERM FINANCIAL LIABILITIES

80

593

3. Long-term accrued costs and deferred revenues

1. Long-term financial liabilities to Group companies 2. Long-term financial liabilities to banks

0

0

80

400

3. Long-term financial liabilities arising from bonds

0

0

4. Long-term financial liabilities to other entities

0

193

II. LONG-TERM OPERATING LIABILITIES

0

0

III. DEFERRED TAX LIABILITIES

0

0

17,908

18,996

D: SHORT-TERM LIABILITIES I. LIABILITIES INCLUDED IN GROUPS FOR DISPOSAL II. SHORT-TERM FINANCIAL LIABILITIES 1. Short-term financial liabilities to Group companies 2. Short-term financial liabilities to banks 3. Short-term liabilities arising from bonds 4. Other short-term financial liabilities III. SHORT-TERM OPERATING LIABILITIES 1. Short-term operating liabilities to Group companies 2. Short-term trade payables 3. Short-term bills payables 4. Short-term operating liabilities arising from advances 5. Other short-term operating liabilities D: SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUES TOTAL LIABILITIES

0

0

8,456

6,556

0

0

8,263

6,363

0

0

193

193

9,452

12,440

936

579

6,714

9,214

0

0

99

113

1,703

2,534

50

14

50,525

49,582

37 Annual Report Savatech ’08

1. Share capital


€ in thousands

Income statement for the period January − December 2008

JAN-DEC 2008 JAN-DEC 2007 1. NET SALES REVENUES

96,202

96,736

a) Revenues in domestic market

26,258

25,308

To companies in the Group

2,584

2,762

0

391

23,674

22,155

69,944

71,428

To companies in the Group

19,603

20,739

To other entities

50,341

50,689

1,122

1,511

To associates To other entities b) Revenues in foreign market

2. CHANGE IN THE VALUE OF INVENTORIES OF PRODUCTS AND WORK IN PROGRESS 3. CAPITALISED OWN PRODUCTS AND SERVICES 4. OTHER OPERATING REVENUES (with operating revenues from revaluation adjustment) 5. COSTS OF MERCHANDISE. MATERIALS AND SERVICES a) Cost of merchandise and material sold and cost of material used b) Cost of services

-73,040

-73,296

-59,289

-58,787

-13,751

-14,509 -17,797

-13,620

-12,625

-2,552

-2,305

- Social security cost

-1,023

-922

- Pension insurance cost

-1,529

-1,383

-2,975

-2,867

-3,524

-3,620

-3,479

-3,455

-8

-102

a) Salaries and wages b) Social security cost (pension insurance cost shown separately)

c) Other labour cost 7. AMORTISATION AND DEPRECIATION EXPENSE. WRITE-OFFS a) Amortisation b) Operating expenses from revaluation of intangible and tangible fixed assets c) Operating expenses from revaluation of current assets 8. OTHER OPERATING EXPENSES 9. OPERATING PROFIT 10. FINANCIAL REVENUES FROM SHARES 11. FINANCIAL REVENUES FROM GRANTED LOANS a) Financial revenues from loans granted to Group companies

-37

-63

-402

-952

1,549

3,092

0

0

39

243

13

40

b) Financial revenues from loans granted to other entities

26

203

12. FINANCIAL REVENUES FROM OPERATING RECEIVABLES

350

111

a) Financial revenues from operating receivables due from Group companies

152

49

b)Financial revenues from operating receivables due from other entities

198

62

0

0

-1,052

-320

0

0

13. FINANCIAL EXPENSES FROM IMPAIRMENT AND WRITE-OFFS IN FINANCIAL INVESTMENTS 14. FINANCIAL EXPENSES FROM FINANCIAL LIABILITIES a) Financial expenses from borrowings obtained from Group companies b) Financial expenses from borrowings obtained from banks 15. FINANCIAL EXPENSES FROM OPERATING LIABILITIES a) Financial expenses from operating liabilities due to Group companies b) Financial expenses from trade payables and bill payables c) Financial expenses from other operating liabilities

Annual Report Savatech ’08

0 510

-19,147

6. LABOUR COSTS

38

0 338

-1,052

-320

-517

-283

-313

-167

-4

-1

-200

-115

16. OTHER REVENUES

10

9

17. OTHER EXPENSES

-37

-22

18. TAX ON PROFIT

0

-667

19. DEFERRED TAXES

-36

51

20. NET PROFIT FOR THE FINANCIAL YEAR

306

2,214

The calculation of accumulated profit is on page 40 of the report


€ in thousands

Statement of cash flows for the period January − December 2008

JAN-DEC 2008 JAN-DEC 2007 A. CASH FLOWS FROM OPERATING ACTIVITIES a) Net profit for the financial year Pre-tax profit Profit tax and other taxes b) Adjustments for: Depreciation Operating revenues from revaluation related to items of investing activity and financing Operating expenses from revaluation related to items of investing activity and financing Financial revenues excluding financial revenues from operating receivables Financial expenses excluding financial expenses from operating liabilities c) Change in net current assets (and accruals. deferrals. provisions and deferred tax receivables and liabilities) of balance sheet items opening minus closing operating receivables

306

2,214

342

2,830

-36

-616

4,492

3,621

3,479

3,455

-8

-13

8

102

-39

-243

1,052

320

-3,326

-1,362

845

-3,941

1

-10

36

-51

opening minus closing inventories

-1,226

-1,741

closing minus opening operating liabilities

-3,023

3,660

opening minus closing deferred costs and accrued revenues opening minus closing deferred tax receivables

closing minus opening accrued costs and deferred revenues and provisions d) Surplus in inflows from operating activities or surplus of outflows from operating activities

41

721

1,472

4,473

37,403

56,136

39

67

8

20

B. CASH FLOWS FROM INVESTING ACTIVITIES a) Inflows from investing activities revenues from received interests and shares in profit revenues from disposal of tangible fixed assets revenues from disposal of long-term financial investments

0

0

revenues from disposal of short-term financial investments

37,356

56,049

-39,780

-57,676

0

-2

b) Outflows from investing activities expenses for purchase of intangible fixed assets

-3,646

-2,368

expenses for purchase of long-term financial investments

0

0

expenses for purchase of short-term financial investments

-36,134

-55,306

-2,377

-1,540

19,613

1,500

expenses for purchase of tangible fixed assets

c) Surplus in inflows from investing activities or surplus in outflows from investing activities C. CASH FLOWS FROM FINANCING ACTIVITIES revenues from increase in short-term financial liabilities b) Outflows from financing activities

19,613

1,500

-19,243

-3,379

expenses for interests related to financing

-326

-323

expenses for repayment of long-term financial liabilities

-513

-513

expenses for repayment of short-term financial liabilities

-18,404

-2,543

370

-1,879

c) Surplus in inflows from financing activities or surplus in expenses from financing activities D. CASH AND CASH EQUIVALENTS AT END OF PERIOD a) Net increase in cash and cash equivalents b) Cash and cash equivalents at beginning of period

637

1,172

-535

1,054

1,172

118 39 Annual Report Savatech ’08

a) Inflows from financing activities


€ in thousands

Statement of changes in equity for the period from 31/12/2007 to 31/12/2008

A. Balance at 31/12/2007

Called-up capital

Revenue reserves

Retained net profit or loss from previous periods

I

III

V

Net profit or loss for the financial year VI

Retained net Retained net Net profit for the Share capital Legal reserves profit from pre- loss from prefinancial year vious periods vious periods I/1 III/1 V/1 V/2 V/1 25,070 101 0 0 1,922

B. Transfer to equity

0

0

0

306

2,503

e) Entry of net profit or loss for the financial year

0

0

0

0

306

306

g) Other increases in capital

2,197

0

0

0

0

2,197

0

15

1,922

0

-1,937

0

0

15

1,922

0

-1,937

0

g) Other allocations within capital elements D. Transfer from equity E, Balance at 31/12/2008

0

0

0

0

0

0

27,267

116

1,922

0

291

29,596

€ in thousands

Statement of changes in equity for the period from 31/12/2006 to 31/12/2007

A. Balance at 01/01/2007

Called-up capital

Revenue reserves

I

III

Retained net profit or loss from previous periods

Net profit or loss for the financial year

V VI Capital total Retained net Retained net Net profit for the Share capital Legal reserves profit from pre- loss from prefinancial year vious periods vious periods I/1 III/1 V/1 V/2 V/1 25,070 0 0 -191 0 24,879

B. Transfer to equity

0

0

0

0

2,214

2,214

0

0

0

0

2,214

2,214

0

101

0

191

-292

0

c) Balancing loss as a deductible item in capital

0

0

0

191

-191

0

f) Other allocations within capital elements

0

101

0

0

-101

0

0

0

0

0

0

0

25,070

101

0

0

1,922

27,093

e) Entry of net profit or loss for the financial year C. Transfer within equity

D. Transfer from equity E. Balance at 31/12/2007

€ in thousands

Calculation of accumulated profit Calculation of accumulated profit or loss NET PROFIT OR LOSS FROM THE FINANCIAL YEAR Retained net profit/loss at 01/01

Annual Report Savatech ’08

27,093

2,197

C. Transfer within equity

40

Capital total

31/12/2008 306 1,922

31/12/2007 2,214 -191

Decrease due to payment of dividends / stakes

0

0

Decrease /reversal of capital reserves

0

0

Decrease /reversal of revenue reserves Increase (additional allocation) to revenue reserves Other changes Accumulated profit / accumulated loss

0

0

-15

-101

0 2,213

0 1,922


getting closer to customers through a network of foreign trade representation offices Warsaw, Poland


2. Notes to the financial statements 2.1. Basis for drawing the financial statements 2.1.1 STATEMENT OF COMPLIANCE The financial statements have been prepared in accordance with Slovene Accounting Standards 2006, which had been issued by the Slovene Institute of Auditors. The Management Board approved the financial statements on 12 February 2009. 2.1.2 FUNCTIONAL CURRENCY The financial statements are presented in the euro currency, which as of 1 January 2007 has been the functional currency of the company. All financial information in this report is presented in euros, rounded to thousand units. 2.1.3 CHANGES IN ACCOUNTING POLICIES In 2008, the accounting policies of the company did not change. 2.1.4 FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are translated to the functional currency at the reference exchange rate of the European Central Bank ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the reference exchange rate of the European Central Bank ruling at last day of the accounting period. Foreign exchange gains/losses present differences between the repayment value in functional currency at the beginning of the period adjusted by the amount of effective interest and payments during the period and the repayment value in foreign currency calculated at the reference exchange rate of ECB at the period end. Non-monetary assets and liabilities denominated in foreign currencies that are stated at original fair value in foreign currency are translated to functional currency at the reference exchange rate of the European Central Bank ruling at the transaction date. Foreign exchange losses/gains are recognised in the income statement

2.2. Significant accounting policies 2.2.1 INTANGIBLE ASSETS Intangible fixed assets have their useful lives defined. They are measured at cost less depreciation adjustment and accumulated losses due to impairment. Cost also includes import and non-refundable purchasing taxes. Cost does not include the interests accrued by the appearance of an intangible fixed asset.

Annual Report Savatech ’08

42

2.2.2 TANGIBLE FIXED ASSETS Tangible fixed assets are measured at cost less depreciation adjustment and accumulated loss due to impairment. At initial recognition a tangible fixed asset is valued at cost. The cost includes its purchase expense, import and

non-refundable purchasing taxes and expenses which can be attributed directly to its placement in service for the intended use, especially expenses for its transport and installation and estimated cost of its dismantling, removal and restoration. Costs do not increase the interests on loans for acquiring a tangible fixed asset until it is put in service for use. Those parts of tangible fixed assets that have different useful lives are calculated as individual fixed assets. Donations and government grants for acquisition of tangible fixed assets are not deducted from their cost value, instead provisions are formed which are used in proportion to the accounted for depreciation for the acquired tangible fixed assets 2.2.3 SUBSEQUENT EXPENDITURES IN CONNECTION WITH TANGIBLE FIXED ASSETS Subsequent expenditures in connection with a tangible fixed asset increase its cost value if the future economic benefits embodied in the assets are higher than originally estimated. Repairs of or maintaining tangible fixed assets are intended for renewing or preserving the future economic benefits expected on the basis of the originally estimated level of asset efficiency. They are recognised as expenses as incurred. 2.2.4 DEPRECIATION The carrying amount of a tangible fixed asset, intangible fixed asset and investment property is decreased through depreciation. We use the method of depreciation on a straight-line basis considering thereby the useful life of an asset. Land is not depreciated. The remaining value of a tangible fixed asset is not assessed. Intangible fixed asset and tangible fixed asset start to be depreciated on the first day of the next month when it is available for use. The depreciation rates are based on the useful lives of the assets and amount to: Current year Intangible assets

Past year

10.0

10.0

Plant and machinery

from 5.0 to 33.3

from 5.0 to 33.3

Other equipment

from 10.0 to 50.0

from 10.0 to 50.0

2.2.5 IMPAIRMENT OF INTANGIBLE ASSETS AND TANGIBLE FIXED ASSETS Once a year the company examines the remaining carrying amount of intangible assets and tangible assets in order to ascertain whether they are impaired. If they are impaired, the recoverable value of the asset is estimated. Impairment of assets or cash-generating items is recognised when its carrying amount exceeds its recoverable value. A cash-generating unit is the smallest group of assets which generates financial inflows that to a great ex-


2.2.6 FINANCIAL INVESTMENTS In the balance sheet financial investments are stated as long- and short-term financial investments. Long-term financial investments are those which are in possession for more than one year, and are not held for trading. Approved loans are initially assessed at cost which equals the paid amount of cash. 2.2.7 INVENTORIES The quantity unit of inventories in material and merchandise is initially recognised at cost price, which consists of purchase price, import and other non-refundable purchase taxes and direct costs of purchase. The quantity unit of a product or work in process is initially recognised at manufacturing cost. The purchase value of the quantity unit of work in process and products does not include interests from received loans used to finance such inventories. Company uses the method of weighted average pricing for evaluating the consumption of raw materials. Direct manufacturing costs include cost of manufacturing material (a product of average weighted prices for raw materials and quantities according to the valid bill of material) and general variable and fix cost (a product of planned price of operations and quantities according to the valid work plan). General variable and fix costs of manufacturing are cost planned at the manufacturing cost centres. They include cost of auxiliary materials, energy, manufacturing services, spare parts, maintenance cost, labour cost, depreciation cost and facility rental. In the calculation of a semi product and product the cost of manufacturing overhead is computed as an addition to variable manufacturing costs. The addition is computed as a planned percentage. If the carrying amount, including the one at last known actual cost prices exceed their net saleable value, its should be written off up to the net saleable value. Net saleable value is ascertained once a year. 2.2.8 RECEIVABLES At their initial recognition the receivables of all types are shown in the amounts that arise from the corresponding

documents on condition that they will be paid. The original receivables can later be increased, or irrespective of payment or any other settlement, decreased by every amount, which is proven by an agreement. The advances in the balance sheet are shown in relation with things they refer to. Receivables, which are assumed not be settled within the due term and in the total amount, respectively, are considered doubtful and, if a court procedure has already begun, disputable. The revaluation adjustments in receivables are formed as follows: • a 100 per cent adjustment in all sued receivables and receivables filed in a bankruptcy proceeding and obligatory enforcement proceeding; and • a 100 per cent adjustment for receivables which according to the best professional judgement are doubtful and there is a reasonable doubt about the outcome of a possible law suit due to customer insolvency. 2.2.9 CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances in hand and on transaction accounts. The company has not an approved limit on its accounts. 2.2.10 CAPITAL The total capital comprises called-up capital, revenue reserves, retained net profit or loss from previous periods and net profit/loss for the financial year. 2.2.11 LONG-TERM PROVISIONS Provisions are recognised if companies due to a past event have legal or indirect liabilities that can be reliably estimated and it is likely that to settle the liability an outflow of assets which assure economic benefits will be required. The amount of provision is defined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. In accordance with the legal regulations, collective agreement and internal book of rules the company is obliged to pay employee jubilee benefits and retirement amounts, for which it forms long-term provisions. There are no other retirement liabilities. Provisions are formed in the amount of the future estimated payments for retirement amounts and jubilee benefits discounted on the balance sheet date. The calculation was made on 31 December 2005 for every employee and it considered the cost of retirement amount and cost of all expected jubilee benefits until retirement. The chosen discount interest rate amounts to 2.75% annually and represents a yield from long-term government bonds. The calculation was made by an authorised actuary using the projected method unit. The recalculation of provisions on 31 December 2006 (and 31 December 2008) took into account a change in the employee number. If the employee number changes by more

43 Annual Report Savatech ’08

tent do not depend on financial inflows from other assets or groups of assets. Impairment is stated in the income statement. Loss recognised in a cash-generating unit arising from an impairment is allocated to other assets of the unit (group of units) in proportion to the carrying amount of each item in the group. The recoverable amount of an asset or a cash-generating unit is the greater of their fair values in use or fair value less selling costs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.


than 10 per cent, the authorised actuary will repeatedly revise the suitability of the provision amount. Government grants are recognised in financial statements as deferred revenue when received and there is a reasonable assurance that it will be received and that the conditions attaching to it will be met. Grants that compensate for expenses incurred are recognised as revenue on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate are strictly recognised in the income statement as other operating income on a systematic basis over the useful life of the asset. 2.2.12 LIABILITIES Liabilities are either financial or operating, short-term or long-term. All liabilities are initially recognised with the amounts arising from the corresponding documents about their appearance, which prove the receipt of cash or redemption of any operating liability. Long-term liabilities are further increased by imputed interests or decreased by repaid amounts and any other settlements, agreed upon with a creditor. The book value of long-term liabilities equals their original value decreased by repayment of the principal and transfers under shortterm liabilities until the need for a revaluation adjustment of long-term debts appears. The book value of short-term liabilities equals their original value adjusted by their increases or decreases as agreed upon with the creditors until the need for their revaluation adjustment appears. Short-term and long-term liabilities of all kinds are initially shown with the amounts which arise from the corresponding documents on condition that the creditors request their repayment. The liabilities are later increased with imputed yields (interests, other compensations), about which an agreement is made with the creditor. Liabilities are decreased by repaid amounts and any other settlements in agreement with the creditor. When measuring long-term liabilities the company follows the policy that the interest rate being agreed upon does not considerably differ from the effective interest rate if the difference is not more than one percentage point.

Annual Report Savatech ’08

44

2.2.13 SHORT-TERM ACCRUALS AND DEFERRALS Short-term accruals and deferrals include receivables and other assets and liabilities that are anticipated to appear within a year and whose appearance is probable and their size reliably estimated. Receivables and liabilities relate to the known and not yet known legal entities or natural persons towards whom actual receivables and debts will then appear, while assets include products and services to their debit. Deferred costs and accrued revenues include short-term accrued revenues and short-term deferred costs. Accrued costs and deferred revenues include short-term deferred revenues and short-term accrued cost.

2.2.14 RECOGNITION OF REVENUES Revenues are recognised if the enhancement of economic benefits in the accounting period is connected with an increase in an asset or decrease in a liability and such an increase could be reliably measured. Revenues are recognised when it is legitimate to expect they will result in earnings if these were not already implemented at their appearance. Operating revenues Revenue from goods sold is recognised at fair value of received payment or receivable less paybacks and discounts, rebates for further sale and quantity discounts. Revenue is shown when the buyer has assumed all significant risk and rewards of ownership and there exists a certainty regarding the recovery of the consideration due, associated costs or the possible return of goods or products and when the Group ceases to make further decisions about sold products. Revenues from received subsidies or endowments are measured in amounts that are approved for this purpose. Operating revenues from revaluation arise upon the disposal of tangible fixed assets, intangible fixed assets and investment property as surpluses of their selling value over their carrying amount and the elimination of previously impaired current assets. Financial revenues Financial revenues include interest revenues from investments, and foreign exchange rate gains. Interest revenues are recognised as they arise by using an effective interest rate method. Other revenues consist of extraordinary items. They appear in actually incurred amounts. 2.2.15 RECOGNITION OF EXPENSES Expenses are recognised if a decrease in economic benefits in the accounting period is connected with a decrease in assets or an increase in liabilities and this decrease could be reliably measured. Operating expenses Operating expenses are recognised when the material is used and service provided, respectively, in the period, to which they relate. Operating expenses from revaluation arise in connection with tangible fixed assets, intangible fixed assets and current assets due to their impairment. Financial expenses Financial expenses include expenses for interest and foreign exchange rate losses. In the income statement the expenses for borrowing are recognised according to the effective rate method. Other expenses Other expenses consist of extraordinary items. They appear in actually incurred amounts.


2.2.17 SEGMENT REPORTING The company has not defined either business or geographical segments. 2.2.18 CRITERIA OF IMPORTANCE FOR DISCLOSURES The company states the accounting policies at least for the assets and liabilities whose value exceeds 10 per cent of the value and liabilities, respectively, at the balance sheet date. The company discloses an individual asset and debt, respectively, at least when it exceeds 10 per cent of the balance sheet total. Lower amounts are disclosed when the company evaluates them of importance for a fair view of its business. 2.2.19 DRAWING UP CASH FLOW STATEMENT The cash flow statement has been prepared in accordance with SAS 26 - variant II. It has been prepared by considering the data from the income statement for the period January-December 2008 (for the past period 2007), the balance sheet data as at 31/12/2008 and 31/12/2007 (for the past data 31/12/2007 and 31/12/2006), and other required data. The cash flow statement excludes values which are not connected with revenues and expenses. 2.3. Financial risk management Below we explain the various financial risks that company is exposed to, the goals, policies and processes for measuring and managing this exposure.

2.3.1 CREDIT RISK This involves the risk that a customer engaged in an agreement on a financial instrument will not meet its obligations, thus causing the company to make a loss. Credit risk is directly connected with commercial risk and presents a danger that trade receivables or receivables due from other business partners will be settled with a delay or not at all. For this purpose we devote special attention to customer solvency. To decrease exposure to this risk we make use of the customer rating system, ongoing compensations and supervision over bad payers. Trade receivables are insured with SID − Prva Kreditna Zavarovalnica d.d. in Ljubljana. 2.3.2 SOLVENCY RISK This involves the risk that a company may encounter difficulties in raising financial assets to meet its financial obligations. In the Sava Group, a standard financial policy and centralised management with financial assets have been established. By balancing cash pooling within the Sava Group on a daily basis, we avoid contracting unnecessary debts outside of the Group. The parent company enjoys a high rating with all banks in Slovenia, and can therefore make up a deficiency in the banking market. Taking into consideration all these factors, the company has a low solvency risk. INTEREST RATE RISK This involves the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. At the level of the Sava Group we have defined a standard approach for all companies with banks and a standard interest rate policy within the Group. In the Group, interest rate swaps offered by banks are used. Interest rate risk is indirectly reduced through continual improvements in managing current assets, thus reducing indebtedness. FOREIGN CURRENCY RISK This involves the risk that the value of financial instruments will fluctuate due to changes in foreign currency exchange rates. Due to its geographically diversified operations the company is exposed to fluctuations in foreign exchange rates, particularly of foreign currency pairs such as €/US$, €/GBP and €/PLN. In 2008, we had the longest net position in American dollars. The exposure to the American dollar decreased through internal protection methods, i.e. balancing sales and purchasing. Out of all foreign currencies our operation was significantly affected by changes in CHF currency (Swiss franc) in 2008 on account of the shortterm loan which was received in that currency. 45 Annual Report Savatech ’08

2.2.16 INCOME TAX AND DEFERRED TAX Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.


2.4. Notes the individual items in the financial statements 2.4.1 INTANGIBLE FIXED ASSETS AND LONG-TERM DEFERRED COSTS AND ACCRUED REVENUES

€ in thousands

Movement of intangible fixed assets: COST VALUE

Investments in acquired industrial property rights and other rights

Balance at 31/12/2007

9

Balance at 31/12/2008

9

ACCUMULATED DEPRECIATION Balance at 31/12/2007

-7

Balance at 31/12/2008

-7

CARRYING AMOUNT Balance at 31/12/2007

2

Balance at 31/12/2008

2

Intangible fixed assets in the amount of €2,000 include software programmes. In 2008, no new purchases were made. 2.4.2 TANGIBLE FIXED ASSETS

€ in thousands

Movement of tangible fixed assets

COST VALUE

Balance at 31/12/2007

Plant and machinery

Tangible fixed assets underconstruction

Other equipment

Advances for tangible fixed assets

TOTAL

23,572

1,772

287

8

25,639

1,280

159

1,786

0

3,225

Increases in advances

0

0

0

1,813

1,813

Decrease in advances

0

0

0

-1,392

-1,392

89

0

-89

0

0

2,181

16

0

0

2,197

Increases, purchases

Put in use Increase in capital through investment in kind Write-offs

-74

-2

0

0

-76

27,048

1,945

1,984

429

31,406

-9,164

-1,052

0

0

-10,216

66

2

0

0

68

-3,249

-230

0

0

-3,479

-12,347

-1,280

0

0

-13,627

Balance at 31/12/2007

14,408

720

287

8

15,423

Balance at 31/12/2008

14,701

665

1,984

429

17,779

Balance at 31/12/2008 ACCUMULATED DEPRECIATION Balance at 31/12/2007 Write-offs Depreciation Balance at 31/12/2008 CARRYING AMOUNT

Annual Report Savatech ’08

46

The company did not mortgage any tangible assets as a guarantee for its debts.


2.4.3 LONG-TERM FINANCIAL INVESTMENTS € in thousands

Movement of long-term financial investments

Long-term loans Long-term loans to Group companies

Long-term loans to other entities

Total long-term loans

GROSS VALUE Balance at 31/12/2007

0

13

13

Transfers

0

-2

-2

Balance 31/12/2008

0

11

11

Balance 31/12/2007

0

0

0

Balance 31/12/2008

0

0

0

Balance 31/12/007

0

13

13

Balance 31/12/2008

0

11

11

ACCUMULATED DEPRECIATION

CARRYING AMOUNT

Long-term financial investments include a receivable from a housing loan, which was approved at interest rate TOM

+ 3 %. A short-term part is stated under short-term financial investments.

2.4.4 DEFERRED TAX RECEIVABLES € in thousands 2008

2007

Initial balance of deferred tax receivables

542

491

Change in receivables for provisions formed for retirement amounts

-27

-8

Other changes End balance of defermed tax ceceivables

2.4.5 INVENTORIES Inventories by type are clear from the balance sheet. The item B/II/3 products and merchandise is further broken down in: • finished products €5,316,000 • merchandise €589,000 At the end of the year, the company compared the carrying amount with the net saleable value of inventories,

-9

59

506

542

and eliminated the impairment in the amount of €164,000. 2.4.6 SHORT-TERM FINANCIAL INVESTMENTS Short-term financial investments include a short-term loan to the company Sava d.d. in the amount of €1,000 at a 3.7% interest rate, and a part of a long-term loan which matures in 2009.

47 Annual Report Savatech ’08

Movement of deferred tax receivables


2.4.7 SHORT-TERM OPERATING RECEIVABLES The company has receivables insured with Slovene Export Company in the amount of 61.8% of total sales revenues.

Receivables due from the Sava Group in Slovenia are not insured, as well as receivables due from companies, with which mutual compensations are carried out. € in thousands

Survey of short-term operating receivables at 31/12/2008

31/12/2008 IV) Short-term operating receivables 1. Short-term operating receivables due from Group companies 2. Short-term trade receivables 3. Short-term operating receivables due from other entities

TOTAL 18,857

Due 2,858

Not due 15,999

5,735

241

5,494

11,449

2,617

8,832

1,673

0

1,673

2.4.8 CAPITAL The share capital was increased by an increase in share capital totalling €2,197,000, which was carried out by the parent company. Legal reserves increased by €15,000 and totalled €116,000. The accumulated profit in the amount of €2,213,000, which consisted of the retained profit of €1,922,000 and the profit in the financial year of €291,000, remained unappropriated.

provisions for employees was made considering the new number of employees. For this purpose, the company additionally formed a provision of €125,000 for retirement amounts and jubilee benefits. A decrease in provisions was due to payment of retirement amounts and jubilee bonuses. A decrease in long-term accrued costs and deferred revenues was due to the depreciation in fixed assets in the current year, which had been co-financed.

2.4.9 PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUES As at 31/12/2008 the company shows the amount of €2,891,000 under provisions and long-term accrued costs and deferred revenues. This amount represented provisions for retirement amounts and jubilee bonuses, and for lawsuits. At the end of 2008, a recalculation of required

The total amount of formed provisions from the lawsuit amounts to €1,200,000, or 30 % of the sued amount.

€ in thousands

Movement of provisions and long-term accrued costs and deferred revenues

Provisions for pensions and similar liabilities Balance of long-term provisions Newly formed provisions Drawing of provisions Balance of long-term provisions

2.4.10 LONG-TERM LIABILITIES At 31/12/2008 the company stated a long-term liability to a domestic bank in the amount of €80,000. The inter-

Annual Report Savatech ’08

48

Long-term accrued costs and deferred revenues

Other provisions

1,653

1,200

33

Total

2,886

125

0

0

125

-116

0

-4

-120

1,662

1,200

2

2,891

est rate for the bank loan is EURIBOR +0.65 %. The loan is insured with bills of exchange and a bank guarantee. The bank loan falls due in 2010.


€ in thousands

Movement of long-term financial liabilities

Balance of loans at 31/12/2007

2008 593

2007 1,106

0

0

Hiring new loans in 2008

0

0

-513 80

-513 593

Repayment of loans in 2008 Transfer to a short-term part Balance of loans at 31/12/2008

2.4.11 SHORT-TERM LIABILITIES Short-term financial liabilities include a loan totalling €6,734,000 approved from a domestic bank, the interest being 5.0 % , and a loan in the amount of €1,209,000 at interest rate a six-month EURIBOR and 1.35%. The loan is insured with bills of exchange. Short-term liabilities include also a long-term part of a loan in the amount of €320,000, and a loan by the EKO fund in the amount of €193,000, which both fall due in 2009. Short-term operating liabilities are mainly trade payables to suppliers. 17.4% of total trade payables to suppliers out of the Group have already fallen due.

2.4.13 ESTIMATING FAIR VALUES Interest-bearing loans and borrowings The fair value is estimated as a discounted value of expected cash flows from the principal and the interest, whereby the effective interest rate equals the contracting interest rate, which is variable. Short-term receivables and liabilities For receivables and liabilities with a remaining life of less than one year, the notional value is deemed to reflect the fair value.

2.4.12 SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUES Short-term accrued costs and deferred revenues represented short-term deferred revenues and accrued costs. € in thousands

Fair values of financial instruments

31/12/2007 Carrying amount

Fair value

Fair value

Securities available for sale

0

0

0

0

Long-term receivables

0

0

0

0

Short-term receivables

18,857

18,857

19,702

19,702

4

4

1,224

1,224

Approved loans Cash and cash equivalents

637

637

1,172

1,172

Long-term loans

80

80

593

593

Short-term loans

8,456

8,456

6,556

6,556

Short-term operating liabilities

9,452

9,384

12,440

12,440

49 Annual Report Savatech ’08

31/12/2008 Carrying amount


2.4.14 NET SALES REVENUES Net sales revenues totalled €96,202,000, of which a sum of €26,258,000 was generated in the domestic and €69,944,000 in the foreign market, or 72.7% of total sales

revenues. The major customers come from the following countries: Germany, Switzerland, England, Poland, Luxembourg, Czech Republic, Cyprus, Italy and Spain. Approximately 28% of sales in the foreign market had the Group companies. € in thousands

Net sales revenues

JAN-DEC 2008 JAN-DEC 2007 89,316 91,035

Net sales revenues from sold products Net sales revenues from sold service Net sales revenues from rents Net sales revenues from sold merchandise Total net sales revenues

2.4.15 OTHER OPERATING REVENUES (WITH OPERATING REVENUES FROM REVALUATION) Other operating revenues totalling €338,000 were non-returnable funds obtained from the structural funds (funds

2,305

2,140

0

0

4,581 96,202

3,561 96,736

from the European Regional Development Fund), and operating revenues from the revaluation of inventories and receivables.

€ in thousands

2.4.16 COSTS BY FUNCTIONAL GROUP

Manufacturing costs of sold products Selling costs Overheads TOTAL

2008 84,742

2007 83,399

5,800

5,728

4,449 94,991

5,027 94,154

2.4.17 COSTS OF GOODS, MATERIALS AND SERVICES Survey of costs of goods, materials and services by cost type

Cost of merchandise sold Cost of material

2007 7,750

50,613

51,037

Cost of transportation services

3,032

2,674

1,672

2,630

Cost of rent

3,110

3,519

Compensation to employee expenses

466

491

Cost of payment transactions, bank service and insurance premiums

412

322

Cost of intellectual and personal services

741

748

Cost of trade fairs, advertising and office allowance

691

652

TOTAL

2.4.18 LABOUR COSTS On average, labour costs were 7.6% higher than last year. The company showed computed premiums of voluntary Annual Report Savatech ’08

2008 8,677

Cost of maintenance

Cost of other services

50

€ in thousands

3,626

3,473

73,040

73,296

additional pension insurance totalling €232,000 under labour costs. Paid premiums amounted to €230,000.


2.4.19 AMORTISATION AND DEPRECIATION EXPENSES, WRITE-OFFS The costs of write-offs totalled €3,524,000 and they entirely represented the amortisation costs. 2.4.20 OTHER OPERATING EXPENSES Other operating expenses totalled €952,000 and mainly included a provision for a lawsuit and provisions for retirement amounts and jubilee bonuses as well as contributions paid for urban land. 2.4.21 FINANCIAL REVENUES FROM INTEREST-BEARING LOANS Financial revenues from loans in the amount of €39,000 included charged interest from loans approved to the Group companies, and interest arising from a vista assets with banks.

2.4.23 FINANCIAL EXPENSES FROM FINANCIAL LIABILITIES Financial expenses from financial liabilities totalling €1,052,000 included expenses for interest from obtained loans in the amount of 359,000 and exchange rate gains/losses for loans obtained from banks in the amount of €693,000. 2.4.24 FINANCIAL EXPENSES FROM OPERATING LIABILITIES Financial expenses from operating liabilities in the amount of €517,000 were exchange rate gains/losses in receivables and debts. 2.4.25 CORPORATE INCOME TAX In 2008, the company generated a pre tax-profit of €342,000. In 2008, the company had no corporate income tax liability on account of utilising tax benefits.

2.4.22 FINANCIAL REVENUES FROM OPERATING RECEIVABLES Financial revenues from operating receivables in the amount of €350,000 mainly included foreign exchange gains/losses to customers and suppliers. € in thousands

Comparison between the actual and Calculated tax rate 2008 Rate Pre-tax profit Tax on profit applying the official rate

2007 Amount

Rate

342 22%

Effect by tax rates in other countries (+)(-)

75

Amount 2,830

23%

651

0

0

543

894

- amount from revenue increase to the level of tax-deductible revenue

0

0

- amount from expense decrease to the level of tax-deductible expense

543

885

0

0

Amounts having negative impact on tax base

- amount of expenses for which tax was deducted - possible other amounts having impact on tax rate increase

0

9

Effect of increase in tax rate on special profits

0

0

Amounts having positive effect on tax base(+)(-)

82

136

- amount from revenue decrease to the level of tax-deductible revenues

37

136

- amount from expense increase to the level of tax-deductible expenses

45

0

- possible other amounts impacting tax rate decrease (e.g. amount of revenues for which tax was already deducted)

0

0

Changed tax base due to transition to a new accounting method resulting from changes in the accounting policy

0

0

- applied. having effect on tax liability decrease

803

689

- remaining. to be utilised in the following years

0

0

0

0

Tax loss - remaining. to be utilised in the following years

0

0

Adjustments for previous years

0

0

TAX ASSESSED FOR THE CURRENT YEAR

0.0%

23.6%

667

21.8%

616

36

Increase/decrease in deferred tax TAX IN THE INCOME STATEMENT

0

10.5%

36

-51

51 Annual Report Savatech ’08

- applied. having effect on tax liability decrease


€ in thousands

2.4.26 SURVEY OF DEFERRED TAX RECEIVABLES AND LIABILITIES Receivables

Liabilities

Net

Intangible long-term assets

0

0

0

Tangible fixed assets

0

0

0

Financial investments

0

0

0

Inventories

0

0

0

Receivables

0

0

0

506

0

-506

0

0

0

Provisions Changes in connection with the changed tax rate Other TOTAL

0

0

0

506

0

-506

2.5 Other disclosures € in thousands

2.5.1 CONTINGENCIES 31/12/2008

Structure 2008

31/12/2007

Structure 2007

INDEX 2008/2007

958

100.0 %

897

100.0 %

107

0

0,0 %

0

0,0 %

0

958

100.0 %

897

100.0 %

107

Issued guarantees Contingent liabilities arising from lawsuits TOTAl

2.5.2 INFLUENCE BY EVENTS AFTER THE BALANCE SHEET DATE After the balance sheet date there were no significant events that would influence the balance of assets and

liabilities shown in the financial statements for the year 2008, or on the presumption that the company will proceed with its operations.

2.5.3 CONVERTING CAPITAL BY MEANS OF COST OF LIVING Net profit after converting capital by means of euro currency and cost of living for the period January-December 2008. € in thousands

CAPITAL......calculation for cost of living

Annual Report Savatech ’08

52

Capital

% growth

Calculated effect

Decrease in profit

27,093

2.10 %

569

-263


RELATIONS AMONG COMPANIES IN THE SAVA GROUP Business relations between Savatech d.o.o. and the parent company Sava d.d. relate to: • Services provided by the financial-accounting departments, purchasing department, logistics, phone switchboard, Plant Engineering, maintenance and projects, services provided by the Workers’ Council, energy costs and phone expense with regard to the actual consumption. • Financial services in connection with managing approved and obtained loans. Business relations between Savatech d.o.o. and its subsidiaries relate to: • The sale of raw materials and products, services by the financial-accounting department, purchasing department, logistics, HR department, Plant Engineering, Trade Union and Workers’ Council.

The business among related parties is performed under the same conditions as applicable in an ordinary arm’s length transaction. RELATIONS WITH NATURAL PERSONS Data about groups of persons In 2008, total gross income of the management members amounted to €362,000. This sum consisted of gross salaries, gross bonuses and other income. In 2008, gross income of employees with managerial contract amounted to €2,364,000. This sum consisted of gross salaries, gross bonuses and other income. Receivables from loans to other employees with managerial contract amounted to €13,000, the interest rate being TOM +3%, the last instalment falls due in 2014. 2.5.5 DISCLOSING BUSINESS WITH THE SELECTED AUDITOR The cost of auditing the financial statements of the company for the year 2008 according to the agreement with KPMG Slovenija, d.o.o. amounted to €18,000.

Physical and chemical tests

53 Annual Report Savatech ’08

2.5.4 RELATED PARTIES Related parties include subsidised and associated companies, Supervisory Board members, Management Board members and their closer family members.


2.6 Statement by the Management The Management confirms the financial statements of the company Savatech d. o. o. for the year that ended on 31 December 2008, which have been prepared in accordance with Slovene Accounting Standards 2006. The Management confirms that when drawing up the financial statements the corresponding accounting policies were consistently applied, and the accounting estimates were elaborated according to the principle of prudence and cost efficiency, and that the annual report gives a true and fair view of company's assets and business results in the year 2008. The Management is responsible for the proper managing of its accounting procedures and establishing and maintaining internal controlling in relation to the preparation and fair presentation of the financial statements, which do not contain any material misstatements originating from a fraud or error, and for adopting suitable measures to secure assets and other funds. The Management confirms herewith that the financial statements and the notes have been produced on the basis of assumption that the company will proceed with its operations and in accordance with the current legislation and Slovene Accounting Standards.

12 February, 2009

Directress Vesna ÂťadeĂŚ

Annual Report Savatech ’08

54

Director Igor Hafnar


getting closer to customers through a network of foreign trade representation offices Trieste, Italy


2.7 Independent Auditor’s Report A scanned copy of the Independent Auditor’s Report

Annual Report Savatech ’08

56


CONTACT PERSONS 1. Who’s who in the company Savatech d.o.o. SAVATECH MANAGEMENT Igor Hafnar, Director Tel: +386 4 206 58 56, fax: +386 4 206 64 60 E-mail: igor.hafnar@sava.si

Vesna »adeæ, Director Tel: +386 4 206 51 79, fax: +386 4 206 64 60 E-mail: vesna.cadez@sava.si

Mira Rjavec, Workers’ Director Tel: +386 4 206 53 77, fax: +386 4 206 64 60 E-mail: mira.rjavec@sava.si

PROGRAMMES Mixing Plant - Compounds Janez Konc, Tel: +386 4 206 55 44, fax: +386 4 206 64 31 E-mail: janez.konc @sava.si

Elastomers Ilija Dimitrievski, Tel: +386 4 206 53 48, fax: +386 4 206 64 36 E-mail: ilija.dimitrievski@sava.si

Conveyor Belts Tomaæ PerËiË, Tel: +386 4 206 64 71, fax: +386 4 206 64 11 E-mail: tomaz.percic@sava.si

Profiles Miran KadoiË, Tel: +386 4 206 55 96, fax: +386 4 206 54 75 E-mail: miran.kadoic @sava.si

Rubber Printing Blankets (Print) Voja JevtiÊ, Tel: +386 4 206 62 16, fax: +386 4 206 64 00 E-mail: voja.jevtic@sava.si

Environmental protection and rescue products (Eko) Samo Janc, Tel: +386 4 206 63 85, fax: +386 4 206 63 90 E-mail: samo.janc@sava.si

57 Annual Report Savatech ’08

Velo Ksenija Bitenc, Tel: +386 4 206 58 81, fax: +386 4 206 64 24 E-mail: ksenija.bitenc@sava.si


BUSINESS SERVICES

FOREIGN TRADE NETWORK

Financial Accounting Sector Vesna »adeæ, Tel: +386 4 206 51 79, fax: +386 4 206 64 60 E-mail: vesna.cadez@sava.si

Sava Trade Vertriebsgeselschaft m.b.H., Munich Zlatko Smrdel, Tel: +49 89 544 14 30, fax: +49 89 532 89 51 E-mail: zlatko.smrdel@sava-trade.de

Quality and Reliability Sector Joæe VodiËar, Tel: +386 4 206 52 85, fax: +386 4 206 64 36 E-mail: joze.vodicar@sava.si

Sava Trade, s.r.o., Prague Milan Vik, Tel: +420 22 494 19 66, fax: +420 22 494 25 59 E-mail: milan.vik@savatrade.cz

Plant Engineering (PI) Peter Krelj, Tel: +386 4 206 61 25, fax: +386 4 206 64 06 E-mail: peter.krelj@sava.si

Sava Trade, Sp.z.o.o., Warsaw Jaka Slavinec, Tel: +48 22 721 01 86, fax: +48 22 721 13 62 E-mail: jaka.slavinec@savatrade.com.pl

Logistics Marija Dolenc, Tel: +386 4 206 57 07, fax: +386 4 206 64 19 E-mail: marija.dolenc@sava.si

Savatech Trade, Ltd., London Boπtjan Podjed, Tel: +44 1883 621 106, fax: +44 1883 621 107 E-mail: bostjan.podjed@savatech.co.uk

Purchasing Marko Rozman, Tel: +386 4 206 58 54, fax: +386 4 206 64 22 E-mail: marko.rozman@sava.si

Sava Trade Inc., Port Orange Tony ©imunac, Tel: +1 386 760 07 06, fax: +1 386 760 87 54 E-mail: savatrade@bellsouth.net

HR Mira Rjavec, Tel: +386 4 206 53 77, fax: +386 4 206 64 60 E-mail: mira.rjavec@sava.si

Representation office Savatech d.o.o., Trieste Niko Golemac, Tel: +39 040 252 81 40, fax: +39 040 252 90 63 E-mail: niko.golemac@sava.si

Representation office Savatech, d.o.o., Moscow Branimir AndjeliÊ, Tel: +7 495 775 38 46, fax: +7 495 981 63 03 E-mail: branimir.andjelic@savatech.ru

Annual Report Savatech ’08

58


Realisation: Savatech, d. o. o., Editor: Atina MiklavËiË, Translator: Lea Meæek, Design: Nimbus, Photo: archive Savatech, Tomaæ Sedej, stockxpert.com


Škofjeloška cesta 6, 4000 Kranj, Slovenia Tel: +386 (0)4 206 60 80, +386 (0)4 206 61 49 Fax: +386 (0)4 206 64 60 E-mail: savatech@sava.si http://www.savatech.eu

Sava Group


Savatech annual report 2008