3
Investor Relator
Marco Cabisto Tel: 035.4232840 - Fax: 035.3844606
e-mail: [email protected]
Tesmec S.p.A. Registered office: Piazza Sant’Ambrogio, 16 – 20123 Milan
Fully paid up share capital as at 30 September 2011 Euro 10,708,400 Milan Register of Companies no. 314026
Tax and VAT code: 10227100152
Internet site: www.tesmec.com
Switchboard: 035.4232911
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TABLE OF CONTENTS
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TABLE OF CONTENTS.................................................................................................................................. 4
COMPOSITION OF THE CORPORATE BODIES ......................................................................................... 6
GROUP STRUCTURE .................................................................................................................................... 8
INTERIM REPORT ON OPERATIONS ....................................................................................................... 10
1. Introduction......................................................................................................................................................................... 11
2. Macroeconomic Framework ......................................................................................................................................... 11
3. Significant events occurred during the period......................................................................................................... 12
4. Activity, reference market and operations for the first nine months of 2011 ................................................. 14
5. Income statement and balance sheet situation as at 30 September 2011 ...................................................... 17
6. Management and types of financial risks ................................................................................................................. 21
7. Atypical and/or unusual and non-recurring transactions with related parties ............................................. 21
8. Group Employees ........................................................................................................................................................... 22
9. Other information........................................................................................................................................................... 22
CONSOLIDATED FINANCIAL STATEMENTS OF THE TESMEC GROUP .............................................. 23
Consolidated statement of financial position as at 30 September 2011 and as at 31 December 2010 ...... 24
Consolidated income statement as at 30 September 2011 and 30 September 2010 ..................................... 25
Consolidated statement of comprehensive income as at 30 September 2011 and 30 September 2010 .. 26
Statement of consolidated cash flows as at 30 September 2011 and 30 September 2010........................... 27
Statement of changes in consolidated shareholders’ equity as at 30 September 2011 and 30
September 2010 .................................................................................................................................................................. 28
Explanatory Notes ...................................................................................................................................... 29
Attestation pursuant to Article 154Attestation pursuant to Article 154Attestation pursuant to Article 154Attestation pursuant to Article 154----bis of Italian Legislative Decree 58/98bis of Italian Legislative Decree 58/98bis of Italian Legislative Decree 58/98bis of Italian Legislative Decree 58/98 ........................................... 45
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COMPOSITION OF THE CORPORATE BODIES
7
Board of Directors Board of Directors Board of Directors Board of Directors (in office until the date of the Shareholders' Meeting convened to approve the financial
statements as at 31 December 2012)
Chairman and Chief Executive Officer Ambrogio Caccia Dominioni
Vice Chairman Alfredo Brignoli
Gianluca Bolelli (2)
Directors
Sergio Arnoldi (1) (2) (3)
Gioacchino Attanzio (1) (2) (3)
Caterina Caccia Dominioni (3)
Guido Giuseppe Maria Corbetta (1)
Michele Carlo Felice Milani
Luca Poggi
Gianluca Vacchi
(1) Independent Directors (2) Members of the Internal Audit Committee (3) Members of the Compensation Committee
Manager responsible for preparing the Company's Andrea Bramani
financial statements
Board of Statutory AuditorsBoard of Statutory AuditorsBoard of Statutory AuditorsBoard of Statutory Auditors
Chairman Simone Cavalli
Statutory Auditors Stefano Chirico
Claudio Melegoni
Alternate Auditors Attilio Marcozzi Stefania Rusconi
Independent AuditorsIndependent AuditorsIndependent AuditorsIndependent Auditors Reconta Ernst & Young S.p.A.
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GROUP STRUCTURE
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(1)
The remaining 25% is held by Simest S.p.A. Since Tesmec has an obligation to buy it back from Simest, from an accounting
point of view the Parent Company’s investment in Tesmec S.p.A. is consolidated on a 100% basis.
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INTERIM REPORT ON OPERATIONS
11
1. Introduction1. Introduction1. Introduction1. Introduction
The parent company Tesmec S.p.A. (hereinafter “Parent Company” or “Tesmec”) is a legal entity organised in
accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA STAR
Segment of the Milan Stock Exchange. The registered office of the Tesmec Group (hereinafter “Group” or “Tesmec
Group”) is in Milan, Piazza S. Ambrogio 16.
The Group is mainly active in designing, manufacturing and selling integrated solutions for the construction and maintenance of infrastructures such as: aerial and underground networks and pipelines.
In particular, the Group operates through two product lines for the design, production and sale of:
� machines and integrated systems for stringing power lines and fibre optic cables and the stringing of
railway power networks; the products for the Stringing equipment segment are manufactured at the Italian
production plants of Grassobbio (Bergamo), Endine Gaiano (Bergamo) and Sirone (Lecco);
� high-powered crawler trenchers for the linear excavation of underground laying of fibre optic and energy
cables and pipelines or for earth moving works and, to a lesser extent, multi-purpose construction
equipment (Gallmac). The products for the trencher segment are manufactured at the production plants
located in Grassobbio (Bergamo) and Sirone (Lecco) in Italy and Alvarado (Texas) in the United States of
America.
The infrastructures market for the transmission of electrical power and data and material transport (oil and oil derivatives, gas, water) is our leading market, which covers an area that is strategic for the growth and
modernisation of any country.
In particular, with reference to stringing equipment, the main sector in which the integrated solutions made by the
Group are used, business consists in construction of infrastructures for electrical power transmission, particularly
the construction of power lines; construction and maintenance of electricity lines on existing power lines and
construction of infrastructures for data and voice transmission, particularly works involving the stringing and
maintenance of optical fibre cables.
Starting from 2009 Tesmec Group has coupled its traditional trencher sales activities with a new service activity.
This activity involves providing trenchers to the excavation companies on long or short term lease contracts with the
additional option of purchasing the trenchers at the end of the lease. These activities are organised through dedicated companies set up to better meet the requirements of a service business.
2. Macroeconomic Framework2. Macroeconomic Framework2. Macroeconomic Framework2. Macroeconomic Framework
From a macroeconomic point of view the third quarter of 2011 began with:
� social tension associated with the change of regime in North African countries;
� focus on possible downgrading of the ratings of major countries, institutions, banks and the main
companies of industrialised nations.
In this context, the third quarter of 2011 recorded:
� continued social tension in North African countries which despite the elimination of dictatorships still lack
clear political and democratic leadership;
� the collapse of the world stock exchanges, now strongly interlinked, caused by downgraded ratings;
� difficulties in both the United States and the European Union after the launch of austerity measures on the
public deficit, imposing clear measures for the medium/long-term sustainment of industrial development;
� a more or less marked upward GDP trend in the real economy of almost every country worldwide, so in net contrast to stock market trends which in financial terms reflect an alarmist climate.
In greater detail, it can be seen that:
� Stock Exchange indices continue to fall, in the third quarter the FTSE Mib recording a -26.5% drop year on
year to reach 14,838 points, the lowest level ever;
� a further increase in raw material prices (Brent +6%) and in stores of value (Gold +13.28%);
� year-on-year inflation in the Euro Area increased from 2.3% in June to 2.5% in September;
� the Euribor rate remained relatively steady over the quarter;
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� the real estate sector crisis continues, one of the sectors hardest hit in this period and at the root of the
financial crisis.
3. Significant events occurred during 3. Significant events occurred during 3. Significant events occurred during 3. Significant events occurred during the periodthe periodthe periodthe period
In the first nine months of 2011, the Group finalised a number of important projects for the implementation of
strategic lines of development that focused mainly on the following areas:
- opening of international branches:
� in March 2011 a joint venture in Qatar was set up with TME, a local operator with consolidated experience
in the sector and already exclusive concessionaire – for several years – for Tesmec Group trenchers on the
Qatar market. The aim of the JV is to increase the commercial presence for the Trencher segment in
countries on the Arabian Peninsula, with a particular focus on Saudi Arabia;
� in August 2011 the setup of a new company, Tesmec SA, was finalised in South Africa with the aim of
investing in important projects in the telecommunications sector and to capture new market shares. The
company operates in the Trencher segment and is a 100% subsidiary of Tesmec S.p.A.;
� for stringing equipment sales in Russia, the establishment of a local company wholly owned by Tesmec
S.p.A. began with a view to increasing its share, also in terms of secondary market volumes, on a market
until now not served directly;
- development of new products/technological solutions:
� cooperation with the FSK Group (manager of the Russian HV power network) has gradually expanded,
increasing the focus on development of new line laying technology and lines management;
� regarding power line management in particular, activities began on the integration of technical skills
acquired through the I-Light business unit and the international network of Tesmec customers, described in
paragraph 3.4 below;
� development activities began on the integrated research project (Umals) which, exploiting the skills
matured by various players in the Italian system, key multinationals and universities, has the aim of
innovating technologies for underground power cable laying;
� studies are at an advanced stage in a number of key projects in the “water” and “pipeline” fields for the
Trencher segment in Saudi Arabia, a country characterised by a strong presence of basalt and therefore calling for highly specialist skills which will involve support to the Italian technical organisation from the
American associate.
Of the more significant events occurring in the first nine months of the year, a more detailed description is provided
of the following operations:
3.1 New lease contract
On 31 January 2011 Tesmec S.p.A. signed a new contract with Dream Immobiliare S.r.l. valid until 31 January 2025.
The renewal of this contract implied an immediate rental cost saving for the Company compared to the annual
amount paid in 2010 of Euro 245 thousand.
When signing the new Lease contract, Tesmec signed an option contract with Dream Immobiliare S.r.l. for purchase
of the Lease contract (the Option Contract assigns Tesmec the right to take over the Lease contract against an initial
consideration already paid of Euro 2,700 thousand. This value may be increased according to the period in which the
Company exercises the option, valid until 31 December 2016). Even if the operation does not legally qualify as an acquisition, in view of the fact that the Lease contract is covered
by the cases in IAS 17 it is recorded as a financial lease in the financial statements with effect from this year.
Therefore, this implied recognition of the value of the industrial complex - for the part occupied by the Company and
subject of the said Lease contract - in the consolidated and separate financial statements of Tesmec based on the
present value of future payments due (equal to approximately Euro 22.5 million), with corresponding entry of the
related discounted loan. At the end of the year, this accounting treatment will improve EBITDA by around Euro 2
million and have a positive effect on the net income of around Euro 200 thousand. IAS application would result in an
increase in net assets of Euro 20 million and a notional debt of Euro 19.9 million.
Considering that the operation started on 1 February 2011, during the first nine months of the year, it improved
EBITDA by around Euro 1,328 thousand and had a positive effect on pre-tax profit of Euro 144 thousand.
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Illustrated below are the economic and financial effects of the operation as at 30 September 2011:
Consolidated statement of financial position as at 30 September 2011
(Euro in thousands)
Impacts deriving Impacts deriving Impacts deriving Impacts deriving from the New lease from the New lease from the New lease from the New lease
contractcontractcontractcontract NotesNotesNotesNotes
NONNONNONNON––––CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS
Property, plant and equipment 21,931 A
TOTAL NONTOTAL NONTOTAL NONTOTAL NON––––CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS 21,93121,93121,93121,931
CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS
Financial receivables and other current financial assets 864 B
Other current assets 101 B
Cash and cash equivalents (2,866) B
TOTAL CURRENT ASSETSTOTAL CURRENT ASSETSTOTAL CURRENT ASSETSTOTAL CURRENT ASSETS (1,901)(1,901)(1,901)(1,901)
TOTAL ASSETSTOTAL ASSETSTOTAL ASSETSTOTAL ASSETS 20,030 20,030 20,030 20,030
SHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITY
EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
Net income (loss) for the period 99
TOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSTOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSTOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSTOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS 99 99 99 99
NONNONNONNON––––CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES
Interest-bearing financial payables 19,148 C
TOTAL NONTOTAL NONTOTAL NONTOTAL NON––––CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES 19,14819,14819,14819,148
CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES
Interest bearing financial payables (current portion) 738 C
Income taxes payable 45 D
TOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIES 783783783783
TOTAL LIABILITIESTOTAL LIABILITIESTOTAL LIABILITIESTOTAL LIABILITIES 19,93119,93119,93119,931
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 20,03020,03020,03020,030
The effects on each item of the consolidated statement of financial position are described below:
(A) The change of Euro 21,931 thousand represents net effects deriving from the recording, as required by IAS 17, of the Industrial Complex of the Company on the basis of its lower fair value at the date of reference and
the present value of the minimum lease payments payable. The share of the Industrial Complex is
represented by the surface area covered in the Lease Contract between the Company and Dream
Immobiliare S.r.l. (equivalent to about 68% of the total surface area of the Industrial Complex). Euro 4,016
thousand is related to Land and Euro 17,915 thousand to Buildings.
(B) Of the decrease of Euro 2,866 thousand, Euro 2,700 thousand refers to the initial disbursement by the
company as advance payment/deposit to secure the option to take over the original financial lease contract
signed by Dream Immobiliare S.r.l. This financial disbursement has been classified, in proportion to the
share of the Industrial Complex covered by the lease contract between Tesmec S.p.A. and Dream
Immobiliare S.r.l., as a decrease in the overall loan represented by the future payments payable, while the
remaining part, not referring to the lease contract, was classified among financial receivables. The remaining Euro 166 thousand relates to the instalment paid in October.
(C) The decrease of Euro 19,886 thousand represents recognition of the corresponding loan against accounting
of the Lease Contract pursuant to IAS 17. This value was prorated between the short-term portion
(represented by the principal that will be repaid within 12 months of the date of reference on the basis of
implementation of future payments) and the medium to long term portion (represented by the remaining
discounted portion of future payments payable on the basis of the Lease Contract.)
(D) The effect of Euro 45 thousand reflects the tax effect on adjustments applied to the income statement.
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Consolidated Income statement as at 30 September 2011
(Euro in thousands)
Impacts deriving Impacts deriving Impacts deriving Impacts deriving from the New lease from the New lease from the New lease from the New lease
contractcontractcontractcontract NotesNotesNotesNotes
Other operating (costs)/revenues, net 1,328 A
Amortization and depreciation (381) B
Total operating costsTotal operating costsTotal operating costsTotal operating costs 947 947 947 947
Operating incomeOperating incomeOperating incomeOperating income 947 947 947 947
Financial expenses (803) C
PrePrePrePre----tax profitstax profitstax profitstax profits 144 144 144 144
Income taxes (45) D
Net profit for the periodNet profit for the periodNet profit for the periodNet profit for the period 99999999
The effects on each item of the consolidated income statement are described below:
(A) The positive effect of Euro 1,328 thousand represents the effect deriving from the recognition, as required
by IAS 17, of the Industrial Complex of Tesmec. This amount refers to the eight lease instalments paid in the
first nine months of 2011.
(B) The negative effect of Euro 381 thousand represents the depreciation charge calculated on the portion of
the Industrial Complex property recorded in accordance with IAS 17. This depreciation charge was
calculated on the basis of the useful life of the Industrial Complex, identified in a total of 40 years but determined by its date of construction (2003) and represents the depreciation charge of 8 months. This
charge was also calculated considering that 18% of the portion of the Industrial Complex is represented by
land not subject to depreciation.
(C) The portion recorded in financial expenses represents the financial component resulting from the loan
repayment plan for the purpose of accounting representation of the Lease Contract in accordance with IAS
17, for the period of 8 months.
(D) The decrease of Euro 45 thousand reflects the tax effect on the adjustments applied to the income
statement.
3.2 Payment of dividends
On 26 May 2011 dividends of Euro 2,998 thousand were paid, equal to Euro 0.028 per share.
3.3 Sale of equity investments
On 27 May 2011 the subsidiary Tesmec Service S.p.A. sold its entire investment in Consorzio Stabile Energie Locali
S.c.a.r.l. at the price of Euro 2,400 (equal to the book value) since it was considered no longer strategic to Group
objectives.
3.4 Business Unit Acquisition
In July 2011 the subsidiary Tesmec Service S.p.A. acquired the I-Light business unit in support of initiatives involving
the use of Innovation Communication Technology skills for the efficient management of power networks. The
acquisition price was Euro 300 thousand, of which Euro 293 thousand goodwill.
4. Activity, reference market and operations for the first nine months of 20114. Activity, reference market and operations for the first nine months of 20114. Activity, reference market and operations for the first nine months of 20114. Activity, reference market and operations for the first nine months of 2011
Given the unfavourable economic situation described in Chapter 2 and which in the third quarter saw a continued rise in volatility levels of the key macroeconomic variables, as a result of its technological leadership position and
strong geographic diversification of its business activities, as at 30 September 2011 the Group achieved revenues of
Euro 80,773 thousand compared to Euro 78,077 thousand as at 30 September 2010, an improvement in percentage
terms of 3.5%.
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A positive contribution to the trend in revenues for the first nine months was seen from both segments, with
stringing equipment recording a growth of 1.3% and the Trencher segment a growth of 6.6%.
During this quarter in particular the Trencher segment recorded a 38.6% increase due to the contribution of sales on
the US and Middle East markets, which more than offset the decrease recorded by the African countries, also
affected by the winding-up of contracting project business in South Africa completed at the end of 2010.
On the American market the growth trend in sales volumes continued, already seen in the second quarter, and
export revenues as at the end of September recorded a 67.1% increase on the figure for the same period last year.
Sales in Saudi Arabia did not record significant progress in the third quarter due to this period coinciding with
religious festivals.
Contracting activities in the Trencher segment were conducted mainly in Saudi Arabia (the Riyadh Financial
District) through outsourcing, since the procedure for setting up a joint venture to operate in that area was
lengthened due to the complex administrative and tax obligations. In the first nine months of 2011, the Stringing equipment segment experienced a 1.3% increase in revenues
compared to the same period last year thanks to the positive contribution that was made by several investment
projects in the BRIC countries, especially Brazil and Russia.
EBITDA stood at Euro 14,482 thousand compared to Euro 12,306 thousand for the same period of the previous year,
with a growth of 17.7%.
This result stemmed from the following major changes:
� improved margins in the Stringing equipment segment for Euro 1.6 million as a result of the improved
product/markets mix;
� lower operating costs, which in 2010 included Euro 2.7 million in listing costs;
� reduced costs for rental of the Grassobbio plant for Euro 1.3 million as a result of the operation described in
paragraph 3.1;
� deterioration in the result for the Trencher segment, mainly due to the effect of less favourable EUR/USD
exchange rates (Euro -1.3 million) and lower contracting margins which in 2010 included Euro 2.1 million
linked largely to the South Africa project completed at the end of the year.
EBITDA as a percentage of revenues therefore increased from 15.8% as at 30 September 2010 to 17.9% as at 30
September 2011.
The need to cover the various major markets, especially where significant investments are planned in electrical
power transmission, data transmission and transport of materials, has affected the Group’s geographic expansion
strategy which, after the setup of a JV in the United States in 2009 to market stringing equipment products,
continued in 2011 with the setup of a JV in Qatar with the aim of developing trencher sales in the Saudi Arabian market, opening of a branch in South Africa for sales and contracting in the Trencher segment and the imminent
opening of a branch in Russia for the Stringing equipment segment.
In confirmation of this, the table below provides a breakdown of revenues by the main geographic areas:
As at 30 SeptemberAs at 30 SeptemberAs at 30 SeptemberAs at 30 September
(Euro in thousands) 2011201120112011 2010201020102010
Italy 5,495 5,183
Europe 13,710 13,644
Middle East 17,545 14,153
Africa 4,536 10,606
North and Central America 11,114 6,651
BRIC and others 28,373 27,840
Total revenuesTotal revenuesTotal revenuesTotal revenues 80,77380,77380,77380,773 78,07778,07778,07778,077
The consolidated financial statements of Tesmec were prepared in accordance with International Financial
Reporting Standards – hereinafter “IFRS” or “International Accounting Standards”) endorsed by the European Union
and in force as at 30 September 2011.
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The following table shows the major economic and financial indicators of the Group in September 2011 and in the
same period in 2010.
30 September 201030 September 201030 September 201030 September 2010
OVERVIEW OF THE FINANCIAL RESULTSOVERVIEW OF THE FINANCIAL RESULTSOVERVIEW OF THE FINANCIAL RESULTSOVERVIEW OF THE FINANCIAL RESULTS
30 September 201130 September 201130 September 201130 September 2011
Key income statement dataKey income statement dataKey income statement dataKey income statement data (Euro in millions)
78.1
Operating Revenue
80.8
12.3
EBITDA
14.5
12.3
EBITDA (excluding the New lease contract)
13.2
8.7
Operating income
10.3
5.0
Net income for the period
4.7
Key financial position data Key financial position data Key financial position data Key financial position data (Euro in millions)
73.4
Net invested capital
96.1
34.5
Shareholders’ equity (*)
36.1
38.9
Net financial indebtedness
60.0
38.9
Net financial indebtedness (excluding the New lease contract)
38.1
5.0
Net investments in tangible and intangible fixed assets
25.4
5.0
Net investments in tangible and intangible fixed assets (excluding the New lease contract)
3.1
339
Annual average employees
359
*The change includes among other things the effects of the increase in capital of 1 July 2010 following the Public Subscription
Offer of Euro 10,011 thousand, gross of expenses recorded under Shareholders’ equity and of their taxes (Euro 2,070 thousand) according to IAS 32.
Information on the main companies in operation in the nine month period is provided below:
� Tesmec USA Inc., a company which is 75% owned by Tesmec S.p.A. and 25% by Simest S.p.A. (with an
option of Tesmec S.p.A. to repurchase the Simest’s shareholding interest), is based in Alvarado (Texas) and
operates in the Trencher segment. In the first nine months revenues amounted to Euro 9 million with a net
loss of Euro 0.6 million (in the same period of the previous year revenues were Euro 8 million with a net loss
of Euro 0.6 million). Note however that 2010 sales consisted mainly of sales to Tesmec S.p.A. to serve the
Middle East Market. The increase in sales achieved by the American subsidiary on the local market was
therefore 67.1%. The performance of this subsidiary reflects the first signs of market recovery and the
results of a rapid positioning in the sector of shale gas which is now developing in several areas of the United States;
� Condux Tesmec Inc, a joint venture 50% owned by Tesmec SpA and 50% by US shareholder Condux,
based in Mankato (USA), has been active since June 2009 in selling products for the North American
stringing equipment market. The company was consolidated using the equity method and generated
revenues for Euro 2 million in the first nine months of the year. The net loss recorded amounts to Euro 0.1
million.
� Tesmec Peninsula, a joint venture 49% owned by Tesmec S.p.A., established in March 2011 with Tesmec
Middle East. The joint venture, in operation since May 2011, aims to increase the commercial presence for
the Trencher segment in countries on the Arabian Peninsula and to develop the related service activities.
The company was consolidated using the equity method and generated revenues for Euro 1.4 million in the first nine months of the year. The net loss recorded amounts to Euro 0.1 million.
� Tesmec SA, a 100% subsidiary of Tesmec S.p.A. In operation since August 2011 this company aims to
invest in important projects in the telecommunications sector and to capture new market shares. In the first
nine months revenues amounted to Euro 102 thousand with a net loss of Euro 7 thousand.
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5. Income statement and balance sheet situation as at 30 September 2011 5. Income statement and balance sheet situation as at 30 September 2011 5. Income statement and balance sheet situation as at 30 September 2011 5. Income statement and balance sheet situation as at 30 September 2011
Balance sheet
Information is provided below on the Group's main equity indicators, as at 30 September 2011 compared to 31
December 2010. In particular, the following tables show the reclassified funding sources and uses from the
consolidated balance sheet as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
USESUSESUSESUSES
Net working capital (1)
47,442 40,236
Fixed assets 47,288 26,064
Other long-term assets and liabilities 1,382 1,146
Net invested capital Net invested capital Net invested capital Net invested capital (2)(2)(2)(2)
96,11296,11296,11296,112 67,44667,44667,44667,446
SOURCESSOURCESSOURCESSOURCES
Net financial indebtedness (3)
59,972 32,707
Shareholders’ equity 36,140 34,739
Total sources of financingTotal sources of financingTotal sources of financingTotal sources of financing 96,11296,11296,11296,112 67,44667,44667,44667,446
(1)
The net working capital is calculated as current assets net of current liabilities excluding financial assets and financial liabilities. The net working capital is not recognised as a measure of performance by the IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balances achieved by the Company are not necessarily comparable with theirs. (2)
The net invested capital is calculated as net working capital plus fixed assets and other non-current assets less non-current liabilities. The net invested capital is not recognised as a measure of financial performance or liquidity under IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balances achieved by the Company are not necessarily comparable with theirs. (3)
The net financial indebtedness is calculated as the sum of cash and cash equivalents, current financial assets including available–for–sale securities, non-current financial liabilities, fair value of hedging instruments and other non-current financial assets.
The effects of the new lease contract played a significant role in the changes in a number of the items of the above table. The table below illustrates the data as at 30 September 2011 excluding these effects for a better
understanding of changes in the underlying items.
(Euro in thousands)
30 September 2011 30 September 2011 30 September 2011 30 September 2011
excluding the New excluding the New excluding the New excluding the New lease contractlease contractlease contractlease contract
31 December 201031 December 201031 December 201031 December 2010
USESUSESUSESUSES
Net working capital (1)
47,386 40,236
Fixed assets 25,357 26,064
Other long-term assets and liabilities 1,382 1,146
Net invested capital Net invested capital Net invested capital Net invested capital (2)(2)(2)(2)
74,12574,12574,12574,125 67,44667,44667,44667,446
SOURCESSOURCESSOURCESSOURCES
Net financial indebtedness (3)
38,084 32,707
Shareholders’ equity 36,041 34,739
Total sources of financingTotal sources of financingTotal sources of financingTotal sources of financing 74,12574,12574,12574,125 67,44667,44667,44667,446
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A) Net working capital
Details of the composition of the “Net Working Capital” as at 30 September 2011 and 31 December 2010 are as
follows:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Trade receivables 31,495 32,482
Inventories 43,187 42,220
Trade payables (22,707) (26,291)
Other current assets (liabilities) (4,533) (8,175)
Net working capital Net working capital Net working capital Net working capital (1)(1)(1)(1)
47,44247,44247,44247,442 40,23640,23640,23640,236
(1)
The net working capital is calculated as current assets net of current liabilities excluding financial assets and financial liabilities. Net working capital is not recognised as a measure of performance by the IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balances achieved by the Company are not necessarily comparable with theirs.
The Net working capital of Euro 47,442 thousand increased by Euro 7,206 thousand compared to 31 December 2010
(17.9%).
The increase in inventories (2.3%), lower than the increase in revenues (+3.5%), and the decrease in trade
receivables (3.0%) confirm the efficiency recovery trend already seen in the results as at 31 December 2010 if
compared to the previous year.
Liabilities for trade payables fell by 13.6% due to seasonal effects associated with lower purchase volumes in the last
quarter, also coinciding with summer holiday closures.
Other current assets/(liabilities) dropped by 44.5% mainly as a result of (i) the increase in VAT credit, with a balance
of Euro 1,378 thousand, (ii) the Euro 1,002 thousand increase in advances to suppliers for important supplies and
(iii) the decrease in advances from customers for Euro 1,457 thousand.
B) Fixed assets and other long-term assets
Details of the composition of the item “Fixed assets and other long term assets” as at 30 September 2011 and 31
December 2010 are as follows:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Intangible assets 7,640 6,813
Property, plant and equipment 38,185 17,993
Equity investments in associates 1,461 1,256
Other equity investments 2 2
Fixed assets and other longFixed assets and other longFixed assets and other longFixed assets and other long----term assetsterm assetsterm assetsterm assets 47,28847,28847,28847,288 26,06426,06426,06426,064
Fixed assets and other long-term assets increased from Euro 26,064 thousand as at 31 December 2010 to Euro 47,288
thousand as at 30 September 2011, up 81.4%. This change is mainly determined by the inclusion among property,
plant and equipment of the value of the Grassobbio plant fully described in paragraph 3.1 of this report. Net of such
inclusion, the value of capital invested in fixed assets would be reduced by 2.7% mainly due to depreciation booked
in the period. A more detailed analysis of changes in the main categories of fixed assets is provided below:
� an increase in intangible assets of Euro 827 thousand, due to the effect of: (i) development costs capitalised
during 2011 of Euro 2,725 thousand, which were partially offset by amortization for the period (Euro 2,052
thousand). The development costs refer to costs incurred by the Group’s technical office for developing
new models for the Stringing equipment segment as well as the trencher segment on the basis of demand
from existing customers in the key markets; (ii) goodwill of Euro 293 thousand generated from acquisition
of the I-Light business unit by the subsidiary Tesmec Service S.p.A.;
19
� an increase in property, plant and equipment of Euro 20,192 thousand due to: (i) investments in the period of
Euro 24,924 thousand, of which Euro 22,312 thousand for the New lease contract; (ii) exchange losses
generated by the conversion of values in dollars of Tesmec USA assets for Euro 176 thousand; (iii)
depreciation for the period of Euro 2,009 thousand;
� an increase in equity investments in associates for Euro 205 thousand due to the combined effect of setup of
the Tesmec Peninsula joint venture on the Arabian Peninsula, recognised to the financial statements for
Euro 346 thousand, and adjustments to the value of investments consolidated using the equity method.
C) Net financial indebtedness
Details of the composition of “Net financial indebtedness” as at 30 September 2011 and 31 December 2010 are as
follows:
(Euro in thousands)
30 September 30 September 30 September 30 September 2011201120112011
of which with of which with of which with of which with related parties related parties related parties related parties
and groupand groupand groupand group
31 December 31 December 31 December 31 December 2010201020102010
of which with of which with of which with of which with related parties related parties related parties related parties
and groupand groupand groupand group
Cash and cash equivalents (9,532)
(7,767)
Current financial assets (1)
(3,170) (2,715) (404) (226)
Current financial liabilities 23,178 738 20,773 -
Current portion of derivative financial instruments 79
90
Current financial indebtedness Current financial indebtedness Current financial indebtedness Current financial indebtedness (2)(2)(2)(2)
10,55510,55510,55510,555 (1,977)(1,977)(1,977)(1,977) 12,69212,69212,69212,692 (226)(226)(226)(226)
Non-current financial liabilities 49,185 19,148 19,981 -
Non-current portion of derivative financial instruments
232
34
NonNonNonNon----current financial indebtedness current financial indebtedness current financial indebtedness current financial indebtedness (2)(2)(2)(2)
49,41749,41749,41749,417 19,14819,14819,14819,148 20,01520,01520,01520,015 ----
Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006
59,97259,97259,97259,972 17,17117,17117,17117,171 32,70732,70732,70732,707 (226)(226)(226)(226)
(1)
The current financial assets as at 30 September 2011 and 31 December 2010 include the market value of shares and warrants listed on the Italian Stock Exchange (Borsa Italiana), which are therefore accounted as cash and cash equivalents. (2)
Current and non-current financial indebtedness is not recognised as a measure of performance by the IFRS. The valuation criteria applied by the Group may not necessarily be the same as those adopted by other groups and therefore the balances achieved by the Group may not be comparable with theirs.
In the first nine months of 2011, the Group’s net financial indebtedness increased compared to 2010 by Euro 27,265
thousand, due to the combined effect of the following changes:
� increase in current financial liabilities from Euro 20,773 thousand to Euro 23,178 thousand, of which Euro 738
thousand due to recognition of the short-term portion of the loan relating to the new lease contract
described in paragraph 3.1 and the remainder to greater recourse to advances on exports;
� increase in non-current financial liabilities from Euro 19,981 thousand to Euro 49,185 thousand, mainly due to:
(i) increase in financial leases (Euro 20,608 thousand as at 30 September 2011 compared to Euro 1,611
thousand as at 31 December 2010), including Euro 19,148 thousand resulting from the new lease contract
described in paragraph 3.1 of this report, (ii) use of Euro 12 million of the new credit facility granted by BNL
and (iii) reclassification to current financial liabilities of Euro 8,122 thousand as the short-term portion of
medium/long-term loans. Net of the effects of the new lease contract described in paragraph 3.1, the net financial indebtedness would increase by Euro 38.1 million reflecting in parallel the changes in working
capital described above.
Offsetting elements include:
� increase in current financial assets from Euro 404 thousand to Euro 3,170 thousand mainly due to (i)
recognition of a short-term loan for Euro 1,392 thousand, repayable within twelve months, to the JV Condux
Tesmec and (ii) the classification in accordance with IAS 17 of the portion not referable to the Lease
Contracts between Tesmec S.p.A. and Dream Immobiliare S.r.l. of the initial disbursement carried out by
the Company of Euro 864 thousand as an advance payment/deposit to secure the option to take over the
original financial lease contract signed by Dream Immobiliare S.r.l. (see paragraph 3.1 of this report).
20
Income statement
The comments provided below refer to comparison of the consolidated income statement figures as at 30
September 2011 to those as at 30 September 2010.
The main income figures for the first nine months of 2011 and 2010 are presented in the table below:
As at As at As at As at 30 September30 September30 September30 September
(Euro in thousands) 2011201120112011
% on % on % on % on revenuesrevenuesrevenuesrevenues
2010201020102010 % on % on % on % on
revenuesrevenuesrevenuesrevenues
Revenues from sales and servicesRevenues from sales and servicesRevenues from sales and servicesRevenues from sales and services 80,77380,77380,77380,773 100.0%100.0%100.0%100.0% 78,07778,07778,07778,077 100.0%100.0%100.0%100.0%
Cost of raw materials and consumables (39,431) -48.8% (34,802) -44.6%
Costs for services (14,920) -18.5% (18,137) -23.2%
Payroll costs (13,194) -16.3% (13,045) -16.7%
Other operating (costs)/revenues, net (1,373) -1.7% (2,364) -3.0%
Amortization and depreciation (4,216) -5.2% (3,572) -4.6%
Development costs capitalised 2,627 3.3% 2,577 3.3%
Total Total Total Total operating costsoperating costsoperating costsoperating costs (70,507)(70,507)(70,507)(70,507) ----87.3%87.3%87.3%87.3% (69,343)(69,343)(69,343)(69,343) ----88.8%88.8%88.8%88.8%
Operating incomeOperating incomeOperating incomeOperating income 10,26610,26610,26610,266 12.7%12.7%12.7%12.7% 8,7348,7348,7348,734 11.2%11.2%11.2%11.2%
Financial expenses (3,656) -4.5% (2,494) -3.2%
Financial income 1,085 1.3% 1,282 1.6%
Portion of gains/(losses) from equity investments evaluated using the equity method
(165) -0.2% - 0.0%
PrePrePrePre----tax profitstax profitstax profitstax profits 7,5307,5307,5307,530 9.3%9.3%9.3%9.3% 7,5227,5227,5227,522 9.6%9.6%9.6%9.6%
Income taxes (2,803) -3.5% (2,514) -3.2%
Net profit for the periodNet profit for the periodNet profit for the periodNet profit for the period 4,7274,7274,7274,727 5.9%5.9%5.9%5.9% 5,0085,0085,0085,008 6.4%6.4%6.4%6.4%
Non-controlling interests - 0.0% (20) 0.0%
Equity holders of the parentEquity holders of the parentEquity holders of the parentEquity holders of the parent 4,7274,7274,7274,727 5.9%5.9%5.9%5.9% 5,0285,0285,0285,028 6.4%6.4%6.4%6.4%
A restatement of the income statement figures representing the performance of EBITDA is provided below:
As at As at As at As at 30 September30 September30 September30 September
(Euro in thousands) 2011201120112011 % on revenues% on revenues% on revenues% on revenues 2010201020102010 % on revenues% on revenues% on revenues% on revenues 2011 vs. 20102011 vs. 20102011 vs. 20102011 vs. 2010
Operating income 10,266 12.7% 8,734 11.2% 1,532
+ Amortization/Depreciation 4,216 5.2% 3,572 4.6% 644
EBITDA EBITDA EBITDA EBITDA (*)(*)(*)(*)
14,48214,48214,48214,482 17.9%17.9%17.9%17.9% 12,30612,30612,30612,306 15.8%15.8%15.8%15.8% 2,1762,1762,1762,176
(*) EBITDA is represented by the operating income gross of amortization/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the company’s operating performance. EBITDA is not recognised as a measure of performance by the IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group’s operating income. As the composition of EBITDA is not governed by the reference accounting standards, the criterion for determination applied by the Group may not be in line with the criterion adopted by others and therefore not comparable.
21
The following table analyses the breakdown of operating revenues and costs gross of amortization/depreciation by
segment. For a better understanding, rental costs (Euro 1,328 thousand), which were reclassified as a result of the
application of IAS 17 to the new lease contract referred to in paragraph 3.1, were added to the operating costs of the
first nine months of 2011:
As at As at As at As at 30 September30 September30 September30 September
2011201120112011 2010201020102010
(Euro in thousands) Stringing Stringing Stringing Stringing
equipmentequipmentequipmentequipment TrencherTrencherTrencherTrencher ConsolidatedConsolidatedConsolidatedConsolidated
Stringing Stringing Stringing Stringing equipmentequipmentequipmentequipment
TrencherTrencherTrencherTrencher ConsolidatedConsolidatedConsolidatedConsolidated
Revenues from sales and services 47,085 33,688 80,773 46,484 31,593 78,077
Operating costs net of depreciation
and amortization and of the effects related to the New lease contract
(36,859) (30,760) (67,619) (39,371) (26,400) (65,771)
EBITDAEBITDAEBITDAEBITDA 10,22610,22610,22610,226 2,9282,9282,9282,928 13,15413,15413,15413,154 7,1137,1137,1137,113 5,1935,1935,1935,193 12,30612,30612,30612,306
Effect on revenues 21.7% 8.7% 16.3% 15.3% 16.4% 15.8%
The change in revenues as at 30 September 2011 compared to the figure for 30 September 2010 reflects the positive
performance in both the Stringing equipment and Trencher segments, which recorded increases, respectively, of
1.3% and 6.6%.
The 6.6% increase in the trencher segment is concentrated in the Middle East and North American markets as a
result of sales achieved by the US subsidiary.
In terms of percentage margins, the reclassified EBITDA net of the positive effects of Euro 1,328 thousand for the
first nine months of 2011 represents the 16.3% higher revenues compared to 15.8% recorded for the first nine
months of 2010, with an increase in absolute terms of Euro 848 thousand. This increase was generated by improved
margins in the Stringing equipment segment which largely offset the negative effects of the EUR/USD exchange rate
on EBITDA in the Trencher segment.
For the Stringing equipment segment, sales achieved on the Russian and South American markets instead
contributed to the improved margins together with the lower impact of sales on the Indian market where,
traditionally, results are lower than the average in margin terms despite high sales volumes.
The net financial management that decreased by Euro 1,524 thousand reflects:
� for Euro 95 thousand, the effects of the different EUR/USD exchange rates in the two reference periods
which in the first nine months of 2011 led to the recording of net profit (realised and unrealised) of a total
Euro 259 thousand compared to net profit of Euro 354 thousand for the first nine months of 2010;
� for Euro 803 thousand, the reclassification to financial expenses of the portion of interest payable on the
new lease contract referred to in paragraph 3.1;
� for Euro 236 thousand, the fair value adjustment of derivatives;
� higher borrowing costs due mainly to the increase in the 3-month Euribor rate, on this rate are parameters the main sources of funding..
6. Management and types of financia6. Management and types of financia6. Management and types of financia6. Management and types of financial risks l risks l risks l risks
For the management of financial risks, please see the paragraph “Financial risk management policy” contained in the
Explanatory Notes to the Annual Consolidated Financial Statements as at 31 December 2010, where the Group’s
policies in relation to the management of financial risks are presented.
7. Atypical and/or unusual and non7. Atypical and/or unusual and non7. Atypical and/or unusual and non7. Atypical and/or unusual and non----recurring transactions with related parties recurring transactions with related parties recurring transactions with related parties recurring transactions with related parties
In compliance with the CONSOB communications of 20 February 1997, 27 February 1998, 30 September 1998, 30
September 2002 and 27 July 2006 we specify that during the first nine months of 2011, the new lease contract
signed with Dream Immobiliare S.r.l. as described in paragraph 3.1 is reported as a related party transaction of an
22
atypical or unusual nature, far removed from normal operations or such as to harm the income, equity or financial
results of the Group.
The remaining transactions with related parties are part of normal operations, within the context of the activity of
each individual involved, and were carried out at arm’s length.
Note that further to the CONSOB Communication of 24 September 2010 containing provisions on related party
transactions pursuant to CONSOB Resolution no. 17221 of 12 March 2010, as amended, the Tesmec S.p.A. Board of
Directors approved the Procedure governing Related Parties Transactions had entered into force on 1 January 2011.
8. Group Employees8. Group Employees8. Group Employees8. Group Employees
The average number of employees of the Group in the first nine months of 2011, including the employees of
consolidated companies, is 359 persons compared to 339 in 2010. Note that the increase is mainly due to the
process of gradual integration of direct sales organisations with the indirect channels (distributors) both in the
parent company and in consolidated (Tesmec USA) or recently established.
9. Other information9. Other information9. Other information9. Other information
Italian Legislative Decree No. 196/2003 Italian Legislative Decree No. 196/2003 Italian Legislative Decree No. 196/2003 Italian Legislative Decree No. 196/2003 ---- The Privacy Act The Privacy Act The Privacy Act The Privacy Act
Pursuant to Italian Legislative Decree no. 196 of 30 September 2003 “Code regarding the protection of personal
data” the company proceeded to reassess and adjust its security systems in light of the standards required by the
relevant legislation. Within the timeframe set by the law, the Company prepared and updated the Security Policy Document in which the
measures protecting the processing of personal data and the operating structure in charge of processing and
managing this data are described.
The security measures adopted by the company are periodically updated each year, in relation to progress in science
and technology or the evolution of the organisation itself, so as to ensure the security of the data and its related
processing.
Treasury shares
We hereby inform you that Tesmec S.p.A. does not hold, nor did it hold during the period, whether directly or
indirectly or through subsidiaries, trust companies or through third parties, any treasury shares or shares of the
parent company.
Subsequent events and business outlook
On 1 November 2011, Tesmec Rus LLC was established in Moscow, 100% owned by Tesmec S.p.A. and with fully
paid-up share capital of 450,000 Roubles.
For 2011, the combined effect of the existing backlog and the forecast for acquiring important orders in the last
quarter of the year is deemed to allow the Tesmec Group to close the year with a strong increase in turnover compared to the 2010 financial period, up with what was recorded in the first 9 months of the year.
23
CONSOLIDATED FINANCIAL STATEMENTS OF THE TESMEC GROUP Consolidated financial statements
24
Consolidated statement of financial position as at 30 September 2011 and as at 31 Consolidated statement of financial position as at 30 September 2011 and as at 31 Consolidated statement of financial position as at 30 September 2011 and as at 31 Consolidated statement of financial position as at 30 September 2011 and as at 31
December 2010December 2010December 2010December 2010
(Euro in thousands) NotesNotesNotesNotes 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
NONNONNONNON––––CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS
Intangible assets 1 7,640 6,813
Property, plant and equipment 2 38,185 17,993
Equity investments evaluated using the equity method
1,461 1,256
Other equity investments
2 2
Financial receivables and other non-current financial assets
29 7
Derivative financial instruments
- 131
Deferred tax assets
4,870 4,912
TOTAL NONTOTAL NONTOTAL NONTOTAL NON––––CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS
52,18752,18752,18752,187 31,11431,11431,11431,114
CURRENT ASSETSCURRENT ASSETSCURRENT ASSETSCURRENT ASSETS
Inventories 3 43,187 42,220
Trade receivables 4 31,495 32,482
of which with subsidiaries, related parties and joint ventures: 4 5,939 2,979
Tax receivables
54 435
Available-for-sale securities
105 101
Financial receivables and other current financial assets 5 3,065 303
of which with subsidiaries, related parties and joint ventures: 5 2,715 226
Other current assets
3,559 1,542
of which with subsidiaries, related parties and joint ventures:
101 427
Cash and cash equivalents 12 9,532 7,767
TOTAL CURRENT ASSETSTOTAL CURRENT ASSETSTOTAL CURRENT ASSETSTOTAL CURRENT ASSETS
90,99790,99790,99790,997 84,85084,85084,85084,850
TOTAL ASSETSTOTAL ASSETSTOTAL ASSETSTOTAL ASSETS
143,184143,184143,184143,184 115,964115,964115,964115,964
SHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITY
EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
Share capital 6 10,708 10,708
Reserves / (deficit) 6 20,705 18,779
Net income (loss) for the period 6 4,727 5,243
TOTAL TOTAL TOTAL TOTAL EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERSEQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
36,14036,14036,14036,140 34,73034,73034,73034,730
NONNONNONNON----CONTROLLING INTERESTSCONTROLLING INTERESTSCONTROLLING INTERESTSCONTROLLING INTERESTS
Minority interest in capital and reserves / (deficit)
---- 38383838
Net income / (loss) for the period attributable to minority interests
---- (29)(29)(29)(29)
TOTAL TOTAL TOTAL TOTAL NONNONNONNON----CONTROLLING INTERESTSCONTROLLING INTERESTSCONTROLLING INTERESTSCONTROLLING INTERESTS
---- 9999
TOTAL SHAREHOLDERS’ EQUITYTOTAL SHAREHOLDERS’ EQUITYTOTAL SHAREHOLDERS’ EQUITYTOTAL SHAREHOLDERS’ EQUITY
36,14036,14036,14036,140 34,73934,73934,73934,739
NONNONNONNON––––CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES
Interest-bearing financial payables 7 49,185 19,981
of which with subsidiaries, related parties and joint ventures: 7 19,148 -
Derivatives 12 232 34
Employee benefit liability
2,533 2,968
Deferred tax liabilities
984 936
TOTAL NONTOTAL NONTOTAL NONTOTAL NON––––CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES
52,93452,93452,93452,934 23,91923,91923,91923,919
CURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIESCURRENT LIABILITIES
Interest bearing financial payables (current portion) 8 23,178 20,773
of which with subsidiaries, related parties and joint ventures: 8 738 -
Derivatives 12 79 90
Trade payables 9 22,707 26,291
of which with subsidiaries, related parties and joint ventures: 9 41 84
Advances from customers 10 648 2,105
Income taxes payable 11 3,156 3,937
Provisions for risks and charges
683 836
Other current liabilities
3,659 3,274
TOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIESTOTAL CURRENT LIABILITIES
54,11054,11054,11054,110 57,30657,30657,30657,306
TOTAL LIABILITIESTOTAL LIABILITIESTOTAL LIABILITIESTOTAL LIABILITIES
107,044107,044107,044107,044 81,22581,22581,22581,225
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIESTOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
143,184143,184143,184143,184 115,964115,964115,964115,964
25
Consolidated income statement as at 30 September 2011 and 30 September 2010Consolidated income statement as at 30 September 2011 and 30 September 2010Consolidated income statement as at 30 September 2011 and 30 September 2010Consolidated income statement as at 30 September 2011 and 30 September 2010
NotesNotesNotesNotes
As at 30 SeptemberAs at 30 SeptemberAs at 30 SeptemberAs at 30 September
(Euro in thousands) 2011201120112011 2010201020102010
Revenues from sales and servicesRevenues from sales and servicesRevenues from sales and servicesRevenues from sales and services 13 80,77380,77380,77380,773 78,07778,07778,07778,077
of which with subsidiaries, related parties and joint ventures:
6,706 4,350
Cost of raw materials and consumables
(39,431) (34,802)
of which with subsidiaries, related parties and joint ventures:
(16) (1)
Costs for services
(14,920) (18,137)
of which with subsidiaries, related parties and joint ventures:
(116) (31)
Payroll costs
(13,194) (13,045)
Other operating (costs)/revenues, net
(1,373) (2,364)
of which with subsidiaries, related parties and joint ventures:
(221) (1,188)
Amortization and depreciation
(4,216) (3,572)
Development costs capitalised
2,627 2,577
Total operating costsTotal operating costsTotal operating costsTotal operating costs 14 (70,507)(70,507)(70,507)(70,507) (69,343)(69,343)(69,343)(69,343)
Operating incomeOperating incomeOperating incomeOperating income
10,266 10,266 10,266 10,266 8,734 8,734 8,734 8,734
Financial expenses
(3,656) (2,494)
of which with subsidiaries, related parties and joint ventures:
(803) -
Financial income
1,085 1,282
of which with subsidiaries, related parties and joint ventures:
45 40
Portion of gains/(losses) from equity investments evaluated using the equity method
(165) -
PrePrePrePre----tax profitstax profitstax profitstax profits
7,530 7,530 7,530 7,530 7,522 7,522 7,522 7,522
Income taxes
(2,803) (2,514)
Net profit for the periodNet profit for the periodNet profit for the periodNet profit for the period
4,727 4,727 4,727 4,727 5,008 5,008 5,008 5,008
NonNonNonNon----controlling interestscontrolling interestscontrolling interestscontrolling interests
---- (20)(20)(20)(20)
Equity holders of the parent
4,7274,7274,7274,727 5,0285,0285,0285,028
Basic and Basic and Basic and Basic and diluted earnings per sharediluted earnings per sharediluted earnings per sharediluted earnings per share
0.044 0.044 0.044 0.044 0.047 0.047 0.047 0.047
26
Consolidated statement of comprehensive income as at 30 September 2011 and 30 Consolidated statement of comprehensive income as at 30 September 2011 and 30 Consolidated statement of comprehensive income as at 30 September 2011 and 30 Consolidated statement of comprehensive income as at 30 September 2011 and 30
September 2010September 2010September 2010September 2010
As at 30 SeptemberAs at 30 SeptemberAs at 30 SeptemberAs at 30 September
(Euro in thousands) 2011201120112011 2010201020102010
NETNETNETNET PROFIT FOR THE PERIODPROFIT FOR THE PERIODPROFIT FOR THE PERIODPROFIT FOR THE PERIOD
4,727 4,727 4,727 4,727
5,008 5,008 5,008 5,008
Other components of comprehensive income:Other components of comprehensive income:Other components of comprehensive income:Other components of comprehensive income:
Listing costs recognised directly to equity according to IAS 32, net of the tax effect
- (1,356)
Exchange differences on translation of foreign operations (298) 1,016
Total other income/(losses) net of taxationTotal other income/(losses) net of taxationTotal other income/(losses) net of taxationTotal other income/(losses) net of taxation (298)(298)(298)(298) (340)(340)(340)(340)
Total comprehensive income (loss) net of taxationTotal comprehensive income (loss) net of taxationTotal comprehensive income (loss) net of taxationTotal comprehensive income (loss) net of taxation 4,429 4,429 4,429 4,429 4,668 4,668 4,668 4,668
Attributable to:
Equity holders of the parent company 4,429 4,685
Non-controlling interests - (17)
27
Statement of consolidated cash flows as at 30 September 2011 and 30 September 2010Statement of consolidated cash flows as at 30 September 2011 and 30 September 2010Statement of consolidated cash flows as at 30 September 2011 and 30 September 2010Statement of consolidated cash flows as at 30 September 2011 and 30 September 2010
As at 30 SeptemberAs at 30 SeptemberAs at 30 SeptemberAs at 30 September
(Euro in thousands) NotesNotesNotesNotes 2011201120112011 2010201020102010
CASH FLOW FROM OPERATING ACTIVITIES CASH FLOW FROM OPERATING ACTIVITIES CASH FLOW FROM OPERATING ACTIVITIES CASH FLOW FROM OPERATING ACTIVITIES
Net profit for the period
4,727 5,008
Adjustments to reconcile net income for the period to the cash flows generated by (used in) operating activities:
Amortization and depreciation 1-2 4,216 3,572
Unrealised exchange gains on Simest operation
- 956
Provisions for employee benefits
69 (6)
Provisions for risks and charges / inventory obsolescence / doubtful accounts
193 1,452
Employee benefit payments
(504) (263)
Payments of provisions for risks and charges
(179) (303)
Net change in deferred tax assets and liabilities
98 (958)
Change in fair value of financial instruments
318 (11)
Change in current assets and liabilities:
Trade receivables 4 (547) (12,873)
Inventories 3 (1,267) (2,444)
Trade payables 9 (3,410) 6,969
Other current assets and liabilities
(2,147) 2,894
NET CASH FLOWS GENERATED BY OPERATING ACTIVITIES (A)NET CASH FLOWS GENERATED BY OPERATING ACTIVITIES (A)NET CASH FLOWS GENERATED BY OPERATING ACTIVITIES (A)NET CASH FLOWS GENERATED BY OPERATING ACTIVITIES (A)
1,567 1,567 1,567 1,567 3,993 3,993 3,993 3,993
CASH FLOW FROM INVESTING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures in property, plant and equipment
(2,612) (2,253)
Investments in intangible assets 1 (3,068) (3,342)
Investments /(disposal) of financial assets 5 (3,102) 4,184
Proceeds from sale of property, plant and equipment and intangible assets 1-2 2,571 644
NET CASH FLOW (USED IN) INVESTING ACTIVITIES (B)NET CASH FLOW (USED IN) INVESTING ACTIVITIES (B)NET CASH FLOW (USED IN) INVESTING ACTIVITIES (B)NET CASH FLOW (USED IN) INVESTING ACTIVITIES (B)
(6,211)(6,211)(6,211)(6,211) (767)(767)(767)(767)
NET CASH FLOW FROM FINANCING NET CASH FLOW FROM FINANCING NET CASH FLOW FROM FINANCING NET CASH FLOW FROM FINANCING ACTIVITIESACTIVITIESACTIVITIESACTIVITIES
Long-term loans received 7 14,911 11,844
Repayment of long-term loans 7 (10,724) (3,185)
Net change in short-term financial debt 7 5,252 (13,007)
Other changes 6 (30) -
Dividend distribution 6 (2,998) (2,582)
Capital injection for share capital increase
- 10,194
NET CASH FLOW GENERATED BY (USED IN) FINANCING NET CASH FLOW GENERATED BY (USED IN) FINANCING NET CASH FLOW GENERATED BY (USED IN) FINANCING NET CASH FLOW GENERATED BY (USED IN) FINANCING ACTIVITIES (C)ACTIVITIES (C)ACTIVITIES (C)ACTIVITIES (C)
6,411 6,411 6,411 6,411 3,264 3,264 3,264 3,264
TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C)TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C)TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C)TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C)
1,767 1,767 1,767 1,767 6,490 6,490 6,490 6,490
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (E)EQUIVALENTS (E)EQUIVALENTS (E)EQUIVALENTS (E)
(2) 10
CASH CASH CASH CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE AND CASH EQUIVALENTS AT THE BEGINNING OF THE AND CASH EQUIVALENTS AT THE BEGINNING OF THE AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD (F)PERIOD (F)PERIOD (F)PERIOD (F) 12 7,767 1,443
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (G=D+E+F)(G=D+E+F)(G=D+E+F)(G=D+E+F)
12121212 9,532 9,532 9,532 9,532 7,943 7,943 7,943 7,943
Additional information:Additional information:Additional information:Additional information:
Interest paid
2,226 1,036
Income tax paid
3,563 1,173
28
Statement of changes in consolidated shareholders’ equity as at 30 September 2011 and Statement of changes in consolidated shareholders’ equity as at 30 September 2011 and Statement of changes in consolidated shareholders’ equity as at 30 September 2011 and Statement of changes in consolidated shareholders’ equity as at 30 September 2011 and
30 September 201030 September 201030 September 201030 September 2010
Share Share Share Share capitalcapitalcapitalcapital
Legal Legal Legal Legal reservereservereservereserve
Share Share Share Share premium premium premium premium
reservereservereservereserve Statutory Statutory Statutory Statutory
reservereservereservereserve Translation Translation Translation Translation
reservereservereservereserve Other Other Other Other
reservesreservesreservesreserves
Net Net Net Net income income income income for the for the for the for the periodperiodperiodperiod
Total Equity Total Equity Total Equity Total Equity attributable to attributable to attributable to attributable to
Parent Company Parent Company Parent Company Parent Company ShareholdersShareholdersShareholdersShareholders
Total nonTotal nonTotal nonTotal non----controlling controlling controlling controlling
interestsinterestsinterestsinterests
Total Total Total Total shareholders’ shareholders’ shareholders’ shareholders’
equity equity equity equity (Euro in thousands)
Balance as at 1 January Balance as at 1 January Balance as at 1 January Balance as at 1 January 2010201020102010
9,0589,0589,0589,058 617617617617 2,5542,5542,5542,554 295295295295 (1,898)(1,898)(1,898)(1,898) 2,8522,8522,8522,852 7,3687,3687,3687,368 20,84620,84620,84620,846 13131313 20,859 20,859 20,859 20,859
Net income for the period - - - - - - 5,028 5,028 (20) 5,008
Other income (loss) - - (1,356) - 1,016 - - (340) (3) (343)
Total comprehensive Total comprehensive Total comprehensive Total comprehensive income/(loss)income/(loss)income/(loss)income/(loss)
4,6884,6884,6884,688 (23)(23)(23)(23) 4,665 4,665 4,665 4,665
Allocation of income of the prior period
- 181 - - - 4,605 (4,786) - - -
Dividend distribution - - - - - - (2,582) (2,582) - (2,582)
Other movements 1,650 - 9,900 (295) - 295 - 11,550 - 11,550
Balance as at 30 Balance as at 30 Balance as at 30 Balance as at 30 September 2010September 2010September 2010September 2010
10,70810,70810,70810,708 798798798798 11,09811,09811,09811,098 ---- (882)(882)(882)(882) 7,7527,7527,7527,752 5,0285,0285,0285,028 34,50234,50234,50234,502 (10)(10)(10)(10) 34,492 34,492 34,492 34,492
Share Share Share Share capitalcapitalcapitalcapital
Legal Legal Legal Legal reservereservereservereserve
Share Share Share Share premium premium premium premium
reservereservereservereserve Statutory Statutory Statutory Statutory
reservereservereservereserve Translation Translation Translation Translation
reservereservereservereserve Other Other Other Other
reservesreservesreservesreserves
Net Net Net Net income income income income for the for the for the for the periodperiodperiodperiod
Total Equity Total Equity Total Equity Total Equity attributable to attributable to attributable to attributable to
Parent Parent Parent Parent Company Company Company Company
ShareholdersShareholdersShareholdersShareholders
Total nonTotal nonTotal nonTotal non----controlling controlling controlling controlling
interestsinterestsinterestsinterests
Total Total Total Total shareholders’ shareholders’ shareholders’ shareholders’
equity equity equity equity (Euro in thousands)
Balance as at 1 January Balance as at 1 January Balance as at 1 January Balance as at 1 January 2011201120112011
10,70810,70810,70810,708 798798798798 10,91510,91510,91510,915 ---- (517)(517)(517)(517) 7,5837,5837,5837,583 5,2435,2435,2435,243 34,73034,73034,73034,730 9999 34.739 34.739 34.739 34.739
Net income for the period - - - - - - 4,727 4,727 - 4.727
Change in the Consolidation area
- - - - - (21) - (21) (9) (30)
Other income (loss) - - - - (298) - - (298) - (298)
Total comprehensive Total comprehensive Total comprehensive Total comprehensive income/(loss)income/(loss)income/(loss)income/(loss)
4,408 4,408 4,408 4,408 (9)(9)(9)(9) 4.399 4.399 4.399 4.399
Allocation of income of the prior period
- 328 - - - 1,917 (2,245) - - -
Dividend distribution - - - - - - (2,998) (2,998) - (2.998)
Increase in share capital - - - - - - - - - -
Balance as at 30 Balance as at 30 Balance as at 30 Balance as at 30 September 2011September 2011September 2011September 2011
10,70810,70810,70810,708 1,1261,1261,1261,126 10,91510,91510,91510,915 ---- (815)(815)(815)(815) 9,4799,4799,4799,479 4,727 4,727 4,727 4,727 36,14036,14036,14036,140 ---- 36.140 36.140 36.140 36.140
29
Explanatory NotesExplanatory NotesExplanatory NotesExplanatory Notes
Accounting policies adopted in preparing the consolidated financial statements as at 30 Accounting policies adopted in preparing the consolidated financial statements as at 30 Accounting policies adopted in preparing the consolidated financial statements as at 30 Accounting policies adopted in preparing the consolidated financial statements as at 30
September 2011September 2011September 2011September 2011
1. Company information1. Company information1. Company information1. Company information
The parent company Tesmec S.p.A. (hereinafter “Parent Company” or “Tesmec”) is a legal entity organised in
accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA STAR
Segment of the Milan Stock Exchange, as from 1 July 2010. The registered office of the Tesmec Group (hereinafter
“Group” or “Tesmec Group”) is in Milan, Piazza S. Ambrogio no. 16.
2. Reporting standards2. Reporting standards2. Reporting standards2. Reporting standards
The interim consolidated financial statements as at 30 September 2011 have been prepared in condensed form in
accordance with International Financial Reporting Standards (IFRS), by using the methods for preparing interim
financial reports provided by IAS 34 Interim financial reporting.
The financial statements format adopted by the Group, the accounting policies and consolidation criteria,
consolidation of international companies, the criteria for translation of items in other currencies and the valuation
criteria adopted in preparing the condensed consolidated financial statements as at 30 September 2011 comply with
those used for the consolidated financial statements as at 31 December 2010, to which reference should be made
for accounting completeness.
More precisely, the consolidated statement of financial position, income statement, comprehensive income
statement, statement of changes in shareholders’ equity and statement of cash flows are drawn up in extended form
and are in the same format adopted for the consolidated financial statements as at 31 December 2010. The
explanatory notes to the financial statements indicated below are in condensed form and therefore do not include all
the information required for annual financial statements. In particular, as provided by IAS 34, in order to avoid
repeating already disclosed information, the notes refer exclusively to items of the consolidated statement of
financial position, income statement, comprehensive income statement, statement of changes in shareholders’ equity and statement of cash flows whose breakdown or change, with regard to amount, type or unusual nature, are
significant to understanding the economic and financial situation of the Group.
Since the interim consolidated financial statements do not disclose all the information required in preparing the
consolidated annual financial statements, they must be read together with the consolidated financial statements as
at 31 December 2010.
The interim consolidated financial statements as at 30 September 2011 comprise the consolidated statement of
financial position, consolidated income statement, consolidated income statement of comprehensive income,
statement of changes in consolidated shareholders’ equity, statement of consolidated cash flows and related
explanatory notes. Comparative figures are disclosed as required by IAS 34 (31 December 2010 for the statement of
financial position and the first nine months of 2010 for the consolidated income statement, comprehensive income statement, statement of changes in shareholders’ equity and statement of cash flows).
The interim condensed consolidated financial statements are presented in Euro and all values are rounded to the
nearest thousand, unless otherwise indicated.
Disclosure of the interim condensed consolidated financial statements of the Tesmec Group for the period ended 30
September 2011 was authorised by the Board of Directors on 9 November 2011.
30
The exchange rates used to determine the countervalue in Euros of the financial statements of subsidiary companies
expressed in foreign currency (exchange rate to 1 Euro) are shown below:
Average exchange rates forAverage exchange rates forAverage exchange rates forAverage exchange rates for Period end exchange ratePeriod end exchange ratePeriod end exchange ratePeriod end exchange rate
quarter ended 30 Septemberquarter ended 30 Septemberquarter ended 30 Septemberquarter ended 30 September as at 30 as at 30 as at 30 as at 30 SeptemberSeptemberSeptemberSeptember
2011201120112011 2010201020102010 2011201120112011 2010201020102010
US Dollar 1.406 1.316 1.350 1.365
Qatar Riyal 5.121 4.790 4.916 4.968
South African Rand 9.818 9.822 10.909 9.544
New Bulgarian Lev 1.956 1.956 1.956 1.956
Russian Rouble 40.480 40.27 43.350 41.690
3. New 3. New 3. New 3. New accounting standardsaccounting standardsaccounting standardsaccounting standards
With effect from 1 January 2011 a number of amendments to international accounting standards and interpretations
entered into force, none of which with a material effect on the Group. The main changes are illustrated below:
� IAS 24 Related Party Disclosures (Amendment).
The IASB issued an amendment to IAS 24 which clarifies the definition of related party. The new definition
emphasises the symmetry in identifying related parties and more clearly defines the circumstances in which
persons and strategic executives must be considered related parties. Secondly, the amendment introduces
an exemption to the general disclosure requirements on related parties for transactions with State
authorities and with subsidiaries, joint ventures or significantly influenced by such State authorities. The
adoption of this amendment had no impact on the financial position or on the performance of the Group.
� IAS 32 Financial Instruments: Presentation (Amendment).
This standard includes a revised version of the definition of financial liabilities for the purpose of
classification of rights issues in foreign currency (and of certain options and warrants) as equity instruments, in cases where such instruments are assigned on a pro-rata basis to all holders of the same
class of an equity instrument (non-derivative) of the entity, or for the buy-back of a set number of equity
instruments of the entity for a set amount in any currency. This amendment had no impact on the financial
position or on the performance of the Group.
� IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
(Amendment)
This amendment removes an unintentional consequence which arises when an entity is subject to minimum
funding requirements and arranges payment in advance to meet such requirements. The amendment
allows an entity to treat the advance payments relating to a minimum contribution provision as an asset.
The Group is not subject to minimum contribution requirements in Europe. This amendment therefore had
no impact on the financial position or on the performance of the Group.
Improvements to the IFRS (issued in May 2010)
In May 2010, IASB issued a third series of improvements to the standards, mainly with a view to eliminating
inconsistencies and clarifying terminology. Each standard provides specific transitional rules. The adoption of the
following improvements implied changes in the accounting policies but had no effect on the financial position or on
the performance of the Group:
� IFRS 3 Business Combinations: The measurement options for non-controlling interests (NCI) have been
amended. Only components of non-controlling interests representing an effective interest that guarantees
holders a proportionate interests in the assets of company in the event of winding-up can be measured at
fair value or, alternatively, in relation to the proportionate share of identifiable net assets of the acquired
company. All other components must be measured at the fair value as at the date of acquisition;
� IFRS 7 Financial Instruments – Disclosures: this amendment was to simplify and improve disclosures by
reducing the quantity of disclosures on guarantees held and to require better quality disclosures to more effectively place the quantitative portion in context, respectively;
31
� IAS 1 Presentation of Financial Statements: this amendment clarifies that an analysis of each component of
other comprehensive income may be included either in the statement of changes in equity or in the notes to
the financial statements;
� IAS 34 Interim Financial Reporting: this amendment calls for an additional disclosure for the fair value and for
changes in classification of financial assets, and for changes in contingent assets and liabilities in interim
financial statements.
The changes to the following standards had no impact on the accounting policies, financial position or results of the
Group:
� IFRS 3 Business Combinations – this amendment clarifies that contingent amounts deriving from business
combinations prior to the adoption of IFRS 3 (as amended in 2008) are recognised in accordance with IFRS 3 (2005);
� IFRS 3 Business Combinations – share-based payments (replaced voluntarily or not replaced) and their
accounting treatment in the context of a business combination;
� IAS 27 Consolidated and Separate Financial Statements – the application of transitional rules of IAS 27
(revised in 2008) to standards amended at a later date;
� IFRIC 13 Customer Loyalty Programmes – in determining the fair value of bonuses, an entity has to consider
discounts and incentives that would otherwise be offered to customers not participating in the loyalty
programmes.
The Group has not adopted in advance any other standard, interpretation or improvement issued but not yet in
force.
4. 4. 4. 4. Consolidation methods and areaConsolidation methods and areaConsolidation methods and areaConsolidation methods and area
As at 30 September 2011 the consolidation area had changed compared to that of 31 December 2010 as a result of
the following transactions:
� on 18 January 2011, Tesmec S.p.A. acquired the share held by Mela Verde OOD in Tesmec Beta AD,
becoming the sole shareholder. On the same date, following the duly convened Shareholders’ Meeting, the
name was changed to Tesmec Balkani EAD. The acquisition value reflects the value of the capital share of
the previous shareholder and its total equity value (since the company is inactive). The transaction did not
therefore generate significant effects on the consolidated financial statements;
� on 27 May 2011, Tesmec Service S.p.A. sold its entire investment in Consorzio Stabile Energie Locali S.c.a.r.l.
at the price of Euro 2,400 (equal to the book value) with subsequent exclusion from the Tesmec Group
consolidation area;
� in April 2011 a formal joint venture agreement establishing Tesmec Peninsula was signed with the Group’s
distributor on the Arabian Peninsula, Tesmec Middle East, to ensure direct monitoring of the Middle East
market. This company, 49% owned by Tesmec S.p.A. was consolidated using the equity method;
� in August 2011 the setup of a new company, Tesmec SA, was finalised in South Africa with the aim of
investing in important projects in the telecommunications sector and to capture new market shares. This
company, 100% owned by Tesmec S.p.A. was consolidated on a line-by-line basis.
5. Significant events occurred during the period5. Significant events occurred during the period5. Significant events occurred during the period5. Significant events occurred during the period
On 31 January 2011 Tesmec S.p.A. signed a new lease contract with Dream Immobiliare S.r.l. valid until 31 January
2025.
The renewal of this contract implied an immediate rental cost saving for the Company compared to the annual
amount paid in 2010 of Euro 245 thousand.
When signing the new Lease contract, Tesmec signed an option contract with Dream Immobiliare S.r.l. for purchase
of the Lease contract (the Option Contract assigns Tesmec the right to take over the Lease contract against an initial consideration already paid of Euro 2,700 thousand. This value may be increased according to the period in which the
Company exercises the option, valid until 31 December 2016).
Even if the operation does not legally qualify as an acquisition, in view of the fact that the Lease contract is covered
by the cases in IAS 17 it is recorded as a financial lease in the financial statements with effect from this year.
Therefore, this implied the registration of the value of the industrial complex - for the part of its area covered by the
32
7Company and subject-matter of the said Lease contract - in the consolidated and separate financial statements of
Tesmec based on the present value of future payments due (equal to Euro 22.5 million), with the corresponding
entry of its financial debt.
In the first nine months, as a result of the medium/long-term loan obtained by Tesmec S.p.A., granted by the BNL-
BNP Paribas Group for Euro 21 million (disbursed for Euro 12 million), arrangements were made to settle the loans and revolving credit facilities granted to the subsidiary Tesmec USA by Southwest Securities.
In July 2011 the subsidiary Tesmec Service S.p.A. acquired the I-Light business unit in support of initiatives involving
the use of Innovation Communication Technology skills for the efficient management of power networks. The
acquisition price was Euro 300 thousand, of which Euro 293 thousand goodwill.
33
EXPLANATORY NOTES TO MAIN FIGURES IN THE FINANCIAL STATEMENTSEXPLANATORY NOTES TO MAIN FIGURES IN THE FINANCIAL STATEMENTSEXPLANATORY NOTES TO MAIN FIGURES IN THE FINANCIAL STATEMENTSEXPLANATORY NOTES TO MAIN FIGURES IN THE FINANCIAL STATEMENTS
1. Intangible assets
The breakdown and changes in Intangible assets as at 30 September 2011 and as at 31 December 2010 are indicated in the table below:
01/01/201101/01/201101/01/201101/01/2011
Increases Increases Increases Increases due to due to due to due to
purchasespurchasespurchasespurchases DecreasesDecreasesDecreasesDecreases ReclassificationsReclassificationsReclassificationsReclassifications
Amortization Amortization Amortization Amortization and and and and
depreciationdepreciationdepreciationdepreciation
Exchange Exchange Exchange Exchange rate rate rate rate
differencesdifferencesdifferencesdifferences 30/09/201130/09/201130/09/201130/09/2011
(Euro in thousands)
Development costs 6,000 2,725 - - (2,052) (10) 6,663
Rights and trademarks 632 50 (6) - (151) - 525
Goodwill - 293 - - - - 293
Assets in progress and
advance payments to suppliers
181 - (18) - (4) - 159
Total intangible Total intangible Total intangible Total intangible
assetsassetsassetsassets 6,8136,8136,8136,813 3,0683,0683,0683,068 (24)(24)(24)(24) ---- (2,207)(2,207)(2,207)(2,207) (10)(10)(10)(10) 7,6407,6407,6407,640
As at 30 September 2011, intangible assets totalled Euro 7,640 thousand, up Euro 827 thousand on the previous year
due to: (i) development costs capitalised in the first nine months of 2011 for Euro 2,725 thousand, partially offset by
amortization for the period (Euro 2,052 thousand). These costs relate to new product and equipment development
projects for which positive cash flows are expected to be generated in future years; (ii) goodwill of Euro 293
thousand generated from acquisition of the I-Light business unit by the subsidiary Tesmec Service S.p.A. in July
2011.
Where signs of impairment and the result of impairment tests suggest that the value of a project will not be recovered by the generation of future cash flows, it is fully amortised in the financial period.
2. Property, plant and equipment
The breakdown and changes in Property, plant and equipment as at 30 September 2011 and as at 31 December 2010
are indicated in the table below:
01/01/201101/01/201101/01/201101/01/2011
Increases Increases Increases Increases due to due to due to due to
purchasespurchasespurchasespurchases DecreasesDecreasesDecreasesDecreases ReclassificationsReclassificationsReclassificationsReclassifications
Amortization Amortization Amortization Amortization and and and and
depreciationdepreciationdepreciationdepreciation
Exchange Exchange Exchange Exchange rate rate rate rate
differencesdifferencesdifferencesdifferences 30/09/201130/09/201130/09/201130/09/2011
(Euro in thousands)
Land 174 4,016 - - - (1) 4,189
Buildings 5,381 18,300 - - (528) (62) 23,091
Plant and machinery 5,797 432 (5) - (728) (12) 5,484
Equipment 440 156 - - (155) (101) 340
Other assets 6,161 2,020 (2,542) - (598) - 5,041
Assets in progress and
advance payments to suppliers
40 - - - - - 40
Total property, plant Total property, plant Total property, plant Total property, plant and equipmentand equipmentand equipmentand equipment
17,99317,99317,99317,993 24,92424,92424,92424,924 (2,547)(2,547)(2,547)(2,547) ---- (2,009)(2,009)(2,009)(2,009) (176)(176)(176)(176) 38,18538,18538,18538,185
As at 30 September 2011, property, plant and equipment totalled Euro 38,185 thousand, up Euro 20,192 thousand on
the previous year. The increase is due to (i) the effect of the new lease contract described in paragraph 5 for Euro
22,312 thousand (including Euro 4,016 thousand in Land and Euro 18,296 thousand Buildings) and (ii) the increase in
the trenchers fleet recognised to other assets for Euro 2,020 thousand, offset however by the sale of two trenchers
on which the buy option envisaged in the rental contracts was exercised.
34
3. Inventories
The following table provides a breakdown of Inventories as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Raw materials and consumables 27,300 27,416
Work in progress 7,611 7,828
Finished goods and merchandise 8,036 6,540
Advances to suppliers for assets 240 436
Total InventoriesTotal InventoriesTotal InventoriesTotal Inventories 43,18743,18743,18743,187 42,22042,22042,22042,220
Compared to 31 December 2010, inventories recorded an increase of Euro 967 thousand as a result of the increase
in finished products required to cover sales forecast for the last quarter of the year.
4. Trade receivables
The following table provides a breakdown of trade receivables as at 30 September 2011 and as at 31 December
2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Trade receivables from third-party customers 25,556 29,503
Trade receivables from associates, related parties and joint ventures 5,939 2,979
Total trade receivablesTotal trade receivablesTotal trade receivablesTotal trade receivables 31,49531,49531,49531,495 32,48232,48232,48232,482
Trade receivables decreased by 3% compared to 31 December 2010, confirming the efficiency recovery trend already
seen in the results as at 31 December 2010 compared to the previous year. During the first nine months of 2011 the
Group had trade relations with subsidiaries and associates, increasing the related balance of Euro 2,960 thousand
receivable, mainly due to sales to the joint venture Tesmec Peninsula.
5. Financial receivables and other current financial assets
The following table provides a breakdown of financial receivables and other current financial assets as at 30
September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Financial receivables due from associates, related parties and joint ventures 3,025 226
Guarantee deposits 13 15
Other current financial assets 27 62
Total financial receivables and other current financial assetsTotal financial receivables and other current financial assetsTotal financial receivables and other current financial assetsTotal financial receivables and other current financial assets 3,0653,0653,0653,065 303303303303
The increase in financial receivables and other current financial assets (Euro 2,762 thousand) is mainly due to (i) the
portion not referring to the lease contract between Tesmec S.p.A. and Dream Immobiliare S.r.l., for Euro 864
thousand, of the Company’s initial disbursement of Euro 2,700 thousand by way of payment on account/deposit to
secure the option to take over the original lease contract signed by Dream Immobiliare S.r.l. as described in
paragraph 5 of the explanatory notes, and (ii) the recognition of a short-term loan to the JV Condux Tesmec Inc. of
Euro 1,392 thousand, due for repayment within twelve months.
35
6. Equity
The share capital amounts to Euro 10,708 thousand, fully paid up, and comprises 107,084,000 shares with a par value of Euro 0.1 per share.
The following table provides a breakdown of Other reserves as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Revaluation reserve 86 86
Extraordinary reserve 9,728 6,502
Change in the consolidation area (21) -
Retained earnings/(losses brought forward) 3,734 5,043
Bills charged directly to equity (4,048) (4,048)
on operations with entities under common control
Total Total Total Total other reservesother reservesother reservesother reserves 9,4799,4799,4799,479 7,5837,5837,5837,583
The revaluation reserve is a reserve in respect of which tax has been deferred, set up in accordance with Italian Law
No. 72/1983.
The change in the consolidation area that has led to a decrease in other reserves of Euro 21 thousand is related to
the purchase of the share owned by Mela Verde OOD in Tesmec Balkani EAD.
Following the resolution of 28 April 2011, the Shareholders’ Meeting approved the allocation of 2010 profits of Euro
6,552 thousand as follows:
� Euro 328 thousand to the legal reserve;
� Euro 3,226 thousand to the extraordinary reserve;
� Distribution of dividends for Euro 2,998 thousand (Euro 0.028 per share).
7. Interest-bearing financial payables
Interest-bearing financial payables include medium/long term loans from banks, payables to other providers of
finance and payables to leasing companies for property, plant and equipment recorded in the consolidated financial
statements in accordance with the financial lease accounting method.
The following table shows the breakdown for this item as at 30 September 2011 and as at 31 December 2010, with
separate disclosure of the current portion:
30 September 30 September 30 September 30 September 2011201120112011
of which of which of which of which
current current current current portionportionportionportion
31 December 31 December 31 December 31 December 2010201020102010
of which of which of which of which
current current current current portionportionportionportion (Euro in thousands)
Efibanca – loan rescheduled on 27 January 2011 for Euro 3.75 million, maturing 26 July 2010; floating rate
equivalent to the 3-month Euribor rate + spread of 1.70%.
2,500 2,500 3,750 1,875
Eracle Finance – unsecured loan drawn down on 13 July 2006 from JP Morgan Chase Bank and transferred on 2
August 2006 to Eracle Finance; original value Euro 4 million; repayable in a single instalment on 31 July 2013;
fixed interest rate of 7.61% + floating interest rate <0.0% and 0.1%> equivalent to 3-month Euribor rate + spread of 1.10%
3,956 - 3,930 -
Banca Popolare di Lodi – unsecured loan with Sace
guarantee for 50% of amount; original value Euro 2 million, drawn down on 16 January 2008 with maturity
date 31 March 2013; floating interest rate equivalent to 3-month Euribor rate + spread of 1.50%
600 400 900 400
36
Iccrea Banca – Istituto Centrale del Credito Cooperativo
– unsecured pool loan 70% backed by Sace guarantee; original value Euro 2 million; drawn down on 6 August
2009 with maturity date 30 September 2014; floating interest rate equivalent to 3-month Euribor rate +
spread of 1.70%
1,203 390 1,487 381
Banca Popolare dell’Emilia Romagna – unsecured loan
70% backed by Sace guarantee; original value Euro 2 million; drawn down on 20 October 2009 with maturity
date 31 December 2014; fixed annual interest rate of 4.2%
1,346 395 1,633 383
Banca Nazionale del Lavoro – loan at floating interest rate with a 2-year pre-amortization; original value Euro
6 million; drawn down on 1 July 2010 with maturity date 31 May 2018; floating interest rate equivalent to 6-
month Euribor rate + spread of 2.25%
6,000 462 6,000 -
Banca Popolare di Milano – loan at floating interest rate;
original value Euro 2 million; drawn down on 16 June 2010 with maturity date 30 June 2011; floating interest
rate equivalent to 3-month Euribor rate + spread of 2%
- - 1,007 1,007
Credito Bergamasco – loan at floating interest rate;
original value Euro 500 thousand; drawn down on 31 May 2011 with maturity date 31 May 2012; floating interest rate equivalent to 3-month Euribor rate +
average % a.p.
335 335 - -
BNL-BNP Paribas Group – pool loan; original value Euro 21 million, drawn down on 11 March 2011 for Euro 8 million with maturity date 4 March 2016 and further
Euro 4 million draw down on 5 August 2011 with maturity date of 4 March 2013.
11,380 833 - -
Banca Popolare dell’Emilia Romagna – unsecured loan
backed by Sace guarantee; original value Euro 2.5 million; drawn down on 6 July 2011 with maturity date 31 December 2012; floating annual interest rate of
3.15%
2,486 - - -
Southwest Securities - loan received by TESMEC USA and backed by a mortgage on the building owned by this company; original value USD 2.6 million; drawn
down in 2005; rescheduled in 2007 and repayable by the end of July 2012 (with renewal option); interest rate
equivalent to US Prime Rate + spread of 0.5%
- - 1,533 1,533
Southwest Securities- loan received in 2009 by
TESMEC USA; original value USD 2.9 million; with option to reschedule the terms of the contract every 5
years; floating interest rate equivalent to the US Prime Rate + spread of 1%. The loan contract specifies a
minimum interest rate of 6%
- - 3,078 3,078
Total InterestTotal InterestTotal InterestTotal Interest----bearing financial payablesbearing financial payablesbearing financial payablesbearing financial payables 29,80629,80629,80629,806 5,3155,3155,3155,315 23,31823,31823,31823,318 8,6578,6578,6578,657
Less current portion (5,315)
(8,657) NonNonNonNon----current portion of Interestcurrent portion of Interestcurrent portion of Interestcurrent portion of Interest----bearing bearing bearing bearing financial financial financial financial
payablespayablespayablespayables 24,49124,49124,49124,491
14,66114,66114,66114,661
Loan due to Simest 3,696
3,696
Total medium/long term loansTotal medium/long term loansTotal medium/long term loansTotal medium/long term loans 28,18728,18728,18728,187
18,35718,35718,35718,357
Non-current portion of finance leases 22,318 1,320 2,045 421
Less current portion (1,320)
(421)
NonNonNonNon----current portion of finance leases, current portion of finance leases, current portion of finance leases, current portion of finance leases, netnetnetnet 20,99820,99820,99820,998
1,6241,6241,6241,624
Total current portionTotal current portionTotal current portionTotal current portion
6,6356,6356,6356,635
9,0789,0789,0789,078
InterestInterestInterestInterest----bearing financial payablesbearing financial payablesbearing financial payablesbearing financial payables 49,18549,18549,18549,185
19,98119,98119,98119,981
During the first nine months of 2011, Interest-bearing financial payables increased by Euro 29,204 thousand due to the
following transactions:
� the New lease contract described in paragraph 5 of the explanatory notes, recorded in accordance with IAS
17, led to the entry of notional interest-bearing financial loans and borrowings of Euro 19,886 thousand, equal to discounted future instalments;
37
� during the first nine months of the year, a new loan agreement was signed with the bank BNL-BNP
PARIBAS Group for Euro 21 million, of which a total of Euro 12 million disbursed and repayable in half-
yearly instalments until March 2016.
8. Interest-bearing financial payables (current portion)
The following table provides details of this item as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Advances from banks against invoices and bills receivables 15,427 7,040
Short-term portion of financial leases 1,320 421
Advances from factors 1,116 760
Current accounts overdraft - 3,895
Current portion of interest-bearing loans and borrowings 5,315 8,657
Total interestTotal interestTotal interestTotal interest----bearing financial payables (current bearing financial payables (current bearing financial payables (current bearing financial payables (current portion)portion)portion)portion) 23,17823,17823,17823,178 20,77320,77320,77320,773
The advances from banks amount to Euro 15,427 thousand and increased by Euro 8,387 thousand as a result of a
greater use of advances on discounted export invoices with more extended payment terms compared to the
standard terms of the Group.
The decrease in the current accounts overdraft and current portion of interest-bearing loans and borrowings is due to the
repayment of the loans and the revolving credit facility granted to Tesmec USA by Southwest Securities.
9. Trade payables
The following table provides a breakdown of trade payables as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
Trade payables due to third-party suppliers 22,666 26,207
Trade payables due to associates, related parties and joint ventures 41 84
Total trade payablesTotal trade payablesTotal trade payablesTotal trade payables 22,70722,70722,70722,707 26,29126,29126,29126,291
Trade payables as at 30 September 2011 decreased compared to the previous year by Euro 3,584 thousand due to
seasonal effects, in relation to the reduced volumes coinciding with summer holiday closures.
10. Advances from customers
The decrease in this item is related to the fact that during the first nine months of 2011 the supply orders were
completed for which the Group had received advances during the previous year.
38
11. Income taxes payable
The following table provides details of income taxes payable as at 30 September 2011 and as at 31 December 2010:
(Euro in thousands) 30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
IRPEF liabilities for employees 257 512
Current IRES tax liabilities 1,632 2,809
Current IRAP tax liabilities 516 495
Other current taxes 749 90
Withholding taxes 2 31
Total income taxes payableTotal income taxes payableTotal income taxes payableTotal income taxes payable 3,1563,1563,1563,156 3,9373,9373,9373,937
Income taxes payable as at 30 September 2011 fell compared to the previous year by Euro 781 thousand as a result
of payment of the balance in July 2011 of IRES and IRAP taxes for the previous year.
12. Net financial indebtedness
Details of the breakdown of Net financial indebtedness as at 30 September 2011 and 31 December 2010 are as
follows:
(Euro in thousands)
30 September 30 September 30 September 30 September 2011201120112011
of which of which of which of which with with with with related parties related parties related parties related parties
and groupand groupand groupand group
31 December 31 December 31 December 31 December 2010201020102010
of which with of which with of which with of which with related parties related parties related parties related parties
and groupand groupand groupand group
Cash and cash equivalents (9,532)
(7,767)
Current financial assets (1)
(3,170) (2,715) (404) (226)
Current financial liabilities 23,178 738 20,773 -
Current portion of derivative financial instruments 79
90
Current financial indebtedness Current financial indebtedness Current financial indebtedness Current financial indebtedness (2)(2)(2)(2)
10,55510,55510,55510,555 (1,977)(1,977)(1,977)(1,977) 12,69212,69212,69212,692 (226)(226)(226)(226)
Non-current financial liabilities 49,185 19,148 19,981 -
Non-current portion of derivative financial
instruments 232
34
NonNonNonNon----current financial indebtedness current financial indebtedness current financial indebtedness current financial indebtedness (2)(2)(2)(2)
49,41749,41749,41749,417 19,14819,14819,14819,148 20,01520,01520,01520,015 ----
Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB Net financial indebtedness pursuant to CONSOB
Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006Communication No. DEM/6064293/2006 59,97259,97259,97259,972 17,17117,17117,17117,171 32,70732,70732,70732,707 (226)(226)(226)(226)
(1)
The current financial assets as at 30 September 2011 and 31 December 2010 include the market value of shares and warrants listed on the Italian Stock Exchange (Borsa Italiana), which are therefore accounted as cash and cash equivalents. (2)
Current and non-current financial indebtedness is not recognised as a measure of performance by the IFRS. The valuation criteria applied by the Group may not necessarily be the same as those adopted by other groups and therefore the balances achieved by the Group may not be comparable with theirs.
In the first nine months of 2011, the Group’s net financial indebtedness increased compared to 2010 by Euro 27,265
thousand, due to the combined effect of the following changes:
� increase in current financial liabilities from Euro 20,773 thousand to Euro 23,178 thousand, of which Euro 738
thousand due to recognition of the short-term portion of the loan relating to the new lease contract
described in paragraph 3.1 and the remainder to greater recourse to advances on exports;
� increase in non-current financial liabilities from Euro 19,981 thousand to Euro 49,185 thousand, mainly due to:
(i) increase in financial leases (Euro 20,608 thousand as at 30 September 2011 compared to Euro 1,611
thousand as at 31 December 2010), including Euro 19,148 thousand resulting from the new lease contract
described in paragraph 5, (ii) use of Euro 12 million of the new credit facility granted by BNL and (iii) reclassification to current financial liabilities of Euro 8,122 thousand as the short-term portion of
medium/long-term loans. Net of the effects of the new lease contract described in paragraph 5, the net
financial indebtedness would increase by Euro 38.1 million reflecting in parallel the changes in working
capital described above.
39
The above are offset by:
� increase in current financial assets from Euro 404 thousand to Euro 3,170 thousand mainly due to (i)
recognition of a short-term loan for Euro 1,392 thousand, repayable by the end of the year, to the JV Condux
Tesmec and (ii) the classification in accordance with IAS 17 of the portion not referable to the Lease
Contracts between Tesmec S.p.A. and Dream Immobiliare S.r.l. of the initial disbursement carried out by
the Company of Euro 864 thousand as an advance payment/deposit to secure the option to take over the
original financial lease contract signed by Dream Immobiliare S.r.l. (see paragraph 5);
13. Revenues from sales and services
The table below shows the breakdown of Revenues from sales and services as at 30 September 2011 and as at 30
September 2010:
As at As at As at As at 30 September30 September30 September30 September
(Euro in thousands) 2011201120112011 2010201020102010
Sales of products 79,146 73,695
Services rendered 1,627 4,382
Total revenues from sales and servicesTotal revenues from sales and servicesTotal revenues from sales and servicesTotal revenues from sales and services 80,77380,77380,77380,773 78,07778,07778,07778,077
The breakdown of revenues from sales and services shows an increase of Euro 2,696 thousand due to the increase
in sales volumes in both the Stringing equipment and Trencher segments which absorbed the negative effect of
EUR/USD exchange rates. The increase in the Trencher segment was due to results recorded in the second and third
quarters which offset the negative result for the third quarter. The services for the Trencher segment were mainly concentrated in Saudi Arabia. Given the time necessary for
setup of a JV with Tesmec Peninsula, the revenues were achieved by a company not included in the Tesmec Group
consolidation.
14. Operating costs
The following table provides the breakdown of Operating costs as at 30 September 2011 and as at 30 September
2010:
As at As at As at As at 30 September30 September30 September30 September
(Euro in thousands) 2011201120112011 2010201020102010
Cost of raw materials and consumables (39,431) (34,802)
of which with subsidiaries, related parties and joint ventures: (16) (1)
Costs for services (14,920) (18,137)
of which with subsidiaries, related parties and joint ventures: (116) (31)
Payroll costs (13,194) (13,045)
Other operating (costs)/revenues, net (1,373) (2,364)
of which with subsidiaries, related parties and joint ventures: (221) (1,188)
Amortization and depreciation (4,216) (3,572)
Development costs capitalised 2,627 2,577
Total operating costsTotal operating costsTotal operating costsTotal operating costs (70,507)(70,507)(70,507)(70,507) (69,343)(69,343)(69,343)(69,343)
Operating costs totalled Euro 70,507 thousand, up on the same period of last year and 1.7% lower than the increase
in turnover. The impact of these costs on revenues for the period is 87.3% lower than the impact of 88.8% recorded the previous year.
40
Segment Reporting
For management purposes, Tesmec Group is organized into strategic business units on the basis of the nature of the goods and services supplied, and presents two operating segments for disclosure purposes:
� Stringing equipment: this segment is involved in the design, production and marketing of integrated
solutions for the stringing and maintenance of underground and aerial very high, high and medium voltage
electric power lines, stringing equipment for underground and overhead optic fibre cables, as well as
integrated solutions for the stringing and maintenance of electric power lines for railways. The Stringing
equipment segment machines are produced at the Italian production plants of Grassobbio (Bergamo),
Endine Gaiano (Bergamo) and Sirone (Lecco);
� Trencher: this segment is involved in the design, production and marketing of integrated solutions that
entail the use of high-powered crawler trenchers for the linear excavation of underground power lines and
pipelines or for other excavation operations and, on a smaller scale, Gallmac multipurpose machines. The
Trencher segment products are manufactured at the Grassobbio (Bergamo) and Sirone (Lecco) production
plants in Italy, and at the Alvarado plant in Texas in the USA.
As at As at As at As at 30 September30 September30 September30 September
2011201120112011 2020202010101010
(Euro in thousands) Stringing Stringing Stringing Stringing
equipmentequipmentequipmentequipment TrencherTrencherTrencherTrencher ConsolidatedConsolidatedConsolidatedConsolidated
Stringing Stringing Stringing Stringing
equipmentequipmentequipmentequipment TrencherTrencherTrencherTrencher ConsolidatedConsolidatedConsolidatedConsolidated
Revenues from sales and services 47,085 33,688 80,773 46,484 31,593 78,077
Operating costs net of depreciation and amortization (36,195) (30,096) (66,291) (39,371) (26,400) (65,771)
EBITDA EBITDA EBITDA EBITDA 10,89010,89010,89010,890 3,5923,5923,5923,592 14,48214,48214,48214,482 7,1137,1137,1137,113 5,1935,1935,1935,193 12,30612,30612,30612,306
Amortization and depreciation (1,279) (2,937) (4,216) (926) (2,646) (3,572)
Total operating costsTotal operating costsTotal operating costsTotal operating costs (37,474)(37,474)(37,474)(37,474) (33,033)(33,033)(33,033)(33,033) (70,507)(70,507)(70,507)(70,507) (40,297)(40,297)(40,297)(40,297) (29,046)(29,046)(29,046)(29,046) (69,343)(69,343)(69,343)(69,343)
Operating incomeOperating incomeOperating incomeOperating income 9,6119,6119,6119,611 655655655655 10,26610,26610,26610,266 6,1876,1876,1876,187 2,5472,5472,5472,547 8,7348,7348,7348,734
Financial expenses and share of profit/(loss)
(2,736)
(1,212)
PrePrePrePre----tax profitstax profitstax profitstax profits
7,5307,5307,5307,530
7,5227,5227,5227,522
Income taxes
(2,803)
(2,514)
Net profit for the periodNet profit for the periodNet profit for the periodNet profit for the period
4,7274,7274,7274,727
5,0085,0085,0085,008
Non-controlling interests
-
(20)
Equity holders of the parentEquity holders of the parentEquity holders of the parentEquity holders of the parent
4,7274,7274,7274,727
5,0285,0285,0285,028
(*) The EBITDA is represented by the operating income gross of amortization/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the company’s operating performance. EBITDA is not recognised as a measure of performance by the IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group’s operating income. As the composition of EBITDA is not governed by the reference accounting standards, the criterion for determination applied by the Group may not be in line with the criterion adopted by others and therefore not comparable.
Revenues in the Stringing equipment segment, after the 46% growth recorded in 2010, further increase by 1.3% in
the period. The major markets were Russia and South America where margins higher than the historical average
were achieved. With regard to the Trencher segment, revenues were 6.6% higher than the same period in 2010 as a result of the
consolidated recovery of sales on the US market and Middle East market, where the JV Tesmec Peninsula has also
been operative since March 2011. The margins achieved in the period were affected by the unfavourable trend in the
EUR/USD exchange rate (Euro 1.3 million), particularly felt by sales in this segment.
Administrators monitors the operating income of its business units separately for the purpose of making decisions
about resource allocation and performance assessment. Segment performance is evaluated on the basis of
operating income.
The Group financial management (including financial income and charges) and income taxes are managed at Group
level and are not allocated to the individual operating segments.
The following table shows the consolidated statement of financial position by business segment as at 30 September
2011 and as at 31 December 2010:
41
30 September 201130 September 201130 September 201130 September 2011 31 December 201031 December 201031 December 201031 December 2010
(Euro in thousands) Stringing Stringing Stringing Stringing
equipmentequipmentequipmentequipment TrencherTrencherTrencherTrencher
Not Not Not Not allocatedallocatedallocatedallocated
ConsolidatedConsolidatedConsolidatedConsolidated Stringing Stringing Stringing Stringing
equipmentequipmentequipmentequipment TrencherTrencherTrencherTrencher
Not Not Not Not allocatedallocatedallocatedallocated
ConsolidatedConsolidatedConsolidatedConsolidated
Intangible assets 3,310 4,330 - 7,640 2,454 4,359 - 6,813
Property, plant and equipment
12,566 25,619 - 38,185 487 17,506 - 17,993
Financial assets 970 511 11 1,492 1,044 216 136 1,396
Other non-current assets
- 1,678 3,192 4,870 - 1,404 3,508 4,912
Total nonTotal nonTotal nonTotal non----current current current current
assetsassetsassetsassets 16,84616,84616,84616,846 32,13832,13832,13832,138 3,2033,2033,2033,203 52,18752,18752,18752,187 3,9853,9853,9853,985 23,48523,48523,48523,485 3,6443,6443,6443,644 31,11431,11431,11431,114
Inventories 13,044 30,143 - 43,187 10,518 31,702 - 42,220
Trade receivables 8,823 22,672 - 31,495 13,506 18,976 - 32,482
Other current assets 1,620 1,174 3,989 6,783 468 624 1,289 2,381
Cash and cash
equivalents - 249 9,283 9,532 - - 7,767 7,767
Total current assetsTotal current assetsTotal current assetsTotal current assets 23,48723,48723,48723,487 54,23854,23854,23854,238 13,27213,27213,27213,272 90,99790,99790,99790,997 24,49224,49224,49224,492 51,30251,30251,30251,302 9,0569,0569,0569,056 84,85084,85084,85084,850
Total assetsTotal assetsTotal assetsTotal assets 40,33340,33340,33340,333 86,37686,37686,37686,376 16,47516,47516,47516,475 143,184143,184143,184143,184 28,47728,47728,47728,477 74,78774,78774,78774,787 12,70012,70012,70012,700 115,964115,964115,964115,964
Equity attributable Equity attributable Equity attributable Equity attributable
to Parent Company to Parent Company to Parent Company to Parent Company ShareholdersShareholdersShareholdersShareholders
---- ---- 36,14036,14036,14036,140 36,14036,14036,14036,140 ---- ---- 34,73034,73034,73034,730 34,73034,73034,73034,730
NonNonNonNon----controlling controlling controlling controlling
interestsinterestsinterestsinterests ---- ---- ---- ---- ---- ---- 9999 9999
NonNonNonNon----current current current current
liabilitiesliabilitiesliabilitiesliabilities ---- 1,2051,2051,2051,205 51,72951,72951,72951,729 52,93452,93452,93452,934 ---- 945945945945 22,97422,97422,97422,974 23,91923,91923,91923,919
Current financial
liabilities - 266 22,991 23,257 - - 20,863 20,863
Trade payables 13,273 9,434 - 22,707 16,563 9,728 - 26,291
Other current liabilities
582 1,716 5,848 8,146 2,159 4,146 3,847 10,152
Total current Total current Total current Total current liabilitiesliabilitiesliabilitiesliabilities
13,85513,85513,85513,855 11,41611,41611,41611,416 28,83928,83928,83928,839 54,11054,11054,11054,110 18,72218,72218,72218,722 13,87413,87413,87413,874 24,71024,71024,71024,710 57,30657,30657,30657,306
Total Total Total Total liabilitiesliabilitiesliabilitiesliabilities 15,06015,06015,06015,060 63,14563,14563,14563,145 28,83928,83928,83928,839 107,044107,044107,044107,044 18,72218,72218,72218,722 14,81914,81914,81914,819 47,68447,68447,68447,684 81,22581,22581,22581,225
Total shareholders’ Total shareholders’ Total shareholders’ Total shareholders’ equity and liabilitiesequity and liabilitiesequity and liabilitiesequity and liabilities
15,06015,06015,06015,060 63,14563,14563,14563,145 64,97964,97964,97964,979 143,184143,184143,184143,184 18,72218,72218,72218,722 14,81914,81914,81914,819 82,42382,42382,42382,423 115,964115,964115,964115,964
42
Related party transactions
The following table gives details of economic and equity transactions with related parties. The companies listed below have been identified as related parties as they are linked directly or indirectly to the current shareholders:
As at 30 September 2011As at 30 September 2011As at 30 September 2011As at 30 September 2011 30 September 201130 September 201130 September 201130 September 2011
(Euro in thousands)
RevenuesRevenuesRevenuesRevenues Costs of Costs of Costs of Costs of
raw raw raw raw materialsmaterialsmaterialsmaterials
Costs for Costs for Costs for Costs for servicesservicesservicesservices
Other operating Other operating Other operating Other operating (costs)/revenues, (costs)/revenues, (costs)/revenues, (costs)/revenues,
netnetnetnet
Financial Financial Financial Financial expenses and expenses and expenses and expenses and
share of share of share of share of profit/lossprofit/lossprofit/lossprofit/loss
NonNonNonNon----current current current current
financial financial financial financial assetsassetsassetsassets
Trade Trade Trade Trade receivablesreceivablesreceivablesreceivables
Current Current Current Current financial financial financial financial
receivablesreceivablesreceivablesreceivables
Other Other Other Other current current current current assetsassetsassetsassets
NonNonNonNon----current current current current financial financial financial financial liabilitiesliabilitiesliabilitiesliabilities
Current Current Current Current financial financial financial financial liabilitiesliabilitiesliabilitiesliabilities
Trade Trade Trade Trade payablespayablespayablespayables
Associated Associated Associated Associated companies:companies:companies:companies: East Trencher S.r.l.
- - (117) - 2 - - 252 - - - -
Locavert S.A. 179 - - - - - 72 - - - - -
Sibtechmash - - - - - - 15 - - - - -
SubtotalSubtotalSubtotalSubtotal 179179179179 ---- (117)(117)(117)(117) ---- 2222 ---- 87878787 252252252252 ---- ---- ---- ----
Joint ventures:Joint ventures:Joint ventures:Joint ventures:
Condux Tesmec Inc.
1,455 - - - 40 - 594 1,392 - - - -
Tesmec Peninsula
3,637 - 72 - - - 3,863 - - - - -
SubtotalSubtotalSubtotalSubtotal 5,0925,0925,0925,092 ---- 72727272 ---- 40404040 ---- 4,4574,4574,4574,457 1,3921,3921,3921,392 ---- ---- ---- ----
Related Related Related Related parties:parties:parties:parties:
Ambrosio S.r.l. - - - (14) - - - - - - - 17
Caterina Caccia Dominioni, Lawyer
- - (21) - - - - - - - - -
Matteo Caccia Dominioni
- - - - - - - - - - - 24
CBF S.r.l. - - - (283) - - - - - - - -
Ceresio Tours S.r.l.
- - (12) - - - - - - - - 1
Dream Immobiliare S.r.l.
- - (24) (103) (800) - 1 1,069 101 19,148 738 (2)
Eurofidi S.p.A. - - - - - - - 2 - - - -
FI.IND S.p.A. - -
- - - 16 - - - - (4)
Jaeggli S.p.A. - - - - - - 4 - - - - -
Jaeggli Meccanotessile S.r.l.
- - (2) - - - - - - - - 5
Lame Nautica S.r.l.
1 - - - - - - - - - - -
M.T.S. Officine Meccaniche S.p.A.
1,431 (16) (102) (2) - - 1,292 - - - - -
Reggiani Macchine S.p.A.
3 - 90 181 - - 82 - - - - -
SubtotalSubtotalSubtotalSubtotal 1,4351,4351,4351,435 (16)(16)(16)(16) (71)(71)(71)(71) (221)(221)(221)(221) (800)(800)(800)(800) ---- 1,3951,3951,3951,395 1,0711,0711,0711,071 101101101101 19,14819,14819,14819,148 738738738738 41414141
TotalTotalTotalTotal 6,7066,7066,7066,706 (16)(16)(16)(16) (116)(116)(116)(116) (221)(221)(221)(221) (758)(758)(758)(758) ---- 5,9395,9395,9395,939 2,7152,7152,7152,715 101101101101 19,14819,14819,14819,148 738738738738 41414141
43
As at 30 September 2010As at 30 September 2010As at 30 September 2010As at 30 September 2010 30 September 201030 September 201030 September 201030 September 2010
(Euro in thousands)
RevenuesRevenuesRevenuesRevenues Costs of Costs of Costs of Costs of
raw raw raw raw materialsmaterialsmaterialsmaterials
Costs for Costs for Costs for Costs for servicesservicesservicesservices
Other operating Other operating Other operating Other operating (costs)/revenues, (costs)/revenues, (costs)/revenues, (costs)/revenues,
netnetnetnet
Financial Financial Financial Financial expenses and expenses and expenses and expenses and
share of share of share of share of profit/lossprofit/lossprofit/lossprofit/loss
NonNonNonNon----current current current current
financial financial financial financial assetsassetsassetsassets
Trade Trade Trade Trade receivablesreceivablesreceivablesreceivables
Current Current Current Current financial financial financial financial
receivablesreceivablesreceivablesreceivables
Other Other Other Other current current current current assetsassetsassetsassets
NonNonNonNon----current current current current financial financial financial financial liabilitiesliabilitiesliabilitiesliabilities
Current Current Current Current financial financial financial financial liabilitiesliabilitiesliabilitiesliabilities
Trade Trade Trade Trade payablespayablespayablespayables
Associated Associated Associated Associated companies:companies:companies:companies:
Locavert S.A. 100 - - - - - 24 - - - - 13
East Trencher S.r.l.
945 - - - -
1,134 - - - -
Sibtechmash - - - - - - 15 - - - - -
SubtotalSubtotalSubtotalSubtotal 1,0451,0451,0451,045 ---- ---- ---- ---- ---- 1,1731,1731,1731,173 ---- ---- ---- ---- 13131313
JoiJoiJoiJoint nt nt nt ventures:ventures:ventures:ventures: Condux Tesmec Inc.
2,743 - 97 - - - 2,658 - - - - -
SubtotalSubtotalSubtotalSubtotal 2,7432,7432,7432,743 ---- 97979797 ---- ---- ---- 2,6582,6582,6582,658 ---- ---- ---- ---- ----
RelRelRelRelated ated ated ated parties:parties:parties:parties: Ambrosio S.r.l.
- - - (10) - - - - - - - -
Consorzio Stabile Energie Locali
- - - - - - 19 - - - - -
Caterina Caccia Dominioni, Lawyer
- - (16) - - - - - - - - -
Matteo Caccia Dominioni
- - (32) - - - - - - - - 12
CBF S.r.l. - - - (285) 1 - 1 - - - - -
Ceresio Tours S.r.l.
- - - - - - - - - - - 1
Dream Immobiliare S.r.l.
- - - (233) - - - - - - - -
FI.IND S.p.A. - - - 1 14 - 14 - - - - 48
Jaeggli Meccanotessile S.r.l.
- - - - - - 4 - - - - -
Jaeggli S.p.A. - - - - 2 - 4 - - - - -
Lame Nautica S.r.l.
5 - - - - -
- - - - -
M.T.S. Officine Meccaniche S.p.A.
557 (1) (157) - 2 - 284 - - - - 1
Reggiani Macchine S.p.A.
- - 77 (661) 21 - 481 - - - - -
SubSubSubSubtotaltotaltotaltotal 562562562562 (1)(1)(1)(1) (128)(128)(128)(128) (1,188)(1,188)(1,188)(1,188) 40404040 ---- 807807807807 ---- ---- ---- ---- 62626262
TotalTotalTotalTotal 4,3504,3504,3504,350 (1)(1)(1)(1) (31)(31)(31)(31) (1,188)(1,188)(1,188)(1,188) 40404040 ---- 4,6384,6384,6384,638 ---- ---- ---- ---- 75757575
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Subsequent events and business outlook
On 1 November 2011, Tesmec Rus LLC was established in Moscow, 100% owned by Tesmec S.p.A. and with fully paid-up share capital of 450,000 Roubles.
For 2011, the combined effect of the existing backlog and the forecast for acquiring important orders in the last
quarter of the year is deemed to allow the Tesmec Group to close the year with a strong increase up to double digit,
in turnover compared to the 2010 financial period, up with what was recorded in the first 9 months of the year.
For the near future, strategic developments in the Group's supply mix envisage:
� development of new products/technologies
� new service activities (special contracting).
Customer relations will increasingly develop towards national utilities and general contractors involved in large
projects.
As a result of this it is envisaged that these factors could lead to a certain volatility in short-term trends.
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Attestation pursuant to Article 154Attestation pursuant to Article 154Attestation pursuant to Article 154Attestation pursuant to Article 154----bis of Italian Legislative Decree 5bis of Italian Legislative Decree 5bis of Italian Legislative Decree 5bis of Italian Legislative Decree 58/988/988/988/98
1. The undersigned Ambrogio Caccia Dominioni and Andrea Bramani, as the Chief Executive Officer and the
Manager responsible for preparing the Company's financial statements, respectively, attest, considering also
what is provided under Article 154-bis, sub-sections 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998:
� the adequacy in relation to the characteristics of the business and
� actual application
of the administrative and accounting procedures for preparing the consolidated financial statements as at 30
September 2011.We also attest that:
2.1 The condensed consolidated financial statements as at 30 September 2011:
� have been prepared in accordance with IFRS as endorsed by the European Union, as provided by the EC
Regulation No. 1606/2002 issued by the European Parliament and by the European Council on 19 July 2002.
� correspond to the amounts shown in the Company’s accounts, books and records;
� provide a fair and correct representation of the financial conditions, results of operations and cash-flow of
the Company and its consolidated subsidiaries.
2.2 The interim report on operations refers to the important events that took place during the first nine months of
the year and their impact on the condensed interim consolidated financial statements, together with a
description of the main risks and uncertainties for the three remaining months of the financial period. The
interim report on operations also includes a reliable analysis of information on significant transactions with
related parties.
Grassobbio, 9 November 2011
Ambrogio Caccia Dominioni Andrea Bramani
Chief Executive Officer Manager responsible for
preparing the Company’s
financial statements
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