tesmec relazione settembre ing 2011...

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

4

TABLE OF CONTENTS

5

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

6

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.

8

GROUP STRUCTURE

9

(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.

SSEERRVVIICCEE TTRREENNCCHHEERR SSTTRRIINNGGIINNGG EEQQUUIIPPMMEENNTT

TTeessmmeecc SS..pp..AA..

TTeessmmeecc UUSSAA IInncc

((7755%%))11

TTeessmmeecc BBaallkkaannii

EEAADD ((110000 %%))

LLooccaavveerrtt SS..AA..

((3388,,6633%%))

SSiibbtteecchhmmaasshh JJSSCC

((2200 %%))

CCoonnss.. LLoommbbaarrtteecchh

SS..cc..aa..rr..ll.. ((1199,,2233%%))

TTeessmmeecc SSeerrvviiccee

SS..pp..AA.. ((110000%%))

EEaasstt TTrreenncchheerrss

SS..rr..ll.. ((2244%%))

CCoonnss.. TTRR SS..cc..aa..rr..ll..

iinn lliiqquuiiddaazziioonnee

((5500%%))

CCoonndduuxx TTeessmmeecc IInncc

((5500%%))

TTeessmmeecc PPeenniinnssuullaa

WWLLLL ((4499%%))

TTeessmmeecc SSAA LLTTDD

((110000%%))

10

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;

12

� 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.

13

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.

14

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%.

15

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.

16

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


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.

17

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

18

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:


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:


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)


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:


(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:


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



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


6,706 4,350

Cost of raw materials and consumables

(39,431) (34,802)


(16) (1)

Costs for services

(14,920) (18,137)


(116) (31)

Payroll costs

(13,194) (13,045)

Other operating (costs)/revenues, net

(1,373) (2,364)


(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)


(803) -

Financial income

1,085 1,282


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



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


(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


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:


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:


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:


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:


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:


of which of which of which of which

current current current current portionportionportionportion


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:


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:


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:


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)


of which of which of which of which with with with with related parties related parties related parties related parties





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:



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:



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.


2011201120112011 2020202010101010



Stringing Stringing Stringing Stringing


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


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


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


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

44

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.

45

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

tesmec relazione settembre ing 2011...

Documents